A government enters into a lease agreement for the purchase of a new snow plow. The present value of the future lease payments is $845,500 and there is a down payment at the inception of the lease of $25,000. The snow plow should be recorded in the government-wide statement of net position at:

Question

Quizplus · Accepted Answer

The snow plow should be recorded at its fair value, which is the present value of the future lease payments plus the down payment. Therefore, the correct amount to record the plow in the government-wide statement of net position is $870,500 ($845,500 + $25,000).

A Government Enters into a Lease Agreement for the Purchase