If a city has an unpaid lease obligation at the beginning of its fiscal year, the journal entry in the debt service fund to record the lease payment during that fiscal year will include:
A) A debit to Lease Obligations Payable.
B) A credit to Expenditures-Principal of Lease Obligation.
C) A debit to Expenditures-Principal of Lease Obligation.
D) A debit to Interest Expense on Leases.

Question

If a city has an unpaid lease obligation at the beginning of its fiscal year, the journal entry in the debt service fund to record the lease payment during that fiscal year will include: 
A) A debit to Lease Obligations Payable.
B) A credit to Expenditures-Principal of Lease Obligation.
C) A debit to Expenditures-Principal of Lease Obligation.
D) A debit to Interest Expense on Leases.

Quizplus · Accepted Answer

The journal entry to record the lease payment would include a debit to the Expenditures-Principal of Lease Obligation account to reduce the outstanding lease obligation. This is because the lease payment is reducing the principal amount owed on the lease.

If a City Has an Unpaid Lease Obligation at the Beginning