A government enters into a capital lease 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 as a capital lease asset at the present value of the future lease payments plus any initial direct costs, in this case the down payment of $25,000. Therefore, the correct recording would be $845,500 + $25,000 = $870,500.

A Government Enters into a Capital Lease for the Purchase