If a city has an unpaid capital lease obligation at the beginning of its fiscal year,the journal entry in the debt service fund to record the lease payment at the end of that fiscal year will include

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The journal entry in the debt service fund to record the lease payment at the end of the fiscal year will include a debit to Expenditures-Principal of Capital Lease Obligation because this is the amount being paid towards the principal of the capital lease obligation. The journal entry will also include a credit to Cash for the total payment amount. There will be no debit to Capital Lease Obligations Payable since this account was already recorded as a liability at the beginning of the fiscal year. Finally, there will be no debit to Interest Expense on Capital Leases since this account only reflects the interest portion of the lease payment, which is a separate expenditure account.

If a City Has an Unpaid Capital Lease Obligation at the Beginning