A government entered into a capital lease agreement to acquire equipment for the general government on January 1, 2017. Five payments of $9,000 each are to be made, beginning on December 31, 2017. Discounting is at 6%, computed annually. The present value of the five payments is $37,911. Which of the following would be true as of January 1, 2017?
A) An entry would be made debiting Expenditures and crediting Other Financing Sources-Capital in a governmental fund, both in the amount of $45,000.
B) An entry would be made debiting Equipment and crediting Capital Payable in a governmental fund, both in the amount of $37,911.
C) An entry would be made debiting Capital Expenditure and crediting Capital Payable in a governmental fund, both in the amount of $37,911.
D) An entry would be made debiting Expenditures and crediting Other Financing Sources-Capital in a governmental fund, both in the amount of $37,911.

Question

Quizplus · Accepted Answer

The journal entry would be a debit to Expenditures - Capital Outlay for $37,911 and credit Other Financing Sources - Capital Lease Agreement for $37,911.

A Government Entered into a Capital Lease Agreement to Acquire