Accounting For Governmental & Nonprofit Entities
18th Edition
ISBN: 9781259917059
Author: RECK, Jacqueline L., Lowensohn, Suzanne L., NEELY, Daniel G.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 5, Problem 17.10EP
Neighborville enters into a lease agreement for new copiers in all its city hall offices. In the governmental activities journal at the inception of the lease, it should record
- a. Leased equipment balances equal to the lease payments made during the year.
- b. Capital expenses equal to the initial lease payment.
- c. Leased equipment balances equal to the capitalizable cost of the lease assets regardless of the amount of lease payments made during the year.
- d. Capital expenses equal to the capitalizable cost of the lease asset regardless of the amount of lease payments made during the year.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
15
When Capitol City makes its annual lease payment on an unpaid lease obligation, the journal entry for the governmental activities
accounts will include:
Multiple Choice
A debit to Lease Obligation Payable.
A credit to Lease Obligation Payable.
A debit to Lease Expense.
A debit to Expenditures-Principal of Lease Obligation.
Laster City recorded a 20-year building rental agreement as a capital lease. An asset for the building lease was recorded in the general fixed assets account group. Where should the lease liability be reported?a. In the general long-term debt account groupb. In the debt service fundc. In the general fundd. A lease liability should not be reported.
1. Clavel County leases an office building with a remaining economic life of 20 years. The fair market value of the building is $6 million. Annual lease payments are agreed at $523,107, based on a 6 percent interest rate. The lease meets the conditions for a capital lease.Record the lease and the first year’s interest payment
(a) In a governmental fund
(b) In the government-wide statements
2. Should the office building be depreciated? If so, how and where should depreciation be recorded?
3. Suppose the lease did not meet the conditions for a capital lease. How and where should the lease be recorded? Should the office building be depreciated? If so, how and where should depreciation be reported?
Chapter 5 Solutions
Accounting For Governmental & Nonprofit Entities
Ch. 5 - What are general capital assets? How are they...Ch. 5 - Explain what disclosures the GASB requires for...Ch. 5 - Prob. 3QCh. 5 - Prob. 4QCh. 5 - Prob. 5QCh. 5 - What is the accounting difference between using...Ch. 5 - Prob. 7QCh. 5 - Prob. 8QCh. 5 - Prob. 9QCh. 5 - What is a service concession arrangement, and why...
Ch. 5 - Prob. 13CCh. 5 - Prob. 14CCh. 5 - Prob. 15CCh. 5 - Under GASB standards, which of the following would...Ch. 5 - Two new copiers were purchased for use by the city...Ch. 5 - Maxim County just completed construction of a new...Ch. 5 - A capital projects fund would probably not be used...Ch. 5 - Machinery and equipment depreciation expense for...Ch. 5 - Prob. 17.6EPCh. 5 - Prob. 17.7EPCh. 5 - Callaway County issued 10,000,000 in bonds at 101...Ch. 5 - Neighborville enters into a lease agreement for...Ch. 5 - Neighborville enters into a lease agreement for...Ch. 5 - Prob. 17.11EPCh. 5 - Prob. 17.12EPCh. 5 - Prob. 17.13EPCh. 5 - Arbitrage rules under the Internal Revenue Code a....Ch. 5 - Prob. 17.15EPCh. 5 - Make all necessary entries in the appropriate...Ch. 5 - Prob. 19EPCh. 5 - Prob. 20EPCh. 5 - In the current year, the building occupied by...Ch. 5 - Prob. 22EPCh. 5 - Make all necessary entries in a capital projects...Ch. 5 - The year-end pre-closing trial balance for the...Ch. 5 - Prob. 25EPCh. 5 - This year Riverside began work on an outdoor...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Prepare the journal entries that the lessee should make to record the following transactions. The lessee makes a lease payment of $80,000 to the lessor in an operating lease transaction. Veatech Company leases a new building from Joel Construction, Inc. The present value of the lease payments is $700,000.The lease qualifies as a capital lease.arrow_forwardKendall County entered into a lease agreement to finance computer equipment used in government offices. The lease covers three years, and county officials are reasonably certain that funding and approvals will be renewed annually. At the inception of the lease, a payment of $640,000 will be made; two additional annual lease payments of $640,000 are to be made near the end of each year. The total amount to be paid under this lease is $1,920,000. The lease arrangements implied an annual interest rate of 3 percent. Therefore, the present value of the lease at inception, including the initial payment, is $1,864,620. Assume that the fair value of the equipment at the inception of the lease is $1,900,000. What amount would the liability be reported at the end of the first yeararrow_forwardPrepare an amortization table for the five-year term of the lease. Prepare journal entries in the books of Generous, Inc. for years 2022 and 2023 to record all transactions relating to the lease. Prepare the journal entry at the end of the lease term to record the transfer of the leased automobiles to the lessor.arrow_forward
- Land City leases a fleet of garbage trucks. The term of the lease is 10 years, approximately the useful life of the equipment. Based on a sales price of $800,000 and an interest rate of 6%, the city agrees to make annual payments of $108,694. Upon the expiration of the lease, the trucks will revert to the city. 1. Prepare appropriate journal entries in the general fund, the general fixed assets account group, and the general long-term debt account group to record the signing of the lease. 2. Prepare appropriate journal entries in the same fund and account groups to record the first payment on the lease. The city records depreciation on garbage trucks using the straight-line method.arrow_forwardZachariah City's water utility fund enters into a five-year lease for maintenance equipment on July 1, 2022. The City's fiscal year end is December 31, 2022. Assuming lease payments are $50,000, the interest rate is 5%, and the present value of the lease payments is $227,298. 1. Record any necessary entry at the inception of the lease. 2. Record the first lease payment of $50,000 on July 2, 2022. 3. Record any necessary amortization on December 31, 2022. 4. Record the second lease payment of $50,000 on July 2, 2023. Reset. Now show me what these four journal entries would be if it had been the City's general fund that entered into the lease.arrow_forwardOn January 1, 2021, Winn Heat Transfer leased office space under a three-year lease agreement. The arrangement specified three annual rent payments of $80,000 each, beginning January 1, 2021, the inception of the lease, and at each January 1 through 2023. Winn also paid a $96,000 advance payment at the inception of the lease in addition to the first $80,000 rent payment. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $180,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. The implicit rate of the lease is 8% per annum, which is also Winn’s incremental borrowing rate. Required: Prepare the appropriate entries for Winn Heat Transfer from the inception of the lease through the end of 2021. Winn’s financial year is the calendar year. Winn uses straight-line depreciation.arrow_forward
- Kendall County entered into a lease agreement to finance computer equipment used in government offices. The lease covers three years, and county officials are reasonably certain that funding and approvals will be renewed annually. At the inception of the lease, a payment of $150,000 will be made; two additional annual lease payments of $150,000 are to be made near the end of each year. The total amount to be paid under this lease is $450,000. The lease arrangements implied an annual interest rate of 3 percent. Therefore, the present value of the lease at inception, including the initial payment, is $437,020. Assume that the fair value of the equipment at the inception of the lease is $445,750. Required Prepare entries required to record the inception of the lease in the General Fund, the debt service fund, and the governmental activities journal. Prepare entries required to record the payment at the end of the first year of the lease in both the debt service fund and governmental…arrow_forwardAssume that on December 31, 2019, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $67,599 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $494,051. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $9,000, and an expected residual value of $5,500. Kimberly-Clark depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Kimberly-Clark’s incremental borrowing rate is 8% per year. The lessor’s implicit rate is not known by Kimberly-Clark. Prepare the journal entries on the lessee’s books to reflect the signing of the lease agreement and to record the payments and expenses related to this…arrow_forwardIn your audit of Entity A, you noted that the Rent expense account has an ending balance of $1,100,000 at December 31, 2021. $100,000 of this pertains to the maintenance costs paid by the Lessor on behalf of Entity A, which was later paid by Entity A. The lease commenced on January 1, 2021. The following are the terms of agreement. Terms of the Lease Agreement Lease term 8 years Useful life 10 years Annual rental payments due at the end of the year $1,000,000 Residual value at the end of useful life $500,000 Bargain purchase option 200,000 Maintenance costs reimbursed to lessor 100,000 8% Implicit rate Note: There is reasonable certainty that the purchase option will be exercised by Entity A at the end of the lease term Required: 1. Compute for the (a) initial lease liability and the cost of the right-of-use asset, (b) Depreciable amount to be used and depreciation expense (c) Carrying amount of the lease liability and the right- of-use asset at the end of the year. 2. Show adjusting…arrow_forward
- Assume that on December 31, 2019, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $ 67,299 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $ 492,571. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $ 10,500, and an expected residual value of $ 7,300. Kimberly-Clark depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Kimberly-Clark’s incremental borrowing rate is 8% per year. The lessor’s implicit rate is not known by Kimberly-Clark.arrow_forwardAssume that on December 31, 2019, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $66,299 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $486,019. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $12,000, and an expected residual value of $9,800. Kimberly-Clark depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Kimberly-Clark’s incremental borrowing rate is 8% per year. The lessor’s implicit rate is not known by Kimberly-Clark. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Partially…arrow_forwardAssume that on December 31, 2019, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $66,299 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $486,019. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $12,000, and an expected residual value of $9,800. Kimberly-Clark depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Kimberly-Clark’s incremental borrowing rate is 8% per year. The lessor’s implicit rate is not known by Kimberly-Clark. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your Answer…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Accounting for Finance and Operating Leases | U.S. GAAP CPA Exams; Author: Maxwell CPA Review;https://www.youtube.com/watch?v=iMSaxzIqH9s;License: Standard Youtube License