Leases for Government-wide Financial Statements Assignment Help
1.On January 1, 2015, a city entered into the following leases for equipment items. Each of the leases qualifies as a capital lease. Initial payments are on December 31, 2015. An interest rate of 12 percent is viewed as appropriate. No bargain purchase options exist.
|FUND||ANNUAL PAYMENTS||TOTAL PAYMENTS||PRESENT VALUE OF TOTAL PAYMENTS|
|General (10-year life)||$3,000||$30,000||$19,000|
|Enterprise (4-year life)||9,000||36,000||30,600|
a. Prepare journal entries for the year 2015 for both of these leases for government-wide financial statements.
b. Prepare journal entries for the year 2015 for both of these leases for fund financial statements.
2.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.
a)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.
b)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.
3.Prepare journal entries to record the following events using the general fund and the general ﬁxed assets account group:
a.The general fund vouchered the purchase of trucks for $80,000. The purchase had been encumbered earlier in the year at $75,000.
b.Several years ago, equipment costing $15,000 was acquired with general fund revenues. It was sold for $6,000, with proceeds belonging to the general fund.
c.Early in the year, a citizen donated to the city land appraised at $100,000. She submitted plans for a new library and agreed to cover the total cost of construction, paying the company directly as work proceeded. At year-end, the building was two-thirds ﬁnished, with costs to date of $300,000. The expenditures are recorded in a capital projects fund.
d.A snow plow was purchased with general fund cash for $92,000, which represented a cost of $110,000 less trade-in of $18,000 for an old snow plow originally purchased for $66,000 from special revenue funds. As an emergency purchase, the acquisition of the new snow plow had not been encumbered.
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4.What costs necessitate the reporting of an expenditure by a governmental fund? At what point in time does a governmental fund report an expenditure? How do governmental funds report capital outlay in fund financial statements? How do government-wide financial statements report capital expenditures?
5.Irrespective of how capital assets are acquired, they are recorded differently in governmental funds than in business.
In a recent year, Ives Township acquired six police cars at total cost of $200,000. The vehicles are expected to have a useful life of four years.
Prepared the journal entries that the township would make in its general fund in the year of acquisition if:
a. It paid for the cars in cash at the time of acquisition.
b.It leased the cars, agreeing to make four equal payments of $63,095 starting the year of acquisition, an amount that represents the annuity required to liquidate a loan of $200,000 at 10% interest. The lease would satisfy the criteria necessary to be accounted for as a capital lease (purchase-borrow transaction).
c. It issued $200,000 in installment notes to the car dealer, agreeing to repay them in four annual payments of $63,095, starting in year of acquisition.
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