On January 1 2015 a city entered into the following leases f

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 14 percent is viewed as appropriate. No bargain purchase options exist. Annual Payments Payments of Total Payments Total Present Value Fund General (10-year life) 1,800 Enterprise (4-year life) 10,100 $ 18,000 $11,200 33,300 40,400 a. Prepare journal entries for the year 2015 for both of these leases for government-wide financial statements. (If no entry is required for a transaction/event, select \"No journal entry required\" in the first account field.) View transaction list Journal entry worksheet 2 3 4 Record the entry for capital lease at the beginning of the year. Note: Enter debits before credits Date General Journal Debit Credit January 01, 2015 Record entry Clear entry View general journal

Solution

GOVERNMENT-WIDE FINANCIAL STATEMENTS Date Account Titles and Explanation Debit Credit Jan 1 2015 Assets - Capital Lease ($11,200 + $33,300) $44,500.00 Capital Lease Obligation $44,500.00 Dec 31 2015 Capital Lease Obligation $5,670.00 Interest Expense ($44,500 x 14%) $6,230.00 Cash ($1800 + $10100) $11,900.00 Dec 31 2015 Depreciation Expense - Governmental ($11,200/10) $1,120.00 Accumulated Depreciation (10-year life) $1,120.00 Dec 31 2015 Depreciation Expense- Business Type ($33,300/4) $8,325.00 Accumulated Depreciation (4-year life) $8,325.00 FUND-BASED FINANCIAL STATEMENTS Date Account Titles and Explanation Debit Credit Enterprise Fund Jan 1 2015 Assets - Capital Lease $33,300.00 Capital Lease Obligation $33,300.00 Dec 31 2015 Capital Lease Obligation $5,438.00 Interest Expense ($33,300 x 14%) $4,662.00 Cash $10,100.00 Dec 31 2015 Depreciation Expense- Business Type ($33,300/4) $8,325.00 Accumulated Depreciation (4-year life) $8,325.00 General Fund Dec 31 2015 Expenditures —Leased Asset $11,200.00 Other Financing Sources—Capital Lease $11,200.00 Dec 31 2015 Expenditures—Interest ($11,200 x 14%) $1,568.00 Expenditures—Principal $232.00 Cash $1,800.00