The following schedule is based on the notes to the financial statements of Beth County Health District. Future minimum payments under capitalized leases and non-cancellable operating leases with initial or remaining terms of one year or more

1. Where on the district's government-wide statement of net position, if at all, would each of the amounts reported on the schedule be reflected (or combined with other amounts)?
2. What is the significance of the amount representing interest?
3. Prepare a journal entry to record the 2017 capital lease payments. Assume that the leases incorporate an interest rate of 6.56 percent (a rate that when used to discount each of the lease payments yields $1,818, the total present value of minimum payments).
4. Prepare a journal entry to record the 2017 operating lease payments.
5. Suppose that the district's cost of capital is 6.56 percent and that the $25,079 in operating lease payments are for a period of five years from 2021 through 2025 (in equal amounts of $5,016). What is the present value of the district's operating lease obligations from 2017 through 2025? Of what significance is this amount to a statement user (i.e., why might it be as important as the actual debt reported on the balance sheet)? Would you favor requiring governments to report such a liability on their balance sheets?

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Capitalized leases Operating leases (in thousands) 2017 2018 2019 2020 2021 and thereafter Total minimum lease payments Less amount representing interest Present value of minimum payments S 756 560 415 242 116 $2,089 271 $1,818 $11.696 7,949 6,388 5,475 25,079 $56,587