Irrespective of how capital assets are aquired, they are recorded differently in overnmental funds than in business.

Question:

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.

1. Prepared the journal entries that the township would make in its general fund in the year of acquistion 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 reprepsents the annuity required to liquidae a loan of $200,000 at 10% interest. The lease would satify the cirteria necessary to be accounted for as a capital lease.

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.

2. Comment on how any ''off the balance sheet'' assets or obligations would be reported in supplementary schedules and the government-wide statements.

Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...