Kendall County entered into a lease agreement to finance computer equipment used in government offices. The...

 

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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 $440,000 will be made; two additional annual lease payments of $440,000 are to be made near the end of each year. The total amount to be paid under this lease is $1,320,000. 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 $1,281,926. Assume that the fair value of the equipment at the inception of the lease is $1,310,000. Required a Prepare entries required to record the inception of the lease in the General Fund, the debt service fund, and the governmental activities journal. b. 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 activities journal. c-1. Which financial statement prepared at the end of the first year would show both the asset and the liability related to this lease? c2. What amount would the liability be reported at the end of the first year? Complete this question by entering your answers in the tabs below. Required A Required B Required C1 Required C2 Prepare entries required to record the inception of the lease in the General Fund, the debt service fund, and the governmental activities journal. (If is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations. Round your to the nearest whole dollar amount.) Fund / Governmental Activties Transaction General Journal Debit Credit 1. Record the inception of the lease 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 $440,000 will be made; two additional annual lease payments of $440,000 are to be made near the end of each year. The total amount to be paid under this lease is $1,320,000. 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 $1,281,926. Assume that the fair value of the equipment at the inception of the lease is $1,310,000. Required a Prepare entries required to record the inception of the lease in the General Fund, the debt service fund, and the governmental activities journal. b. 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 activities journal. c-1. Which financial statement prepared at the end of the first year would show both the asset and the liability related to this lease? c2. What amount would the liability be reported at the end of the first year? Complete this question by entering your answers in the tabs below. Required A Required B Required C1 Required C2 Prepare entries required to record the inception of the lease in the General Fund, the debt service fund, and the governmental activities journal. (If is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations. Round your to the nearest whole dollar amount.) Fund / Governmental Activties Transaction General Journal Debit Credit 1. Record the inception of the lease

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PV of lease liability is to be recognised Similarly right to use of asset Using the implicit rate fi... View the full answer