AccountingSBITAS are accounted for similarly to leases.A city signs a three- year licensing agreementwith a soft-ware company for use of a payrollmanagement system in its electrical utility fund.Annual charges are $10,000 per year. It is thepolicy of the city to use a discount rate of 6percent to value right- to- use assets when aninterest rate is not explicitly stated in a lease orcomparable agreement. It also depreciates allcapital and similar assets on a straight- linebasis. The subscription period runs from January1, 20X1 through December 31, 20X3, withpayment due on January 1 of each of the threeyears.1. Prepare a journal entries to record the start ofthe licensing agreement on January 1, 20X1 inits electrical utility fund (a proprietary fund) aswell as the first payment of $10,000.2. Prepare an entry to record an appropriatejournal entry on December 31, 20X1.3. Prepare an entry to record the secondpayment of $10,000 on January 1, 20X2.

SBITA are subscription based information technology arrangements. These are accounted in similar way…

1. Prepare a journal entries to record the start of the licensing agreement on January 1, 20X1 in its electrical utility fund (a proprietary fund) as well as the first payment of $10,000. 2. Prepare an entry to record an appropriate journal entry on December 31, 20X1. 3. Prepare an entry to record the second payment of $10,000 on January 1, 20X2.

1. Prepare a journal entries to record the start of the licensing agreement on January 1, 20X1 in its electrical utility fund (a proprietary fund) as well as the first payment of $10,000. 2. Prepare an entry to record an appropriate journal entry on December 31, 20X1. 3. Prepare an entry to record the second payment of $10,000 on January 1, 20X2.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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