Pittston County has an empty school building with a net book value of $700,000 and a remaining life of 10 years with no expected residual value. The building is leased to the City of Lincoln at the start of the current year for 10 years. Annual payments are set at $103,565 to reflect Pittston's implicit interest rate of 10 percent per year. This rate is known by both parties. The first pay- ment is made immediately. What revenue and expense does Pittston report in the first year on government-wide statements? What expense does Lincoln report in the first year on government- wide statements?
Pittston County has an empty school building with a net book value of $700,000 and a remaining life of 10 years with no expected residual value. The building is leased to the City of Lincoln at the start of the current year for 10 years. Annual payments are set at $103,565 to reflect Pittston's implicit interest rate of 10 percent per year. This rate is known by both parties. The first pay- ment is made immediately. What revenue and expense does Pittston report in the first year on government-wide statements? What expense does Lincoln report in the first year on government- wide statements?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 7
Transcribed Image Text:7. Pittston County has an empty school building with a net book value of $700,000 and a remaining
life of 10 years with no expected residual value. The building is leased to the City of Lincoln at
the start of the current year for 10 years. Annual payments are set at $103,565 to reflect Pittston's
implicit interest rate of 10 percent per year. This rate is known by both parties. The first pay-
ment is made immediately. What revenue and expense does Pittston report in the first year on
government-wide statements? What expense does Lincoln report in the first year on government-
wide statements?
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