Kendall County entered into a lease agreement to finance computer equipment used in governmentoffices. The lease covers three years, and county officials are reasonably certain that funding andapprovals will be renewed annually. At the inception of the lease, a payment of $150,000 will be made;two additional annual lease payments of $150,000 are to be made near the end of each year. The totalamount to be paid under this lease is $450,000. The lease arrangements implied an annual interest rate of3 percent. Therefore, the present value of the lease at inception, including the initial payment, is $437,020.Assume that the fair value of the equipment at the inception of the lease is $445,750. Required Prepareentries required to record the inception of the lease in the General Fund, the debt service fund, and thegovernmental activities journal. Prepare entries required to record the payment at the end of the first yearof the lease in both the debt service fund and governmental activities journal. c-1. Which financialstatement prepared at the end of the first year would show both the asset and the liability related to thislease? c-2. What amount would the liability be reported at the end of the first year?Transaction1. Record the inception of the lease.Fund/Governmental Activties General Journal Debit Credit1General FundDebt Service FundGovernmental Activities.Record the payment at the end of the yeardebit service fund⚫governmental activities

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Description: Kendall County entered into a lease agreement to finance computer equipment used in governmentoffices. The lease covers three years, and county officials are reasonably certain that funding andapprovals will be renewed annually. At the inception of

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Answered: What amount would the liability be…

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What amount would the liability be reported at the end of the first year?

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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Concept explainers

Financial Transaction Analysis

The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business, at least two accounts should be affected I.e. both the debit side and the credit side should be equal. The Accounting Equation is

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Question

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 $150,000 will be made;
two additional annual lease payments of $150,000 are to be made near the end of each year. The total
amount to be paid under this lease is $450,000. 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 $437,020.
Assume that the fair value of the equipment at the inception of the lease is $445,750. Required Prepare
entries required to record the inception of the lease in the General Fund, the debt service fund, and the
governmental activities journal. 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? c-2. What amount would the liability be reported at the end of the first year?
Transaction
1. Record the inception of the lease.
Fund/Governmental Activties General Journal Debit Credit
1
General Fund
Debt Service Fund
Governmental Activities
.
Record the payment at the end of the year
debit service fund
⚫governmental activities

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