Chapter 6, Problem 2.6E

Assume a governmental entity enters into a capital lease for the purchase of seven new public safety vehicles. The present value of the future minimum lease payments is $224,750, and a down payment of $25,000 is made at the inception of the lease. The net effect on fund balance of the General Fund in the year of inception is

1. a. a decrease of $25,000.
2. b. a decrease of $224,750.
3. c. a decrease of $199,750.
4. d. an increase of $224,750.