1. GASB 87 provides a new framework for accounting for leases under the principle that leases are financings. No longer will leases be classified between capital and operating. Lessees will recognize an intangible asset and a corresponding liability. The liability will be based on the payments expected to be paid over the lease term, which includes an evaluation of the likelihood of exercising renewal or termination options in the lease.        The city of El Paso decided to implement early adoption in 2019. It just signs 3 years lease for an office building with a remaining Economic life of 20 years. The building has a fair market value of $555,018 million. Based on an interest rate of 4 percent, annual lease payments are set at $200,000, the amount required to liquidate a $555,018 million, 3 year, 4 percent loan in equal annual installments. Total Liability reported in Government-Wide and Governmental Fund statement respectively for City of El  Paso at  the end of Year 1 will be:        Approximately $555,018, $555,018 respectively     Approximately $177,799, 22,201 respectively     Approximately  $377,219, $0 respectively;     Approximately  $377,219, $22,201 respectively;

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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1. GASB 87 provides a new framework for accounting for leases under the principle that leases are financings. No longer will leases be classified between capital and operating. Lessees will recognize an intangible asset and a corresponding liability. The liability will be based on the payments expected to be paid over the lease term, which includes an evaluation of the likelihood of exercising renewal or termination options in the lease.

       The city of El Paso decided to implement early adoption in 2019. It just signs 3 years lease for an office building with a remaining Economic life of 20 years. The building has a fair market value of $555,018 million. Based on an interest rate of 4 percent, annual lease payments are set at $200,000, the amount required to liquidate a $555,018 million, 3 year, 4 percent loan in equal annual installments.

Total Liability reported in Government-Wide and Governmental Fund statement respectively for City of El  Paso at  the end of Year 1 will be: 

 

   

Approximately $555,018, $555,018 respectively

   

Approximately $177,799, 22,201 respectively

   

Approximately  $377,219, $0 respectively;

   

Approximately  $377,219, $22,201 respectively;

 

 

2.

Which of the following will increase the Pension Fund Profolio

 

   

Employer Contribution

 

   

Employee Contribution

 

   

Net Investment Gain 

 

   

All of the above

ANSWER 1 AND 2 both please

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