The City of Clear Lake signed a lease agreement with Mountainside Builders whereby Mountainside will construct a new office building for city administrative use and lease it to the City for 30 years. The City has agreed to make an initial payment of $822,441 and annual payments in the same amount for the next 29 years. At a 6 percent discount rate, the present value of the lease payments totals $12 million. Upon completion, the building had an appraised value of $13 million and an estimated useful life of 40 years. Required a. Provide the journal entries the city should make in both the capital projects fund general journal and the governmental activities general journal to record the lease at the date of inception. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in whole dollars, not in millions.) Transaction Fund / Governmental Activities 1. Record the lease at the date of inception. 1 Answer is complete but not entirely correct. General Journal Debit Credit Capital Projects Fund Expenditures Cash Other Financing Sources-Lease Agreements Governmental Activities Lease Assets-Buildings Cash Capital Lease Obligations Payable 12,000,000 ( 822,441 11,177,559 ( 12,000,000 822,411x 11,177,589 x
The City of Clear Lake signed a lease agreement with Mountainside Builders whereby Mountainside will construct a new office building for city administrative use and lease it to the City for 30 years. The City has agreed to make an initial payment of $822,441 and annual payments in the same amount for the next 29 years. At a 6 percent discount rate, the present value of the lease payments totals $12 million. Upon completion, the building had an appraised value of $13 million and an estimated useful life of 40 years. Required a. Provide the journal entries the city should make in both the capital projects fund general journal and the governmental activities general journal to record the lease at the date of inception. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in whole dollars, not in millions.) Transaction Fund / Governmental Activities 1. Record the lease at the date of inception. 1 Answer is complete but not entirely correct. General Journal Debit Credit Capital Projects Fund Expenditures Cash Other Financing Sources-Lease Agreements Governmental Activities Lease Assets-Buildings Cash Capital Lease Obligations Payable 12,000,000 ( 822,441 11,177,559 ( 12,000,000 822,411x 11,177,589 x
Chapter3: Income Sources
Section: Chapter Questions
Problem 88P
Related questions
Question
None
Transcribed Image Text:The City of Clear Lake signed a lease agreement with Mountainside Builders whereby Mountainside will construct a new office building
for city administrative use and lease it to the City for 30 years. The City has agreed to make an initial payment of $822,441 and annual
payments in the same amount for the next 29 years. At a 6 percent discount rate, the present value of the lease payments totals $12
million. Upon completion, the building had an appraised value of $13 million and an estimated useful life of 40 years.
Required
a. Provide the journal entries the city should make in both the capital projects fund general journal and the governmental activities
general journal to record the lease at the date of inception. (If no entry is required for a transaction/event, select "No Journal Entry
Required" in the first account field. Enter your answers in whole dollars, not in millions.)
Transaction
Fund / Governmental
Activities
1. Record the lease at the date of inception.
1
Answer is complete but not entirely correct.
General Journal
Capital Projects Fund
Expenditures
Cash
Other Financing Sources-Lease Agreements
Governmental Activities
Lease Assets-Buildings
Cash
Capital Lease Obligations Payable
Debit
Credit
12,000,000
822,441
11,177,559
12,000,000
822,411x
11,177,589
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you