Buy here : http :// homework . plus / in-early-2017-mccormick-county-a greed-to-acquire-a-new-recreation-equipment-storage-fa cility-under-a-capital-lease-agreement /
Buy here : http :// homework . plus / in-early-2017-mccormick-county-a greed-to-acquire-a-new-recreation-equipment-storage-fa cility-under-a-capital-lease-agreement /
In early 2017 , McCormick County agreed to acquire a new recreation equipment storage facility under a capital lease agreement . At the inception of the lease , a payment of $ 750,000 will be made ; four additional annual lease payments , each in the amount of $ 750,000 , are to be made at the end of each year , beginning in late 2017 . The total amount to be paid under this lease is $ 3,750,000 . The county could borrow this amount for four years at an annual interest rate of 6 percent . Therefore , the present value of the lease at inception , including the initial payment , is $ 3,348,829 . Assume that the fair value of the building at the inception of the lease is $ 3,600,000 .
Required
a . Was this lease properly classified as a capital lease ? Explain .
b . Show the entries required to record the inception of the lease in the capital projects fund , the debt service fund , and the governmental activities journal .
c . Show the 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 .
d . Which financial statement ( s ) prepared at the end of the first year would show both the asset and the liability related to this capital lease ? At what amount would the liability be reported ?