In a recent year Ives Township acquired six police cars at a total cost of $200,000. The

Question:

In a recent year Ives Township acquired six police cars at a total cost of $200,000. The vehicles are expected to have a useful life of four years.
1. Prepare the journal entries that the township would make in its general fund in the year of acquisition for each of the following assumptions:
a. It paid for the cars in cash at the time of acquisition.
b. It leased the cars and agreed to make, starting in the year of acquisition, four equal payments of $ 63,095, an amount that represents the required to liquidate a loan of $ 200,000 at 10 percent interest.
The lease would satisfy the criteria necessary to be accounted for as a capital lease.
c. It issued $ 200,000 in installment notes to the car dealer, agreeing to repay them in four annual payments of $ 63,095, starting in the year of acquisition.
2. Comment on how any ''off the balance sheet'' assets or obligations would be reported in supplementary schedules and the government-wide statements.

Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...