At the beginning of the fiscal year, a general fund leases property. The lease qualifies as a

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At the beginning of the fiscal year, a general fund leases property. The lease qualifies as a capital lease. At the time the lease is initiated, the present value of the future lease payments is \($3,000,000\). The lease agreement reflects an implicit interest rate of 4 percent. The first payment of \($500,000\) is made at the end of the fiscal year. On its operating statement for the year, the general fund reports

a. other financing sources of \($3,000,000\) and a capital outlay expenditure of \($500,000.\)

b. a capital outlay expenditure of \($500,000.\)

c. a capital outlay expenditure of \($3,000,000\) and other financing sources of \($3,000,000,\) an expenditure for interest of \($120,000,\) and an expenditure for principal of \($380,000.\)

d. an expenditure for interest of \($120,000.\)

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Advanced Accounting

ISBN: 978-1618531513

3rd Edition

Authors: Susan S. Hamlen

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