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5 - 6 Irrespective of how capital assets are acquired, they are recorded differently in governmental funds than in businesses. In a recent year, Ives
Irrespective of how capital assets are acquired, they are recorded differently in governmental funds than in businesses.
In a recent year, Ives Township acquired six police cars at a total cost of $ The vehicles are expected to have a useful life of four years.
Prepare the journal entries that the township would make in its general fund in the year of acquisition for each of the following assumptions:
It paid for the cars in cash at the time of acquisition.
It leased the cars and agreed to make, starting in the year of acquisition, four equal payments of $ an amount that represents the annuity required to liquidate a loan of $ at percent interest. The lease would satisfy the criteria necessary to be accounted for as a capital lease.
It issued $ in installment notes to the car dealer, agreeing to repay them in four annual payments of $ starting in the year of acquisition.
Comment on how any "off the balance sheet" assets or obligations would be reported in supplementary schedules and the governmentwide statements.
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