doan12345 smile DS - AutoSaver File Home 8 Insert Chapter Homework Template (Tata Formulas Data Review Page Layout View O Comments Share Genel Conditional Formatting Format sole 2 - 98 C 2Y Clipboard PRODUCT DEACTIVATED To keping with i n reactivate now 4 H21 - for A B C D E F G H I J K L M N O P Q R 1 On Dec 31, 2016, the Eastville City Water Department based equipment under a noncancelable lease agreement that transferred title to the city after making seven payments of S 15,250 The present value (6% interest of the minimum lease payments is $90.250. Payments are to take place on December 31, beginning in 2016. The Eastville City Water Department is an enterprise fund and accounts for capital leases as a businesslike activity Required: Prepare journal entries for 2016 and 2017 assuming the estimated useful life of the equipment is 10 years, The transactions recorded in the section Accounting for Equipment Acquired under Capital Leases - Businesslike Activities," on page 268 can be used as an example 268 Chapter 9 Credits Debits 57,590 57,590 Other Financing Sources-Capital Lease Agreements Obligation Under Capital Lease .. Additional worksheet entries are necessary in 2017 to record depreciation on the equipment, to record payment of principal on the lease obligation, and since work- sheet entries are not "booked") to re-establish the beginning balances of the leased asset and obligation: 67.590 PAMALT Capital Assets Leased Equipment.... Obligation Under Capital Lease.... Net Position ..... 57,590 10,000 6,759 6,759 Depreciation Expense (10-year life) ......... Accumulated Depreciation-Leased Equipment.. Obligation Under Capital Lease.... Expenditures-Principal.... 4,341 4.241 Accounting for Equipment Acquired under Capital Leases-Businesslike Activities Proprietary funds may also enter lease agreements. The same four criteria are applied to determine whether the lease is operating or capital. Assume the same facts regarding the equipment lease, except that it was an enterprise fund that entered the lease. The entries for the first two years would be: 67,590 Capital Assets-Leased Equipment..... Obligation Under Capital Lease.... 57,590 10.000 Cash... Because the lease was signed at the end of 2016, no further entries are required. The entries for the December 31, 2017, rental payment and depreciation in the enterprise fund are as follows: 5,759 Nonoperating Expense-Interest ........... Obligation Under Capital Lease............ Cash... . 4,241 10,000 Depreciation Expense ........... . .. ........................ Accumulated Depreciation-Lease Equipment ... 6,759 6,759