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 annuity 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.