The accountant for the City of Abernethy calls the local CPA firm that audits the city's financial statements with a question.

"At the stat of the current year, city officials signed a contract to lease a new police car for seven years, its entire useful life. We drove a hard bargain. The annual payments are only $18,000 per year so the liability has a present value of $98,031. I realize the city has to report the initial liability at that amount. Nevertheless, the car has a fair value of $114,000. We know that based on its sales price. Can we report the asset at $114.000 even if we have to report the liability at $98,031?"

Required

Go to GASB Click on "Standards & Guidance." Under "Pronouncements," click on "More." Under "View GASB

Pronouncements," search for GASB Statement No. 87. Click on "Full Text." Scroll to the Table of Contents. Locate "Appendix B: Basis for Conclusions." This section explains what options GASB considered and what decisions were made. Locate and read paragraphs B47 through B50. Based on that discussion, write a memo to officials for the City of Abernethy answering the question posed by the

accountant

Need help with B48

B48. The measurement of the lease asset includes any lease payments made at or before the commencement of the lease term. Those payments are not included in the lease liability but are part of the cost of the lease asset. Therefore, those amounts should be added to the amount derived from the lease liability so that the lease asset is measured at its total cost. Accordingly, any lease incentive payments received from the lessor at or before the com- mencement of the lease term reduce the amount capitalized, as discussed in paragraph 62.

Please give the numbers too.