The City of Bellaire has agreed to acquire a new city maintenance building under a lease agreement. At the inception of the lease, a payment of $$100,000$ is to be made; nine annual lease payments, each in the amount of $$100,000,$ are to be made at the end of each year after the inception of the lease. The total amount to be paid under this lease, therefore, is $$1,000,000.$

The town could borrow this amount for nine years at the annual rate of $4$ percent; therefore, the present value of the lease at inception, including the initial payment, is $$843,533.$ Assume that the fair value of the building at the inception of the lease is $$850,000.$

Prepare the entry that should be made in a capital projects fund at the inception of the lease.

Record the entry that should be made in the debt service fund for the second lease payment.

Record the entry that should be made in governmental activities journal for the second lease payment.Problem