Question
The City of Rochester signed a 30-year agreement with East Coast Real Estate, Inc. to lease a newly-constructed building for city services. The city agrees
The City of Rochester signed a 30-year agreement with East Coast Real Estate, Inc. to lease a newly-constructed building for city services. The city agrees to make an initial payment of $1,900,000 and annual payments of $760,840 for the next 29 years. Using an assumed borrowing rate of 6 percent, the present value of the lease payments is approximately $12,240,400. At the time the lease agreement is signed, the building had an appraised market value of $13 million and an estimated life of 40 years.
Provide journal entries the city should make for both the capital projects fund and governmental activities at the government-wide level to record the lease at the date of inception. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) (Possible Journal Accounts that can be used: Accumulated Depreciation, Appropriations, Budgetary Fund Balance, Buildings, Capital Lease Obligations Payable, Cash, Construction Expenditures, Construction Work in Progress, Encumbrances, Encumbrances Outstanding, Estimated Revenues, Expenditures, Expenses -General Government, Expenses-Public Safety, Fund Balance-Assigned, Fund Balance-Unassigned, Other Financing Sources-Capital Lease Agreements)
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