On January 1, 2015, the City of Verga leased a large truck for five years and ma

Question

On January 1, 2015, the City of Verga leased a large truck for five years and made the initial annual payment of $26,500 immediately. The present value of these five payments based on an 5 percent interest rate is assumed to be $114,700. The truck has an expected useful life of 5 years.

Assuming that the airport (an enterprise fund) operated by the city will use the truck, what journal entries should be made for 2015 and 2016 on the fund financial statements? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answer to the nearest dollar amount.)
1. Record the entry for capital lease at the beginning of the year.
2. Record first payment of the leased truck.
3. Record depreciation.
4. Record payment ln leased truck.
5. Record depreciation.

Assuming that the airport (an enterprise fund) operated by the city will use the truck, what journal entries should be made for 2015 and 2016 on the fund financial statements? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answer to the nearest dollar amount.)
1. Record the entry for capital lease at the beginning of the year.
2. Record first payment of the leased truck.
3. Record depreciation.
4. Record payment ln leased truck.
5. Record depreciation.

Explanation / Answer

Solution 1 Debit Truck A/c    600000 Credit Capital Lease Liabities A/c           600000 (Inclduing Interest) 2 Debit Capital Lease Liabities A/c   114700 Credit Accounts payable account 114700 3 Debit Depriciation Account 120000 Credit Accumlated Depriciation   120000 4 Accounts payable account 114700 Bank Account 114700 5 No journal entry required

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