1. Irrespective of how capital assets are aquired, they are recorded differently in overnmental funds than in business. In a recent year, Ives Township acquired six police cars at total cost of $200,000. The vehicles are expected to have a useful life of four years.
1. Prepared the journal entries that the township would make in its general fund in the year of acquistion if:
a. It paid for the cars in cash at the time of acquisition.
b.
It leased the cars, agreeing to make four equal payments of $63,095 starting the year of acquisition, an amount that reprepsents the annuity required to liquidae a loan of $200,000 at 10% interest. The lease would satify the cirteria 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 year of acquisition.
2. Comment on how any assets or obligations that are not included in the governmental fund balance sheet would be reported.
3. Comment on any adjustments that would have to be made to report the assets on government-wide statements.