Fundamentals of Advanced Accounting 5th Edition by Joe Ben Hoyle,Thomas Schaefer,Timothy Doupnik

Exercise 83

On January 1, 2013, a city entered into the following leases for equipment items. Each of the leases qualifies as a capital lease. Initial payments are on December 31, 2013. An interest rate of 12 percent is viewed as appropriate. No bargain purchase options exist.

a. Prepare journal entries for the year 2013 for both of these leases for government-wide financial statements.
b. Prepare journal entries for the year 2013 for both of these leases for fund financial statements.