A Government Signed a Five-Year Capital Lease on January 1

Multiple Choice

A government signed a five-year capital lease on January 1, 2017 to obtain some equipment. The lease provided that the government would make a down payment of $20,000 and four $20,000 payments each year after that, beginning January 1, 2016. The government has a fiscal year ending December 31. Upon inception of the lease, the government, in its governmental fund accounting records would:

A) Debit expenditures for $20,000 and credit cash for $20,000.
B) Debit expenditures for $100,000, credit cash for $20,000, and credit accounts payable for $80,000.
C) Debit expenditures for the present value of the payments including the $20,000 down payment) , credit cash for $20,000, and credit accounts payable for the difference between the $20,000 and the present value of the future payments.
D) Debit expenditures for the present value of the payments including the $20,000 down payment) , credit cash for $20,000, and credit other financing sources for the difference between the $20,000 and the present value of the future payments.