When a government acquires general fixed assets under a capital lease agreement, the asset should be recorded in the General Fund's fund basis financial statements:
A) As a capital asset and lease obligation at the inception of the lease agreement at the lesser of the present value of the minimum lease payments or the fair market value of the property
B) as debt service expenditures when payments are made
C) As a capital asset and lease obligation at the inception of the lease agreement for the total lease payments
D) as an expense when payments are made

Question

Quizplus · Accepted Answer

GASB standards require the lease to be reflected as a capital expenditure within a governmental fund. The general fund would record a to debit Expenditures - Capital Outlay for the present value of the payments and credit Cash assuming a down payment) and Other Financing Sources - Capital.

When a Government Acquires General Fixed Assets Under a Capital