Question

A government enters into a lease agreement for the purchase of a new snow plow. The present value of the future lease payments is $845,500 and there is a down payment at the inception of the lease of $25,000. The snow plow should be recorded in the General Fund at:

Answer 1

$870,500

Step-by-step explanation:

The computation of the snow plow should be recorded in the General Fund is shown below:

= The present value of the future lease payments + down payment at the inception of the lease

= $845,500 + 25,000

= $870,500

We simply added the above two items i.e present value and the down payment so that the correct amount could arrive