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Pearl City leases an emergency communications system. The term of the lease is 10 years, approximately the useful life of the equipment. Based on the sales price of $800,000 and an interest rate of 6%, the city agrees to make annual payments of $108,694. Upon the expirarion of the lease, the equipment reverts to the city.

1. Prepare appropriate entry in the citys government wide statements to reflect the signing of the lease.

2. Prepare appropriate entries to record the first payment on the lease.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9984205

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