The City of Roswell Has a 6/30 Fiscal Year-End

question 17

Multiple Choice

The City of Roswell has a 6/30 fiscal year-end. The city uses the consumption method for recognizing inventories and prepayments. On July 1, 2017, the city leased computer equipment for use in the city's general activities. The lease is a three-year lease that qualifies as an operating lease. The city prepaid the entire three-year rental fee of $45,000. At June 30, 2018, the appropriate account balances in the general fund associated with this transaction would be

• A) Prepaid lease $0; Expenditures $45,000; Fund balance-nonspendable $0.
• B) Prepaid lease $45,000; Expenditures $0; Fund balance-nonspendable $45,000.
• C) Prepaid lease $30,000; Expenditures $45,000; Fund balance-nonspendable $30,000.
• D) Prepaid lease $30,000; Expenditures $15,000; Fund balance-nonspendable $0.

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Definitions:

Financial Risk

The likelihood of financial setbacks in an investment or business initiative.

Interest Tax Shield

Lowering income taxes through the deduction of debt interest payments from taxable earnings.

Debt

An amount of money that is owed by one party to another, usually as a result of borrowing.

Tax Rate

Tax rate is the percentage at which an individual or corporation is taxed by the government on their income, assets, or transactions.