How Should a Capital Lease for a General Capital Asset

question 35

Multiple Choice

How should a capital lease for a general capital asset be recorded in the governmental activities accounts at the inception of the lease?

• A) Debit to a capital asset account.
• B) Debit to a capital expense/expenditure account.
• C) Credit to Capital Lease Obligations Payable.
• D) Both A and C are correct.

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Definitions:

Raw Materials

Materials in their natural, unprocessed state used as inputs in production processes.

FOB Destination

A shipping term where the seller bears the shipping costs and retains ownership of the goods until they are delivered and accepted by the purchaser.

Consignment Stock

Inventory that is in the possession of the customer but still legally owned by the supplier until sold.

Stock Discrepancies

Differences between the amount of inventory recorded and the actual inventory present, often resulting from errors or theft.