Final Answer:
The snow plow should be recorded in the General Fund at $870,500. So the correct option is 2). 870,500
Step-by-step explanation:
The correct amount to record the snow plow in the General Fund is $870,500. This includes the present value of the future lease payments ($845,500) and the down payment at the inception of the lease ($25,000). The present value of the lease payments represents the total cost of the snow plow over the lease term, and adding the down payment provides the total initial cost. Therefore, the appropriate accounting entry in the General Fund is $870,500.
In detail, the present value of the future lease payments represents the discounted value of the total lease payments over time. It considers the time value of money, providing a more accurate reflection of the actual cost. The down payment, made at the beginning of the lease, is part of the overall cost of acquiring the snow plow. Summing up these two components results in the total amount to be recorded in the General Fund. This comprehensive approach adheres to sound accounting principles, ensuring that the financial statements accurately reflect the government's financial position and commitments.
In conclusion, recording the snow plow in the General Fund at $870,500 appropriately reflects both the present value of the future lease payments and the down payment, providing a holistic representation of the government's financial obligation related to the acquisition of the snow plow. So the correct option is 2) 870,500