Question

Prepare journal entries for each of the following transactions entered into by the City of Loveland.

A car was leased for the mayor's use. The first payment was $1,000 and the present value of the remaining lease payments was $29,000. (Note: The initial cash payment was made by the General Fund.)
a. Debit: General Fund $1,000; Credit: Cash $1,000

b. Debit: Mayor's Car Expense $30,000; Credit: Cash $30,000

c. Debit: Mayor's Car Expense $1,000; Credit: Cash $1,000

d. Debit: Mayor's Car Expense $30,000; Credit: General Fund $30,000

Answer 1

The correct journal entries for the car leased for the Mayor's use by the City of Loveland should include a $1,000 debit to Mayor's Car Expense and a $1,000 credit to Cash for the initial payment, and a $29,000 debit to Leased Vehicle Asset with a $29,000 credit to Lease Liability to acknowledge the future lease payments.

Step-by-step explanation:

The proper journal entries for leasing a car for the Mayor's use by the City of Loveland would involve recording both the expense and the liability related to the lease. If the first payment is $1,000 and the present value of the remaining lease payments is $29,000, then the entries should reflect the initial payment and recognize the liability for the remaining lease payments.

Journal Entries

It is important to note that there is no entry with a credit to the General Fund for $30,000 as the General Fund is not directly involved in the transaction other than making the initial cash payment.