Question

When Sunny City makes its annual lease payment on an unpaid lease obligation, the journal

entry for the governmental activities accounts will include:

Answer 1

The journal entry for the annual lease payment includes a debit to the Lease Payable account and a credit to the Cash account.

Step-by-step explanation:

When Sunny City makes its annual lease payment on an unpaid lease obligation, the journal entry for the governmental activities accounts will include a debit to the Lease Payable or Lease Obligation account and a credit to the Cash or Bank account.

This journal entry reflects the payment made towards the lease obligation, reducing the outstanding liability and recording the expenditure of cash.

For example, let's say Sunny City makes a $10,000 lease payment. The journal entry would be:

Debit Lease Payable: $10,000
Credit Cash: $10,000