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ctcLink Accounting Manual | 40.60.20.1 Governmental Funds (Lessee)

40.60.20.1 Governmental Funds (Lessee)

In governmental funds, the recording for a leased asset acquisition at commencement of the lease term is recorded by the following series of entries:

Operating (governmental) Fund

Account Account Description DR CR

5040275

Lease Asset Acquisition

$ 1,066,109.82

 

4040200

Other Finance Sources/Right-to-Use Lease Acquisition

 

1,066,109.82

Fund 997 – General Capital Assets Subsidiary

Account Account Description DR CR

11220xx

Leased Asset – Land/Buildings/Furn. & Equip.

$ 1,066,109.82

 

3000050

Investment-General Capital Assets

 

1,066,109.82

Fund 999 – General Long-Term Obligations Subsidiary

Account Account Description DR CR

1110040

Amount Provided-Retirement of Long-term Obligations

$ 1,066,109.82

 

2050100

Right-to-use Lease Liability Short-Term

 

88,484.78

2140100

Right-to-use Lease Liability Long-Term

 

977,625.04

The following illustrative entries and instructions below are based on the amortization schedule shown in Section 40.60.20 Right-To-Use Lease Agreements as Lessee.

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Periodic lease payments represent debt service expenditures in governmental fund type accounts. Periodic payments can be recorded directly as expenditures to leases and principal, or as expensed to 5081110 Equipment Rental or 5081240 Rentals/Leases (Land or Building) and re-classed to leases and principal at year-end. The following example shows the re-class at year-end option.

In the operating (governmental) fund re-class monthly payments to principal and interest:

Account Account Description DR CR

5110110 or 5110130

Equipment Leases – Principal (Equipment) or
Equipment Leases – Principal (Land or Buildings)

$ 352,735.69

 

5110120 or 5110140

Equipment Leases – Interest (Equipment) or
Equipment Leases – Interest (Land or Buildings)

7,264.31

 

5081110 or 5081240

Equipment Rental or
Rentals (Land or Buildings)

 

360,000.00

Reduce the short-term liability by annual payments amount:

Fund 999

Account Account Description DR CR

2050100

Right-to-use Lease Liability Short-Term

$ 352,735.69

 

1110040

  Allow for Amort. – Lease Asset

 

352,735.69

The right-to-use lease asset should be amortized using the straight-line method over the shorter of the lease term or the asset useful life. Amortization Expense and Allowance for Amortization are recorded as follows:

Fund 997

Account Account Description DR CR

5070040

Gov’t – Depreciation (Amort) Expense

$ 355,369.94

 

1122xxx

  Allow for Amort. – Lease asset

 

355,369.94

At year-end, reclassify the amount due within one year from long-term to short-term.

Fund 999

Account Account Description DR CR

2140100

Right-to-use Lease Liability LT

$ 355,887.88

 

2050100

  Right-to-use Lease Liability ST

 

355,887.88

At the end of the lease, remove the capital asset when the asset is returned to the lessor. If the lease is cancelled early and the asset was not fully amortized (i.e. the cost is greater than the accumulated amortization), debit account 5070070-Gov’t Capital Asset Adjust for the difference between the initial cost of the asset and the accumulated amortization.

Fund 997 – Remove Asset and Related Entries

Account Account Description DR CR

1122xxx

Allow. For Amortization – Asset

$ 444,212.00

 

5070070

Capital Asset Adjustment

621,897.00

 

1122xxx

  Lease Asset – Equipment Account

 

1,066,110.00

 


40.60.20 Right-To-Use Lease Agreements as Lessee <<  40.60.20.1  >>  40.60.20.2 Proprietary Funds (Lessee

Page Manager: slocke@sbctc.edu
Last Modified: 3/4/24, 2:52 PM

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