Reference no: EM132703226

The following information pertains to a computer properly classified as a general capital asset that Pine Township leased from Karl Supply Co. on July 1:

1. Karl's cost $4,900
2. Fair value at July 1 $5,100 
3. Estimated economic life 5 years 
4. Fixed noncancelable term 30 months 
5. Rental due at beginning of each month $135 
6. Guaranteed residual value $2,000 
7. Present value of lease payments at the beginning of the lease using: 
8. Pine's incremental borrowing rate (10.5%) $5,120

Problem 1: Karl's implicit interest rate (12.04%) known to Pine $5,000On July 1, at what amount should Pine recognize the leased computer if the transaction is reported as a financed purchase?

Problem 2: When a lease of a governmental unit represents the acquisition of a general capital asset, the acquisition should be reflected as

Group of answer choices

Option 1: Both an expenditure and an other financing source.

Option 2: An expenditure but not as an other financing source.

Option 3: An other financing source but not as an expenditure.

Option 4: Neither an expenditure nor an other financing source.