10522 ENTRY NO. 22 [FIXED ASSET IS ACQUIRED BY INSTALLMENT PURCHASE OR CAPITAL LEASE CONTRACT]
(Revised 5/87)
Nature of Transaction:
Fixed asset is acquired by an installment purchase or capital lease (lease-purchase) contract. (See SAM Section 8632.)
Journal Entry for General Ledger Accounts:
Debit:
23XX–24XX Fixed Asset a/
2920 Amount to be Provided for Other Long-Term Debt b/
Credit:
4210 Installment Contracts Payable b/
4220 Lease-Purchase Contracts b/
5200 Investment in General Fixed Assets c/
a/ Specific asset type; general ledger accounts 2300 through 2410 recorded at lesser of fair value or present value of the minimum contract payments.
b/ Same amount as "a/" less any amount paid at inception of contract.
c/ Offset to Fixed Asset account.
Source:
Document:
Capital lease or installment purchase contract.
Explanation:
When a lease contract which is essentially an installment purchase, or an actual installment purchase contract is executed, an asset is recorded in the General Fixed Asset Account Group. Since there is also a long-term commitment to make the lease or installment payments, a liability is also recorded in the General Long-Term Debt Account Group. (See SAM Section 8632.)
Note:
This entry would normally be included in Entry No. 20. It is shown here separately for clarity.
