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A Government enters into an agreement with a vendor for cloud computing services. The contract...

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Accounting

A Government enters into an agreement with a vendor for cloud computing services. The contract began on July 1,2022 and lasts for five years. The government has an option to extend the contract for an additional 2 years but is not sure that it will extend. After the SBITA term, the agreement becomes a cancellable month -to-month arrangement.
Assume the following:
Monthly Payment: 1,000
Number of months: 60
Discount Rate: 4%
Initial implementation costs: 1,500
Preliminary project costs: 1,000
Operational and implementation costs: 750(these do not increase functionality of cloud services)
PV of Subscription Liability: 54,480
First Year Total Payment on SBITA: 12,000
Interest INCUDED in first year payment: 1,809
First year amortization cost: 11,196
REQUIRED:
What is the term of the agreement?
What is the amount of subscription asset?
Prepare journal entries in both the Governmental Funds and Governmental Activities ledger at the inception and and at the end of the first year.

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