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The City of Raylan has a rather large warehouse that it no longer needs. The city had previously used the warehouse to store supplies and equipment for the school system, police department, and other public service functions. It has a remaining expected life of 18 years with no expected residual value. On January 1, 2020, the warehouse has a net book value of $1.4 million. On that date, city officials agree to lease the property to Acme International for its remaining life. Both parties agree to an implicit interest rate of 12 percent. The first payment is to be made immediately and on each subsequent January 1. The straight-line method is used where an allocation method is required.

1. Assume that the present value of an annuity due of $1 at a 12 percent annual rate for 18 periods is 8.11963. Based on that assumption, what amount does the City of Raylan charge Acme each period?

2. Assume the annual payments are properly calculated as $172,400 based on the information provided. What journal entries does the City of Raylan make for this lease for the year 2020 in preparing government-wide financial statements? Assume the city reports these transactions within the governmental activities.

3. Assume the annual payments are properly calculated as $172,400 based on the information provided. What journal entries does the City of Raylan make for this lease for the year 2020 in preparing fund financial statements? Assume the city reports these transactions within the general fund.

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