Choice "C" is correct. Capital lease obligations associated with general governmental activities are recorded as an asset and as a liability on the full accrual government-wide financial statements. Governmental fund financial statements would record the asset financed by a capital lease as an expenditure and the lease financing as other financing sources under modified accrual accounting.
Choice "b" is incorrect. Although governmental fund financial statements (GRaSPP funds) would initially record an asset financed by a capital lease as an expenditure and the lease financing as other financing sources under modified accrual accounting, capital lease obligations associated with governmental activities are recorded as an asset and as a liability on the full accrual government-wide financial statements.
Choice "a" is incorrect. Although governmental fund financial statements (GRaSPP funds) would initially record an asset financed by a capital lease as an expenditure and the lease financing as other financing sources under modified accrual accounting, capital lease obligations associated with governmental activities are recorded as an asset and as a liability on the full accrual government-wide financial statements.
Choice "d" is incorrect. Capital lease obligations associated with general governmental activities are recorded as an asset and as a liability on the full accrual government-wide financial statements. Capital outlay would be recorded as an expenditure in the modified accrual governmental fund financial statements. Lease financing would be recorded as other financing sources in the fund financial statements. Governments would report capital lease activity in both fund and government-wide financial statements.