Question: A city s road maintenance department received donations of two types

A city’s road maintenance department received ‘‘donations’’ of two types of assets:
1. From the county in which the city is located it received earthmoving equipment. The equipment had cost the county $800,000 when it was acquired five years earlier. Accounted for in a county proprietary fund, its book value, net of accumulated depreciation at the time of donation, was $500,000. Its fair market value was $530,000.
2. From the city’s own utility fund (a proprietary fund) it received motor vehicles that had cost the city $400,000 when acquired three years earlier. At the time of transfer, the vehicles were recorded on the utility’s books at $180,000, net of accumulated depreciation. Their fair market value was $225,000.
a. At what value should the city record in its government-wide financial statements: (1) the earth-moving equipment, and (2) the motor vehicles?
b. Briefly justify your response, commenting on any apparent inconsistencies in the values assigned to each of the two types of assets.
c. Comment on the significance of the resultant book values for decisions or assessments to be made by statement users.

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  • CreatedAugust 13, 2014
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