A city included the schedule that follows in its financial statements.
1. Prepare entries to reflect the activity relating to improvements and equipment in both the general-fund and the government-wide statements, assuming, as appropriate, that all transactions were for cash. The deleted improvements and equipment were sold during the year for $12,000,000.
2. The schedule is based on numbers drawn from an actual city. What percentage of total assets, at historical cost (ignoring accumulated depreciation), represents infrastructure as of year-end? Despite this sizable percentage, which is typical of most cities, what arguments have critics of GASB Statement No. 34 made in support of their contention that governments should not be required to give balance-sheet recognition to infrastructure assets?
3. A note to the schedule states that €˜€˜the federal government funded a portion of the capital assets and thereby has an interest in them. This interest includes the right to approve the sale of such assets and to require the return to the federal government of a portion of any sales proceeds.€™€™ Suppose that the government funded 50 percent of a law enforcement center that had a cost of $10 million and accumulated depreciation of $5 million, and thus had a book value of $5 million. During the year the government sold the center for $4 million and per the agreement with the federal government was required to return 50 percent of the sales proceeds to the government. Prepare a government-wide statement entry to record the sale. What reservations might you have with regard to this entry? Do you have any suggestions as to an alternative way to account for federally funded assets?
4. Assume that the land on which the city€™s administrative offices are constructed was acquired in 1930 for $500. At what value would that land be reported today? Of what significance is that value to statementusers?