Ex 7-6

the initial value assigned to an asset is not always obvious. A city aquired general capital assets as follows:

1. It purchased new construction equiotment. List price was $400,000, but the city was granted a 10 percent "government discount." The city also incurred $12,000 in transportation costs and paid $4,000 to its own employees to customize the equiptment.

2. It received a donation of land to be set aside for a nature preserve. The land had cost the donor $300,000. At the time of the contribution it was valued on the city's tax rolls at $1.7 million. However, independent appraisers estimated its fair value at $1.9 million.

3. It constructed a new maintenance facility at a cost of $2 million. During the period of construction the city incured an additional $110,000 in interest on funds borrowed to finance the construction.

Required:

Indicate the value that the government should assign to these assets. Justify briefly the value you assigned and, as appropriate, indicate any other accepotable alternatives.