For the following transactions, prepare the entries that would be recorded in the general fixed assets account group for the city of Evert.a. The city purchased property costing $1,300,000, with three-fourths of the cost allocated to a building.b. A mansion belonging to the great-granddaughter of the city’s founder was donated to the city. The land cost the original owner $600, and the house was built for an additional $50,000. At the time of donation, the property had an estimated fair value of $550,000, of which $330,000 was allocable to the land. The property was accepted and is to be used as a park and a museum.c. A central fire station, financed by general obligation bonds, was two-thirds complete at yearend with costs to date of $800,000 that were recorded in the capital project fund.d. A new fire engine was purchased for $165,000. The city traded a used fire engine originally purchased for $100,000. The trade-in value was $25,000. Both engines were purchased from general property tax revenues.e. A new street was completed at a cost of $250,000, which is to be charged, through the capital projects fund’s special assessments, against property owners in the vicinity. The city follows GASB recommendations and records infrastructure assets.f. Evert developed computer software valued at $70,000 with an estimated useful life of seven years.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
For the following transactions, prepare the entries that would be recorded in the general fixed assets account group for the city of Evert.
a. The city purchased property costing $1,300,000, with three-fourths of the cost allocated to a building.
b. A mansion belonging to the great-granddaughter of the city’s founder was donated to the city. The land cost the original owner $600, and the house was built for an additional $50,000. At the time of donation, the property had an estimated fair value of $550,000, of which $330,000 was allocable to the land. The property was accepted and is to be used as a park and a museum.
c. A central fire station, financed by general obligation bonds, was two-thirds complete at yearend with costs to date of $800,000 that were recorded in the capital project fund.
d. A new fire engine was purchased for $165,000. The city traded a used fire engine originally purchased for $100,000. The trade-in value was $25,000. Both engines were purchased from general property tax revenues.
e. A new street was completed at a cost of $250,000, which is to be charged, through the capital projects fund’s special assessments, against property owners in the vicinity. The city follows GASB recommendations and records infrastructure assets.
f. Evert developed computer software valued at $70,000 with an estimated useful life of seven years.
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