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Use the following information to answer Questions : A county acquires equipment for $16,000,000 at the...

Use the following information to answer Questions :

  • A county acquires equipment for $16,000,000 at the beginning of 2015.
  • The equipment has an 8-year life, no residual value.
  • At the beginning of 2021 (6 years later), the equipment is sold for $9,000,000.
  • When appropriate, the fund uses straight-line depreciation.
  1. The equipment is used for a parking garage and is reported in an enterprise fund. What is reported in the enterprise fund’s operating statement, related to this equipment, in 2015?

  1. The equipment is not reported in the operating statement
  2. Expense of $16,000,000
  3. Expense of $2,000,000
  4. Expenditure of $16,000,000
  1. The equipment is used for general operations and is reported in the general fund. What is reported in the general fund’s operating statement, related to this equipment, in 2015?

  1. The equipment is not reported in the operating statement
  2. Expense of $16,000,000
  3. Expense of $2,000,000
  4. Expenditure of $16,000,000
  1. The equipment is used for a parking garage and is reported in an enterprise fund. What is reported in the enterprise fund’s operating statement, related to this equipment, in 2021?

  1. Other financing source, $9,000,000
  2. Gain on sale, $5,000,000
  3. Revenue, $9,000,000
  4. Loss on sale, $7,000,000
  1. The equipment is used for general operations and is reported in the general fund. What is reported in the general fund’s operating statement, related to this equipment, in 2021?

  1. Other financing source, $9,000,000
  2. Gain on sale, $5,000,000
  3. Revenue, $9,000,000
  4. Loss on sale, $7,000,000
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Homework Answers

Answer #1

1.The right answer is option B . Expense of $16,000,000

Since the equipment is used for a parking garage and is reported in an enterprise fund and not categorizsed as an asset , the cost should be recorded as an expense in opearting statement in 2015.

  • The option D Expenditure of $16,000,000 is not right since there is difference between expenditure and expense in accounting term. Expenditure will generate benefits in the future but expense is only for the current period and also this is the reason why depreciation is not provided.

2.The right answer is option D. Loss on sale $7,000,000

The equipment is recorded in general fund not in asset category, depreciation is not provided, Hence , the original value is considered.

Cost is $16,000,000 but sold for $9,000,000. Hence Loss would be $7,000,000

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