Question

At the beginning of fiscal 2019, a county government acquires equipment for $4,000,000. The equipment has an estimated life of 5 years, and straight-line depreciation is used, with no residual value, if appropriate. At the end of fiscal 2020 (two years later), the government disposes of the equipment for $1,800,000.

If the equipment is reported in the general fund, what amount is subtracted in the fiscal 2020 reconciliation of the change in fund balances of governmental funds to the change in net position of governmental activities, related to this equipment?

	A.	$ 600,000
	B.	$2,400,000
	C.	$1,800,000
	D.	$3,200,000

Answer 1

Ans: The correct option for the answer is option A i.e. 600,000

Equipment Cost= 4,000,000

Depreciation of equipment= 4,000,000/5

Depreciation= 800,000

After Two Year, Value of Equipment= 4,000,000-1,600,000

Value of Equipment= 2,400,000

Disposal of equipment= 1,800,000

Loss on equipment= 600,000

Amount of reconciliation of the change in fund balances of governmental funds to the change in net position of governmental activities, related to this equipment that must be subtracted will be 600,000