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 an enterprise fund, how is its disposal reported in the fiscal 2020 CAFR?

	A.	$1,800,000 revenue in the proprietary funds operating statement and $600,000 loss in the government-wide statement of activities.
	B.	$1,800,000 revenue in the proprietary funds operating statement and the government-wide statement of activities.
	C.	$1,800,000 other financing source in the proprietary funds operating statement and $600,000 loss in the government-wide statement of activities.
	D.	$600,000 loss in the proprietary funds operating statement and the government-wide statement of activities.

Answer 1

Answer : D .$600,000 loss in the proprietary funds operating statement and the government-wide statement of activities.

Cost of asset	$4,000,000
Life	5 Years
Deprection	$4000000/5
	$800,000
Deprection for 2 years	$80000*2
	$1,600,000
Calculation of profit or loss
Particulars	Amount
Cost of asset	$4,000,000
Less : deprection	$1,600,000
Written down value	$2,400,000
less: sale value	$1,800,000
Loss	$600,000