Question

During the year, a wealthy local merchant donated a building to the City of Rosewood. The original cost of the building was $300,000. Accumulated depreciation at the date of the gift amounted to $250,000. The appraised fair market value of the donation at the date of the gift was $600,000, of which $40,000 was the value of the land on which the building was situated. Atwhat amount should this contribution be recorded in the governmental activities accounts at thegovernment-wide level?

a.$0.
b.$600,000.
c.$50,000.
d.$300,000.

Answer 1

The answer is: B) $600,000

Step-by-step explanation:

The City of Rosewood local government should record this donation at its fair market value ($600,000). Most government entities use two types of accounting systems (following GASB 34) called fund accounting and an accrual based accounting, and both require that contributions are recorded at fair market value.