Question

palm city acquired, through forfeiture as a result of nonpayment of property taxes, a parcel of land that the city intends to use as a parking lot for general governmental purposes. the total amount of taxes, liens, and other costs incurred by palm incidental to acquiring ownership and perfecting title was $20,000. the land's fair market value at the forfeiture date was $60,000. what amount should be reported in the governmental activities column of the governmentwide financial statements for this land?

Answer 1

Palm City should report the parcel of land at its fair market value of $60,000 in the governmental activities column of the governmentwide financial statements, not at the cost incurred to acquire it.

Step-by-step explanation:

The question pertains to the reporting of an asset acquired by Palm City in the governmental activities column of the governmentwide financial statements. In accounting for governmental activities under the accrual basis of accounting, assets should be reported at their fair market value on the date of acquisition.

In this case, Palm City acquired the land with a fair market value of $60,000 on the forfeiture date.

Therefore, even though Palm City incurred costs of $20,000 to acquire and perfect title to the land, it should report the land at its fair market value, which is $60,000, in the governmental activities column.