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 value of the donation at the date of the gift was $600,000. At what amount should this contribution be recorded in the governmental activities accounts at the government-wide level?

1) $50,000
2) $300,000
3) $600,000
4) $0

Answer 1

The contribution should be recorded at the appraised value of $600,000.

Step-by-step explanation:

According to accounting principles, the contribution of the building by the wealthy local merchant should be recorded in the governmental activities accounts at the appraised value of the donation at the date of the gift, which is $600,000. This is because the original cost and accumulated depreciation are not relevant when determining the contribution amount. As the donation is considered a gift, it should be recorded at its fair market value.