Question

Two new 3D printers were purchased for use by the city clerk's office using General Fund resources. The printers cost $25,000 each; the city's capitalization threshold is $5,000. Which of the following entries would be required to record this transaction?

a) Debit: Office Equipment $50,000; Credit: General Fund $50,000
b) Debit: 3D Printers $50,000; Credit: General Fund $50,000
c) Debit: Office Supplies $50,000; Credit: Accounts Payable $50,000
d) Debit: General Fund $50,000; Credit: Office Equipment $50,000

Answer 1

The correct journal entry to record the purchase of two 3D printers totaling $50,000, exceeding the capitalization threshold, is a debit to Office Equipment and a credit to General Fund.

Step-by-step explanation:

The question pertains to accounting entries for the purchase of capital assets using General Fund resources. When capital assets such as 3D printers are acquired and exceed the capitalization threshold, which in this case is $5,000, the purchase should be recorded as a capital asset on the balance sheet rather than an expense. The correct journal entry would be to debit an asset account and credit the funding source, which is the General Fund. Given that these 3D printers cost $25,000 each and two were purchased, the total cost amounts to $50,000. Therefore, the correct entry to record this transaction would be:

Debit: Office Equipment $50,000;
Credit: General Fund $50,000

This entry reflects the acquisition of a long-term asset that will provide benefits over multiple fiscal periods and acknowledges the decrease in General Fund resources used to finance the purchase.