Question

on january 1, 2024, the city of graf pays $45,000 for a work of art to display in the local library. the city will take appropriate measures to protect and preserve the piece. however, if the work is ever sold, the money received will go into unrestricted funds. officials view the work as inexhaustible, but they have opted to depreciate the cost over 10 years (using the straight-line method). required: how is this work reported on government-wide financial statements for the year ended december 31, 2024? how is this work reported in fund financial statements for the governmental funds for the year ended december 31, 2024?

Answer 1

The work of art would be reported as a capital asset on the government-wide financial statements and would not be reported on the fund financial statements for the governmental funds.

Step-by-step explanation:

The work of art purchased by the city of Graf on January 1, 2024, would be reported differently on the government-wide financial statements and the fund financial statements.

Government-Wide Financial Statements:

The work of art would be reported as a capital asset on the government-wide financial statements. The cost of $45,000 would be depreciated over 10 years using the straight-line method. As of December 31, 2024, the accumulated depreciation on the work of art would be $4,500 (10% of $45,000).

Fund Financial Statements:

The work of art would not be reported on the fund financial statements for the governmental funds. The reason is that it does not meet the criteria for a financial resource that is measurable and available to finance government programs. Since the city of Graf does not plan to sell the work of art, it would not have any impact on the funds.