Question

EX. 7-3 General capital assets are accounted for differently in fund and government-wide financial statements. A city engaged in the following transactions during a year:

1. It acquired computer equipment at a cost of $40,000.
2. It completed construction of a new jail, incurring $245,000 in new costs. In the previous year the city had incurred $2.5 million in construction costs. The project was accounted for in a capital projects fund.
3. It sold for $16,000 land that it had acquired three years earlier for $28,000.
4. It traded in a four-year-old sanitation department vehicle for a new model. The old vehicle had initially cost $27,000, its carrying value at the time of trade was $17,000, and its market value was $13,000. The city paid an additional $39,000 cash for the new model. The fair value of the new model was $52,000.
1. Prepare journal entries to reflect the transactions in an appropriate governmental fund (e.g., a general fund or a capital projects fund).
2. Prepare journal entries to reflect the transactions in the city's government-wide statements.

Answer 1

Journal entries for transactions in an appropriate governmental fund:

Computer equipment acquisition:

Debit: Computer equipment $40,000

Credit: Cash $40,000

Jail construction:

Debit: Expenditures $245,000

Credit: Other financing sources - Capital projects fund $245,000

Land sale:

Debit: Cash $16,000

Credit: Land $28,000

Credit: Gain on sale of land $12,000

Sanitation department vehicle trade-in:

Debit: Equipment $13,000

Debit: Accumulated depreciation $4,000

Debit: Loss on trade-in $4,000

Credit: Equipment $27,000

Credit: Cash $39,000

Journal entries to reflect the transactions in the city's government-wide statements:

Computer equipment acquisition:

Debit: Computer equipment $40,000

Credit: Cash $40,000

Jail construction:

Debit: Construction in progress $2,500,000

Credit: Bonds payable $2,500,000

Debit: Construction in progress $245,000

Credit: Cash $245,000

Land sale:

Debit: Cash $16,000

Credit: Land $28.