In 20XO , Bantham County incurred $80 million in costs to construct a new highway. Engineers estimate

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In 20XO , Bantham County incurred $80 million in costs to construct a new highway. Engineers estimate that the useful life of the highway is 20 years .

1. Prepare the entry that the county should make to record annual depreciation (straight-line method) to facilitate preparation of its government-wide statements.
2. What reservations might you have as to the engineers' estimate of useful life? Why might a n y estimate of a highway' s useful life be suspect?
3. The engineers have determined that in 20Xl the county would have to incur $1 million in resurfacing costs every four years to preserve the highway in the same condition as it was when the road was completed. In 20Xl, the county spent the $1 million to resurface the highway.
a. Prepare the entries, including the one for first year depreciation, the county should make.
b. Assume instead t hat as permitted b y Statement No. 34, the county opts to report a road preservation charge in lieu of depreciation. Prepare the entry the county should make.

4. Suppose that in 20Xl the county added a new lane to a portion of the highway. The cost was $1.5 million. Prepare an appropriate journal entry to facilitate preparation of the government-wide statements regardless of whether the county takes the depreciation or the modified approach.

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Government And Not For Profit Accounting Concepts And Practices

ISBN: 9781119803898

9th Edition

Authors: Michael H. Granof, Saleha B. Khumawala, Thad D. Calabrese

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