Governments must now account for their capital assets, including infrastructure, and they must recognize in their accounts that the assets may not last forever (unless continually preserved). In the year a road maintenance district was established, it engaged in the transactions that follow involving capital assets (all dollar amounts in thousands). The district maintains only a single governmental fund (a general fund).

1. Received authority over roads previously owned by the county. The estimated replacement cost of the roads was $60,000. On average they have a remaining useful life of 40 years. 2. Acquired machinery and equipment for $700, with general fund resources. They have a useful life of 10 years. 3. Incurred costs of $3,000 to construct a building. The construction was financed with general obligation bonds. The building has a useful life of 30 years. 4. Acquired equipment having a fair value of $60 in exchange for $20 cash (from general-fund resources) plus used equipment for which the district had paid $50. The used equipment had a fair value at the time of the trade of $40; depreciation of $25 had previously been recognized. 5. Sold land for $70 that had been acquired for $90. 6. Received a donation of land from one of the towns within the district. The land had cost the town $120, but at the time of the contribution had a fair market value of $500. 7. Incurred $1,200 in road resurfacing costs. The district estimates that its roads must be resurfaced every four years if they are to be preserved in the condition they were in when they were acquired. 8. Recognized depreciation of $100 on its building, $70 on its machinery and equipment, and $1,500 on its roads, in addition to any depreciation relating to the resurfacing costs.

a. Prepare entries to record the transactions so that they could be reflected in the districts government-wide statements. The district has opted to depreciate its infrastructure assets. b. Suppose instead that the district has elected not to depreciate its roads but to record as an expense only the costs necessary to preserve the roads in the condition they were in when acquired. How would your entries differ? c. If, in fact, the roads have a useful life of 40 years, do you think it is sound accounting not to depre-ciate the roads? Explain. d. If, in fact, the preservation costs are sufficient to preserve the roads in the condition they were in when the district acquired them, do you think it is sound accounting to depreciate the roads? Explain.