Question
Please help with the following question related to Governmental Accounting: Clayton City constructed a new Fifth Avenue bridge in 1991, but maintained no records supporting
Please help with the following question related to Governmental Accounting:
Clayton City constructed a new Fifth Avenue bridge in 1991, but maintained no
records supporting the cost of the bridge.The city's engineers estimate that the
current replacement cost of the bridge is $25 million.The current construction
price index is 200, but was 150 in 1991 when the bridge was built. The city's
engineers also estimate that the bridge has a total useful life of 30 years. Since
the city's CPAs are conducting the annual financial statement audit, they have
asked you, the city's Accounting Manager, the following questions........
a. What values should the city assign to the bridge for estimated historical cost and
accumulated depreciation?
b. As a possible alternative, what value would the city assign to the bridge if it
decided to use the modified approach to report its bridges?
c. In order to decide which way to go, do you believe that having depreciation
charged for the bridge adds significant information to the city's financial
statements?Why or why not?
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