F10 – Governmental-wide Financial Statements

  • Creator
    Topic
  • #1895676
    shawnl112
    Spectator

    In Year 1, Palm City acquired, through forfeiture as a result of nonpayment of property taxes, a parcel of land that the city intends to use as parking lot for general governmental purposes. The total amount of taxes, liens, and other costs incurred by Palm incidental to acquiring ownership and perfecting title was $20,000. The land’s fair market value at the forfeiture date was $60,000. What amount should Palm City Capitalize relative to its governmental activities?

    A. $80,000
    B. $20,000
    C. $60,000
    D. 0 M

    How do you know when to use the lower of cost rule for properties ? i know there is Lower of cost for inventories but what is the rule for properties? it is not always Fair value?

Viewing 3 replies - 1 through 3 (of 3 total)
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  • #1895796
    Frances
    Participant

    When a government gets an asset through forfeiture, it is valued at the lower of cost or FV.

    When a government gets an asset through donation, it is valued at FV.

    I don’t think it matters what type of assets are received (property vs. inventory), but it does matter how they were received (forfeiture vs. donation).

    #1896528
    shawnl112
    Spectator

    Thank you Great answer!

    #2066114
    Riyaad
    Participant

    I just got this question wrong and had no idea why. Thank god you posted this question on here, as the reply above really helped me understand the concept.

Viewing 3 replies - 1 through 3 (of 3 total)
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