ACIS+4124_5124+Chapter+5+Part+2+PowerPoints+-+Student

ACIS+4124_5124+Chapter+5+Part+2+PowerPoints+-+Student -...

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1 ACIS 4124/5124 Chapter 5 – Part 2 Accounting for General Capital Assets and Capital Projects
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2 Acquisition of General Capital Assets Example: Purchased office equipment for the Mayor’s office and paid $50,000 cash from the General Fund General Fund: Dr. Cr. Expenditures 50,000 Cash 50,000 Governmental Activities: Dr. Cr. Equipment 50,000 Cash 50,000
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3 Follow SFAS No. 13 criteria to determine if the lease is a capital lease or an operating lease Record capital assets and related obligation in the government-wide statements in the amount of the present value of minimum lease payments. Report at fair value if lower than the present value of minimum lease payments Record an expenditure and other financing source in the governmental fund that is using the asset Accounting for Capital Leases
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4 Accounting for Capital Leases Example: Capital lease with present value of minimum lease payments of $50,000 Special Revenue Fund: Dr. Cr. Expenditures 50,000 Other Financing Sources— Capital Lease Agreements 50,000 Governmental Activities: Equipment 50,000 Capital Lease Obligations Payable 50,000
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5 Required Capital Asset Disclosures Capitalization policy Policy for estimating useful lives of assets Beginning and end of the year balances, including accumulated depreciation Acquisitions during the year
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6 Required Capital Asset Disclosures Acquisitions during the year Sales or other dispositions during the year Depreciation expense for the current period Why collections (e.g., works of art or historical treasures) are not capitalized, if that is the case
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7 Costs Incurred After Acquisition Additions and betterments – capitalize Replacements and maintenance – do not capitalize Replacements that are partly additions or betterments Capitalize but remove cost of old asset Requires judgment
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8 At government-wide level: Remove original cost and accumulated depreciation. Recognize gain or loss. In General Fund (or other governmental fund) Record expenditure if cash paid to dispose of asset. Record Other Financing Sources – Proceeds of Sales of Assets if cash received from sale. Disposition of General Capital Assets
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9 Disposition of General Capital Assets Example 1: Assume a machine is sold for $500. The asset had originally been purchased for $8,000 using GF revenues. It is fully depreciated and has no salvage value.
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