Description Discuss the three questions for the following scenario, in very short answers: Recording and Reporting of Damaged Capital Assets. A tornado damaged a part of the City of Westbrook’s Police Station. Some of the costs related to the damage included the following: The building wiring had to be replaced. Since the wiring was over 20 years old, replacing the wiring allowed the city to bring the wiring up to current code and accommodate the increasing technology needs of the police station. A large section of the interior walls (dry-wall) had to be replaced and painted. The same type of material was used in replacing the interior walls. All hardwood floors were replaced with the same materials. Office furniture that had been gathered for transfer to the city’s surplus storage facility was damaged beyond repair. Replacement furniture was on order but had not been received by the date of the tornado. The police station’s radio dispatch equipment suffered water damage. 1. Discuss how to determine if the police station should be considered impaired, and if it is impaired, how accounting and reporting should be handled. 2. Discuss whether you would classify the costs incurred to repair the building as enhancements or replacements. 3. Discuss the accounting treatment of the damaged furniture and radio dispatch equipment. Answer the following questions in very short answers: A. What are general capital assets? How are they reported in the fund and government-wide financial statements? B. Explain what disclosures the GASB requires for capital assets in the notes to the financial statements. C. Compare and contrast the valuation of general capital assets of a government to the valuation of assets of a for-profit entity. What special issues may arise in valuing a government’s assets that generally do not occur in a for-profit company? D. How does one determine whether a particular lease is a capital lease or an operating lease? What entries are required in the general journals of a governmental fund and governmental activities at the government-wide level to record a capital lease at its inception? E. What are examples of intangible assets held by governments? How are they recorded? F. What two measures help protect a government from failure on a contractor’s part to comply with the terms and specifications of a construction agreement? Describe each measure and its primary purpose. G. What is a service concession arrangement, and why might a government choose to enter into such an arrangement? Provide examples of general capital assets that might be subject to service concession arrangements
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