Question

A local citizen donated land with a fair market value of $500,000 to the county government. The donor had paid $550,000 for the land five years ago. The county incurred $150,000 in development costs to convert the land into a public park. The county should capitalize the new public park in the General Capital Assets accounts in the amount of
A.$500,000.
B.$550,000.
C.$650,000.
D.$700,000

Answer 1

Answer:

C) $650,000

Explanation:

Government entities should record their assets at fair market value, not at cost basis. They should also include the land improvements as part of the total value of the land:

total value of the land = $500,000 (donated land) + $150,000 (land improvements) = $650,000

Answer 2

Your answer is C because the local citizen donated $500,000 + the county incurred $150,000more =$650,000