Question

A city government adds street lights within its boundaries at a total cost of $300,000. The lights should burn for at least 10 years but can last significantly longer if maintained properly. The city sets up a system to monitor these lights with the goal that 97 percent will be working at any one time. During the year, the city spends $48,000 to clean and repair the lights so that they are working according to the specified conditions. However, it spends another $78,000 to construct lights for several new streets in the city.a. Prepare the entries assuming infrastructure assets are capitalized with depreciation recorded. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)Government-Wide Financial Statementsb. Prepare the entries assuming infrastructure assets capitalized with government using the modified approach. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Answer:

a.Dr Infrastructure Assets - Street Lights $300,000

Cr Cash $300,000

Dr Depreciation Expense $30,000

Cr Accumulated Depreciation - Infrastructure Assets $30,000

Dr Maintenance Expense - Infrastructure Assets $48,000

Cr Cash $48,000

Dr Infrastructure Assets - Street Lights $78,000

Cr Cash$78,000

b.

Dr Infrastructure Assets - Street Lights $300,000

Cr Cash $300,000

Dr Maintenance Expense - Infrastructure Assets $48,000

Cash $48,000

Dr Infrastructure Assets - Street Lights $78,000

Cr Cash $78,000

Explanation:

1.Preparation of the Journal entries assuming infrastructure assets are capitalized with depreciation recorded.

Based on the information given we were told that the city government adds street lights total cost of the amount of $300,000 which means that the transaction will be recorded as:

Dr Infrastructure Assets - Street Lights $300,000

Cr Cash $300,000

(To record the original cost of the asset)

Based on the information given we were told that the city government adds street lights total cost of the amount of $300,000 in which the lights should burn for at least 10 years

which means that the transaction will be recorded as:

Dr Depreciation Expense $30,000

($300,000/10)

Cr Accumulated Depreciation - Infrastructure Assets $30,000

(To record the amount of depreciation expense)

Based on the information given we were told that city spends the amount of $48,000 in order to clean and repair the lights, this means that the Journal entry will be:

Maintenance Expense - Infrastructure Assets $48,000

Cr Cash $48,000

(To record maintenance expenses)

Based on the information given we were told that they spends another amount of $78,000 to construct lights for new streets in the city which means that the Journal entry will be :

Dr Infrastructure Assets - Street Lights $78,000

Cr Cash $78,000

(To record the additional cost of assets)

b.Preparation of t the Journal entries assuming infrastructure assets capitalized with government using the modified approach.

Based on the information given we were told that the city government adds street lights total cost of the amount of $300,000 which means that the transaction will be recorded as:

Dr Infrastructure Assets - Street Lights $300,000

Cr Cash $300,000

(To record the original cost of the assets)

Based on the information given we were told that city spends the amount of $48,000 in order to clean and repair the lights, this means that the Journal entry will be:

Dr Maintenance Expense - Infrastructure Assets $48,000

Cash $48,000

(To record t maintenance expense)

Based on the information given we were told that they spends another amount of $78,000 to construct lights for new streets in the city which means that the Journal entry will be :

Dr Infrastructure Assets - Street Lights $78,000

Cr Cash $78,000

(To record the additional cost of assets)