Question

The City of Oak Park constructed a new storage facility using the city's own public works employees. Construction costs were incurred in the amount of $900,000, plus $25,000 in interest on short-term notes used to finance construction. What amount should be capitalized in the government-wide statements?

Answer 1

Answer:

The $900,000 should be capitalized in the government-wide statements

Explanation:

The amount which is to be capitalized in the financial statement should be an asset or an expense that is not showing in an income statement.  

In the given question, the construction cost of a new storage facility is $900,000 plus it has $25,000 interest on short term notes.  

So, $900,000 should be capitalized, and $25,000 would not be capitalized because it is of short term period which is shown in the income statement.