14. Assume in problem (12) that the city reports the work as a capital asset. Wh

Question

14. Assume in problem (12) that the city reports the work as a capital asset. Which of the following is true? a. Depreciation is not recorded because the city has no cost. b. Depreciation is not required if the asset is viewed as being inexhaustible. c. Depreciation must be recognized because the asset is capitalized. d. Because the property was received as a gift, recognition of depreciation is optional. 12. The City of Wilson receives a large sculpture valued at $240,000 as a gift to be placed in front of the municipal building. Which of the following is true for reporting the gift within the government-wide financial statements? a. A capital asset of $240,000 must be reported. b. No capital asset will be reported. c. If conditions are met, recording the sculpture as a capital asset is optional. d. The sculpture will be recorded but only for the amount paid by the city. I need the answer to both questions please

Explanation / Answer

14.Depreciation is not required if the asset is viewed as being inexhaustible.

Explanation:Depreciation is required only for assets that are exhausitive and have a finite life.If a work of art or historical treasure is inexhaustible no depreciation is required for such assets.

12.In the present scenario the city receives the sculpture as gift to be placed in front of municipal building.It means sculpture placed in front of municipal building is displayed for public to see as it will not generate any direct cash inflows or other economic benefit.This signifies that the first guideline was met.

Since the scuplture is protected and free from encumbrances cared and preserved the second creteria is also met.

Hence Option C is true

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