The City of Chessie received two contributions during its current fiscal year: A developer contributed 10 acres of land as part of an agreement with the city to allow more houses to be built per acre than current zoning laws permit. The city will use the land to build a park. The developer purchased the land for $1.5 million. The fair value of the land at the time of the contribution was $1.9 million. · A local resident contributed 30 acres of land to the city. The city agreed that it would sell the land and use the proceeds to add a new wing to the city’s senior center. The resident paid $500,000 for the land. When it was contributed, it had a fair value of $1.5 million. The city sold the land to several developers a month after its fiscal year-end for $1.7 million. a. Prepare journal entries to record each of these contributions in the city’s general fund. b. Comment on and justify any differences in the way you recognized each of these transactions. c. Would your answer on the contribution for the senior center be different if the city had been unable to sell the land before its financial statements were issued? d. How would each of these transactions be reported in the city’s government-wide financial statements?
The City of Chessie received two contributions during its current fiscal year:
A developer contributed 10 acres of land as part of an agreement with the city to allow more houses to be built per acre than current zoning laws permit. The city will use the land to build a park. The developer purchased the land for $1.5 million. The fair value of the land at the time of the contribution was $1.9 million.
· A local resident contributed 30 acres of land to the city. The city agreed that it would sell the land and use the proceeds to add a new wing to the city’s senior center. The resident paid $500,000 for the land. When it was contributed, it had a fair value of $1.5 million. The city sold the land to several developers a month after its fiscal year-end for $1.7 million.
a. Prepare
b. Comment on and justify any differences in the way you recognized each of these transactions.
c. Would your answer on the contribution for the senior center be different if the city had been unable to sell the land before its financial statements were issued?
d. How would each of these transactions be reported in the city’s government-wide financial statements?
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