City of Kirkland is located in an area subsect to hurricanes. On June 13,2011, the building which is occupied by employees was suffered several structural damage as a result of a hurricanes. It had been 42 years since a hurricanes had hit the City of Appleton area, although hurricanes in City of Appleton geographic area are not uncommon. The building had been purchased in 2000 at a cost of $2,000,000 and had accumulated depreciation of $500,000 as of July 2011. Based on a restoration cost analysis, city engineers estimate the impairment loss at $822,000; however, the city expects during the next fiscal year to receive insurance recoveries of $520,000 for the damage. Required: a. Should the estimated impairment loss be reported as an extraordinary item? As a special item? Explain. b. Record the estimated impairment loss in the journal for governmental activities at the government-wide level.
City of Kirkland is located in an area subsect to hurricanes. On June 13,2011, the building which is occupied by employees was suffered several structural damage as a result of a hurricanes. It had been 42 years since a hurricanes had hit the City of Appleton area, although hurricanes in City of Appleton geographic area are not uncommon. The building had been purchased in 2000 at a cost of $2,000,000 and had accumulated depreciation of $500,000 as of July 2011. Based on a restoration cost analysis, city engineers estimate the impairment loss at $822,000; however, the city expects during the next fiscal year to receive insurance recoveries of $520,000 for the damage. Required: a. Should the estimated impairment loss be reported as an extraordinary item? As a special item? Explain. b. Record the estimated impairment loss in the journal for governmental activities at the government-wide level.
Chapter1: Financial Statements And Business Decisions
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5. City of Kirkland is located in an area subsect to hurricanes. On June 13,2011, the building which is occupied by employees was suffered several structural damage as a result of a hurricanes. It had been 42 years since a hurricanes had hit the City of Appleton area, although hurricanes in City of Appleton geographic area are not uncommon. The building had been purchased in 2000 at a cost of $2,000,000 and had accumulated depreciation of $500,000 as of July 2011. Based on a restoration cost analysis, city engineers estimate the impairment loss at $822,000; however, the city expects during the next fiscal year to receive insurance recoveries of $520,000 for the damage.
Required:
a. Should the estimated impairment loss be reported as an extraordinary item? As a special item? Explain.
b. Record the estimated impairment loss in the journal for governmental activities at the government-wide level.
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