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1) A county acquires equipment for $16,000,000 at the beginning of 2015. The equipment has an...

1) A county acquires equipment for $16,000,000 at the beginning of 2015. The equipment has an 8-year life, no residual value. At the beginning of 2021 (6 years later), the equipment is sold for $9,000,000. Use straight-line depreciation, if appropriate. The equipment is used for general operations and is reported in the general fund.

What is reported in the general fund's operating statement, related to this equipment, in 2015?

A. The equipment is not reported in the operating statement

B. Expenditure of $16,000,000

C. Expense of $16,000,000

D. Expense of $2,000,000

2) A county acquires equipment for $16,000,000 at the beginning of 2015. The equipment has an 8-year life, no residual value. At the beginning of 2021 (6 years later), the equipment is sold for $9,000,000. Use straight-line depreciation, if appropriate. The equipment is used for general operations and is reported in the general fund.

What is reported in the general fund's operating statement, related to this equipment, in 2018?

A. Revenue, $9,000,000

B. Loss on sale, $7,000,000

C. Gain on sale, $5,000,000

D. Other financing source, $9,000,000

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Answer #1

1.

C. Expense of $16,000,000 is the correct answer

Explanation: Purchase of equipment is an expense to the entity. When the equipment is purchased Expenditures account is debited.

2. B. Loss on sale, $7,000,000 is the correct answer.

Explanation:

Equipment Cost $16,000,000

Less: Sale Price ($9,000,000)

Loss on sale $7,000,000

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