In 1991, Katie City constructed a new Fifth Avenue bridge. The city has no records of the cost of the bridge. The city's engineers estimate that the current replacement cost (2016) of the bridge is $24 million. The construction price index was 150 in 1991 and is 200 in 2016. The engineers also estimate that the bridge has a total useful life of 30 years.
REQUIRED:
a. What values should the city assign to the bridge for estimated historical cost and accumulated depreciation?
b. Suppose the city decided to use the modified approach to report its bridges. What value would the city assign to the bridge?
c. In your opinion, would a depreciation charge for the bridge add significant information to the city's financial statements? Why or why not?

Question

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The Answer of In 1991, Katie City constructed a new Fifth Avenue bridge. The city has no records of the cost of the bridge. The city's engineers estimate that the current replacement cost (2016) of the bridge is $24 million. The construction price index was 150 in 1991 and is 200 in 2016. The engineers also estimate that the bridge has a total useful life of 30 years.
REQUIRED:
a. What values should the city assign to the bridge for estimated historical cost and accumulated depreciation?
b. Suppose the city decided to use the modified approach to report its bridges. What value would the city assign to the bridge?
c. In your opinion, would a depreciation charge for the bridge add significant information to the city's financial statements? Why or why not?

In 1991, Katie City Constructed a New Fifth Avenue Bridge