On July 1, Gilbert County bought computer equipment for use in the administrative offices of the county. The equipment has an estimated useful life of three years and salvage of $10,000. The county has a 6/30 fiscal year-end. Assuming that the county maintains its books and records in a manner that facilitates the preparation of government-wide financial statements, the $85,000 cost of this equipment would require which of the following entries?
A) Debit Expenditures $85,000; Credit Cash $85,000.
B) Debit Equipment $85,000; Credit Cash $85,000.
C) Debit Expenses $85,000; Credit Cash $85,000.
D) No entry is required.

Question

Quizplus · Accepted Answer

The correct entry for purchasing equipment in a government-wide financial statement context is to debit the asset account (Equipment) and credit the cash account, reflecting the acquisition of a capital asset. This is because government-wide financial statements are prepared using the accrual basis of accounting, where the acquisition of long-term assets is capitalized and depreciated over their useful life, rather than being expensed immediately.

On July 1, Gilbert County Bought Computer Equipment for Use