A local citizen donated land to the county government. It estimates that it could have purchased the same or similar land for $500,000. The donor had paid $550,000 for the land five years ago. The county incurred $150,000 in development costs to convert the land into a public park. The county should capitalize the new public park in the General Capital Assets accounts in the amount of

Question

Quizplus · Accepted Answer

The county should capitalize the new public park at the cost that was incurred to develop it, which includes the cost of the land and the development costs. The cost of the land should be recorded at the fair value of $500,000, which is the estimated cost that could have been paid for similar land. The development cost of $150,000 should also be added to this, making the total capitalization cost $650,000. The original cost paid by the donor, $550,000, is irrelevant for capitalization purposes.

A Local Citizen Donated Land to the County Government