A government has a general government capital project underway. In the first year of the project, the government paid $75,000 for land to be used as a building site; signed a contract with a contractor for $8,000,000; was billed $4,500,000 by the contractor for work completed during the year; and paid the contractor $4,050,000. At the end of the first year, what amount of assets should be included in General Capital Assets accounts as a result of this activity?

Question

Quizplus · Accepted Answer

The $75,000 paid for land should be included in the General Capital Assets accounts as an asset.

The total cost of the project is $8,000,000, but only $4,050,000 was paid during the first year. The remaining $3,950,000 is considered a liability and should not be included in the General Capital Assets accounts.

The amount of work completed during the year, $4,500,000, should be included in the General Capital Assets accounts as an asset, even though it was not fully paid for.

Therefore, the total assets that should be included in the General Capital Assets accounts as a result of this activity are $75,000 + $4,500,000 = $4,575,000.

A Government Has a General Government Capital Project Underway