A fire destroyed one of Government A's fire stations, which had a net book value of $635,000. The government received an insurance settlement of $400,000 in the same fiscal year the fire had occurred. Which of the following best describes the external financial reporting in the year of the fire?

Question

Quizplus · Accepted Answer

The net book value of the fire station is an internal accounting measure and should not be reported in external financial statements. The insurance settlement of $400,000 should be recorded as a revenue in the government-wide financial statements. Therefore, the loss to be reported would be the difference between the net book value and the insurance settlement, which is $235,000. This loss should be reported in the government-wide financial statements only. The General Fund financial statements would not be impacted as the fire station was not part of the General Fund.

A Fire Destroyed One of Government A's Fire Stations, Which