Assume that the City of Wakefield purchased a tract of land to be used as a public park. The purchase was financed with proceeds from a five-year note issued by a local lending institution. Because of the time required for facilities construction and land improvements, the park itself will not be ready for public use for at least two years. At the date of purchase, the city would most likely account for the transaction in

Question

Quizplus · Accepted Answer

The purchase of land for a public park is considered a capital project, which should be accounted for in the Capital Projects Fund. The financing of the project with a five-year note would result in a long-term liability, which should be recorded in the General Long-Term Liabilities accounts. The land itself would be recorded as a capital asset in the General Capital Assets accounts.

Assume That the City of Wakefield Purchased a Tract of Land