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At the beginning of fiscal 2019, a county government acquires equipment for $4,000,000. The equipment has an estimated life of 5 years, and straight-line depreciation is used, with no residual value, if appropriate. At the end of fiscal 2020 (two years later), the government disposes of the equipment for $1,800,000.
-If the equipment is reported in an enterprise fund, how is its disposal reported in the fiscal 2020 CAFR?

Question

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The equipment's annual depreciation is $800,000 ($4,000,000 / 5 years). After two years, accumulated depreciation is $1,600,000, making the book value $2,400,000 ($4,000,000 - $1,600,000). Disposing of the equipment for $1,800,000 results in a $600,000 loss ($2,400,000 - $1,800,000), reported in both the proprietary funds operating statement and the government-wide statement of activities.

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