Reference no: EM132739793

Question - Capital assets are accounted for in governmental fund statements on a modified accrual basis.

The following summarizes the history of the Sharp City Recreation Center.

1. In 1993, the city constructed the building at a cost of $1,500,000. Of this amount, $1,000,000 was financed with bonds and the balance from unrestricted city funds.

2. In the 10 years from 1993 through 2002, the city recorded depreciation (as appropriate) based on an estimated useful life of 30 years.

3. In the same period, the city repaid $750,000 of the bonds.

4. In 2004, the city renovated the building at a cost of $3,000,000. The entire amount was financed with unrestricted city funds. The renovation was expected to extend the useful life of the building so that it would last a total of 25 more years-that is, until 2029.

5. In the 15 years from 2004 through 2018, the city recorded depreciation (as appropriate). Depreciation was calculated by dividing the undepreciated balance of the original cost, plus the costs of renovation, over the anticipated remaining life of 25 years.

6. In the same period, the city repaid the $250,000 balance of the debt.

7. In 2019, the city demolished the building so that the land on which it is situated could be converted into softball fields.

Required -

1. Prepare journal entries that the city would make in its governmental funds (e.g., its general fund or a capital projects fund).

2. How would you recommend that the city maintain accounting control over the capital assets themselves-those you did not record as assets in the governmental funds?