E5-20 – Asset Impairment
Asset Impairment . On July 20 , 2017 , the building occupied by Sunshine City ’ s Culture and Recreation Department suffered severe structural damage as a result of a hurricane . It had been 48 years since a hurricane had hit the Sunshine City area , although hurricanes in Sunshine City ’ s geographic area are not uncommon . The building had been purchased in 2007 at a cost of $ 2,000,000 and had accumulated depreciation of $ 500,000 as of July 2017 . Based on a restoration cost analysis , city engineers estimate the impairment loss at $ 230,000 ; however , the city expects during the next fiscal year to receive insurance recoveries of $ 120,000 for the damage .
Required
a . Should the estimated impairment loss be reported as an extraordinary item ? As a special item ? Explain .
b . Record the estimated impairment loss in the journal for governmental activities at the government-wide level .
c . How should the insurance recovery be reported in the following fiscal year ? ( You need not provide the journal entry or entries here .)