Items 1 through 3 are based on the following:

The general fund of Cliff Township acquired two police cars at the beginning of January 2005, at a total cost of $40,000. The cars are expected to last for four years and have a $10,000 residual value. Straight-line depreciation is used. Cliff adopted the provisions of GASB 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, for its financial statements issued for 2005.

On the balance sheet for the governmental funds at December 31, 2005, the police cars will be reported under assets in the general fund column at which of the following amounts?

  1. $40,000
  2. $32,500
  3. $0
  4. $22,500

On the government-wide statement of net assets at December 31, 2005, the police cars will be reported under assets in the governmental activities column at which of the following amounts?

  1. $40,000
  2. $32,500
  3. $0
  4. $22,500

On the statement of revenues, expenditures, and changes in fund balances prepared for the governmental funds for the year ended December 31, 2005, the police cars will be reported as

  1. Expenditures of $40,000.
  2. Expense of $7,500.
  3. Expenditures of $7,500.
  4. Expense of $40,000.