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Chapter 9 Homework.

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Presentation on theme: "Chapter 9 Homework."— Presentation transcript:

1 Chapter 9 Homework

2 Exercise 9-3

3 NET ASSETS-INVESTED IN CAPITAL ASSETS……………… $40,000
Prepare the journal entries required in the GCA and GLTL accounts of Percy County to record the following transactions. Indicate where any gains and losses occur in GOVT WIDE f/s. 1. Land was DONATED for use as the site of a bike and nature trail. The donor had acquired the land for $3,000 about 20 years earlier. Its estimated fair value when donated to the county was $40,000. LAND………….. $40,000 NET ASSETS-INVESTED IN CAPITAL ASSETS……………… $40,000 * Record gift at FMV

4 no entry 2. Computer equipment was ordered for GF departments.
The estimated cost was $48,000. no entry We are doing entries for the GCA and GLTL. They don't record encumbrances…just the assets/liabilities as they occur.

5 NET ASSETS- INVESTED IN CAPITAL ASSETS……………….. $47,750
3. The computer equipment was received by the county. The actual cost was $47,750. The county had paid $42,000 to the vendor by year-end. EQUIPMENT………….. $47,750 NET ASSETS- INVESTED IN CAPITAL ASSETS……………….. $47,750 This assumes the amount due to vendors is SHORT-TERM.

6 Accumulated Depreciation…….. $50,000
4. The county sold a (general government) dump truck that had cost $55,000. Accumulated depreciation on the truck was $50,000. The county sold the truck at auction for $3,300. Accumulated Depreciation…….. $50,000 Net assets-Invested in CA……… 5,000 Trucks………………………………$55,000 Removes asset from GCA records GOVT WIDE GAIN/LOSS? Book lost…$5,000 Vs Cash received $3,300 LOSS $1,700

7 5. A storage building used by general government departments was
destroyed by a tornado. The building, which cost $150,000 is expected to be rebuilt at a cost of $200,000. The building was 50% depreciated when destroyed. Construction has not begun on the new building. Accumulated Depreciation…….. $75,000 Net Assets-Invested in CA…….. $75,000 Buildings………………………….$150,000 Need to remove destroyed building from GCA GOV WIDE LOSS Book lost……..$75,000 Vs Cash received…$0 LOSS $75,000

8 Liability under CL……………$1,100,000 Net Assets-Invested in CA……$ 100,000
6. The government leased a building under a capital lease agreement. The capitalizable cost was $1,200,000. The county made an initial down payment of $100,000. Buildings…………… $1,200,000 Liability under CL……………$1,100,000 Net Assets-Invested in CA……$ 100,000

9 Exercise 9-5

10 Wildwood Township entered into the following transactions during 20X6:
REQUIRED: Prepare the journal entries required in the various accounts (in BOTH FUNDS and NONFUNDS) 1. The township authorized a bond issue of $5M par to finance construction of a fountain in the town square. The bonds were issued for $5,120,000. Bond issue costs of $30,000 were incurred and paid. The premium, less bond issue costs, was transferred to the fund from which the debt is to be serviced. CAPITAL PROJECTS FUND CASH…………. $5,090,000 Bond issue expenditure $30,000 OTHER FINANCING SOURCE-BONDS…..$5,000,000 OTHER FINANCING SOURCE-PREM…… ,000 OTHER FINANCING USE-TRANSFER TO DSF…………………………………….. $90,000 CASH………………………………………………..$90,000

11 1. continued. DEBT SERVICE FUND CASH………. $90,000 OTHER FINANCING SOURCE-TRANSFER FROM CPF……………………………. $90,000 GCA/GLTL NONFUND GCA-Unamortized Bond issue costs $30,000 NA……………………$30,000 NET ASSETS-INVESTED IN CAPITAL ASSETS…….. $5,120,000 BONDS PAYABLE……………….$5,000,000 PREMIUM ON B/P……………… $ 120,000

12 2. The township entered into a contract for construction of the fountain
at an estimated cost of $4,850,000. CAPITAL PROJECTS FUND ENCUMBRANCES……..$4,850,000 RESERVE FOR ENCUMBRANCES……..$4,850,000

13 3. The town received and paid a $4,890,000 bill for the construction
upon completion of and approval of the fountain. CAPITAL PROJECTS FUND RESERVE FOR ENCUMBRANCES………$4,850,000 ENCUMBRANCES………………………..$4,850,000 EXPENDITURES-CAPITAL OUTLAY……$4,890,000 CASH………………………………………..$4,890,000 GCA/GLTL NONFUND FOUNTAIN………………. $4,890,000 NET ASSETS-INVESTED IN CAPITAL ASSETS……………….$4,890,000

14 4. The unused bond proceeds were set aside for debt service on the
bonds. Accordingly, those resources were paid to the appropriate fund. Bond proceeds………………………….. $5,120,000 - Bond premium transferred earlier…… (120,000) Capital outlay cost……………………. (4,890,000) NET PROCEEDS……………. $ 110,000 * The solution manual went with $110,000 which did not consider the bond issue costs. CAPITAL PROJECTS FUND OTHER FINANCING USE- TRANSFER TO DSF…………… $110,000 CASH………………………………$110,000 DEBT SERVICE FUND CASH………….. $110,000 OTHER FINANCING SOURCE- TRANSFER FROM CPF…………..$110,000

15 E 9-6

16 1. The city issued $3 MIL of refunding bonds at par.
The City of Burton has $5 million par value of general government, general obligation bonds payable outstanding. The city has decided to DEFEASE THOSE BONDS IN SUBSTANCE. Record the following transactions in all the accounts (both in the funds and in the GCA and GLTL of the City of Burton that are affected. 1. The city issued $3 MIL of refunding bonds at par. FUNDS NON-FUNDS Net Assets $3M Refunding Bonds/p....$3M Cash $3,000,000 OFS-Refunding Bonds $3,000,000

17 The city transferred $1,850,000 from its GF to its DSF to provide the
The City of Burton has $5 million par value of general government, general obligation bonds payable outstanding. The city has decided to DEFEASE THOSE BONDS IN SUBSTANCE. Record the following transactions in all the accounts (both in the funds and in the GCA and GLTL of the City of Burton that are affected. The city transferred $1,850,000 from its GF to its DSF to provide the additional resources needed to defease the bonds in substance.. FUNDS NON-FUNDS N/A GF: OFU-Transfer $1,850,000 Cash $1,850,000 DSF: Cash $1,850,000 OFS-Transfer $1,850,000

18 National Bank of Burton to defease the bonds in substance.
The City of Burton has $5 million par value of general government, general obligation bonds payable outstanding. The city has decided to DEFEASE THOSE BONDS IN SUBSTANCE. Record the following transactions in all the accounts (both in the funds and in the GCA and GLTL of the City of Burton that are affected. The city paid $4,850,000 into an irrevocable trust established at the First National Bank of Burton to defease the bonds in substance. FUNDS NON-FUNDS Bonds payable...$5MIL Net Assets $5 MIL OFU-Transfer $3,000,000 Expenditure... $1,850,000 Cash $4,850,000 even tho less money was put in trust you can still defease the whole amount.

19 Problem 9-1

20 Computers....... $150,000 Liability......... $120,000
Prepare general journal entries to record the effects on the GCA accounts of the following transactions. They are independent of each other. Assume SL depreciation. 1. A government leased computers with a capitalizable cost of $150,000, including $30,000 paid at the inception of the lease agreement. The lease is properly classified as a capital lease, and the computers are for the use of the government's finance and accounting division. GF entry? Computers $150,000 Liability $120,000 Net Assets $ 30,000 GCA entry Computer expenditure..$150K OFS $120K Cash $ 30K

21 GCA entry @ lower of taxes/penalties etc. or FMV
2. A government foreclosed on land against which it had tax liens amounting to $20,000. The estimable salable value of the land is $18,500. The government decided to use the land as the site for a new baseball park. Land $18,500 Net Assets $18,500 GCA lower of taxes/penalties etc. or FMV GF entry? DO THIS FIRST! Expenditures..... $18,500 Allowance for Uncollectible tax liens $1,500 Tax Liens Receivable $20,000

22 3. Construction costs billed during the year on a new addition
to city hall totaled $8,000,000. - $7,600,000 was paid to contractors. Encumbrances of $10,000,000 related to the project were outstanding at year end. General revenues of $3,000,000 were transferred to the City Hall Addition CPF. The remainder of the construction costs are being financed from bond proceeds. GF entry DO THIS FIRST? Construction in Progress $8,000,000 Net Assets $8,000,000 GCA entry Construction expenditure..$8.0M Cash $7.6M V/P………………….$0.4M (assume short-term)

23 3. Construction costs billed during the year on a new addition
to city hall totaled $8,000,000. - $7,600,000 was paid to contractors. Encumbrances of $10,000,000 related to the project were outstanding at year end. General revenues of $3,000,000 were transferred to the City Hall Addition CPF. The remainder of the construction costs are being financed from bond proceeds. GF DO THIS FIRST? NO ENTRY--Encumbrances are not recorded in the GCA (only expenditures). GCA entry UFB $10,000,000 Encumbrances....$10,000,000 Closing entry

24 3. Construction costs billed during the year on a new addition
to city hall totaled $8,000,000. - $7,600,000 was paid to contractors. Encumbrances of $10,000,000 related to the project were outstanding at year end. General revenues of $3,000,000 were transferred to the City Hall Addition CPF. The remainder of the construction costs are being financed from bond proceeds. GF DO THIS FIRST? NO ENTRY--Interfund transfer are not recorded in GCA. GCA entry Transfer to CPF.... $3M Cash $3M

25 3. Construction costs billed during the year on a new addition
to city hall totaled $8,000,000. - $7,600,000 was paid to contractors. Encumbrances of $10,000,000 related to the project were outstanding at year end. General revenues of $3,000,000 were transferred to the City Hall Addition CPF. The remainder of the construction costs are being financed from bond proceeds. NO ENTRY--nothing to really record.

26 4. In the next year, the city hall addition in item 3 was completed
at an additional cost of $9,800,000. The building was inspected and approved, but $2,000,000 of the construction costs have not been paid. 8,000,000 (from #3) + $9,800,000 = $17,800,000 in buildings Buildings $17,800,000 Construction in Progress $8,000,000 Net Assets $9,800,000 GCA entry to record completion of building GF DO THIS FIRST? Construction expenditure..$9.8M Cash $7.8M V/P assume short-term $2M

27 5. General government equipment with an original cost of $300,000
(estimated salvage zero) was sold three-fourths through its useful life for $65,000. Accumulated depreciation = $300,000 x .75 = $225,000. GAIN or LOSS? $75,000 $65,000 ($10,000) LOSS Net assets (book) $75,000 Accumulated Depreciation... $225,000 Capital Assets $300,000 GCA entry Book vs Cash GF DO THIS FIRST? Cash $65,000 OFS-sale of equpiment $65,000

28 6. A bridge was destroyed by a tornado. Its original cost was $92,000.
-Useful life 1/2 over. Replacement cost of bridge is $250,000. GF DO THIS FIRST? Net assets $46,000 (book) Acc Deprec $46,000 Buildings $92,000 GCA entry No entry until new expenditures made for replacement. GOVT WIDE Book loss……$46,000 Vs. Cash received..$0 LOSS……….. $46,000

29 7. A dump truck originally purchased for and used by a city
Enterprise Fund has been transferred to the streets and roads department- a general government department. The truck originally cost $80,000 and is halfway through its estimated useful life. Its residual value is $18,000. The FMV of truck at date of transfer is $52,000. Accumulated depreciation = ($80,000 - $18,000) x 1/2 = $31,000 Entry for Enterprise? Equipment $80,000 Accumulated Depreciation.... $31,000 Net Assets $49,000 GCA entry: Recorded at lower of book vs FMV Capital Contrib... $49,000 Acc-Dep $31,000 Equipment....$80,000 GF entry first (receipt of truck) Book is lower not called transfer in Enterprise Fund. NOTHING: ITS ALL IN GCA

30 8. Computers with an original cost of $40,000 and estimated residual
value of $5,000 were transferred from GF departments to the municipal golf course, which is accounted for in an Enterprise Fund. The transfer occurred at the end of the estimated useful life of the computers.

31 8. Computers with an original cost of $40,000 and estimated residual
value of $5,000 were transferred from GF departments to the municipal golf course, which is accounted for in an Enterprise Fund. The transfer occurred at the end of the estimated useful life of the computers. - Remove capital asset from GCA and record in Proprietary at lower of book vs "use-value". - Called "capital contribution" in fund statements NO ENTRY IN GF: ALL GCA Accumulated Depreciation.... $35,000 (all used except for salvage) Net Assets (book) ,000 Equipment $40,000 GCA entry Proprietary Fund Use-value is inextricably tied to "the physical properties of the commodity" (126); that is, the material uses to which the object can actually be put, the human needs it fulfills . MARX Equipment……. $5,000 Capital Contribution…. $5,000

32 Problem 9-2

33 Prepare general journal entries to record the effects on the GLTL accounts of the following
transactions. The transactions are independent of one another unless otherwise noted. BOND ANTICIPATION notes that meet the criteria for noncurrent treatment were issued to provide financing for a general government capital project. The notes were issued at face (par) value of $5,000,000. Capital Projects Fund Cash $5,000,000 OFS-BANs $5,000,000 GLTL Net Assets $5,000,000 BANS $5,000,000

34 Prepare general journal entries to record the effects on the GLTL accounts of the following
transactions. The transactions are independent of one another unless otherwise noted. Special assessment bonds, guaranteed by the government matured and were paid during the year: $50,000 principal and $30,000 interest were paid. Debt Service Fund Principal expenditure $50,000 Interest expenditure $30,000 Cash $80,000 GLTL Bonds payable $50,000 Net Assets $50,000

35 Prepare general journal entries to record the effects on the GLTL accounts of the following
transactions. The transactions are independent of one another unless otherwise noted. Principal and interest on the County Courthouse Serial Bonds matured during the year. The maturing interest ($200,000) was paid from the related Debt Service Fund, but the maturing principal ($75,000) had not been paid by year end. GF revenues were transferred to cover the interest payments. Debt Service Fund Interest expenditure $200,000 Cash $200,000 Principal Expenditure.....$75,000 Defaulted Bonds payable $75,000 GLTL Bonds payable $75,000 Net Assets $75,000 This is an example of a LTL becoming DUE AND NOT PAID so its set up as a shortterm payable.

36 Capital Lease payable..........$70,000
Prepare general journal entries to record the effects on the GLTL accounts of the following transactions. The transactions are independent of one another unless otherwise noted. General Fund expenditures accounts included a Rent Expenditures account with a balance of $200,000. Further investigation of the account indicated that the balance resulted from the payment of $40,000 on operating leases and $160,000 of lease payments on a capital lease (of which $90,000 was for imputed interest). General Fund Rent Expenditures Operating lease $40,000 Rent Expenditures (Interest on CL) $90,000 Rent Expenditures (Prin on CL)... $70,000 Cash $200,000 GLTL Capital Lease payable $70,000 Net Assets $70,000

37 Prepare general journal entries to record the effects on the GLTL accounts of the following
transactions. The transactions are independent of one another unless otherwise noted. The total general government underfunded pension liability at the beginning of the fiscal year was $14,000,000. Of this $1,500,000 was considered a fund liability. The total general government underfunded pension liability at the end of the fiscal year was $14,500,000. Of this, $2,500,000 was considered due and payable at year end. LONGTERM General Fund Pension expenditure $1,000,000 Current pension liability $1,000,000 Beg $14,000,000 ,500,000 current 12,500,000 GLTL End $14,500,000 ,500,000 current 12,000,000 Pension liability $500,000 Net Assets $500,000

38 Advance refunding bonds ($10,000,000 par) were issued at 100
Advance refunding bonds ($10,000,000 par) were issued at The proceeds of the refunding and $2,000,000 of previously accumulated Debt Service Fund resources were set aside in an irrevocable trust to defease in substance $11,500,000 of School Bonds. Governmental Fund Cash $10,000,000 OFS-refunding bonds $10,000,000 OFU-payment to bond escrow agent......$10,000,000 Expenditure-payment to BEA $2,000,000 Cash $12,000,000 Net Assets $10,000,000 Refunding bonds payable $10,000,000 GLTL Bonds payable $11,500,000 Net Assets $11,500,000

39 Refunding bonds payable...........$10,000,000
Assume the same information as in item 6, except that the School Bonds are not defeased in substance as a result of the transaction described. (it’s a little unclear specifically what they mean about why it wasn’t defeased... was it still set aside but it didn’t meet the requirements? did they not make the entry to set aside???) Governmental Fund Cash $10,000,000 OFS-refunding bonds $10,000,000 OFU-payment to bond escrow agent......$10,000,000 Expenditure-payment to BEA $2,000,000 Cash $12,000,000 GLTL Net Assets $10,000,000 Refunding bonds payable $10,000,000 DOESN’T HAPPEN; if for some legal reason the in substance defeasance doesn’t take place, then you aren’t supposed to roll out the LTL.

40 Computers with an original cost of $40,000 and estimated residual value of $5,000
were transferred from GF departments to the municipal golf course, which is accounted for in an Enterprise Fund. The transfer occurred at the end of the original estimated useful life of the computers. Book value of computers $40,000 $5,000 salvage $35,000 book General Fund Entry NONE GCA/GLGL entry Enterprise Fund Net Assets…$5,000 Acc/Dep….. $35,000 Computers….$40,000 Computers…… $35,000 Capital Contribution…$35,000


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