As of December 31, 2010, New Town had $9,500,000 in 4.5 percent serial bonds outstanding. Cash of $509,000 is the debt service fund’s only asset as of December 31, 2010, and there are no liabilities. The serial bonds pay interest semiannually on January 1 and July 1, with $500,000 in bonds being retired on each interest payment date. Resources for payment of interest are transferred from the General Fund and the debt service fund levies property taxes in an amount sufficient to cover principal payments. Required a. Prepare debt service fund and government-wide entries in general journal form to reflect, as necessary, the following information and transactions for FY 2011. (1) The operating budget for FY 2011 consists of estimated revenues of $1,020,000 and estimated other financing sources equal to the amount of interest to be paid in FY 2011. Appropriations must be provided for interest payments and bond redemptions on January 1 and July 1. (2) Cash was received from the General Fund and checks were written and mailed for the January 1 principal and interest payments. (3) Property taxes in the amount of $1,020,000 were levied (no estimate for uncollectible accounts has been made). (4) Property taxes in the amount of $1,019,000 were collected. (5) Cash was received from the General Fund and checks were written and mailed for the July 1 principal and interest payments. (6) Adjusting entries were made and uncollected taxes receivable were reclassified as delinquent. At the fund level, entries were also made to close budgetary and operating statement accounts. (Ignore closing entries in the government activities journal.) b. Prepare a statement of revenues, expenditures, and changes in fund balances for the debt service fund for the year ended December 31, 2011. c. Prepare a balance sheet for the debt service fund as of December 31, 2011.
> What is a special district and why might a government create one or more special districts?
> Describe the governmental activities of a state or local government and identify the measurement focus and basis of accounting used in accounting and financial reporting for these activities.
> Ray County administers a tax agency fund, an investment trust fund, and a private-purpose trust fund. The tax agency fund acts as an agent for the county, a city within the county, and the school district within the county. Participants in the investment
> The State of Nodak operates a Public Employees Retirement System (PERS) for all employees of the state. The preclosing trial balance of the PERS as of June 30, 2011, follows (in thousands of dollars): Required a. Prepare a statement of changes in plan
> The Village of Dover administers a defined benefit pension plan for its police and fire personnel. Employees are not required to contribute to the plan. The village received from the actuary and other sources the following information about the Public Sa
> The Albertville City Council decided to pool the investments of its General Fund with Albertville Schools and Richwood Township in an investment pool to be managed by the city. Each of the pool participants had reported its investments at fair value as o
> St. George County has entered into a contract for the demolition and construction of a six-lane bridge. It is expected that the project will take three years to complete. The terms of the contract indicate that the county will retain 5 percent (retained
> Fawn community, located in the City of Deerville, voted to form a local improvement district to fund the construction of a new community center. The city agreed to construct the community center and administer the bond debt; however, Fawn community was s
> The county collector of Lincoln County is responsible for collecting all property taxes levied by funds and governments within the boundaries of the county. To reimburse the county for estimated administrative expenses of operating the tax agency fund, t
> GASB standards require that governments report other postemployment benefits offered to employees. A typical example of such benefits is health care provided to retirees. It is estimated that the unrecorded and unfunded liability related to OPEB is huge.
> Following is a list of fund names and descriptions of funds from comprehensive annual financial reports (CAFRs). Required For each fund, indicate which type of fund should be used to account for the activities and explain why that fund is most appropria
> While the examples in this chapter have focused on a single-employer plan, many states operate statewide plans, referred to as Public Employee Retirement Systems (PERS), to which multiple employers contribute. One of the largest PERS plans in the nation
> Place the abbreviations corresponding to the appropriate reporting attribute(s) in the spaces provided for each financial statement. Include all that apply. Basis of Accounting Activities or Funds Governmental activities GA Business-type activities
> What are the two types of risk that are of concern to investment managers? Define each type of risk.
> If you were trying to assess the financial health of a government administered pension plan, which financial statements or schedules would you review and why?
> Explain the difference between a private-purpose trust and a public-purpose trust. How does the reporting for the two types of trusts differ?
> GASB standards require that investments be reported at fair value. Explain the GASB reporting requirements related to fair value. How do these requirements differ from reporting requirements for corporate entities?
> How does the accounting for an internal investment pool differ from the accounting for an external investment pool?
> What is a “pass-through” agency fund and under what conditions is it appropriate to use such a fund?
> Why do agency funds have no fund equity?
> Must an agency fund be used to account for withholding taxes, retirement contributions, and (if applicable) social security taxes of General Fund employees? Explain.
> Identify the different types of trust funds and explain the purpose of each type.
> Explain the distinction(s) between agency funds and trust funds.
> In partnership with Jefferson County and the Mound City Visitor’s Bureau, Mound City recently established a Native American Heritage Center and Museum, organized as a tax-exempt not-for-profit organization. Although the facility does not charge admission
> From the right-hand column, choose the letter that corresponds to the section of the statement of cash flows where the activity listed in the left-hand column would be reported. Activities Cash Flow Section A. Operating Activities B. Noncapital Fina
> Von County has prepared the following statement of revenues, expenses, and changes in fund net assets for its proprietary funds. The county has three enterprise funds and two internal service funds. Required The statement as presented is not in accorda
> Following is the June 30, 2010, statement of net assets for the City of Bay Lake Water Utility Fund. Required a. For fiscal year 2011, prepare general journal entries for the Water Utility Fund using the following information. (1) The amount in the Acc
> The Town of Elizabeth operates the old train station as an enterprise fund. The train station is on the national register of historic buildings. Since the town has held the building for such a long time, the Central Station Fund has no long-term debt. Th
> The City of Dalton accounts for its parking facilities as an enterprise fund. For the year ended December 31, 2011, the pre-closing trial balance for the Parking Facilities Fund is provided. Additional information concerning the Parking Facilities Fund
> During the past year, Oak City had a number of transactions that impacted net asset classifications of its produce market, which is operated as an enterprise fund. All nominal accounts for the period have been closed to unrestricted net assets. For repor
> The City of Ashville operates an internal service fund to provide garage space and repairs for all city-owned-and-operated vehicles. The Central Garage Fund was established by a contribution of $300,000 from the General Fund on July 1, 2008, at which tim
> As of September 30, 2010, the Central Duplicating Fund of the Town of Fredericksburg had the following post-closing trial balance: During the fiscal year ended September 30, 2011, the following transactions (summarized) occurred: 1. Employees were paid
> The City of Dixon operates a mass transit system (DTS) consisting of a network of bus and trolley routes. The following information is provided about the operations and financing of the mass transit system.* 1. Operating revenues for the most recent fisc
> Jaffry County operates a Risk Management Pool as an internal service fund. The Risk Management Pool provides the insurance function for the county departments through the purchase of insurance policies and the investing of resources to cover uninsured lo
> Examine the Federal Accounting Standards Advisory Board’s Web site at www.fasab.gov and prepare a brief report about its mission and structure and compile a list of organizations represented on its Accounting and Auditing Policy Committee. Can you obtain
> The balance sheet and statement of revenues, expenditures, and changes in fund balance for the Building Maintenance Fund, an internal service fund of Coastal City, are reproduced here. No further information about the nature or purposes of this fund is g
> What is meant by “segment information for enterprise funds”? When is the disclosure of segment information required?
> Explain the difference between operating revenues/expenses and non-operating revenues/expenses. Why does the GASB require that operating revenues/expenses be reported separately on proprietary statements of revenues, expenses, and changes in fund net ass
> What are regulatory accounting principles and how do they relate to enterprise fund accounting?
> How does the statement of cash flows under GASB standards differ from the statement of cash flows under FASB standards?
> Explain how capitalization of interest costs differs for enterprise funds as opposed to governmental funds.
> What is the purpose of the Restricted Assets section of an enterprise fund statement of fund net assets? Provide examples of items that might be reported in the Restricted Assets section.
> How does GASB reporting of uncollectible accounts for governmental funds and proprietary funds differ from the reporting of uncollectible accounts under FASB standards?
> A member of the city commission insists that the city’s internal service fund prepare and submit a budget for commission approval. The commissioner argues that it is only through the budget that the commissioners will be able to ensure control over the i
> When would a city establish an internal service fund? An enterprise fund?
> Examine the Governmental Accounting Standards Board’s Web site (www.gasb.org) and prepare a brief report about its mission and structure and the representative organizations on its advisory council. Can you get a copy of the full text of a GASB statement
> Explain the reporting requirements for internal service funds and enterprise funds.
> Transaction data related to the City of Chambers’s issuance of serial bonds to finance street and park improvements follow. Utilizing worksheets formatted as shown at the end of the problem, prepare all necessary journal entries for the
> Following are transaction data for a term bonds issue for the City of Nevin. Prepare all necessary entries for these transactions in the city’s funds, and governmental activities journal at the government-wide level. a. On July 1, 2010, the first day of
> The City of Jamestown has agreed to acquire a new city maintenance building under a capital lease agreement. At the inception of the lease, a payment of $100,000 is to be made; nine annual lease payments, each in the amount of $100,000, are to be made at
> Following is Franklin County’s debt service fund pre-closing trial balance for the fiscal year ended June 30, 2011. Required Using information provided by the trial balance, answer the following. a. Assuming the budget was not amended
> In preparation for a proposed bond sale, the city manager of the City of Appleton requested that you prepare a statement of legal debt margin for the city as of December 31, 2010. You ascertain that the following bond issues are outstanding on that date:
> Fleck County issued $5,500,000, 3 percent serial bonds, paying interest on January 1 and July 1. The bonds were sold on June 1 for 101. The county is required to use all accrued interest and premiums to service the debt. Any additional resources needed t
> Following are a number of unrelated transactions for K-Town, some of which affect governmental activities at the government wide level. None of the transactions has been recorded yet. 1. The General Fund collected $825,000 in accrued taxes, which was tra
> Assessing General Obligation Debt Burden. This case focuses on the analysis of a city’s general obligation debt burden. After examining the accompanying table that shows a city’s general obligation (tax-supported) debt
> Why does the GASB encourage state and local governments to report service efforts and accomplishments information in addition to a CAFR?
> Explain how general purpose governments differ from special purpose governments and give a few examples of each type of government.
> Amy Dyken, controller at Fitzgerald Pharmaceutical Industries, a public company, is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Fitzgerald’s financial statements. Below is
> On January 1, 2014, Novotna Company purchased $400,000, 8% bonds of Aguirre Co. for $369,114. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2019. Novotna Company u
> The transactions below took place during the year 2014. 1. Convertible bonds payable with a par value of $300,000 were exchanged for unissued common stock with a par value of $300,000. The market price of both types of securities was par. 2. The net inco
> The treasurer of Miller Co. has read on the Internet that the stock price of Wade Inc. is about to take off. In order to profit from this potential development, Miller Co. purchased a call option on Wade common shares on July 7, 2014, for $240. The call
> Uddin Publishing Co. publishes college textbooks that are sold to bookstores on the following terms. Each title has a fixed wholesale price, terms f.o.b. shipping point, and payment is due 60 days after shipment. The retailer may return a maximum of 30%
> On June 1, 2012, Andre Company and Agassi Company merged to form Lancaster Inc. A total of 800,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis. On April 1, 2014, the company issued an additional 400,000
> “Earnings per share” (EPS) is the most featured, single financial statistic about modern corporations. Daily published quotations of stock prices have recently been expanded to include for many securities a “times earnings” figure that is based on EPS. S
> Indicate how unrealized holding gains and losses should be reported for investments securities classified as trading, available-for-sale, and held-to-maturity.
> Thinken Technology recently merged with College Electronix (CE), a computer graphics manufacturing firm. In performing a comprehensive audit of CE’s accounting system, Gerald Ott, internal audit manager for Thinken Technology, discovered that the new sub
> What are the major types of subsequent events? Indicate how each of the following “subsequent events” would be reported. (a) Collection of a note written off in a prior period. (b) Issuance of a large preference share offering. (c) Acquisition of a compa
> Volker Inc. issued $2,500,000 of convertible 10-year bonds on July 1, 2014. The bonds provide for 12% interest payable semiannually on January 1 and July 1. The discount in connection with the issue was $54,000, which is being amortized monthly on a stra
> Saprano Company, on January 2, 2014, entered into a contract with a manufacturing company to purchase room-size air conditioners and to sell the units on an installment plan with collections over approximately 30 months with no carrying charge. For incom
> Callaway Corp. has a deferred tax asset account with a balance of $150,000 at the end of 2014 due to a single cumulative temporary difference of $375,000. At the end of 2015, this same temporary difference has increased to a cumulative amount of $500,000
> On July 1, 2014, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,900,000. On July 1, Torvill estimated that it would take between 2 and 3 years to complete the building. On Decemb
> Fernandez Corp. invested its excess cash in available-for-sale securities during 2014. As of December 31, 2014, the portfolio of available-for-sale securities consisted of the following common stocks. Instructions (a) What should be reported on Fernandez
> The following two items appeared on the Internet concerning the GAAP requirement to expense stock options. WASHINGTON, D.C.—February 17, 2005 Congressman David Dreier (R–CA), Chairman of the House Rules Committee, and Congresswoman Anna Eshoo (D–CA) rein
> What is an operating segment, and when can information about two operating segments be aggregated?
> Vickie Plato, accounting clerk in the personnel office of Streisand Corp., has begun to compute pension expense for 2016 but is not sure whether or not she should include the amortization of unrecognized gains/losses. She is currently working with the fo
> At December 31, 2014, Cascade Company had a net deferred tax liability of $450,000. An explanation of the items that compose this balance is as follows. In analyzing the temporary differences, you find that $30,000 of the depreciation temporary differenc
> On March 1, 2014, Pechstein Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $8,400,000. The building was completed by October 31, 2016. The annual contract costs incurred, estima
> Keystone Corporation’s financial statements for the year ended December 31, 2014, were authorized for issue on March 10, 2015. The following events took place early in 2015. (a) On January 10, 10,000 ordinary shares of $5 par value were issued at $66 per
> Mike Crane is an audit senior of a large public accounting firm who has just been assigned to the Frost Corporation’s annual audit engagement. Frost has been a client of Crane’s firm for many years. Frost is a fast-growing business in the commercial cons
> Comparative balance sheet accounts of Sharpe Company are presented below. Additional data: 1. Equipment that cost $10,000 and was 60% depreciated was sold in 2014. 2. Cash dividends were declared and paid during the year. 3. Common stock was issued in ex
> Berg Company adopted a stock-option plan on November 30, 2013, that provided that 70,000 shares of $5 par value stock be designated as available for the granting of options to officers of the corporation at a price of $9 a share. The market price was $12
> You have just started work for Warren Co. as part of the controller’s group involved in current financial reporting problems. Jane Henshaw, controller for Warren, is interested in your accounting background because the company has experienced a series of
> Assume the same information as E17-9 and that Steffi Graf Inc. reports net income in 2013 of $120,000 and in 2014 of $140,000. Total holding gains (including any realized holding gain or loss) total $40,000. Instructions (a) Prepare a statement of compre
> Castleman Holdings, Inc. had the following available for-sale investment portfolio at January 1, 2014. During 2014, the following transactions took place. 1. On March 1, Rogers Company paid a $2 per share dividend. 2. On April 30, Castleman Holdings, Inc
> For various reasons a corporation may issue warrants to purchase shares of its common stock at specified prices that, depending on the circumstances, may be less than, equal to, or greater than the current market price. For example, warrants may be issue
> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://annualreport.marksandspencer.com/_assets/downloads/Marksand-Spencer-Annual-report-and-financial-statements-2012.pdf. Instr
> Jill Vogel and Pete Dell have to do a class presentation on GAAP rules for reporting pension information. In developing the class presentation, they decided to provide the class with a series of questions related to pensions and then discuss the answers
> Youngman Corporation has temporary differences at December 31, 2014, that result in the following deferred taxes. Indicate how these balances would be presented in Youngman’s December 31, 2014, statement of financial position. $24,0
> Reynolds Custom Builders (RCB) was established in 1987 by Avery Conway and initially built high-quality customized homes under contract with specific buyers. In 2002, Conway’s two sons joined the company and expanded RCBâ€
> Briefly discuss the IASB and FASB efforts to converge their accounting guidelines for leases.
> On January 1, 2014, Acker Inc. had the following balance sheet. The accumulated other comprehensive income related to unrealized holding gains on available-for-sale securities. The fair value of Acker Inc.’s available-for-sale securitie
> Ashley Company is a young and growing producer of electronic measuring instruments and technical equipment. You have been retained by Ashley to advise it in the preparation of a statement of cash flows using the indirect method. For the fiscal year ended
> Broussard Company reported net income of $3.5 million in 2014. Depreciation for the year was $520,000; accounts receivable increased $500,000; and accounts payable increased $300,000. Compute net cash flow from operating activities using the indirect met
> The executive officers of Rouse Corporation have a performance-based compensation plan. The performance criterion of this plan is linked to growth in earnings per share. When annual EPS growth is 12%, the Rouse executives earn 100% of the shares; if grow
> Explain how the conversion feature of convertible debt has a value (a) To the issuer and (b) To the purchaser.
> Springsteen Co. had the following activity in its most recent year of operations. (a) Pension expense exceeds amount funded. (b) Redemption of bonds payable. (c) Sale of building at book value. (d) Depreciation. (e) Exchange of equipment f
> The following statement was prepared by Maloney Corporation’s accountant. The following additional information relating to Maloney Corporation is available for the year ended September 30, 2014. 1. Salaries and wages expense attributabl
> Daniel Hardware Co. is considering alternative financing arrangements for equipment used in its warehouses. Besides purchasing the equipment outright, Daniel is also considering a lease. Accounting for the outright purchase is fairly straightforward, but
> Tweedie Company issues 10,000 shares of restricted stock to its CFO, Mary Tokar, on January 1, 2014. The stock has a fair value of $500,000 on this date. The service period related to this restricted stock is 5 years. Vesting occurs if Tokar stays with t
> Davis Corporation is a medium-sized manufacturer of paperboard containers and boxes. The corporation sponsors a noncontributory, defined benefit pension plan that covers its 250 employees. Sid Cole has recently been hired as president of Davis Corporatio
