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Test Bank for Essentials of Accounting for Governmental_3 pot

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Apago PDF Enhancer Accounting for Other Governmental Fund Types: Capital Projects, Debt Service, and Permanent It rivals anything in the history of the world built by men. (Matthew Amorello, chairman of the Massachusetts Turnpike Authority on the completion of Boston’s “Big Dig,” a $14.6 billion underground highway. Since opening, the project has gained notoriety for a criminal investigation into faulty materials and problems with hundreds of leaks. In July 2006, 12 tons of ceiling tiles fell to the roadway, killing one person.) I place . . . public debt as the greatest of the dangers to be feared . Thomas Jefferson, 3rd president of the United States, whose administration negotiated the Louisiana Purchase, financing 80 percent of the purchase with govern- ment debt. Learning Objectives Apply the modified accrual basis of accounting in the recording of typical • transactions of capital projects, debt service, and permanent funds. Prepare the fund-basis financial statements for governmental funds. • Record capital lease transactions related to governmental operations. • Classify and identify appropriate fund reporting for trust agreements. • C hapter 4 describes accounting and financial reporting for the General Fund and special revenue funds. This chapter describes and illustrates the accounting for the remaining governmental funds: capital projects, debt service, and permanent. Chapter Five cop2705X_Ch05_122-153.indd 122cop2705X_Ch05_122-153.indd 122 2/2/10 8:16:19 PM2/2/10 8:16:19 PM Apago PDF Enhancer 123 ILLUSTRATION 5–1 Summary of Governmental Type Funds Fund Name Fund Description Fund Term General Fund Special Revenue Capital Projects Debt Service Permanent ✓ ✓ ✓ ✓ ✓ Accounts for all financial resources not required to be reported in another fund. Accounts for legally restricted revenue sources, other than those restricted for capital projects or debt service. Accounts for financial resources to be used for acquisition or construction of major capital facili- ties (other than those financed by proprietary or fiduciary funds). Accounts for financial resources to be used for payment of interest and principal on general long-term debt (not needed for debt paid from proprietary or fiduciary funds). Accounts for resources that are legally restricted to the extent earnings (but not principal) may be used to support government programs. Indefinite life. For each period that a substantial portion of the resources are provided by one or more restricted or com- mited revenue sources. From the period resources are first provided until the capital facility is complete. From the period funds are first accu- mulated until the final interest and principal payment is made. Indefinite life, beginning with the initial contribution. Modified Accrual Basis Financial Resource Focus Record Budgets Encumbrances ✓ ✓ ✓ ✓ * ✓ ✓ ✓ ✓ ✓ ✓ *Debt service funds are required to report only matured interest and principal payments as current liabilities. Unmatured principal installments and accrued interest, although due shortly after year-end are not required to be reported as liabilities in the debt service fund until due. cop2705X_Ch05_122-153.indd 123cop2705X_Ch05_122-153.indd 123 2/1/10 5:43:57 PM2/1/10 5:43:57 PM Apago PDF Enhancer 124 Chapter 5 Representative transactions and fund-basis financial statements are presented for the Village of Elizabeth. Illustration 5–1 provides a summary of governmental funds. Many of the prac- tices described in Chapter 4 apply to capital projects, debt service, and permanent funds. All of the governmental funds use the modified accrual basis of accounting and the current financial resources measurement focus. Budgets are typically not recorded for capital projects, debt service, and permanent funds. Similarly, encum- brance accounting is typically not used for debt service and permanent funds. Governmental fund types account for revenues, other financing sources, expendi- tures, and other financing uses that are for capital outlay and debt service purposes, as well as for current purposes. General fixed assets that are acquired with govern- mental fund resources are recorded as expenditures in the governmental funds but are displayed as capital assets in the government-wide financial statements. Simi- larly, the proceeds of general long-term debt incurred for governmental activities are recorded as other financing sources in governmental funds but the liability is displayed as long-term debt in the government-wide statements. Since long-term liabilities are not recorded in the governmental funds, payments of principal are recorded as expenditures, rather than reductions of outstandings li- abilities. Capital projects funds and debt service funds, in particular, are used to ac- quire major fixed assets and to issue and service long-term debt, although the General Fund may also be used for these purposes. Adjustments needed to record the general fixed assets and long-term debt transactions prior to preparing the government-wide statements are identified in this chapter but are illustrated more fully in Chapter 8 of this text. The general fixed assets and long-term debt for the Village of Elizabeth are included in the government-wide statements illustrated in Chapter 8. Permanent funds reflect resources that are restricted so that principal may not be expended and earnings are used to benefit the government or its citizenry. If both earnings and principal may be expended, the activities should be reported in a special revenue fund. In this chapter, a cemetery perpetual care fund is used to illustrate permanent funds. CAPITAL PROJECTS FUNDS A major source of funding for capital projects funds is the issuance of long-term debt. In addition to debt proceeds, capital projects funds may receive: grants from other governmental units, proceeds of dedicated taxes, transfers from other funds, gifts from individuals or organizations, or a combination of several of these sources. Capital projects funds differ from General Funds in that a capital projects fund ex- ists only for the duration of the project for which it is created. In some jurisdictions, governments are allowed to account for all capital projects within a single capital projects fund. In other jurisdictions, laws require each project to be accounted for by a separate capital projects fund. Even in jurisdictions that permit the use of a single fund, managers may prefer to use separate funds to enhance control over individual cop2705X_Ch05_122-153.indd 124cop2705X_Ch05_122-153.indd 124 2/1/10 5:43:57 PM2/1/10 5:43:57 PM Apago PDF Enhancer Accounting for Other Governmental Fund Types 125 projects. In such cases, a fund is created when a capital project or a series of related projects is legally authorized; it is closed when the project or series is completed. GASB standards require capital project fund-basis statements to be reported using the modified accrual basis of accounting. Proceeds of debt issues should be recognized by a capital projects fund at the time the debt is actually incurred, rather than at the time it is authorized, because authorization of an issue does not guarantee its sale. Proceeds of debt issues are recorded as Proceeds of Bonds or Proceeds of Long-Term Notes rather than as Revenues and are reported in the Other Financing Sources section of the Statement of Revenues, Expenditures, and Changes in Fund Balances. Similarly, revenues raised by the General Fund or a special revenue fund and transferred to a capital projects fund are recorded as Transfers In and reported in the Other Financing Sources section of the operat- ing statement. Taxes or other revenues raised specifically for a capital project are recorded as revenues of the capital projects fund. Grants, entitlements, or shared revenues received by a capital projects fund from another governmental unit are considered revenues of the capital projects fund, as is interest earned on temporary investments of the capital projects fund. Expenditures of capital projects funds generally are reported in the capital outlay character classification in the Governmental Funds Statement of Revenues, Expen- ditures, and Changes in Fund Balances. Capital outlay expenditures result in addi- tions to the general fixed assets reported in the government-wide Statement of Net Assets. Even though budgetary reporting is not required for capital projects funds, encumbrance accounting is used. Illustrative Case The following case illustrates representative transactions of a capital projects fund. Assume that early in 2012 the Village Council of the Village of Elizabeth authorized an issue of $1,200,000 of 8 percent 10-year regular serial tax- supported bonds to finance construction of a fire station addition. The total cost of the fire station addition was expected to be $2,000,000, with $600,000 to be financed by grants from other governmental units and $200,000 to be transferred from an enterprise fund of the Village of Elizabeth. The project would utilize land already owned by the Village and was to be done partly by a private contractor and partly by the Village’s own working force. Completion of the project was expected within the year. Transactions and entries are illustrated next. For economy of time and space, vouchering of liabilities and entries in subsidiary ledger accounts are not illustrated. The $1,200,000 bond issue, which had received referendum approval by taxpay- ers, was officially approved by the Village Council. No formal entry is required. A memorandum entry may be made to identify the approved project and the means of financing it. The sum of $100,000 was borrowed from the National Bank for defraying engi- neering and other preliminary costs incurred before bonds could be sold. The notes will be repaid in the current period and are recorded as a liability in the capital project fund. cop2705X_Ch05_122-153.indd 125cop2705X_Ch05_122-153.indd 125 2/1/10 5:43:57 PM2/1/10 5:43:57 PM Apago PDF Enhancer 126 Chapter 5 1. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bond Anticipation Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . Debits 100,000 Credits 100,000 The receivables from the enterprise fund and the other governmental units were recorded; receipt was expected during the current year. 2. Due from Other Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due from Other Governmental Units . . . . . . . . . . . . . . . . . . . . . . . Other Financing Sources—Transfers In . . . . . . . . . . . . . . . . . . . Revenues Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 600,000 200,000 600,000 Total purchase orders for supplies, materials, items of minor equipment, and con- tracted services required for the project amounted to $247,698. 3. Encumbrances Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Budgetary Fund Balance—Reserve for Encumbrances . . . . . . . 247,698 247,698 A contract was issued for the major part of the work to be done by a private con- tractor in the amount of $1,500,000. 4. Encumbrances Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Budgetary Fund Balance—Reserve for Encumbrances . . . . . . 1,500,000 1,500,000 Special engineering and miscellaneous preliminary costs that had not been en- cumbered were paid in the amount of $97,500. 5. Construction Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,500 97,500 When the project was approximately half-finished, the contractor submitted bill- ing for a payment of $750,000. The following entry records conversion of a commit- ment (Encumbrances) to a liability, eligible for payment upon proper authentication. Contracts Payable records the status of a claim under a contract between the time of presentation and verification for payment. cop2705X_Ch05_122-153.indd 126cop2705X_Ch05_122-153.indd 126 2/1/10 5:43:57 PM2/1/10 5:43:57 PM Apago PDF Enhancer Accounting for Other Governmental Fund Types 127 6. Budgetary Fund Balance—Reserve for Encumbrances . . . . . . . . . Construction Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Encumbrances Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contracts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debits 750,000 750,000 Credits 750,000 750,000 The transfer ($200,000) was received from the enterprise fund, and $300,000 was received from the other governmental units. 7. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due from Other Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due from Other Governmental Units . . . . . . . . . . . . . . . . . . . . . . 500,000 200,000 300,000 The bond issue, dated January 2, was sold at a premium of $12,000 on that date. In this example, as is generally the case, the premium must be used for debt service and is not available for use by the capital projects fund; therefore, the premium is transferred to the debt service fund. Entry 8a records the receipt by the capital proj- ects fund of the proceeds of the bonds, and 8b records the transfer of the premium amount to the debt service fund. 8a. Cash Other Financing Sources—Proceeds of Bonds . . . . . . . . . . . . . Other Financing Sources—Premium on Bonds . . . . . . . . . . . . 8b. Other Financing Uses—Transfers Out . . . . . . . . . . . . . . . . . . . . . Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,212,000 12,000 1,200,000 12,000 102,500 If bonds were sold at a discount, either the difference would be made up by a transfer from another fund, or the capital projects fund would have fewer resources available for the project. Generally, bond issue costs would be involved and would be recorded as expenditures. If bonds were sold between interest dates, the government would collect from the purchaser the amount of interest accrued to the date of sale, because a full six months’ interest would be paid on the next interest payment date. Interest payments are made from debt service funds; therefore, cash in the amount of accrued interest sold at the time of bond issuance should be recorded in the Debt Service Fund. The Village of Elizabeth’s Capital Projects Fund pays the bond anticipation notes and interest (assumed to amount to $2,500), and records the following journal entry: 9. Bond Anticipation Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . Interest Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 2,500 102,500 cop2705X_Ch05_122-153.indd 127cop2705X_Ch05_122-153.indd 127 2/1/10 5:43:57 PM2/1/10 5:43:57 PM Apago PDF Enhancer 128 Chapter 5 The contractor’s initial claim (see entry 6) was paid, less a 5 percent retention. Retention of a contractually stipulated percentage from payments to a contractor is common until the construction is completed and has been inspected for conformity with specifications and plans. 10. Contracts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contracts Payable—Retained Percentage . . . . . . . . . . . . . . . . . . . . . Debits 750,000 Credits 712,500 37,500 Upon final acceptance of the project, the retained percentage is paid. In the event that the government finds it necessary to spend money correcting deficiencies in the contractor’s performance, the payment is charged to Contracts Payable—Retained Percentage. Disbursements for items ordered at an estimated cost of $217,000 (included in the amount recorded by entry 3) amounted to $216,500. 11. Budgetary Fund Balance—Reserve for Encumbrances . . . . . . . . . . . Construction Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Encumbrances Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217,000 216,500 217,000 216,500 Assume the contractor completes construction of the fire station and bills the Village of Elizabeth for the balance on the contract: 12. Budgetary Fund Balance—Reserve for Encumbrances . . . . . . . . . . . Construction Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Encumbrances Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contracts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750,000 750,000 750,000 750,000 Assume the amount remaining from other governmental units was received: 13. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due from Other Governmental Units . . . . . . . . . . . . . . . . . . . . . . . 300,000 300,000 Invoices for goods and services previously encumbered in the amount of $30,698 were received and approved for payment in the amount of $30,500. Additional con- struction expenditures, not encumbered, amounted to $116,500. The entire amount was paid in cash. cop2705X_Ch05_122-153.indd 128cop2705X_Ch05_122-153.indd 128 2/1/10 5:43:57 PM2/1/10 5:43:57 PM Apago PDF Enhancer Accounting for Other Governmental Fund Types 129 14. Budgetary Fund Balance—Reserve for Encumbrances . . . . . . . . Construction Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Encumbrances Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debits 30,698 147,000 Credits 30,698 147,000 Assuming that inspection revealed only minor imperfections in the contractor’s performance, and upon correction of these, the contractor’s bill and the amount previously retained were paid, entry 15 should be made: 15. Contracts Payable—Retained Percentage . . . . . . . . . . . . . . . . . . . Contracts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,500 750,000 787,500 After entry 15 is recorded, $36,500 in cash remained in the capital projects fund. That amount was transferred to a debt service fund for the payment of bonds: 16. Other Financing Uses—Transfers Out . . . . . . . . . . . . . . . . . . . . . Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,500 36,500 Upon completion of the project and disposition of any remaining cash, the fol- lowing closing entry was made: 17. Revenues Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Financing Sources—Transfers In . . . . . . . . . . . . . . . . . . . . Other Financing Sources—Proceeds of Bonds . . . . . . . . . . . . . . . Other Financing Sources—Premium on Bonds . . . . . . . . . . . . . . Construction Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Financing Uses—Transfers Out . . . . . . . . . . . . . . . . . . . . 600,000 200,000 1,200,000 12,000 1,961,000 2,500 48,500 Financial statements for the Fire Station Addition Capital Projects Fund are pre- sented as part of the Governmental Funds Balance Sheet (Illustration 5–3) and the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances (Illustration 5–4) provided near the end of this chapter. Because the Vil- lage’s fire station project was completed and the remaining resources transferred to the debt service fund, there are no balances remaining in the fund and it does not appear in the governmental funds Balance Sheet (Illustration 5–3). However, the assets, liabilities, and fund balances of major capital projects continuing into the next period would appear in governmental fund Balance Sheets. Fund balances of cop2705X_Ch05_122-153.indd 129cop2705X_Ch05_122-153.indd 129 2/1/10 5:43:57 PM2/1/10 5:43:57 PM Apago PDF Enhancer 130 Chapter 5 capital projects funds are classified among the categories identified in GASB State- ment 54: Nonspendable, Restricted, Committed, or Assigned. In the case of capital projects funds, it is common for net resources to be classified as Restricted . For example, the bond issue may be the result of a referendum in which the voters both approved the debt issue and established its intended use. Intergovernmental grants and taxes dedicated to capital improvements are also likely to be classified as Re- stricted. Resources not meeting the definition of restricted are likely to be reported as Committed Fund Balance. GASB Statement 54 requires that resources intended to fulfill contractual obligations (such as long-term construction contracts) be re- ported as Committed. Any remaining net resources would be reported as Assigned, the residual classification for funds other than the General Fund. The addition to the fire station, excluding interest, will be capitalized and shown as an addition to the capital assets in the government-wide financial statements. In addition, the $1,200,000 in bonds will be recorded as a liability in the government- wide statements. See Chapter 8 for the adjustments necessary as a result of this project. OTHER ISSUES INVOLVING ACQUISITION OF CAPITAL ASSETS Acquisition of General Fixed Assets by Lease Agreements FASB SFAS No. 13 defines and establishes accounting and financial reporting stan- dards for a number of forms of leases including operating leases and capital leases. GASB Statement No. 13 accepts the FASB’s SFAS No. 13 definitions of these two forms of leases and prescribes accounting and financial reporting for lease agreements of state and local governments. If a noncancelable lease meets any one of the following criteria, it is a capital lease: The lease transfers ownership of the property to the lessee by the end of the lease 1. term. The lease contains an option to purchase the leased property at a bargain price. 2. The lease term is equal to or greater than 75 percent of the estimated economic 3. life of the leased property. The present value of rental or other minimum lease payments equals or exceeds 4. 90 percent of the fair value of the leased property. If none of the criteria are met, the lease is classified as an operating lease by the lessee. Rental payments under an operating lease for assets used by the govern- mental funds are recorded by the governmental funds as current expenditures of the period. The GASB has issued specific guidelines for state and government entities with operating leases with scheduled rent increases ( Statement No. 13 ). Discussion of this special case is beyond the scope of this text. If a government acquires general fixed assets under a capital lease agreement, the asset should be recorded in the government-wide financial statements at the cop2705X_Ch05_122-153.indd 130cop2705X_Ch05_122-153.indd 130 2/1/10 5:43:57 PM2/1/10 5:43:57 PM Apago PDF Enhancer Accounting for Other Governmental Fund Types 131 inception of the agreement at the lesser of (1) the present value of the rental and other minimum lease payments or (2) the fair value of the leased property. For example, assume a government signs a capital lease agreement to pay $10,000 on January 1, 2012, the scheduled date of delivery of certain equipment to be used by an activity accounted for by a special revenue fund. The lease calls for annual pay- ments of $10,000 at the beginning of each year thereafter; that is, January 1, 2013, January 1, 2014, and so on. There are 10 payments of $10,000 each, for a total of $100,000, but capital outlays under capital leases are recorded at the present value of the stream of annual payments, using the rate “the lessee would have incurred to borrow over a similar term the funds necessary to purchase the leased asset.” Assuming the rate to be 10 percent, the present value of the 10 payments is $67,590. If the fair value of the leased property is more than $67,590, the asset should be reported in the government-wide statement at $67,590, and the liability for $57,590 ($67,590 less the payment of $10,000 at inception) should also be reported in the government- wide statements. GASB standards also require a governmental fund be used to record the following entry at the inception of the capital lease: Debits Credits Expenditures—Capital Outlay . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,590 Other Financing Sources—Capital Lease Agreements . . . . . . . 57,590 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 Rental payments during the life of the capital lease are recorded in a governmen- tal fund (such as a debt service fund) as illustrated later in this chapter. Construction of General Fixed Assets Financed by Special Assessment Debt A special assessment is a tax levy that is assessed only against certain taxpayers— those taxpayers who are deemed to benefit from the service or project paid for by the proceeds of the special assessment levy. Special assessments may be either service types or construction types. Service-type special assessments, such as an assessment to downtown businesses for special garbage removal or police protection, would be accounted for in the appropriate fund, often the General or a special revenue fund. Construction-type special assessment projects account for longer-term projects that often require debt financing. For example, assume that a government issued $500,000 in debt to install street lighting and build sidewalks in a newly annexed subdivision. Five-year special assessment bonds were issued to finance the proj- ect, which is administered by the city. Since city law requires that the provision of lighting and sidewalks is the responsibility of property owners, a special assess- ment (property tax) is levied against the property owners in that subdivision for a five-year period. The proceeds of the assessment are used to pay the principal and interest on the debt. cop2705X_Ch05_122-153.indd 131cop2705X_Ch05_122-153.indd 131 2/1/10 5:43:57 PM2/1/10 5:43:57 PM [...]... life of the issue The annuity tables used for an actuarial basis assume that the investments of a debt service fund earn interest at a given percentage Accounting for a term bond debt service fund would be similar to the method of accounting for a deferred serial bond issue cop2705X_Ch05_122-153.indd 136 2/1/10 5:43:57 PM Accounting for Other Governmental Fund Types 137 Debt Service Accounting for Capital... Serial Bonds Accounting for regular serial bonds is illustrated by a debt service fund created to pay principal and interest for the fire station project for the Village of Elizabeth discussed earlier in this chapter Recall that, early in 2012, the Village Council of the Village of Elizabeth authorized an issue of $1,200,000 of 8 percent tax-supported bonds At the time of authorization, no formal entry... Fund for the eventual payment of principal Required: a Prepare journal entries for the capital projects fund based on the aforementioned information Include a closing entry b Prepare journal entries for the debt service fund based on the information presented above Include a closing entry c Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the year ended June 30, 2012, for. .. for a microwavable “microwave” dinner is programmed for a shelf life of maybe six months, a cook time of two minutes and a landfill dead-time of centuries (David Wann, President of the Sustainable Futures Society Wann is an author and videographer whose works focus on environmental sustainability) Learning Objectives • Apply the accrual basis of accounting in the recording of typical transactions of. .. $13,900 of the amounts due for book purchases had been paid by year-end 13 An additional $2,500 of interest had accrued on the investments at December 31 and will be received in January of next year 14 The corporate bonds had a market value of $371,500 and the U.S securities had a market value of $129,400 as of December 31 Required: Using the Excel template provided (a separate tab is provided for each of. .. establishment of a debt service fund even when it is not legally required If neither law nor sound financial administration requires the use of debt service funds, the function may be performed within the accounting and budgeting framework of the General Fund In such cases, the accounting and financial reporting standards discussed in this chapter should be followed for the debt service activities of the... above in the debt service fund b Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the debt service fund for the year ended December 31, 2011 c Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the debt service fund for the year ended December 31, 2012 5–8 Beachfront property owners of the Village of Eden requested a seawall be constructed to protect... Service Accounting for Serial Bonds The principal on serial bonds is paid over the term of the bonds, rather than in a lump sum at the end Usually the government designates a bank as fiscal agent to handle interest and principal payments for each debt issue The assets of a debt service fund may, therefore, include Cash with Fiscal Agent, and the expenditures, and liabilities may include amounts for the... made for interest 6 Also, on December 31, a reading of the financial press indicated that the ABC bonds had a fair value of $966,000, exclusive of accrued interest 7 The books were closed Required: a Record the transactions on the books of the Library Book Permanent Fund b Prepare a separate Statement of Revenues, Expenditures, and Changes in Fund Balances for the Library Book Permanent Fund for the... amounts for the service charges of fiscal agents There are four types of serial bonds: regular, deferred, annuity, and irregular If the total principal of an issue is repayable in a specified number of equal installments over the life of the issue, it is a regular serial bond issue If the first installment is delayed for a period of more than one year after the date of the issue, but thereafter installments . cop2705X_Ch05_122-1 53. indd 130 cop2705X_Ch05_122-1 53. indd 130 2/1/10 5: 43: 57 PM2/1/10 5: 43: 57 PM Apago PDF Enhancer Accounting for Other Governmental Fund Types 131 inception of the agreement at the lesser of. method of accounting for a deferred serial bond issue. cop2705X_Ch05_122-1 53. indd 136 cop2705X_Ch05_122-1 53. indd 136 2/1/10 5: 43: 57 PM2/1/10 5: 43: 57 PM Apago PDF Enhancer Accounting for Other Governmental. cop2705X_Ch05_122-1 53. indd 133 cop2705X_Ch05_122-1 53. indd 133 2/1/10 5: 43: 57 PM2/1/10 5: 43: 57 PM Apago PDF Enhancer 134 Chapter 5 Illustrative Case—Regular Serial Bonds Accounting for regular serial

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  • Contents

  • Preface

  • Chapter One: INTRODUCTION TO ACCOUNTING AND FINANCIAL REPORTING FOR GOVERNMENTAL AND NOT-FOR-PROFIT ORGANIZATIONS

    • Generally Accepted Accounting Principles

    • Objectives of Accounting and Financial Reporting

      • Objectives of Accounting and Financial Reporting for the Federal Government

      • Objectives of Financial Reporting by Not-for-Profit Entities

      • Objectives of Accounting and Financial Reporting for State and Local Governmental Units

      • State and Local Government Financial Reporting

        • Comprehensive Annual Financial Report

        • Measurement Focus and Basis of Accounting

        • Fund Structure for State and Local Government Accounting and Reporting

        • Number of Funds Required

        • Budgetary Accounting

        • Additional Resources

        • Chapter Two: OVERVIEW OF FINANCIAL REPORTING FOR STATE AND LOCAL GOVERNMENTS

          • The Governmental Reporting Entity

          • Reporting by Major Funds

          • Overview of the Comprehensive Annual Financial Report (CAFR)

            • Introductory Section

            • Financial Section: Auditor’s Report

            • Management’s Discussion and Analysis (MD&A)

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