## (Nature of governmental fund types and fund balances) J. J. Peachum is running for election as a…

(Nature of governmental fund types and fund balances) J. J. Peachum is running for election as a commissioner of the municipality of Mt. Lebanon. He examines Table 2-6 in the text and calculates the total of the fund balances to be \$10,282,000. Then, in a major campaign speech, he announces: “We have a surplus of more than \$10 million. If elected, I will use this entire slush fund to reduce your property taxes.” Comment on Peachum’s assertion, based solely on your analysis of Table 2-6 , your understanding of the nature of governmental-type funds, and your general knowledge of governmental finance. (Fund balances will be discussed in Chapter 5 , and financial statement analysis will be covered in Chapter 14 .)

Table 2-6

## From the preceding information you need to submit to management a detailed report on thecompanyâ??s

From the preceding information you need to submit to management a detailed report on thecompanyâ€™s breakeven point. In view of the conditions in the cottonseed market, managementtold you that it would also like to know the average maximum amount that the company canafford to pay for a ton of cottonseed.Required:1. (CVP Analysis and Target Costing). Assume that the revenues in Table 1 are the annualbreakeven sales dollars. At the breakeven point, what is the highest amount that Memphiscan pay per ton of raw cottonseed? Show your answer and calculations in an Excelspreadsheet with formulas for a contribution margin income statement.2. (CVP Analysis and Target Costing). The stockholders consider the minimum satisfactoryreturn on their equity investment (ROE = Pretax net income/ average equity) in thebusiness to be 20% before corporate income taxes. The stockholdersâ€™ equity in thecompany is \$1,500,000. Compute the average amount that the company can pay for a tonof cottonseed to realize the minimum satisfactory return on the stockholdersâ€™ investmentin the company. Show your answer and calculations in an Excel spreadsheet withformulas for a contribution margin income statement.3. (Process Costing). As a part of your financial projections for 2013, you need to estimatethe value of Work-in-Process inventory at December 31, 2013. Use the data in Table 3below to show the total inventory valuation for products and byproducts of the cottonseedprocess. Calculate equivalent units (EU) of DM and CC for each product, the endinginventory value for each product, and the combined inventory value for all five items.Show this in a spreadsheet with formulas.Table 3: Ending Work in Process InventoryMeal Hulls Lint Oil Waste*Ending Inventory (Lbs.) 36,000 48,000 6,000 18,000 12,000DM % complete 100% 100% 100% 100% 100%CC % complete 95% 95% 95% 35% 50%DM unit cost per EU \$0.123 \$0.123 \$0.123 \$0.123 \$0.123CC unit cost per EU \$0.008 \$0.002 \$0.002 \$0.019 \$0.011*Processing produces waste or â€œSoapstock.â€ Although it has no sale value, it does have a cost.

## The following balances relate to the pension plan of Rienstem Transportation Co. at December 31,…

The following balances relate to the pension plan of Rienstem Transportation Co. at December 31, 2008 and 2009:Instructions:1. Determine whether a minimum pension liability adjustment is required at December 31, 2008 and 2009.2. Prepare journal entries at December 31, 2008 and 2009, to record any additionalliability.
View Solution:
The following balances relate to the pension plan of Rienstem

## When converting to a new system, which of the following conversion alternatives would be the most…

When converting to a new system, which of the following conversion alternatives would be the most risky for a financial services firm?

a. Direct conversion

b. Modular conversion

c. Parallel conversion

d. Turnkey conversion

## For this exercise refer to the Denver government-wide statement of net position (p. 40), the Denver.

For this exercise refer to the Denver government-wide statement of net position (p. 40), the Denver government-wide statement of activities (p. 42), the American Diabetes Association balance sheet (p. 528), and the American Diabetes Association statement of activities Required a. Compare Denver’s statement of net position to the American Diabetes Association’s balance sheet. What are some similarities and differences in the statement formats? b. Compare Denver’s statement of activities to the American Diabetes Association’s statement of activities. What are some similarities and differences in the statement formats? View Solution:
For this exercise refer to the Denver government wide statement of

## Harbor Division has total assets (net of accumulated depreciation) of \$610,000 at the beginning of y

Harbor Division has total assets (net of accumulated depreciation) of \$610,000 at the beginning of year 1. One of the assets is a machine that has a net book value of \$50,000. Expected divisional income in year 1 is \$81,000 including \$5,900 in income generated by the machine (after depreciation). Harbor’s cost of capital is 12 percent. Harbor is considering disposing of the asset today (the beginning of year 1).

In answering the following questions, assume that Harbor does not own the machine but has been leasing it for \$19,000 annually. Assume also that the machine generates income of \$5,900 annually after the lease payment. Harbor can cancel the lease on the machine without penalty at any time.

Required:

a. Harbor computes ROI using beginning-of-the-year net assets. What will the divisional ROI be for year 1 assuming Harbor retains the asset? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).)

b. What would divisional ROI be for year 1 assuming Harbor disposes of the asset? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).)

c. Harbor computes residual income using beginning-of-the-year net assets. What will the divisional residual income be for year 1 assuming Harbor retains the asset?

d. What would divisional residual income be for year 1 assuming Harbor disposes of the asset for its book value (there is no gain or loss on the sale)?

## 1) Several independent financial activities of a governmental unit are given below.1. Revenue from t

1) Several independent financial activities of a governmental unit are given below.1. Revenue from the sale of licenses and permits for the first two months totaled \$15,000.2. Land that had been donated previously was sold for \$100,000.3. An order was placed for the purchase of a new fire engine at a price of \$130,000.4. Bonds with a face value of \$500,000 were issued at par value to finance a new park.5. A \$250,000 grant was received from the federal government to help improve the local schools.6. The new fire engine was received and accepted. The approved price, however, was \$140,000 rather than \$130,000.Required:Prepare the journal entries needed to account for each transaction in the General Fund.2) Following is the pre-closing trial balance for the General Fund of the City of Doyle.Doyle CityThe General FundGeneral Ledger Trial BalanceDecember 31, 2016Cash \$400,000Certificates of Deposit 350,000Due from State Government 112,000Due from Other Funds 30,000Taxes Receivable 774,000Estimated Revenue 3,110,000 Expenditures 1,960,000 Encumbrances 734,000Transfers to Other Funds 90,000Expendituresâ€”2015 55,000Estimated Uncollectible Taxes \$ 30,000Vouchers Payable 64,000Due to Other Funds 27,000Fund Balanceâ€”Unassigned 760,000Fund Balanceâ€”Assigned (Note 1) 784,000Appropriations 2,700,000Revenue 3,210,000Transfers from Other Funds 40,000\$7,615,000 \$7,615,000Note 1: Includes \$50,000 of encumbrances from 2015.Required:Prepare in general journal form the closing entries for the General Fund of Doyle City.

## 1. The voters of Salt Lake City authorized the construction of a new north-south expressway for a to

1. The
voters of Salt Lake City authorized the construction of a new north-south
expressway for a total cost of no more that \$75 million. The voters also approved the issuance of \$50
million of 5% general obligation bonds.
The balance of the necessary funds will come from the following
sources: \$15 million from a federal
grant and \$10 million from a state grant.
The City controls expenditures in capital project funds through project
management. The City does not formally
incorporate budgetary entries in the capital projects fund but it does use
encumbrance accounting for control purposes.
REQUIRED: Assuming the City maintains its books and records in a manner
that facilitates the preparation of the fund financial statements, prepare
journal entries, in the Capital Projects Fund, for the following transactions.

(a) The City
issued \$50 million of 5% general obligation bonds at 101.
(b) The City
transferred the premium to the appropriate fund.
(c) The City
incurred bid-related expenditures of \$1,000.
(d) The City
signed a contract with the lowest competent bidder for \$48 million.
(e) The city
received notice from the State that the grant had been approved and the
proceeds will be forwarded to the City in the Stateâ€™s current fiscal year.
(f) The City
received the federal grant in full.
(g) The City
received a progress billing from the contractor for \$10 million. The City pays the billing.

2. The City
of Eugene has the following balances in the accounts of its capital projects
fund at year-end before closing entries.
All accounts have normal balances.
All amounts are in millions of dollars.

REQUIRED: (a) Prepare an operating statement for the
capital projects fund.
(b) Prepare a Balance Sheet for the
capital projects fund.

Cash \$
68
Deferred Revenue \$ 5
Encumbrances \$
38
Expenditures \$
10
Fund Balanceâ€”Unreserved \$
14
Grants Receivable \$
10
Other Financing Sources \$
50
Other Financing Uses \$ 1
Reserve for Encumbrances \$
38
Revenues \$
20

3. In 2006,
the voters of Southside City authorized the construction of a new swimming pool
for a total cost of no more that \$5 million.
The voters also approved the issuance of \$5 million of 5% general
obligation serial bonds to be repaid by a special property tax. Interest on these bonds is payable annually
on June 30. On June 30, 2006, the City
sold the bonds at 101 and signed contracts for the construction of the swimming
pool. Principal payments of \$250,000 are
due each June 30, beginning in 2007. If
the property tax is not sufficient to make the necessary principal and interest
payments, the City is obligated to transfer the necessary monies from the
general fund to the debt service fund.
The City does not formally incorporate budgetary entries in the debt
service fund but it does use encumbrance accounting for control purposes. The City has a June 30 fiscal year end.

REQUIRED: Assuming
that the City maintains its books and records in a manner that facilitates the
preparation of the fund financial statements, prepare journal entries, in the
Debt Service Fund, for the following transactions.

(a) The City
immediately transferred the premium to the Debt Service Fund. The Debt Service Fund may not use the premium
to pay principal or interest until the year 2021.
(b) On June
30, the City invested the premium in a 10-year 5% Certificate of Deposit at a
local financial institution. The
Certificate pays interest annually on June 30.
The interest is automatically reinvested in the Certificate.
(c) Property
taxes in the amount of \$300,000 were collected by June 30, 2007. The City expects to collect another \$50,000
by August 31.
(d) The City
transferred, to the debt service fund, the cash necessary to make the June 30,
2007 principal and interest payments.
The checks will be mailed on July 1.
(e) The City
recognizes interest earned on the Certificate of Deposit.
(f) The City
recognizes the appropriate liabilities in the debt service fund.

voter approval to issue \$10 million of 5% bonds to construct a city office
building. The estimated total cost of
construction is \$15 million. The City
hopes to raise the balance needed through private donations. The City has a June 30 fiscal year-end.
REQUIRED: Assuming
that the City maintains its books and records in a manner that facilitates the
preparation of the fund financial statements, prepare journal entries to record
the following transactions. Indicate in which fund the entry is being made.

(a) On July 1
the City issued \$10 million of 5% serial bonds at face to fund construction of
the new office buildings. The bonds pay
interest on January 1 and July 1. The
first principal payments are due five years hence.
(b) On July 15
the City signed a \$15 million contract with a local construction company for
construction of the buildings.
(c) On
September 1 a local benefactor donated \$5 million cash for the office
buildings.
(d) On October
1, the contractor requested a progress payment of \$2 million for the earthwork
and foundation work on the new buildings.
The City paid the contractor.
(e) On January
1, the City transferred from the general fund the amount necessary to make the
first interest payment. The City made
the first interest payment on the bonds.
(f) On June 1
the contractor requested, and received, a progress payment of \$10 million.

5. Krauss
County had outstanding \$35 million in Series 1991 general obligation bonds on
June 30, 2007. The bonds were issued at
an interest rate of 10 percent with interest payable on June 30 and December
31. In July 2007, interest rates had
declined substantially, and the County issued refunding bonds in the amount of
\$35 million at 5 percent. The proceeds
of the new refunding bonds were placed in escrow along with \$2,800,000 held in
the Countyâ€™s debt service fund as a sinking fund for the 1991 debt. The proceeds of the refunding bonds and the
sinking fund amount would be used in December 2007 (the call date) to purchase
the 1991 debt at a 3 percent call premium, totaling \$1,050,000, plus accrued
interest of \$1,750,000. The County had
\$250,000 of unamortized debt issue costs on the 1991 bonds, which it reported
in its government-wide financial statements.
This amount combined with the call premium resulted in a \$3,050,000
â€œlossâ€ on the refunding. REQUIRED:

(a) What
journal entries should the County make in July 2007 to record the in-substance
defeasance of the 1991 debt in its debt service fund?
(b) What debt
should be reported in the Countyâ€™s government-wide financial statements at July
2007?
(c) What
journal entry should be made in the Countyâ€™s debt service fund in December 2007
to record the purchase of the old debt at the call date?
(d) How should
the â€œlossâ€ on the refunding be recognized in the government-wide financial
statements? Why did the GASB choose this
method of recognition?

6. In 2007,
the citizens living on Coolidge Avenue agreed to a capital improvement special
assessment to replace sidewalks on both sides of the avenue. The City will oversee the construction, issue
special assessment debt to pay for it, and bill (assess) homeowners for their
portion of the cost. The estimated cost
of the project is \$3.0 million. The City
itself will be responsible for 25 percent of the cost (\$750,000). However, the
City also has indicated that it will be responsible for any defaults on the
part of homeowners. Because the City uses a separate capital projects fund for
the project, it does not integrate budgetary accounts. However it does use encumbrance accounting.
REQUIRED: Provide journal entries for
the Cityâ€™s funds and discussion as follows.
Be sure to indicate which fund would record the entry.

(a) The City
puts the project out for bid and accepts the lowest competent bid of \$2.8
million.
(b) The
contractor does the work and bills the City for \$2.9 million, \$0.1 million over
contracted amount. The City Council
approves the overage. The City lends
resources from its General Fund to pay the bill, pending issuance of special
assessment debt.
(c) The City
issues \$3.0 million in 10-year special assessment debt. The City receives \$2.9 million, an amount
that is net of debt issue costs of \$0.1 million.
(d) The
Capital Projects Fund repays the Cityâ€™s General Fund.
(e) The City
assesses taxpayers on Coolidge Avenue a total of \$2.75 million in special
assessments. The City has an enforceable
legal claim against those taxpayers on the date of the assessment.
(f) Several
taxpayers pay their assessment immediately.
During the 2007, the City receives a total of \$.775 million in special
assessment revenues.

7. A
government held the following equity securities in its debt service fund as of
January 1, 2007. During 2007 it engaged in the following
transactions as indicated.

Beginning
Bal. Ending
Bal.
Security Cost FMV Purch. Sales Cost FMV

A 600 800 600 840
B 380 300 380 275
C 100 140 150 –

D 700 700 710
Total 1,080 1,240 700 150 1,680 1,825

A. Ignoring
dividends, what would be the impact of the transactions on 2007 debt service
fund revenues or expenditures?

B. What
would be the impact of the transactions on 2007 government-wide revenues
or expenses?

8. To
construct a new junior high school, the Central Scholl District, on October 1,
2007, issued, at par, \$20 million of 6
percent bonds. The first interest
payment of \$600,000 is due on March 31, 2008.
In December 2007 the district transferred \$600,000 from its general fund
to a debt service fund to cover the March 2008 interest payment. How much interest expense/expenditure should
the district recognize for 2007 in its
3. general
fund ____________
4. debt
service fund ____________
5. government-wide
statements _____________

## What are earmarked funds ? Which funds are characterized as earmarked?

What are earmarked funds ? Which funds are characterized as earmarked?

## In developing and implementing IT, the study team and steering committee must consider…

In developing and implementing IT, the study team and steering committee must consider organizational goals. These include:

a. General, technical, and top management goals

b. General, operating management, and technical goals

c. Top management, operating management, and economic goals

d. Top management, operating management, and general systems goals