Homework answers / question archive / Chapter 5 – Homework

Chapter 5 – Homework

Accounting

Share With

---

Chapter 5 – Homework.

1. Under GASB standards, which of the following would be considered an example of an intangible asset?
2. Two new copiers were purchased for use by the city clerk’s office using General Fund resources.  The copiers cost $15,000 each; the city’s capitalization threshold is $5,000.  Which of the following entries would be required to completely record this transaction?
3. Maxim County just completed construction of a new town hall to be used for its governmental offices.  The employees have moved in and the new building is officially in use.  The county used a capital projects fund to account for the construction of the building, and the building came in under budget.  There is a fund balance of $12,000.  The county should:
4. A capital projects fund would probably not be used for which of the following assets?
5. Machinery and equipment depreciation expense for general capital assets totaled $163,000 for the reporting period.
6. Which of the following is a correct statement regarding the use of the modified approach for accounting for eligible infrastructure assets?
7. The city of Deauville entered into a service concession arrangement (SC) with Water Wonders, Inc. to operate the city pool for the next 20 years.  Water Wonders has agreed to pay the city $3,000,000 up front as a part of this agreement.  According to the agreement, Water Wonders will be responsible for operating the pool, and the city will continue to the responsible for costs related to maintaining it.  In addition, Water Wonders has the right to collect fees from the public for their use of the pool, although the rates are subject to approval by the City.  The City should:
8. Callaway County issued $10,000,000 in bonds at 101 for the purpose of constructing a new County Recreation Center.  State law requires that any premium on bond issues to be deposited directly in a debt service for eventual repayment of bond principal.  The journal entry to record issuance of the bonds will require a (an):
9. Centerville enters into a capital lease for new copiers in all its city hall offices.  In the General Fund, it should report:
10. The following balances are included in the subsidiary records of Sincilair:

Town hall building                                          $5,000,000

Town pool (supported by user fees)               1,000,000

Town pool maintenance equipment                25,000

Police cars                                                       200,000

Equipment                                                       75,000

Office supplies                                                10,000

 

What is the total amount of general capital assets held by the town?

 

11. Prepare a journal entry for governmental funds and government-wide governmental activities for each of the following transactions entered into by the City of Loveland.  (if no entry is required for a transaction/event, select “No journal entry required” in the first account field)
     

1. The city received a donation of land is to be used by Parks and Recreation to develop a public park.  At the time of the donation, the land had a fair value of $5,200,000 and was recorded on the donor’s books at a historical cost of $4,500,000

 

2. The public works department sold machinery with a historical cost of $35,100 and accumulated depreciation of $28,700 for $6,000.  The machinery had originally been purchased with special revenue funds.

 

 

3. A car was leased for the mayor’s use.  Since the term of the lease exceeded 75% of the useful life of the car, the lease was capitalized.  The first payment was $1,000 and the present value of the remaining lease payments was $30,000.

 

4. During the current year, a capital projects fund completed a new public safety building that was started in the prior year.  The total cost of the project was $9,750,000.  Financing for the project came from a $9,000,000 bond issue that was sold in the prior year, and from a $720,000 federal capital grant received in the current year.  Current year expenditures for the project totaled $1,176,000.  The full cost is attributed to the building since it was constructed on city-owned property

 

Capital Project Fund:

 

• • Record the funds received for the public safety building

 

 

• • Record the current year’s expenditure for the public safety building

            Governmental Activities:

• • Record the funds received for the public safety building

 

4. • Record the current year’s expenditure for the public safety building
   • Record the transfer of the work in progress to the capital asset        
5. Due to technology developments, the city determined that the service capacity of some of the technology equipment used by general government had been impaired.  The calculated impairment loss due to technology obsolescence was $1,156,000.

12. The City of Rochester signed a 30-year agreement with East Coast Real Estate, Inc. to lease a newly-constructed building for city services. The city agrees to make an initial payment of $1,000,000 and annual payments of $809,375 for the next 29 years. Using an assumed borrowing rate of 6 percent, the present value of the lease payments is approximately $12,000,000. At the time the lease agreement is signed, the building had an appraised market value of $13 million and an estimated life of 40 years

 

Required

 

a-1.  Complete the following criteria’s in relation to decision making.

 

1. Present value of minimum lease payment as a percentage of fair value of building: 92.3%
2. Lease term as a percentage of estimated useful life of building: 75.0%

b. Provide journal entries the city should make for both the capital projects fund and governmental activities at the government-wide level to record the lease at the date of inception. (if no entry is required for a transaction/event, select “No journal entry required” in the first column field)

 

c.  which financial statement(s) prepared at the end of the fiscal year would show both the asset and the liability related to this capital lease?

 

13.   In Fulbright County, the Parks and Recreation Department constructed a library in one of the country’s high growth areas.  The construction was funded by a number of sources.  Below is selected information related to the Library Capital Project Fund.  All activity related to the library construction occurred within the 2017 fiscal year.

 

Required

Prepare a journal entry for capital projects fund and governmental activities at the government-wide level.  (if no entry is required for a transaction/event, select “No journal entry required” in the first column field)

 

1. The county issued $6,000,000, 4 % bonds, with interest payable semiannually on June 30 and December 31.  The bonds sold for 101 on July 30, 2016.  Proceeds from the bonds were to be used for construction of the library, with all interest and premiums received to be used to service the debt issue.  Assume the premium and interest are recorded directly in the debt service fund.

 

                             

2. A $650,000 federal grant was received to help finance construction of the library

 

3. The library Special revenue fund transferred $250,000 for use in construction of the library

 

 

4. A construction contract was awarded in the amount of $6,800,000

 

 

5. The library was completed on June 1, 2017, four months ahead of schedule.  Total construction expenditures for the library amounted to $6,890,000.  When the project was completed, the cost of the library was allocated as follows: $200,000 to land $6,295,000 to building and the remainder to equipment.

 

6. The capital projects fund temporary accounts were closed to Fund Balance – Restricted.  The resources are restricted because they were obtained from bonded debt issued exclusively for library construction.  The capital projects fund was closed by transferring remaining funds to the debt service fund for use in library construction debt repayment

 

 

14. During FY 2017, the voters of Surprise County approved construction of a $21 million police facility and an $11 million fire station to accommodate the county’s population growth.  The construction will be financed by tax-supported bonds in the amount of $30 million, a $1 million economic stimulus grant, and a portion of future use tax revenues.  During 2017, the following events and transactions occurred.

 

Required

1. Prepare journal entries to record the following transactions in a single Surprise Country Construction Fund and governmental activities general journal at the government-wide level.  (if no entry is required for a transaction/event, select “No journal entry required” in the first account field.  Enter your answers in whole dollar amounts and not in millions)

 

1. Issued $100,000 of a 6% bond anticipation notes to cover preliminary planning and engineering expenses.

 

 

2. Incurred architecture and engineering costs in the amount of $6,000.  They were split evenly between the two projects

 

 

3. Entered into a construction contract for $32 million - $21 million was for the police facility and $11 million was related to the fire station

 

4. Issued the $30 million, 20-year 5% bonds at 101.  (The premium should be recorded in a debt service fund.  You do not need to record this entry)

 

5. Paid off the bond anticipation notes that had been outstanding 180 days.  (Interest is an expenditure of the capital projects fund).  Assume 360 days in a year

 

6. An invoice for $16 million was received from the contractor for a portion of police facility construction ($10 million) and fire station construction ($6 million).

 

7. Half of the grant funds were received in cash.  The reminder is anticipated in 2018; however, the grantor notified the county that there is no guarantee that the federal government will appropriate the 2018 potion.

 

8. The initial construction invoice, less 5% retainage, was paid.
9. The fire station was completed, and a final invoice for the remaining $5 million was received.  All fire station charged incurred can be capitalized as buildings.

 

10. Following inspection, the fire station invoices were paid in full

 

 

11. At year-end, the contractor billed the county an additional $7.5 million for the police facility; however, the police facility was incomplete

 

 

 

12. Temporary accounts were closed at year-end.  Assume that the fund balances are all restricted

 

 

 

 

 

2. Prepare a Surprise County Construction Fund balance sheet for the year ended December 31, 2017.  (Enter your answers in whole dollar amounts and not in millions)

 

3. Prepare a construction fund statement of revenues, expenditures, and changes in fund balances for the year ended December 31, 2017.  (Negative amounts should be indicated by a minus sign.  Enter your answers in whole dollar amounts and not in millions)