Solution manual advanced accounting 10e by fischer taylor CH17

To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com CHAPTER 17 UNDERSTANDING THE ISSUES government’s financial statements Information required to be included: a brief discussion of the basic financial statements, including how they relate to each other and the significant differences in the information they provide; condensed current and prior-year financial information from the government-wide financial statements; an analysis of the government’s overall financial position and results of operations, including impact of important economic factors; an analysis of individual fund financial information, including the reasons for significant changes in fund balances (or net assets) and whether limitations significantly affect the future use of the resources; an analysis of significant variations between original and final budget amounts and between final budget amounts and actual budget results for the general fund; a description of changes in capital assets and long-term liabilities during the year; a discussion of the condition of infrastructure assets; and a description of currently known facts, decisions, or conditions that have or are expected to have a material effect on the financial position or results of operations The new reporting model adopts full accrual accounting for the government-wide statements for both governmental and businesstype activities Therefore, a conversion of the governmental fund activity is necessary in order to present government-wide financial statements Since business-type activities are already recorded at full accrual, there is no conversion necessary from fund to government-wide financial statements Both fund and government-wide financial statements are required in the new model Fund statements include (1) the governmental fund balance sheet and statement of revenues, expenditures, and changes in fund balances; (2) the proprietary fund balance sheet, statement of revenues, expenses, and changes in net assets, and statement of cash flows; and (3) the fiduciary fund statement of net assets and statement of changes in net assets The fund statements provide information on flows of financial revenues Government-wide statements include a statement of net assets and a statement of activities They provide full accrual, consolidated government-wide reports Budgetary comparison information may be reported in a statement and in a schedule accompanying the financial statements The budgetary comparisons may be included as an additional statement or in a schedule The original as well as amended budget must be included with a comparison of actual results reported on a budgetary basis Major funds are those funds management chooses to disclose in a separate column in the fund statements either due to their relative size or because they are of particular interest or convey unique information The general fund is always considered a major fund Funds whose assets, liabilities, revenues, or expenditures/expenses are at least 10% of all funds in a category (all governmental or all enterprise) and are at least 5% of all government and enterprise funds combined must be considered major funds Interfund transactions are recorded separately from other transactions Interfund payables and receivables are eliminated when governmentwide statements are prepared Interfund payables and receivables are “netted” and shown separately as internal balances In addition, internal service fund revenues and expenses are eliminated, and charges are adjusted to eliminate the internal profit by decreasing expenses for internal service fund services in the various funds The purpose of the MD&A is to give a concise overview and analysis of the information in the 715 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Exercises EXERCISES EXERCISE 17-1 Note to Instructor: The 2005 CAFR of the city of Milwaukee needs to be examined to answer these questions The general fund is always considered a major fund Every other governmental fund from the combining statements must be examined to determine if it is at least 10% of all the governmental funds and at least 5% of all government and enterprise funds combined Every enterprise fund from the combining statements must also be examined to determine if it is at least 10% of all the enterprise funds and at least 5% of all government and enterprise funds combined The size tests are based on assets, liabilities, revenues, and expenditures/expenses Internal service funds are not considered major funds In addition, management may determine funds that it wishes to disclose in a separate column in the fund statements because they are of particular interest or convey unique information, even though they not meet the size test EXERCISE 17-2 Note to Instructor: This assignment can also include a class presentation or class discussion as part of a student project It may be useful to have student groups or teams work on this assignment EXERCISE 17-3 (1) Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balance General Fund Special Revenue Fund B Capital Projects Fund A Capital Projects Fund B Total Nonmajor Funds Total Government Funds (2) Proprietary Fund Statement of Revenues, Expenses, and Changes in Net Assets Total Enterprise Funds Enterprise Fund D Enterprise Fund E Other Enterprise Funds 716 Totals Total Internal Service Funds To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Exercises EXERCISE 17-4 (1) a When moving from modified accrual to full accrual accounting, many long-term liabilities may need to be adjusted (2) c Both expenditures for debt principal and capital outlays must be eliminated and converted to expenses In addition, depreciation expense must be recorded (3) a The government-wide statements report internal service funds among the governmental activities and not include fiduciary funds Component units are included in governmentwide statements (4) a All capital assets, including infrastructure, must be included in the government-wide statements In addition, all capital assets must be depreciated Governments may elect the modified approach in lieu of depreciation if they meet the criteria set forth for the modified approach (5) d The government-wide statements not include fiduciary funds but include component units, and internal service funds are included with governmental activities (6) c An up-to-date inventory and a current condition assessment are necessary for the modified approach In addition, governments must keep the capital assets maintained at or above the predetermined condition level (7) c Revenue that is specific to a particular activity, function, or program, such as fees for services, specific tax revenue, operating grants, or capital grants, is considered program revenue Other revenue is considered general government revenue necessary to support all activities not covered by specific program revenues (8) d The government-wide statements report internal service funds among the governmental activities The reason is that these are internal cost allocation mechanisms and not business-type activities Thus, internal service funds are included in the governmental activities column in the government-wide statements (9) c The reconciliation is necessary for the governmental funds to convert the modified accrual fund information to the full accrual government-wide governmental activities information In addition, internal service fund balances must be added to the governmental funds as part of the conversion Reconciliation may be either on face of financial statement or as a separate statement (10) b The statement of cash flows is part of the proprietary fund financial statements but is not part of the government-wide statements EXERCISE 17-5 To convert from the governmental fund balance sheet to the government-wide statement of net assets, the following adjustments are necessary: • • • • • Add general capital assets, including infrastructure, net of accumulated depreciation Add general long-term liabilities Add assets and liabilities of most internal service funds Adjust balances of assets and liabilities from modified accrual to full accrual Convert fund balances to three categories of net assets—invested in capital, restricted, and unrestricted 717 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Exercises EXERCISE 17-6 (1) a The governmental cash flow statement contains four parts: operating, capital-related financing, non-capital-related financing, and investing (2) c In the fund statements, proprietary funds are included in the proprietary fund balance sheet, statement of revenues, expenses, and changes in net assets, and statement of cash flows In the government-wide statements, proprietary funds are included in business-type activities columns in both the statement of net assets and the statement of changes in net assets (3) d Account groups are not reported in either the fund or government-wide statements (4) b Total columns are not required for combining statements but are quite commonly shown Total columns are required in both the fund and government-wide combined statements under the new reporting model (5) a A statement of cash flows is required for all enterprise funds (6) d Construction in progress will be reported in the government-wide statements as a capital asset Capital assets are not reported in the fund statements EXERCISE 17-7 The new reports model requires that all capital assets, including infrastructure assets, be included on the financial statements In addition, these assets must be depreciated (The rules are effective three years after the requirement for implementing the new reporting model.) Governments may adopt a “modified approach” to depreciation if they have an up-to-date inventory of their infrastructure assets and have a current condition assessment As long as the assets are maintained at an agreed-upon condition, depreciation does not need to be recorded The advantage of recording depreciation is ease of implementation The disadvantages include recording the additional expense on the statement of activities and the lack of useful information in the opinion of many governmental managers and financial statement users The advantage of the modified approach is that as long as assets are maintained, there is no depreciation expense recorded on the statement of activities The disadvantage is the cost of implementation and monitoring Also, if the condition drops below the required level, the government must record depreciation 718 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems PROBLEMS PROBLEM 17-1 (1) b The statement of activities is presented using a net program expense format where program revenues are subtracted from program expenses to determine the amount funded by general revenues (2) d Special purpose governments that provide business-type activities only are permitted to report the financial statements required for enterprise funds Since these are already on an economic measurement focus using full accrual accounting and all of the expenses are covered by program revenues, there is no need to convert to government-wide statements (3) d The government-wide financial statements include a statement of net assets and a statement of activities with an economic resources measurement focus and are prepared on a full accrual basis of accounting Governmental activities and business-type activities of the primary government are included as well as financial information about component units (4) b Budgetary comparison may be included as a separate statement or schedule The budgetary comparisons are considered required supplementary information and not part of the basic financial statements (5) c Combining statements are used to add together nonmajor funds of the same type in order to present summary data in the combined statements They are not considered part of the basic financial statements but are included in the comprehensive annual financial statement (6) a The three major sections of the comprehensive annual financial statement are the introductory section, the financial section, and the statistical section The MD&A and the auditor's report are part of the financial section (7) a The government-wide financial statements include a statement of net assets and a statement of activities with an economic resources measurement focus and are prepared on a full accrual basis of accounting Governmental activities and business-type activities of the primary government are included as well as financial information about component units Comparison with prior-year data is not required Works of art and historical treasures need not be capitalized (8) a The new reporting model requires that all capital assets, including infrastructure, be recorded and depreciated Governments have the option of choosing a modified approach for infrastructure assets Under the modified approach, governments not report depreciation if they have an up-to-date inventory of capital assets, a condition assessment of all infrastructure assets, and maintenance of them at or above a predetermined level (9) d Major funds are those funds which management chooses to disclose in a separate column in the fund statements either due to their relative size or because they are of particular interest or convey unique information Funds whose assets, liabilities, revenues, or expenditures/expenses are at least 10% of all funds in a category (all governmental or all enterprise) and at least 5% of all government and enterprise funds combined must be considered a major fund The general fund is always considered a major fund 719 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems Problem 17-1, Concluded (10) b The Office of Management and Budget (OMB) sets standards for audits of recipients of federal financial assistance Guidance for the “single audit” is found in OMB Circular A-133 (11) c OMB Circular A-133 applies to state, local, and not-for-profit organizations that receive more than $300,000 of federal financial assistance in the form of grants, contracts, etc (12) b The total amount of internal control and compliance testing is based on making sure that 50% of the federal expenditures are subject to audit PROBLEM 17-2 Note to Instructor: This assignment can also include a class presentation or class discussion as part of a student project It may also be useful to have student groups or teams work on this assignment PROBLEM 17-3 The authority is legally separate The primary government appoints a voting majority of the board, but the primary government may not be able to impose its will over the authority due to the staggered terms and security of office There is a financial burden/benefit, so the authority should be a component unit PROBLEM 17-4 (1) The school district is not legally separate, so it is part of the city and not a component unit (2) The authority is legally separate, the city has financial accountability, and so it is a component unit Because it leases equipment exclusively to the city, the financial information will be blended in the fund and government-wide statements (3) The mayor appoints all members of the board so it can be assumed that there is control over the board Since the housing authority does not primarily serve the city, the financials will be discretely presented in the government-wide statements (4) Since the hospital is owned by the city, it is not legally separate and therefore part of the city and not a component unit (5) The water utility is a joint venture and not a component unit The city’s equity interest will be presented in the government-wide statements as an asset (6) The school district is a special purpose government separate from the city 720 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems PROBLEM 17-5 The financial reporting entity of a government includes the primary government and all its component units An example of a primary government is a city An example of a component unit is a legally separate hospital for which the city is financially accountable Component units can either be blended into the financial reports of the primary government or discretely presented in a separate column Blending is required if the component unit is established primarily to serve the primary government or if the two boards are essentially the same PROBLEM 17-6 (1) Budgetary Fund Balance Estimated Other Financing Uses Appropriations Estimated Other Financing Sources Estimated Revenues 305,000 25,000 640,000 950,000 20,000 (2) Statement of Revenues, Expenditures, and Changes in Fund Balance For the Year Ended December 31, 20X9 Revenues Expenditures Excess of revenue over expenditures Other financing sources Other financing uses Excess of revenue and other financing sources over expenditures and other financing uses Fund balance, January 2, 20X9 Fund balance, December 31, 20X9 $ $ 16,600 (686,600) (670,000) 900,000 (15,000) $ 215,000 215,000 $ (3) Balance Sheet as of December 31, 20X9 Cash Investments Total assets $ 75,000 Contracts payable 200,000 Fund balance—reserved $275,000 for encumbrances Unreserved Total fund balance Total liabilities & fund balance 721 $ 60,000 $ 80,000 135,000 $215,000 $275,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems PROBLEM 17-7 Revenues Other Financing Sources Expenditures Other Financing Uses Bonds Payable Capital Assets Fund Debit (16,600) (900,000) (2) 900,000 686,600 15,000 0 (1) 686,600 Credit Government-Wide (16,600) 686,600 (1) 15,000 900,000 (2) (900,000) 686,600 The adjustments will convert (eliminate) other financing sources and transfer that balance into bonds payable The expenditure for capital assets will be eliminated since capital assets must be recorded on the government-wide statement of net assets PROBLEM 17-8 Statement of Net Assets June 30, 20X9 Governmental Activities Assets: Cash and cash equivalents Receivables Inventory Capital assets (net) 2,600,000 Total assets Liabilities: Accounts payable Noncurrent liabilities Total liabilities $ 280,000 36,000 Business-Type Activities $ 75,000 145,000 56,000 1,500,000 $1,816,000 $ 65,000 500,000 565,000 $ Net assets: Invested in capital, net of related debt $1,800,000 Restricted Unrestricted Total net assets $ $ $1,000,000 65,000 186,000 $1,251,000 722 Total Primary Government $ 355,000 181,000 56,000 1,100,000 $1,376,000 56,000 300,000 356,000 $ $ $ 36,000 184,000 $1,020,000 $3,192,000 121,000 800,000 921,000 800,000 101,000 370,000 $2,271,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems PROBLEM 17-9 Statement of Activities As of June 30, 20X9 Expenses Governmental activities: General government $(1,200,000) Public safety (145,000) Public works Health and sanitation Culture and recreation Interest on long-term debt (60,000) Total governmental activities $(2,905,000) Business-type activities: Water and sewer system $ 300,000 Parking system (5,000) Total business-type activities $ 295,000 Total primary government $ 295,000 $(2,610,000) $ Program Revenues Net Revenue Change in Net Assets Charges Businessfor Operating Capital Governmental Type Services Grants Grants Activities Activities Total 1,300,000 240,000 $ 100,000 25,000 1,000,000 650,000 250,000 450,000 200,000 60,000 $ 3,700,000 $ $1,500,000 $ 45,000 $ $(1,200,000) 70,000 575,000$220,000 1,800,000 $ 40,000 $1,545,000 $ 1,840,000 $ $5,245,000 $ 2,415,000 $ Property taxes Sales taxes Investment earnings Special item—gain on sale Transfers between funds Total general revenues 4,670,000 723 (145,000) (1,000,000) (250,000) (250,000) (60,000) 150,000 0 (1,000,000) (250,000) (250,000) $(2,905,000) $ 0 $ $ $ $ 300,000 (5,000) $ 295,000 220,000 $(2,905,000) $ 2,500,000 2,000,000 $ 140,000 (70,000) $ $ 4,570,000 2,500,000 2,000,000 30,000 30,000 140,000 70,000 $ 100,000 $ To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems Change in net assets 2,060,000 Net assets—July 1, 20X8 3,900,000 Net assets—June 30, 20X9 5,960,000 724 $ 1,665,000 1,400,000 $ 3,065,000 $ 395,000 $ 2,500,000 $2,895,000 $ To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems Problem 17-14, Continued Nov 30 Balance Acct No Boat Launch Enterprise Fund Cash Land Building and Improvements Accumulated Depreciation Unearned Revenue— Season Passes Net Assets—Capital Assets Net Assets— Unrestricted Boat Launch Revenue Wages Employee Benefits Sanitation Fees Sales Tax Paid Depreciation Expense Other Expenses Total Debits and Credits a Dr Cr Transactions and Adjustments Dr Cr Unadjusted Trial Balance, Dec 31 Dr Adjusted Trial Balance, Dec 31 Adjustments Cr Dr Cr Dr 100 200 24,733 200,000 24,733 200,000 24,733 200,000 210 100,000 100,000 100,000 Cr 215 25,000 25,000 (I) 5,000 30,000 310 800 800 (H) 2,300 3,100 410 275,000 275,000 (I) 5,000 420 500 411 412 413 414 415 416 600 32,996 600 32,996 (H) 2,300 Capital asset and debt transactions 5,902 86 1,150 1,778 5,902 86 1,150 1,778 747 747 (I) (I) 334,396 270,000 5,000 5,000 334,396 1,796,117 1,796,117 738 3,564,966 3,564,966 154,770 154,770 5,600 30,696 5,902 86 1,150 1,778 5,000 747 _ 339,396 339,396 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems Problem 17-14, Continued (3) The information for this statement comes directly from the Worksheet Adjusted Trial Balance columns You may summarize expenditures by major functional categories (general government, public safety, public works, interest payments, and principal payments) There should be a column for each governmental type fund and for the totals of all governmental type funds The schedule should show the change in total fund balances prior to designations within the general fund A final adjustment should reflect the intention of the designations The boat launch enterprise fund is not included in this statement since it is not a governmental type fund Worksheet Village Combining Statement of Revenues, Expenditures, and Changes in Fund Balances December 31, 2006 Debt Service Fund General Fund Revenues Revenues from other governments $ Village property tax Investment revenue License fees Building permits Police fines and forfeitures Board of appeals fees Totals Expenditures General government $ Public safety Public works Principal payments Interest payments Totals Excess of revenues over expenditures $ Other financing sources and (uses) Proceeds from asset sale Proceeds from bond issue Transfer, general/debt service fund Transfer, capital project/debt fund Transfer, permanent/general fund Net change in fund balance $ Balance, January 1, 2006 $ Balance, December 31, 2006 $ 109,025 1,032,761 80,401 6,885 25,289 36,984 750 $1,292,095 Capital Project Fund Permanent Fund Total Government Funds $ $ $ 18,000 $ 1,445 18,000 $ 1,445 180,147 835,451 224,095 $ 150,000 37,400 30,908 $ 68,308 $ $1,239,693 $180,147 835,451 374,095 37,400 30,908 $ 52,402 $(68,308) $(132,000) $ 150,000 1,445 21,800 (146 (1,200) 6,500 739 $ 68,408 1,200 12,294 $ 555,277 $ 567,571 $ $1,4 21,800 181,200 181,200 (68,408) 109,025 1,050,761 81,846 6,885 25,289 36,984 750 $1,311,540 (6,500) 1,300 $ 2,100 $ 3,400 $ 48,000 $ (2,500) 45,500 (5,055) $34,500 $29,445 $ $ $ 56,5 589 645 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems Problem 17-14, Continued Debt Service Fund General Fund Reserve for inventory, December 31, 2006 $ Reserve for encumbrances, December 31, 2006 Designated fund balance, December 31, 2006 Undesignated fund balance, December 31, 2006a Total fund balances, December 31, 2006 $ Net change in general fund balance $ Designations created Designations returned Change in undesignated fund balance $ Capital Project Fund 6,700 Permanent Fund Total Government Funds $ $ 18,000 18,000 266,957 266,957 293,914 $ 3,400 27,500 $29,445 567,571 $ 3,400 $ 45,500 $29,445 12,294 (44,100) 71,270 39,464 a Computation of undesignated fund balance Undesignated fund balance, January $ 254,450 Net change in fund balance 39,464 Undesignated fund balance, December 31 $ 293,914 740 6,700 354 $ 645 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems Problem 17-14, Continued (4) Worksheet Village Combining Balance Sheet for All Governmental Funds December 31, 2006 Debt Service Fund General Fund Assets Cash $ Cash-tax collection account Investments Accounts receivable Inventory of supplies Prepaid expenses Totals Liabilities Vouchers payable $ Deferred tax revenue Fund Balances Reserve for inventory Reserved fund balance Reserve for encumbrances Designated fund balance Undesignated fund balance Total liabilities and fund balances 212,133 $3,400 447,277 355,300 604,956 6,700 250 $1,626,616 $3,400 Capital Project Fund Permanent Fund $45,500 $ Total Government Funds 5,145 24,300 266 379 604,956 6,700 250 $45,500 6,812 1,052,233 $29,445 $ 6,700 $1,7 6,812 1,052,233 6,700 $3,400 $29,445 $18,000 266,957 293,914 $1,626,616 $3,400 741 $ 447,277 27,500 $45,500 32,8 18,000 266,957 321,414 $29,445 $1,7 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems Problem 17-14, Continued (5) This information is taken directly from the Adjusted Trial Balance columns of Worksheet If needed, see the examples in the textbook for an enterprise fund This will be the student’s Worksheet Worksheet Village Boat Launch Enterprise Fund December 31, 2006 Statement of Revenues, Expenses, and Changes in Net Assets Launch fees Less, sales tax Net fees $30,696 (1,778) $28,918 Expenses: Wages Employee benefits Sanitation fees Other expenses Depreciation expense Total expenses $ 5,902 86 1,150 747 5,000 $ 12,885 Revenue in excess of expenditures Transfer from restricted assets Balance, January Balance—unrestricted, December 31 $ 16,033 5,000 600 $ 21,633 Balance Sheet Assets Cash Land Building and improvements Accumulated depreciation Total assets $ 24,733 200,000 100,000 (30,000) $294,733 Liabilities Unearned revenue—season passes $ 3,100 Net Assets Restricted—capital assets Unrestricted Total liabilities and net assets $270,000 21,633 $291,633 $294,733 742 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems Problem 17-14, Continued (6) These schedules will be in the same format as the schedules found in “Notes to Financial Statements” for December 31, 2005 This information will be taken from the December 31 notes (Exhibit 1), the applicable (highlighted) amounts from Worksheet 1, and the information from items I through III in the “Additional Information for Statement of Net Assets and Statement of Activities” table These notes are the student’s Worksheet Worksheet Notes to Financial Statements December 31, 2006 Capital Assets Beginning Ending Increases Decreases Balances Balance $ 855,733 $ 855,733 304,484 304,484 870,348 870,348 312,380 $ 69,732 (a) $ 35,000 (e) Land and improvements LaLumiere property Building and improvements Equipment 347,112 Office furniture and fixtures Infrastructure under construction 150,000 Infrastructure 148,237 Total capital assets $2,711,477 Accumulated depreciation (460,345) Net assets $ $2,251,132 Long-Term Obligation Activity General obligation $574,486 Special assessment 180,000 Waukesha County radio 15,106 Waukesha County dispatch 8,969 Totals 35,563 35,563 150,000 (b) 100,167 48,070 (c) $2,478,675 (430,246) 2,048,429 $267,802 (51,099) (d) $ Beginning Balance Increases $605,000 $ 35,000 (21,000) 216,703$ (f) 14,000 Ending Balances Decreases $30,514 (h) $180,000 (g) 19,750 4,644 (h) 11,211 2,242 (h) $635,961 $ 180,000 $37,400 $778,561 Source of information for changes: (a) Worksheet Public Works: Truck capital for $45,000, Tools—capital for $758 Worksheet Public Safety: Police capital equipment for $22,483 Worksheet General Government: Computer capital for $1,491 (b) Worksheet Capital Projects Fund: Construction expenses (c) Worksheet Public Works: Road and bridges—capital (d) Village Description Information Item 3, II: Office equipment, $4,673; Village hall, $30,213; Public works, $9,504; Police squads, $6,709 (e) Village Description Information Item 3, I: Cost of truck sold 743 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems (f) Village Description Information Item 3, I: Accumulated depreciation on truck sold (g) Worksheet Capital Projects Fund: Other financing sources, proceeds from special assessment bond issue net of premium transferred to debt service fund (h) Village Description Information Item 3, III: Principal payment 744 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems Problem 17-14, Continued (7) Prepare the reconciliation schedules for the balance sheet (governmental type funds) to statement of net assets (refer to the text for an example of this schedule) Basically, it takes the format: Total fund balances for governmental type funds (from Total Government Funds column of Worksheet 3) This is the total of all fund balances including reserved (3), designated and undesignated Add: Add: All Fixed Assets from Ending Balances column of Worksheet “Capital Assets.” Accrued interest receivable from “Additional Information for Statement of Net Assets and Statement of Activities” table, item VI Deduct: Accumulated depreciation from Worksheet “Capital Assets.” Deduct: All obligations listed on Worksheet “Long-Term Obligation Activity.” Deduct: Accrued interest payable from “Additional Information for Statement of Net Assets and Statement of Activities” table, item V Equals: Net assets of governmental activities Prepare the reconciliation schedules for the statement of revenues, expenditures, and changes in fund balances to statement of activities (refer to the text for an example of this schedule) Basically, it takes the format: Net change in fund balances—total governmental funds (from “Total Government Funds” column, “Net change in fund balance” line of Worksheet 2) Add: Increase in capital assets from “Increases” column of Capital Assets schedule in Worksheet Deduct: Decrease in capital assets from “Decreases” column of Capital Assets schedule in Worksheet 5.* Add: Decrease from accumulated depreciation from “Decreases” column of Capital Assets schedule in Worksheet 5.* Deduct: Increase in accumulated depreciation from “Increases” column of Capital Assets schedule in Worksheet Add: Change in accrued interest on investments from accrued from “Additional Information for Statement of Net Assets and Statement of Activities” table, item VI This item is the change in this item Since there was no amount on January 1, it is the entire amount in this example Add: Principal payments of long-term debt from totals, Decreases column of Long-Term Obligation Activity schedule in Worksheet Deduct: New long-term debt issuances from Increases column of Long-Term Obligation Activity schedule in Worksheet 5.** Deduct: Change in accrued interest payable from “Additional Information for Statement of Net Assets and Statement of Activities” table, item V This item is the change in this item Since there was no amount on January 1, it is the entire amount in this example Equals: Change in net assets of governmental activities *This item is at book value for disposed asset The entire proceeds ($21,800) were included in general funds, “other financing sources.” These two adjustments remove the $35,000 cost – $21,000 accumulated depreciation to result in a net increase in net assets equal to the gain of $7,800 **This is the face value of the debt issuance, $180,000 The capital project fund included $181,200 of other financing sources Subtracting the $180,000 leaves a net increase in the net assets of $1,200 (the amount of the premium) 745 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems Problem 17-14, Continued (7) Worksheet Village Reconciliation Schedules Balance Sheet to Statement of Net Assets Total fund balances for governmental funds (WS 3) Add: Land and improvements LaLumiere property Building and improvements Equipment Office furniture and fixtures Infrastructure under construction Infrastructure Accrued interest receivable Total adds Deduct: Accumulated depreciation General obligation debt Special assessment debt Waukesha County radio loan Waukesha County dispatch loan Accrued interest payable $ 645,916 $855,733 304,484 870,348 347,112 35,563 150,000 148,237 5,300 WS WS WS WS WS WS WS IV 2,716,777 $460,345 574,486 180,000 15,106 8,969 10,300 Total deducts Net assets of governmental activities WS WS WS WS WS V&VI 1,249,206 $2,113,487 Statement of Revenues, Expenditures, and Changes in Fund Balances to Statement of Activities Net change in fund balances—total governmental funds (per WS 2) $ 56,539 Change in capital assets: Increase in total capital assets (per WS 5) Decrease in capital assets (per WS 5) Accrued interest on investments (above) Total increase in assets $216,703 (14,000) 5,300 $208,003 Changes in long-term debt: Principal payments (per WS 5) Issuance of special assessment bonds (per WS 5) Accrued interest (above) Total increase in liabilities $ (37,400) 180,000 10,300 $152,900 Change in net assets of governmental activities $111,642 746 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems Problem 17-14, Continued (8) A template for Worksheet is furnished for this statement Construct the statement of net assets for the governmental type funds by combining: The assets from the Total Government Funds column of the balance sheet in Worksheet Plus: The asset adjustments from the “Balance Sheet to Statement of Net Assets” Reconciliation schedule in Worksheet The liabilities from the “Total Gov Funds” column of the balance sheet in Worksheet Plus: The liability adjustments from the balance sheet to statement of net assets reconciliation schedule in Worksheet Separate the net assets section into three balances: • Held for investment purposes (LaLumiere property) • Capital assets net of related debt • Unrestricted When the governmental funds balances are completed, enter the balance sheet amounts for the boat launch enterprise fund from Worksheet Then, sum the totals of the governmental funds plus the enterprise fund Worksheet Village Statement of Net Assets at December 31, 2006 Governmental Fundsa Assets Cash 290,911 Cash collection account Investments Accrued interest receivable Accounts receivable Inventory of supplies Prepaid expenses Land LaLumiere property 304,484 Building and improvements Equipment Office furniture and fixtures Infrastructure under construction 150,000 Infrastructure Accumulated depreciation Total assets $ Enterprise Fundb 266,1783 447,2773 379,6003 5,3006 604,9563 6,7003 2503 855,7336 304,4846 870,3486 347,1126 35,5636 150,0006 $ 24,733 $ 200,000 100,000 148,2376 (460,345)6 (30,000) $3,961,393 $294,733 747 Total 447,277 379,600 5,300 604,956 6,700 250 1,055,733 970,348 347,112 35,563 148,237 (490,345) $4,256,126 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems Problem 17-14, Continued Governmental Fundsa Liabilities Vouchers payable 6,812 Prepaid passes Accrued interest payable Deferred tax revenue General obligation debt Special assessment debt 180,000 Waukesha County radio loan Waukesha County dispatch loan Total liabilities Net Assets Held for investment purposes Capital assets net of debt 1,168,087 Restricted Unrestricted Total net assets Liabilities plus net assets $ Enterprise Fundb 6,8123 $ 10,3006 1,052,2333 574,4866 180,0006 15,1066 8,9696 $1,847,906 $ $ Total $ 3,100 3,100 10,300 1,052,233 574,486 15,106 8,969 $1,851,006 3,100 304,484c 1,168,087d $ $270,000 640,916e 21,633 $2,113,487 $291,633 $3,961,393 $294,733 Source of Information a Worksheet 3: Village Balance Sheet and Worksheet 6: Reconciliation Schedules (Specific worksheet is reported above for each item.) b Worksheet 4: Boat Launch Enterprise Fund c The LaLumiere property is held for investment purposes d This is basically just total capital assets (excluding the LaLumiere property) less long-term liabilities e Although this could be determined directly, the simple approach is to plug unrestricted (Note that you know what total net assets should be; it's reported in Worksheet 6.) 748 304,484 270,000 662,549 $2,405,120 $4,256,126 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems Problem 17-14, Continued (9) Prepare the statement of activities for December 31, 2006 A template is provided for Worksheet A Support Schedule Before being concerned with the statement, you need to prepare a support schedule to convert revenues, other sources, and expenditures to include the adjustments from the statement of revenues, expenditures, and changes in fund balances to statement of activities reconciliation schedule in Worksheet Basically, you are converting from a working capital to full accrual basis for revenue, other sources, and expenditures Start by copying the individual revenue, other sources, and expenditures into the four fund columns from the Total Government Funds column in Worksheet Next, post the adjustments from the Worksheet 6, Statement of Revenues, Expenditures, and Changes in Fund Balances to Statement of Activities reconciliation schedule The only added information you need is which expenditures to adjust for capital asset increases The detail for this is contained in Worksheet (these are the capital amounts that you should have highlighted) Combining the total government funds amounts with the adjustments provides adjusted amounts that will appear in the statement of activities Basically, you have adjusted revenues, other sources, and expenditures to an accrual basis The “net change” amount should agree with the “change in net assets of governmental activities” amount at the bottom of Worksheet B Statement of Activities Copy the adjusted expenditures from your support schedule into the Expenses column Choose the applicable revenue items from the support schedule to the Fines, Fees, and Charges column These are the offsets against individual expenses in the first column Choose the applicable revenue items from the support schedule to the Operating Grants column You will need to spilt apart the total shown in the support schedule This information is contained in the “Additional Information for Statement of Net Assets and Statement of Activities” table, item VIII Total the Net Revenue (Expense) items Insert the total expenses and revenues from the boat launch enterprise fund Insert the appropriate “General revenues” from the support schedule The “net change” should agree with that contained in the support schedule 749 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems Problem 17-14, Continued (9) Worksheet Village Statement of Activities December 31, 2006 a Expenses General government Building inspection Police Fire protection Other public safety Public works Interest charges Unallocated depreciation Total $(1,035,265) Boat launch, enterprise fund 16,033 $ Governmental Funds Enterprise Fund Fines, Fees, Operating Net Revenue/ Net Revenue/ and Charges Grants (Expense) (Expense) Totals 199,757 $ 13,785 666,897 134,981 17,799 139,771 41,208 7,635 $ 26,745b 25,289 b 36,984 7,000 b 9,780 b 65,500 $1,214,198 $69,908 12,885 $109,025 $(1,035,265) $16,033 1,050,761 87,146 1,200 $ Source of information: b (165,377) 11,504 (622,913) (125,201) (17,799) (74,271) (41,208) 28,918 General revenues Property tax 1,050,761 Investment income 87,146 Other sources, bond premium 1,200 Other sources, asset sales Net change 127,675 a $ Worksheet 8: Support for Statement of Activities; go to Worksheet for boat launch input Allocation of revenues from grants per info Item 3, VIII 750 7,800 111,642 7,800 $16,033 $ To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Problems Problem 17-14, Concluded Worksheet Village Support for Statement of Activities for Year Ended December 31, 2006 Revenues: Property tax Grants Investment income License and board of appeals fees Building permits Police fines Bond proceeds Other sources Total revenues and other sources Expenditures: General a General government (WS 1) Building inspector (WS 1) c Police (WS 1) Fire (WS 1) b Other Safety (WS 1) Public works (WS 1) Debt Service Interest (WS 1) Principal payment (WS 1) Capital Projects Construction (WS 1) Interest Total expenses Net change General Fund $1,032,761 109,025 80,401 7,635 25,289 36,984 Revenues per Worksheet Debt Capital Service Projects Permanent $ 18,000 $1,445 181,200 _ $199,200 21,800 $1,313,895 $1,445 Adjustments (see below) Total $1,050,761 109,025 81,846 7,635 25,289 36,984 181,200 21,800 $1,514,540 Dr Cr $5,300 $180,000 14,000 Adjusted TB x $1,050,761 x 109,025 x 87,146 x 7,635 x 25,289 x 36,984 x 1,200 x 7,800 $1,325,840 Expenditures per Worksheet $ 166,362 13,785 682,671 134,981 17,799 224,095 $30,908 37,400 _ $1,239,693 $68,308 $150,000 _ $150,000 $ 166,362 13,785 682,671 134,981 17,799 224,095 $34,886 30,908 37,400 4,900 150,000 _ $1,458,001 $ 56,539 $ 1,491 22,483 93,828 6,709 9,504 x 7 5,400 x $ 199,757 x 13,785 x 666,897 x 134,981 x 17,799 x 139,771 x 37,400 150,000 35,808 x x x Source of Unadjusted Balances: a $180,147 (WS total for General Government expenditures) less $13,785 (amount specifically identified for building inspector) b $12,440 (Safety Expenses) plus $5,359 (Lake Water Quality) c $835,451 (Total Public Safety Expenditures) less fire ($134,981) and other ($17,799) allocations x Carried to statement of activities Adjustments and Explanations: Eliminate purchase of capital assets recorded as expense (WS 1) Record depreciation not recorded (Info Item C, II) Accrued income—to record interest not recorded in TB (WS 7) Eliminate capitalizable construction costs recorded as expense Eliminate payment of principal from expense Eliminate receipt from bond issue recorded as revenue in TB Accrued interest expense per Info Item 3, V & VI Adjust income from sale of truck (gain should be $7,800: $21,800 received less $14,000 book value—note that amount of the adjustment is the book value of the truck) per Info Items 751 x 5,400 $ 1,214,198 $ 111,642 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com ... more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 17—Exercises EXERCISE 17-4 (1) a When moving from modified accrual to full accrual accounting, many long-term... Since these are already on an economic measurement focus using full accrual accounting and all of the expenses are covered by program revenues, there is no need to convert to government-wide statements... using the modified accrual basis of accounting The proprietary activities are presented from an economic resources measurement focus using the full accrual basis of accounting The only fiduciary fund