Question 1

Transactions:
1. A loan of $50 was made from the General Fund to the Gasoline Tax Fund GTF, which is accounted for as a Special Revenue Fund. The loan will be repaid in five years.
2. The General Fund loaned $320 to the Capital Projects Fund-to be repaid in 90 days.
Requirement: Prepare the general journal entries using standard fund-type terminology, identifying the fund or nonfund accounts for which the entry is being prepared. Appropriate abbreviations are acceptable e.g., GF, SRF, CPF, DSF, GCA, GLTL, OFS, or OFU. If no entry is required, write "No Entry Required" and briefly explain why. Do not include formal entry explanations or dates, but include any important assumptions made and all calculations.

Accepted Answer

$$\begin{array} { | c | c | l | r | r | } 
\hline \text {\#} & \begin{array} { c } 
\text { Fund or } \
\text { Nonfund } \
\text { Accounts }
\end{array} & & & \
\hline \text { Ia } & \text { GF } & \text { Advarce to GTF } & \text { Debit } & \text { Credit } \
\hline & & \text { Cash } & 50 & \
\hline & & & & 50 \
\hline \text { Ib } & \text { SRF } & \text { Cash } & & \
\hline & & \text { Advarnce from GF } & 50 & \
\hline & & & & 50 \
\hline \text { 2a } & \text { GF } & \text { Due from CPF } & 320 & \
\hline & & \text { Cash } & &320 \
\hline & & &  \
\hline \text { 2b } & \text { CPF } & \text { Cash } &320& \
\hline & & \text { Due to GF } &  & 320\
\hline & & & \
\hline
\end{array}$$

Question 2

Which of the following methods of capital asset valuation is not considered an acceptable alternative under generally accepted accounting principles for a donated capital asset?

Accepted Answer

Book value to donor is not considered an acceptable alternative under generally accepted accounting principles for a donated capital asset. Generally, the acceptable methods for capital asset valuation for a donated asset are original cost, estimated cost, or fair market value. Book value to donor may not reflect the current fair value of the asset and may not be a reliable indicator of its worth.

Question 3

Transactions:
1. A pickup truck purchased seven years ago for $30 with General Fund money was sold for $5. The government's proprietary funds usually depreciate this type of asset over a 10-year period using straight-line depreciation with zero 0 salvage value and disposes of assets at the end of its useful life.
2. Sold land for $300, which had been used many years ago as a public park. The land had been purchased for $140.
3. The county purchased a police vehicle for $22 and paid cash.
4. The government signed a contract for $5,000 for construction of an addition to the jail.
5. The contractor billed the county for 40% of the work on the jail addition. The actual cost of the work was $2,200. The county paid all but 10% of the amount billed. The balance is to be paid upon completion and approval of the project. The state was billed for its 30% of the project based on an expenditure-driven grant. See entry #4 and #6
6. The contractor billed the county $2,800 for the remainder of the work on the jail. The county approved the facility and paid the contractor all amounts owed. The state was billed for its portion of the work. See entries #4, #5, and #7
7. The state reimbursed only $1,400. Other costs were disallowed for reimbursement. See entries #5 and #6
Requirement: Prepare the general journal entries using standard fund-type terminology, identifying the fund or nonfund accounts for which the entry is being prepared. Appropriate abbreviations are acceptable e.g., GF, SRF, CPF, DSF, GCA, GLTL, OFS, OFU. If no entry is required, write "No Entry Required" and briefly explain why. Do not include formal entry explanations or dates, but include any important assumptions made and all calculations.

Accepted Answer

The answer of Transactions:
1. A pickup truck purchased seven years...

Question 4

Transactions:
1. The $10 assets cash from a terminated Capital Projects Fund CPF were received by the General Fund.
2. General Fund resources of $250 were paid to a newly established Capital Projects Fund. The resources will not be repaid to the General Fund.
3. The government ordered that $140 be paid from its General Fund to the fund that services its long-term debt.
4. The government directed that $200 be moved from the General Fund to the Jail Addition Capital Projects Fund to provide additional funding for the project. The actual payment will occur at the beginning of the next fiscal year.
Requirement: Prepare the general journal entries using standard fund-type terminology, identifying the fund or nonfund accounts for which the entry is being prepared. Appropriate abbreviations are acceptable e.g., GF, SRF, CPF, DSF, GCA, GLTL, OFS, or OFU. If no entry is required, write "No Entry Required" and briefly explain why. Do not include formal entry explanations or dates, but include any important assumptions made and all calculations.

Accepted Answer

The answer of Transactions:
1. The $10 assets cash from a...

Question 5

A local government purchased land to be used for a new city hall to be built within the next five years. The purchase price was for the land's fair value, $1,500,000. The government financed the required $150,000 down payment by securing a short-term note with a local lending institution. The remaining $1,350,000 was financed by issuing certificates of participation. Costs incurred in issuing the certificates of participation totaled $60,000. The land should be capitalized in the General Capital Assets account in the amount of

Accepted Answer

The land should be capitalized at its fair value, which is the purchase price of $1,500,000. Costs incurred in issuing the certificates of participation are not included in the capitalized cost of the land.

Question 6

A government entered into a general government capital lease in the prior year. During the current year, a lease payment of $50,000, which includes implicit interest of $12,000, was made from the General Fund. What effect does the $50,000 payment have on the General Capital Assets and General Long-Term Liabilities accounts?

Accepted Answer

The $50,000 payment reduces the capital lease liability by $38,000 (the principal portion), which increases the net investment in capital assets by the same amount.

Question 7

Which of the following capital assets would not be considered a general capital asset?

Accepted Answer

Infrastructure associated with the local water system is typically considered a business-type activity, not a general capital asset. General capital assets are associated with governmental activities, whereas assets like local water systems are often operated as enterprise funds, which are intended to be self-supporting through user fees.

Question 8

New municipal building office equipment costs $400,000 and is being financed with a capital lease. If the government makes a $40,000 down payment, which of the following best describes the external financial reporting effects?

Accepted Answer

The down payment of $40,000 will be treated as other financing sources, which will reduce the amount of the capital lease liability. Therefore, the General Fund statements will report expenditures of $400,000 and other financing sources of $360,000. The General Long-Term Liabilities accounts will report a liability of $360,000 and the General Capital Assets accounts will report an asset of $400,000.

Question 9

Assume that the fiscal year-end for all the transactions below is June 30.
Transactions:
1. The General Fund paid $12 to a Special Revenue Fund to repay it for General Fund employee salaries that were inadvertently recorded as expenditures in the Special Revenue Fund.
2. The government decided to settle a lawsuit on the advice of its legal counsel. The lawsuit came about because of damage to a citizen's property caused by a garbage service employee. The garbage operation is accounted for in the General Fund. The government settled the suit for $300, paying $100 on June 1, 20X1, and $50 on August 1 for each of the next 4 fiscal years. For these types of lawsuits, the government is self-insured for the first $50 and 100% insured for the remaining payments. Because of a cash flow issue, the government borrowed $200 on a 6 month, 3% note that comes due 2 months after year-end. No money was received from the insurance company by year-end, but the total amount due was expected by August 15. Prepare all journal entries required through the end of the 20X1 fiscal year.
3. The government's employees earned $25 in compensated absences during the year. Of this amount, $10 was paid during the year and another $8 will be paid in the first 45 days of the following fiscal year. In addition, $5 due at the end of last year was paid at the beginning of this year.. Finally, $3 earned in earlier years was paid this year.
4. The actuarial amount owed to the government's OPEB Plan for the year is $20,000. Of this amount, only $5,000 - the approximate amount of retiree healthcare costs paid for the year - was paid to the plan. The balance will be paid in later years.
Requirement: Prepare the general journal entries using standard fund-type terminology, identifying the fund or nonfund accounts for which the entry is being prepared. Appropriate abbreviations are acceptable e.g., GF, SRF, CPF, DSF, GCA, GLTL, OFS, OFU. If no entry is required, write "No Entry Required" and briefly explain why. Do not include formal entry explanations or dates, but include any important assumptions made and all calculations.

Accepted Answer

The answer of Assume that the fiscal year-end for all...

Question 10

Transactions:
The City of Armona has decided to refinance $8,000 of par value, general government, general obligation bonds outstanding. The bonds had a related unamortized bond premium of $200. The city issues $6,000 of refunding bonds and transfers $2,700,000 from the General Fund to the Debt Service Fund. The city paid $8,700 from the Debt Service Fund into an irrevocable trust to cover future payments on the original bonds.
Requirement: Prepare the general journal entries using standard fund-type terminology, identifying the fund or nonfund accounts for which the entry is being prepared. Appropriate abbreviations are acceptable e.g., GF, SRF, CPF, DSF, GCA, GLTL, OFS, or OFU. If no entry is required, write "No Entry Required" and briefly explain why. Do not include formal entry explanations or dates, but include any important assumptions made and all calculations.

Accepted Answer

The answer of Transactions:
The City of Armona has decided to...

Question 11

The parks and recreation department, which is accounted for within the General Fund, purchased a new athletic field mower at a cost of $25,000. The mower has an estimated useful life of 5 years. The General Fund would report depreciation expense at the end of Year 2 in the amount of

Accepted Answer

General Funds, being governmental funds, use the modified accrual accounting method, which does not recognize fixed assets or long-term debt in the fund financial statements. Therefore, depreciation is not recorded in the General Fund.

Question 12

A city recently ordered a new fire truck. The base cost of the truck is $250,000. In addition, the city will be paying $1,000 in delivery charges and $5,000 for necessary calibrations once it is delivered; and the city will also have the necessary logos added at a cost $2,500. The capitalizable cost of the fire truck in the General Fund will be

Accepted Answer

The answer of A city recently ordered a new fire...

Question 13

A county government sold two of its emergency vehicles for a total of $35,000. The vehicles had a collective net book value of $46,000 total original cost = $150,000; accumulated depreciation = $104,000. The entry that would be made in the General Fund at the time of the transaction would be $\begin{array}{|l|l|l|l|}
\hline&&\text { Debit } & \text { Credit }\
\hline\text { A.}&\text { Cash } & \$ 35,000 \
&\quad \text { Capital Contribution }&& \$ 35,000 \
\hline\text { B.}& \text { Cash } & \$ 35,000 \
&\text { Other Financing Sources }- \text { Sale of Capital Assets }&& \$ 35,000  \
\hline\text {C.}&\text { Cash } & \$ 35,000 & \
&\text { Accumulated Depreciation } & 104,000 & \
&\text { Loss on Sale of Capital Assets } & 11,000 & \
&\quad \text { Capital Assets -- Vehicles } & & \$ 150,000 \
\hline\text {D.}& \text { Cash } & \$35,000 & \
&\text { Loss on Sale of Capital Assets } &  11,000 \
&\text { Other Financing Sources - Sale of Capital Assets }&&\$46,000\
\hline
\end{array}$

Accepted Answer

The answer of A county government sold two of its...

Question 14

A local citizen donated land with a fair market value of $500,000 to the county government. The donor had paid $550,000 for the land five years ago. The county incurred $150,000 in development costs to convert the land into a public park. The county should capitalize the new public park in the General Capital Assets accounts in the amount of

Accepted Answer

The county should capitalize the land at its fair market value, which is $500,000. However, since the county incurred additional costs to develop the land into a public park, those costs should also be capitalized and added to the cost of the land. Therefore, the total amount to be capitalized is $500,000 + $150,000 = $650,000. The original cost that the donor paid for the land is not relevant in this situation.

Question 15

Assume that the city foreclosed on a piece of property with a fair market value of $5,000. It has an assessed value for taxes of $4,000. The outstanding amount of taxes and penalties due on the property totals $3,500. Normally, the city would value the foreclosed property at

Accepted Answer

Since the outstanding amount of taxes and penalties due on the property is $3,500, the city will value the foreclosed property at the same amount to cover their expenses. This is also known as the minimum bid for the property if it were to be sold at a tax auction. Therefore, the correct choice is B.

Question 16

SEQ CHAPTER \h \r 1Prepare the general journal entries to properly record each of the following transactions and events in the appropriate general ledger accounts of the appropriate funds for the year ended June 30, 2011. The City of Middlesettlements uses a series of each type of nominal account e.g., Revenues-Property Taxes, Revenues-Other, Expenditures-Operations, Expenditures-Capital Outlay, Expenditures-Debt Service-Interest, OFS-Bond Principal, OFU-Transfer to GF, etc., except for budgetary entries where no additional detail is required. The General Capital Assets and General Long-term Liability accounts are updated whenever a relevant transaction occurs.
ADDITIONAL INFORMATION:
? The fiscal year for the City is July 1 to June 30.
? All premiums on bonds payable, net of bond issue costs, are transferred to the DSF that will be used to service the debt. The amounts transferred are used for future bond interest payments.
? When bonds are issued at a discount or bond issue costs are incurred, a special transfer is made from the GF to the fund issuing the bonds to reimburse it for the discount and issue costs. This transfer is over and above any previously authorized transfers from the GF to that fund.
? The City uses the consumption method / periodic inventory system to account for supplies.
The City is constructing a new municipal building. Capital Projects Fund #1 will be used to account for this construction. The expected cost of and the sources of proportional financing for the municipal building are:
 $\begin{array}{llr}
  \text {Bond issue authorized July 1, 2010,6\%,30-year serial bonds  } &\$3,000\
 \text {  State grant expenditure driven.} &1,500\
 \text { Transfer from the General Fund } &500\
 \text { Total sources and cost of building } &\$5,000\
 \text { All amounts are in thousands of dollars. } &\

\end{array}$
 
Transactions:
1. A computer has been leased for the City for its accounting and payroll operations. The lease has a fair market value and a net present value of $2,000. The lease will be serviced through the General Fund.
2. A contract for the construction of the new municipal building was accepted by Swann & Hall S&H Construction Company for $4,500. The required transfer from the General Fund to the Capital Projects Fund was made.
3. $400 in 6-month, 4%, bond anticipation notes BANs were issued to finance expenditures in advance of the bond issue. The BANs are to be repaid from the proceeds of the previously authorized bond issue-as required by the debt covenant-by CPF #1.
4. The City accounts for its supplies in the General Fund. The City started the year with $100 in its supply account and purchased $200 in supplies to augment its inventory.
5. The first capital lease payment on the computer, $150 including $100 in interest, was paid. See entry 1
6. 5 acres of land were purchased for $200 for the new municipal building. This purchase had not been previously encumbered, but it is included in the budget for the project.
7. The bonds authorized on July 1, 2010, were issued at 102 on October 1, 20X1. Bond issue costs were $20. The bonds pay interest on March 31 and September 30. Principal payments occur evenly over the life of the bonds each year 1/30 each September 30. DSF #1 was established to service this debt. See entries 3 & 8
8. The BANs were paid when due. See entries 3 and 7
9. The City issued $125 in supplies to its departments.
10. Expenditures totaling $2,500 were made for the construction project. These expenditures had originally been encumbered for $2,600. The amount was vouchered for payment to S&H Construction net of a 10% retainage. See entry 2
11. Sufficient funds were transferred from the General Fund to the DSF #1 to finance one year's principal retirement, interest, and fiscal agent fees $10 for the municipal building bonds. See entries 7 and 13
12. The City issued another $100 in supplies to its departments.
13. DSF #13 made the required March 31 bond payments. See entries 7 and 11
14. At year-end an inventory of supplies revealed that $80 were on hand. The appropriate adjustments were made.
Requirement: Prepare the general journal entries for the City of Middlesettlements, using standard fund-type terminology, identifying the fund or list for which the entry is being prepared. Appropriate abbreviations are acceptable e.g., GF, SRF, CPF, DSF, GCA, GLTL, OFS, OFU. If no entry is required, write "No Entry Required" and briefly explain why. Do not include formal entry explanations or dates, but include any important assumptions made and all calculations. If an amount is not given in the exam, you must show your work to demonstrate how you determined the amount.

Accepted Answer

The answer of SEQ CHAPTER \h \r 1Prepare the general...

Question 17

Which of the following comments best describes the accounting and financial reporting guidelines for works of art and historical treasures?

Accepted Answer

According to US GAAP and IFRS, works of art and historical treasures should be capitalized and not depreciated unless they are considered exhaustible. This means that they should be reported at their cost or fair value, and that any increase in value should not be recognized unless the item is sold. However, if the item is expected to deteriorate or become obsolete over time, it may be depreciated. Governments may also have their own specific guidelines regarding the accounting treatment of works of art and historical treasures.

Question 18

Assume that a governmental entity acquires a new garbage truck. The garbage truck costs $189,000. The vendor allowed a $30,000 allowance with the trade-in of the entity's old garbage truck, which had a net book value of $42,000. The government financed the balance with a short-term bank note. The new garbage truck would be recorded in the General Capital Assets account at

Accepted Answer

The cost of the new garbage truck is $189,000, and the trade-in allowance is $30,000. This means the government only paid $159,000 in cash for the new truck. Therefore, the General Capital Assets account should be recorded at $159,000.

Question 19

Transactions:
1. A government Special Revenue Fund leased specialized equipment under a multi-year, noncancelable lease agreement that qualifies as a capital lease. The lease required a down payment of $500 and the present value of the minimum lease payments i.e., the capitalizable cost of the leased asset was $5,000. The implicit rate of interest on the lease is 10%.
2. The government made the first lease payment of $750.
3. The government made the second lease payment of $750.
Requirement: Prepare the general journal entries using standard fund-type terminology, identifying the fund or nonfund accounts for which the entry is being prepared. Appropriate abbreviations are acceptable e.g., GF, SRF, CPF, DSF, GCA, GLTL, OFS, or OFU. If no entry is required, write "No Entry Required" and briefly explain why. Do not include formal entry explanations or dates, but include any important assumptions made and all calculations.

Accepted Answer

The answer of Transactions:
1. A government Special Revenue Fund leased...

Question 20

Transactions:
1. The government issued $2,500 of 8-month, 9% bond anticipation notes. The notes meet the requirements to be accounted for as long-term debt. The proceeds are to be used to begin construction of a recently approved addition to the county jail.
2. The government issued $5,000 of 10-year, 8% bonds at par. Bond issue costs of $50 were withheld from the proceeds. Interest and one-tenth of the principal are payable annually on the bonds. The bond proceeds are to be used to repay the bond anticipation notes and to finance construction of the jail addition. See entries #1 and #3
3. The BANs and interest were paid on their due date. See entries #1 and #2
4. The semi-annual payment of interest on bonds issued several years ago by a Capital Projects Fund came due and was paid. The outstanding principal of these 20-year, 4% face rate, term bonds is $3,000. The unamortized discount on these bonds is $100. The bonds were issued 15 years ago on this date. The payment includes fiscal agent fees of $10.
5. The annual payment of serial bonds issued 10 years ago by the government came due. The amount owed is $1,250 in principal, $20 interest, and $5 in fiscal agent fees. The amount due was paid.
6. Another term bond issued 20 years ago by the government came due and was paid. The face amount and rate was $3,200 and 3%, respectively, and pays interest semi-annually. The fiscal agent fees were $60.
7. A serial bond issued in the current year has its first annual payment of principal and interest due on the third day of the next fiscal year. As is required by the debt covenant and following the general procedures for all debt issues of the county, $1,200 $1,000 for principal, $180 for interest, and $20 for fiscal agent fees has been transferred from the General Fund to the Debt Service Fund to make this payment.
Requirement: Prepare the general journal entries using standard fund-type terminology, identifying the fund or nonfund accounts for which the entry is being prepared. Appropriate abbreviations are acceptable e.g., GF, SRF, CPF, DSF, GCA, GLTL, OFS, OFU. If no entry is required, write "No Entry Required" and briefly explain why. Do not include formal entry explanations or dates, but include any important assumptions made and all calculations.

Accepted Answer

The answer of Transactions:
1. The government issued $2,500 of 8-month,...

Quiz 9: General Capital Assets; General Long-Term Liabilities; Permanent Fundsintroduction to Interfund-Gca-Gltl Accounting