Exam 11: State and Local Governments: Other Transactions

A county uses a debt service fund to account for events related to a $50,000,000 2.5% general obligation serial bond issue used to finance construction of a new courthouse. For the current year, principal payments of $5,000,000 and interest payments of $1,250,000 are scheduled. The payments are financed by a transfer from the general fund. In addition, the courthouse capital projects fund transferred $500,000 of excess cash to the debt service fund. The debt service fund invested this cash in securities. Investment income, received in cash, was $10,000. The securities have a fair value of $499,000 at year-end. Required Prepare the debt service fund operating statement for the year.

The pre-closing trial balance of a county's debt service fund at year-end is provided below: Dr (Cr) Cash \ 42,000 Investments 8,000 Required additions 100,000 Required earnings 200 Appropriations (65,000) Debt service: principal 15,000 Debt service: interest 50,000 Transfersin Investment income (205) Fund balance-committed Total \ 0 After the accounts are closed, what is the reported fund balance for the debt service fund?

A special revenue fund reports total assets of $400,000 and total liabilities of $375,000. It reports these fund balance categories: Nonspendable, $12,000, and restricted, $15,000. What other fund balance category is reported?

At the beginning of the current year, an enterprise fund enters a 3-year lease with these terms: $100,000 is due at signing, and payments of $100,000 per year are due at the end of each of the next two years. The lease agreement carries an interest rate of 3%. The present value of the lease payments is $291,347. At the start of the lease, the enterprise fund:

At the beginning of fiscal 2020, a county builds a sewage treatment plant, reported in an enterprise fund. The plant is expected to be in service for 35 years. The county is responsible for the plant's retirement at the end of its life, following all safety and environmental requirements. The estimated present value of the future retirement costs is $7,000,000, to be recognized as expense on a straight-line basis over the plant's estimated life. Required Prepare the journal entries to record the sewage treatment plant retirement costs for fiscal 2020.

On January 1, 2020, a county government leases equipment for three years with these terms: $1,000,000 is due at signing, and payments of $1,000,000 per year are due on January 1 of each of the next two years. The lease agreement carries an interest rate of 3%. Straight-line depreciation over three years, no residual value, is used if appropriate. Required Prepare the entries to record events related to this lease on January 1, 2020, December 31, 2020 (the government's year-end), January 1, 2021, and December 31, 2021, assuming that: a. The equipment is reported in an internal service fund. b. The equipment is reported in the general fund. Round all answers to the nearest dollar.

Which account will you never see on the balance sheet of a capital projects fund?

A $30 million contract is awarded by a county for construction of a building. Bonds are issued to finance construction, in the amount of $30 million. During the first year, contractors bill the county $22 million for work done, and $20 million is paid in cash to contractors. At year-end, the capital projects fund reports the following fund balances:

Spencer County has a special revenue fund that accounts for resources to be used for boardwalk construction projects. Resources for the projects come from state grants. The construction activities themselves are reported in a capital projects fund. The balance sheets of the Boardwalk Fund at June 30, 2021, and June 30, 2020, are below. June 30 2021 2020 Cash and investments... \ 26,980,000 \ 25,000,000 Grants receivable, net....... 2,000,000 1,900,000 Due from capital projects fund. Total assets.................. \ 30,480,000 \ 26,900,000 Accounts payable. Total liabilities 45,000 35,000 Fund balance Restricted for boardwalk projects. Total liabilities and fund balance The following transactions occurred during fiscal 2021: 1. Investment income was $150,000, and unrealized gains on investments were $20,000. 2. The state granted $8,000,000 for boardwalk projects. 3. Transfers of $1,200,000 were made to the Waterway Maintenance Fund, which maintains waterways within the County. 4. Transfers of $1,600,000 were received from the capital projects fund for return of excess funds from various boardwalk construction projects. 5. Expenditures were $5,000,000. Assume the following: • Receivables are accrued state grants. • Amounts due from the capital projects fund are advances on construction projects. • Accounts payable related to accrued expenditures. Required a. Prepare the summary journal entries made in the Boardwalk Fund. b. Present the fiscal 2021 operating statement for the Boardwalk Fund, in good form.

A state university's activities are reported in the state CAFR as a proprietary fund. The university issues variable rate debt and hedges its interest rate risk with a receive variable/pay fixed interest rate swap. If market interest rates increase, how is the derivative investment, reported on the state's proprietary funds statement of net position, affected?

A state enterprise fund has $25 million in variable rate debt, due in 5 years, with the rate set annually on May 1 of each year, interest payable on April 30. On May 1, 2019, the start of its fiscal year, the variable rate on the debt is set at 3.5%. The fund enters a 5-year receive variable/pay fixed interest rate swap, where it agrees to pay a 3.8% fixed rate and receives the amount necessary to pay interest on its variable rate debt. The swap qualifies for hedge accounting, per SGAS 53. The swap has no value on May 1, 2019. Over fiscal year 2020, market interest rates fall, and the swap loses $80,000 in value. On May 1, 2020, the variable rate on the debt is set at 3.4%. Over fiscal year 2021, interest rates rise slightly and the swap gains $10,000 in value. Required Prepare the journal entries the enterprise fund makes to record the above information for fiscal years 2020 and 2021.

A permanent fund reports endowment investments of $10 million, where donors specify that investment income be used for specific activities. On its balance sheet, the permanent fund reports the investments as assets, and also reports $10 million in which category of fund balance?

On May 1, 2020, a state university issued $6,000,000 in variable rate debt, with interest paid on April 30 of each year, the state's fiscal year-end. The rate is reset annually. The state reports the activities of the state university in an enterprise fund. The variable rate for fiscal 2021 is 3%. On the same date, the state enters a receive variable/pay fixed interest rate swap, where the state pays a 3.2% fixed rate to a counterparty. By the end of fiscal 2021, the variable rate has risen to 3.3% and the swap has increased in value by $100,000. The swap qualifies for hedge accounting, per SGAS 53. Required a. Prepare the journal entries necessary to record the above events in the state's enterprise fund for fiscal 2021. b. Assume that on May 1, 2021, it is determined that the swap no longer qualifies for hedge accounting. Prepare the appropriate journal entry.

A proprietary fund issues 3% bonds for $15,000,000 and uses this money to refund 5% bonds currently carried at $14,900,000. How is this reported by the proprietary fund?

A county reports the activities of its water and sewer services in an enterprise fund. Below is information related to this fund for fiscal 2021. All dollar amounts are in thousands. Beginning net position at October 1, 2020: Net investment in capital \ 58,000 assets Restricted for programs 35,000 Unrestricted Total net position During fiscal 2021, the following transactions occurred: 1) Depreciation expense on capital assets was $45,000. 2) Capital assets of $82,000, financed by capital asset-related debt, were acquired. An additional $15,000 in capital assets were not financed by capital asset-related debt. 3) Principal payments on capital asset-related debt were $62,000. Interest payments were $25,000. 4) Principal payments on general debt were $40,000. Interest payments were $52,000. 5) Proceeds from sale of capital assets were $28,000, and losses of $10,000 were recognized on these asset sales. 6) At the end of fiscal 2021, net position restricted for programs had increased by $6,500. 7) The water and sewer fund's statement of net position at September 30, 2021 reports the following balances: Total assets \ 170,000 Total liabilities 25,000 Deferred outflows of resources 3,000 Deferred inflows of resources 1,600 Required a. Calculate the water and sewer fund's total net position at September 30, 2021. b. Present the net position section of the water and sewer fund's statement of net position at September 30, 2021, in good form. Show calculations clearly.

A county acquires equipment for $10,000,000 for use for a community project, reported in a special revenue fund. The equipment has a 5-year life, no residual value. After 3 years, the equipment is sold for $1,000,000. Straight-line depreciation is used if appropriate. How is the sale reported in the special revenue fund?

Use the following information to answer Questions bellow. At the beginning of the year, a county builds a sewage treatment plant, reported in an enterprise fund. The plant is expected to be in service for 25 years. The county is responsible for the plant's retirement at the end of its life, following all safety and environmental requirements. The estimated present value of the future retirement costs is $10,000,000, to be recognized on a straight-line basis over the plant's estimated life. -The enterprise fund reports asset retirement expense for the current year of:

A county acquires equipment for $500,000, for use for a community program, reported in an enterprise fund. The equipment has a 5-year life, no residual value. After 3 years, the equipment is sold for $275,000. Straight-line depreciation is used if appropriate. How is the sale reported in the enterprise fund's operating statement?

Many governments have extensive investments in debt and equity securities, held for income and not for hedging purposes. Which types of funds must report these investments at fair value and report unrealized gains and losses in their operating statement?

Here is the year's financial information for a county's internal service fund: Change in net position \ 40,000 Operating income 65,000 Depreciation expense 100,000 Increase in accounts receivable 5,000 Decrease in inventories 2,000 Increase in net pension and OPEB liability 20,000 Decrease in accounts payable 4,000 In the internal service fund's statement of cash flows for the year, cash provided by operations is: