Answer the Following Questions with Regard to the Preparation of Fund

Essay

Answer the following questions with regard to the preparation of fund financial statements. At fiscal year-end, a city holds an investment portfolio in its general fund that has a fair market value of $15 million and a historical cost of $28 million. The portfolio had a fair value of $18 million at the beginning of the current fiscal year. The portfolio is composed of a variety of bonds with a face value $29 and a due date five years in the future. The bonds were acquired to meet a $29 million debt due five years in the future.
a.) At what amount should the portfolio be valued on the balance sheet?
b.) What amount, if any, should appear on the operating statement?
c.) Defend the valuation method required by GAAP.
d.) Argue against the valuation method required by GAAP.
e.) At what amount would the city want to record these investments on its financial statements for the current year? Why?