5-7 The Village of Harris issued $5,000,000 in 6 percent general obligation, taxsupported bonds on July 1, 2008, at 101. A fiscal agent is not used....
5–7 The Village of Harris issued $5,000,000 in 6 percent general obligation, taxsupported
bonds on July 1, 2008, at 101. A fiscal agent is not used. Resources
for principal and interest payments are to come from the General Fund. Interest
payment dates are December 31 and June 30. The first of 20 annual principal
payments is to be made June 30, 2009. Harris has a calendar fiscal year.
1. A capital projects fund transferred the premium ($50,000) to the debt
service fund.
2. On December 31, 2008, funds in the amount of $150,000 were received
from the General Fund and the first interest payment was made.
3. The books were closed for 2008.
4. On June 30, 2009, funds in the amount of $350,000 were received from
the General Fund, and the second interest payment was made along with
the first principal payment ($250,000).
5. On December 31, 2009, funds in the amount of $142,500 were received
from the General Fund and the first interest payment was made.
6. The books were closed for 2009.
a. Prepare journal entries to record the events above in the debt service
fund.
b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund
Balance for the debt service fund for the year ended December 31,
2008.
c. Prepare a Statement of Revenues, Expenditures, and Changes in Fund
Balance for the debt service fund for the year ended December 31,
2009.
5–10. On July 1, 2008, a five-year agreement is signed between the City of Genoa
and the Computer Leasing Corporation for the use of computer equipment
not associated with proprietary funds activity. The cost of the lease, excluding
executory costs, is $15,000 per year. The first payment is to be made by
a capital projects fund at the inception of the lease. Subsequent payments, beginning
July 1, 2009, are to be made by a debt service fund. The present
value of the lease payments, including the first payment, is $68,189. The interest rate implicit in the lease is 5 percent.
a. Assuming the agreement meets the criteria for a capital lease under the provisions of SFAS No. 13, make the entries required in (1) the capital projects
fund and (2) the debt service fund on July 1, 2008, and July 1, 2009.
6–10. The Village of Parry reported the following for its Print Shop Fund for the
year ended April 30, 2009.
VILLAGE OF PARRY—PRINT SHOP FUND
Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended April 30, 2009
Operating revenues:
Charges for services $1,000,000
Operating expenses:
Salaries and benefits $500,000
Depreciation 200,000
Supplies used 200,000
Utilities 70,000 970,000
Income from operations 30,000
Nonoperating income (expenses):
Interest revenue 30,000
Interest expense (50,000) (20,000)
Net income before transfers 10,000
Transfers in 180,000
Changes in net assets 190,000
Net assets—beginning 1,120,000
Net assets—ending $1,310,000
The Print Shop Fund records also revealed the following:
1. Contribution from Water Utility Fund
for working capital needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,000
2. Contribution from General Fund
for purchase of equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
3. Loan from Water Utility Fund
for purchase of equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000
4. Purchase of equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (450,000)
5. Purchase of one-year investments . . . . . . . . . . . . . . . . . . . . . .. (100,000)
6. Paid off a bank loan outstanding at May 1, 2008 . . . . . . . . . . $50,000
Paid interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $1,000
The loan was for short-term operating purposes.
7. Signed a capital lease on April 30, 2009 . . . . . . . . . . . . . . . . . . . . $42,180
The following balances were observed in current asset and current liability
accounts. ( ) denote credit balances:
5/1/08 4/30/09
Cash $151,000 $233,000
Accrued interest receivable 5,000 10,000
Due from other funds 40,000 50,000
Accrued salaries and benefits (20,000) (30,000)
Utility bills payable (4,000) (5,000)
Accounts payable (30,000) (25,000)
Accrued interest payable (5,000) (7,000)
Prepare a Statement of Cash Flows for the Village of Parry Print Shop
Fund for the Year Ended April 30, 2009. Include the reconciliation of operating
income to net cash provided by operating activities.
7–6. On July 1, 2008, the City of Belvedere accepted a gift of cash in the amount
of $3,000,000 from a number of individuals and foundations and signed an
agreement to establish a private-purpose trust. The $3,000,000 and any additional
gifts are to be invested and retained as principal. Income from the trust
is to be distributed to community nonprofit groups as directed by a Board consisting of city officials and other community leaders. The agreement provides
that any increases in the market value of the principal investments are to be
held in trust; if the investments fall below the gift amounts, then earnings are
to be withheld until the principal amount is reestablished.
a. The following events and transactions occurred during the fiscal year ended
June 30, 2009. Record them in the Belvedere Community Trust Fund.
(1) On July 1, the original gift of cash was received.
(2) On July 1, $2,000,000 in XYZ Company bonds were purchased at
par plus accrued interest. The bonds pay an annual rate of 6 percent
interest semiannually on April 1 and October 1.
(3) On July 2, $950,000 in ABC Company common stock was purchased.
ABC normally declares and pays dividends semiannually, on
January 31 and July 31.
(4) On October 1, the first semiannual interest payment was received
from XYZ Company. Note that part of this is for accrued interest due
at the time of purchase; the remaining part is an addition that may be
used for distribution.
(5) On January 31, 2009, a cash dividend was received from ABC
Company in the amount of $19,000.
(6) On March 1, the ABC stock was sold for $960,000. On the same day,
DEF Company stock was purchased for $965,000.
(7) On April 1, the second semiannual interest payment was received
from XYZ Company.
(8) During the month of June, distributions were approved by the Board
and paid in cash in the amount of $95,000.
(9) Administrative expenses were recorded and paid in the amount of
$12,000.
(10) An accrual for interest on the XYZ bonds was made as of June 30, 2009.
(11) As of June 30, 2009, the fair value of the XYZ bonds, exclusive of
accrued interest, was determined to be $2,002,000. The fair value of
the DEF stock was determined to be $960,000.
(12) Closing entries were prepared.
