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A special district's balance sheet may not capture its economic resources and obligations. A special district accounts for its general fund (its only...
A special district’s balance sheet may not capture itseconomic resources and obligations.A special district accounts for its general fund (itsonly fund) on a modified accrual basis. In a particularperiod, it engaged in the following transactions.a. It issued $20 million in long-term bonds.b. It acquired several tracts of land, at a total costof $4 million, paying the entire amount in cash.c. It sold a portion of the land for $1 million,receiving cash for the entire amount. The tractsold had cost $0.8 million.d. It repaid $2 million of the bonds.e. It lost a lawsuit and was ordered to pay $9million over three years. It made its first cashpayment of $3 million.1. Prepare journal entries to record the transactionsin the general fund.2. Based on your journal entries, prepare a balancesheet and a statement of revenues, expenditures,and other changes in fund balance.3. Comment on the extent to which the balancesheet captures the district’s economic resourcesand obligations. How can you justifysuch a balance sheet?4. Comment on the extent to which the statementof revenues, expenditures, and otherchanges in fund balance captures the district’scost of services. How can you justify such afinancial statement?2-4Funds are separate fiscal and accounting entities, eachwith its own self-balancing set of accounts.The newly established Society for EthicalTeachings maintains two funds—a general fundfor operations and a building fund to accumulateresources for a new building. In its first year, itengaged in the following transactions.a. It received cash contributions of $200,000, ofwhich $40,000 was restricted for the acquisitionof the new building.b. It incurred operating costs of $130,000, ofwhich it paid $120,000 in cash.c. It earned $3,000 of interest (the entire amountreceived in cash) on resources restricted for theacquisition of the new building.d. It transferred $17,000 from the operating fundto the new building fund.e. It paid $12,000 in fees (accounted for asexpenses) to an architect to draw up plans forthe new building.1. Prepare journal entries to record the transactions.Be certain to indicate the fund in whichthey would be made.2. Prepare a statement of revenues, expenditures,and other changes in fund balances and abalance sheet. Use a two-column format,one column for each of the funds.
