Homework

1
Chapter 10 Homework
2
Exercise 10-2
3
Using the format at the end of this exercise,
indicate the impact that each of the following
transactions has on the total net assets of a
proprietary fund and on each net asset
component. Also, indicate whether the
transaction is reported in the statement of
revenues, expenses, and changes in net assets of
a proprietary fund.

• Sold building with a book value of 150,000 for
  225,000 (proceeds
• not restricted).

225,000 - 150,000 75,000 gain
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
Cash225,000 Asset..150,000 (book-all we
know) Gain 75,000
4
Using the format at the end of this exercise,
indicate the impact that each of the following
transactions has on the total net assets of a
proprietary fund and on each net asset
component. Also, indicate whether the
transaction is reported in the statement of
revenues, expenses, and changes in net assets of
a proprietary fund.

• Sold building with a book value of 150,000 for
  225,000 (proceeds
• not restricted).

225,000 - 150,000 75,000 gain
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
Cash225,000 Asset..150,000 (book-all we
know) Gain 75,000
5
Using the format at the end of this exercise,
indicate the impact that each of the following
transactions has on the total net assets of a
proprietary fund and on each net asset
component. Also, indicate whether the
transaction is reported in the statement of
revenues, expenses, and changes in net assets of
a proprietary fund.

• Sold building with a book value of 150,000 for
  225,000 (proceeds
• not restricted).

225,000 - 150,000 75,000 gain
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
225,000
Cash225,000 Asset..150,000 (book-all we
know) Gain 75,000
6
Using the format at the end of this exercise,
indicate the impact that each of the following
transactions has on the total net assets of a
proprietary fund and on each net asset
component. Also, indicate whether the
transaction is reported in the statement of
revenues, expenses, and changes in net assets of
a proprietary fund.

• Sold building with a book value of 150,000 for
  225,000 (proceeds
• not restricted).

225,000 - 150,000 75,000 gain
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
225,000
Cash225,000 Asset..150,000 (book-all we
know) Gain 75,000
7
Using the format at the end of this exercise,
indicate the impact that each of the following
transactions has on the total net assets of a
proprietary fund and on each net asset
component. Also, indicate whether the
transaction is reported in the statement of
revenues, expenses, and changes in net assets of
a proprietary fund.

• Sold building with a book value of 150,000 for
  225,000 (proceeds
• not restricted).

225,000 - 150,000 75,000 gain
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
225,000
75,000
Cash225,000 Asset..150,000 (book-all we
know) Gain 75,000
8
Using the format at the end of this exercise,
indicate the impact that each of the following
transactions has on the total net assets of a
proprietary fund and on each net asset
component. Also, indicate whether the
transaction is reported in the statement of
revenues, expenses, and changes in net assets of
a proprietary fund.

• Sold building with a book value of 150,000 for
  225,000 (proceeds
• not restricted).

225,000 - 150,000 75,000 gain
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
225,000
75,000
Cash225,000 Asset..150,000 (book-all we
know) Gain 75,000
9
Using the format at the end of this exercise,
indicate the impact that each of the following
transactions has on the total net assets of a
proprietary fund and on each net asset
component. Also, indicate whether the
transaction is reported in the statement of
revenues, expenses, and changes in net assets of
a proprietary fund.

• Sold building with a book value of 150,000 for
  225,000 (proceeds
• not restricted).

225,000 - 150,000 75,000 gain
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
225,000
75,000
- 150,000
75,000
Cash225,000 Asset..150,000 (book-all we
know) Gain 75,000
10

• Land costing 500,000 was purchased by issuing a
  5-year, 8 note
• for 450,000. The balance was paid from cash
  restricted for an
• expansion project.

Land..500,000 N/P450,000 Cash reserved
for expansion.. 50,000
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
11

• Land costing 500,000 was purchased by issuing a
  5-year, 8 note
• for 450,000. The balance was paid from cash
  restricted for an
• expansion project.

• Capital Assets
• Acc/Dep
• Debt related to
• capital assets
• expended.

Land..500,000 N/P450,000 Cash reserved
for expansion.. 50,000
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
2 NONE NONE (50,000) 50,000 NONE
what happened to the capital asset land and the
long-term note/p?

• Land of 500,000
• capital
• debt 450,000 (proceeds expended already)
• ---------------------------
• 50,000

12
3. Depreciation expense for the year was 200,000.

• Capital Assets
• Acc/Dep
• Debt related to
• capital assets
• expended.

Depreciation Expense.200,000 Accumulated
Depreciation200,000
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
3 (200,000) NONE NONE (200,000) (200,000)
13

• Interest expense of 36,000 on the note in
  transaction 2 was paid
• from unrestricted resources.

Interest expense 36,000 Unrestricted
Cash.36,000
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
4 (36,000) (36,000) NONE NONE (36,000)
14

• Bonds payable of 200,000 were repaid with
  restricted resources
• along with 50,000 of interest. The bonds were
  issued several years
• earlier to finance capital asset construction.

because there is less capital debt.
Bonds payable..200,000 Interest expense..
50,000 Cash250,000
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
5 (50,000) (250,000) NONE 200,000
(50,000)
it doesnt say it came from restricted
15

• A capital grant of 500,000 was received, but no
  qualifying costs
• have been incurred.

Cash.500,000 Deferred capital grant
500,000
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
6 NONE NONE NONE NONE NONE
Cash restricted 500,000 - Related capital debt
500,000 -----------------------------------------
-0-
16

• 300,000 of the restricted capital grant from
  transaction 6 was
• expended for its intended purpose.

Asset300,000 (because its capital
grant) Cash-Restricted300,000 Deferred
Capital Grant300,000 Revenue-Capital
Contributions..300,000
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
7 300,000 NONE NONE 300,000 300,000
- cash 300,000 def cap/grt 300,000 -----------
------------ -0-
17
8. Sales revenues amounted to 1,000,000.
Cash.1,000,000 Sales1,000,000
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
8 1,000,000 1,000,000 NONE NONE
1,000,000
18

• Interest revenues restricted to the use of the
  Enterprise Fund
• 40,000 were received.

Cash restricted.. 40,000 Interest
revenue40,000
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
9 40,000 40,000
its restricted to the Enterprise Fund but
anything within the enterprise fun can use it
(thus its unrestricted within the fund). pg. 391
In govt-wide these assets would be restricted
because there the Enterprise fund is merged with
other funds.
19

• The cost of materials and supplies used for the
  year was
• 75,000.

Supplies expense.75,000 Supplies..75,000
Net Assets Affect Invested Transactio
n Operating Unrestricted Restricted in
Capital Number Statement? Assets Total
10 (75,000) (75,000) NONE NONE
(75,000)
20
Exercise 10-3
21
Prepare the journal entries needed in an
Enterprise Fund to record the following transactio
ns. Include any adjusting entries required.

• Issued REFUNDING BONDS at par, 8,000,000. The
  bonds bear interest
• at 8 payable annually and mature in 5 years.
  (Ignore bond issue costs).

Cash.................... 8,000,000 Refunding
Bonds Payable..................8,000,000
22

• Paid the 8,000,000 into an irrevocable trust to
  defease in substance
• the previously outstanding bonds payable of the
  Enterprise Fund. These
• old bonds have a par value of 7,200,000 and an
  unamortized discount of
• 100,000. The old bonds are scheduled to mature
  in 6 more years.

Bonds payable............................7,200,00
0 Deferred Interest Expense adj..
900,000 Discount on Bonds payable................
................100,000 Cash....................
................................................8
,000,000
Refunding bond...........8,000,000 - Def Int
Exp.................... 900,000 -----------------
-------------------------------------- NET
amount of liability.................
7,100,000
23
3, The annual interest payment on the new bonds
was made at year end when due.
8,000,000 x .08 640,000 interest in cash
Interest Expense.............. 640,000 Cash.....
..............................640,000
ADJUSTMENT OF DEFERRED INTEREST.
amortize over shorter of remaining term of old
debt (6 years) or term of refunding issue (5
years).
900,000 / 5 180,000
Interest expense.........180,000 Deferred
Interest Expense............180,000
24
E 10-5
25
Indicate the classification in which each of the
following would be reported in a government
proprietary fund cash flow statement. Use the
following letters for each classification to
respond
A OPERATING activities. B NONCAPITAL FINANCING
activities. C CAPITAL and RELATED FINANCING
activities. D INVESTING activities. E NONE of
the above
26

• Cash paid to purchase investments with resources
  restricted
• for capital asset construction.

D. INVESTING
27
2. Cash received from the sale of equipment.
C. CAPITAL and related financing.
28
3. Cash paid for salaries.
A. OPERATING
29
4. Cash received from interest on investments
that are restricted for servicing bonds that
had been issued to finance construction of a
building.
D. INVESTMENTS
30

• Cash paid for interest on refunding bonds that
  were issued for repayment
• of bonds that were issued to finance purchase of
  major pieces of equipment.

C. CAPITAL and related financing.
31

• Cash transfer paid to General Fund (The General
  Fund budget requires these
• funds to be used to help finance acquisition of
  a fire truck).

B. NONCAPITAL financing.
The GF is using for capital purposes but to the
enterprise fund it was just a misc transfer.
32
7. Cash received from operating grants.
B. NONCAPITAL financing.
33

• Cash received from a transfer from the GF to
  finance expansion of the
• physical plant.

C. CAPITAL and related financing.
34
9. Cash received from capital grants.
C. CAPITAL and related financing.
35

• Cash paid for interest on a short-term note
  issued to fulfill a temporary need
• for operating funds.

B. NONCAPITAL FINANCING
Interest NEVER goes into operating in GNP.
36
E 10-7
37
Explain or illustrate how the following items
should be reported in a proprietary funds
statement of revenues, expenses and changes in
net assets
1. DEPRECIATION on capital grant financed capital
assets.
OPERATING EXPENSE
38
Explain or illustrate how the following items
should be reported in a proprietary funds
statement of revenues, expenses and changes in
net assets
2. Depreciation on INFRASTRUCTURE ASSETS.
OPERATING EXPENSE
WHAT IF THE MODIFIED APPROACH?
Then depreciation is not done.
39
Explain or illustrate how the following items
should be reported in a proprietary funds
statement of revenues, expenses and changes in
net assets
3. Transfers from other funds.
Last item before changes in NA
40
Explain or illustrate how the following items
should be reported in a proprietary funds
statement of revenues, expenses and changes in
net assets
4. Cash proceeds of short-term note issuances.
N/A
41
Explain or illustrate how the following items
should be reported in a proprietary funds
statement of revenues, expenses and changes in
net assets
5. Retirement of bonds payable of the fund.
N/A
42
Explain or illustrate how the following items
should be reported in a proprietary funds
statement of revenues, expenses and changes in
net assets
6. Routine annual transfers from other funds.
Last item before changes in NA
43
Explain or illustrate how the following items
should be reported in a proprietary funds
statement of revenues, expenses and changes in
net assets
7. Gain on sale of capital assets.
Normally as NONOPERATING REVENUE
unless its considered a SPECIAL GAIN then with
special items.
44
Explain or illustrate how the following items
should be reported in a proprietary funds
statement of revenues, expenses and changes in
net assets
8. Loss on advance refunding of bonds.
called DEFERRED INTEREST EXPENSE
shows as contra liability on balance sheet
45
Explain or illustrate how the following items
should be reported in a proprietary funds
statement of revenues, expenses and changes in
net assets

• Restricted grants received that can be used for
  operations or for
• capital asset acquisition- assume 30 was
  expended during the year
• to acquire capital assets, 30 to cover
  operating expenses and 40
• is not expended.

Operating grants are ALWAYS shown as NONOPERATING
REV. So 60 (operating and capital asset
restrictions) are shown as non operating
revenues because allowable costs met, the other
40 is shown as liability on the balance sheet
(deferred revenue).
46
Explain or illustrate how the following items
should be reported in a proprietary funds
statement of revenues, expenses and changes in
net assets

• Entering into a capital lease with a
  capitalizable cost of 4,000,000 on the last
• day of the year- assume an initial payment on
  that day of 1,000,000.

NO EFFECT on operating statement
Leased Asset 4,000,000 Capital Lease Obligation
4,000,000 Capital Lease Obligation...
1,000,000 Cash.................................
1,000,000
47
E 10-8
48
Using the information provided below for the
Airport Enterprise Fund of the City of Demere,
prepare a statement of revenues, expenses and
changes in net assets for 20X3.
City of Demere Airport Enterprise Fund Statement
of Revenue, Expenses and Changes in Net
Assets For the Year Ended 20X3
Operating Revenue Operating
Expenses Operating Income Nonoperating
Revenues (Expenses) Income before Other
Revenues, Expenses and Transfers Change in Net
Assets
49
CHARGES FOR SERVICES..............................
3,500,000
City of Demere Airport Enterprise Fund Statement
of Revenue, Expenses and Changes in Net
Assets For the Year Ended 20X3
Operating Revenue Operating
Expenses Operating Income Nonoperating
Revenues (Expenses) Income before Other
Revenues, Expenses and Transfers Change in Net
Assets
50
SALARIES EXPENSE........................
1,000,000
City of Demere Airport Enterprise Fund Statement
of Revenue, Expenses and Changes in Net
Assets For the Year Ended 20X3
Operating Revenue Operating
Expenses Operating Income Nonoperating
Revenues (Expenses) Income before Other
Revenues, Expenses and Transfers Change in Net
Assets
CHARGES FOR SERVICES..............................
3,500,000
51
CONTRACTURAL SERVICES USED........ 1,100,000
City of Demere Airport Enterprise Fund Statement
of Revenue, Expenses and Changes in Net
Assets For the Year Ended 20X3
Operating Revenue Operating
Expenses Operating Income Nonoperating
Revenues (Expenses) Income before Other
Revenues, Expenses and Transfers Change in Net
Assets
CHARGES FOR SERVICES..............................
3,500,000
SALARIES EXPENSE........................
1,000,000
52
SUPPLIES USED................ 200,000
City of Demere Airport Enterprise Fund Statement
of Revenue, Expenses and Changes in Net
Assets For the Year Ended 20X3
Operating Revenue Operating
Expenses Operating Income Nonoperating
Revenues (Expenses) Income before Other
Revenues, Expenses and Transfers Change in Net
Assets
CHARGES FOR SERVICES..............................
3,500,000
SALARIES EXPENSE........................
1,000,000
CONTRACTURAL SERVICES USED........ 1,100,000
53
DEPRECIATION EXPENSE.......... 1,500,000
City of Demere Airport Enterprise Fund Statement
of Revenue, Expenses and Changes in Net
Assets For the Year Ended 20X3
Operating Revenue Operating
Expenses Operating Income Nonoperating
Revenues (Expenses) Income before Other
Revenues, Expenses and Transfers Change in Net
Assets
CHARGES FOR SERVICES..............................
3,500,000
SUPPLIES USED................ 200,000
SALARIES EXPENSE........................
1,000,000
CONTRACTURAL SERVICES USED........ 1,100,000
54
INTEREST RECEIVED............120,000
City of Demere Airport Enterprise Fund Statement
of Revenue, Expenses and Changes in Net
Assets For the Year Ended 20X3
Operating Revenue Operating
Expenses Operating Income Nonoperating
Revenues (Expenses) Income before Other
Revenues, Expenses and Transfers Change in Net
Assets
CHARGES FOR SERVICES..............................
3,500,000
SUPPLIES USED................ 200,000
SALARIES EXPENSE........................
1,000,000
CONTRACTURAL SERVICES USED........ 1,100,000
DEPRECIATION EXPENSE.......... 1,500,000
55
INCREASE IN FV OF INVESTMENTS.......... 23,000
City of Demere Airport Enterprise Fund Statement
of Revenue, Expenses and Changes in Net
Assets For the Year Ended 20X3
Operating Revenue Operating
Expenses Operating Income Nonoperating
Revenues (Expenses) Income before Other
Revenues, Expenses and Transfers Change in Net
Assets
CHARGES FOR SERVICES..............................
3,500,000
SUPPLIES USED................ 200,000
SALARIES EXPENSE........................
1,000,000
CONTRACTURAL SERVICES USED........ 1,100,000
DEPRECIATION EXPENSE.......... 1,500,000
Investment Income............120,000
56
Loss on sale of CAPITAL ASSETS........... 4,000
City of Demere Airport Enterprise Fund Statement
of Revenue, Expenses and Changes in Net
Assets For the Year Ended 20X3
Operating Revenue Operating
Expenses Operating Income Nonoperating
Revenues (Expenses) Income before Other
Revenues, Expenses and Transfers Change in Net
Assets
CHARGES FOR SERVICES..............................
3,500,000
SUPPLIES USED................ 200,000
SALARIES EXPENSE........................
1,000,000
CONTRACTURAL SERVICES USED........ 1,100,000
DEPRECIATION EXPENSE.......... 1,500,000
Investment Income............143,000
57
TRANSFERS from the GF............ 222,000
City of Demere Airport Enterprise Fund Statement
of Revenue, Expenses and Changes in Net
Assets For the Year Ended 20X3
Operating Revenue Operating
Expenses Operating Income Nonoperating
Revenues (Expenses) Income before Other
Revenues, Expenses and Transfers Change in Net
Assets
CHARGES FOR SERVICES..............................
3,500,000
SUPPLIES USED................ 200,000
SALARIES EXPENSE........................
1,000,000
CONTRACTURAL SERVICES USED........ 1,100,000
DEPRECIATION EXPENSE.......... 1,500,000
Investment Income............143,000
Loss on sale of CAPITAL ASSETS........... 4,000
58
Capital assets donated for enterprise fund
use.........500,000
City of Demere Airport Enterprise Fund Statement
of Revenue, Expenses and Changes in Net
Assets For the Year Ended 20X3
Operating Revenue Operating
Expenses Operating Income Nonoperating
Revenues (Expenses) Income before Other
Revenues, Expenses and Transfers Change in Net
Assets
CHARGES FOR SERVICES..............................
3,500,000
SUPPLIES USED................ 200,000
SALARIES EXPENSE........................
1,000,000
CONTRACTURAL SERVICES USED........ 1,100,000
DEPRECIATION EXPENSE.......... 1,500,000
Investment Income............143,000
Loss on sale of CAPITAL ASSETS........... 4,000
TRANSFERS from the GF............ 222,000
59
Interest expense............. 450,000
City of Demere Airport Enterprise Fund Statement
of Revenue, Expenses and Changes in Net
Assets For the Year Ended 20X3
Operating Revenue Operating
Expenses Operating Income Nonoperating
Revenues (Expenses) Income before Other
Revenues, Expenses and Transfers Change in Net
Assets
CHARGES FOR SERVICES..............................
3,500,000
SUPPLIES USED................ 200,000
SALARIES EXPENSE........................
1,000,000
CONTRACTURAL SERVICES USED........ 1,100,000
DEPRECIATION EXPENSE.......... 1,500,000
Investment Income............143,000
Loss on sale of CAPITAL ASSETS........... 4,000
Capital assets donated for enterprise fund
use.........500,000
TRANSFERS from the GF............ 222,000
60
Amortization of deferred interest expense
adjustment with credit bal.... 25,000
City of Demere Airport Enterprise Fund Statement
of Revenue, Expenses and Changes in Net
Assets For the Year Ended 20X3
Operating Revenue Operating
Expenses Operating Income Nonoperating
Revenues (Expenses) Income before Other
Revenues, Expenses and Transfers Change in Net
Assets
CHARGES FOR SERVICES..............................
3,500,000
SUPPLIES USED................ 200,000
SALARIES EXPENSE........................
1,000,000
CONTRACTURAL SERVICES USED........ 1,100,000
DEPRECIATION EXPENSE.......... 1,500,000
Investment Income............143,000
Loss on sale of CAPITAL ASSETS........... 4,000
Interest expense............. 450,000
Capital assets donated for enterprise fund
use.........500,000
TRANSFERS from the GF............ 222,000
61
Expenditures that qualify (100 reimbursable)
under capital grant... 1,300,000
City of Demere Airport Enterprise Fund Statement
of Revenue, Expenses and Changes in Net
Assets For the Year Ended 20X3
Operating Revenue Operating
Expenses Operating Income Nonoperating
Revenues (Expenses) Income before Other
Revenues, Expenses and Transfers Change in Net
Assets
CHARGES FOR SERVICES..............................
3,500,000
LOOKING FORRECOGNITION OF THE REVENUERELATED
TO ALLOWABLE COSTS
SUPPLIES USED................ 200,000
SALARIES EXPENSE........................
1,000,000
CONTRACTURAL SERVICES USED........ 1,100,000
DEPRECIATION EXPENSE.......... 1,500,000
Investment Income............143,000
Loss on sale of CAPITAL ASSETS........... 4,000
Interest expense............. 450,000 25,000
425,000
Capital assets donated for enterprise fund
use.........500,000
TRANSFERS from the GF............ 222,000

• assumption is probably that contractural services
• of 1.1M and supplies used of 200K are the
  qualifying
• expenditures (they arent new ones).

62
City of Demere Airport Enterprise Fund Statement
of Revenue, Expenses and Changes in Net
Assets For the Year Ended 20X3
Operating Revenue Operating
Expenses Operating Income Nonoperating
Revenues (Expenses) Income before Other
Revenues, Expenses and Transfers Change in Net
Assets
CHARGES FOR SERVICES..............................
3,500,000
SUPPLIES USED................ 200,000
SALARIES EXPENSE........................
1,000,000
CONTRACTURAL SERVICES USED........ 1,100,000
DEPRECIATION EXPENSE.......... 1,500,000
Investment Income............143,000
Loss on sale of CAPITAL ASSETS........... 4,000
Interest expense............. 450,000 25,000
425,000
Capital assets donated for enterprise fund
use.........500,000. OTHER REV 1,300,000
1,800,000
TRANSFERS from the GF............ 222,000
63
Operating Revenues Charges for
services..........................................
........ 3,500,000 Operating
expenses Salaries...............................
................ 1,000,000 Contractural
services........................
1,100,000 Supplies...............................
........... 200,000 Depreciation...........
........................... 1,500,000 3,800,00
0 ----------------- Operating Income
(loss) (300,000) Nonoperating income
(expense) Investment income......................
. 143,000 Interest expense......................
.... (425,000) Loss on sale of capital
assets ( 4,000) ( 286,000) --------------
-- Income (Loss) before other revenue, expenses
and transfers ( 586,000) Capital
contributions.................... 1,800,000 T
ransfer from GF......................
222,000 Increase in NA....... 1,436,000 Net
assets 1/1/03............................ 3,8
27,000 (given) Net Assets 12/31/03...............
............... 5,263,000
64
P10-3
65
The city of Lynn operates its municipal airport.
The trial balance of the Airport Fund as of
January 1, 20X0, was as follows
Cash 37,000 A/R..
50,000 Allowance for uncollectibles..
2,000 Land.. 200,000 Structures/Improveme
nts 700,000 Acc Dep (Struct Improv)
50,000 Equipment 250,000 Acc Dep
(Equipment).. 90,000 Vouchers/p
. 48,000 Bonds payable..
800,000 Net Assets..
247,000 --------------- -------------------
1,237,000 1,237,000
66

• Revenues collected in cash
• - aviation revenues 340,500
• - concession revenues.. 90,000
• - revenues from airport
• mgt.. 30,000
• - revenues from sales of
• petroleum products
• (net after deducting all costs
• of sales). 10,500

The following transactions took place. Asks
for a worksheet. Start out with JOURNAL ENTRIES
471,000
CASH............ 471,000 AVIATION
REVENUES.......... 340,500 CONCESSION
REVENUES.. 90,000 REVENUES FROM AIRPORT
MANAGEMENT... 30,000 NET REVENUES
FROM SALES OF PETROLEUM.... 10,500
67

• Expenses, all paid in cash with the exception of
  24,000, which remained
• unpaid at 12/31, were operating, 222,000
  maintenance, 75,000
• general and administrative, 73,000.

Operating expenses........ 222,000 Maintenance
expense... 75,000 GA expense.............
73,000 Cash.............................
........ 346,000 Vouchers/p.....................
... 24,000
68
3. Bad debts written off during the year, 1900.
Allowance for uncollectible accounts...
1900 Accounts Receivable........................
....1900

• The vouchers payable outstanding on January 1,
  20X0, were paid.
• bal 48,000.

Vouchers payable........ 48,000 Cash............
............................. 48,000
69

• Bond principal paid during the year, 50,000,
  along with
• interest of 40,000.

Bonds payable....... 50,000 Interest expense...
40,000 Cash.......................... 90,000

• The remaining A/R outstanding on January 1, 20X0
  were
• collected. bal 50,000 - 1,900 (write off)
  48,100.

Cash........ 48,100 A/R.............. 48,100
70

• A/R on 12/31/X0 amounted to 30,000, all
  applicable to
• aviation revenues, of which 1,400 is estimated
  to be uncollectible.

A/R.......... 30,000 Allowance for doubtful
accounts......... 1,300 Aviation
Revenues................................ 28,700
Allowance
A/R
2000 beg bal
1900 w.o.
1,900 w.o
50,000 (beg)
30K
100
48,100 collected
1300
0
1,400 needs to get to
30K needs to get to
71
8. Accrued interest payable at the end of the
year, 3000.
Interest expense........ 3000 Interest
payable........ 3,000

• Depreciation charges
• Structures Improvements........ 14,000
• Equipment..................... 21,000

Depreciation expense-SI.... 14,000 Depreciation
expense-EPT..... 21,000 Acc/Dep.................
.........................14,000 Acc/Dep.........
.................................. 21,000
72
allow for d/a
equip
unrestricted cash
interest p
37,000
2000
346,000
1900
3000 UR
1300
471,000 (1)
48K
250K ICA
90K
48100
72,100 UR
a/r
land
acc dep sI
acc dep e.
50K
200K ICA
90K
1900
50K
21K
48100
30K
14,000
111,000 ICA
28,600 NET of allowance UR
64,000 ICA
vouchers/p
SI
bonds p
na
48K
48K
800K
50K
700K ICA
247,000
24K UR
750K ICA
capital assets net to 975,000 net of acc dep
73

• Compute the beginning and ending balances of the
  three
• NET ASSET components.

INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT
UNRESTRICTED
RESTRICTED
72,100
Cash
Land.... 200K SI 700K (50K)
(14K) EPT 250K (90K)
(21K) ---------------------- 975,000
28,600
A/R
Capital Assets
975,000
Vouchers/p
(24,000)
Interest/p
(3,000)
(750,000) assume they are related to capital
ast.
Bonds payable
73,700
225,000
74
C. Prepare a statement of Net Assets as of
12/31/X0.
City of Lynn Airport Enterprise Fund Balance
Sheet 12/31/X0
ASSETS Current Assets Cash............. 72,
100 A/R.............. 30,000 less
allowance (1,400) 28,600 100,700
Capital Assets Land.............. 200,000 S
tructures I 700,000 Less Acc/Dep
(64,000) 636,000 Equipment 250,000 Less
Acc/Dep (111,000) 139,000
975,000 -------------
1,075,700
75
Liabilities and Governmental Equity Liabilities
Current liabilities Vouchers/p...............
24,000 Accrued int/p........ 3,000
27,000 Bonds payable..... 750,000
777,000
Net Assets Invested in capital assets net of
related debt....... 225,000 Unrestricted....
73,700 298,700 -----------------
- 1,075,700
76

• Prepare a statement of revenues, expenses, and
  changes
• in net assets for the Airport Fund for the
  fiscal year ended
• 12/31/X0.

City of Lynn Airport Enterprise Fund Operating
Statement Fiscal year ended 12/31/X0
Revenues Aviation (370,500 -
1,300).... 369,200 Concession...
90,000 Airport management....
30,000 Sales of petroleum (after deducting cost
of sales)..... 10,500 499,700
Expenses Operating (various)........ 222,000
Maintenance.... 75,000 GA.....
73,000 Dep- SI... 14,000 Dep-Ept
21,000 405,000
77
Operating Income....... 94,700 Non operating
expenses Interest expense........ 43,000 Chang
es in Net Assets.... 51,700 Net assets,
January 1, 20X0 247,000 Net assets,
12/31/X0..... 298,700
78
PROBLEM 10-6
79
Prepare journal entries, including adjusting
entries needed, to record the following
transactions for the Pickens County Transit
Authority. Assume the fiscal year ends on April
30.

• Issued REFUNDING BONDS at par, 10,000,000. The
  interest rate
• is 10, payable annually. Bonds mature in 10
  years. Bond issue
• costs were 200,000.

Cash............ 9,800,000 Unamortized Bond
Issue Costs 200,000 Refunding Bonds
Payable............. 10,000,000
80
Prepare journal entries, including adjusting
entries needed, to record the following
transactions for the Pickens County Transit
Authority. Assume the fiscal year ends on April
30.

• Retired old debt with refunding proceeds of
  9,800,000.
• Bonds payable outstanding (old).... 9,300,000
• Unamortized premium on outstanding
• bonds...........................................
  ..... 300,000
• Unamortized bond issue costs on
• outstanding bonds.............................
  50,000
• Remaining term of old debt, 4 years.

B/P (Old).........................
9,300,000 Unamortized Prem............
300,000 Def Interest Exp Adj.......
250,000 Unamortized bond issue costs..........
50,000 Cash......................................
............... 9,800,000
81
Prepare journal entries, including adjusting
entries needed, to record the following
transactions for the Pickens County Transit
Authority. Assume the fiscal year ends on April
30.

• Annual interest payment (1,000,000) on new bonds
  was made at the due
• date which is year end.

Interest expense............. 1,000,000 Cash....
................................1,000,000
Also need to do adjustments
Interest Expense...... 82,500 Unamortized Bond
Issue Costs (200,000/10).......
20,000 Deferred Interest Expense
Adjustment (250,000/4 remain term of old bond
is shortest).. 62,500
82
Prepare journal entries, including adjusting
entries needed, to record the following
transactions for the Pickens County Transit
Authority. Assume the fiscal year ends on April
30.

• On April 30, 20X2, the Transit Authority leased
  10 buses under a 6-year,
• non-cancelable capital lease. The capitalizable
  cost of the buses was
• 680,000, and an 80,000 down payment was made.
  The county
• does not receive title to the leased buses at
  the end of the lease term.

Equipment under capital lease........
680,000 Obligation under capital
lease................. 600,000 Cash.............
.............................................
80,000
83
Prepare journal entries, including adjusting
entries needed, to record the following
transactions for the Pickens County Transit
Authority. Assume the fiscal year ends on April
30.

• Lease payments made during the fiscal year ended
  April 30, 20X3,
• totaled 130,262, including interest of 37,932.

Interest expense............ 37,932 Obligation
under capital lease..............................
92,330 Cash....................................
130,262
also need to depreciate buses
Depreciation expense..........113,333 Accumulate
d Depreciation-Leased Equipment.... 113,333
84
Prepare journal entries, including adjusting
entries needed, to record the following
transactions for the Pickens County Transit
Authority. Assume the fiscal year ends on April
30.

• The county estimates its probable losses from
  claims and judgments
• against the Transit Authority for events
  occurring in 20X2-20X3 at
• 227,000. However, only 85,000 of this is a
  current liability.

Losses-CJ................ 227,000 Liability
for CJ-Current...................85,000 Liabili
ty for CJ-LT........................... 142,000