Chapter 05 - Accounting for General Capital Assets and Capital Projects

CHAPTER 5:

ACCOUNTING FOR GENERAL CAPITAL ASSETS AND CAPITAL PROJECTS

OUTLINE Topic Type/T !" S# #u! $re: %5/e& Same Same Same Same 5-5 re&ised (e) 5-* re&ised Same Same (e) 5-1 re&ised Same Same (e) Same 5-2 re&ised Same Same 5-5 re&ised Same Same Same (e) (e)

Number 'ue!#io(!: 5-1 5-2 5-! 5-# 5-5 5-' 5-* 5-+ 5-5-10 C !e!: 5-1 5-2 5-! 5-#

Defining and reporting general capital assets Capital asset disclosures "odified approach for infrastructure Capital lease accounting %ntangi$le assets Capital projects fund $onds sold at a premium ncum$rances Construction )or, in progress Asset impairment Ser&ice concession arrangements "odified approach for infrastructure assets /ptions for financing pu$lic infrastructure 0ecording and reporting damaged capital assets Ser&ice concession arrangements

Define and explain xplain xplain Descri$e Compare xplain xplain xplain xplain xplain &aluate. )rite &aluate. explain &aluate. explain &aluate. explain xamine "ultiple Choice 3ournal entries 1inancial statement Calculate5 3 s 3 s5 reporting 3 s 1S5 explain 3 s 6 1S 3 s 6 1S

E)erci!e!/Prob*em!: 5-1 xamine the CA10 5-2 2arious 5-! General capital assets 5-# Capital asset disclosure schedule 5-5 4ease classification and accounting 5-' Asset impairment 5-* Capital projects fund 5-+ Statement of re&enues and expenditures 5-"ulti-project construction fund 5-10 Capital project transactions

5-1

Chapter 05 - Accounting for General Capital Assets and Capital Projects

CHAPTER 5:

ACCOUNTING FOR GENERAL CAPITAL ASSETS AND CAPITAL PROJECTS

Ans)ers to 7uestions 5-18 General capital assets are those assets ac9uired )ith the resources of go&ernmental funds8 :he; are reported as assets in the Go&ernmental Acti&ities column of the go&ernment-)ide financial statements at historical cost8 :hose capital assets identified as deprecia$le are sho)n net of accumulated depreciation8 :he resources used $; the go&ernmental funds to ac9uire a general capital asset are reported as an expenditure of the ac9uiring go&ernmental fund in the fund financial statements8 (ote that capital assets ac9uired $; proprietar; and fiduciar; funds are accounted for $; those funds and are not considered general capital assets8 Capital asset disclosures re9uired $; the GAS< include descriptions of policies for capitali=ing assets and for estimating the useful li&es of deprecia$le assets8 %n addition. the disclosures should include> ?1@ $eginning-of-;ear and end-of-;ear $alances sho)ing accumulated depreciation separate from historical cost. ?2@ capital ac9uisitions during the ;ear. ?!@ sales or other dispositions during the ;ear. ?#@ depreciation expense sho)ing amounts charged to each function in the statement of acti&ities. and ?5@ disclosures regarding collections of art or historical treasures8 :he modified approach to accounting for infrastructure assets does not record an adjusting entr; recogni=ing depreciation expense and accumulated depreciation8 0ather the go&ernment reports. as an expense. the costs of maintaining the infrastructure assets at an esta$lished le&el or condition8 <; doing this the $oo, &alue of the infrastructure asset remains unchanged ?i8e8. there is no accumulated depreciation@8 :his is unli,e the depreciation method. )here$; the $oo, &alue of the infrastructure assets decreases each time depreciation expense is recorded8 /nl; certain infrastructure assets are eligi$le to use the modified approach8 ligi$le assets are defined as those assets that are parts of major net)or,s of infrastructure assets or su$s;stems of net)or,s. )here a net)or, might $e a high)a; s;stem. for example8 %f the go&ernment meets t)o re9uirements it can use the modified approach for eligi$le infrastructure assets8 :he t)o re9uirements are> ?1@ management of eligi$le infrastructure assets using a management s;stem that includes an up-to-date in&entor; of eligi$le assets. condition assessments and results using a measurement scale. and estimates of annual costs to maintain assets at the esta$lished and disclosed condition le&el. and ?2@ documentation that the assets are $eing preser&ed at or a$o&e the esta$lished condition le&el8 %f the go&ernment fails to maintain the assets at or a$o&e the esta$lished condition le&el. it must re&ert to reporting depreciation for its infrastructure assets and discontinue use of the modified approach8 %f the lease meets one or more of the criteria prescri$ed in GASBS 62 for a capital lease. as discussed in this chapter. the lease must $e reported as a capital lease8 %f the lease is deemed to $e a capital lease. the go&ernmental fund journal entr; on the date of inception

5-28

5-!8

5-#8

5-2

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Ans)ers. 5-# ?ContAd@

)ill include a de$it to xpenditures and a credit to /ther 1inancing SourcesBCapital 4ease Agreements8 :he journal entr; at the go&ernment-)ide le&el )ill $e the same as that used in $usiness accountingBa de$it to 9uipment and a credit to Capital 4ease /$ligations Pa;a$le8 5858 Cnder $oth GAS< and 1AS< standards intangi$le assets are defined as assets that lac, ph;sical su$stance8 %ntangi$le assets held $; a go&ernment might include easements. )ater rights. tim$er rights. patents. trademar,s. and computer soft)are8 :he GAS< considers intangi$le assets to $e a t;pe of general capital asset5 therefore. intangi$les are reported under the capital asset heading in the statement of net position8 %n contrast. under 1AS< standards intangi$le assets are reported under the heading intangi$les. appearing after the propert;. plant and e9uipment heading in the $alance sheet8 %f $onds sold to finance the construction of general capital assets are sold at a premium. the 9uestion arises as to )hether or not the initial issue premium is re9uired to $e set aside for de$t ser&ice or ma; remain in the capital projects fund8 %f $ond indentures re9uire that initial issue premiums $e used for de$t ser&ice. onl; the par &alue of the $onds is considered as an other financing source of the capital projects fund. and the premium is considered as an other financing source of the de$t ser&ice fund8 At the go&ernment-)ide le&el. a premium )ould $e recorded and should $e amorti=ed o&er the life of the $onds8 :o facilitate preparation of financial statements at the end of the fiscal ;ear. all operating accounts should $e closed5 ho)e&er. since the project is still under)a; and contractual commitments still exist to pa; contractors )hen $illed. it is essential that ncum$rances $e maintained8 ?%f a go&ernment chooses to close encum$rance accounts at ;ear end. the; should $e reesta$lished at the $eginning of the next ;ear in order to maintain $udgetar; control o&er outstanding commitments8@ Since encum$rances and encum$rances outstanding are $udgetar; accounts. the; )ill not $e reported on the capital projects fund $alance sheet5 ho)e&er. the fund $alances should $e classified as restricted. committed or assigned. as appropriate. )ith no reference to encum$rances8 All ordinar; and necessar; costs to construct or ac9uire the asset are appropriatel; reported as construction )or, in progress8 :his includes all legal costs. engineering and architectural ser&ices. site preparation. materials used. and $illings from contractors. among other items8 %nterest incurred during construction is not capitali=ed for general capital assets. ho)e&er8 Construction Dor, in Progress is found in the ledger for go&ernmental acti&ities at the go&ernment-)ide le&el for general capital assets8 :his capital asset account is not found in the ledger of the capital projects fund8 %n the capital projects fund. all capitali=a$le items are de$ited to Construction xpenditures8

5-'8

5-*8

5-+8

5-!

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Ans)ers ?ContAd@

5--8

%n the case of the office $uilding there has $een a su$stantial change in the manner of use Bgoing from an office $uilding to a storage facilit;8 Since the cost of office space is considera$l; more than storage space it is li,el; that a significant decline in ser&ice utilit; has occurred8 %n this case. it )ould $e appropriate to measure impairment using the deflated depreciated replacement cost approach8 :his approach )ould allo) the count; to calculate the inflation adjusted and depreciated &alue of a replacement storage facilit; and compare it to the $oo, &alue of the office $uilding8 :he difference )ould reflect the degree of impairment8

5-108 Cnder a ser&ice concession arrangement. a go&ernment transfers the rights and o$ligations of a capital asset to another legall;-separate go&ernmental or pri&ate sector entit;8 :his external entit;. the operator. pro&ides pu$lic ser&ices through the use of the asset. collecting related fees in return for an up-front pa;ment to the transferring go&ernment8 A go&ernment )ill generall; enter into a ser&ice concession arrangement to generate re&enue and cash flo)s from its capital assets or to impro&e the efficienc; of pu$lic ser&ices8 0ecentl;. go&ernments ha&e entered into ser&ice concession arrangements )ith par,ing facilities. airports. =oos. office $uildings and )ater supplies8 Solutions to Cases 5-18 a8 Discuss )ith students &arious methods of o$taining financial statements and getting E$enchmar,F data to ma,e comparisons across entities8 Professional associations such as the Go&ernment 1inance /fficers Association5 (ational Association of State Auditors. Controllers and :reasurers5 and Association of School <usiness /fficials pu$lish E$est practicesF for &arious areas of pu$lic finance. accounting. and financial reporting8 Since students )ill ha&e a different list of cities. as, them to compare their results )ith other students and loo, for patterns in )hich t;pes and si=es of go&ernments ma,e similar choices in accounting methods. particularl;. in this case. regarding choice of infrastructure asset accounting methods8 b. An important communication s,ill for students to master is to con&e; technical financial accounting information in an effecti&e )a; so that decision ma,ers find the information useful for ma,ing informed decisions8 Gou ma; )ish to as, students to sho) their memo or essa; to a finance director of a cit; and get the directorAs opinion a$out )hether the student has captured the fundamental issues relating to infrastructure and communicated it in a professional and informati&e manner8 5-28 a. /ption ?1@. the sales tax approach. offers the ad&antage of spreading the $urden for infrastructure impro&ements across a larger num$er of taxpa;ers. including man; non-residents )ho &isit or shop in Desert Cit;8 1rom an e9uit; standpoint. the sales tax approach has appeal $ecause infrastructure impro&ements enhance the cit; for &isitors and shoppers. as )ell as for residents8 Disad&antages of this approach are the necessit; of scheduling and conducting a special election and the political ris, of ad&ocating for a tax increase8

5-#

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions. Case 5-2 ?ContAd@

/ption ?2@. the de&elopment fee approach. has the ad&antage of $eing relati&el; Ein&isi$leF to the pu$lic and efficient to administer since the num$er of de&elopers )ill $e relati&el; small8 Although real estate de&elopers can $e expected to pass the de&elopment fee to ne) homeo)ners and $usinesses. propert; &alues ma; $e increased $; enhanced infrastructure ?e8g8. impro&ed streets and high)a;s. ade9uate storm drainage. and so forth@8 As a result. taxpa;ers ma; recoup a portion of the de&elopment fee8 :he main disad&antage is the potential ine9uit; of the de&elopment fee since a relati&el; high financial $urden is imposed on ne) homeo)ners and ne) $usinesses for infrastructure expansion and impro&ement that ma; su$stantiall; $enefit the entire cit;8 A cit; council mem$er ma; prefer the de&elopment fee approach since it holds less political ris, than as,ing residents to appro&e a tax increase8 :he cit; manager ma; prefer the sales tax approach as retail sales ma; $e less &olatile than ne) construction. )hich can $e strongl; impacted $; the local. regional. and national economies8 Since the cit; manager is responsi$le for ensuring that infrastructure sta;s a$reast of population and ne) de&elopment. he or she ma; prefer a more sta$le source of infrastructure financing8 Current homeo)ners and $usinesses might $e expected to prefer the de&elopment fee approach since those fees )ould not directl; impact on their propert; and )ould place the incidence of the tax on others8 %t )ould $e surprising if ne) homeo)ners or ne) $usinesses fa&ored the de&elopment fee approach as the; )ould pro$a$l; &ie) it as ine9uita$le8 b. Accounting and financial reporting )ould $e minimall; impacted $; )hich option is ultimatel; chosen8 ither )a;. there is re&enue to $e recogni=ed in a capital projects fund ?a tax in one case and de&elopment fee in the other@8 Accounting for infrastructure construction )ould not $e affected $; the source of financing8 5-!8 a8 Ges and (o8 1or the go&ernment-)ide financial statements. the recording and reporting of the damage and repairs )ill $e affected $; )hether the to)n opted to capitali=e its historic treasure ?li$rar; $uilding@8 %f the to)n met the criteria for noncapitali=ation outlined in footnote # of Chapter 5. it could ha&e opted not to capitali=e the li$rar; $uilding8 :he go&ernment-)ide statement of net position )ould not reflect the effect of the flooding on the li$rar; $uilding ?asset@ if the to)n opted not to capitali=e the li$rar; $uilding8 Ho)e&er. an; expenses related to repair or replacement )ould $e sho)n on the statement of acti&ities8 &en if the to)n chooses not to capitali=e the li$rar; it )ill )ant to update its internal records for insurance and ste)ardship purposes to reflect an; changes in the &alue of the li$rar;8 At the fund le&el costs incurred for repair and replacement )ould $e recorded as expenditures. )ithout respect to )hether the to)n has chosen to capitali=e the li$rar;8

5-5

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions. Case 5-! ?ContAd@

b. %n determining )hether an impairment has occurred the to)n )ill need to determine )hether there )as a significant and unexpected decline in ser&ice utilit;8 %f it is determined that an impairment has occurred. the restorati&e approach to measuring the impairment appears to $e appropriate8 An impairment loss is reported separatel; from the )or, ?capitali=ed or expensed costs@ needed to restore the $uilding8 1or reporting purposes. insurance proceeds recei&ed as a result of the flood damage to the li$rar; $uilding )ould $e netted against the impairment loss if the insurance proceeds are recei&ed in the same fiscal ;ear as the impairment loss8 %f the insurance proceeds are recei&ed in a su$se9uent ;ear. the insurance proceeds )ould $e reported as program re&enue at the go&ernment-)ide le&el and as an other financing source at the fund le&el8 %t should $e noted that an impairment loss )ould onl; $e recorded if the $uilding has a remaining useful life at the time of the impairment8 %f a $uilding is full; depreciated. no impairment )ould $e recogni=ed8 c8 %n all cases identified the )or, appears to $e a com$ination of enhancement and replacement8 As such. the to)n )ill pro$a$l; )ant to remo&e an; capital costs allocated to the items listed and replace them )ith the ne) costs8 :he re)iring of the $uilding is replacing the old $ut is also an enhancement8 %t is $ringing the $uilding up to current code and allo)ing for increased capacit;. )hich should add to the &alue of the $uilding and enhance the utilit; of the $uilding8 0eplacing damaged dr;-)all is a replacement $ut could also $e considered a capital cost since it )ill add to the &alue of the $uilding8 Painting is generall; considered an expense5 ho)e&er. in this instance it could $e argued that it is a necessar; cost to finish the )alls and ma,e the li$rar; usea$le. adding to the asset &alue8 0eplacing *0-;ear old hard)ood floors is a replacement. $ut )ould add to the &alue of the $uilding. especiall; gi&en that the historic nature of the floors appears to $e preser&ed8 d. Ino)ledge of the to)nAs capitali=ation polic; and )hether an; of the $oo,s )ere considered a part of a non-capitali=ed collection )ould $e important in determining )hether the damaged $oo,s are reported as impaired assets8 %f the $oo,s )ere recorded as li$rar; expenses )hen purchased or part of a non-capitali=ed collection there )ould $e no impairment8

5-'

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions ?ContAd@

5-#8

a8

Some rele&ant 9uestions might include> Are there an; alternati&e uses for the par,ing operations that the to)n might li,e to exercise in the next 20 ;earsJ Dho retains an; ris, associated )ith the par,ing operationsJ Dho )ill maintain the assetsJ Does the econom; appear to $e turning aroundJ Ho) se&ere is the current financial situationJ Could the to)n increase par,ing fees independent of this proposalJ Ho) do the citi=ens feel a$out the proposalJ Does the in&estment team ha&e experience in handling par,ing operationsJ Dill the team impro&e operationsJ %s the up-front pa;ment sufficient to co&er potential gro)th and par,ing rate increases in future ;earsJ

b. /n a short-term $asis. the proposal appears fa&ora$le8 :he to)n recei&es a cash infusion that ma; help to alle&iate current $udget )oes8 Citi=ens )ill $e relie&ed that the to)nAs finances are sta$le. and the; )ill li,el; not notice much difference in par,ing operations8 %t is important to note. that selling or leasing assets to co&er current financial o$ligations. in and of itself. is not a solid pu$lic polic;. hence the to)n should not ma,e a ha$it of this t;pe of transaction unless it enhances efficienc;8 %n the long-term. the to)n )ill )ant to ensure that par,ing rates remain at reasona$le le&els. that the assets are maintained in good. )or,ing condition. and that o&erall par,ing operations are run in such a manner that does not reflect poorl; on the to)n8 <efore entering into the proposal. the to)n council should consider if there are an; alternati&e uses for the propert; or assets $efore t;ing them up for 20 ;ears8 c. %t depends8 %n the case of Chicago and the State of Ari=ona. $ond rating agencies do)ngraded $ond ratings. $ecause the; &ie)ed such arrangements as one-time cash infusions to pa; current operating expenses8 %f the proposal impro&es efficienc; in an area )here a go&ernment has not $een particularl; successful. $ond ratings might $e unaffected in the short-term $ut might impro&e in the longer-term8 Solutions to xercises and Pro$lems 5-18 ach student )ill ha&e a different annual report. so he or she )ill ha&e different ans)ers to 9uestions in this exercise8 :he &arious ,inds of capital assets and capital projects. )ide &ariet; of financing mechanisms. and different accounting policies used in and $; go&ernments should generate interesting classroom discussions8 5-28 18 28 !8 #8 b8 d8 b8 a '8 *8 +8 -8 a. c8 d. d8
5-*

Chapter 05 - Accounting for General Capital Assets and Capital Projects

58 5-3. 1.

c.

108

a8 CITY OF LOVELAND Debits Credits

Ch8 5. Solutions ?ContAd@

General Fund: THERE WOULD BE NO ENTRY SINCE THERE IS NO FLOW OF FINANCIAL RESOURCES. Governmental Activities LAND $RO%RA& REVENUE'$AR(S AND RECREATION'CA$ITAL %RANTS AND CONTRIBUTIONS 5!"##!###

5!"##!###

".

General Fund: CASH OTHER FINANCIN% SOURCES'$ROCEEDS OF CA$ITAL ASSET SALE Governmental Activities CASH ACCU&ULATED DE$RECIATION &ACHINERY AND E-UI$&ENT )!*## "+!,## 35!1## )!*## )!*##

3.

General Fund: E.$ENDITURES'%ENERAL %OVERN&ENT OTHER FINANCIN% SOURCES'CA$ITAL LEASE A%REE&ENTS CASH 3#!55# 3#!### 55#

5-+

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions. 5-! ?ContAd@

Debits Governmental Activities &ACHINERY / E-UI$&ENT CA$ITAL LEASE OBLI%ATIONS $AYABLE CA$ITAL LEASE OBLI%ATIONS $AYABLE CASH *. Capital Projects Fund: CASH REVENUE CONSTRUCTION E.$ENDITURES CASH Governmental Activities CASH $RO%RA& REVENUE'$UBLIC SAFETY' CA$ITAL %RANTS / CONTRIBUTIONS CONSTRUCTION WOR( IN $RO%RESS CASH BUILDIN% CONSTRUCTION WOR( IN $RO%RESS 0!,"#!### 1!1,)!### ,"#!### 1!1,)!### ,"#!### 55# 3#!55#

Credits

3#!55#

55#

,"#!###

1!1,)!###

,"#!###

1!1,)!###

0!,"#!###

5--

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions. 5-! ?ContAd@

Debits 5. General Fund:

Credits

THERE WOULD BE NO ENTRY SINCE THERE IS NO FLOW OF FINANCIAL RESOURCES. Governmental Activities: E.$ENSES'%ENERAL %OVERN&ENT &ACHINERY / E-UI$&ENT 5-*. a. 1!15)!### 1!15)!###

N1! t2e 31te d1es 31t 415678 9it2 %ASB re:;ire5e3ts. T2e <17719i3= 42>3=es 91;7d 2e76 bri3= t2e 31te i3t1 41567i>34e. 1. I3ste>d 1< 13e 42>3=e 417;53 t2ere s21;7d be t91 417;53s'13e ide3ti<8i3= >dditi13s t1 4>6it>7 >ssets >3d 13e ide3ti<8i3= de7eti13s t1 4>6it>7 >ssets. ". 3. Se6>r>te 7i3e dis471s;res s21;7d be 6r1?ided <1r >sset 47>sses s;42 >s 7>3d! b;i7di3=s >3d e:;i65e3t. De6re4i>ti13 e@6e3se b8 <;34ti13 s21;7d be 6r1?ided.

b.

Yes. I3<r>str;4t;re is 7isted 9it2 AT1t>7 4>6it>7 >ssets 31t bei3= de6re4i>tedBC t2ere<1re! t2e 41;3t8 5;st be ;si3= t2e 51di<ied >66r1>42 t1 5>i3t>i3i3= i3<r>str;4t;re. I< t2e 51di<ied >66r1>42 9>s 31t bei3= ;sed t2e i3<r>str;4t;re >ssets 91;7d 3eed t1 be de6re4i>ted.

c.

DE15!#)+!###-E*!#""!###FGE15!#)+!###H,3.3I is t2e >66r1@i5>te 6er4e3t>=e 1< re5>i3i3= ;se<;7 7i<e 1< de6re4i>b7e 4>6it>7 >ssets! >ss;5i3= t2e 41;3t8Js de6re4i>ti13 5et21d re<7e4ts t2e >66r1@i5>te 71ss 1< t2e ;ti7it8 1< de6re4i>b7e >ssets.

5-10

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions ?ContAd@

5-5. a.

T2e 6rese3t ?>7;e 1< Cr8st>7 Cit8Js 5i3i5;5 7e>se 6>85e3ts is t2e i3iti>7 6>85e3t 1< E+*,!)3, 67;s E+*,!)3, . t2e 6rese3t ?>7;e 1< >3 >33;it8 <1r "0 6eri1ds >t ) 6er4e3t! 1r E+*,!)3, K DE+*,!)3, . 13.50#,"1F H E+*,!)3, K E11!510!00+ H E1"!3),!)35. Si34e t2e 6rese3t ?>7;e 1< t2e 5i3i5;5 7e>se 6>85e3ts is E1"!3),!)35 L E13!###!###! 1r 05.1 6er4e3t 1< t2e <>ir ?>7;e! t2is 5eets 13e 4riteri13 <1r > 4>6it>7 7e>se Di.e.! 6rese3t ?>7;e e:;>7s 1r e@4eeds 0# 6er4e3t 1< <>ir ?>7;eF. I3 >dditi13! t2e 7e>se ter5 is e@>4t78 ,5 6er4e3t 1< t2e esti5>ted ;se<;7 7i<e 1< t2e b;i7di3=! s1 t2>t 4riteri13 is 5et >s 9e77. S1! t2is 7e>se 5;st be re41rded >s > 4>6it>7 7e>se.

b. Capital Projects Fund: E.$ENDITURES CASH OTHER FINANCIN% SOURCES' CA$ITAL LEASE A%REE&ENTS Governmental Activities: BUILDIN%S CASH CA$ITAL LEASE OBLI%ATIONS $AYABLE

Debits 1"!3),!)35

Credits

+*,!)3, 11!510!00+ 1"!3),!)35 +*,!)3, 11!510!00+

5-11

Chapter 05 - Accounting for General Capital Assets and Capital Projects Chapter 5. Solutions ?ContAd@

5-). a.

Be4>;se S;3s2i3e Cit8 is 714>ted i3 >3 >re> t2>t is s;s4e6tib7e t1 2;rri4>3es! t2e unusual 4riteri13 91;7d 31t be 5et <1r t2e 71ss t1 be re61rted >s e@tr>1rdi3>r8. T1 be re61rted >s > special item re:;ires t2>t t2e e?e3t be eit2er ;3;s;>7 1r i3<re:;e3t i3 144;rre34e Db;t 31t b1t2F >3d be 9it2i3 5>3>=e5e3tJs 413tr17. Si34e t2is is t2e <irst 2;rri4>3e t1 2it t2e 4it8 i3 *+ 8e>rs! t2e infrequent 4riteri13 91;7d >66e>r t1 be 5et! b;t 2;rri4>3es 5>8 be 413sidered <re:;e3t <1r t2e br1>der =e1=r>62i4 >re>. &1re1?er! t2e 2;rri4>3e 9>s 47e>r78 be813d 5>3>=e5e3tJs 413tr17! s1 t2is e?e3t 4>331t be re61rted >s > s6e4i>7 ite5. I3 >dditi13 t1 re61rti3= t2e ite5 >s >3 1rdi3>r8 e@6e3se! it s21;7d be dis471sed i3 t2e 31tes t1 t2e <i3>34i>7 st>te5e3t i< it is dee5ed t1 be si=3i<i4>3t >3d i3<re:;e3t78 144;rri3=.

b. Debits Governmental Activities: E.$ENSES'$AR(S AND RECREATION BUILDIN%S "3#!### "3#!### Credits

c.

%ASB re:;ires t2>t t2e E1"#!### i3s;r>34e re41?eries be re61rted >s 6r1=r>5 re?e3;es D6res;5>b78 1< t2e $>rMs >3d Re4re>ti13 <;34ti13 i3 t2e C>6it>7 %r>3ts >3d C13trib;ti13s 417;53 ;3der %1?er35e3t>7 A4ti?itiesF 13 t2e =1?er35e3t-9ide st>te5e3t 1< >4ti?ities i3 t2e 8e>r re4ei?ed. I3 >dditi13! it s21;7d be re61rted >s >3 other financing source b8 t2e %e3er>7 F;3d.

5-12

Chapter 05 - Accounting for General Capital Assets and Capital Projects Chapter 5. Solutions ?ContAd@

5-,. 1. Capital Projects Fund: CASH

ERI(US COUNTY Debits )!###!### )!###!### Credits

OTHER FINANCIN% SOURCES' $ROCEEDS OF BONDS Governmental Activities CASH BONDS $AYABLE $RE&IU& ON BONDS $AYABLE INTEREST $AYABLE DOR E.$ENSES'INTEREST ON BONDSF )!#+#!###

)!###!### )#!### "#!###

DN1te T2is >ss;5es t2e 6re5i;5 >3d i3terest >re re41rded dire4t78 i3 t2e debt ser?i4e <;3d. I< t2e 6re5i;5 >3d i3terest 9ere <irst re41rded i3 t2e 4>6it>7 6r1Ne4ts <;3d! t2e 4>6it>7 6r1Ne4ts <;3d 91;7d >7s1 4redit D;e t1 Debt Ser?i4e F;3d <1r E+#!###.F ". Capital Projects Fund: CASH REVENUES Governmental Activities: CASH $RO%RA& REVENUES'$AR(S / RECREATION'CA$ITAL %RANTS / CONTRIBUTIONS 3. Capital Projects Fund: CASH OTHER FINANCIN% SOURCES' INTERFUND TRANSFERS IN "5#!### "5#!### )5#!### )5#!### )5#!###

)5#!###

5-1!

Chapter 05 - Accounting for General Capital Assets and Capital Projects Chapter 5. Solutions. 5-* ?ContAd@

Debits Governmental Activities:

Credits

NO ENTRY WHEN TRANSFERS ARE BETWEEN %OVERN&ENTAL FUNDS DN1te T2ere 91;7d >7s1 be >3 e3tr8 i3 t2e s6e4i>7 re?e3;e <;3d.F *. Capital Projects Fund: ENCU&BRANCES ENCU&BRANCES OUTSTANDIN% Governmental Activities: BUD%ETARY TRANSACTIONS ARE NOT RECORDED IN THE %OVERN&ENTAL ACTIVITIES OOURNAL 5. Capital Projects Fund: CONSTRUCTION E.$ENDITURES CASH ENCU&BRANCES OUTSTANDIN% ENCU&BRANCES Governmental Activities: CONSTRUCTION WOR( IN $RO%RESS CASH LAND BUILDIN%S E-UI$&ENT CONSTRUCTION WOR( IN $RO%RESS "##!### )!"05!### 305!### )!+0#!### )!+0#!### )!+0#!### )!+##!### )!+##!### )!+0#!### )!+0#!### )!+##!### )!+##!###

5-1#

Chapter 05 - Accounting for General Capital Assets and Capital Projects Chapter 5. Solutions. 5-* ?ContAd@

Debits ). Capital Projects Fund: T1 471se 315i3>7 >441;3ts OTHER FINANCIN% SOURCES' $ROCEEDS OF BONDS OTHER FINANCIN% SOURCES' INTERFUND TRANSFERS IN REVENUES CONSTRUCTION E.$ENDITURES FUND BALANCE'RESTRICTED T1 471se t2e <;3d INTERFUND TRANSFERS OUT CASH FUND BALANCE'RESTRICTED INTERFUND TRANSFERS OUT 1#!### 1#!### )!###!### "5#!### )5#!###

Credits

)!+0#!### 1#!###

1#!###

1#!###

DN1te T2ere 91;7d >7s1 be >3 e3tr8 i3 t2e debt ser?i4e <;3d.F Governmental Activities: NO ENTRY SINCE THE CLOSIN% ONLY RELATES TO THE FUND

5-15

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions ?ContAd@

5-+. a.

ANNETTE COUNTY $UBLIC WOR(S CA$ITAL $ROOECT FUND STATE&ENT OF REVENUES! E.$ENDITURES! AND CHAN%ES IN FUND BALANCES FOR THE YEAR ENDED OUNE 3#! "#1* E )+#!### 3!33+!### "!)5+!### 3!+##!### 1!1*"!### # E1!1*"!###

REVENUES E.$ENDITURES CONSTRUCTION E.$ENDITURES E.CESS OF E.$ENDITURES OVER REVENUES OTHER FINANCIN% SOURCES $ROCEEDS OF BONDS E.CESS OF REVENUES AND OTHER FINANCIN% SOURCES OVER E.$ENDITURES FUND BALANCES! OULY 1! "#13 FUND BALANCES! OUNE 3#! "#1* b.

It 91;7d >66e>r t2>t t2e 4>6it>7 6r1Ne4t 2>s 31t bee3 41567eted si34e e34;5br>34es re5>i3 >t 8e>r e3d. Additi13>778! t2ere >re > 3;5ber 1< 4;rre3t re4ei?>b7esG6>8>b7es t2>t >re 16e3 >t 8e>r e3d.

5-1'

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions ?ContAd@

5-0. a.

SUR$RISE COUNTY

Debits 1. Construction Fund: CASH OTHER FINANCIN% SOURCES'$ROCEEDS OF BOND ANTICI$ATION NOTES Governmental Activities: CASH BOND ANTICI$ATION NOTES $AYABLE ". Construction Fund: CONSTRUCTION E.$ENDITURES'$OLICE CONSTRUCTION E.$ENDITURES'FIRE VOUCHERS $AYABLE Governmental Activities: CONSTRUCTION WOR( IN $RO%RESS'$OLICE CONSTRUCTION WOR( IN $RO%RESS'FIRE VOUCHERS $AYABLE 3. Construction Fund: ENCU&BRANCES'$OLICE ENCU&BRANCES'FIRE ENCU&BRANCES OUTSTANDIN%'$OLICE ENCU&BRANCES OUTSTANDIN%'FIRE Governmental Activities: NO ENTRY RE-UIRED
5-1*

Credits

1##!### 1##!###

1##!### 1##!###

3#!### 3#!### )#!###

3#!### 3#!### )#!###

"1!###!### 11!###!### "1!###!### 11!###!###

Chapter 05 - Accounting for General Capital Assets and Capital Projects Chapter 5. Solutions. 5-- ?ContAd@

Debits *. Construction Fund: CASH OTHER FINANCIN% SOURCES'$ROCEEDS OF BONDS Governmental Activities: CASH BONDS $AYABLE $RE&IU& ON BONDS $AYABLE 5. Construction Fund: OTHER FINANCIN% USES'RE$AY&ENT OF BANs INTEREST E.$ENDITURES DNOTE AF CASH DBANs H BOND ANTICI$ATION NOTESF NOTE A I3terest d;e is 4>74;7>ted >s <17719s E1##!### @ .#) @ 1+#G3)# H E3!###C i3terest is 31t 4>6it>7iPed <1r =e3er>7 4>6it>7 >ssets. Governmental Activities: BOND ANTICI$ATION NOTES $AYABLE E.$ENSES'INTEREST ON BANs CASH 6. Construction Fund: ENCU&BRANCES OUTSTANDIN%'$OLICE ENCU&BRANCES OUTSTANDIN%'FIRE ENCU&BRANCES'$OLICE ENCU&BRANCES'FIRE 1#!###!### )!###!### 1##!### 3!### 1##!### 3!### 3#!3##!### 3#!###!###

Credits

3#!###!###

3#!###!### 3##!###

1#3!###

1#3!###

1#!###!### )!###!###

5-1+

Chapter 05 - Accounting for General Capital Assets and Capital Projects Chapter 5. Solutions. 5-- ?ContAd@

Debits CONSTRUCTION E.$ENDITURES'$OLICE CONSTRUCTION E.$ENDITURES'FIRE CONTRACTS $AYABLE Governmental Activities: CONSTRUCTION WOR( IN $RO%RESS'$OLICE CONSTRUCTION WOR( IN $RO%RESS'FIRE CONTRACTS $AYABLE ,. Construction Fund: CASH REVENUES Governmental Activities: CASH $RO%RA& REVENUES'ECONO&IC DEVELO$&ENT'CA$ITAL %RANTS / CONTRIBUTIONS +. Construction Fund and Governmental Activities: CONTRACTS $AYABLE CONTRACTS $AYABLE'RETAINED $ERCENTA%E CASH 0. Construction Fund: ENCU&BRANCES OUTSTANDIN%'FIRE ENCU&BRANCES'FIRE CONSTRUCTION E.$ENDITURES'FIRE CONTRACTS $AYABLE 5!###!### 5!###!### 1)!###!### 5##!### 5##!### 1#!###!### )!###!### 1#!###!### )!###!###

Credits

1)!###!###

1)!###!###

5##!###

5##!###

+##!### 15!"##!###

5!###!###

5!###!###

5-1-

Chapter 05 - Accounting for General Capital Assets and Capital Projects Chapter 5. Solutions. 5-- ?ContAd@

Debits Governmental Activities: CONSTRUCTION WOR( IN $RO%RESS'FIRE CONTRACTS $AYABLE BUILDIN%S CONSTRUCTION WOR( IN $RO%RESS 1#. Construction Fund and Governmental Activities: CONTRACTS $AYABLE CONTRACTS $AYABLE'RETAINED $ERCENTA%E CASH 5!###!### 3##!### 11!###!### 5!###!###

Credits

5!###!###

11!###!###

5!3##!###

DC>74;7>ti13 5I 1< )!###!### Q3##!###R 2>d bee3 ret>i3ed <1r t2e <ire st>ti13.F 11. Construction Fund: ENCU&BRANCES OUTSTANDIN%'$OLICE ENCU&BRANCES'$OLICE CONSTRUCTION E.$ENDITURES'$OLICE CONTRACTS $AYABLE Governmental Activities: CONSTRUCTION WOR( IN $RO%RESS'$OLICE CONTRACTS $AYABLE ,!5##!### ,!5##!### ,!5##!### ,!5##!### ,!5##!### ,!5##!###

5-20

Chapter 05 - Accounting for General Capital Assets and Capital Projects Chapter 5. Solutions. 5-- ?ContAd@

Debits 1". Construction Fund: OTHER FINANCIN% SOURCES'$ROCEEDS OF BOND ANTICI$ATION NOTES OTHER FINANCIN% SOURCES'$ROCEEDS OF BOND REVENUES CONSTRUCTION E.$ENDITURES'$OLICE CONSTRUCTION E.$ENDITURES'FIRE INTEREST E.$ENDITURES OTHER FINANCIN% USES'RE$AY&ENT OF BANs FUND BALANCE'RESTRICTED Governmental Activities: NO CLOSIN% ENTRY RE-UIRED AS THERE ARE NO TE&$ORARY ACCOUNT BALANCES. 1##!### 3#!###!### 5##!###

Credits

1,!53#!### 11!#3#!### 3!### 1##!### 1!03,!###

5-21

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions. 5-- ?ContAd@

SUR$RISE COUNTY CONSTRUCTION FUND %ENERAL LED%ER DNOT RE-UIREDF CASH D1F D,F 1##!### 5##!### D5F 1#3!### D*F 3#!###!### D+F 15!"##!### D1#F 5!3##!### CONTRACTS $AYABLE D+F 1)!###!### D1#F 5!###!### D)F 1)!###!### D0F 5!###!### D11F ,!5##!### CONTRACTS $AYABLE RETAINED $ERCENTA%E D1#F 3##!### D+F +##!### ENCU&BRANCES'FIRE D3F 11!###!### D)F )!###!### D0F 5!###!### ENCU&BRANCES OUTSTANDIN% 'FIRE D)F )!###!### D3F 11!###!### D0F 5!###!### CONSTRUCTION E.$ENDITURES 'FIRE D"F 3#!### D1"F 11!#3#!### D)F )!###!### D0F 5!###!### OFU'RE$AY&ENT OF BANS 3!### D5F 1##!### D1"F 1##!###

VOUCHERS $AYABLE D"F )#!### ENCU&BRANCES'$OLICE D3F "1!###!### D)F 1#!###!### D11F ,!5##!### ENCU&BRANCES OUTSTANDIN% '$OLICE D)F 1#!###!### D3F "1!###!### D11F ,!5##!### CONSTRUCTION E.$ENDITURES '$OLICE D"F 3#!### D1"F 1,!53#!### D)F 1#!###!### D11F ,!5##!### INTEREST E.$ENDITURES D5F 3!### D1"F

OFS'$ROCEEDS OF BANS D1"F 1##!### REVENUES D1"F 5##!### D,F 5##!### D1F 1##!###

OFS'$ROCEEDS OF BONDS D1"F 3#!###!### D*F 3#!###!###

FUND BALANCE'RESTRICTED D1"F 1!03,!###

5-22

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions. 5-- ?ContAd@

b.

SUR$RISE COUNTY CONSTRUCTION FUND BALANCE SHEET DECE&BER 31! "#1* ASSETS

CASH TOTAL ASSETS LIABILITIES AND FUND BALANCES LIABILITIES VOUCHERS $AYABLE CONTRACTS $AYABLE CONTRACTS $AYABLE'RETAINED $ERCENTA%E TOTAL LIABILITIES FUND BALANCES FUND BALANCE'RESTRICTED TOTAL LIABILITIES AND FUND BALANCES

E 0!00,!### E 0!00,!###

)#!### ,!5##!### 5##!### +!#)#!###

1!03,!### E0!00,!###

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5-2!

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions. 5-- ?ContAd@

c.

SUR$RISE COUNTY CONSTRUCTION FUND STATE&ENT OF REVENUES! E.$ENDITURES! AND CHAN%ES IN FUND BALANCES FOR THE $ERIOD ENDED DECE&BER 31! "#1* E 5##!### 1,!53#!### 11!#3#!### 3!### "+!5)3!### "+!#)3!### 1##!### 3#!###!### D1##!###F 3#!###!### 1!03,!### -#E 1!03,!###

REVENUES E.$ENDITURES CONSTRUCTION E.$ENDITURES'$OLICE CONSTRUCTION E.$ENDITURES S FIRE INTEREST E.$ENDITURES TOTAL E.$ENDITURES E.CESS OF E.$ENDITURES OVER REVENUES OTHER FINANCIN% SOURCES DUSESF $ROCEEDS OF BOND ANTICI$ATION NOTES $ROCEEDS OF BONDS RE$AY&ENT OF BOND ANTICI$ATION NOTES TOTAL OTHER FINANCIN% SOURCES DUSESF E.CESS OF REVENUES AND OTHER FINANCIN% SOURCES AND USES OVER E.$ENDITURES FUND BALANCES! OANUARY 1! "#1* FUND BALANCES! DECE&BER 31! "#1* d.

I3 t2e %1?er35e3t>7 A4ti?ities 417;53 1< t2e st>te5e3t 1< 3et 61siti13! t2e <ire st>ti13 9i77 be re61rted 9it2 1t2er b;i7di3=s! 3et 1< de6re4i>ti13! i< >38 is t>Me3 i3 t2e <irst 8e>r. T2e 617i4e <>4i7it8 413str;4ti13 e@6e3dit;res 1< E1,!53#!### <1r t2is 8e>r 9i77 >66e>r >s 413str;4ti13 91rM i3 6r1=ress i3 t2e 4>6it>7 >ssets se4ti13. T2e %1?er35e3t>7 A4ti?ities 417;53 1< t2e st>te5e3t 1< >4ti?ities 9i77 s219 >38 de6re4i>ti13 e@6e3se 13 t2e <ire st>ti13 Di< >667i4>b7eF! 51st 7iMe78 i3 t2e <;34ti13>7 e@6e3se 4>te=1r8 Dr19F 4>77ed 6;b7i4 ser?i4es.

5-2#

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions ?ContAd@

5-1#. a.

RIVERSIDE $AR( BUILDIN% CA$ITAL $ROOECTS FUND Debits Credits

1.

CASH OTHER FINANCIN% SOURCES'INTERFUND TRANSFERS IN

5##!### 5##!### "!,##!### "!,##!### )0!### )0!### 1+!5## 1+!5## 1!###!### 1!###!### 1!###!### 1!###!### 3!5##!### 3!5##!### 1!###!### 5#!### 05#!###

".

ENCU&BRANCES ENCU&BRANCES OUTSTANDIN%

3.

CONSTRUCTION E.$ENDITURES VOUCHERS $AYABLE

*.

CONSTRUCTION E.$ENDITURES DUE TO OTHER FUNDS

5.

ENCU&BRANCES OUTSTANDIN% CONSTRUCTION E.$ENDITURES ENCU&BRANCES CONTRACTS $AYABLE

).

CASH OTHER FINANCIN% SOURCES'$ROCEEDS OF BONDS

,.

CONTRACTS $AYABLE CONTRACTS $AYABLE'RETAINED $ERCENTA%E CASH

5-25

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions. 5-10 ?ContAd@

Debits +. INVEST&ENTS CASH 0. OTHER FINANCIN% SOURCES' INTERFUND TRANSFERS IN OTHER FINANCIN% SOURCES' $ROCEEDS OF BONDS FUND BALANCE RESTRICTED FUND BALANCE ASSI%NED CONSTRUCTION E.$ENDITURES

Credits 1!+##!### 1!+##!###

5##!### 3!5##!### "!5##!### *1"!5## 1!#+,!5##

5-2'

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions. 5-10 ?ContAd@

RIVERSIDE $AR( BUILDIN% CA$ITAL $ROOECTS FUND %ENERAL LED%ER DNOT RE-UIREDF CASH D1F D)F 5##!### 3!5##!### INVEST&ENTS D+F 1!+##!### VOUCHERS $AYABLE D3F CONTRACTS $AYABLE D,F 1!###!### D5F 1!###!### )0!### D,F D+F 1!+##!### 05#!###

CONTRACTS $AYABLE RETAINED $ERCENTA%E D,F DUE TO OTHER FUNDS D*F FUND BALANCE'RESTRICTED D0F FUND BALANCE'ASSI%NED D0F OTHER FINANCIN% SOURCES'INTERFUND TRANSFERS IN D0F 5##!###
5-2*

5#!###

1+!5##

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D1F

5##!###

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions. 5-10 ?ContAd@

OTHER FINANCIN% SOURCES'$ROCEEDS OF BONDS D0F 3!5##!### ENCU&BRANCES D"F "!,##!### ENCU&BRANCES OUTSTANDIN% D5F 1!###!### CONSTRUCTION E.$ENDITURES D3F D*F D5F )0!### 1+!5## 1!###!### D0F 1!#+,!5## D"F "!,##!### D5F 1!###!### D)F 3!5##!###

5-2+

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions. 5-10 ?ContAd@

b.

RIVERSIDE $AR( BUILDIN% CA$ITAL $ROOECTS FUND BALANCE SHEET! DECE&BER 31! "#1* ASSETS

CASH INVEST&ENTS TOTAL ASSETS LIABILITIES AND FUND BALANCES LIABILITIES VOUCHERS $AYABLE DUE TO OTHER FUNDS CONTRACTS $AYABLE'RETAINED $ERCENTA%E TOTAL LIABILITIES FUND BALANCES FUND BALANCE'RESTRICTED FUND BALANCE'ASSI%NED TOTAL FUND BALANCES TOTAL LIABILITIES AND FUND BALANCES E"!5##!### *1"!5##

E1!"5#!### 1!+##!### E3!#5#!###

)0!### 1+!5## 5#!### 13,!5##

"!01"!5## E3!#5#!###

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5-2-

Chapter 05 - Accounting for General Capital Assets and Capital Projects Ch8 5. Solutions. 5-10 ?ContAd@

c.

RIVERSIDE $AR( BUILDIN% CA$ITAL $ROOECTS FUND STATE&ENT OF REVENUES! E.$ENDITURES! AND CHAN%ES IN FUND BALANCES FOR THE $ERIOD ENDED DECE&BER 31! "#1*

E.$ENDITURES CONSTRUCTION E.$ENDITURES OTHER FINANCIN% SOURCES AND USES INTERFUND TRANSFERS IN $ROCEEDS OF BONDS SOLD E.CESS OF REVENUES AND OTHER SOURCES OVER E.$ENDITURES FUND BALANCES! OANUARY 1! "#1* FUND BALANCES! DECE&BER 31! "#1* "!01"!5## -#E"!01"!5## E 5##!### 3!5##!### *!###!### E1!#+,!5##

5-!0