Author Question: (Preparation of government-wide financial statements - capital asset elements) The following ... (Read 85 times)

Alygatorr01285 · **on:** Jul 5, 2018

(Preparation of government-wide financial statements - capital asset elements)

The following information is extracted from the City of Lucas' government-wide statement of net position at December 31, 2012:
Capital assets 2,000,000

Accumulated depreciation, capital assets 1,600,000
Annual depreciation rate on capital assets 10
Bonds payable -0-

The following information is extracted from the city's governmental funds statement of revenues, expenditures, and changes in fund balances for the year ended December 31, 2013 .
Expenditures - capital outlay (General Fund) 40,000
Expenditures - capital outlay (Capital Projects Fund) 600,000
Expenditures - bond principal (Debt Service Fund) 60,000
Expenditures - bond interest (Debt Service Fund 15,000
Proceeds of debt (Capital Projects Fund) 600,000

According to the notes to the financial statements, the city sold 600,000 of 5-year serial bonds on April 1, 2013, to finance the acquisition of capital assets. Principal is payable every six months, starting October 1, 2013 . Interest of 5 percent per annum on the unpaid principal is also payable every six months, starting October 1, 2013 .

Required:
a. Prepare journal entries so the foregoing information can be used in a work sheet to prepare government-wide financial statements for the year ended December 31, 2013
b. Compute the amounts for the following statement elements as they will appear in the government-wide financial statements for the year ended December 31, 2013:
1, Depreciation expense (assume all assets acquired in 2013 were acquired July 1 and all have a 10-year life)
2, Interest expense
3, Capital assets
4, Accumulated depreciation, capital assets
5, Interest payable
6, Bonds payable
7, Net investment in capital assets

Question 2

At December 31, 2013, Yorktown's pension fund had net assets available for benefits of 12 million. Its actuarial accrued liability at that time was 16 million.

For the year ended December 31, 2013, its pension fund had paid 3 million in pension benefits. Yorktown's salaries for the year were 18 million. What was Yorktown's funded ratio?
a. 67
b. 75
c. 89
d. 400

cadimas · **Reply #1 on:** Jul 5, 2018

Answer to Question 1

Part a. Journal Entries
a. Capital assets 2,000,000
Accumulated depreciation, capital assets 1,600,000
Net position 400,000
To report carry-over balances.

b. Capital assets 640,000
Expenditures - capital outlay 640,000
To report capital asset acquisitions.

c. Depreciation expense 232,000
Accumulated depreciation, capital assets 232,000
To report depreciation expense (10 of 2,000,000
+ 5 of 640,000)

d. Proceeds of debt 600,000
Expenditures - bond principal 60,000
Bonds payable 540,000
To report outstanding bonds payable

e. Interest expense 6,750
Interest payable 6,750
To report accrued interest
(540,000 x 5 x 3 months)

Part b.- Statement Elements
1, Depreciation expense (journal entry c.) 232,000
2, Interest expense (from fund statement - 15,000;
plus journal entry e. - 6,750) 21,750
3, Capital assets (journal entries a. and b.) 2,640,000
4, Accumulated depreciation, capital assets
(journal entries a.and c.) 1,832,000
5, Interest payable (journal entry e.) 6,750
6, Bonds payable (journal entry d.) 540,000
7, Net investment in capital assets 268,000
Computed as follows:
Capital assets 2,640,000
Accumulated depreciation (1,832,000)
Net capital assets 808,000
Bonds payable (540,000)
= 268,000

Answer to Question 2

b