Capital projects funds are used to account for the inflows and outflows of financial resources raised and expended to acquire major capital assets used by the general government.. Equit
Trang 1CHAPTER 16 UNDERSTANDING THE ISSUES
1 Capital projects funds are used to account for
the inflows and outflows of financial resources
raised and expended to acquire major capital
assets used by the general government This
accounting is in accordance with the flows of
fi-nancial resources measurement focus adopted
for governmental funds Fixed assets acquired
with proceeds from general obligation bonds
are accounted for in the general fixed assets
account group subsequent to acquisition
2 Closing of a capital projects fund at the end of a
period is desirable to adjust and balance the
fund accounts for the annual preparation of the
financial statements As part of this process,
the fund balance, unreserved, undesignated is
determined This amount is the balance
availa-ble for completion of the project Also, the total
amount of expenditures on a project is
deter-mined, which is recorded in the general fixed
assets account group as the cost of a
com-pleted asset or as Construction in Progress
3 Capital special assessments are levied in
in-stallments to provide more time over which to
spread collections Only the portion available in
the current period is recognized as revenue
Recognition of revenue must be deferred for
those installments to be collected in future
pe-riods
4 The due date and amounts of principal and
in-terest payments are known No useful data
would be produced by using budgetary
accounts
5 Revenues would be credited if resources were
received from a source outside of the
govern-mental unit that need not be repaid An
exam-ple is a property tax levy If repayment is
required, as in the case of a bond issue, the
credit is to Other Financing Sources The latter
account is also used for amounts received from
other funds of the same governmental unit if
that unit had previously recorded the resources
as revenue The procedure prevents
recogniz-ing the same resources twice as revenue
can be used to finance government programs, then a special revenue fund is used If only the earnings can be spent, a permanent fund is used
7 Two major types of interfund transfers are
op-erating transfers and equity transfers ing transfers are of a frequent and recurring nature and record billings for goods or services provided, or transfers between funds for such items as debt servicing, financing of specific programs, or funding of major construction projects Equity transfers are infrequent and of-ten nonrecurring These transfers are often in conjunction with the initiating or closing of a fund Operating or equity transfers between go-vernmental funds use “other financing sources” and “other financing uses” accounts Operating transfers between proprietary funds and go-vernmental funds or between two proprietary funds are recorded as revenues and expendi-tures/expenses Equity transfers between go-vernmental funds and proprietary funds are recorded as interfund transfers (in proprietary funds) and other financing sources or uses (in governmental funds)
8 Both an agency fund and a trust fund are
fidu-ciary funds An agency fund is adopted when the fiduciary responsibility is short term and all funds received are expendable A trust fund is used when the fiduciary responsibility is of a longer duration
9 Both are proprietary funds An enterprise fund
is used to account for activities of a government that provides goods or services to the public
An internal service fund is used to account for activities providing goods or services to other departments within the same governmental unit
10 Expenses are the expiration of economic
re-sources Expenditures are the expiration of financial resources Proprietary funds record expenses using accrual accounting Govern-mental funds record expenditures using mod-ified accrual accounting
Trang 211 The accounting emphasis for governmental
funds emphasizes the funds available,
spenda-ble resources, and their expenditures Modified
accrual accounting is required The
accounting for proprietary funds, however,
em-phasizes expenses rather than expenditures
and is similar to that for a private enterprise
Proprietary funds measure net income,
focus-ing on the total cost of services and the
amounts of cost recovered by revenue
Proprie-tary funds are accounted for with a capital
maintenance measurement focus, using the
accrual basis of accounting They account for their own assets (including fixed assets and depreciation) and liabilities (including long-term debt) Proprietary funds also differentiate be-tween contributed and earned equity, just as a corporation would
12 Private-purpose trust funds are used to account
for assets held by the government on behalf of
an individual, group, or organization nent funds record assets held, income from which will benefit the government activities
Trang 3Perma-Ch 16—Exercises
EXERCISES EXERCISE 16-1
(1) a The cash flow statement for governmental proprietary funds and nonexpendable trust funds
has four parts Cash from operations, cash from capital financing activities, cash from capital financing activities, and cash from investing activities
non-(2) a The general fund uses modified accrual Enterprise funds recognize revenue when earned
under full accrual accounts
(3) b Accounting procedures of internal service funds resemble commercial accounting Thus, all
costs for operating the fund as well as asset replacement and expansion should be covered (4) d Payments for services provided by an internal service fund within the same governmental enti-
ty are considered quasi-external transactions Therefore, they are recognized as operating revenues
(5) c As an interest adjustment factor, the premium should be transferred to the debt service fund
that pays the interest
(6) c Item A is debt service, B is in the trust fund, and D is within the proprietary fund
(7) a The entry for reinstatement is:
crual are near cost
(10) c The revenue is recorded by the general fund, but the debt service fund makes the payment of
principal and interest
EXERCISE 16-2
(1) d The debt service fund follows general fund procedures except for the usual practice of not
us-ing budgetary entries
(2) a Permanent funds are used to account for public-purpose trusts, for which earnings are
ex-pendable for a specific purpose Permanent funds are classified as governmental funds
Trang 4Ch 16—Exercises
Exercise 16-2, Concluded
(4) d Capital projects funds are used to account for major construction activity financed by general
tax revenues or special assessments
(5) a An investment trust fund is used to account for assets, liabilities, net assets, and changes in
net assets of external participants in an investment pool managed by the government
(6) a Debt service funds are used to account for the payment of interest and principal on general
government long-term debt, not short-term debt or the debt of proprietary funds
(7) b The agency fund internally distributes monies to recipient funds
(8) b With no commitment by the governmental unit, the liability is solely that of the assessed
prop-erty owners However, the amount of the bond liability may be shown in the notes to the cial statements
finan-(9) d This is the typical entry to record a year’s capitalizable costs of an unfinished capital project (10) c The amount to be provided is reduced with the receipt of available funds in the debt service
fund
EXERCISE 16-3
(1) a Interest is recorded only in the period that interest is due
(2) b The capital projects fund receives the proceeds and records the applicable expenditures (3) c All long-term debt that is the responsibility of the city (except debt of proprietary funds) is rec-
orded here
(4) d Expenditures are closed at year-end in the capital projects fund The amount spent to date is
recorded in an “in-progress” account in the general fixed assets account group
Trang 5To record budgeted amounts for city hall construction project
General The general fund budgetary entry would include
Fund $6,000,000 in Estimated Other Financing Uses
(b) General Other Financing Uses 6,000,000
Fund Other Financing Uses 250,000
Other Financing Sources 30,000,000
To record proceeds from the sale of bonds
General Amount to Be Provided for Payment of Serial Bonds 30,000,000
Long-Term Serial Bonds Payable 30,000,000
Debt To record liability for the serial bonds
(d) Capital Encumbrances 35,500,000
Projects Fund Balance—Reserved for Encumbrances 35,500,000
Fund To record signing of construction contract
(e) Capital Fund Balance—Reserved for Encumbrances 10,000,000
Projects Encumbrances 10,000,000 Fund To record liquidation of encumbrances
Expenditures 10,000,000
Cash 10,000,000
To record expenditures for partial completion
General Construction in Progress 10,000,000
Fixed Assets Investment in General Fixed Assets—
Account Capital Projects Fund(s) 10,000,000 Group To record partial completion of city hall project
Trang 6Ch 16—Exercises
EXERCISE 16-5
Cash 40,000
Other Financing Sources 40,000
To record cash receipt from the general fund
Cash 360,000
Other Financing Sources 360,000
To record bonds issued
Encumbrances 400,000
Fund Balance—Reserved for Encumbrances 400,000
To record purchase orders placed and signing of contract
Fund Balance—Reserved for Encumbrances 400,000
To record payments and retained percentage
*Vouchers payable could be used for the entire $399,000
EXERCISE 16-6
Fund or
Account Group Date Entries Debit Credit
Debt Jan 1 Special Assessments Receivable (current) 90,000
Service Special Assessments Receivable (deferred) 270,000
Trang 7Ch 16—Exercises
Exercise 16-6, Concluded
Fund or
Account Group Date Entries Debit Credit
Debt Dec 31 Cash 60,750
Service Special Assessments Receivable (current) 45,000
and Amount to Be Provided by Special Dec 31 Assessments 45,000
EXERCISE 16-7
(a) No entry is made in the debt service fund
(b) Expenditures 800,000
Matured Bonds Payable 500,000
Matured Interest Payable (6% × $5,000,000) 300,000
To record matured items
(c) Cash 800,000
Other Financing Sources 800,000
To record receipt of cash from the general fund
(d) Cash with Fiscal Agent 800,000
Cash 800,000
To record transfer to First Bank
(e) Matured Bonds Payable 500,000
Matured Interest Payable 291,000
Cash with Fiscal Agent 791,000
To record payments by bank
Trang 8Ch 16—Exercises
EXERCISE 16-8
(a) Restricted Assets—Cash for Construction 300,000
Interfund Transfer from General Fund 300,000
To record restricted amount received from the
general fund
(b) Accounts Receivable 220,000
Due from Other Funds 67,000
Operating Revenues (or Billings for Services) 287,000
(d) Restricted Assets—Revenue Bond Development Cash 700,000
Revenue Bonds Payable 700,000
To record bond issuance with restriction on proceeds
(e) No entry Enterprise funds do not use budgetary accounts
for encumbrances
(f) Construction in Progress 360,000
Contracts Payable from Restricted Assets 360,000
To record liability for work to date
(g) Contracts Payable from Restricted Assets 300,000
Restricted Assets—Revenue Bond Development Cash 300,000
To record issuance of check from restricted cash
Trang 9Ch 16—Exercises
Exercise 16-9, Concluded
Unrealized Loss 600
Investment in Bonds 600
To record fair value adjustment
Other Financing Uses 6,000
Balance Sheet December 31, 20X8
Trang 11Ch 16—Problems
PROBLEMS PROBLEM 16-1
(1) b The agency fund distributes the collections to the recipient funds
(2) c The grant is for the construction of a fixed asset
(3) b The capital projects fund records other financing sources and uses The debt service fund
records other financing sources The general long-term debt account group records the amount available in the debt service fund for principal only Because the premium is an adjustment to the interest, no entry is made in the GLTDAG
(4) a Enterprise funds record their own debt
(5) d All self-sustaining activities are recorded in proprietary funds; in this case, both are enterprise
funds
(6) a Services to other governmental units by an internal service fund are recorded as either
reve-nues or billings
(7) d The general fund records only its transfer; the debt proceeds are recorded as other financing
sources in the capital projects fund
(8) b The change in the fund balance is equal to (revenues plus other sources) minus (expenditures
and other uses)
PROBLEM 16-2
(1) d Only the property taxes are revenue of a governmental fund
(2) c Expenditures for a debt service fund equal the amount of matured principal ($2,000,000) plus
matured interest ($900,000) Unpaid accrued interest is recognized as an expenditure only if the payment date for such interest has passed
(3) a Because transfers received from other funds are not revenue but are other financing sources,
only the interest of $600,000 qualifies as revenue
(4) c The grant from the state is revenue to the capital projects fund Bond proceeds and transfers
from other funds are other financing sources
(5) a Under modified accrual, issue costs and debt insurance are recorded as expenditures
(6) b The general fund would record an interfund transfer-out (other financing use)
Trang 12Ch 16—Problems
Problem 16-2, Concluded
(7) d “City streets and sidewalks” are infrastructure fixed assets A governmental unit must include
such assets in its financial statements The city hall ($800,000) and the three fire stations ($1,000,000) must also be included in the general fixed assets account group
(8) a Special revenue funds are established to account for restricted resources used for operating
activities such as repair of streets and educational and economic development programs If sources are for a major construction project, the proceeds will be accounted for in a capital projects fund
re-PROBLEM 16-3
Administration Center Capital Projects Fund
Journal Entries For Period July 1, 20X8, to June 30, 20X9 20X8
July 1 Cash 250,000
Advance from General Fund 250,000
To record loan received from general fund
To record sale of bonds
1 Other Financing Uses 60,000
Cash 60,000
To transfer premium to debt service fund
1 Due from State Government 3,000,000
Revenues 3,000,000
To record grant due from state
Trang 13Ch 16—Problems
Problem 16-3, Continued
20X9
Apr 30 Encumbrances 7,000,000
Fund Balance—Reserved for Encumbrances 7,000,000
To record encumbrance for contract
May 9 Cash 1,000,000
Due from State Government 1,000,000
To record receipt of grant
June 10 Advance from General Fund 250,000
Cash 250,000
To record payment of loan
30 Fund Balance—Reserved for Encumbrances 1,200,000
Contracts Payable—Retained Percentage 48,000
To record expenditures on construction contract and
retained amount
Administration Center Capital Projects Fund
Closing Entries June 30, 20X9 Revenues 3,000,000
Other Financing Sources 6,060,000
Expenditures 1,400,000
Other Financing Uses 60,000 Fund Balance—Unreserved, Undesignated 7,600,000 Fund Balance—Unreserved, Undesignated 5,800,000
Encumbrances 5,800,000
To close
Trang 14Liabilities and Fund Balance Liabilities:
Contracts payable $1,152,000
Contracts payable—retained percentage 48,000
Total liabilities $1,200,000 Fund balance:
Reserved for encumbrances $5,800,000
Unreserved, undesignated 1,800,000
Total fund balance 7,600,000
Total liabilities and fund balance $8,800,000 (4) 20X8
July 1 General Advance to Capital Projects Fund 250,000
Fund Cash 250,000
To record loan to the capital projects fund
Dec 1 Debt Cash 60,000
Service Other Financing Sources 60,000 Fund To record receipt of premiums
General Amount to Be Provided for Payment Long-Term of Term Bonds 6,000,000
Debt Bonds Payable 6,000,000 Account To record bond liability
Group
20X9
June 10 General Cash 250,000
Fund Advance to Capital Projects Fund 250,000
To record repayment of loan
30 General Construction in Progress 1,200,000
Fixed Assets Investment in General Fixed Assets—
Account Capital Projects Fund 1,200,000 Group To record asset
Trang 15Ch 16—Problems
PROBLEM 16-4
(1) Appropriations 640,000
Estimated Other Financing Uses 25,000
Budgetary Fund Balance—Unreserved 305,000
Other financing uses (15,000)
Excess of other financing sources over uses 885,000 Excess of revenues and other financing sources
over expenditures and other financing uses $ 215,000 Fund balances, January 2, 20X9 0
Fund balances, December 31, 20X9 $ 215,000
Trang 16Cash $ 75,000 Investments 200,000 Total current assets $275,000
Liabilities and Fund Balances Current:
Contracts payable—retained percentage $ 60,000 Fund balances:
Reserved for encumbrances $ 80,000
Unreserved, undesignated 135,000
Total fund balances 215,000
Total liabilities and fund balances $275,000
PROBLEM 16-5
Trang 17Ch 16—Problems
PROBLEM 16-6
Date Account Group Entry
Jan 2 Capital Budgetary Fund Balance—Unreserved 223,400
Feb 1 Debt Cash 237,600
Service Interest Receivable on Delinquent Special Fund Assessments 2,400
Revenues 20,000 Special Assessments Receivable—
Current 220,000
To record collections and to bill interest
General Amount Available to Debt Service Fund 220,000
Long-Term Amount to Be Provided for Payment
Debt Account of Special Assessment Bonds 220,000
General Capital Project Special Assessment Debt with
Long-Term Governmental Commitment 100,000
Debt Account Amount Available in the Debt Service
Group Fund for Payment of Special
Assessment Bonds 100,000