chapter 14 advances past the format of the government-wide financial statements to the actual...

Chapter 14 advances past the format of the Government-Wide financial statements to the actualconstruction of them.

Best way to learn, is by doing an example.

REQUIRED: Prepare a conversion worksheet for Tierney County to derive the governmental activities information to be reported in the county’s government-wide statement of net assets and statement of activities for 20X5.

ENTER THE PRECLOSING TRIAL BALANCE INFORMATION FOR TIERNEY COUNTYGOVERNMENTAL FUNDS INTO THE WORKSHEET.

This is done for you already on your handout.

PAGE ONE OF WORKSHEET

BALANCES AT $22,860,075 ==========

PAGE TWO OF WORKSHEET

ENTER IN THE GCA AND GLTL INFORMATION DIRECTLY BELOW THEPRE-CLOSING TRIAL BALANCE INFORMATION.

SHOW A SEPARATE BALANCING FIGURE FOR THISINFORMATION.

This is also done for you already on your handout.

THIS BALANCES AT $36,100,575

Reclassify capital outlay expenditures as capital assets

(2) are listed on the pre-closing trial balance: First page CAPITAL OUTLAY EXPENDITURES

For construction………….. $8,890,000For equipment…………….. 203,700

Construction-in-progress…….. $8,890,000Machinery & Equipment…….. 203,700

Construction expenditures………… $8,890,000Equipment expenditures…………… 203,700

NOTE: These entries ARE NOT REALLY MADE in any journal/ledger.They are just WORKSHEET entries made to adjust governmental fundsto GOVERNMENT-WIDE accounts.

Entry posted on worksheet to CONVERT.

1




GCA&GLTL

NOW RECORD THE CREDITS ON THE 1ST PAGE THE WORKSHEET.

1

Eliminate GCA sale proceeds and record a gain onthe capital asset sale

$175,000 is listed as a proceed from the Sale of GCA on pre-closing trial balance (PCTB) top oftop of page 2 of worksheetpage 2 of worksheet.

Need to also know:

The capital asset sold was for equipment which cost $500,000, and had accumulatedThe capital asset sold was for equipment which cost $500,000, and had accumulateddepreciation at the January 1 sale date of $400,000.depreciation at the January 1 sale date of $400,000.

Entry made for governmental accounting

Cash……..$175,000Proceeds from sale of capital equipment………$175,000

Entry which would have been made for government-wide (full-accrual)

Cash…….$175,000Acc/Dep.mach&ept.. 400,000

Equipment……..$500,000Gain on saleof equipment… $ 75,000

Entry posted to worksheet to CONVERT.

Acc/Depmach & eqt . $400,000Proceeds…. 175,000

Equipment………$500,000Gain………………. 75,000

NOW POST TO WORKSHEET

2


GCA&GLTL

Acc/Depmach & eqt . $400,000Proceeds…. 175,000

Equipment………$500,000Gain………………. 75,000

2

Record Depreciation

Depreciation expense is of course, not recorded for governmental funds.

Additional information:

Depreciation expense on buildings and on machinery and equipment is associated withfunctions as follows:

General government…………. 10%

Public Safety…………………. 50%

Highways and Streets………. 25%

Heath and sanitation………. 10%

Other………………………….. 5%

Additionally:

The county depreciates equipment over 5 years, buildings over 20 years, and streets androads over 30 years. Assume zero salvage values.

Record Depreciation






Other………………………….. 5%

From PCTB:

Buildings……… $4,375,000

20 yrs (given)

= $218,750 depreciation expense for 20X5.

x 218,750 = $21,875x 218,750 = $109,375x 218,750 = $54,687* roundingx 218,750 = $21,875x 218,750 = $10,938

wait to post to worksheetuntil all depreciation is calculated.

Record Depreciation






Other………………………….. 5%

The county depreciates equipment over 5 years, buildings over 20 years, and streets androads over 30 years. Assume zero salvage values.

From PCTB:

Mach & Ept……… ($1,400,000 beg + $203,700 adj(1))

5 years = $320,740

= $320,740 depreciation expense for 20X5.

x 320,740 = $32,074x 320,740 = $160,370x 320,740 = $ 80,186*roundingx 320,740 = $32,074x 320,740 = $16,036

218,750 = $21,875218,750 = $109,375218,750 = $54,687*rounding218,750 = $21,875218,750 = $10,938

SUM

$53,949269,745134,873

53,949 26,974

Depreciation expense-Gen Gov…$32,074Depreciation expense-Pub Saf…..160,370Depreciation expense-Highways.. 80,186Health & Sanitation……………… 32,074Other……………………………… 16,036

Accumulated Depreciation- Machinery & Equipment………$320,740

These are posted onworksheet as summations of bothexpenses but theaccumulated depreciat.for mach & buildingsare posted separately.


Accumulated Depreciation- Building………$218,750

PLUS

•The $500,000 sold should be subtracted beforedepreciating but the authors of problem didn’t do that.

PAGE ONE OF WORKSHEET Depreciation expense-Gen Gov…$32,074Depreciation expense-Pub Saf…..160,370Depreciation expense-Highways.. 80,186Health & Sanitation……………… 32,074Other……………………………… 16,036




$32,074 + $21,875 = $53,949

3a

3a





$160,370 + $109,375 = $269,745

3a

3a





$80,186 + $54,687 = $134,873

3a

3a





$32,074 + $21,875 =$53,949

3a

3a





$16,036 + $10,938 = $26,974

now record the accumulated depreciations

3a

3a


GCA&GLTL





3a

3a

Record DepreciationNOT quite done, still INFRASTRUCTURE ASSETS.

The balance of Streets and Roads is $7,000,000

30 years left = $233,333

Entry to record depreciation of infrastructure

Highways & streets depreciation expense…..$233,333Accumulated depreciation-infrastructure streets………..$233,333



now post the credit

3b


GCA&GLTL


3b

Reclassify bond proceeds and bond issue costsBond issuance occurred at year-end.

THERE ARE TWO BONDS ON THE BOOKS! ONE IS LISTED IN THE GOVERNMENTAL FUNDSINFO AS BONDS $6.3M AND PREMIUMS $42K. (Bottom page 1) THESE ARE OFS.

THE OTHER ONE IS LISTED IN THE GLTL AS B/P $2.8M, PREM $70K, AND DEF BOND ISSUE COSTS 28k[This stuff is already at fullThis stuff is already at full –accrualaccrual and doesn’t need adjusting].

Right now in the PCTB the following accounts are present:

Bonds……………………pg 2……. $6,300,000 (CR)Bond premiums………pg 2…….. 42,000 (CR)Bond issue costs………pg 1…. 35,000 (DR)

Entry which was made to record bond issue:

Cash……………..….$6,307,000Bond issue costs…$ 35,000

OFS-Bonds…………………$6,300,000OFS-Bond premiums……..$ 42,000

Entry which would be made in govt-wide

Cash………..$6,307,000Def bond issuecosts………..$ 35,000

Bonds payable…$6,300,000Premium on b/p…$ 42,000

Entry to roll-over into GOVT-WIDE

OFS-Bonds………..$6,300,000OFS-Bond Prem… $ 42,000Def bond issuecosts………… $35,000

Bonds payable……..$6,300,000Premium on b/p….. $ 42,000Bond issue costs…..$35,000

GCA&GLTL



4BOTTOM OF PAGE ONE OF WORKSHEET


GCA&GLTL



now post the last credit

4

PAGE ONE OF WORKSHEETOFS-Bonds………..$6,300,000OFS-Bond Prem… $ 42,000Def bond issuecosts………… $35,000


4

Eliminate GLTL retirement expenditures and reduce liability

Right now the PCTB contains the following:

Bond Principal Retirement $700,000 (DR).

Entry that was made

Bond Principal Retirement expenditure….$700,000Cash……………………………………$700,000

Entry that would be made in full accrual. govt-w

Bonds payable….$700,000Cash…………$700,000

Entry to ROLLOVER

Bonds payable……………….…..$ 700,000Bond Principal Retirement Expenditure…………$700,000


GCA&GLTL

now post the credit


Record bond premium amortizationThe remaining term of the bonds payable with which the premium

($70,000) and bond issue costs ($28,000) are associated is10 years. Use SL amortization.

THIS IS FOR THE BOND THAT IS ALREADY ESTABLISHED AS A BOND IN THE GLTL

Entry which was made to amortize premium in govt’l funds

NONE

Entry to FIX and rollover to govt-wide $70,000/10 = $7,000 amortization

Premium on b/p……..$ 7,000Interest on bonds………$7,000

* Bond issue costs amortized in step 9


GCA&GLTL

now post the credit

Premium on b/p……..$ 7,000Interest on bonds………$7,000(reduces the interest expense)

6


Premium on b/p……..$ 7,000Interest on bonds………$7,000(reduces the interest expense)

6

Record bond issue cost amortization

The remaining term of the bonds payable with which the premium($70,000) and bond issue costs ($28,000) are associated is10 years. Use SL amortization.

$28,000 / 10 = $2,800 amortization.

Interest on bonds……. $2,800Deferred bond issue costs……..$2,800


GCA&GLTL


Record accrued interest and adjust beginningnet assets and interest expense.

The accrued interest associated with bonds at 12/31/X5 was $ 99,000.The January 1, 20X5 balance was $87,500.

$87,500 BOY vs $99,000 EOY = $11,500 increase in accrued interest payable.

This increase should have resulted in this entry for GOVT-WIDE

Interest expense……..$11,500Accrued interest on bonds (payable)……. $11,500

To record this entry now in adjustments of worksheet

Interest on bonds…….. $11,500Accrued interest on bonds……$11,500

We also need to pick up the beginning balance of accrued interest because its not currentlypresent in the governmental accounts.

Net Assets (to reflect past interest expenses)….. $87,500Accrued interest payable on bonds……………..$87,500




now record rest.

8b

8a


GCA&GLTL



8b

8a

Adjust claim/adjustments expenses fordecreases in long-term liability for C&J.

The balance of the long-term claims and judgments obligationat 12/31/20X5 was $200,000. All claims and judgments of the county are related to health and sanitation.

The PCTB shows the BOY balance is $490,000 $490,000 - $200,000 = $290,000 decrease.

Entry to make to record reduction

Liability for C&J….. $290,000Health & Sanitation expenditures…..$290,000Entry that was made.

Health and Sanitation expenditures…. $290,000Cash…………………………………….$290,000

•know this because the long-term liability for C&J came down $290K andit was all for health/sanitation.

Entry that would have been made in Govt-Wide

Liability for C&J………… $290,000Cash……………………….$290,000

implies that $290Kwas treated as an expenditure while itshould have been treatedas reducing a payableas cash was paid toreduce it.


GCA&GLTL

Liability for C&J….. $290,000Health & Sanitation expenditures…..$290,000

now post credit

9


Liability for C&A….. $290,000Health & Sanitation expenditures…..$290,0009

Adjust compensated absences expenses for increasein long-term liability for compensated absences

The balance of the long-term liability for compensated absences at12/31/X5, was $425,000. Compensated absence liabilities are generated equally by the general government, public safety,streets and roads, and health/sanitation functions.

Beg. Bal is $350,000 vs $425,000 = $75,000 increase. Implies that $75,000 needs to be chargedas an expenditure and the payable increase needs to be recorded.

$75,000 / 4 = $18,750 Entry to record Govt-Wide

CA Expenditure-Gen Gov…. $18,750CA Expenditure-Pub Safety.. 18,750CA Expenditure-Streets/Roads..18,750CA Expenditure- Health/San…. 18,750

CA liability-longterm…………….$75,000

PAGE ONE OF WORKSHEETCA Expenditure-Gen Gov…. $18,750CA Expenditure-Pub Safety.. 18,750CA Expenditure-Streets/Roads..18,750CA Expenditure- Health/San…. 18,750


now post credit

10


GCA&GLTL

CA Expenditure-Gen Gov…. $18,750CA Expenditure-Pub Safety.. 18,750CA Expenditure-Streets/Roads..18,750CA Expenditure- Health/San…. 18,750


10

Eliminate deferred tax revenues.

The January 1, 20X5 balance of Deferred Tax Revenues was $84,000.

First, take the beginning balance of deferred tax revenue, and give it to net assetsbecause it should have been recognized as revenue in 20X4.

Deferred Revenues………… $84,000Net Assets…………………..$84,000

Deferred Revenue has an ending balance of $107,800 which means thatit has grown during 20X5 in the amount of $107,800 - $84,000 = $23,800

Entry to get rid of $23,800 of deferred revenue that increased during the yearbecause it would be recognized as revenue in 20X5 (not deferred).

Deferred Revenues……….. $23,800Revenues (Taxes)…………..$23,800



Deferred Revenues……….. $23,800Revenues (Taxes)…………..$23,800

The deferred revenues sum to $107,800

now post the credit to net assets

11

11


GCA&GLTL


11

Eliminate interfund payables and receivablesbetween governmental funds.

Just go through the PCTB and eliminate it. There’s only one.

Due to Special Revenue Fund…….. $3,500Due from General fund…...................….$3,500


Due to Special Revenue Fund…….. $3,500Due from General fund…...................….$3,500

12

Eliminate transfers between governmentalfunds.

Again, go through the PCTB and find/eliminate them.

Transfers from GF……………..….. $616,000Transfers from Special Rev Funds $70,000

Transfers to CPF………………….. $56,000Transfers to DSF…………………. $560,000Transfers to GF…………………….$ 70,000


GCA&GLTL

Transfers from GF……………..….. $616,000Transfers from Special Rev Fund.… $70,000

Transfers to CPF………………….. $56,000Transfers to DSF…………………. $560,000Transfers to GF…………………….$ 70,000

13

Reclassify beginning fund balance as netassets.

Fund Balance…… $695,049 Net assets……….$695,049

not allowed to call it “fund balance” in GOVT-WIDE



now post credit to NA

14


GCA&GLTL


14

Worksheet is COMPLETEWorksheet is COMPLETE

Using the information derived from the worksheet present the government activities in the government-wide financial statements for Tierney County for 20X5.

Tierney CountyStatement of Activities

For the Year Ended December 31, 20X5

Program Revenues Net (Expenses) Revenues and Changes in Net AssetsPrimary Government

Charges Operating Governmental Business-Type Total for Grants and Capital Activities Activities

Functions: Expenses Services Contributions Grnts

Primary gov.Gov Activities:

Gen Government $347,099 ($347,099) worksheet GW Lunch Exp DR.

Public Safety 1,705,995 444,500

$311,500 (License & Permits) + $133,000 (Fines & Forfeitures) = $444,500. (We’re told they arepublic safety in piece of info #4). worksheet GW Lunch CR

100,000

#7 notes that $100K of $420 worksheet GW Lunch CR is for public safety.

(1,161,495)

Using the information derived from the worksheet you prepared for P14-5, present the government activities in the government-wide financial statements for Tierney County for 20X5.







Gen Government $347,099 ($347,099)

Public Safety 1,705,995 444,500 100,000 (1,161,495)

Highways & Streets

1,248,656 worksht GW Lunch DR 7,231,000 5,982,344

Health &Sanitation

(54,901)actually isnegativeexpensews GW(DR)

320,000

rest of $420,000 grant;told in #7 its highwaysand streets ws GW Lunch CR

374,901

Told its highways &streets in piece ofinfo #7 WS GW Lunch CR








Gen Government $347,099 ($347,099)

Public Safety 1,705,995 444,500 100,000 (1,161,495)

Highways & Streets

1,248,656 7,231,000 5,982,344

Health &Sanitation

(54,901) 320,000 374,901

Other 92,074 (92,074) ws GW Lunch DR

Interest 416,275

$363,775 (interest on bonds) + $52,500 (fiscal agent fees) ws GW Lunch DR

(416,275)








Gen Government $347,099 ($347,099)

Public Safety 1,705,995 444,500 100,000 (1,161,495)

Highways & Streets

1,248,656 7,231,000 5,982,344

Health &Sanitation

(54,901) 320,000 374,901

Other 92,074 (92,074)

Interest 416,275 (416,275)

Total governmentactivities…… $3,755,198 $444,500 $420,000 $7,231,000 $4,340,302







General Revenues: Property taxes, levied forgeneral purposes… $3,418,800 GW lunch CRUnrestricted grant rev 367,500 GW lunch CRInvestment income 600,000 GW lunch CROther…………… 7,000 GW lunch CRGain on sale of capital assets.. 75,000 GW lunch CR toward bottom WSTransfers from enterprise 63,000 GW lunch CR-------------------------------------------------------Total general revenuesand transfers………… $4,531,300Change in net assets.. 8,871,602 (4,340,302 + 4,531,300)Net Assets-beg……. 2,767,049 (given)Net assets-end…… $11,638,651

Total governmentactivities…… $3,755,198 $444,500 $420,000 $7,231,000 $4,340,302

Tierney County

Statement of Net AssetsDecember 31, 20X5

ASSETS:Cash………………………………. $1,348,200Investments…………………….. 7,355,600Taxes Receivable (net)………… 150,500 (189K-38,500)Interest/penalities Receivable…(net) 4,774 (5,250 – 476)Accounts Receivable…(net)… 43,750 (45,500 – 1,750)Accrued Interest Receivable… 191,800Internal Balances…(to enterprise fund) (11,550) shown with the assetsInventory of Materials & Supplies.. 16,450Deferred Bond Issue Costs…. 60,200

Capital Assets, net: Land………………………………. 437,500 Buildings (net) …………………. 1,426,250 (4,375,000 – 2,948,750) Machinery & Equipment (net) .. 657,960 (1,103,700 – 445,740) Infrastructure (Streets & Roads)net.. 2,566,667(7,000,000 – 4,433,333) CIP………………………………… 8,890,000

----------------13,978,377----------------

Total Assets………………… $23,138,101

Tierney CountyStatement of Net Assets

December 31, 20X5

ASSETS:Cash………………………………. $1,348,200Investments…………………….. 7,355,600Taxes Receivable (net)………… 150,500 Interest/penalities Receivable…(net) 4,774 Accounts Receivable…(net)… 43,750 Accrued Interest Receivable… 191,800Internal Balances…(to enterprise fund) (11,550)Inventory of Materials & Supplies.. 16,450Deferred Bond Issue Costs…. 60,200

Capital Assets, net: Land………………………………. 437,500 Buildings (net) …………………. 1,426,250 Machinery & Equipment (net) .. 657,960 Infrastructure (Streets & Roads)net.. CIP………………………………… 8,890,000

----------------13,978,377----------------

Total Assets………………… $23,138,101

LIABILITIES:

Vouchers payable……….. $1,016,400Accrued sal/wages payable 17,500Contracts/p- Retained % 350,000Interest/p (on current debt) 100,050Def Operat Grnt Rev…… 360,500Def Cap Grnt Rev…. 525,000Noncapital Liabilities: B/P & prem………………. 8,505,000 C&J payable…………….. 200,000 Compen. Absence p…. 425,000Due in more than one year… 9,130,000

Total liabilities………… $11,499,450

$1,050 interest/p current debt + 99,000 from bond interestadjustments (bttm worksheet)

The NET ASSETS are presented in (3) classifications:

1. Invested in Capital Assets, Net of Related Debt

Capital Assets net of accumulated depreciation...........

Capital Assets, net:

Land………………………………. 437,500

Buildings (net) …………………. 1,426,250

Machinery & Equipment (net) .. 657,960

Infrastructure (Streets & Roads)net.. 2,566,667

CIP………………………………… 8,890,000

--------------

$13,978,377

$13,978,377

The NET ASSETS are presented in (3) classifications:

1. Invested in Capital Assets, Net of Related Debt

Capital Assets net of accumulated depreciation........... $13,978,377

- Bonds payable (less portion equal to unspent proceeds)

$8,505,000 B/P (including premium)-1,659,000 (Piece of info #1: Unexpended bond proceeds

at December 31, 20X5 )----------------$6,846,000

(6,846,000)

+ Bond issue costs........................................................ 60,200(These are added because they are an asset and relatedto bonds which relate to capital assets).-Contracts payable....................................................... (350,000) (contracts would be related to capital assets-assume)

$6,842,577

2. Restricted Net Assets (after conversions and eliminations)

Piece of info #2 tells us:

Assets include cash and investments restricted for:

Debt service (from which interest is payable)..... $300,000

Special Programs.............................................. $1,600,000

Debt Service Fund restricted assets................. $300,000

-Debt Service Fund liabilities-............................ (99,000) (this is the accrued interest on non-capital bonds)

$201,000The only debt discussed as being serviced from the DSF is for the bonds.Thus only the bond interest is subtracted here.

This is not the end because the special programs are also restricted

2. Restricted Net Assets (after conversions and eliminations)

Piece of info #2 tells us:

Assets include cash and investments restricted for:

Debt service (from which interest is payable)..... $300,000

Special Programs.............................................. $1,600,000

Special Program restricted assets................. $1,600,000

- Deferred operating grant revenue.............. (360,500)

$1,239,500The operating grant would be used to run somethinglike a special program.

3. Unrestricted net assets (after conversions and eliminations).

General fund unrestricted NA..................

Cash...... $1,348,200+ Investments 7,355,600-Restricted cash and investments given 1,900,000 (piece of info #2; page 556)-Unexpended proceeds 1,659,000+ Taxes/Rec 150,500 (189,000 – 38,500)+ Int/Pen Rec 4,774 (5,250 – 476)+ A/R...... 43,750+Accrued IntRec........ 191,800+Internal Bal (11,550)+ Material & Sup 16,450

----------------- 5,540,524

$5,540,524


General fund unrestricted NA.................. $ 5,540,524

- General Fund liabilities........................

Vouchers Payable 1,016,400 Salaries/wages p...... 17,500 Interest payable (bal) 1,050 Def Capital Grant rev... 525,000 *this is where authors placed this --------------------

$1,559,950

$1,559,950


General fund unrestricted NA.................. $ 5,540,524

- General Fund liabilities........................ $1,559,950

-Noncapital asset related C&J payable.. 200,000

-Noncapital asset related CA payable..... 425,000

$3,355,574


This can also be PLUGGED since we already know 2/3 of the components and thetotal net assets of $11,638,651

NET ASSETS:

Invested in capital assets net of related debt.... $6,842,577

Restricted for:Debt service......... $201,000Special Programs.1,239,500

Unrestricted:

Total Net Assets... $11,638,651

$3,355,574

chapter 14 advances past the format of the government-wide financial statements to the actual...

Documents

worksheet slide

equipment expenditures

worksheet construction

sale of equipment

machinery equipment

sale of capital equipment

construction expenditures

worksheet entries