17/8
The City of Pfeiffer starts the year of 2017 with the general fund and an enterprise fund. The general fund has two activities: education and parks/recreation. For convenience, assume that the general fund holds $131,000 cash and a new school building costing $980,000. The city utilizes straight-line depreciation. The building has a 20-year life and no salvage value. The enterprise fund has $68,600 cash and a new $690,000 civic auditorium with a 30-year life and no salvage value. The enterprise fund monitors just one activity, the rental of the civic auditorium for entertainment and other cultural affairs. The following transactions for the city take place during 2017. Assume that the city's fiscal year ends on December 31. a. Decides to build a municipal park and transfers $78,000 into a capital projects fund and immediately expends $22,400 for a piece of land. The creation of this fund and this transfer were made by the highest level of government authority. b. Borrows $123,400 cash on a long-term bond for use in creating the new municipal park. c. Assesses property taxes on the first day of the year. The assessment, which is immediately enforceable, totals $673,200. Of this amount $572,200 will be collected during 2017 and another $56,200 is expected in the first month of 2018. The remainder is expected about halfway through 2018. d. Constructs a building in the park in (b) for $60,000 cash so that local citizens can play basketball and other sports. It is put into service on July 1 and should last 10 years with no salvage value. e. Builds a sidewalk around the new park for $40,000 cash and puts it into service on July 1. It should last for 10 years, but the city plans to keep it up to a predetermined quality level so that it will last almost indefinitely f. Opens the park and charges an entrance fee of only a token amount so that it records the park, therefore, in the general fund. Collections during this first year total $6,000. g. Buys a new parking deck for $220,000, paying $22,000 cash and signing a long-term note for the rest. The parking deck, which is to go into operation on July 1, is across the street from the civic auditorium and is considered part of that activity. It has a 20-year life and no salvage value. h. Receives a $110,000 cash grant for the city school system that must be spent for school lunches for the poor, Appropriate spending of these funds is viewed as an eligibility requirement of this grant. During the current year, $40,700 of the amount received was properly spent. Charges students in the school system a total fee of $6,600 for books and the like. Of this amount, 90 percent is collected during 2017 with the remainder expected to be collected in the first few weeks of 2018. J. Buys school supplies for $27,000 cash and uses $20,900 of them. The general fund uses the purchases method. k. Receives a painting by a local artist to be displayed in the local school. It qualifies as a work of art, and officials have chosen not to capitalize it. The painting has a value of $98,300. It is viewed as inexhaustible. 1. Transfers $22,400 cash from the general fund to the enterprise fund as a capital contribution. n. Orders a school bus for $111,000.
