E2-10 (Transaction Analysis, Proprietary vs. Governmental Model) 1. Analyze the following transactions, assuming that a business-type activity was involved. (Hint: Use the proprietary funds accounting equation and the analysis format in Illustration 2-6.) 2. Analyze the following transactions, assuming that a general government activity was involved. (Him: Use the accounting equations for governmental funds and the nonfund accounts and the analysis format in Illustration 2-7.) . b. 64 CHAPTER 2 Slate and Local Government Accounting and Financial Reporting Model Salaries of $5,100 were incurred and paid during the year. Another $200 for salaries was incurred but not paid as of year end. Charges for services rendered were billed (and received early the next fiscal year), $3,000. Borrowed $2,000 on a l year, 10%, interest-bearing note, due 3 months after year end. Principal ($2,000) and interest ($200) on the 1-year note were paid when due Received a $200 transfer from another fund. Issued 10-year, 10% bonds payable for par of $1,000. Annual interest on the bonds ($100) was paid when dueat year end. Repaid the principal amount of a 5-year note, $800. Purchased a computer with a 3 year useful life for cash, $900. Straight-line depreciation of the computer is calculated to be $280 per year. The esti- mated residual value of the computer is $60. The computer is sold at the end of its useful life for $35. Original cost was $900. udah, e f. of J. k. k. IN P2-2 (Transaction Analysis) a. Analyze the effects of the following transactions on the accounting equations of the van- ous funds and nonfund accounts of a state or local government. (For any borrowing trans- actions, reflect any necessary year-end interest accruals in your responses.) b. Indicate how each transaction would be reported in the operating statement for each fund affected. Be sure to identify the fund and the operating statement. 1. A government incurred and paid salaries for general government employees, $500,000. 2. A government purchased a truck for $38,000 cash for the use of a general government department that is financed from restricted taxes that can be used only to support the department's programs. Problems 65 3. A government issued $5,000,000 of 6%, 10-year bonds to help finance expansion of a facility used by one of its public utility operations. The bonds were issued at par 3 months before year end and pay interest annually. 4. A government issued a 9-month, 10% note payable for $50,000. The note was issued 6 months before the end of the fiscal year to provide financing for various programs that are financed primarily from general tax revenues. 5. A govemment issued general obligation bonds at par, $15 million, to finance construc- tion of a new school building. The bonds bear interest at 8%, payable annually, and were dated and issued 6 months before the end of the year. 6. The govemment purchased land for the site of the school , $185,000. 7. The government incurred and paid construction costs on the school building, which was completed during the year, $14,715,000. 8. The government's goveming body ordered that the unused school bond proceeds be set aside for paying principal and interest on the bonds, and those resources were set aside in the appropriate fund. 9. General tax revenues, $1,500,000. were paid to the fund to be used to pay principal and interest on the school bonds. 10. The first annual interest payment on the school bonds came due and was paid. 11. The 9-month note (from item 4) was repaid with interest when due. 12. The govemment-owned public utility sold services to the public on account, $1 million; no uncollectibles are expected. 13. The government-owned public utility sold services to other departments of the govem- ment. $110.000. The other departments have paid all but $10,000. 14. The government sold a police department computer for $4,000. Its original cost (3 years earlier) was $15,000. At the time of purchase the computer was expected to be used for 4 years and have a $7,000 residual value. 15. The government paid $100,000 principal and $10,000 interest on a long term note when due, at mid-year. 1 of P2-4 (Transaction Analysis) (1) Analyze the effects of each of the following transactions on each of the funds and nonfund accounts of the City of Timbuktu. (2) Indicate how each transac- tion would be reported in the operating statement for each fund affected. 1. Salaries and wages paid to general government employees from unrestricted resources during the year totaled $3,000,000. Salaries and wages payable at the beginning of the year totaled $50,000 and at year-end amounted to $32,000. 2. The city issued $10,000,000 of 10-year, 8% bonds at the beginning of the year. Interest is due semiannually at the beginning of each year and at mid-year. The bonds were issued at par to provide for the construction of a new police and fire facility. 3. Indicate any accruals required at the end of the year that the bonds were issued. 4. Construction costs totaling $5,000,000 were paid during the year related to the police and fire facility. A bill from the contractor requiring an additional payment of $346,500 was received before year end but was not paid by year end. 5. In the beginning of year 2, the city paid the bond interest due and retired $1,000,000 of bonds. Before the payments were made, an adequate amount of General Fund resources was paid to the fund from which the bond payments were made to provide for those pay- ments. (Analyze both transactions.) 1