Presented below are the computed amounts of ratios for the Village of Riverside example appearing in the chapter.

Required: a. Using the financial statements provided in Illustrations 2-5 through 2-11, compute ratios for the City of Salem. Assume the population of Salem is 52,000 and the fair value of property totals $970 million. b. For each ratio, indicate which of the two governments has a stronger financial position. (Round "Debt per Capita" answer to the nearest whole dollar and other answers to 2 decimal places.)

Overview of Financial Reporting for State and Local Governments 29 cop4101X_ch02_020-053.indd 29 10/21/16 11:46 AM Example Comprehensive Annual Financial Report Financial Section: Basic Financial Statements Government-wide Financial Statements: Statement of Net Position ILLUSTRATION 2-5 Statement of Net Position CITY OF SALEM Statement of Net Position As of December 31, 2017 Primary Government Governmental Business-type Primary Component Assets Activities Activities Government Units Cash and cash equivalents $ 8,242,998 $ 4,814,724 $13,057,722 $ 84,733 Investments 3,312,992 10,350,334 13,663,326 _____ Inventory 1,072,963 30,779 1,103,742 _____ Receivables (net): Taxes receivable 2,872,611 _____ 2,872,611 _____ Accounts receivable 722,215 2,657,326 3,379,541 27,085 Due from other governments 1,328,448 _____ 1,328,448 _____ Restricted assets 3,933,126 2,295,043 6,228,169 _____ Capital assets (net of accumulated depreciation) 65,690,373 48,894,402 114,584,775 11,170,900 Total assets 87,175,726 69,042,608 156,218,334 11,282,718 Liabilities Accounts payable 2,425,447 493,849 2,919,296 710 Accrued liabilities 4,340,108 473,168 4,813,276 _____ Bonds payable due within one year 2,164,521 1,342,717 3,507,238 _____ Bonds payable due in more than one year 39,834,882 18,858,187 58,693,069 _____ Total liabilities 48,764,958 21,167,921 69,932,879 710 Net position Net investment in capital assets 23,690,970 30,757,135 54,448,105 11,197,985 Restricted 3,933,126 2,295,043 6,228,169 _____ Unrestricted 10,786,672 14,822,509 25,609,181 84,023 Total net position $38,410,768 $47,874,687 $86,285,455 $11,282,008 Final PDF to printer cop4101X_ch02_020-053.indd 31 10/21/16 11:46 AM 31 Financial Section: Basic Financial Statements Government-wide Financial Statements: Statement of Activities ILLUSTRATION 2-6 Statement of Activities CITY OF SALEM Statement of Activities For the Year Ended December 31, 2017 Primary Government Program Revenues Net (Expense) Revenue and Change in Net Position Functions/Programs Expenses Charges for Services Operational Grants and Contributions Capital Grants and Contributions Governmental Activities Businesstype Activities Total Component Units Governmental activities General government $ 3,734,068 $1,144,018 $ 263,178 $ _____ ($2,326,872) $ _____ ($2,326,872) $ _____ Judicial administration 1,433,650 56,497 1,002,525 _____ (374,628) _____ (374,628) _____ Public safety 9,265,997 275,492 750,109 277,700 (7,962,696) _____ (7,962,696) _____ Public works 6,167,650 _____ 2,903,982 1,853,091 (1,410,577) _____ (1,410,577) _____ Health and welfare 4,436,534 _____ 2,861,389 4,203 (1,570,942) _____ (1,570,942) _____ Education 9,292,427 _____ 73,300 _____ (9,219,127) _____ (9,219,127) _____ Parks and recreation 3,217,236 604,359 302,672 500 (2,309,705) _____ (2,309,705) _____ Community development 1,720,121 51,611 298,495 156,361 (1,213,654) _____ (1,213,654) _____ Interest on long-term debt 1,422,428 _____ _____ _____ (1,422,428) _____ (1,422,428) _____ Total governmental activities 40,690,111 2,131,977 8,455,650 2,291,855 (27,810,629) _____ (27,810,629) _____ Business-type activities Water 6,041,987 6,385,233 _____ 3,109,692 _____ 3,452,938 3,452,938 _____ Solid waste 2,556,633 2,351,433 6,594 2,085,064 _____ 1,886,458 1,886,458 _____ Parking 481,869 261,107 _____ _____ _____ (220,762) (220,762) _____ Total business-type activities 9,080,489 8,997,773 6,594 5,194,756 _____ 5,118,634 5,118,634 _____ Total primary government 49,770,600 11,129,750 8,462,244 7,486,611 (27,810,629) 5,118,634 (22,691,995) _____ Component units Industrial development authority 4,322,849 9,979 20,000 4,193,964 _____ _____ _____ (98,906) General revenues Property taxes 15,382,482 _____ 15,382,482 _____ Sales taxes 5,729,224 _____ 5,729,224 _____ Hotel and meals taxes 4,998,045 _____ 4,998,045 _____ Grants 2,724,725 _____ 2,724,725 _____ Miscellaneous 1,611,886 729,488 2,341,374 1,172 Transfers 615,062 (615,062) _____ _____ Total general revenues 31,061,424 114,426 31,175,850 1,172 Change in net position 3,250,795 5,233,060 8,483,855 (97,734) Net position, beginning 35,159,973 42,641,627 77,801,600 11,379,742 Net position, ending $38,410,768 $47,874,687 $86,285,455 $11,282,008 Final PDF to printer 32 Chapter 2 cop4101X_ch02_020-053.indd 32 10/21/16 11:46 AM Example Comprehensive Annual Financial Report Financial Section: Basic Financial Statements Governmental Funds Statements: Balance Sheet Governmental Funds: Balance Sheet Illustration 2-7b presents a Balance Sheet for the governmental funds, including the General, special revenue, capital projects, and debt service funds. The City of Salem does not have a permanent fund or it would be presented here as well. Each of the citys governmental funds is considered a major fund and is presented separately. If the city had multiple smaller funds, they would be combined and reported in a single column labeled nonmajor funds. The governmental fund statements are prepared using the current financial resources measurement focus and the modified accrual basis of accounting. For this reason, capital assets and long-term debt do not appear on the Balance Sheet. The excess of assets and deferred outflows over liabilities and deferred inflows is labeled fund balance, an account title used only in the governmental funds. All other funds and the government-wide statements label the difference between assets and liabilities as net position. Several features of the Balance Sheet should be noted. First, a total column is required. Secondly, fund balance is displayed within the categories of nonspendable, restricted, committed, assigned, and unassigned. These will be more fully described in later chapters, but represent varying degrees of constraint placed on the use of the (net) resources of governmental funds. Finally, total fund balances reported in the total column ($12,922,626) must be reconciled to total net position ($38,410,768) presented in the governmental activities column of the government-wide Statement of Net Position. The reconciliation is presented separately in Illustration 2-7a (below). These amounts differ because the two statements have different bases of accounting and because most internal service funds are included in the governmental activities column on the government-wide statements. ILLUSTRATION 2-7a Reconciliation to (Government-wide) Statement of Net Position Fund balance reported in the Governmental Funds Balance Sheet $12,992,626 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in government operations are not financial resources and therefore are not reported in the funds. 65,690,373 Some liabilities are not due and payable in the current period and are not reported in fund liabilities. (41,999,403) The assets and liabilities of internal service funds are included in governmental activities for the Statement of Net Position. 436,475 Accrued liabilities that are not to be paid from current financial resources are not recognized in the funds. (3,117,390) Receivables on the Statement of Net Position that do not provide current financial resources are reported as deferred inflows in the funds. 4,408,087 Net position of governmental activities in the Statement of Net Position $38,410,768 Final PDF to printer Overview of Financial Reporting for State and Local Governments 33 cop4101X_ch02_020-053.indd 33 10/21/16 11:46 AM Example Comprehensive Annual Financial Report Financial Section: Basic Financial Statements Governmental Funds Statements: Balance Sheet ILLUSTRATION 2-7b Governmental Funds Balance Sheet CITY OF SALEM Balance Sheet Governmental Funds As of December 31, 2017 Special Courthouse Debt Total General Revenue Renovation Service Governmental Assets Fund Fund Fund Fund Funds Cash and cash equivalents $ 6,408,214 $627,837 $ 895,300 $230,000 $ 8,161,351 Investments 3,312,992 _____ _____ _____ 3,312,992 Receivables (net) Taxes receivable 2,872,611 _____ _____ _____ 2,872,611 Accounts receivable 679,215 14,177 _____ _____ 693,392 Due from other governments 1,085,184 _____ 243,264 _____ 1,328,448 Supplies inventory 23,747 _____ _____ _____ 23,747 Restricted assets 3,933,126 _____ _____ _____ 3,933,126 Total assets $18,315,089 $642,014 $1,138,564 $230,000 $20,325,667 Liabilities Accounts payable 2,085,358 70,000 207,134 _____ 2,362,492 Accrued liabilities 543,064 _____ 19,398 _____ 562,462 Total liabilities 2,628,422 70,000 226,532 _____ 2,924,954 Deferred Inflows of Resources Property taxes 4,408,087 _____ _____ _____ 4,408,0 cop4101X_ch02_020-053.indd 34 10/21/16 11:46 AM 34 Example Comprehensive Annual Financial Report Financial Section: Basic Financial Statements Governmental Funds Statements: Statement of Revenues, Expenditures, and Changes in Fund Balance Governmental Funds: Statement of Revenues, Expenditures, and Changes in Fund Balance Illustration 2-8b presents the operating statement for the same governmental funds appearing in Illustration 2-7b (the balance sheet). Again, the statement is prepared using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are reported by source, and expenditures (not expenses) are reported by character: current, debt service, and capital outlay. Within the current category, expenditures are presented by function: general government, judicial administration, public safety, and so on. Within the debt service category, expenditures are displayed as interest or principal. Following revenues and expenses, the statement reports other financing sources and uses. These reflect interfund transfers and the proceeds of issuing debt. Most of the items appearing in this section are eliminated when preparing the governmentwide financial statements. Like all operating statements, reconciliations to the Balance Sheet are required. In this case, the operating statement is reconciled to total fund balances by adding the beginning of year fund balances. The excess of revenues and other sources over expenditures and other uses ($1,485,357) is reconciled to the change in net position ($+3,250,795) for the governmental activities column in the government-wide Statement of Activities. This reconciliation would normally appear at the bottom of the Statement of Revenues, Expenditures, and Changes in Fund Balance, but is presented in Illustration 2-8a due to space considerations. ILLUSTRATION 2-8a Reconciliation to (Government-wide) Statement of Activities Excess of revenues and other sources over expenditures and other uses reported in the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance. $(1,485,357) Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report the cost of capital assets as expenditures, while they are capital assets in the government-wide statements. 10,924,818 Debt proceeds provide current financial resources to the governmental funds but are liabilities in the government-wide statements. (9,675,400) Depreciation is not recorded in the governmental funds, but is expensed in the Statement of Activities. (1,691,116) Income earned by internal service funds is included in governmental activities on government-wide statements. 23,964 Payments of principal on long-term debt are expenditures in the governmental funds but reduce the liability in the government-wide statements. 1,155,326 Property taxes expected to be collected more than 60 days after year-end are deferred in the governmental funds. 3,998,560 Change in net position of governmental activities (government-wide) $3,250,795 Final PDF to printer cop4101X_ch02_020-053.indd 35 10/21/16 11:46 AM Example Comprehensive Annual Financial Report Financial Section: Basic Financial Statements Governmental Funds Statements: Statement of Revenues, Expenditures, and Changes in Fund Balance ILLUSTRATION 2-8b Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance CITY OF SALEM Statement of Revenues, Expenditures, and Changes in Fund BalancesGovernmental Funds For the Year Ended December 31, 2017 Special Courthouse Debt Total General Revenue Renovation Service Governmental Revenues Property taxes $15,361,830 $ _______ $ ________ $ _______ $15,361,830 Other local taxes 11,761,522 _______ ________ _______ 11,761,522 Charges for services 1,601,435 291,243 ________ _______ 1,892,678 Intergovernmental 7,098,698 3,456,194 441,548 _______ 10,996,440 Miscellaneous 1,262,549 _______ ________ _______ 1,262,549 Total revenues 37,086,034 3,747,437 441,548 _______ 41,275,019 Expenditures Current: General government 3,353,502 _______ ________ _______ 3,353,502 Judicial administration 1,456,734 1,981,144 ________ _______ 3,437,878 Public safety 8,216,347 _______ ________ _______ 8,216,347 Public works 4,602,273 _______ ________ _______ 4,602,273 Health and welfare 4,418,294 _______ ________ _______ 4,418,294 Education 8,887,834 _______ ________ _______ 8,887,834 Parks and recreation 3,055,325 _______ ________ _______ 3,055,325 Community development 899,209 1,093,804 ________ _______ 1,993,013 Capital outlay _______ _______ 10,924,818 _______ 10,924,818 Debt service: _______ _______ ________ _______ _______ Principal _______ _______ ________ 1,155,326 1,155,326 Interest _______ _______ ________ 924,818 924,818 Total expenditures 34,889,518 3,074,948 10,924,818 2,080,144 50,969,428 Revenues over (under) expenditures 2,196,516 672,489 (10,483,270) (2,080,144) (9,694,409) Other financing sources (uses) Issuance of debt _______ _______ 9,675,400 _______ 9,675,400 Transfers from other funds 2,080,144 2,080,144 Transfers (to) other funds (3,256,899) (289,593) ________ _______ (3,546,492) Total other financing sources (uses) (3,256,899) (289,593) 9,675,400 2,080,144 8,209,052 Excess of revenues and other sources over (under) expenditures and other uses (1,060,383) 382,896 (807,870) _______ (1,485,357) Fund balance beginning of year 12,338,963 189,118 1,719,902 230,000 14,477,983 Fund balanceend of year $11,278,580 $572,014 $912,032 $230,000 $12,992,626 35 Final PDF to printer Overview of Financial Reporting for State and Local Governments 37 cop4101X_ch02_020-053.indd 37 10/21/16 11:46 AM Example Comprehensive Annual Financial Report Financial Section: Basic Financial Statements Proprietary Funds Statements: Statement of Net Position CITY OF SALEM Statement of Net PositionProprietary Funds As of December 31, 2017 Governmental Activities Internal Business-type ActivitiesEnterprise Funds Service Assets Water Solid Waste Parking Total Fund Current assets: Cash and cash equivalents $ 3,801,978 $ 847,889 $ 164,857 $ 4,814,724 $ 81,647 Investments 4,433,039 5,917,295 _____ 10,350,334 _____ Inventory 30,779 _____ _____ 30,779 330,759 Receivables (net) _____ _____ _____ _____ _____ Accounts receivable 2,307,643 342,394 7,289 2,657,326 _____ Due from other funds _____ _____ _____ _____ 28,824 Restricted assets 1,394,787 900,256 _____ 2,295,043 _____ Total current assets 11,968,226 8,007,834 172,146 20,148,206 441,230 Noncurrent assets: Capital assets (net of accumulated depreciation) 37,975,852 4,611,754 6,306,796 48,894,402 68,603 Total assets $49,944,078 $12,619,588 $6,478,942 $69,042,608 $509,833 Liabilities Current liabilities: Accounts payable 317,131 174,087 2,631 493,849 62,958 Accrued liabilities 437,363 25,854 9,951 473,168 3,309 Total current liabilities 754,494 199,941 12,582 967,017 66,267 Liability for landfill closure and postclosure care costs _____ 2,063,637 _____ 2,063,637 _____ Capital leases payable 7,091 Bonds payable 16,114,097 _____ 2,023,170 18,137,267 _____ Total noncurrent liabilities 16,114,097 2,063,637 2,023,170 20,200,904 7,091 Total liabilities 16,868,591 2,263,578 2,035,752 21,167,921 73,358 Net position Net investment in capital assets 21,861,755 4,611,754 4,283,626 30,757,135 61,512 Restricted 1,394,787 900,256 _____ 2,295,043 _____ Unrestricted 9,818,945 4,844,000 159,564 14,822,509 374,963 Total net position $33,075,487 $10,356,010 $4,443,190 $47,874,687 $436,475 ILLUSTRATION 2-9 Proprietary Funds: Statement of Net Position Final PDF to printer Overview of Financial Reporting for State and Local Governments 39 cop4101X_ch02_020-053.indd 39 10/21/16 11:46 AM Example Comprehensive Annual Financial Report Financial Section: Basic Financial Statements Proprietary Funds Statements: Statement of Revenues, Expenses, and Changes in Fund Net Position CITY OF SALEM Statement of Revenues, Expenses, and Changes in Fund Net PositionProprietary Funds For the Year Ended December 31, 2017 Governmental Activities Internal Business-type ActivitiesEnterprise Funds Service Water Solid Waste Parking Total Fund Operating revenues Charges for services $ 6,335,022 $ 2,292,322 $ 261,088 $ 8,888,432 $663,162 Miscellaneous 45,499 58,827 _____ 104,326 _____ Total revenues 6,380,521 2,351,149 261,088 8,992,758 663,162 Operating expenses Personnel services 1,576,088 1,164,629 126,466 2,867,183 591,010 Repairs and maintenance 389,271 50,296 _____ 439,567 2,698 Contractual services 1,107,169 439,355 _____ 1,546,524 34,622 Depreciation 1,374,214 353,411 153,097 1,880,722 6,654 Utilities 186,195 1,173 40,619 227,987 100 Other 699,009 332,110 63,766 1,094,885 4,256 Landfill closure costs _____ 215,659 _____ 215,659 _____ Total operating expenses 5,331,946 2,556,633 383,948 8,272,527 639,340 Operating income (loss) 1,048,575 (205,484) (122,860) 720,231 23,822 Nonoperating revenues (expenses) Interest income 452,718 279,924 1,558 734,200 700 State aid 23,746 6,878 _____ 30,624 _____ Interest expense (710,042) _____ (97,901) (807,943) (558) Total nonoperating revenue (233,578) 286,802 (96,343) (43,119) 142 Income before contributions and transfers 814,997 81,318 (219,203) 677,112 23,964 Capital contributions 3,085,946 2,085,064 _____ 5,171,010 _____ Transfers in _____ _____ 179,440 179,440 _____ Transfers out (92,300) (702,202) _____ (794,502) _____ Change in net position 3,808,643 1,464,180 (39,763) 5,233,060 23,964 Net positionbeginning of year 29,266,844 8,891,830 4,482,953 42,641,627 412,511 Net positionend of year $33,075,487 $10,356,010 $4,443,190 $47,874,687 $436,475 ILLUSTRATION 2-10 Proprietary Funds: Statement of Revenues, Expenses, and Changes in Fund Net Position Final PDF to printer cop4101X_ch02_020-053.indd 41 10/21/16 11:46 AM Example Comprehensive Annual Financial Report Financial Section: Basic Financial Statements Proprietary Funds Statements: Statement of Cash Flows ILLUSTRATION 2-11 Proprietary Funds: Statement of Cash Flows CITY OF SALEM Statement of Cash Flows Proprietary Funds For the Year Ended December 31, 2017 Governmental Activities Internal Business-type ActivitiesEnterprise Funds Service Water Solid Waste Parking Total Fund Cash flows from operating activities Cash received from customers $6,388,018 $2,343,431 $259,946 $8,991,395 $649,426 Cash paid to suppliers (2,490,241) (822,363) (80,137) (3,392,741) (630,437) Cash paid to employees (948,035) (764,032) (99,517) (1,811,584) _____ Other (588,974) (322,472) (50,430) (961,876) _____ Net cash provided by operating activities 2,360,768 434,564 29,862 2,825,194 18,989 Cash flows from noncapital financing activities Operating grants received _____ 6,594 _____ 6,594 _____ Transfers from other funds _____ _____ 179,440 179,440 _____ Transfers to other funds (92,300) (702,202) _____ (794,502) _____ Net cash provided by noncapital financing activities (92,300) (695,608) 179,440 (608,468) _____ Cash flows from capital and related financing activities Acquisition of capital assets (543,169) (456,179) _____ (999,348) _____ Principal paid on long-term debt (1,014,887) _____ (128,420) (1,143,307) (3,719) Interest paid (535,567) _____ (95,961) (631,528) _____ Net cash provided from capital and related financing activities (2,093,623) (456,179) (224,381) (2,774,183) (3,719) Cash flows from investing activities Interest received 287,725 279,924 1,558 569,207 700 Net cash provided from investing activities 287,725 279,924 1,558 569,207 700 Increase in cash 462,570 (437,299) (13,521) 11,750 15,970 Cash and cash equivalents beginning of year 4,734,195 2,185,444 178,378 7,098,017 65,677 Cash and cash equivalents end of year $5,196,765 $1,748,145 $164,857 $7,109,767 $ 81,647 Reconciliation of operating income to net cash provided by operating activities: Operating income 1,048,575 (205,484) (122,860) 720,231 23,822 Depreciation 1,374,214 353,411 153,097 1,880,722 6,654 (Increase) decrease in receivables 21,097 122,828 (375) 143,550 (13,736) (Increase) decrease in inventory _____ _____ _____ _____ (46,535) Increase (decrease) in accounts payable (83,118) _____ (83,118) 48,784 Increase in landfill closure liability _____ 163,809 _____ 163,809 _____ Net cash provided by operating activities $2,360,768 $ 434,564 $ 29,862 $2,825,194 $ 18,989 Noncash investing, capital, and financing activities: Contributions of capital assets from developers $3,085,946 $2,085,064 $ ______ $5,171,000 $ ______