The City of Pfeiffer starts the year of 2013 with #8146

The City of Pfeiffer starts the year of 2013 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 $123,000 cash and a new school building costing $1 million. The city
utilizes straight-line depreciation. The building has a 20-year life and no salvage value. The
enterprise fund has $62,000 cash and a new $600,000 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 2013. Assume that the city's fiscal year ends on December 31.a. Decides to build a
municipal park and transfers $70,000 into a capital projects fund and immediately expends
$20,000 for a piece of land. The creation of this fund and this transfer were made by the highest
level of government authority.b. Borrows $110,000 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 $600,000. Of this amount, $510,000 will be collected
during 2013 and another $50,000 is expected in the first month of 2014. The remainder is
expected about halfway through 2014.d. Constructs a building in the park in (b) for $80,000
cash for playing 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 $10,000 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 $8,000.g. Buys a new parking deck for $200,000,
paying $20,000 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 $100,000 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,
$37,000 of the amount received was properly spent.i. Charges students in the school system a
total fee of $6,000 for books and the like. Of this amount, 90 percent is collected during 2013
with the remainder expected to be collected in the first few weeks of 2014.j. Buys school
supplies for $22,000 cash and uses $17,000 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 $80,000.
It is viewed as inexhaustible.l. Transfers $20,000 cash from the General Fund to the Enterprise
Fund as a capital contribution.m. Orders a school bus for $99,000.n. Receives the school bus
and pays an actual cost of $102,000. The bus is put into operation on October 1 and should last
for five years with no salvage value.o. Pays salaries of $240,000 to school teachers. In addition,
owes and will pay $30,000 during the first two weeks of 2014. Vacations worth $23,000 have
also been earned but will not be taken until July 2014.p. Pays salaries of $42,000 to city
auditorium workers. In addition, owes and will pay $3,000 in the first two weeks of 2014.
Vacations worth $5,000 have also been earned but will not be taken until July 2014.q. Charges
customers $130,000 for the rental of the civic auditorium. Of this balance, collected $110,000 in
cash and will collect the remainder in April 2014.r. Pays $9,000 maintenance charges for the
building and sidewalk in (d ) and (e).s. Pays $14,000 on the bond in (b) on the last day of 2013:
$5,000 principal and $9,000 interest.t. Accrues interest of $13,000 on the note in (g) as of the

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 end of 2013, an amount that it will pay in June 2014.u. Assumes that a museum that operates
within the city is a component unit that will be discretely presented. The museum reports to city
officials that it had $42,000 of direct expenses this past year and $50,000 in revenues from
admission charges. The only assets that it had at year-end were cash of $24,000, building (net
of depreciation) of $300,000, and a long-term liability of $210,000.Prepare the 2013 government-
wide financial statements for this city. Assume the use of the modified approach.View Solution:
The City of Pfeiffer starts the year of 2013 with

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