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Cassandra Johnson
Unit 4 Assignment
Purdue Global University
AC556- Governmental and Not-for-Profit Accounting
April 20, 2021
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Chapter 7: Question 7-3 I disagree with the commissioner’s argument. This is because the main

buyer of the services of the internal service funds are the government funds for the city. The

commission of the city has authority over the budget over the other budgetary funds but not the

internal service fund[ CITATION Low16 \l 1033 ].

Chapter 7: Question 7-7 The accounting treatment if an internal service fund recovers more than

the costs incurred then the internal service fund should record the excess amount as nonoperating

transfer. The other funders should report the excess amount as other financing use. The accounting

treatment if an internal service fund recovers lower than the costs incurred then there will be a

deficit. The other funds should report the deficit amount as an expenditure[ CITATION Low16 \l

1033 ].

Chapter 7: Exercise 7-16

1. b. Enterprise funds only

2. c . An asphalt plant used to supply the asphalt needed to resurface the city’s streets.

3. d. All of the above are true.

4. b. Net transfers in of $10,000

5. b . Loss on the sale of a piece of equipment

6. c. The city council must legally approve the fund’s budget.

7. a. Interest earned on certificates of deposit held by the proprietary fund.

8. d. A claim has been made, it is probable that a liability has been incurred, and the amount can be

reasonably estimated.
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9. a. Net investment in capital assets is increased by $7,000.

10. d. $450,000.

Chapter 7: Exercise 7-19

a . Prepare the statement of revenues, expenses, and changes in fund net position for the Tribute

Aquatic Center as of December 31, 2017.

The City of Saltwater Beach – Tribute Aquatic Center Enterprise Fund

Statement of revenues, expenses, and changes in fund net position
For the year ended December 31, 2017
Account Amount Amount
Operating Revenues
Charges for services (A) $2,040,000

Less Operating Expenses

Personnel expense ($1,034,000)
Utility expenses ($188,500)
Repairs and maintenance ($82,100)
Supplies expense ($67,200)
Depreciation expense ($136,960)
Total operating expenses (B) ($1,508,760)
Operating income (A-B=C) $531,240

Nonoperating revenues/expenses
Interest and dividend income $92,500
Less: Interest Expense ($323,840)
Total nonoperating expenses (D) ($231,340)
Change in net position (C-D) $299,900
Add: Net position – January 1, 2017 $1,125,040
Net position – December 31, 2017 $1,424,940
b . Prepare the statement of net position for the Tribute Aquatic Center as of December 31, 2017.

The City of Saltwater Beach – Tribute Aquatic Center Enterprise Fund

Statement of net position
For the year ended December 31, 2017
Account Amount $ Amount $ Amount $
Assets
Current assets:
Cash $182,240
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Due from other funds $5,225

Inventory of materials and supplies $8,225
Total current assets (A) $195,690

Restricted cash and cash equivalents (B) $942,000

Capital assets:
Land $1,400,000
Building and equipment $925,000
Less: Accumulated depreciation ($41,625) $883,375
Improvements other than building $4,715,000
Less: Accumulated depreciation ($212,175) $4,502,825
Total capital assets (C) $6,786,200
Total Assets (A+B+C) $7,923,890

Liabilities
Current Liabilities:
Accounts Payable $22,150
Current portion of long-term debt $281,600
Total current liabilities (D) $303,750

Long-term liabilities
Bonds payable (E) $6,195,200
Total liabilities (D+E) $6,498,950

Net position
Net position – net investment in capital assets $309,400
Net position-restricted $942,000
Net position-unrestricted $173,540
Total net position $1,424,940

c. Prepare the statement of cash flows for the Tribute Aquatic Center as of December 31, 2017.

The City of Saltwater Beach – Tribute Aquatic Center Enterprise Fund

Statement of cash flows
For the year ended December 31, 2017
Account Amount Amount
Cash flows from operating activities
Cash received from customers $2,038,355
Less: Cash paid to personnel ($1,038,800)
Cash paid to utilities ($185,800)
Cash paid for repairs and maintenance ($86,225)
Cash paid for supplies ($65,900)
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Net cash provided by operating activities (A) $661,630

Cash flows from non-capital financing activities

Net cash provided by noncapital financing activities (B) $0

Cash flows from capital and related financing activities $9,250

Receipts from the sale of equipment ($281,600)
Less: Payment of long-term debt ($323,840)
Interest Expense ($323,840)
Net cash used for capital and related activities (C) ($596,190)

Cash flows from investing activities

Interest and dividend income $92,500
Net cash provided by investing activities (D) $92,500
Net increase in cash and cash equivalents (A+B+C+D) $157,940
Add: Cash and cash equivalents – January 1, 2017 $966,300
Cash and cash equivalents – December 31, 2017 $1,124,240

Chapter 8: Question 8-4 The financial reporting of fiduciary funds differs from that of

governmental funds because the fiduciary funds are reported in the fiduciary fund financial

statement instead of the government’s financial statement. The government funds are recorded in

the government-wide financial stated in the government activities column. To record the fiduciary

funs, the financial statement is prepared using the accrual basis of accounting. On the other hand,

governmental funds are recorded on a financial statement that is prepared on the modified accrual

basis[ CITATION Low16 \l 1033 ].

Chapter 8: Exercise 8-16

1. a . Permanent fund.

2. b. A fund used to distribute scholarships to the children of the city’s police officers.

3. a. Because the resources in the funds are not owned by the government.
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4. c. Are used to account for the collection and distribution of taxes when one government collects

taxes for multiple purposes and governments.

5. b. A government manages investments for itself and other external entities

6. c. Agency fund.

7. d. Governments may opt to prepare a combining statement of net position to display the assets

and liabilities of individual agency funds.

8. a. Are accounted for using the accrual basis of accounting.

9. d. Both a and c.

10. c. An agent multiple-employer pension plan.

Chapter 8: Exercise 8-17

1. b. Statement of net position

2. d . Fiduciary funds are not reported at the government-wide level.

3. d. Unless mandated by law, the county may use a governmental or proprietary fund; however, an

agency fund is typically used.

4. a . Due to Other Funds and Governments.

5. d . Due to County.

6. c. Debit Equity in Pooled Investments for the current fair value of investments pooled, credit

Investments for the prior fair value of investments pooled, and credit or debit Revenues—Change

in Fair Value of Investments for the difference.

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7. b. The loss of $10,000 is borne by each participant in proportion to its equity in the pool.

8. c. $36,339.

9. b. $145,600.

10. d. $153,750.

Chapter 8: Exercise 8-24

Bluff County employee retirement system

Schedule of changes in the county’s net position liability and related ratios
Last 3 fiscal years
Account 2017 2016 2015
Total Pension Liability
Service Cost $123,225 $125,440 $127,950
Interest $189,730 (a) $182,580 $169,960
Difference between expected and $1,250 ($850) $625
actual
Benefit payments (including ($248,000) ($231,580) (g) (217,960)
refunds of employee contributions)
Net change in total pension liability $66,025 $75,590 $80,575 (o)
Total pension liability, beginning $2,083,715 $2,008,12 (h) $1,927,55

5 0
Total pension liability, ending $2,149,920 (b) $2,083,71 (i) $2,008,12 (p)

5 5
Plan fiduciary net position
Contributions-employee $32,450 $36,240 $30,170 (q)
Contributions-employer $98,620 $102,530 $91,550
Net investment income $18,990 ($12,380) (j) ($21,510)
Benefit payments (including ($64,500) ($42,780) ($51,330)
refunds of employee contributions)
Administrative expenses ($3,290) ($3,110) ($2,840)
Net change in plan fiduciary net $82,270 (c) $80,500 $46,040 (r)
position
Plan fiduciary net position, $1,138,220 (d) $1,057,72 (k) $1,011,68
beginning
0 0
Plan fiduciary net position, ending $1,220,490 $1,138,22 (l) $1,057,72

0 0
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Net pension liability, ending $929,430 $945,495 (m) $950,405 (s)

Plan fiduciary net position as a 56.77% (e) 54.62% 52.67%
percentage of total pension liability
Covered-employee payroll $502,160 (f) $485,218 (n) $489,810
Net pension liability as a percentage 185.09% 194.86% 194.04% (t)
of covered-employee payroll

References

Lowensohn, S. L., & Reck, J. L. (2016). Accounting for Governmental & Nonprofit Entities (17th

ed.). New York, New York: McGraw-Hill Education.

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