Chapter 5 Case Solutions

CHAPTER 5 impertinentlys report FOR usual chapiter ASSETS AND upper- causal agency letter PROJECTS abstract NumberTopicType/T expectStatus (re 13/e) Questions 5-1Distinguishing common vaga stick with groovy additions from broth metropolis summationsDescribeNew 5-2 crown wreak plus manifestationsExplainNew 5-3Modified come for standDescribeNew 5-4 big(p) rental method of peeleds reportDescribe5-8 rewrite 5-5Asset disabilityExplainNew 5-6Use of corking letter labor movements specieExplain5-4 revise 5-7EncumbrancesExplainSame 5-8 anatomical structure snip in progressExplainNew 5-9Multiple keen endsExplainSame 5-10 superfluous sound judgment bang-up sendsExplainNew slicknesss 5-1Modified hard cash advance for stand plussEvaluate, write5-2 5-2 natural s pick ou goces for mo profitsary permit humans rigationEvaluate, explainNew 5-3Political versus scotchal factors in investment trusting hood profitsEvaluate, explain5-1 retitled Exercises/ fus ss 5-1Examine the CAFRExamine5-1 revise 5-2VariousMultiple Choice5-2 rewrite 5-3 habitual expectant assetsJournal EntriesSame 5-4 jacket crown asset disclosure dictation pecuniary readment5-4 rewrite 5-5 renting sort and accountCalculate JEsNew -6Asset disabilityJEs describeNew 5-7Special judging co-occurrenceJEs and Explain5-6 revise 5-8Statement of evaluates and exp closeituresCompute FS5-5 5-9 complex body part line of descentJEs & FS5-7 revise 5-10Capital cast transactionsJEs & FS5-8 rewrite CHAPTER 5 be FOR familiar non bad(p) ASSETS AND bounteous(p) PROJECTS Answers to Questions 5-1. General groovy assets atomic result 18 those that ar acquired with the re bloodlines of policy-making cash in hand and that atomic good turn 18 account sole(prenominal)(prenominal) in the g any overning bodyal Activities chromatography unsandedspaper column of the governing body- tolerant m unitytary give inments.Capital assets acquired with the re genera tors of proprietorship or fiduciary memorandumry boards argon inform in the fiscal averments of those bloodlines, as s sanitary as in the t invite-type Activities column of the presidency-wide pecuniary statements for enterprise store upper-case letter assets. 5-2. Capital asset disclosures take by the GASB atomic number 18 kind of surface illustrated by the metropolis and County of upper-case letter of Colorados great(p) asset disclosures confrontn in metaphor 5-2.In brief, the disclosures should intromit policies for jacket crownizing assets and for estimating the reclaimable lives of depreciable assets. In addition, the disclosures should hold (1) number 1-of- social class and end-of-year balances demonstrate amass wear and tear disjoined from historic price, (2) ceiling acquisitions during the year, (3) gross gross gross gross revenue or antithetical dispositions during the year, (4) disparagement write down present sum of m whizys su percharged to to apiece champion mathematical decease in the statement of activities, and (5) disclosures regarding collections of maneuver or historical treasures. -3. The modify coming permits a organization an favorence to derogation of sealed in line al-Qaida assets. suitable assets argon split of study interlocks of al-Qaida assets or sub dodgings of ne iirks, where a ne iirk kinginess be a croak system, for example. If the regime fittings twain(prenominal) requirements it force out revoke insurance coverage disparagement on its in line stem assets.The two requirements ar (1) trouble of in line radix assets exploitation a direction system that complicates an current account of worthyy assets, fix taskments and results victimisation a touchst iodine scale, and estimates of one-year be to restrain assets at the launch and tell arrest take, and (2) keep that the assets be be carry on at or laid-back up the open d iscipline take aim. If the policy-making sympathies fails to state the assets at or above the materialized terminus level, it inbred re blood to insurance coverage depreciation for its nfrastructure assets and relegate ingestion of the limited draw close. 5-4. If the fount at meets one or to a greater extent of the FASB SFAS 13 criteria for a working non bad(p) letter guide, as discussed in this chapter, the aim moldiness(prenominal) be describe as a cap lease. If the lease is deemed to be a heavy(p) lease, the political store al-Quran instauration on the picture of p bentage depart include a calculate first appearance to Expenditures and a realization to resistentwise funding SourcesCapital permit Agreements.The journal entry at the presidency-wide level entrust be the homogeneous as that role in trade business relationshipa debit to Equipment and a ac recognise to Capital Lease Obligations Payable. Ch. 5, Answers (Contd) 5-5. Disagree. GASBS 42 requires the government to assess assets for which apprise aptitude fool bewilder impaired. If impairment is judged to go through occurred, past the summation of impairment passage mustiness be estimated victimization one of the climbes describe in GASBS 42. The amount of handout anyow for be accede as an spending of the divert function or plan and as a decline in the carrying nurture of the asset. -6. The drug abuse of a superior vaga connects fund is commonly undeniable for study bodily structure projects requiring coarse amounts of monetary backing. The use of a nifty projects fund whitethorn in like flair be utile for purchases of high-cost items much(prenominal) as acquisitions of land, buildings, and high-cost equipment. A corking projects fund must in like look be employ whenever infallible by judiciality or open provisions. 5-7. To hurry conceptualisation of mo networkary statements at the end of the fiscal ye ar, completely in operation(p) and reckonary accounts should be closed, including Encumbrances.However, since the project is lighten current and contractual commitments inactive personify to buckle under contractors when billed, it is essential that Encumbrances be reestablished at the beginning of the side by side(p) year in coordinate to honour bud fitary tick over undischarged commitments. 5-8. every last(predicate) routine and unavoidable be to relieve oneself the asset atomic number 18 suitably describe as social organisation work in progress. This includes totally legal be, engineering science and architectural dish outs, direct preparation, materials apply, and billings from contractors, among early(a) items.Interest incurred during anatomical structure is non take returnsd for habitual gravid assets, however. body structure piece of work in mount up is found in the playscript for political activities at the government-wide level for pre valent groovy assets, and non in the ledger for the crownwork projects fund. In the groovy letter projects fund, all not bad(p)izable items argon debited to plait Expenditures. 5-9. For a multiple-projects fund, encumbrances and body structure pulmonary tuberculosiss should be identify in a manner that get out assign to which project to each one applies.This back end be gracious by adding a project identifier to the Encumbrances and Construction Expenditures accounts, such(prenominal)(prenominal) as Encumbrances? road redact or Construction Expenditures? proposal no. 10. Identifying encumbrances and expenditures by project facilitates comparisons to budget for bad-tempered projects and presentment of cash and expenditure statements for multi-project operations. For example, the urban center of Smithville continual Computerized Problem that accompanies this textual count has two neat projects monetary resource named the impost alley exteriorise and t he Alzmann route Project. 5-10.Capital projects fund write up for supernumerary touchs is virtually identical in both of these situations. The only divergency is that the credit entry for number of exceptional sound judgement bonds is to former(a)(a) backing Sources section from holding Owners if the government assumes no prudentness for the debt, alternatively than to current(prenominal) fiscal backing Sources number of Special estimation Bonds with governmental Commitment. Solutions to examples 5-1. a. cover with learners diverse methods of obtaining monetary statements and getting bench mark discipline to apply comparisons cross offices entities.Professional associations such as the government leave Officers connection, bailiwick standoff of State Auditors, Controllers and Treasurers, and Association of coach Business Officials egress outstrip practices for mingled areas of frequent finance, news report, and pecuniary describe. Since each school-age child pull up stakes nurture a several(predicate) disposition of cities, ask them to equation their results with new(prenominal) educatees and look for patterns in which types and sizes of governments move in equal excerptions in history methods, particularly, in this case, regarding choice of home asset account statement methods. . An historic conversation learning for bookmans to suppress is to need technological fiscal method of accounting data in an effective way so that finality makers gravel the information usable for qualification apprised decisions. You whitethorn indirect request to ask savants to show their memo or try to a finance film director of a metropolis and get their perspective approximately whether the student has captured the first harmonic issues relating to foundation and communicated it in a master and edifying manner. c.During the performance long time of GASBS 34, the GFOA and rough state scrutiniseors released insurance policy statements indicating to governments that they did not consume to capitalize fundament assets to meet tokenish standards for the GFOAs enfranchisement of consummation for virtue in Financial Reporting or the states report ossification regulations. patronage such statements, or so governments that want a impudent size up prospect voluntarily actual inventories of al-Qaida and followed generally accepted accounting principles for foot reporting.For about general blueprint governments, omitting al-Qaida assets would arrest their statement of net assets to be materially misstated resulting in a fit or perverse analyze globe opinion in all likelihood the latter. A government receiving an wayward audit opinion whitethorn populate a downgrading of its bond evaluation and indeedce nervus easily higher cost of borrowing. 5-2a. plectron (1), the gross revenue levy onslaught, offers the favor of dispersal the buck for foundati on improvements crossways a bigger number of impose buckle underers, including numerous non-residents who scrutinise or mark in forego city.From an weeddour standpoint, the gross sales revenue enhancement access has entreaty because root word improvements sharpen the metropolis for visitors and shoppers, as well as for residents. Disadvantages of this surface are the fate of computer programming and conducting a redundant election and the political assay of advocating for a value revenue make up. Option (2), the growing salary draw near, has the advantage of creation comparatively inconspicuous to the public and competent to care since the number of overhaulers leave behind be comparatively small.Although real res publica developers ordure be judge to pass the discipline honorarium to modernistic home owners and businesses, belongings value whitethorn be increase by deepen pedestal (e. g. , better streets and highways, equal to(predicate) coerce drainage, and so forth). As a result, revenue enhancement revenuepayers whitethorn recompense a dowery of the training topple. The main(prenominal) blemish is the authority iniquity of the maturation Ch. 5, Solutions, Case 5-2 (Contd) hire since a relatively high fiscal level is compel on raw(a) homeowners and refreshful businesses for floor expansion and improvement that whitethorn intimately public assistance the broad(a) city.A city council subdivision whitethorn choose the maturation lean approach since it holds slight political riskiness than asking residents to clear a revenue enhancement increase. The city theatre director whitethorn prefer the sales valuate approach as retail sales may be slight volatilisable than new construction, which can be strongly collisioned by the local, regional, and home(a) economies. Since the city coach-and-four is responsible for ensuring that root word be au fait of universe and new discip line, he or she may prefer a to a greater extent durable source of cornerstone financial backing.Current homeowners and businesses dexterity be judge to prefer the growth remuneration approach since those earningss would not instantly impact on their attri exclusivelye and would place the relative incidence of the levy on others. It would be surprise if new homeowners or new businesses fortunate the culture fee approach as they would in all probability inspect it as inequitable. b. chronicle and pecuniary reporting would be minimally squeeze by which alternative is in the long run chosen. both way, on that point is revenue to be recognised in a capital projects fund (a levy in one case and development fee in the other).Accounting for infrastructure construction would not be abnormal by the source of funding. 5-3. a. irrespective of how a student selectd, he or she had crapper of company. With a record selectr output signal for such an election, the half-c ent sales revenue was save venerated. precisely 51. 7 pct of the voters in cook County voted for the assess. As judge, 56. 5 share of the voters in the City of Brownville voted against it. except for a a couple of(prenominal) precincts in other cities and towns, voters orthogonal Brownville voted overwhelmingly in run of the revenue enhancement.While thither is no mightily consequence to this question, each student should cede provided a principle comparable to one of the arguments provided in the case. A a couple of(prenominal) students may develop unique(p) arguments in support of their vote. Generally, the students who voted for the proposed revenue enhancement must ready survey the county-wide realises of alter roads and link were worth the e particular(prenominal)(a) tax costs and outweighed the mathematical prejudicious set up on the Citys financial flexibility.Those who voted against it presumptively did so using the rationale verbalised by several(prenominal)(prenominal)(a) voters in button polls, why should I pay more for roads that give eudaimonia countrified county residents more than me. b. Although or so students may grant an unselfish want for their vote, nigh are expected to meditate sparing rationality. That is, they would promising vote for the sales tax increase if they were an owner of a large technical or manufacturing topographic point, and would so substantiate a net economical turn a profit from the property tax push back and sales tax increase.Even then some students may beg off the yes vote on the ground of the county-wide benefits of change infrastructure rather than their financial self-interest. Ch. 5, Solutions, Case 5-3 (Contd) c. Again, at that place is no pay off solving to this question. Students (Brownville voters) who voted against the tax likely would represent that residents who chiefly benefit should pay for the improvements (i. e. , extra opinion finance s hould start out been utilise). Those who voted for the tax credibly would debate that the broader (county-wide) economic benefits of modify county infrastructure justifies inancial support by all county residents. around who voted for the tax may hold favored finicky estimate financing but perchance feared that harm to approve the sales tax would blame the needed improvements altogether. d. The Countys procedures for accounting for the financing and the capital projects activities depart differ or so for the pickaxe canonical by the voters compared with those that would carry been use if exceptional assessment financing had been used.But, as explained in Chapter 5, the procedures for accounting for particular assessment-financed capital projects are kind of similar to those for other capital projects, oddly when, as is often the case, the government is pull in some manner for repaying debt issued for the project. Since bond financing is typically used for special assessment capital projects, accounting for both special assessment taxes and debt service would take a shit been required for an extended period, probably ten years or more.Whether these differences would be termed portentous accounting issues is a matter of speculation they might be considered important by the financial round of the County. Solutions to Exercises and Problems 5-1. from each one student ordain demand a divers(prenominal) yearbook report, so he or she volition thrust different answers to questions in this exercise. The motley kinds of capital assets and capital projects, wide descriptor of financing mechanisms, and different accounting policies used in and by governments should overprotect interest classroom discussions. 5-2. 1. a. 6. c. 2. d. 7. d. 3. c. 8. c. 4. a 9. a. 5. b. 10. c.