Question 1. The following relate to Hudson City for its fiscal year ended December 31, 2014.
- On January 31, 2014, the city purchased as an investment for its debt service fund a fifteen-year, 6 percent, $1 million bond for $998,000. During the year it received $30,000 in interest. At year-end the market value of the bond was $999,500.
b. On December 31, 2013, the Foundation for the Arts pledged to donate $1, up to a maximum of $1 million, for each $3 that the museum is able to collect from other private contributors. The funds are to finance construction of the city-owned art museum. During 2014, the city collected $600,000 and received the matching money from the Foundation. In January and February 2015 it collected an additional $2,400,000 and also received the matching money.
c. During the year the city imposed license fees on street vendors. All vendors were required to purchase the licenses by September 30, 2014. The licenses cover the one-year periods from October 1, 2014, through September 30, 2015. During 2014 the city collected $240,000 in license fees.
d. The city sold a fire truck for $40,000 that it had acquired five years earlier for $250,000. At the time of sale, the city had charged $225,000 in depreciation.
e. The city received a grant of $2 million to partially reimburse costs of training police officers. During the year the city incurred $1,500.000 of allowable costs and received $1,200,000. It expects to incur an additional $500,000 in allowable costs in January 2015 and to be reimbursed for all allowable costs by the end of February 2015.
Refer to the two lists that follow. Select the appropriate amounts from the lettered list for each item in the numbered list. An amount may be selected once, more than once, or not at all.
1. Amount of investment income that the city should recognize in its debt service fund.
2. Reported value of bonds in government-wide statements at year-end.
3. Amount of investment income that the city should recognize in its government-wide statements.
4. Contribution revenue from Foundation for the Arts to be recognized in funds statements.
5. Contribution revenue from Foundation for the Arts to be recognized in government-wide statements.
6. Revenue from license fees to be recognized in funds statements.
7. Increase in general fund balance owing to sale of fire engine.
8. Increase in net assets (government-wide statements_ owing to sale of fire engine.
9. Revenue in fund statements from police training grant.
10. Revenue in government-wide statements from police training grant.
A. $0
B. $1,500
C. $15,000
D. $30,000
E. $31,500
F. $40,000
G. $60,000
H. $200,000
I. $225,000
J. $240,000
K. $600,000
L. $998,000
M. $999,500
N. $1,000,000
O. $1,200,000
P. $1,500,000
Q. $2,000,000
Question 2. The fiscal year of Duchess County ends on December 31. Property taxes are due March 31 on the year they are levied.
1. Prepare journal entries (excluding budgetary and closing entries) to record the following property tax related transactions in which the country engaged in 2014 and 2015.
a. On Jan 15, 2014 the county council levied property taxes of $170million for the year ending Dec 31, 2014. Officials estimated that 1% would be uncollectible
b. During 2014 it collected $120 million
c. In Jan and Feb 2015, prior to preparing its 2014 financial statements, it collected an additional $45 million in 2014 taxes. It reclassified as delinquent the $5 million of 2014 taxes not yet collected.
d. In Jan 2015, the county levied property taxes of $190 million, of which officials estimated 1.1 % would be uncollectible
e. During the remainder of 2015 the county collected $2.5 million more in taxes relating to 2014, $160 million relating to 2015, and $1.9 million (in advance) applicable to 2016.
f. In Dec 2015 it wrote off $1million of 2014 taxes that it determined would be uncollectible.
2. Suppose the county were to prepare government-wide statements and account for property taxes on a full accrual basis of accounting rather than the modified accrual basis. How would your entries differ? Explain
Question 3. Green Hills County received the following two contributions during a year:
• A developer (in exchange for exemptions to zoning restrictions) donated several acres of land that the county intended to convert to a park. The land had cost the developer $1.7 million. At the time of the contribution its fair market value was $3.2 million.
• A local resident donated several acres of land to the county with the understanding that the county would sell the land and use the proceeds to fund construction of a county health center. The land had cost the resident $2.5 million. The county sold the land intended for the health center for $3 million thirty days after the end of its ?scal year.
1. Prepare journal entries to record the contributions. Be sure to specify the appropriate fund in which they would likely be made.
2. Comment on and justify any differences in the way you accounted for the two contributions.
3. Comment on how each of the contributions would be reported on the county's government-wide statements.
4. How would your answers differ if the land intended for the health center were not sold by the time year-end ?nancial statements were issued?
Question 4. The following relate to three grants that the town of College Hills received from the state during its fiscal year ending December 31, 2015:
1. Prepare journal entries to record the three grants in a governmental fund.
a. A cash grant of $200,000 must be used to repair roads.
b. $150,000 in cash is received out of a total grant of $200,000 intended to reimburse the town for actual expenditures incurred in repairing roads. During the year, the town incurred $150,000 in allowable repair costs.
c. A cash entitlement grant of $200,000 is intended to supplement the town's 2016 budget and must be expended in that year.