Ch 10 HW Solutions - Acct 3533 Advanced Accounting Chapter...

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Acct 3533 Advanced Accounting Chapter 10 HW Solutions 26. a. The two reconciliation entries that the City must include in its spreadsheet related to Capital assets are as follows: 1. Capital assets, net 500,000 Net assets 500,000 The effect is to increase capital assets by the BOY book value of $500,000 with a resulting increase in net assets. 2. Depreciation expense 25,000 Capital assets, net 275,000 Expenditures - capital outlay 300,000 The effect is to reverse out the expenditures account and to increase capital assets by $300,000 less $25,000 of depreciation expense recognized for the year for a net increase in $275,000 in the capital assets account. b. The first journal entry recognizes on the Government-Wide Statement of Net Assets the Capital Assets at the beginning of the year that are omitted in the Fund Financial Statements. These Capital Assets are not recognized on fund financial statements because they are prepared using the c urrent financial resources measurement focus which reports only those resources that are available to meet current obligations. Since Fund accounting records Capital Asset purchases as expenditures rather than assets, the second journal entry reverses the Expenditures journal entry and records depreciation expense for the year. The debit or credit to Capital Assets, net reflects the net increase (decrease) in Capital Assets for the year.
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27. a. The two journal entries that the Village must make in its spreadsheet related to its Bond liability are as follows: 1. Net assets 10,000 Bonds payable 10,000 The effect is to recognize the BOY balance of bonds payable in the amount of $10,000 and to reduce net assets by that amount. 2. Other financing sources - proceeds from bonds 2,000 Bonds payable 1,500 Expenditures - debt principal payments 500 The effect is to reverse out the $500 of expenditures account relating to debt payments as well as the other financial sources relating to borrowing during the year in the amount of $2,000. The bonds payable account is recognized for the net balance of $1,500.
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