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strayer.acc410.2011.wk6.sln

# strayer.acc410.2011.wk6.sln - Accounting 410 Solution to...

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Accounting 410 – Solution to Week 6 Homework (48 points) 8-3 (6 points) 1. Government-wide statements (a, b, and c, in millions) 1 point per JE (a) Cash \$ 89.322 Bond discount 10.678 Bonds payable \$100.00 To record the issuance of bonds (b) Interest expense \$ 3.126 Cash \$ 3.000 Bond discount 0.126 To record first period interest expense (3.5 percent of \$89.322) (c) Interest expense \$ 3.131 Cash \$ 3.000 Bond discount 0.131 To record second period interest expense (3.5 percent of \$89.448 — the initial issue price of \$89.322 plus the \$0.126 of first period bond discount amortization) 2. Governmental fund statements (a, b, and c, in millions) (a) Cash \$ 89.322 Other financing sources—bond proceeds \$ 89.322 To record issuance of bonds (b) Interest expenditure \$ 3.000 Cash \$ 3.000 To record first period interest expenditure (c) Interest expenditure \$ 3.000 Cash \$ 3.000 To record second period interest expenditure 1

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8-5 (5 points- 1 per part) General Fund Government-wide Statements (in millions) (in millions) 1. Expenditure \$ 6.6 Expense \$ 7.7 Increase in debt 0.0 Increase in debt 1.1 2. Expenditure \$ 0.5 Expense \$ 0.0 Change in debt 0.0 Decrease in debt 0.5 3. Expenditure \$ 10.0 Expense \$ 20.0 Change in debt 0.0 Increase in debt 10.0 4. Expenditure \$ 0.0 Expense \$ 0.0 Change in debt 0.0 Increase in debt 99.7 5. Expenditure \$ 4.0 Expense \$ 3.0* Change in debt 0.0 Decrease in debt 1.0 *This amount is for cash interest paid. Additional interest expense should be recognized for amortization of the bond discount. 8-6 (4 points – 1 per part) 1. Upon inception of lease Equipment held under lease \$800,000 Capital lease obligations \$800,000 To record the signing of the lease 2. First payment of interest Capital lease obligations (lease principal) \$ 60,694 Interest expense (lease interest) 48,000 Cash \$108,694 To record the first lease payment (interest equals 6 percent of \$800,000) Depreciation expense \$ 80,000 Accumulated depreciation—equipment held under lease \$ 80,000 To record first year’s depreciation (\$800,000 divided by 10 years) 3. Each year the allocation of the payment will change. As the balance in the lease liability is decreased, the proportion allocated to interest will decrease and that allocated to principal will increase. 4. In the appropriate governmental fund, the lease would be recorded as an “other financing source.” No liability or asset would be recognized. Each lease payment would be reported entirely as an expenditure. No depreciation would be charged. 2
8-10 (4 points) 1. The percentages of the debt applicable to the city were most likely derived by dividing the assessed value of the property located within the city by the assessed value of the property located within the other governments. 2. Direct and overlapping debt Percentage Net Debt Applicable City’s Name of Government Unit Outstanding to City Share City of Wyoming \$ 22,863,510 100.00% \$ 22,863,510 Kent County 125,653,951 13.40 16,837,629 Kent County Intermediate School District 1,766,795 13.55 239,401 Wyoming Public Schools 3,956,922 99.24 3,926,849 Godwin Heights Public Schools 1,338,501 85.96 1,150,576 Kelloggsville Public Schools 2,363,037 61.97 1,464,374 Grandville Public Schools 10,734,809 13.58 1,457,787 Kentwood Public Schools 25,502,958 .55 140,266 Godfrey Lee Public Schools 3,204,362 100.00 3,204,362 Total direct and overlapping debt \$ 51,284,754 3. Adjusted measures Ratio of total net direct debt and overlapping debt to assessed value of property: \$51,284,754/\$1,228,774,900 = 4.17%

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strayer.acc410.2011.wk6.sln - Accounting 410 Solution to...

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