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Exercise 1-3, answer (4th edition) by Granof and Wardlow 1. Employees earned $128,000 in salaries and wages for the last five days in December 2007....

Exercise 1-3, answer (4th edition) by Granof and Wardlow

1. Employees earned $128,000 in salaries and wages for the last five days in December 2007. They were paid on
January 8, 2008.

2. A consulting actuary calculated that per an accepted actuarial cost method, the city should contribute $225,000 to its firefighters’ pension fund for benefits earned in 2007. However, the city contributed only
$170,000, the amount budgeted at the start of the year.

3. The city acquired three police cars for $35,000 cash each. The vehicles are expected to last for three years.

4. On December 1, 2007, the city invested $99,000 in short-term commercial paper (promissory notes). The notes matured on January 1, 2008. The city received $100,000. The $1,000 difference between the two amounts represents the city’s return (interest) on the investment.

5. On January 2, 2007, the city acquired a new $10 million office building, financing it with twenty-five-year serial bonds. The bonds are to be repaid evenly over the period they are outstanding—that is, $400,000 per year. The useful life of the building is twenty-five years.

6. On January 3, 2007, the city acquired another $10 million office building, financing this facility with twenty five- year term bonds. These bonds will be repaid entirely when they mature on January 1, 2032. The useful life of this building is also twenty-five years.

7. City restaurants are required to pay a $1,200 annual license fee, the proceeds of which the city uses to fund its restaurant inspection program. The license covers the period July 1 through June 30. In 2007 the city collected $120,000 in fees for the license period beginning July 1, 2007.

8. The city borrowed $300,000 in November 2007 to cover a temporary shortage of cash. It expects to repay the loan in February 2008.
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