20 Fischer10e SM Ch17 Final

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CHAPTER 17
UNDERSTANDING THE ISSUES
1. The new reporting model adopts full accrual governments financial statements. Information
accounting for the government-wide state- required to be included: a brief discussion of
ments for both governmental and business- the basic financial statements, including how
type activities. Therefore, a conversion of the they relate to each other and the significant
governmental fund activity is necessary in differences in the information they provide;
order to present government-wide financial condensed current and prior-year financial
statements. Since business-type activities are information from the government-wide financial
already recorded at full accrual, there is no statements; an analysis of the governments
conversion necessary from fund to govern- overall financial position and results of opera-
ment-wide financial statements. tions, including impact of important economic
factors; an analysis of individual fund financial
2. Both fund and government-wide financial
information, including the reasons for signifi-
statements are required in the new model.
cant changes in fund balances (or net assets)
Fund statements include (1) the governmental
and whether limitations significantly affect the
fund balance sheet and statement of revenues,
future use of the resources; an analysis of
expenditures, and changes in fund balances;
significant variations between original and final
(2) the proprietary fund balance sheet, state-
budget amounts and between final budget
ment of revenues, expenses, and changes in
amounts and actual budget results for the gen-
net assets, and statement of cash flows; and
eral fund; a description of changes in capital
(3) the fiduciary fund statement of net assets
assets and long-term liabilities during the year;
and statement of changes in net assets. The
a discussion of the condition of infrastructure
fund statements provide information on flows of
assets; and a description of currently known
financial revenues. Government-wide state-
facts, decisions, or conditions that have or are
ments include a statement of net assets and a
expected to have a material effect on the finan-
statement of activities. They provide full ac-
cial position or results of operations.
crual, consolidated government-wide reports.
Budgetary comparison information may be re- 5. The budgetary comparisons may be included
ported in a statement and in a schedule as an additional statement or in a schedule.
accompanying the financial statements. The original as well as amended budget must
be included with a comparison of actual results
3. Major funds are those funds management
reported on a budgetary basis.
chooses to disclose in a separate column in the
fund statements either due to their relative size 6. Interfund transactions are recorded separately
or because they are of particular interest or from other transactions. Interfund payables and
convey unique information. The general fund is receivables are eliminated when government-
always considered a major fund. Funds whose wide statements are prepared. Interfund
assets, liabilities, revenues, or expendi- payables and receivables are netted and
tures/expenses are at least 10% of all funds in shown separately as internal balances. In addi-
a category (all governmental or all enterprise) tion, internal service fund revenues and ex-
and are at least 5% of all government and en- penses are eliminated, and charges are ad-
terprise funds combined must be considered justed to eliminate the internal profit by de-
major funds. creasing expenses for internal service fund
services in the various funds.
4. The purpose of the MD&A is to give a concise
overview and analysis of the information in the
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Ch. 17Exercises
EXERCISES
EXERCISE 17-1
Note to Instructor: The 2005 CAFR of the city of Milwaukee needs to be examined to answer these
questions. The general fund is always considered a major fund. Every other governmental fund from
the combining statements must be examined to determine if it is at least 10% of all the governmental
funds and at least 5% of all government and enterprise funds combined. Every enterprise fund from the
combining statements must also be examined to determine if it is at least 10% of all the enterprise
funds and at least 5% of all government and enterprise funds combined. The size tests are based on
assets, liabilities, revenues, and expenditures/expenses. Internal service funds are not considered ma-
jor funds. In addition, management may determine funds that it wishes to disclose in a separate column
in the fund statements because they are of particular interest or convey unique information, even
though they do not meet the size test.
EXERCISE 17-2
Note to Instructor: This assignment can also include a class presentation or class discussion as part of
a student project. It may be useful to have student groups or teams work on this assignment.
EXERCISE 17-3
(1) Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balance.
Special Capital Capital Total Total

General Revenue Projects Projects Nonmajor Government
Fund Fund B Fund A Fund B Funds Funds
(2) Proprietary Fund Statement of Revenues, Expenses, and Changes in Net Assets
Total Enterprise Funds

Other
Enterprise Enterprise Enterprise Total Internal
Fund D Fund E Funds Totals Service Funds
716
Ch. 17Exercises
EXERCISE 17-4
(1) a When moving from modified accrual to full accrual accounting, many long-term liabilities
may need to be adjusted.
(2) c Both expenditures for debt principal and capital outlays must be eliminated and converted
to expenses. In addition, depreciation expense must be recorded.
(3) a The government-wide statements report internal service funds among the governmental
activities and do not include fiduciary funds. Component units are included in government-
wide statements.
(4) a All capital assets, including infrastructure, must be included in the government-wide state-
ments. In addition, all capital assets must be depreciated. Governments may elect the mod-
ified approach in lieu of depreciation if they meet the criteria set forth for the modified ap-
proach.
(5) d The government-wide statements do not include fiduciary funds but do include component
units, and internal service funds are included with governmental activities.
(6) c An up-to-date inventory and a current condition assessment are necessary for the modified
approach. In addition, governments must keep the capital assets maintained at or above
the predetermined condition level.
(7) c Revenue that is specific to a particular activity, function, or program, such as fees for ser-
vices, specific tax revenue, operating grants, or capital grants, is considered program reve-
nue. Other revenue is considered general government revenue necessary to support all
activities not covered by specific program revenues.
(8) d The government-wide statements report internal service funds among the governmental
activities. The reason is that these are internal cost allocation mechanisms and not
business-type activities. Thus, internal service funds are included in the governmental ac-
tivities column in the government-wide statements.
(9) c The reconciliation is necessary for the governmental funds to convert the modified accrual
fund information to the full accrual government-wide governmental activities information. In
addition, internal service fund balances must be added to the governmental funds as part of
the conversion. Reconciliation may be either on face of financial statement or as a separate
statement.
(10) b The statement of cash flows is part of the proprietary fund financial statements but is not
part of the government-wide statements.
EXERCISE 17-5
To convert from the governmental fund balance sheet to the government-wide statement of net assets,
the following adjustments are necessary:
Add general capital assets, including infrastructure, net of accumulated depreciation.
Add general long-term liabilities.
Add assets and liabilities of most internal service funds.
Adjust balances of assets and liabilities from modified accrual to full accrual.
Convert fund balances to three categories of net assetsinvested in capital, restricted, and un-
restricted.
717
Ch. 17Exercises
EXERCISE 17-6
(1) a The governmental cash flow statement contains four parts: operating, capital-related fi-
nancing, non-capital-related financing, and investing.
(2) c In the fund statements, proprietary funds are included in the proprietary fund balance sheet,
statement of revenues, expenses, and changes in net assets, and statement of cash flows.
In the government-wide statements, proprietary funds are included in business-type activi-
ties columns in both the statement of net assets and the statement of changes in net as-
sets.
(3) d Account groups are not reported in either the fund or government-wide statements.
(4) b Total columns are not required for combining statements but are quite commonly shown.
Total columns are required in both the fund and government-wide combined statements
under the new reporting model.
(5) a A statement of cash flows is required for all enterprise funds.
(6) d Construction in progress will be reported in the government-wide statements as a capital
asset. Capital assets are not reported in the fund statements.
EXERCISE 17-7
The new reports model requires that all capital assets, including infrastructure assets, be included on
the financial statements. In addition, these assets must be depreciated. (The rules are effective three
years after the requirement for implementing the new reporting model.) Governments may adopt a
modified approach to depreciation if they have an up-to-date inventory of their infrastructure assets
and have a current condition assessment. As long as the assets are maintained at an agreed-upon
condition, depreciation does not need to be recorded. The advantage of recording depreciation is ease
of implementation. The disadvantages include recording the additional expense on the statement of
activities and the lack of useful information in the opinion of many governmental managers and financial
statement users. The advantage of the modified approach is that as long as assets are maintained,
there is no depreciation expense recorded on the statement of activities. The disadvantage is the cost
of implementation and monitoring. Also, if the condition drops below the required level, the government
must record depreciation.
718
Ch. 17Problems
PROBLEMS
PROBLEM 17-1
(1) b The statement of activities is presented using a net program expense format where pro-
gram revenues are subtracted from program expenses to determine the amount funded by
general revenues.
(2) d Special purpose governments that provide business-type activities only are permitted to
report the financial statements required for enterprise funds. Since these are already on an
economic measurement focus using full accrual accounting and all of the expenses are
covered by program revenues, there is no need to convert to government-wide statements.
(3) d The government-wide financial statements include a statement of net assets and a state-
ment of activities with an economic resources measurement focus and are prepared on a
full accrual basis of accounting. Governmental activities and business-type activities of the
primary government are included as well as financial information about component units.
(4) b Budgetary comparison may be included as a separate statement or schedule. The budge-
tary comparisons are considered required supplementary information and not part of the
basic financial statements.
(5) c Combining statements are used to add together nonmajor funds of the same type in order
to present summary data in the combined statements. They are not considered part of the
basic financial statements but are included in the comprehensive annual financial state-
ment.
(6) a The three major sections of the comprehensive annual financial statement are the introduc-
tory section, the financial section, and the statistical section. The MD&A and the auditor's
report are part of the financial section.
(7) a The government-wide financial statements include a statement of net assets and a state-
ment of activities with an economic resources measurement focus and are prepared on a
full accrual basis of accounting. Governmental activities and business-type activities of the
primary government are included as well as financial information about component units.
Comparison with prior-year data is not required. Works of art and historical treasures need
not be capitalized.
(8) a The new reporting model requires that all capital assets, including infrastructure, be record-
ed and depreciated. Governments have the option of choosing a modified approach for in-
frastructure assets. Under the modified approach, governments do not report depreciation if
they have an up-to-date inventory of capital assets, a condition assessment of all infrastruc-
ture assets, and maintenance of them at or above a predetermined level.
(9) d Major funds are those funds which management chooses to disclose in a separate column
in the fund statements either due to their relative size or because they are of particular
interest or convey unique information. Funds whose assets, liabilities, revenues, or
expenditures/expenses are at least 10% of all funds in a category (all governmental or all
enterprise) and at least 5% of all government and enterprise funds combined must be con-
sidered a major fund. The general fund is always considered a major fund.
719
Ch. 17Problems
Problem 17-1, Concluded
(10) b The Office of Management and Budget (OMB) sets standards for audits of recipients of
federal financial assistance. Guidance for the single audit is found in OMB Circular A-133.
(11) c OMB Circular A-133 applies to state, local, and not-for-profit organizations that receive
more than $300,000 of federal financial assistance in the form of grants, contracts, etc.
(12) b The total amount of internal control and compliance testing is based on making sure that
50% of the federal expenditures are subject to audit.
PROBLEM 17-2
Note to Instructor: This assignment can also include a class presentation or class discussion as part of
a student project. It may also be useful to have student groups or teams work on this assignment.
PROBLEM 17-3
The authority is legally separate. The primary government appoints a voting majority of the board, but
the primary government may not be able to impose its will over the authority due to the staggered terms
and security of office. There is a financial burden/benefit, so the authority should be a component unit.
PROBLEM 17-4
(1) The school district is not legally separate, so it is part of the city and not a component unit.
(2) The authority is legally separate, the city has financial accountability, and so it is a component unit.
Because it leases equipment exclusively to the city, the financial information will be blended in the
fund and government-wide statements.
(3) The mayor appoints all members of the board so it can be assumed that there is control over the
board. Since the housing authority does not primarily serve the city, the financials will be discretely
presented in the government-wide statements.
(4) Since the hospital is owned by the city, it is not legally separate and therefore part of the city and
not a component unit.
(5) The water utility is a joint venture and not a component unit. The citys equity interest will be pre-
sented in the government-wide statements as an asset.
(6) The school district is a special purpose government separate from the city.
720
Ch. 17Problems
PROBLEM 17-5
The financial reporting entity of a government includes the primary government and all its component
units. An example of a primary government is a city. An example of a component unit is a legally sepa-
rate hospital for which the city is financially accountable. Component units can either be blended into
the financial reports of the primary government or discretely presented in a separate column. Blending
is required if the component unit is established primarily to serve the primary government or if the two
boards are essentially the same.
PROBLEM 17-6
(1) Budgetary Fund Balance ........................................................... 305,000

Estimated Other Financing Uses ............................................... 25,000
Appropriations ............................................................................ 640,000
Estimated Other Financing Sources ...................................... 950,000
Estimated Revenues ............................................................. 20,000
(2) Statement of Revenues, Expenditures, and Changes in Fund Balance
For the Year Ended December 31, 20X9
Revenues ..................................................................................................... $ 16,600

Expenditures ................................................................................................ (686,600)
Excess of revenue over expenditures .......................................................... $ (670,000)
Other financing sources ............................................................................... 900,000
Other financing uses .................................................................................... (15,000)
Excess of revenue and other financing sources
over expenditures and other financing uses .......................................... $ 215,000
Fund balance, January 2, 20X9 ................................................................... 0
Fund balance, December 31, 20X9 ............................................................. $ 215,000
(3) Balance Sheet as of December 31, 20X9

Cash.................................. $ 75,000 Contracts payable.................. $ 60,000
Investments....................... 200,000 Fund balancereserved
Total assets .................. $275,000 for encumbrances .............. $ 80,000
Unreserved ............................ 135,000
Total fund balance ............ $215,000
Total liabilities & fund balance $275,000
721
Ch. 17Problems
PROBLEM 17-7
Fund Debit Credit Government-Wide

Revenues ...................................... (16,600) (16,600)
Other Financing Sources .............. (900,000) (2) 900,000 0
Expenditures ................................. 686,600 686,600 (1) 0
Other Financing Uses ................... 15,000 15,000
Bonds Payable .............................. 0 900,000 (2) (900,000)
Capital Assets ............................... 0 (1) 686,600 686,600
The adjustments will convert (eliminate) other financing sources and transfer that balance into bonds
payable. The expenditure for capital assets will be eliminated since capital assets must be recorded on
the government-wide statement of net assets.
PROBLEM 17-8
Statement of Net Assets

June 30, 20X9
Governmental Business-Type Total Primary
Activities Activities Government
Assets:
Cash and cash equivalents .................... $ 280,000 $ 75,000 $ 355,000
Receivables ............................................ 36,000 145,000 181,000
Inventory................................................. 56,000 56,000
Capital assets (net) ................................ 1,500,000 1,100,000
2,600,000
Total assets ...................................... $1,816,000 $1,376,000 $3,192,000
Liabilities:
Accounts payable ................................... $ 65,000 $ 56,000 $ 121,000
Noncurrent liabilities ............................... 500,000 300,000 800,000
Total liabilities ................................... $ 565,000 $ 356,000 $ 921,000
Net assets:
Invested in capital, net of
related debt....................................... $1,000,000 $ 800,000
$1,800,000
Restricted ............................................... 65,000 36,000 101,000
Unrestricted ........................................... 186,000 184,000 370,000
Total net assets ................................ $1,251,000 $1,020,000 $2,271,000
722
Ch. 17Problems
PROBLEM 17-9
Statement of Activities
As of June 30, 20X9
Program Revenues Net Revenue Change in Net Assets

Charges Business-
for Operating Capital Governmental Type
Expenses Services Grants Grants Activities Activities Total
Governmental activities:
General government .................. $ 1,300,000 $ 100,000 $(1,200,000) $
0 $(1,200,000)
Public safety ............................... 240,000 25,000 $ 70,000 (145,000) 0
(145,000)
Public works ............................... 1,000,000 (1,000,000) 0 (1,000,000)
Health and sanitation ................. 650,000 250,000 150,000 (250,000) 0 (250,000)
Culture and recreation................ 450,000 200,000 (250,000) 0 (250,000)
Interest on long-term debt .......... 60,000 (60,000) 0
(60,000)
Total governmental activities .. $ 3,700,000 $ 575,000$220,000 $(2,905,000) $
0 $(2,905,000)
Business-type activities:
Water and sewer system............ $1,500,000 $ 1,800,000 $ 0 $ 0 $ 300,000
$ 300,000
Parking system........................... 45,000 40,000 0 0 (5,000)
(5,000)
Total business-type activities .. $1,545,000 $ 1,840,000 $ 0 $ 0 $ 295,000
$ 295,000
Total primary government .......... $5,245,000 $ 2,415,000 $ 220,000 $(2,905,000)
$ 295,000............... $(2,610,000)
Property taxes .............................................................................................. $ 2,500,000 $2,500,000
Sales taxes................................................................................................... 2,000,000 2,000,000
Investment earnings ..................................................................................... $ 30,000 30,000
Special itemgain on sale........................................................................... 140,000 140,000
Transfers between funds.............................................................................. (70,000) 70,000
0
Total general revenues ............................................................................ $ 4,570,000 $ 100,000 $
4,670,000
723
Ch. 17Problems
Change in net assets ................................................................................... $ 1,665,000 $ 395,000 $
2,060,000
Net assetsJuly 1, 20X8 ............................................................................. 1,400,000 2,500,000
3,900,000
Net assetsJune 30, 20X9 ..................................................................... $ 3,065,000 $2,895,000 $
5,960,000
724
Ch. 17Problems
PROBLEM 17-10
(1) The basic financial statements in the new reporting model include both government-wide financial
statements and fund financial statements. The government-wide financial statement presents the fi-
nancial picture of Minneapolis from an economic resources measurement focus using full accrual
basis of accounting. Governmental and business-type activities are presented separately. The
government-wide statements include all assets and all liabilities (including infrastructure assets and
long-term debt). In addition, certain interfund activity and interfund payables and receivables have
been eliminated. The fund financial statements include separate statements for each of the three
categories of activitiesgovernmental, proprietary, and fiduciary. The governmental activities
statements present information from a current financial resources measurement focus using the
modified accrual basis of accounting. The proprietary activities are presented from an economic
resources measurement focus using the full accrual basis of accounting. The only fiduciary fund of
Minneapolis is an agency fund presented in a balance sheet. In addition to the examples shown in
the text, the financial section includes the auditors opinion and detailed notes and supplementary
information. Minneapolis has no fiduciary funds and no permanent funds.
(2) The managements discussion and analysis is a requirement in the new reporting model. It provides
an overview of the citys financial activities for the fiscal year and is subject to audit. The MD&A
provides an objective and easily readable analysis of the governments financial activities based on
currently known facts, conditions, or decisions. The focus is on the primary government. There are
eight specific requirements for the MD&A as listed in the text. No additional information can be
included. Governments can, however, provide as much detail as they wish about the required
information. The MD&A differs from the letter of transmittal. The letter of transmittal is optional;
governments can choose any format to communicate information. It provides a forum for govern-
ment officials to discuss plans and other information that may not meet the currently known facts,
conditions, or decisions criteria for the MD&A.
(3) Budgetary comparison information is reported as required supplementary information. A description

of the annual budget, comparison of departmental expenditure totals from prior years, and a budge-
tary comparison schedule with original, final, and actual amounts (and a variance column) are in-
cluded.
(4) Minneapolis has 3 major governmental funds: Community Planning and Economic Development,
Convention Center, Permanent Improvement
Minneapolis uses the GASB Statement No. 34 criteria for determining major fundsmeeting the
test of 10% of total governmental assets, liabilities, revenues, or expenditures, and at least 5% of
the corresponding total for all governmental and enterprise funds. In addition, certain funds are pre-
sented as major funds because the city believes the financial position and activities of these funds
are significant to the city as a whole.
Nonmajor governmental funds (found on the combining statements):
Special revenue: Arena Reserve, Board of Estimate and Taxation, Community Development Block
Grant, Convention Facilities Reserve, Employee Retirement, GrantsFederal, GrantsOther, Po-
lice
725
Ch. 17Problems
Debt service: Community Planning and Economic Development, General Debt Service Special As-
sessment
Capital projects: none
Permanent funds: none
(5) Minneapolis capitalizes and depreciates (or amortizes) all capital assets (including infrastructure)
using a straight-line method over the lesser of the capital lease period or estimated useful lives in
the government-wide statements and proprietary fund. Estimated useful lives of infrastructure as-
sets range from 15 to 100 years.
PROBLEM 17-11
(1) The measurement focus for governmental funds is financial resources, and the basis of accounting
for governmental funds statements is modified accrual. The proprietary and fiduciary fund state-
ments adopt economic resources as the measurement focus and use the full accrual accounting
basis. The government-wide statements measure economic resources and report activities using
full accrual accounting for both governmental and business-type activities.
(2) Differences between fund financial statements and government-wide statements:

Fund Statements Government-Wide Statements
Component units Only blended component units Both blended and discretely
are included. presented component units
are included.
Fiduciary funds Separate fiduciary fund state- Fiduciary funds are not included.
ments include a statement of
net assets and a statement of
changes in net assets.
Internal service funds Internal service funds are Internal service funds are included
included in the proprietary in governmental activities.
fund statements.
(3) The three net asset categories found in the statement of net assets:
Invested in capital assets, net of related debt Fixed assets of the government less all fixed
asset-related debt (current and noncurrent)
Restricted Externally restricted assets less any
liabilities payable from these restricted assets
Unrestricted Difference between the remaining assets and
liabilities as well as reclassified restricted assets
726
Ch. 17Problems
PROBLEM 17-12
(1) Major programs for the audit will include Programs 1, 3, and 5. These three programs are identified
due to their size and risk assessment. They represent more than 40% of the total federal assistance
expenditures.
(2) If Program 2 were to be assessed as high risk, then the audit would be focused on Programs 1 and
2 only.
PROBLEM 17-13
Musky City
Reconciliation Schedules
(1) Balance Sheet to Statement of Net Assets

Total fund balances for governmental funds $ 15,462,380
Add:
Land .............................................................. $ 3,871,054
Construction in progress ............................... 748,411
Land improvements ...................................... 1,880,024
Buildings ....................................................... 10,844,461
Machinery and equipment ............................. 5,968,095
Library collection ........................................... 1,580,523
Infrastructure ................................................. 10,026,505
Deferred bond issue costs ............................ 104,357
Special assessments receivable ................... 66,008
Advance to water utility ................................. 1,402,904
Deduct:
Accumulated depreciation............................. (8,048,495) 28,443,847
General obligation debt ................................. $(23,403,178)
Community development .............................. (2,000,000)
Compensated absences ............................... (2,611,738)
Accrued interest payable .............................. (133,627)
(28,148,543)
Net assets of governmental activities ................. $ 15,757,684
727
Ch. 17Problems
Problem 17-13, Continued
(2) Statement of Revenues, Expenditures, and Changes

in Fund Balances to Statement of Activities
Net change in fund balancestotal governmental funds $(1,326,268)
Changes in capital assets:
Increase in total capital assets* .................... $ 4,157,074
Book value, assets sold ................................ (76,506)
Depreciation .................................................. (1,291,691) 2,788,877

Principal payments received ......................... (189,417)
Amortization of bond issue cost .................... (12,777)
Add to deferred debits................................... 6,389
Decrease in special assessments received .. (44,394)
Changes in long-term debt:
General obligation bonds repaid ................... $ 1,982,514
General obligation bonds issued................... (3,025,000)
Net increase in accrued uncompensated
absences .................................................. (487,276)
Increase in accrued interest .......................... (18,862) (1,548,624)
Change in net assets of governmental
activities ........................................................ $ (326,214)
*Not all capital expenditures are capitalized.
728
Ch. 17Problems
(3) Musky City

Statement of Net Assets
Government Activities
December 31, 2004
Governmental
Funds Adjustments Total
Assets:
Cash.............................................................. $16,445,619
$16,445,619
Accounts receivable ...................................... 604,403 604,403
Due from other governments ........................ 36,580 36,580
Taxes receivable ........................................... 10,751,122 10,751,122
Special assessments receivable ................... 133,222 $ 66,009
199,231
Due from other funds .................................... 1,900 1,900
Prepaid expenses ......................................... 8,689 8,689
Advance to water utility ................................. 1,402,904 1,402,904 2,805,808
Deferred bond issue cost .............................. 104,357 104,357
Land .............................................................. 3,871,054 3,871,054
Construction in progress ............................... 748,411 748,411
Land improvements ...................................... 1,880,024 1,880,024
Buildings ....................................................... 10,844,461
10,844,461
Machinery and equipment ............................. 5,968,095
5,968,095
Library collection ........................................... 1,580,523
1,580,523
Infrastructure ................................................. 10,026,505
10,026,505

Accumulated depreciation............................. (8,048,495)
(8,048,495)
Total assets................................................... $29,384,439 $28,443,848
$57,828,287
Liabilities:
Accounts payable.......................................... $ 1,043,544 $
1,043,544
Accrued liabilities .......................................... 142,235 142,235
Due to other funds ........................................ 1,900 1,900
Due to other governments ............................ 320,000 320,000
Deferred revenue .......................................... 12,414,380 12,414,380
Accrued interest payable .............................. $ 133,627 133,627
General obligation debt ................................. 23,403,178 23,403,178
Community development bonds ................... 2,000,000 2,000,000
Compensated absences ............................... 2,611,738
2,611,738
Total liabilities ............................................... $13,922,059 $28,148,543 $42,070,602
729
Ch. 17Problems
Net Assets:
Held for investment purposes ....................... $
Capital assets net of debt ............................. $ 3,467,400a
b
Restricted ...................................................... 4,377,735 4,377,735
Unrestricted................................................... 11,084,645c
7,912,550
Total net assets ........................................ 15,462,380 15,757,685
Liabilities plus net assets .............................. $29,384,439 $57,828,287
a
Total of land through infrastructure less Accumulated depreciation = $26,870,578 $23,403,178.
b
Total of reserved fund balances from the governmental funds balance sheet.
c
Total of unreserved fund balances from the governmental funds balance sheet.
730
Ch. 17Problems
(4) Musky City

December 31, 2004
Governmental Funds
Fines, Fees, Operating Net (Expense)
Expenses Charges Grants Revenue
General government ......................... $ 3,249,306 $ (456,271) $ (2,583,307) $
(209,728)
Protection .......................................... 6,161,176 (154,270)
(6,006,906)
Highway ............................................ 3,102,827 (159,636)
(2,943,191)
Health ............................................... 863,461
(863,461)
Economic development .................... 86,788
(86,788)
Education and recreation .................. 2,102,422 (3,651,389)
1,548,967
Interest expense ............................... 1,076,481
(1,076,481)
Bond issue expense ......................... 63,884
(63,884)
Unallocated depreciation .................. 525,089
(525,089)
Total ............................................ $17,231,434
$(10,226,561)
General revenues .............................

Property tax................................. 9,910,221
Transfers in ................................. 2,613,353
Transfers out ............................... (2,576,241)
Loss on assets sale .................... (46,986)
Net change ....................................... $ (326,214)
731
Ch. 17Problems
Support Schedule
General Debt Capital Non- Adjustments
Fund Service Project major Total Debit Credit Total
Adjustments:
Property tax ........................................... $ 8,466,838 $1,666,729 $ 10,465 $10,144,032 (6) $ 44,394
............................................................ $ 9,910,221
(11) 189,417
Intergovernment .................................... 1,530,215 413,989 1,944,204
.............................................. 1,944,204
Commercial revenues ........................... 232,598 6,745 $ 51,217 360,725651,285
................................................. 651,285
Licenses and permits ............................ 639,103 639,103 639,103
Charges for services ............................. 691,659 2,308,445 3,000,104
.............................................. 3,000,104
Fines, forfeitures and penalties ............. 154,270 154,270 154,270
Public improvement revenues ............... 159,636 159,636 159,636
Intergovernmental charges .................... 102,637 102,637 102,637
Interdepartmental revenue .................... 69,672 283,962 353,634
................................................. 353,634
Total revenues and other sources ......... $11,886,992 $1,957,436 $ 51,217 $3,253,260 $17,148,905
.............................................................. $16,915,094
Expenditures:
General government.............................. $ 2,618,262 $ 143,768 $ 2,762,030 (9) $ 487,276
............................................................ $ 3,249,306
Protection .............................................. 4,945,330 295,846 5,241,176
.............................................. 5,241,176
Highway and transportation ................... 1,423,885 1,423,885
.............................................. 1,423,885
Health and sanitation............................. 863,461 863,461 863,461
Economic development ......................... 86,788 86,788 86,788
Education and recreation ...................... 1,768,889 130,257 1,899,146
.............................................. 1,899,146
Debt principal ........................................ $1,157,514 1,157,514 (7) $1,157,514
..............................................................
Debt interest .......................................... 1,057,619 1,057,619 (10) 18,862

.............................................. 1,076,481
Bond issuance costs ............................. $ 57,496 57,496(4) 12,777 (5) 6,389 63,884
Capital outlay ........................................ 673,283 4,005,427 1,513,980 6,192,690 (1) 4,157,074
.............................................. 2,035,616
Unallocated depreciation ....................... (3) 1,291,691
.............................................. 1,291,691
Total ...................................................... $20,741,805
.......................................... $17,231,434
732
Ch. 17Problems
Transfer in ............................................. 647,067 635,600 1,330,686 2,613,353

.............................................. 2,613,353
Transfer out ........................................... (147,846) (15,096) (2,413,299) (2,576,241)
............................................ (2,576,241)
Sale of capital asset .............................. 29,520 29,520(2) 76,506 (46,986)
Debt refunded ....................................... (825,000) (825,000) (7) 825,000
Long-term debt issue............................. 825,000 2,200,000 3,025,000 (8) 3,025,000
..............................................................
Totals .................................................... $(1,326,268) $ 5,145,923
............................................ $6,145,977 $ (326,214)
Net change ........................................ (1,000,054)
(1) Increase capital assets. (4) Bond issue cost amortization. (7) Repayment of bonds. (10) Increase in accrued interest.
(2) Book value of assets sold. (5) New issue cost. (8) New bond issue. (11) Principal payments received in advance.
(3) Depreciation. (6) Decrease in special assessments. (9) Increase in uncompensated absences.
Add facts:
Capital outlays total $2,035,616 ($920,000 protection and the balance is Highway).
733
Ch. 17Problems
PROBLEM 17-14
(1) and (2) (Comprehensive Review)
Worksheet 1
Village
Adjustment Worksheet
December 31, 2006
Unadjusted Trial Adjusted Trial
Nov. 30 Balance Transaction and Adjustments Balance, Dec. 31 Adjustments Balance, Dec. 31
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
General Fund
Balance Sheet Accounts
Cash......................... 318,518 (1) 8,727 (5) 4,830 212,133 212,133
(2) 25 (6) 1,685
(3) 250 (7) 2,400
(4) 2,963 (8) 5,035
(25) 2,500 (9) 327
(27) 6,500 (10) 50,917
(29) 21,800 (11) 1,038
(12) 1,116
(13) 416
(14) 237
(15) 4,243
(16) 395
(17) 216
(20) 187
(21) 758
(23) 30,350
(28) 45,000
Cash-Tax Collection
Account .................. (31) 447,277 447,277 447,277
Investments ................ 353,000 353,000 (F) 2,300 355,300
Accounts Receivable .... (30) 1,052,233 (31) 447,277 604,956 604,956
Taxes Receivable ........
Due from Other Funds .. 2,500 (25) 2,500
Inventory of Supplies .... 3,700 3,700 (G) 3,000 6,700
Prepaid Expenses ........ (19) 250 250 250
Vouchers Payable ........ 1,340 (18) 4,022 5,612 (E) 1,200 6,812
(19) 250
Deferred Tax Revenue .. (30) 1,052,233 1,052,233 1,052,233
Other Liabilities ...........
Undesignated Fund
Balance .................. 254,450 254,450 (C) 41,100 (D) 71,270 281,620
(G) 3,000
Designated Fund
Balance .................. 297,127 297,127 (D) 71,270 (C) 41,100 266,957
Reserve for Inventory.... 3,700 3,700 (G) 3,000 6,700
734
Ch. 17Problems

Revenues
Revenues from Other
Governments ........... 100,298 (1) 8,727 109,025 109,025
Village Property Tax ..... 1,032,761 1,032,761 1,032,761
Investment Revenue ..... 78,076 (2) 25 78,101 (F) 2,300 80,401
License Fees .............. 6,635 (3) 250 6,885 6,885
Building Permits .......... 25,289 25,289 25,289
Police Fines and
Forfeitures .............. 34,021 (4) 2,963 36,984 36,984
Contributions ..............
Board of Appeals Fees .. 750 750 750
Total Revenues ......... 1,277,830 1,292,095
Expenditures
General Government
Administrative Salaries .. 46,203 (5) 4,200 50,403 50,403
Village Hall
Maintenance............ 5,502 (9) 327 5,829 5,829
Professional Fees ........ 48,521 (6) 1,685 50,206 (E) 1,200 51,406
Casualty Insurance ...... 13,161 13,161 13,161
Employee Benefits ....... 8,669 (5) 630 9,299 9,299
Office Expenses .......... 28,348 (7) 2,400 30,748 (G) 1,200 29,548
Fireworks ................... 5,225 5,225 5,225
Building Inspector ........ 8,750 (8) 5,035 13,785 13,785
Computer Capital ......... 1,491 1,491 1,491
Total Expenditures ..... 165,870 180,147
Public Safety
Police Salaries ............ 378,622 (10) 35,115 413,737 413,737
Uniforms .................... 2,399 (11) 1,038 3,437 3,437
Squad Operations ........ 25,934 (12) 1,116 27,050 27,050
Police Training ............ 3,699 3,699 3,699
Safety Expenses.......... 12,024 (13) 416 12,440 12,440
Lake Water Quality ....... 5,359 5,359 5,359
Fire Protection (paid to
Summit) ................. 134,981 134,981 134,981
Legal Costs ................ 5,007 (14) 237 5,244 5,244
Police Insurance .......... 5,853 5,853 5,853
Police Benefits ............ 185,366 (10) 15,802 201,168 201,168
Police Capital
Equipment .............. 22,483 22,483 22,483
735
Ch. 17Problems

Public Works
Wages ...................... 32,489 (15) 3,120 35,609 35,609
Truck Operations ......... 6,851 6,851 6,851
Road Repair and
Forestry .................. 20,457 (16) 395 21,068 (G) 1,800 19,268
(17) 216
Garbage Collection ...... 45,451 (18) 4,022 49,473 49,473
Garage Operations ....... 3,953 (20) 187 4,140 4,140
Benefits ..................... 13,803 (15) 1,123 14,926 14,926
Road and Bridges
Capital.................... 48,070 48,070 48,070
TruckCapital ............ (28) 45,000 45,000 45,000
ToolsCapital ............ ________ (21) 758 758 758
Other Financing Sources,
Asset Sale .............. (29) 21,800 21,800 21,800
Transfers ................... 38,058 (23) 30,350 (27) 6,500 61,908 61,908
Total Debits and
Credits ................. 1,834,447 1,834,447 2,928,217 2,928,217
736
Ch. 17Problems
Village
Adjustment Worksheet
December 31, 2006
Transactions and Unadjusted Trial Adjusted Trial
Nov. 30 Balance Adjustments Balance, Dec. 31 Adjustments Balance, Dec. 31
Acct. No Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Debt Service Fund
Cash ......................... 11110 2,100 (23) 30,350 (24) 30,250 2,200 (B) 1,200 3,400
Reserved Fund
Balance ................... 12330 2,100 2,100 2,100
Interest Payment .......... 53007 18,058 (24) 12,850 30,908 30,908
a Principal Payment ........ 53012 20,000 (24) 17,400 37,400 37,400
Transfers ................... 60002 38,058 (23) 30,350 68,408 (B) 1,200 _____ 69,608
Total Debits and
Credits .................. 40,158 40,158 71,708 71,708
Capital Projects Fund

Cash ......................... 11120 79,200 (22) 30,000 46,700 (B) 1,200 45,500
(25) 2,500
Due to Other Funds ...... 12100 2,500 (25) 2,500
Reserve for Encum-
brances ................... 12110 (A) 18,000 18,000
Undesignated Fund
Balance .................. 12120 2,500 2,500 (A) 18,000 20,500
RevenueVillage Prop-
erty Taxes ................ 68000 18,000 18,000 18,000
Transfers ................... 68050 (B) 1,200 1,200
a Construction Expenses .. 68100 120,000 (22) 30,000 150,000 150,000
Special Assessment
a Bond Proceeds ......... 61001 181,200 181,200 ______ 181,200
Total Debits and
Credits ................. 201,700 201,700 217,200 217,200
Permanent Fund
Cash ......................... 11130 10,825 (26) 820 (27) 6,500 5,145 5,145
Investments ................ 11510 24,500 24,500 (F) 200 24,300
Reserved Fund
Balance ................... 12300 34,500 34,500 34,500
Other Financing
UsesTransfer.......... 12350 (27) 6,500 6,500 6,500
Investment Income ....... 12100 825 (26) 820 1,645 (F) 200 _____ 1,445
Total Debits and
Credits ................ 35,325 35,325 35,945 35,945
737
Ch. 17Problems
Transactions and Unadjusted Trial Adjusted Trial

Nov. 30 Balance Adjustments Balance, Dec. 31 Adjustments Balance, Dec. 31
Acct. No Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Boat Launch
Enterprise Fund
Cash ......................... 100 24,733 24,733 24,733
Land ......................... 200 200,000 200,000 200,000
Building and
Improvements ........... 210 100,000 100,000 100,000
Accumulated
Depreciation.............. 215 25,000 25,000 (I) 5,000 30,000
Unearned Revenue
Season Passes .......... 310 800 800 (H) 2,300 3,100
Net AssetsCapital
Assets ..................... 410 275,000 275,000 (I) 5,000 270,000
Net Assets
Unrestricted .............. 420 600 600 (I) 5,000 5,600
Boat Launch Revenue ... 500 32,996 32,996 (H) 2,300 30,696
Wages ....................... 411 5,902 5,902 5,902
Employee Benefits........ 412 86 86 86
Sanitation Fees ............ 413 1,150 1,150 1,150
Sales Tax Paid ............ 414 1,778 1,778 1,778
Depreciation Expense ... 415 (I) 5,000 5,000
Other Expenses ........... 416 747 747 747 _______
Total Debits and
Credits .................. 334,396 334,396 339,396 339,396
a
Capital asset and debt transactions 1,796,117 1,796,117 3,564,966 3,564,966 154,770 154,770
738
Ch. 17Problems
(3) The information for this statement comes directly from the Worksheet 1 Adjusted Trial Balance columns. You
may summarize expenditures by major functional categories (general government, public safety, public works,
interest payments, and principal payments). There should be a column for each governmental type fund and
for the totals of all governmental type funds. The schedule should show the change in total fund balances prior
to designations within the general fund. A final adjustment should reflect the intention of the designations. The
boat launch enterprise fund is not included in this statement since it is not a governmental type fund.
Worksheet 2
Village
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
December 31, 2006
Debt Capital Total
General Service Project Permanent Government
Fund Fund Fund Fund Funds
Revenues
Revenues from other
governments ......................... $ 109,025 $ 109,025
Village property tax ..................... 1,032,761 $ 18,000 1,050,761
Investment revenue .................... 80,401 $ 1,445 81,846
License fees ................................ 6,885 6,885
Building permits .......................... 25,289 25,289
Police fines and forfeitures.......... 36,984 36,984
Board of appeals fees ................. 750 750
Totals .................................... $1,292,095 $ 18,000 $ 1,445 $1,311,540
Expenditures
General government ................... $ 180,147 $180,147
Public safety ............................... 835,451 835,451
Public works ................................ 224,095 $ 150,000 374,095
Principal payments ..................... $
37,400 37,400
Interest payments ....................... 30,908 30,908
Totals .................................... $1,239,693 $ 68,308 $ 150,000 $1,4
Excess of revenues over
expenditures ......................... $ 52,402 $(68,308) $(132,000) $ 1,445 $ (146
Other financing sources and

(uses) ....................................
Proceeds from asset sale ........... 21,800 21,800
Proceeds from bond issue .......... 181,200 181,200
Transfer, general/debt service
fund ....................................... (68,408) 68,408
Transfer, capital project/debt
fund ....................................... 1,200 (1,200)
Transfer, permanent/general
fund ....................................... 6,500 (6,500)
Net change in fund balance ........ $ 12,294 $ 1,300 $ 48,000 $ (5,055) $ 56,5
Balance, January 1, 2006 ........... $ 555,277 $ 2,100 $ (2,500) $34,500 $ 589
Balance, December 31, 2006 ..... $ 567,571 $ 3,400 $ 45,500 $29,445 $ 645
739
Ch. 17Problems
Debt Capital Total

Reserve for inventory,
December 31, 2006 .............. $ 6,700 $ 6,700
Reserve for encumbrances,
December 31, 2006 .............. $ 18,000 18,000
Designated fund balance,
December 31, 2006 .............. 266,957 266,957
Undesignated fund balance,
December 31, 2006a ............. 293,914 $ 3,400 27,500 $29,445 354
Total fund balances,
December 31, 2006 .............. $ 567,571 $ 3,400 $ 45,500 $29,445 $ 645
Net change in general fund

balance ................................. $ 12,294
Designations created .................. (44,100)
Designations returned ................. 71,270
Change in undesignated fund
balance ................................. $ 39,464
a
Computation of undesignated fund balance
January 1 .............................. $ 254,450
Net change in fund balance....... 39,464
December 31 ........................ $ 293,914
740
Ch. 17Problems
(4) Worksheet 3
Village
Combining Balance Sheet for All Governmental Funds
December 31, 2006
Debt Capital Total

Assets
Cash ........................................... $ 212,133 $3,400 $45,500 $ 5,145 $ 266
Cash-tax collection account ........ 447,277 447,277
Investments ................................ 355,300 24,300 379
Accounts receivable .................... 604,956 604,956
Inventory of supplies ................... 6,700 6,700
Prepaid expenses ....................... 250 250
Totals .......................................... $1,626,616 $3,400 $45,500 $29,445 $1,7
Liabilities
Vouchers payable ....................... $ 6,812 $ 6,812
Deferred tax revenue .................. 1,052,233 1,052,233
Fund Balances
Reserve for inventory .................. 6,700 6,700
Reserved fund balance ............... $3,400 $29,445 32,8
Reserve for encumbrances ......... $18,000 18,000
Designated fund balance ............ 266,957 266,957
Undesignated fund balance ........ 293,914 27,500 321,414
Total liabilities and fund
balances................................ $1,626,616 $3,400 $45,500 $29,445 $1,7
741
Ch. 17Problems
(5) This information is taken directly from the Adjusted Trial Balance columns of Worksheet 1. If needed, see the
examples in the textbook for an enterprise fund. This will be the students Worksheet 4.
Worksheet 4
Village Boat Launch Enterprise Fund
December 31, 2006
Statement of Revenues, Expenses, and Changes in Net Assets
Launch fees .................................................. $30,696

Less, sales tax .............................................. (1,778)
Net fees ........................................................ $28,918
Expenses:
Wages ........................................................... $ 5,902
Employee benefits ........................................ 86
Sanitation fees .............................................. 1,150
Other expenses ............................................ 747
Depreciation expense ................................... 5,000
Total expenses ............................................. $ 12,885
Revenue in excess of expenditures .............. $ 16,033

Transfer from restricted assets ..................... 5,000
Balance, January 1 ....................................... 600
Balanceunrestricted, December 31 ........... $ 21,633
Balance Sheet
Assets
Cash ............................................................. $ 24,733
Land .............................................................. 200,000
Building and improvements .......................... 100,000
Accumulated depreciation ............................ (30,000)
Total assets .................................................. $294,733
Liabilities
Unearned revenueseason passes............. $ 3,100
Net Assets
Restrictedcapital assets ............................ $270,000
Unrestricted .................................................. 21,633
$291,633
Total liabilities and net assets ....................... $294,733
742
Ch. 17Problems
(6) These schedules will be in the same format as the schedules found in Notes to Financial Statements for
December 31, 2005. This information will be taken from the December 31 notes (Exhibit 1), the applicable
(highlighted) amounts from Worksheet 1, and the information from items I through III in the Additional Infor-
mation for Statement of Net Assets and Statement of Activities table. These notes are the students Work-
sheet 5.
Worksheet 5
Notes to Financial Statements
December 31, 2006
4. Capital Assets Beginning Ending

Balance Increases Decreases Balances
Land and improvements ......................... $ 855,733 $ 855,733
LaLumiere property ................................. 304,484 304,484
Building and improvements .................... 870,348 870,348
Equipment ............................................... 312,380 $ 69,732 (a) $ 35,000 (e)
347,112
Office furniture and fixtures ..................... 35,563 35,563
Infrastructure under construction ............ 150,000 (b)
150,000
Infrastructure ........................................... 100,167 48,070 (c)
148,237
Total capital assets ........................... $2,478,675 $267,802 $ 35,000
$2,711,477
Accumulated depreciation ...................... (430,246) (51,099) (d) (21,000) (f)
(460,345)
Net assets ......................................... $ 2,048,429 $ 216,703$ 14,000
$2,251,132
8. Long-Term Obligation Activity Beginning Ending

Balance Increases Decreases Balances
General obligation ................................... $605,000 $30,514 (h)
$574,486
Special assessment ................................ $180,000 (g)
180,000
Waukesha County radio.......................... 19,750 4,644 (h)
15,106
Waukesha County dispatch .................... 11,211 2,242 (h)
8,969
Totals ................................................ $635,961 $ 180,000 $37,400 $778,561
Source of information for changes:

(a) Worksheet 1 Public Works: Truck capital for $45,000, Toolscapital for $758
Worksheet 1 Public Safety: Police capital equipment for $22,483
Worksheet 1 General Government: Computer capital for $1,491
(b) Worksheet 1 Capital Projects Fund: Construction expenses
(c) Worksheet 1 Public Works: Road and bridgescapital
(d) Village Description Information Item 3, II: Office equipment, $4,673; Village hall, $30,213; Public works,
$9,504; Police squads, $6,709
(e) Village Description Information Item 3, I: Cost of truck sold
743
Ch. 17Problems
(f) Village Description Information Item 3, I: Accumulated depreciation on truck sold
(g) Worksheet 1 Capital Projects Fund: Other financing sources, proceeds from special assessment bond issue
net of premium transferred to debt service fund
(h) Village Description Information Item 3, III: Principal payment
744
Ch. 17Problems
(7) Prepare the reconciliation schedules for the balance sheet (governmental type funds) to statement of net as-
sets (refer to the text for an example of this schedule). Basically, it takes the format:
Total fund balances for governmental type funds (from Total Government Funds column of Worksheet 3).
This is the total of all fund balances including reserved (3), designated and undesignated.
Add: All Fixed Assets from Ending Balances column of Worksheet 5 Capital Assets.
Add: Accrued interest receivable from Additional Information for Statement of Net Assets and Statement
of Activities table, item VI.
Deduct: Accumulated depreciation from Worksheet 5 Capital Assets.

Deduct: All obligations listed on Worksheet 5 Long-Term Obligation Activity.
Deduct: Accrued interest payable from Additional Information for Statement of Net Assets and Statement of
Activities table, item V.
Equals: Net assets of governmental activities.
Prepare the reconciliation schedules for the statement of revenues, expenditures, and changes in fund bal-
ances to statement of activities (refer to the text for an example of this schedule). Basically, it takes the for-
mat:
Net change in fund balancestotal governmental funds (from Total Government Funds column, Net
change in fund balance line of Worksheet 2)
Add: Increase in capital assets from Increases column of Capital Assets schedule in Worksheet 5.
Deduct: Decrease in capital assets from Decreases column of Capital Assets schedule in Worksheet 5.*
Add: Decrease from accumulated depreciation from Decreases column of Capital Assets schedule in
Worksheet 5.*
Deduct: Increase in accumulated depreciation from Increases column of Capital Assets schedule in
Worksheet 5.
Add: Change in accrued interest on investments from accrued from Additional Information for Statement
of Net Assets and Statement of Activities table, item VI. This item is the change in this item. Since
there was no amount on January 1, it is the entire amount in this example.
Add: Principal payments of long-term debt from totals, Decreases column of Long-Term Obligation
Activity schedule in Worksheet 5.
Deduct: New long-term debt issuances from Increases column of Long-Term Obligation Activity schedule
in Worksheet 5.**
Deduct: Change in accrued interest payable from Additional Information for Statement of Net Assets and
Statement of Activities table, item V. This item is the change in this item. Since there was no
amount on January 1, it is the entire amount in this example.
Equals: Change in net assets of governmental activities.
*This item is at book value for disposed asset. The entire proceeds ($21,800) were included in general
funds, other financing sources. These two adjustments remove the $35,000 cost $21,000 accumulated
depreciation to result in a net increase in net assets equal to the gain of $7,800.
**This is the face value of the debt issuance, $180,000. The capital project fund included $181,200 of other fi-
nancing sources. Subtracting the $180,000 leaves a net increase in the net assets of $1,200 (the amount of
the premium).
745
Ch. 17Problems
(7) Worksheet 6
Village
Reconciliation Schedules
Balance Sheet to Statement of Net Assets

Total fund balances for governmental funds (WS 3) $ 645,916
Add:
Land and improvements ............................................. $855,733 WS 5
LaLumiere property ..................................................... 304,484 WS 5
Building and improvements......................................... 870,348 WS 5
Equipment ................................................................... 347,112 WS 5
Office furniture and fixtures ......................................... 35,563 WS 5
Infrastructure under construction ................................ 150,000 WS 5
Infrastructure ............................................................... 148,237 WS 5
Accrued interest receivable......................................... 5,300 IV
Total adds ......................................................................... 2,716,777
Deduct:
Accumulated depreciation........................................... $460,345 WS 5
General obligation debt ............................................... 574,486 WS 5
Special assessment debt ............................................ 180,000 WS 5
Waukesha County radio loan ...................................... 15,106 WS 5
Waukesha County dispatch loan ................................ 8,969 WS 5
Accrued interest payable ............................................ 10,300 V&VI
Total deducts .................................................................... 1,249,206

Net assets of governmental activities ............................... $2,113,487
Statement of Revenues, Expenditures, and Changes in Fund Balances to Statement of Activities

Net change in fund balancestotal governmental funds (per WS 2) $ 56,539
Change in capital assets:
Increase in total capital assets (per WS 5) .................................................. $216,703
Decrease in capital assets (per WS 5) ......................................................... (14,000)
Accrued interest on investments (above) ..................................................... 5,300
Total increase in assets ..................................................................................... $208,003
Changes in long-term debt:
Principal payments (per WS 5) .................................................................... $ (37,400)
Issuance of special assessment bonds (per WS 5) ..................................... 180,000
Accrued interest (above) .............................................................................. 10,300
Total increase in liabilities .................................................................................. $152,900
Change in net assets of governmental activities................................................ $111,642
746
Ch. 17Problems
(8) A template for Worksheet 7 is furnished for this statement. Construct the statement of net assets
for the governmental type funds by combining:
The assets from the Total Government Funds column of the balance sheet in Worksheet 3.
Plus: The asset adjustments from the Balance Sheet to Statement of Net Assets
Reconciliation schedule in Worksheet 6.
The liabilities from the Total Gov. Funds column of the balance sheet in Worksheet 3.
Plus: The liability adjustments from the balance sheet to statement of net assets reconciliation
schedule in Worksheet 6.
Separate the net assets section into three balances:

Held for investment purposes (LaLumiere property)
Capital assets net of related debt
Unrestricted
When the governmental funds balances are completed, enter the balance sheet amounts for the boat
launch enterprise fund from Worksheet 4. Then, sum the totals of the governmental funds plus the en-
terprise fund.
Worksheet 7
Village
Statement of Net Assets at December 31, 2006
Governmental Enterprise
Fundsa Fundb Total
Assets
Cash.............................................................. $ 266,1783 $ 24,733 $
290,911
Cash collection account ................................ 447,2773 447,277
Investments................................................... 379,6003 379,600
Accrued interest receivable........................... 5,3006 5,300
Accounts receivable ...................................... 604,9563 604,956
Inventory of supplies ..................................... 6,7003 6,700
Prepaid expenses ......................................... 2503 250
Land .............................................................. 855,7336 200,000 1,055,733
LaLumiere property ....................................... 304,4846
304,484
Building and improvements........................... 870,3486 100,000 970,348
Equipment ..................................................... 347,1126 347,112
Office furniture and fixtures ........................... 35,5636 35,563
Infrastructure under construction .................. 150,0006
150,000
Infrastructure ................................................. 148,2376 148,237
Accumulated depreciation ......................... (460,345)6 (30,000) (490,345)
Total assets................................................... $3,961,393 $294,733 $4,256,126
747
Ch. 17Problems
Governmental Enterprise
Fundsa Fundb Total
Liabilities
Vouchers payable ......................................... $ 6,8123 $
6,812
Prepaid passes ............................................. $ 3,100 3,100
Accrued interest payable .............................. 10,3006 10,300
Deferred tax revenue .................................... 1,052,2333 1,052,233
General obligation debt ................................. 574,4866 574,486
Special assessment debt .............................. 180,0006
180,000
Waukesha County radio loan ........................ 15,1066 15,106
Waukesha County dispatch loan .................. 8,9696 8,969
Total liabilities ............................................ $1,847,906 $ 3,100 $1,851,006
Net Assets
Held for investment purposes ....................... $ 304,484c $ 304,484
Capital assets net of debt ............................. 1,168,087d
1,168,087
Restricted ...................................................... $270,000 270,000
Unrestricted................................................... 640,916e 21,633 662,549
6
Total net assets ......................................... $2,113,487 $291,633 $2,405,120
Liabilities plus net assets .............................. $3,961,393 $294,733 $4,256,126
Source of Information
a
Worksheet 3: Village Balance Sheet and Worksheet 6: Reconciliation Schedules
(Specific worksheet is reported above for each item.)
b
Worksheet 4: Boat Launch Enterprise Fund
c
The LaLumiere property is held for investment purposes.
d
This is basically just total capital assets (excluding the LaLumiere property) less long-term liabilities.
e
Although this could be determined directly, the simple approach is to plug unrestricted.
(Note that you know what total net assets should be; it's reported in Worksheet 6.)
748
Ch. 17Problems
(9) Prepare the statement of activities for December 31, 2006. A template is provided for Worksheet 8.
A. Support Schedule
Before being concerned with the statement, you need to prepare a support schedule to convert rev-
enues, other sources, and expenditures to include the adjustments from the statement of revenues,
expenditures, and changes in fund balances to statement of activities reconciliation schedule in
Worksheet 6. Basically, you are converting from a working capital to full accrual basis for revenue,
other sources, and expenditures.
Start by copying the individual revenue, other sources, and expenditures into the four fund columns
from the Total Government Funds column in Worksheet 2.
Next, post the adjustments from the Worksheet 6, Statement of Revenues, Expenditures, and
Changes in Fund Balances to Statement of Activities reconciliation schedule. The only added in-
formation you need is which expenditures to adjust for capital asset increases. The detail for this is
contained in Worksheet 1 (these are the capital amounts that you should have highlighted).
Combining the total government funds amounts with the adjustments provides adjusted amounts
that will appear in the statement of activities. Basically, you have adjusted revenues, other sources,
and expenditures to an accrual basis.
The net change amount should agree with the change in net assets of governmental activities
amount at the bottom of Worksheet 6.
B. Statement of Activities
Copy the adjusted expenditures from your support schedule into the Expenses column.
Choose the applicable revenue items from the support schedule to the Fines, Fees, and Charges
column. These are the offsets against individual expenses in the first column.
Choose the applicable revenue items from the support schedule to the Operating Grants column.
You will need to spilt apart the total shown in the support schedule. This information is contained in
the Additional Information for Statement of Net Assets and Statement of Activities table, item VIII.
Total the Net Revenue (Expense) items.
Insert the total expenses and revenues from the boat launch enterprise fund.
Insert the appropriate General revenues from the support schedule.
The net change should agree with that contained in the support schedule.
749
Ch. 17Problems
(9) Worksheet 8
Village
December 31, 2006
Governmental Funds Enterprise Fund

Fines, Fees, Operating Net Revenue/ Net Revenue/
a
Expenses and Charges Grants (Expense) (Expense) Totals
General government ................. $ 199,757 $ 7,635 $ 26,745b $ (165,377)
Building inspection ................... 13,785 25,289 11,504
b
Police ....................................... 666,897 36,984 7,000 (622,913)
b
Fire protection .......................... 134,981 9,780 (125,201)
Other public safety ................... 17,799 (17,799)
b
Public works ............................. 139,771 65,500 (74,271)
Interest charges........................ 41,208 (41,208)
Unallocated depreciation ..........
Total ...................................... $1,214,198 $69,908 $109,025 $(1,035,265)
$(1,035,265)
Boat launch, enterprise fund .... 12,885 28,918 $16,033
16,033
General revenues .....................

Property tax .......................... 1,050,761
1,050,761
Investment income ................ 87,146
87,146
Other sources, bond
premium ............................ 1,200
1,200
Other sources, asset sales ... 7,800 7,800
Net change ............................... $ 111,642 $16,033 $
127,675
Source of information:
a
Worksheet 8: Support for Statement of Activities; go to Worksheet 4 for boat launch input.
b
Allocation of revenues from grants per info Item 3, VIII.
750
Ch. 17Problems
Worksheet 8
Village
Support for Statement of Activities for Year Ended December 31, 2006
Revenues per Worksheet 2 Adjustments (see below)
Debt Capital
Revenues: General Fund Service Projects Permanent Total Dr. Cr. Adjusted TB
x
Property tax ................................... $1,032,761 $ 18,000 $1,050,761 $1,050,761
x
Grants ........................................... 109,025 109,025 109,025
3 x
Investment income .......................... 80,401 $1,445 81,846 $5,300 87,146
x
License and board of appeals fees .... 7,635 7,635 7,635
x
Building permits .............................. 25,289 25,289 25,289
x
Police fines .................................... 36,984 36,984 36,984
6 x
Bond proceeds ............................... 181,200 181,200 $180,000 1,200
8 x
Other sources ................................ 21,800 _______ 21,800 14,000 7,800
Total revenues and other sources ..... $1,313,895 $199,200 $1,445 $1,514,540 $1,325,840
Expenditures: Expenditures per Worksheet 1

General
a 2 1 x
General government (WS 1) ........ $ 166,362 $ 166,362 $34,886 $ 1,491 $ 199,757
x
Building inspector (WS 1) ............. 13,785 13,785 13,785
c 2 1 x
Police (WS 1) ............................. 682,671 682,671 6,709 22,483 666,897
x
Fire (WS 1) ................................ 134,981 134,981 134,981
b x
Other Safety (WS 1) ................... 17,799 17,799 17,799
2 1 x
Public works (WS 1) .................... 224,095 224,095 9,504 93,828 139,771
x
Debt Service
7 x
Interest (WS 1) ........................... $30,908 30,908 4,900 35,808
5 x
Principal payment (WS 1) ............. 37,400 37,400 37,400
x
Capital Projects
4 x
Construction (WS 1) .................... $150,000 150,000 150,000
7 x
Interest ...................................... _________ ______ _______ _________ 5,400 5,400
Total expenses ............................. $1,239,693 $68,308 $150,000 $1,458,001 $ 1,214,198
Net change .................................. $ 56,539 $ 111,642
Source of Unadjusted Balances:

a
$180,147 (WS 1 total for General Government expenditures) less $13,785 (amount specifically identified for building inspector)
b
$12,440 (Safety Expenses) plus $5,359 (Lake Water Quality)
c
$835,451 (Total Public Safety Expenditures) less fire ($134,981) and other ($17,799) allocations
x
Carried to statement of activities
Adjustments and Explanations:
1
Eliminate purchase of capital assets recorded as expense (WS 1)
2
Record depreciation not recorded (Info Item C, II)
3
Accrued incometo record interest not recorded in TB (WS 7)
4
Eliminate capitalizable construction costs recorded as expense
5
Eliminate payment of principal from expense
6
Eliminate receipt from bond issue recorded as revenue in TB
7
Accrued interest expense per Info Item 3, V & VI
8
Adjust income from sale of truck (gain should be $7,800: $21,800 received less $14,000 book valuenote that amount of the adjustment is the book value of the truck) per Info Items 3
751

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UNDERSTANDING THE ISSUES

Special Capital Capital Total Total

Total Enterprise Funds

Problem 17-1, Concluded

(1) Budgetary Fund Balance ........................................................... 305,000

(2) Statement of Revenues, Expenditures, and Changes in Fund Balance

For the Year Ended December 31, 20X9

Revenues ..................................................................................................... $ 16,600

(3) Balance Sheet as of December 31, 20X9

Fund Debit Credit Government-Wide

Statement of Net Assets

Program Revenues Net Revenue Change in Net Assets

(3) Budgetary comparison information is reported as required supplementary information. A description

Problem 17-10, Concluded

(2) Differences between fund financial statements and government-wide statements:

(1) Balance Sheet to Statement of Net Assets

Problem 17-13, Continued

(2) Statement of Revenues, Expenditures, and Changes

Depreciation .................................................. (1,291,691) 2,788,877

*Not all capital expenditures are capitalized.

Problem 17-13, Continued

(3) Musky City

Problem 17-13, Continued

(4) Musky City

General revenues .............................

Debt interest .......................................... 1,057,619 1,057,619 (10) 18,862

Transfer in ............................................. 647,067 635,600 1,330,686 2,613,353

(1) and (2) (Comprehensive Review)

Unadjusted Trial Adjusted Trial

Problem 17-14, Continued

Unadjusted Trial Adjusted Trial

Capital Projects Fund

Transactions and Unadjusted Trial Adjusted Trial

Other financing sources and

Debt Capital Total

Net change in general fund

Debt Capital Total

Statement of Revenues, Expenses, and Changes in Net Assets

Launch fees .................................................. $30,696

Revenue in excess of expenditures .............. $ 16,033

4. Capital Assets Beginning Ending

8. Long-Term Obligation Activity Beginning Ending

Source of information for changes:

Deduct: Accumulated depreciation from Worksheet 5 Capital Assets.

Balance Sheet to Statement of Net Assets

Total deducts .................................................................... 1,249,206

Statement of Revenues, Expenditures, and Changes in Fund Balances to Statement of Activities

Separate the net assets section into three balances:

Total the Net Revenue (Expense) items.

Insert the appropriate General revenues from the support schedule.

Governmental Funds Enterprise Fund

General revenues .....................

Expenditures: Expenditures per Worksheet 1

Source of Unadjusted Balances:

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