CHAPTER 6: ACCOUNTING FOR GENERAL LONG-TERM

LIABILITIES AND DEBT SERVICE

6-2. 1. c. 6. c.
2. a. 7. b.
3. a. 8. b.
4. b. 9. a.
5. c. 10. d.

6-3. Debits Credits

1. General Fund:
ESTIMATED REVENUES 650,000
ESTIMATED OTHER FINANCING USES 650,000

TAXES RECEIVABLE-CURRENT 650,000

REVENUES 650,000

CASH 650,000
TAXES RECEIVABLE-CURRENT 650,000

OFU - INTERFUND TRANSFER OUT 650,000

CASH 650,000
Debt Service Fund:
ESTIMATED OTHER FINANCING SOURCES 650,000
APPROPRIATIONS 250,000
FUND BALANCE 400,000

CASH 650,000
OFS - INTERFUND TRANSFER IN 650,000

EXPENDITURES - INTEREST 250,000

CASH 250,000
Governmental Activities:
TAXES RECEIVABLE-CURRENT 650,000
GENERAL REVENUES-TAXES 650,000

EXPENSES INTEREST ON LONG-TERM DEBT 250,000

CASH 250,000

Debits Credits

2. Capital Projects Fund:

CASH 5,000,000
PROCEEDS OF BONDS 5,000,000

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 Debt Service Fund:
CASH 150,000
OTHER FINANCING SOURCE-
PREMIUM ON BONDS PAYABLE 100,000
REVENUES 50,000

Governmental Activities:
CASH 5,150,000
SERIAL BONDS PAYBLE 5,000,000
ACCRUED INTEREST PAYABLE 50,000
PREMIUM ON BONDS PAYBLE 100,000

3. Debt Service Fund:

CASH 180,000
REVENUES 180,000

Governmental Activities:
CASH 180,000
GENERAL REVENUES-INVESTMENT
EARNINGS 180,000

4. Debt Service Fund:

CASH 2,800,000
OFS PROCEEDS OF REFUNDING BONDS 2,800,000
Debits Credits
OTHER FINANCING USES REFUNDED BONDS 2,800,000
EXPENDITURES 700,000
CASH 3,500,000

Governmental Activities:
CASH 2,800,000
SERIAL BONDS PAYABLE 2,800,000

TERM BONDS PAYABLE 3,500,000

CASH 3,500,000
Debits Credits
6-5. a. Capital Projects Fund:
EXPENDITURES 362,345
OTHER FINANCING SOURCES
CAPITAL LEASE AGREEMENTS 362,345
Computations:
The present value of an ordinary annuity of $1 for 9 years at 8 percent per year is
6.24689. Therefore, the present value of the 9 annual payments of $50,000 each
is $312,344.50. The present value of the capital lease obligation is $362,345 to
the nearest dollar ($312,344.50 + $50,000 paid at the inception of the lease).

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 b. Governmental Activities:
EQUIPMENT 362,345
CAPITAL LEASE OBLIGATIONS PAYABLE 312,345
CASH 50,000

NOTE: The asset is recorded at the lesser of the present value of the capital lease
obligation or the fair value of the fire truck, $370,000.

c. Debt Service Fund:

EXPENDITURESINTEREST 24,988
EXPENDITURESPRINCIPAL 25,012
CASH 50,000

Governmental Activities:
EXPENSES INTEREST ON CAPITAL LEASES 24,988
CAPITAL LEASE OBLIGATIONS PAYABLE 25,012
CASH 50,000

Computation: Interest Payment Unpaid

Payment Amount of on Unpaid on
Lease
Date Payment Balance at 8% Principal Obligation
$362,345
0 $50,000 $ -0- $50,000 312,345
1 50,000 24,988 25,012 287,333
6-7 a. VILLAGE OF VINCENT
SERIAL BOND DEBT SERVICE FUND
GENERAL JOURNAL
Debits Credits

1. ESTIMATED REVENUES 360,000

APPROPRIATIONS 200,000
FUND BALANCE 160,000

2. TAXES RECEIVABLECURRENT 350,000

ESTIMATED UNCOLLECTIBLE
CURRENT TAXES 20,000
REVENUESTAXES 330,000

3. CASH 175,000
TAXES RECEIVABLECURRENT 175,000

4. EXPENDITURESBOND INTEREST 100,000

CASH 100,000

3
5. CASH 155,000
TAXES RECEIVABLECURRENT 155,000

6. CASH 12,500
INTEREST RECEIVABLE ON INVESTMENTS 12,500

INVESTMENTS 12,500
CASH 12,500

Debits Credits
7. INVESTMENTS 70,000
CASH 70,000

8. EXPENDITURESBOND INTEREST 100,000

CASH 100,000

9. CASH 15,000
REVENUESINTEREST ON INVESTMENTS 15,000

INVESTMENTS 75,000
CASH 75,000

10. INTEREST RECEIVABLE ON

INVESTMENTS 13,000
REVENUESINTEREST ON INVESTMENTS 13,000

11. To reclass:
TAXES RECEIVABLEDELINQUENT 20,000
TAXES RECEIVABLECURRENT 20,000

ESTIMATED UNCOLLECTIBLE
CURRENT TAXES 20,000
ESTIMATED UNCOLLECTIBLE
DELINQUENT TAXES 20,000

Debits Credits
To close:
APPROPRIATIONS 200,000
REVENUESTAXES 330,000
REVENUESINTEREST ON INVESTMENTS 28,000
FUND BALANCE 2,000
ESTIMATED REVENUES 360,000
EXPENDITURESBOND INTEREST 200,000

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b. VILLAGE OF VINCENT
SERIAL BOND DEBT SERVICE FUND
BALANCE SHEET
AS OF DECEMBER 31, 2005
ASSETS
CASH $ 2,000
INVESTMENTS 657,500
TAXES RECEIVABLEDELINQUENT $20,000
LESS ESTIMATED UNCOLLECTIBLES 20,000 -0-
INTEREST RECEIVABLE ON INVESTMENTS 13,000
TOTAL ASSETS $672,500
FUND EQUITY
FUND BALANCE $672,500
TOTAL FUND EQUITY $672,500

c. VILLAGE OF VINCENT
SERIAL BOND DEBT SERVICE FUND
STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED DECEMBER 31, 2005

REVENUES:
TAXES $330,000
INTEREST ON INVESTMENTS 28,000
TOTAL REVENUES 358,000
EXPENDITURES:
INTEREST ON BONDS 200,000
EXCESS OF REVENUES OVER EXPENDITURES 158,000

FUND BALANCE, JANUARY 1, 2005 514,500

FUND BALANCE, DECEMBER 31, 2005 $672,500

d. VILLAGE OF VINCENT
SERIAL BOND DEBT SERVICE FUND
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCEBUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31, 2005
ACTUAL OVER
BUDGET ACTUAL (UNDER) BUDGET
REVENUES:
TAXES $330,000 $330,000 $ -0-
INTEREST ON
INVESTMENTS 30,000 28,000 (2,000)
TOTAL REVENUES 360,000 358,000 (2,000)
EXPENDITURES:

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 INTEREST ON BONDS 200,000 200,000 -0-
EXCESS OF REVENUES
OVER EXPENDITURES 160,000 158,000 (2,000)
FUND BALANCE,
JANUARY 1, 2005 514,500 514,500 -0-
FUND BALANCE,
DECEMBER 31, 2005 $674,500 $672,500 $ (2,000)

6-9. a. (1) SINKING FUND SCHEDULE

FISCAL REQUIRED* EXPECTED ENDING

YEAR PERIOD ADDITION EARNINGS BALANCE
2005 1 $174,461.01 $ 0.00 $174,461.01
2 174,461.01 5,233.83 354,155.85
2006 3 174,461.01 10,624.68 539,241.54
4 174,461.01 16,177.25 729,879.80
2007 5 174,461.01 21,896.39 926,237.20
6 174,461.01 27,787.12 1,128,485.33
2008 7 174,461.01 33,854.56 1,336,800.90
8 174,461.01 40,104.03 1,551,365.94
2009 9 174,461.01 46,540.98 1,772,367.93
**
10 174,461.01 53,171.04 1,999,999.98
*
Required addition = 2,000,000/11.4638793 where 11.4638793 is the future
amount of an annuity of $1 for 10 periods at 3 percent per period.
**
Rounding error accounts for the $0.02 deficit balance.

6
 Ch. 6, Solutions, 6-9 (Contd)
WORKSHEET SOLUTIONS

CAPITAL PROJECTS FUND CAPITAL PROJECTS FUND GOVERNMENTAL ACTIVITIES

(a2) Cash 2,000,000 (n) Contracts Payable 950,000 (a2) Cash 2,000,000
Proceeds of Bonds 2,000,000 C/P - Ret. % 47,500 Bonds Payable 2,000,000
Cash 902,500
(b) Enc. 1,950,000 (c) Investments 174,461
Res. for Enc. 1,950,000 (o) C/P - Ret. % 97,500 Cash 174,461
Const. Expend. 27,500
(e) Res. for Enc. 1,000,000 Cash 125,000 (d) Interest Expense 60,000
Constr. Expend. 1,000,000 Cash 60,000
Enc. 1,000,000 (p) Fund Balance 977,500
Contracts Payable 1,000,000 Const. Expend. 977,500 (e) CWIP 1,000,000
Contracts Payable 1,000,000
(f) Contracts Payable 1,000,000 Interfund Transfer- 22,500
out
C/P- Retained %* 50,000 Cash 22,500 (f) Contracts Payable 1,000,000
Cash 950,000 C/P Retained % 50,000
Fund Balance 22,500 Cash 950,000
(i) OFS-Proceeds 2,000,000 Interfund Transfer- 22,500
of Bonds out
Enc. 950,000 (g) Investments 174,761
Constr. Expend. 1,000,000 Cash 174,761
Fund Balance 50,000
(h) Investments 5,234
(k) Enc. 950,000 General 5,234
Revenues-
Interest
Fund Balance 950,000 (i) Interest Expense 60,000
Acc. Int. Payable 60,000
(m) Res. for Enc. 950,000
Constr. Expend. 950,000 (i) General Revenues- 5,234
Interest
Encumbrances 950,000 Net Assets Unres. 54,766
Contracts Payable 950,000 Interest Expense 60,000

C/P - Ret. % means Contracts Payable - Retained Percentage and ** CWIP means Construction Work in Progress

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 Ch. 6, Solutions, 6-9 (Contd) WORKSHEET SOLUTIONS
DEBT SERVICE FUND DEBT SERVICE FUND DEBT SERVICE FUND
(a3) Est. OFS - Tr. In 468,922 (j) Expenditures BI 60,000 (u) Expend. - BP 2,000,000
Est. Rev (1/2 yr) 5,234 Cash 60,000 Expend. - BI 60,000
Appropriation 60,000 Cash 2,060,000
Fund Balance 414,156
(Est. OFS consists of 2 times sinking fund additions
(174,461) and 2 interest payments (120,000), although
only one interest payment is authorized in FY2000)
Due from GF 468,922 (l) Est. OFS - Tr. In 468,922 Appropriations 2,060,000
OFS- Inter. Tr. In 468,922 Est. Revenues 26,802 Expenditures - BP 2,000,000
Appropriations 120,000 Expenditures -BI 60,000
(c) Cash 234,461 Fund Balance 375,724
Due from GF 234,461
Due from GF 468,922
Investments 174,461 OFS - Op. Tr. In 468,922
Cash 174,461
(p) Cash 22,500
(d) Expend BI* 60,000 Interfund Tr. In. 22,500
Cash 60,000
Investments 22,500
(g) Cash 234,461 Cash 22,500
Due from GF 234,461
(q) Due from GF 234,461
Investments 174,761 Cash 234,461
Cash 174,461
(r) Investments 53,171
(h) Investments 5,234 Interest Revenue 53,171
Interest Revenue 5,234
Cash 1,825,539
(i) Appropriations 60,000 Investments 1,825,539
OFSInter Tr. In 468,922 (s) Appropriations 120,000
Interest Revenue 5,234 OFS- InterfundTr. In 468,922
Expend - BI 60,000 Interest Revenue 99,712
Est. OFS - Tr. In 468,922 Expend. BI 120,000
Est. Revenues 5,234 Est. Revenues 99,712
Est. OFS - Tr. In 468,922
* BI means Bond Interest
** BP means Bond Principal (t) Fund Balance 2,060,000
Appropriations 2,060,000

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 Ch. 6, Solutions, 6-9 (Contd) WORKSHEET SOLUTIONS
GOVERNMENTAL ACTIVITIES
(j) Interest Payable 60,000
Cash 60,000

(m) Building 1,950,000

CWIP 1,000,000
Contracts Payable 950,000

(n) Contracts Payable 950,000

Cash 902,500
C/P Retained % 47,500

(o) C/P Retained % 97,500

Building 27,500
Cash 125,000

(p) Investments 22,500

Cash 22,500

(r) Investments 53,171

General 53,171
Revenues-
Interest

Cash 1,825,539
Investments 1,825,539

6-30-06 Adj. Entry

(u) Interest Expense 60,000
Interest Payable 60,000

Cl. Entry Omitted

(u) Bonds Payable 2,000,000
Interest Payable 60,000
Cash 2,060,000