Chapter 07 - Accounting for the Business-type Activities of State and Local Governments

CHAPTER 7:

ACCOUNTING FOR THE BUSINESS-TYPE ACTIVITIES OF STATE AND LOCAL GOVERNMENTS

OUTLINE T"pe#T$%& S'$'u% (re: )*#e+ 7-1 revised &e' Same &e' Same &e' Same 17-2 17-. Same 7-1 revised Same Same &e' Same 7-" revised Same Same &e' 7-, revised Same Same 7-2 revised &e'

Number ,ue%' o-%: 7-1 7-" 7-( 7-) 7-* 7-, 7-7 7-. 7-2 7-10 C$%e%: 7-1 7-" 7-( 7-)

Top !

Internal service and enterprise funds #se of enterprise funds Budgetary control of internal service funds Accounting for capital leases +estricted assets of enterprise funds Components of net position Cash flo's in proprietary funds /perating and nonoperating revenues0e!penses +egulatory accounting Segment information Building maintenance fund +is3 management internal service fund 5ass transit system nterprise fund golf course management

!plain $escri%e !plain Compare $escri%e $escri%e- e!plain Contrast $escri%e $escri%e- e!plain $efine Assess !plain- analy4e valuate valuate !amine 5ultiple Choice 8 s- 6S 8 s- 6S 6S 6S 8 s- 6S- assess 8 s- 6S Analysis 6S

E.er! %e%#Prob/em%: 7-1 !amine the CA6+ 7-" 7arious 7-( Central $uplicating Internal Service 6und 7-) Central Garage IS6 9 City of Ashville 7-* &et position classifications 7-, City of $alton :ar3ing 6acilities 6und 7-7 ;o'n of li4a%eth Central Station 6und 7-. City of Bay La3e <ater #tility 6und 7-2 7on County proprietary funds statement of revenues- e!penses and changes in fund net position 7-10 nterprise fund statement of cash flo's

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments

CHAPTER 7:
Ans'ers to 1uestions 7-1=

ACCOUNTING FOR THE BUSINESS-TYPE ACTIVITIES OF STATE AND LOCAL GOVERNMENTS

Internal service funds and enterprise funds are presented in three proprietary fund financial statements>a statement of revenues- e!penses and changes in fund net position? a statement of net position? and a statement of cash flo's= ;hose enterprise funds considered to %e ma@or funds are presented in separate columns of the proprietary fund financial statements- 'ith non-ma@or enterprise funds aggregated in an /ther nterprise 6unds column= All internal service funds are aggregated and reported in a single column on the fund statements= At the government-'ide level the internal service funds %alances are essentially collapsed into the Government Activities column of the government-'ide statements= nterprise funds are considered %usiness-type activities and are reported in the Business-type Activities column of the government-'ide statements= Internal service funds and enterprise funds are %oth proprietary funds and are presented as such in the funds financial statements= Ao'ever- since the transactions of internal service funds primarily involve sales of goods or services to the General 6und and other funds that compose the governmental activities of a government- their financial %alances are included in a single column of the proprietary fund financial statements=

7="=

#nder GASB Codification Section 1(00=102- a government must report %usiness-type activities in an enterprise fund if any of the follo'ing criteria are metB C1D ;he activity is financed 'ith de%t that is secured solely %y a pledge of the revenues from fees and charges of an activity? C"D La's or regulations reEuire that the activityFs costs of providing services- including capital costs Csuch as depreciation or de%t serviceD- %e recovered 'ith fees and charges- rather than 'ith ta!es or similar revenues? or C(D :ricing policies are designed to recover the costs of the activity- including capital costs= $isagree= ;he main purchasers of the internal service fundFs services are the cityFs governmental funds= As sho'n in Illustration 7-1- the city commission has %udgetary authority over the General 6und and other %udgetary funds that 'ill %e using internal services= ;hrough its approval of the %udgets for these funds- the commission is a%le to control the resources flo'ing to the cityFs internal service funds= ;he definition of a capital lease is the same for governmental funds and proprietary funds? ho'ever- accounting at the fund level differs= Assets acEuired under a capital lease agreement %y a governmental fund result in a de%it to !penditures and a credit to /6SCapital Lease Agreements in the year of acEuisition= Capital lease assets are capitali4ed in proprietary funds- and the associated long-term lia%ility- Capital Lease /%ligation- is credited= In su%seEuent years- governmental funds 'ill continue to de%it !penditures and credit Cash for capital lease payments- 'hile proprietary funds 'ill allocate a portion of lease payments %et'een lease and interest and accordingly record a de%it to Capital Lease /%ligation- a de%it to Interest !pense- and a credit to Cash= Capital lease assets in proprietary funds are also depreciated each year= At the government-'ide levelaccounting is the same as that descri%ed for proprietary funds=

7-(=

7-)=

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Ans'ers CContFdD

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+estricted assets are assets that have %een segregated- pursuant to an agreement 'ith an e!ternal party or %y la' or regulation- for a specified purpose and therefore are not availa%le for the discretionary use of management= Items typically reported in the G+estricted AssetsG section of the statement of fund net position include assets set aside for retirement of revenue %onds in conformity 'ith %ond covenants and %ond proceedsgrants- and contri%utions restricted for capital purposes= Customer deposits are commonly reported as restricted assets %y government utilities that use proprietary fund accounting= GASBS ,( provides the follo'ing three components for the classification of net positionB net investment in capital assets- restricted- and unrestricted= &et investment in capital assets is calculated as the total of gross capital assets- net of accumulated depreciationless any outstanding de%t related to the acEuisition or construction of capital assets= If de%t has %een incurred for construction or acEuisition of a capital asset- %ut the proceeds of the de%t have not %een spent %y year-end- that de%t is e!cluded in calculating net investment in capital assets= +estricted net position represents those net resources 'ith restrictions on use imposed %y la' or e!ternal parties? 'hile unrestricted net position represents the residual amount of net position after separately identifying net investment in capital assets and restrictions= 6ASB allo's entities to prepare the statement of cash flo's using either the indirect or the direct preparation method- 'hile GASB reEuires the direct method= ;he information in the statement of cash flo's is displayed using three categories under 6ASB standards>operating activities- investing activities- and financing activities= GASB standards provide for four categories of cash flo's>operating activities- noncapital financing activities- capital and related financing activities- and investing activities= Chapter 7 gives a fairly detailed description of the types of transactions reported in each of the four GASB categories= &otice that the types of activities reported in the t'o financing categories and the investing category have a num%er of differences 'hen compared 'ith the compara%le 6ASB categories= GASB leaves the definition of operating and nonoperating revenues0e!penses0income to management= Ao'ever- guidance indicates that operating revenues and e!penses are those related to the primary function or reason for the proprietary fundFs e!istence= ;he operating revenues generated %y a proprietary fund are %ased on the goods or services provided %y the proprietary fund= ConseEuently- operating e!penses are those e!penses incurred in provision of the fundFs primary goods or services= &onoperating revenues and e!penses are peripheral or incidental in nature to the primary function or o%@ective of the proprietary fund= Generally- nonoperating revenues include such items as interest incomegains on sale of assets- ta! revenues- and grants and gifts that can %e used for operating activity= /ne reason for separating operating and nonoperating items is to help assess management performance= Additionally- GASB reEuires that operating revenues0e!penses0income %e separately identified on the statement of revenues- e!penses and changes in fund net position since the information is necessary for classifying activity as operating- noncapital financing- capital and related financing- or investing on the statement of cash flo's=

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7=7=

7=.=

Ch= 7- Ans'ers CContFdD

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments

7=2=

+egulatory accounting principles C+A:D are accounting principles esta%lished %y any one of a num%er of state and0or federal entities= An e!ample of a federal entity that esta%lishes regulatory accounting principles is the 6ederal nergy +egulatory Commission C6 +CD= ;he purpose of +A: is to help ensure that reports su%mitted to regulatory agencies are in a format that helps regulators determine that entities su%@ect to regulatorsF oversight are complying 'ith la's and regulations= A num%er of enterprise funds may %e su%@ect to certain +A: reEuirements- given that enterprise funds freEuently provide utility type services- 'hich tend to %e su%@ect to state and federal regulation= State and federal entities are 'or3ing to'ard reconciliation of differences %et'een +A: and GAA:- ma3ing reporting easier for entities su%@ect to %oth sets of accounting principles=

7=10= A segment is an identifia%le activity either 'ithin an enterprise fund or other stand alone entity= Segment information consists of providing 3ey operating and %alance sheet information for each segment for 'hich reporting is reEuired= Information a%out the segments is provided in condensed statement format in the notes to the financial statements= An entity must disclose segment information if the segment has one or more %onds or other de%t instruments outstanding- 'ith revenues pledged to support the de%t= ;he intent is that segment information %e provided to %ondholders- analysts- and others needing information to determine the financial condition of the segment on 'hich the %onded de%t is dependent=

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions

Solutions to Cases 7-1= a= ;he financial statements suggest the Building 5aintenance 6und is not %eing recorded and reported in accordance 'ith GASB standards for internal service funds- as descri%ed in Chapter 7= In particular- there is no recognition of eEuipment and0or %uilding on the %alance sheet Cof 'hich there should %e at least eEuipmentgiven the nature of the operationD= As a conseEuence- depreciation also is not %eing charged and reported on the statement of revenues- e!penditures and changes in fund %alance= 6urthermore- capital leases should %e capitali4ed in a proprietary fund= A loo3 at the headers for the financial statements provides a clue that modified accrual accounting may %e used rather than accrual accountinge!plaining the lac3 of capital assets on the %alance sheet= ;he preferred titles for the financial statements under accrual accounting 'ould %e statement of net position and statement of revenues- expenses and changes in fund net position= :roprietary funds also use contra-revenue accounts- rather than a %ad de%t e!pense0e!penditure= A loo3 at the fund eEuity section of the %alance sheet and operating statement also suggests that the Building 5aintenance 6und is using modified accrual rather than accrual accounting= ;his is reflected in the use of the line item Hfund %alanceI rather than net position- segregated into C1D net investment in capital assets- C"D restricted- and C(D unrestricted? and the matching of e!penditures Crather than e!pensesD to revenues in the operating statement= 6inally- internal service fund financial statements typically include a statement of cash flo's= As manager of a city department you should 'ant to 3no' the full cost of the Building 5aintenance 6undFs operations= Such information 'ould aid in determining the appropriateness and fairness of the fundFs charges to departments= Although the financial statements indicate that revenues e!ceed e!penditures only slightly- the statements fail to disclose the relationship %et'een operating revenues and operating e!penses= As such- they provide you 'ith little useful informationeven though as a city employee you might have a pretty good idea if the salaries'ages- and num%er of employees of the Building 5aintenance 6und are in line 'ith those of the rest of the city departments= Cash and Investments e!ceed current lia%ilities if one assumes that Accrued Annual Leave is a long-term lia%ility and /ther Accrued Lia%ilities are current lia%ilities= CIf current lia%ilities 'ere reported separately it 'ouldnJt %e necessary to guess 'hich is current and 'hich is long-term=D It 'ould also %e useful to 3no' ho' accrued annual leave 'as computed- and ho' much of this 'ill pro%a%ly have to %e paid each year= 6inallyone should determine that the inventory figure does not include an e!cessive supply of materials that could %e o%tained readily from suppliers 'hen needed=

b.

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- Case 7-1 CContFdD

It is also possi%le that some managers of city departments that use the services of the Building 5aintenance 6und may have little interest in the financial statements if the employees of that fund are doing a good @o% of 3eeping the cityFs %uildings 'ell maintained- and the charges of that fund do not strain their maintenance %udgets= If- ho'ever- managers perceived the service to %e poor or the charges to %e e!cessive- the lac3 of full accrual financial information to o%@ectively evaluate the Building 5aintenance 6und managerFs performance could %ecome a pro%lem= 7-"= a= Since the +is3 5anagement :ool is providing an insurance service to the departments of the General 6und- it should record its assessments li3e an e!change transaction 'ith a de%it to an account such as $ue from General 6und Cor CashD and a credit to an account such as Billings for Services= ;he General 6und 'ould recogni4e the service received from the +is3 5anagement :ool 'ith a de%it to an !penditures account and a credit to an account such as $ue to +is3 5anagement :ool Cor CashD= Internal service funds are generally reported in the Governmental Activities column in the government-'ide statements= GASB reEuires that all interfund activity %e eliminated to prevent dou%le counting of transactions= Since the +is3 5anagement :ool and the General 6und 'ould %e reported in the same Governmental Activities column- the transaction 'ould not %e recorded at the government-'ide level= At the government-'ide level the assets attri%uted to General 6und functions and the assets of the +is3 5anagement :ool 'ould generally %e com%ined and sho'n in the same Governmental Activities column on the statement of net position= Internal service fund assets 'ould also %e included in the governmental activities information sho'n in the capital asset note disclosures= ;herefore- from the government-'ide perspective it 'ould not ma3e a difference if a portion of the %uilding 'as recorded in the +is3 5anagement :ool= Ao'ever- as e!plained in part d- it appears that the +is3 5anagement :ool should record an e!pense for the entire amount of the outlays for the claims rather than de%iting Buildings for the increase in value=

b=

c=

d. In accordance 'ith the information provided in the section HInternal Service 6unds as 6inancing $evicesI of this chapter- the +is3 5anagement :ool should have recogni4ed the claims from the General 6und as e!penses and reim%ursed the General 6und for the e!penditures it incurred related to the %uilding= Although the +is3 5anagement :ool paid K100-000 of the invoices directly- that 'ould not affect the accounting= ;he +is3 5anagement :ool is not receiving an operational asset from this transaction? therefore- a correcting entry that de%its an e!pense and credits Building 'ould remove the asset from the +is3 5anagement :ool ledger=

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions CContFdD

7=(=

a=

If the finance director and the head of the $;S 'ish to measure the full cost of operating the mass transit system- then it is important that the accrual %asis of accounting- including depreciation- %e used= $etermination of full cost 'ould facilitate measurement of operational efficiency and help determine 'hether the General 6und su%sidy is reasona%le in relation to %enefits received= 6urther- the reEuirement to use %udgetary accounting- including appropriation control- under special revenue fund accounting 'ould detract from efficient operation of the mass transit system= ;hus- sound management suggests the need to measure the full cost of operating the mass transit system and to use fle!i%le %udgeting as 'ell managed %usiness enterprises do= nterprise fund accounting 'ould measure full cost? special revenue fund accounting 'ould not= Since the $;SFs operating revenues have covered only )*-*0L of its operating costs- and apparently none of its capital costs since inception- ta!payers are heavily su%sidi4ing the $;S operations= Because the $;S relies primarily on none!change resources for operations- ta!payers should have a say in the %udget and operations of the $;S= ;he a%ility to have such a voice is through the %udget process and scrutiny %y elected officials= ;a!payer control over the $;S is increased 'hen the $;S is placed in a special revenue fund= ;he information in the case provides no clearcut ans'er as to 'hich fund type should %e used to account for the mass transit system- since GASB standards reEuire the use of an enterprise fund only if the government intends to cover the full cost of operations 'ith user fees- or else %ond financing to %e repaid from enterprise fund revenues is used= It should also %e noted that GASB Codification Section 1(00=10* specifies that a special revenue fund should %e used 'hen specific revenue sources are e!pected to comprise Ha su%stantial portionI of the inflo's reported in the fund= &either piece of guidance is definitive in this case= By definition- a General 6und is used to account and report all financial resources not accounted for and reported in another fund CGASB Codification 1(00=10)D? 'hereas- %usiness-type activities must %e reported in an enterprise fund if GASB Codification Section 1(00=102 criteria are met= In this case- there is no evidence that the golf course is financed 'ith de%t that is secured solely %y a pledge of the golf course revenues or that la's reEuire fees to cover costs and capital charges= Aence- the golf course could %e accounted for in either fund- su%@ect to administrative approval= nterprise funds are used to account for %usiness-type activities that offer goods and services to the pu%lic for a fee= <hen a golf course is operated in an enterprise fund- there is an e!pectation that the fund 'ill %e self-supporting and also retain eEuity for capital maintenance= If a golf course is operated 'ithin a

b.

c.

7-)=

a.

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- Case 7-) CContFdD

General 6und- there no reEuirement to produce a net income? ho'ever- ta!payers 'ho do not utili4e the golf course are often unhappy su%sidi4ing the facility 'ith ta! dollars= If a government does su%sidi4e 'ith ta! dollars- it is important to demonstrate that the golf course provides a pu%lic %enefit to the communityperhaps %y offering free golf lessons to at-ris3 youth or underta3ing a mar3eting campaign that highlights the %eauty of the pu%lic resource= b= ;his e!ercise is intended to have students consider the options provided= ;heir Euestions might includeB C1D S'$'u% ,uo0 $o the citi4ens support su%sidies for the golf courseM Is th decline in revenue a short or long-term pro%lemM Can rates %e raised or are there other revenue sources that could ma3e the fund self-supportingM Ao' %ig are the ongoing losses e!pected to %eM If the county selects this option- 'ill administrators decide to maintain an enterprise fund- 'hich may reEuire su%sidies from General 6und revenues during periods of loss- or to return operations to the General 6undM C"D Co-!e%% o- A1reeme-'% or M$-$1eme-' Co-'r$!'%0 <ould the management company or outside vendor maintain the facility at an accepta%le levelM Ao' is the contract to %e negotiated 9 are costs @ust competitive in the short-term and then increase Clo'-%allingDM <hat happens if the services are not accepta%leM <hich operations should %e retainedM C(D Oper$' -1 Le$%e0 Ao' does this offer differ in structure from option "M <hich is more %eneficial to the countyM Is it %etter to retain o'nership of the golf course or sell itM C)D Se// -1 '2e Go/3 Cour%e0 $o any potential %uyers e!istM <ould they upgrade the golf facility to an e!tent not afforda%le to the countyM <hat %enefit is derived from selling the golf course other than the one time cash infusion and possi%le operating cost savingsM

Solutions to !ercises and :ro%lems 7-1= Since each student has a different annual report- no t'o ans'ers to this e!ercise 'ill %e e!actly ali3e= #se this opportunity to discuss the value of government-'ide financial statements to determine the Hprofita%ilityI of proprietary activities and the e!tent of su%sidies from resources arising from governmental activities= Airports are an e!ample of enterprise funds that may or may not provide additional resources to su%sidi4e general governmental services= 1= "= (= )= *= b= c= d. b= b= ,= 7= .= 2= 10= a= a= d= a= d=

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions CContFdD

7-3.

TOWN OF FREDERICKSBURG CENTRAL DUPLICATING FUND GENERAL JOURNAL (NOT REQUIRED) Debit C!e"it

#.

WAGE E$PENSE PA(ROLL TA$ E$PENSE CAS* DUE TO FEDERAL GO,ERN-ENT

333%&'' )3%37& )+'%''' ..%/7& .&%&'' .&%&'' )3%&'' )3%&'' #'%&'' #'%&'' #&7%&'' #&7%&'' #&)%3'' #&)%3'' &//%''' &//%'''

).

DUE TO FEDERAL GO,ERN-ENT CAS*

3.

UTILIT( E$PENSE DUE TO OT*ER FUNDS

0.

OFFICE E$PENSES CAS*

&.

SER,ICE SUPPLIES IN,ENTOR( ACCOUNTS PA(ABLE

..

COST OF PARTS AND SUPPLIES USED SER,ICE SUPPLIES IN,ENTOR(

7.

DUE FRO- OT*ER FUNDS BILLINGS TO DEPART-ENTS

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-( CContJdD

Debit /. CAS* DUE FRO- OT*ER FUNDS ()'%)'' 1 &//%''' - 3'%''') +. DUE TO OT*ER FUNDS CAS* #'. ACCOUNTS PA(ABLE CAS* (#)%7'' 1 #&7%&'' - #3%)&') ##. DEPRECIATION OF -AC*INER( AND EQUIP-ENT ALLOWANCE FOR DEPRECIATION #). Closing Entries2 BILLINGS TO DEPART-ENTS WAGE E$PENSE PA(ROLL TA$ E$PENSE UTILIT( E$PENSE OFFICE E$PENSES COST OF PARTS AND SUPPLIES USED DEPRECIATION OF -AC*INER( AND EQUIP-ENT OPERATING INCO-E &//%''' 3'%''' #&.%+&' )#%/'' &7/%)''

C!e"it &7/%)''

)#%/''

#&.%+&'

3'%'''

333%&'' )3%37& )3%&'' #'%&'' #&)%3'' 3'%''' #0%/)&

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-( CContJdD

Debit OPERATING INCO-E NET POSITION3UNRESTRICTED NET POSITION3NET IN,EST-ENT IN CAPITAL ASSETS NET POSITION3UNRESTRICTED 3'%''' #0%/)&

C!e"it

#0%/)&

3'%'''

7-11

Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-( CContJdD
TOWN OF FREDERICKSBURG T- ACCOUNTS FOR CENTRAL DUPLICATING FUND (NOT REQUIRED) CAS* DUE FRO- OT*ER FUNDS +-3'-#3 (/) #&%''' &7/%)'' (#) )+'%''' ()) .&%&'' (0) #'%&'' (+) )#%/'' (#') #&.%+&' SER,ICE SUPPLIES IN,ENTOR( +-3'-#3 (&) 3&%3'' #&7%&'' ALLOW FOR DEP-AC* 4 EQUIP +-3'-#3 +'%''' (##) ACCOUNTS PA(ABLE (#') #&.%+&' +-3'-#3 #)%7'' (&) DUE TO OT*ER FUNDS (+) )#%/'' +-3'-#3 (3) C.L. 3'%''' NET POSITION3NET IN,EST IN CAP. ASSETS C.L. 3'%''' WAGE E$PENSE (#) 333%&'' UTILIT( E$PENSE (3) )3%&'' CL. )3%&'' CL. 333%&'' (#) +-3'-#3 )#'%''' CL. BILLINGS TO DEPART-ENTS &//%''' PA(ROLL TA$ E$PENSE )3%37& CL. )3%37& (7) &//%''' /'' )3%&'' #&7%&'' ()) 3'%''' DUE TO FEDERAL GO,ERN-ENT .&%&'' +-3'-#3 #%&'' (#) ..%/7& (.) #&)%3'' -AC*INER( AND EQUIP-ENT +-3'-#3 3''%''' +-3'-#3 (7) )'%)'' &//%''' (/) &7/%)''

NET POSITION3UNRESTRICTED +-3'-#3 &&%&'' C.L. #0%/)&

COST OF PARTS AND SUPPLIES USED (.) #&)%3'' OFFICE E$PENSES 3'%''' (0) #'%&'' CL. #'%&'' CL. #&)%3''

DEPRECIATION OF -AC*. AND EQUIP. (##) 3'%''' OPERATING INCO-E CL. #0%/)& CL. #0%/)& CL.

7-1"

Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-( CContJdD

7-3. a.

TOWN OF FREDERICKSBURG CENTRAL DUPLICATING FUND STATE-ENT OF RE,ENUES% E$PENSES% AND C*ANGES IN FUND NET POSITION FOR (EAR ENDED SEPTE-BER 3'% )'#0 5&//%'''

BILLINGS TO DEPART-ENTS OPERATING E$PENSES2 WAGE E$PENSE PA(ROLL TA$ E$PENSE OFFICE E$PENSES UTILIT( E$PENSE PARTS AND SUPPLIES USED DEPRECIATION OF -AC*INER( AND EQUIP-ENT TOTAL OPERATING E$PENSES OPERATING INCO-E NET POSITION% OCTOBER #% )'#3 NET POSITION% SEPTE-BER 3'% )'#0 3'%''' 5333%&'' )3%37& #'%&'' )3%&'' #&)%3''

&73%#7& #0%/)& ).&%&'' 5)/'%3)&

b. O6 t7e b8 i 9: t7e 9;e!8ti6< t8te=e6t :9! t7e >e8! e6"e" Se;te=be! 3'% )'#0% t7e ;!i?i6< ;9@i?> i 8?7ieAi6< t7e <98@ 9: ?9Ae!i6< 8@@ 9;e!8ti6< eB;e6 e % i6?@C"i6< "e;!e?i8ti96. T7e 6et i6?9=e :9! t7e >e8! i ).&) ;e!?e6t 9: bi@@i6< t9 "e;8!t=e6t % C6"e! t7e 3 ;e!?e6t =8Bi=C= et :9! t7i :C6".

7-1(

Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-( CContJdD

c.

TOWN OF FREDERICKSBURG CENTRAL DUPLICATING FUND STATE-ENT OF NET POSITION AS OF SEPTE-BER 3'% )'#0

ASSETS: CURRENT ASSETS2 CAS* DUE FRO- OT*ER FUNDS SER,ICE SUPPLIES IN,ENTOR( TOTAL CURRENT ASSETS CAPITAL ASSETS2 -AC*INER( AND EQUIP-ENT LESS2 ALLOWANCE FOR DEPRECIATION TOTAL CAPITAL ASSETS TOTAL ASSETS LIABILITIES: ACCOUNTS PA(ABLE DUE TO FEDERAL GO,ERN-ENT DUE TO OT*ER FUNDS TOTAL CURRENT LIABILITIES NET POSITION2 NET POSITION3NET IN,EST-ENT IN CAPITAL ASSETS NET POSITION3UNRESTRICTED TOTAL NET POSITION #/'%''' #''%3)& 5 )/'%3)& #3%)&' )%/7& )%&'' #/%.)& 3''%''' #)'%''' #/'%''' )+/%+&' 5 0/%0&' 3'%''' 0'%&'' 5##/%+&'

7-1)

Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-( CContFdD

d.

TOWN OF FREDERICKSBURG CENTRAL DUPLICATING FUND STATE-ENT OF CAS* FLOWS FOR T*E (EAR ENDED SEPTE-BER 3'% )'#0

CAS* FLOWS FRO- OPERATING ACTI,ITIES2 CAS* RECEI,ED FRO- CUSTO-ERS CAS* PAID TO2 E-PLO(EES FEDERAL GO,ERN-ENT (WDT% FICA) SUPPLIERS OT*ER DEPART-ENTS NET CAS* PRO,IDED B( OPERATIONS NET INCREASE IN CAS* AND CAS* EQUI,ALENTS CAS* AND CAS* EQUI,ALENTS% #'D#D)'#3 CAS* AND CAS* EQUI,ALENTS% +D3'D)'#0 RECONCILIATION OF OPERATING INCO-E TO NET CAS* PRO,IDED B( OPERATIONS OPERATING INCO-E ADJUST-ENTS2 DEPRECIATION E$PENSE-AC*INER( 4 EQUIP-ENT INCREASE IN IN,ENTOR( INCREASE IN RECEI,ABLES FRO- OT*ER FUNDS INCREASE IN ACCOUNTS PA(ABLE INCREASE IN DUE TO FEDERAL GO,ERN-ENT INCREASE IN DUE TO OT*ER FUNDS NET CAS* PRO,IDED B( OPERATING ACTI,ITIES 3'%''' (&%)'') (+%/'') &&' #%37& #%7'' 5 33%0&' 5 #0%/)& 33%0&' #&%''' 5 0/%0&' 5()+'%''') (.&%&'') (#.7%0&') ()#%/'') (&00%7&') 5 33%0&' 5&7/%)''

7-1*

Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions CContFdD

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-) CContJdD

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-) CContJdD

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-) CContJdD

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions CContJdD

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-, CContJdD

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments

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7-",

Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-, CContJdD

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments

Ch= 7- Solutions- 7-7 CContFdD

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-7 CContFdD

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions CContJdD

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-. CContJdD

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-. CContJdD

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-. CContJdD

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-. CContJdD

c! JUNE 3'% )'#0

CIT( OF BA( LAKE WATER UTLIT( FUND STATE-ENT OF NET POSITION

ASSETS: CURRENT ASSETS2 CAS* AND IN,EST-ENTS ACCOUNTS RECEI,ABLE (NET OF 5#/%).7 PRO,ISION FOR UNCOLLECTIBLE ACCOUNTS) ACCRUED UTILIT( RE,ENUE DUE FRO- GENERAL FUND ACCRUED INTEREST RECEI,ABLE TOTAL CURRENT ASSETS RESTRICTED ASSETS2 CAS* CAPITAL ASSETS2 LAND BUILDINGS (NET OF 53%..'%'&3 IN ACCU-ULATED DEPRECIATION -AC*INER( AND EQUIP-ENT (NET OF 5&%0+'%''7 IN ACCU-ULATED DEPRECIATION) TOTAL CAPITAL ASSETS TOTAL ASSETS LIABILITIES: CURRENT LIABILITIES2 ACCOUNTS PA(ABLE INTEREST PA(ABLE CURRENT PORTION OF LONG-TER- DEBT TOTAL CURRENT LIABILITIES LIABILITIES PA(ABLE FRO- RESTRICTED ASSETS2 CUSTO-ER DEPOSITS LONG-TER- LIABILITIES2 RE,ENUE BOND PA(ABLE TOTAL LIABILITIES NET POSITION2 NET IN,EST-ENT IN CAPITAL ASSETS UNRESTRICTED TOTAL NET POSITION

5 #%/##%0/) 30.%777 7''%''' #3%.0. #&%/0+ 5 )%//7%7&0 #'%7'/ 5#%7/'%+0& 0%+70%3&0 /%7##%70# #&%0.7%'0' #/%3.&%&')

/#0%#++ .#%0'. 0''%''' #%)7&%.'& #'%7'/ ##%)''%''' #)%0/.%3#3 3%/.7%'0' )%'#)%#0+ 5 &%/7+%#/+

Ch= 7- Solutions- 7-. CContJdD

7-(*

Chapter 07 - Accounting for the Business-type Activities of State and Local Governments

d.

CIT( OF BA( LAKE WATER UTILIT( FUND STATE-ENT OF CAS* FLOWS FOR T*E (EAR ENDED JUNE 3'% )'#0 5)%+03%0'# ( #%0.)%&+.) #%0/'%/'&

CAS* FLOWS FRO- OPERATING ACTI,ITIES2 CAS* RECEI,ED FRO- CUSTO-ERS CAS* PAID TO2 E-PLO(EES AND SUPPLIERS NET CAS* PRO,IDED B( OPERATIONS CAS* FLOWS FRO- NONCAPITAL FINANCING ACTI,ITIES2 TRANSFER TO GENERAL FUND 5(/''%''') CUSTO-ER DEPOSITS #%&#& NET CAS* USED B( NONCAPITAL FINANCING ACTI,ITIES CAS* FLOWS FRO- CAPITAL 4 RELATED FINANCING ACTI,ITIES2 PROCEEDS FRO- CAPITAL GRANT PUC*ASE OF -AC*INER( 4 EQUIP-ENT PRINCIPAL PAID ON CAPITAL DEBT INTEREST PAID ON CAPITAL DEBT NET CAS* USED B( CAPITAL 4 RELATED FINANCING ACTI,ITIES CAS* FLOWS FRO- IN,ESTING ACTI,ITIES2 INTEREST RECEI,ED ON IN,EST-ENTS NET INCREASE IN CAS* AND CAS* EQUI,ALENTS CAS* AND CAS* EQUI,ALENTS% JUL( #% )'#3 CAS* AND CAS* EQUI,ALENTS% JUNE 3'% )'#0

(7+/%0/&)

07&%''' (&/3%0)&) (0''%''') (3+&%+#7) (+'0%30)) ).'%''' 37%+7/ #%77&%'#+ 5#%/#)%++7

RECONCILIATION OF CAS* AND CAS* EQUI,ALENTS TO T*E BALANCE S*EET END BEGINNING OF (EAR OF (EAR CAS* AND CAS* EQUI,ALENTS IN CURRENT AND ACCRUED ASSETS 5#%/##%0/) 5#%77&%'#+ RESTRICTED CAS* AND CAS* EQUI,ALENTS #'%7'/ +%#+3 TOTAL CAS* AND CAS* EQUI,ALENTS 5#%/))%#+' 5#%7/0%)#)

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions- 7-. CContJdD

RECONCILIATION OF OPERATING INCO-E TO NET CAS* PRO,IDED B( OPERATIONS OPERATING INCO-E ADJUST-ENTS2 DEPRECIATION E$PENSE-AC*INER( 4 EQUIP-ENT UNCOLLECTIBLE ACCOUNTS INCREASE IN ACCOUNTS RECEI,ABLE INCREASE IN ACCRUED UTILIT( RE,ENUE DECREASE IN DUE FRO- GENERAL FUND INCREASE IN ACCOUNTS AND ACCRUED PA(ABLE NET CAS* PRO,IDED B( OPERATING ACTI,ITIES 5 /))%7.0 .''%#3) 0%+'' (00%/'/) ()''%''') #&%..& )/)%#&) 5#%0/'%/'&

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Ch= 7- Solutions- 7-2 CContJdD

7-(7

Chapter 07 - Accounting for the Business-type Activities of State and Local Governments

T7e ;e?i8@ ite= 79C@" 8;;e8! !i<7t be:9!e t7e ?786<e i6 6et ;9 iti96 86" 8:te! t7e t!86 :e! 9Ct. GASBS "# ?786<e" ;!9;!iet8!> :C6" eJCit> te!=i69@9<> :!9= PNet A et Q t9 PNet P9 iti96Q.

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Chapter 07 - Accounting for the Business-type Activities of State and Local Governments Ch= 7- Solutions CContJdD

7-#'. INGLIS CIT( ENTERPRISE FUND STATE-ENT OF CAS* FLOWS FOR T*E (EAR ENDED DECE-BER 3#% )'#0 CAS* FLOWS FRO- OPERATING ACTI,ITIES2 CAS* RECEI,ED FRO- CUSTO-ERS CAS* PAID TO2 SUPPLIERS E-PLO(EES OT*ER NET CAS* PRO,IDED B( OPERATIONS CAS* FLOWS FRO- NONCAPITAL FINANCING ACTI,ITIES2 GRANT FRO- STATE TRANSFER TO GENERAL FUND NET CAS* PRO,IDED B( NONCAPITAL FINANCING ACTI,ITIES CAS* FLOWS FRO- CAPITAL FINANCING ACTI,ITIES2 PROCEEDS FRO- SALE OF CAPITAL ASSETS DEBT PA(-ENT NET CAS* USED B( CAPITAL FINANCING ACTI,ITIES CAS* FLOWS FRO- IN,ESTING ACTI,ITIES2 PURC*ASE OF IN,EST-ENTS INTEREST RECEI,ED ON IN,EST-ENTS NET CAS* PRO,IDED B( IN,ESTING ACTI,ITIES NET INCREASE IN CAS* AND CAS* EQUI,ALENTS CAS* AND CAS* EQUI,ALENTS% #D#D)'#0 CAS* AND CAS* EQUI,ALENTS% #)D3#D)'#0 (7&%''') 0)%0'' (3)%.'') ))+%/'' /+&%.3& 5#%#)&%03& &7%&'' (&)&%''') (0.7%&'') )&%''' &'%''' ()&%''') 5(#%.0)%#'') (07+%3'') (/+%)'') ()%)#'%.'') 57'0%+'' 5)%+#&%&''

7-(2