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Subject Topic: Governmental Accounting- CPA-01162 (Topic Closed Topic Closed) Post ReplyPost New Topic
  
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Xalina
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Joined: 14 Sep 2009
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Posted: 19 Sep 2009 at 18:12 | IP Logged  

If a primary government's general fund has an equity interest in a joint venture, all or a portion of this equity interest should be reported in the:

a.    Government-wide statement of net assets
b.    Trust fund
c.    Agency fund.
d.    Internal service fund

Becker's Solution
Choice "a" is correct.  Since the general fund has the equity interest, only the available and expendable portion of the investment should be recorded in that fund.  The available and expendable portion would not include any equity interest.  The portion of the equity interest in the joint venture that represents the government's investment in the net assets of the venture is recorded in the government-wide statement of net assets.
Choice "b" is incorrect.  Trust fund are used to account for resources of the governmental unit acting as a trustee.
Choice "c" is incorrect.  Agency funds are used to account for funds where the governmental entity is acting as a custodian.
Choice "d" is incorrect.  Internal service funds are used to account for resources within a governmental unit, not a joint venture.

My question is What do they mean by available and expendable portion of the investment.

As far as I know, this is no where covered in the text. Correct?
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bryris
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Posted: 19 Sep 2009 at 21:24 | IP Logged  

An equity interest is an investment. An investment cannot be used to pay for current obligations unless it is liquidated. Therefore, under the modified accrual basis of accounting used by governmental funds, this equity interest is not recorded unless part of it is/will be available to fund current obligations. However, it is recorded in its entirety in the g-wide statements.

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Xalina
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Joined: 14 Sep 2009
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Posted: 20 Sep 2009 at 12:35 | IP Logged  

Thanks Bryris..

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