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sunnydelite
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Posted: 22 Jul 2010 at 14:13 | IP Logged  

Becker's final review F9

The City of Thayer Point reported Revenues over
Expenditures of $25,000 for all governmental funds for
the year ended December 31, 20X2. The city had capital
outlay of $600,000 partially funded by debt proceeds of
$500,000 at December 31, 20X2. The city paid $219,000 of
debt service expenditures during the 20X2 year comprised
of principal payments of $500,000 and interest payments
of $119,000. Interest of 4 percent is due every six
months on April 1 and October 1 on total debt reported at
December 31, 20X1 of $3,000,000. The increase (decrease)
in net assets to be reported for the City's governmental
activities displayed on their government-wide Statement
of Activities is:
Answer: $226,000
Can anyone please explain to me how to reconcile the
interest part? as I do not understand Becker's
explanation.

Thank you so much!!!


Thank you so much!!!
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amu7
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Posted: 22 Jul 2010 at 15:01 | IP Logged  

Is there a typo?
The city paid $219,000 of
debt service expenditures during the 20X2 year comprised
of principal payments of $500,000 and interest payments
of $119,000.

How is it that 219K comprised of 500K toward principal and 119k for interest?

Can you please provide Becker answer as well?
Thanks
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sunnydelite
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Posted: 22 Jul 2010 at 15:35 | IP Logged  

Thank you for response me so quickly. It is not typo.
Let me give you the question and answer which is Becker's
final review for Ch9.
The City of Thayer Point reported Revenues over
Expenditures of $25,000 for all governmental funds for
the year ended December 31, 20X2. The city had capital
outlay of $600,000 partially funded by debt proceeds of
$500,000 at December 31, 20X2. The city paid $219,000 of
debt service expenditures during the 20X2 year comprised
of principal payments of $500,000 and interest payments
of $119,000. Interest of 4 percent is due every six
months on April 1 and October 1 on total debt reported at
December 31, 20X1 of $3,000,000. The increase (decrease)
in net assets to be reported for the City's governmental
activities displayed on their government-wide Statement
of Activities is:
$226,000
$225,000
$224,000
$125,000

The correct answer is $226,000


Net changes in fund balance          ; 25,000
Other financial sources           
Debt Proceeds                 -$500,000
Expenditures(Capital outlay, principal payments)     
           Capital      Outlay      $600,000     
           Principal payments on Debt     $100,000      
                           $700,000
                          
           Basis of Accounting           
           Additional accrued           
           Revenue and Expense           
                          
                          
           Prior year accrual           
           Balance at 20X1     $3,000,000  &nbs p;  
           Interest rate     4%      
           Accrual period, 4 months      $30,000
                          
           Current year accrual           
           Balance at 20X1     $3,000,000  &nbs p;  
           Less principal payment     -$100,000  &n bsp;  
           Balance at 20X2     $2,900,000  &nbs p;  
           Interest rate     4%      
           Accrual period, 4 months      -$29,000
     Government wide Change in net assets     $226,000

Can you please explain why the interest accrual period is
4 months in both years? thanks




      
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amu7
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Posted: 22 Jul 2010 at 16:08 | IP Logged  

I am sorry, I really don't get this. How is Principal payments on Debt     $100,000? And why prior year accrual is 4 months? I will try to dig into this, but if you understand these 2 points, please let me know.

Can you explain how principal payment of 100K is calculated?

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sunnydelite
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Posted: 22 Jul 2010 at 18:55 | IP Logged  

I do not understand this one, either, but it is from
Becker's final review question and answer.

Anyone can explain it?

Thanks so much!

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