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Problem 3 – Statement of Net Position Reconciliation
Information about the conversion of the Governmental Funds Balance Sheet to the Statement of
Net Position for the City of Pleasant Hill is presented below (all amounts are in thousands of
dollars):
All governmental funds' fund balances................................................................ $13,000
Deferred revenue related to property taxes.......................................................... 2,000
Accrued interest on long-term liabilities.............................................................. 1,200
General capital assets........................................................................................... 10,800
Accumulated depreciation on capital assets ....................................................... 4,100
General long-term liabilities:
Bonds payable for capital assets.................................................................... 5,700
Liability for compensated absences............................................................... 3,200
Internal service fund serving governmental activities
Net position.................................................................................................... 3,000
Capital assets net of accumulated depreciation............................................. 1,700
Liability, capital related................................................................................. 500
Requirement: Prepare the reconciliation of total fund balance to net position for governmental
activities for the City of Pleasant Hill, given the following information.
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Answer:
City of Pleasant Hill
Reconciliation to Balance Sheet of Governmental Funds
to the Statement of Net Position
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Problem 4 – Statement of Activities Reconciliation
Information about the conversion of the Governmental Funds Change in Fund Balance to the
Statement of Activities Change in Net Position for the City of Six Mile is presented below (all
amounts are in thousands of dollars):
Net increase in all governmental funds' fund balances........................................ $1,300
Increase in deferred revenue all related to property taxes................................... 200
Increase in accrued interest on long-term liabilities............................................ 12
Expenditures - capital asset ................................................................................. 5,080
Expenditures - principal on capital related debt.................................................. 3,000
Depreciation expenses on capital assets ............................................................. 4,100
Proceeds from general long-term capital debt..................................................... 3,500
Proceeds from the sale of capital assets (book value of $25).............................. 40
Increase in liability for compensated absences.................................................... 30
Internal service net income.................................................................................. 520
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Answer:
City of Six Mile
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance
to the Statement of Activities
Governmental and Nonprofit Accounting: Theory and Practice, 10e (Freeman)
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Problems – Chapter 15
Problem 1 – Reporting Entity
A city has three related entities. Its finance and accounting staff is trying to determine which, if
any, of those entities must be included in the city reporting entity. Also, for the entities that are
included the staff must determine whether they are to be blended or discretely presented.
Explain how each of the related entities should be treated and why.
Situations:
1. The first entity is the city school district. The district has a separately elected board and
is legally separate from the city. The school board can establish its own budget except
that its property tax levy must be approved by the city council. The city does not
guarantee the debt of the schools or have any other authority over the school district.
2. The second entity is the municipal gas utility. The city appoints the seven members of
the utility governing board and can remove them at will. The city must approve the
budget and the rate structure of the utility. The utility cannot issue bonded debt without
the city council's prior approval. The city is entitled to, and regularly receives, the
operating surpluses of the utility.
3. The third entity is the City Library Commission. According to the commission's charter,
the commission board consists of the city mayor, the city finance director, and the
superintendent of the city schools, and two other members of city council besides the
mayor. City council consists of the mayor and four other council members. The library
commission budget must be approved by the city council, and all long-term debt issued
by the Library Commission is to be repaid by the city.
Answers:
1. The school district is not a component unit of the city. Since the school board is
2. Since the city appoints all members of the governing board and can remove them at will,
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The gas utility should be discretely presented. The only pertinent criterion for blending is
3. The library commission is a component unit of the city because the city has substantive
Problem 2 – Discrete Presentation v. Blending
Requirements:
1. Describe discrete presentation in the context of the government-wide statements. Assume
that a government has five major discretely presented component units. Include the
reporting and disclosures required for each of the major component units.
2. Describe blending. When is it required? Is it permitted under other circumstances—i.e.,
when is it not required?
Answers:
1. Discretely presented component units are presented in the government-wide financial
2. Blending means that a component unit is being reported in substantially the same manner
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Problem 3 – Preparation and Organization of the CAFR
Listed below are various statements, schedules, notes, and other elements that appear in a
Comprehensive Annual Financial Report (CAFR).
A. Demographic and Economic Information
B. Organization Chart
C. Table of Contents
D. Statement of Net Position
E. Schedule of Revenues, Expenditures, and Change in Fund Balance – Budget-to-Actual
F. Proprietary Fund Statement of Cash Flows
G. Summary of Significant Accounting Policies
H. Letter of Transmittal
I. Governmental Funds Balance Sheet
J. Capital Asset note disclosure
K. Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund
Balances of Governmental Funds to the Statement of Activities
L. Management’s Discussion and Analysis
M. Statement of Net Position – Component Units
N. GFOA Certificate of Achievement for Excellence in Financial Reporting
O. Schedule of Employer Contributions
P. Statement of Fiduciary Net Position
Q. Parks and Recreation Special Revenue Fund Balance Sheet
R. Changes in Net Position, Last 10 Years
S. Statement of Activities
T. Auditor’s Report
Requirement – Recommend that you choose one of the following requirements,
1. Identify the major section of the CAFR in which each element is found.
a. Introductory
b. Financial
c. Statistical
2. Identify the major subsection of the CAFR in which each element is found.
a. Introductory
b. Required Supplementary Information
c. Basic Financial Statements
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d. Notes to the Financial Statements
e. Other Required Supplementary Information
f. Supplementary (or Other) Information
g. Statistical Section
3. List each element in the proper order that they are found in the CAFR.
Answers:
Governmental and Nonprofit Accounting: Theory and Practice, 10e (Freeman)
Problems – Chapter 16
Problem 1 – Journal Entries for Nongovernmental, Not-for-Profit Entities
Transactions: The following selected transactions occurred for a nongovernmental, not-for-profit
organization. All amounts are in thousands of dollars.
1. Unrestricted cash contributions received during the year, $300.
2. Restricted cash contributions were received during the year for the following: (a)
Education programs, $43; (b) Building fund, $202; and (c) Endowment, $1,000.
3. Pledges received during the year were as follows: Unrestricted, $3,000; (b) Building
fund, $5,000; and (c) Endowment, $20,000. 10% of pledges receivable typically prove
uncollectible. Pledges expect to be collected early in the next year.
4. A benefit concert was held to raise resources for the building fund. Receipts totaled
$1,400 and direct costs incurred totaled $850.
5. Salary expenses incurred for the education programs were paid, $14.
6. Materials were purchased on account for the education programs, $25.
7. Fees paid to an architect for design of the building during the year were $92.
Additionally, payments to the building contractor during the year were $110.
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8. Earnings on endowment fund investments are restricted to the entity's education
programs. The earnings for the year were $13.
9. Cost of materials used for education programs during the year, $32
10. Earnings on building fund investments were not restricted by donors but the board
requires that they be used to finance the building. The earnings on those investments for
the year were $25.
Requirement: Prepare the journal entries for the above transactions.
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Answers:
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