Chap 006

Chapter 06 - Accounting for General Long-term Liabilities and Debt Service

CHAPT APTER 6:

ACCOUN COUNT TING ING FOR FOR GENER ENERAL AL LONG-T NG-TER ERM M LIABILITIES AND DEBT SERVICE OUTLINE

Number

+ue$&io,$: 6-1

6-" 6-$ 6-% 6-) 6-6 6-+ 6-,

6- 6-10 C#$e$: 6-1

6-"

Topi

T!pe"T#

%$S&#&u$ 're: ()"e*

Defining general long-term liabilities; financial reporting Disclosures about long-term liabilities General obligation bonds &eporting special assessment debt Debt limit and debt margin *verlapping debt Long-term debt and net position Distinguish serial bond characteristics; debt service fund accounting differences for serial and term bonds &eporting investments Advance refunding of bonds

Define e!plain

Same

#!plain #!plain #!plain Calculate #!plain #!plain Describe e!plain

Same Same 'e ( Same Same 'e ( 6-, revised

Describe #!plain

Same Same

.olic/ ssues 2ho should pa/ for neighborhood improvements3 .olic/ ssues &elating to General Long-term

Anal/4e (rite

Same

Anal/4e (rite

'e (


CHAP CHAPTE TER R 6:

ACCO ACCOUN UNTI TING NG FOR FOR GE GENE NERA RAL L LO LONG NG-T -TER ERM M LIABILITIES AND DEBT SERVICE

Ans(ers to
General General long-te long-term rm liabil liabilities ities arise arise from from activi activities ties of the the General General und or some other governmental fund= 5hese liabilities are distinguished from >fund? long-term liabilities that are incurred b/ a proprietar/ or fiduciar/ fund and for (hich debt deb t service (ill be paid from that fund= General long-term liabilities liabilities are reported onl/ in the Governmental Activities column of the government-(ide financial statements and not in an/ fund financial statements=

6-"=

As sho(n sho(n in llust llustrati ration on 6-1 for the the Cit/ Cit/ of 9ac@sonvil 9ac@sonville le note note disclos disclosures ures about long-term long-term debt such as bonds notes and an d capital leasesB and operating long-term liabilities such as claims and udgments compensated absences and other accrued liabilitiesB should sho( the beginning balance of each maor class of long-term liabilit/ as (ell as additions to deletions from and the ending balance ba lance of each maor class= Disclosures should also include the portion of liabilities due (ithin one /ear of the financial statement date= 5hese disclosures should present separate sections for governmental activities and business-t/pe activities= .resenting long-term liabilit/ disclosures for discretel/ presented component units as the Cit/ of 9ac@sonville has done is discretionar/ and is a matter of professional udgment per GAS: Codification Section "$00=11)=

6-$=

a=

5he fund fund rece receivi iving ng the the benefit benefit of the the bond bond issue issue such such as a capi capital tal pro proect ectss fund fund (ould record a debit to Cash and a credit to *ther inancing Sources.roceeds of :onds= Since premiums and accrued interest must be used to service the debt the premium on the bond sale (ould be recorded in the debt service fund as a debit to


Ch= 6 Ans(ers 6-$ ContEdB

6-%=

6-)=

c.

GAS: reFuires that the effective interest method be used to amorti4e the .remium on :onds .a/able= As a result the amorti4ation of the premium reduces the carr/ing value of the bond b/ the amount of premium amorti4ed each interest pa/ment period= At the maturit/ of the bond the carr/ing value of the bond (ill be eFual to the face value of the bond=

aB

Special assessment debt for (hich a government provides secondar/ bac@ing should be reported as special assessment debt (ith governmental commitment in the government-(ide statement of net position (hile an/ portion of special assessment debt that is the direct responsibilit/ of a government and (ill be repaid from general government resources the public benefit portion or the amount assessed against government-o(ned propert/B should be reported li@e other general long-term liabilities=

bB

f the government is not obligated in an/ manner for special assessment debt the debt should not be reported in the financial statements; ho(ever the notes to the financial statements should disclose the amount of the debt as (ell as the fact that the government is in no (a/ liable for repa/ment but is onl/ acting as agent for the propert/ o(ners in collecting the assessments for(arding the collections to bondholders and initiating foreclosure proceedings if appropriate=

5he debt limit and debt margin for 8ilos Cit/ are Debt limit H10,6$)11000 I 0=01B Less General obligation serial bonds Debt margin

H10,6$)110 %$000000B H 6) 6$) 110


Ch= 6 Ans(ers ContEdB

6-+=

*n the surface this statement does not sound correct= 5he issuance of long-term debt at par (ill result in a debit to Cash and a credit to :onds .a/able in the government-(ide ournal= 5he issuance of debt (ould have no effect on net position; ho(ever an/ pa/ment of interest in the /ear of issuance (ould decrease net position= n this e!ample an additional note clarified the meaning of the 8DKA statement= t seems that the proceeds from the debt (ere spent on road construction that (as then gifted to another government= 5hus the government issuing the debt used the resources for construction in the current /ear debiting C2. and crediting cashB; ho(ever the gift removed the capital asset (ith an offsetting decrease to net position= t (as the outright gift of the capital asset rather than the debt issuance that caused the decrease in net position=

6-,=

or a regular serial bond the total principal is repa/able in a specified number of eFual annual installments over the life of the issue= f the first installment of a serial bond issue is dela/ed for a period of more than one /ear after the bond issue date but all future installments fall due on a regular basis the bonds are @no(n as deferred serial bonds= 2ith annuit/ serial bonds the amount of annual principal repa/ments increases each /ear b/ appro!imatel/ the same amount that interest pa/ments decrease so that the total debt service pa/ment remains relativel/ level over the term of the issue= rregular serial bonds e!hibit pa/ment patterns that do not fit the other three categories= &egular serial bonds t/picall/ have principal maturities e!tending from one /ear to "0 or more /ears and do not reFuire setting aside resources= 5erm bonds on the other hand have a one-time principal maturit/ that reFuires a lump-sum repa/ment of principal on the due date= Governments generall/ set aside resources over time to prepare for the large lump-sum pa/ment= 5his practice ma/ be reFuired b/ the debt agreement=


Solutions to Cases 6-1= a. 2e recommend that the substance of a studentJs brief be emphasi4ed more than its form= 5he @e/ issues that students should identif/ in this case are 1B Should propert/ o(ners have to bear the full cost burden for improvements that have public as (ell as private benefit3 "B Should the government have the po(er to create a special improvement district (ithout approval of a maorit/ of affected propert/ o(ners3 As in an/ ambiguous situation involving subective evaluation students ma/ reach different verdicts= So each studentJs (or@ should be assessed on the content and Fualit/ of anal/sis rather than on the verdict itself= Ver/i&: n the verdict on (hich this case is based the court ruled for the plaintiffs on the grounds that the cit/ failed to sho( that propert/ o(ners benefited substantiall/ from the street (idening proect= urther the proect (as found to have significant public benefit; therefore the udge ordered the cit/ to use public ta!es to pa/ a maorit/ of the cost of the proect=

As a result of this case the cit/ adopted a ne( and man/ (ould argue fairer polic/ for financing future capital proects that provide both public and private benefit= urther the revised cit/ ordinance reFuires a public hearing for all special assessment and other public improvement proects as (ell as public notification in local ne(spapers= b. f as in this case the government provides secondar/ bac@ing for special assessment bonds then accounting and financial reporting are not affected b/ (ho pa/s the debt service on the proect= ssuance of the bonds is recorded as an other financing source in the capital proects fund and as a general long-term liabilit/ at the government-(ide level regardless of (ho pa/s debt service on the bonds= 8oreover capital proects fund accounting and reporting for street construction (ould not be affected b/ the verdict=


Ch= 6 Solutions Cases ContJdB

6-"= a. As noted in the chapter the use of long-term debt is a traditional part of the fiscal polic/ of state and local governments particularl/ for financing general capital assets= e( governments possess the resources needed to finance capital proects in the short term as annual ta! revenues are often used for current operating purposes and to meet prior obligations= 5hus long-term debt is freFuentl/ used to fund ne( capital proects government buildings schools roads etc=B and capital asset improvements= n the shortterm local governments might be able to sustain debt prohibitions; ho(ever in the longer term government buildings schools roads emergenc/ service assets etc= (ould suffer= b. #ach studentJs memo should identif/ and support a position on the amendment= 5his is a case that can generate significant class discussion= 2hile ta!pa/ers often e! press distrust of government and generall/ desire reduced ta! liabilities astute individuals recogni4e that ta!es and ta!-supported debt support general government operations and public services upon (hich the general citi4enr/ relies=

n "010 residents of the State of Colorado voted on Amendment 61 a measure (hich called for prohibition of ne( debt issuances b/ state or local governments and stringent limits on local government debt= 2hile Amendment 61 did not pass in Colorado it (as hotl/ contested on both sides= 5he five statements (ere adapted from pros and cons published b/ the press in Colorado= Additional information is available at http(((=toda/=colostate=edustor/=asp!3id%)6"; httpbellpolic/=orgnode$)01; or httpballotpedia=org(i@iinde!=phpColoradoMStateMandMLocalMDebtMLimitationsM AmendmentM61M"010B=


Ch= 6 Solutions Case 6-$ ContJdB

n the authorsJ vie( neither legal nor conceptual anal/ses ustif/ the authorit/Js removal of the liabilit/= rom a legal vie(point removal of the liabilit/ appears inappropriate as long as the creditor still insists that it has a valid receivable an d no legal release has been obtained= rom a conceptual vie(point the GAS: defines liabilities as >Npresent obligations to sacrifice resources that the government has little or no discretion to avoid=? OGAS: Concepts Statement 'o= %P

n most cases of in-substance defeasance the barrier for removing debt from a balance sheet is higher than that for recogni4ing it initiall/ i=e= AS: ASC %0)="0B= 5hus conceptuall/ it appears that the authorit/ can ustif/ removing the liabilit/ from its accounts onl/ if the possibilit/ of hitting the agreed upon attendance trigger annual attendance of $000000B is remote= :ecause a variet/ of sports and entertainment events can be held in the stadium the possibilit/ e!ists that the trigger point could be reached in the future= 5hus as the independent auditor /ou should advise the authorit/ to continue to report the liabilit/ on its statement of net position= b. 8uch of the anal/sis for .art a applies to this part as (ell= 5he un(illingness of the count/ board of commissioners to (rite off the receivable for debt service advances suggests that the/ believe there is a possibilit/ that the attendance sales trigger ma/ be reached in the future= As the independent auditor /ou are not in a position to override the commissionJs opinion particularl/ given the stated facts in this case= Qo(ever /ou should Fuestion (h/ the receivable is being carried at 4ero net reali4able value if there is a positive probabilit/ that some portion of the advances ma/ be repaid in the future= f the count/ is un(illing to report a non4ero amount of receivable then /ou should advise them to (rite off the receivable altogether= n other (ords the count/ cannot have it both


Ch= 6 Solutions Case 6-% ContJdB

#!traneous factors can also impact consideration of (hether the debt burden is e!cessive= 5here ma/ be environmental factors that impact increases in debt such as floods or (ind destruction= Additionall/ the nature of the government issuing the debt ma/ be a factor; for e!ample some cities are responsible for school construction (hile in other cities school districts separatel/ issue debt impacting the amount of overlapping deb tB= inall/ if the debt is part of a capital improvement plan the level of debt ma/ be considered more acceptable since there are plans in place to obtain needed capital assets (hile managing the level of debt= R#&io o0 Ne& Ge,er#. Bo,/e/ Deb& &o A&u#. V#.ue o0 T##b.e Proper&! #,/ Ne& Ge,er#. Bo,/e/ Deb& per C#pi&# 'L#$& Te, Fi$#. 1e#r$ 2 3444$ omi&&e/* Fiscal Estimated Assessed Year Population Valuation 2005 $ 90,599 $ 1,792,747 2006 92,061 1,939,316 2007 93,524 2,057,130 2008 94,986 2,197,710 2009 96,647 2,386,169 2010 97,610 2,585,416 2011 99,208 2,843,133 2012 100,477 3,080,629 2013 102,404 3,201,498 2014 103,428 3,325,203

Gross Bonded Debt $ 192,151 206,856 212,323 221,287 261,519 291,736 280,654 278,042 271,425 309,788

Less: Amount Net in Debt Bonded Service Fund Debt $ 99,545 $ 92,606 100,690 106,166 106,655 105,668 102,518 118,769 117,212 144,307 120,326 171,410 106,551 174,103 105,945 172,097 86,976 184,449 95,158 214,630

Net General Bonded Debt to Assessed Value 5.17% 5.47% 5.14% 5.40% 6.05% 6.63% 6.12% 5.59% 5.76% 6.45%

Net General Bonded Debt per Capita $ 1,022 1,153 1,130 1,250 1,493 1,756 1,755 1,713 1,801 2,075


Solutions to #!ercises and .roblems 6-1=

#ach student (ill have a different annual report; therefore there is no single set of ans(ers to each Fuestion as@ed= As@ing students to compare their ans(ers to various Fuestions is an effective active learning in-class techniFue=

6-"=

1= "= $= %= )=

b= a= a= c= a.

6= += ,= = 10=

c. b= d = d. c=


Ch= 6 Solutions ContEdB

!"#

V$LLAGE %F CEN&E'V$LLE

(#

Debits

Credits

General Fund :

CAS)

*+,-,,,

'EVEN.ES

*+,-,,,

%&)E' F$NANC$NG .SES/$N&E'F.ND &'ANSFE'S %.&

*+,-,,,

CAS)

*+,-,,,

Debt Service Fund :

CAS)

*+,-,,,

%&)E' F$NANC$NG S%.'CES/$N&E'F.ND &'ANSFE' $N

*+,-,,,

E0PEND$&.'ES/P'$NC$PAL

,,-,,,

E0PEND$&.'ES/$N&E'ES&

(+,-,,,


Ch= 6 Solutions 6-$ ContEdB

Debits 2#

Credits

Capital Projects Fund :

CAS)

+-,,,-,,,

%&)E' F$NANC$NG S%.'CES/ P'%CEEDS %F B%NDS

+-,,,-,,,

Debt Service Fund :

CAS)

(+,-,,,

%&)E' F$NANC$NG S%.'CES/ P'E1$.1 %N B%NDS PAYABLE

(,,-,,,

'EVEN.ES

+,-,,,

Governmental Activities :

CAS) SE'$AL B%NDS PAYABLE $N&E'ES& PAYABLE P'E1$.1 %N B%NDS PAYABLE

+-(+,-,,, +-,,,-,,, +,-,,, (,,-,,,



Debits

Credits

Debt Service Fund:

CAS)

((,-,,,

%&)E' F$NANC$NG S%.'CES/ $N&E'F.ND &'ANSFE'S $N

((,-,,,


(+-3,4

E0PEND$&.'ES/P'$NC$PAL

45-(4(

CAS)

((,-,,,


CAS)

((,-,,,

P'%G'A1 'EVEN.ES/GENE'AL G%VE'N1EN&/CAP$&AL G'AN&S 6 C%N&'$B.&$%NS

((,-,,,

E0PENSES/$N&E'ES& %N CAP$&AL LEASE

(+-3,4

CAP$&AL LEASE %BL$GA&$%N

45-(4(



Debits

Credits


CAS)

2-3,,-,,,

SE'$AL B%NDS PAYABLE &E'1 B%NDS PAYABLE

2-3,,-,,, "-+,,-,,,

CAS) +#

"-+,,-,,,

Debt Service Fund :

CAS)

+,,-,,,

%&)E' F$NANC$NG S%.'CES/ P'%CEEDS %F SPEC$AL ASSESS1EN& B%NDS

+,,-,,,

ASSESS1EN&S 'ECE$VABLE/C.''EN&

2+-,,,

ASSESS1EN&S 'ECE$VABLE/DEFE''ED

5*+-,,,

'EVEN.ES DEFE''ED 'EVEN.ES Governmental Activities

2+-,,, 5*+-,,,



Debits #

Credits

Debt Service Fund :

$NVES&1EN&S

(,-,,,

'EVEN.ES/C)ANGE $N FA$' VAL.E %F $NVES&1EN&S

(,-,,,


$NVES&1EN&S

(,-,,,

GENE'AL 'EVEN.ES/$NVES&1EN& EA'N$NGS

(,-,,,

!5# Debt Service Fund : ES&$1A&ED 'EVEN.E 8+-+,,-,,, 0 ,#," 0 (9(2

("-*+,

ES&$1A&ED %&)E' F$NANC$NG S%.'CES/ B%ND P'E1$.1 8+-+,,-,,, 0 #,(

++-,,,

ES&$1A&ED %&)E' F$NANC$NG S%.'CES/ $N&E'F.ND &'ANSFE' $N APP'%P'$A&$%NS 8+-+,,-,,, 0 ,#," 0 ;

("-*+, 32-+,,


Ch= 6 Solutions ContJdB

!+#

C$&Y %F @A1ES&%7N Debits

a#

Credits

Capital Projects Fund:

E0PEND$&.'ES

*25-34

%&)E' F$NANC$NG S%.'CES CAP$&AL LEASE AG'EE1EN&S

*25-34

Calculations: &>e present value o< an ordinar? annuit? o< ( eree present value o< t>e 4 annual pa?ments o< (,,-,,, eac> is 25-34# &>e present value o< t>e capital lease obliation is *25-34 825-34  (,,-,,, paid at t>e inception o< t>e lease# Note: 7>en t>e initial pa?ment o< (,,-,,, is made b? t>e debt service

e same amount#


Ch= 6 Solutions 6-) ContEdB

Debits

Credits

Governmental Activities:

E0PENSES/$N&E'ES& %N CAP$&AL LEASES

54-4*+

CAP$&AL LEASE %BL$GA&$%NS PAYABLE

+,-,2+

CAS)

(,,-,,,

Calculation: Pa?ment Number ( 2

!#

Amount o< Pa?ment (,,-,,, (,,-,,,

$nterest on .npaid Balance at 3I 

!,! 54-4*+

Pa?ment on Principal (,,-,,, +,-,2+

.npaid Lease %bliation *25-34 25-34 +*5-5

C$&Y %F APPLE&%N S&A&E1EN& %F LEGAL DEB& 1A'G$N DECE1BE' "(- 2,("

ASSESSED VAL.E %F P'%PE'&Y 'A&E %F DEB& L$1$&A&$%N A1%.N& %F DEB& L$1$&A&$%N %.&S&AND$NG L%NGJ&E'1 $NDEB&EDNESS

25,-,,,-,,, I (5-5,,-,,,


Ch= 6 Solutions 6-6 ContEdB

C$&Y %F APPLE&%N SC)ED.LE %F D$'EC& AND %VE'LAPP$NG DEB& DECE1BE' "(- 2,("

Governmental .nit

General %bliation Bonds

Estimated Percentae Applicable

Estimated S>are o< %verlappin Debt

Cl?de Count? Sc>ool District Cl?de Count? )ealt> Services 'eional Librar? Subtotal- %verlappin Debt

 (+-,,,-,,, 3-,,,-,,, 2-5,,-,,,

2+I 2+I ""#""I

 "-*+,-,,, 2-,,,-,,, 3,,-,,, -++,-,,,

Cit? Direct Debt

 4-2,,-,,,

(,,I

 4-2,,-,,,

&otal Direct and %verlappin Debt

 (+-*+,-,,,

Note: &>e cit? also >as -,,-,,, 82-*,,-,,,  (-4,,-,,,  2-,,,-,,, o< sel
supportin revenue bonds outstandin- >ic> are bacHed b? t>e and credit o< t>e cit?- s>ould enterprise revenues be insu<


!*#

KLA.S C%.N&Y Debits

Credits

a. Debt Service Fund:

ES&$1A&ED %&)E' F$NANC$NG S%.'CES

+-32+-,,,

ES&$1A&ED 'EVEN.ES

(-,,-+,,

ES&$1A&ED %&)E' F$NANC$NG .SES

+-,,,-,,,

APP'%P'$A&$%NS

(-32+-,,,

B.DGE&A'Y F.ND BALANCE

-+,,

b. -+,,

c. No# &>e onl? interest and principal ependitures recorded relate to

bonds# $< capital lease pa?ments >ad been made interest and principal ependitures ould be recorded related to t>e lease# d. Yes# %t>er Financin Sources/Proceeds o< 'eer


Ch= 6 Solutions 6-+ ContEdB

e.

KLA.S C%.N&Y DEB& SE'V$CE F.ND S&A&E1EN& %F 'EVEN.ES- E0PEND$&.'ES AND C)ANGES $N F.ND BALANCES F%' &)E YEA' ENDED @.NE ",- 2,(5 'EVEN.ES: SALES &A0ES

(-,,(-5,,

$NVES&1EN& EA'N$NGS

+-5,,

&%&AL 'EVEN.ES

(-,,-3,,

E0PEND$&.'ES: B%ND $N&E'ES&

 32+-,,,

B%ND P'$NC$PAL

(-,,,-,,,

&%&AL E0PEND$&.'ES

(-32+-,,,

E0CESS %F 'EVEN.ES .NDE' E0PEND$&.'ES

3(3-2,,

%&)E' F$NANC$NG S%.'CES 8.SES: $N&E'F.ND &'ANSFE'S $N

32+-,,,

P'%CEEDS %F 'EF.ND$NG B%NDS

+-,,,-,,,

PAY1EN& &% ESC'%7 AGEN&

8+-,,,-,,,



!3# a#

SANDY BEAC) Debits

(#

Credits

Serial Bond Debt Service Fund:

ES&$1A&ED %&)E' F$NANC$NG S%.'CES ES&$1A&ED 'EVEN.E

5(-2+, (-,2,-,,,

APP'%P'$A&$%NS

(-5(-2+,

B.DGE&A'Y F.ND BALANCE

2,-,,,

B.DGE& F%' FY2,(5: $N&E'F.ND &'ANSFE'S $N F%' $N&E'ES&  4-+,,-,,, 0 ,#,5+ 0 ; F%' @AN.A'Y ( PAY1EN& AND 4-,,,-,,,  ,#,5+ 0 ; F%' @.LY ( PAY1EN&  5(-2+,#


No entries re=uired 2.


CAS)

2("-*+,


Ch= 6 Solutions 6-, ContJdB

Debits "#

Credits


&A0ES 'ECE$VABLE/C.''EN&

(-,2,-,,,

'EVEN.ES

(-,2,-,,,


&A0ES 'ECE$VABLE/C.''EN&

(-,2,-,,,

GENE'AL 'EVEN.ES/P'%PE'&Y &A0ES 5#

(-,2,-,,,

Serial Bond Debt Service Fund & Governmental Activities:

CAS)

(-,(4-,,,

&A0ES 'ECE$VABLE/C.''EN& +#

(-,(4-,,,


CAS)

2,2-+,,

%&)E' F$NANC$NG S%.'CES/$N&E'F.ND &'ANSFE'S $N

2,2-+,,


Ch= 6 Solutions 6-, ContJdB

Debits #

Credits


B.DGE&A'Y F.ND BALANCE APP'%P'$A&$%NS

2,-,,, (-5(-2+,

ES&$1A&ED %&)E' F$NANC$NG S%.'CES

5(-2+,

ES&$1A&ED 'EVEN.E

(-,2,-,,,

%&)E' F$NANC$NG S%.'CES/$N&E'F.ND &'ANSFE'S $N 'EVEN.ES

5(-2+, (-,2,-,,,

E0PEND$&.'ES/B%ND $N&E'ES&

5(-2+,

E0PEND$&.'ES/B%ND P'$NC$PAL

(-,,,-,,,

F.ND BALANCE/'ES&'$C&ED &A0ES 'ECE$VABLE/DEL$N.EN& &A0ES 'ECE$VABLE/C.''EN&

2,-,,, (-,,, (-,,,


Ch= 6 Solutions 6-, ContEdB

b.

SANDY BEAC) DEB& SE'V$CE F.ND S&A&E1EN& %F 'EVEN.ES- E0PEND$&.'ES AND C)ANGES $N F.ND BALANCE F%' &)E YEA' ENDED DECE1BE' "(- 2,(5 'EVEN.ES: P'%PE'&Y &A0ES

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%&)E' F$NANC$NG S%.'CES 8.SES: $N&E'F.ND &'ANSFE'S $N $NC'EASE $N F.ND BALANCE F.ND BALANCE- @AN.A'Y (- 2,(5 F.ND BALANCE- DECE1BE' "(- 2,(5

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(*5-5( +-2"5 +-2"5


Ch= 6 Solutions ContJdB

!(,#

@%.'NAL EN&'$ES CAP$&AL P'%@EC&S F.ND

DEB& SE'V$CE F.ND (a)

(+)

(*)

()

(e)

()

(&)

Est. Revenues A!"!#at#"ns u&eta!' un aan*e

350,000

NO ENTRY

(+)

as O/nte!un T!anse!s n

NO ENTRY

(*)

NO ENTRY

()

asO!e#u "n "ns

50,000

Est. O!e#u "n "ns u&eta!' un aan*e

50,000

(e) 50,000

G%VE'N1EN&AL AC&$V$&$ES (a)

NO ENTRY

(+)

NO ENTRY

(*)

// as-

62,500 287,500

NO ENTRY

1,000,000 1,000,000

"nst!. Een#tu!es as-

200,000

En*u+!an*es En*u+!an*es O 

4,500,000

asO!"*ees " "ns

2,500,000

200,000 ()

NO ENTRY

(e)

as!e#u "n "ns a'a+e "ns a'a+e

200,000 200,000

4,500,000

2,500,000

2,550,000 50,000 2,500,000

50,000

NO ENTRY

Een#tu!es nte!est as-

(a)

()

(&)


50,000

() 50,000

NO ENTRY

(&)

62,500 62,500

N"te /O : Ot-e! #nan*#n& "u!*es. //  : "nst!u*t#"n "!; #n !"&!ess.

6-"6



O : Outstan#n&

 as!e#u "n "ns a'a+e (50,00040) Eensesnte!est as-

50,000 50,000

1,250 61,250 62,500


Ch= 6 Solutions 6-10 ContJdB

DEB& SE'V$CE F.ND (-)

(#)

(=)

(;)

()

asRevenues

CAP$&AL P'%@EC&S F.ND

350,000

(-)

(-)

350,000

NO ENTRY

(#)

NO ENTRY

(=)

NO ENTRY

A!"!#at#"ns

G%VE'N1EN&AL AC&$V$&$ES

NO ENTRY

(;)

62,500

()

En*u+!an*es O "nst!. Een#tu!es En*u+!an*es "nt!a*ts a'a+e

2,500,000 2,500,000

"nt!a*ts a'a+e Reta#ne %> as-

2,500,000

asRevenues

1,500,000

(#)

337,500

(=) 125,000 2,375,000 (;) 1,500,000

Revenues

()

350,000

Est. O !e#u "n "ns

Onte!un T!anse!s n O!"*ees " "ns "nst!. Een#tu!es

1,000,000 2,500,000 2,750,000

50,000 un aan*e Rest!#*te un aan*e Ass#&ne

1,250,000

Revenues

350,000

1,000,000

O!e#u "n "ns 50,000 Een#tu!es nte!est 62,500 un aan*e Rest!#*te 337,500 > Reta#ne % : "nt!a*ts a'a+eReta#ne e!*enta&e


6-"+

350,000 350,000

 "nt!a*ts a'a+e

2,500,000

"nt!a*ts a'a+e Reta#ne % as-

2,500,000

as!"& Rev
1,500,000

2,500,000

2,500,000 2,500,000

1,500,000 u&eta!' un aan*e Est. Revenues

as
NOT RE?@RE OR ROBEC

125,000 2,375,000

1,500,000


DEB& SE'V$CE F.ND ()

(n)

(")

()

()

(!)

Est. Revenues u&eta!' un aan*e A!"!#at#"nsD

300,000 68,750

asRevenues

250,000

CAP$&AL P'%@EC&S F.ND NO ENTRY

()

NO ENTRY

(n)

NO ENTRY

(n)

as
368,750

250,000

NO ENTRY

(")

NO ENTRY

()

NO ENTRY

Een#tu!es nte!est Een#tu!es !#n*#a as-


()

()

(!)

En*u+!an*es O "nst!. Een#tu!es En*u+!an*es "nt!a*ts a'a+e

2,000,000 2,000,000


130,000

"nta*ts a'a+e Reta#ne % as-

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() 130,000 () 2,125,000

NO ENTRY

250,000 2,000,000 2,000,000

2,000,000 2,000,000

2,000,000 125,000

(!)

62,500

 "nt!a*ts a'a+e

250,000

/// as"nta*ts a'a+e Reta#ne % as!e#u "n "ns a'a+e Eensesnte!est

130,000 130,000 2,000,000 125,000 2,125,000 1,250 61,250

250,000 312,500

"ns a'a+e as-

D

250,000 312,500

T-e a!"!#at#"n #n*ues a !#n*#a a'ent " $250,000, a se#Fannua #nte!est a'ent " $62,500 ($5,000,000/.05/12) an a se#Fannua #nte!est a'ent " $56,250 (G$5,000,000F250,000H/.05/12).

6-",



DEB& SE'V$CE F.ND

CAP$&AL P'%@EC&S F.ND

(s)

(s) as Onte!un T!anse!s n

Est. Onte!un T!anse!s n u&eta!' un aan*e

120,000 120,000

un aan*e Rest!#*te un aan*e Ass#&ne "nst!u*t#"n Een#tu!es


1,250,000

(s)

880,000

u##n&s !"veents Ot-e! t-an u##n&s 

4,750,000 130,000 4,880,000

2,130,000

120,000 120,000

O@nte!un T!anse!s Out as-

120,000 120,000

un aan*e Ass#&ne O@nte!un T!anse!s Out

Note

120,000

120,000

T-e !es"u!*es !"v#e t" t-e a#ta !"=e*ts un #n*ue !est!#*te an ass#&ne a"unts. T-e +"n !"*ees an &!ant uns a!e !est!#*te, I-#e t-e #nte!un t!anse! Ias ass#&ne "! t-e -#st"!#*a !en"vat#"n. t #s assue !est!#*te uns a!e sent #!st, I-en ava#a+e, ea#n#n& I-' !est!#*te un +aan*e Ias use #!st.

6-"

Chap 006

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