Comprehensive Annual Financial Report

Review the Comprehensive Annual Financial Report (CAFR) that you have obtained.

  1. How many capital projects funds does the government maintain? How can you tell? Are any of these major funds? If so, for what purposes are they maintained?
  2. How many debt service funds does the government maintain? How can you tell? Are any of these major funds? If so, for what types of obligations are they maintained?
  3. How are the capital projects and debt service funds reported in the government‐wide statement of net position?
  4. Select one of the more recently established (and larger) capital projects funds (a major fund, if there is one).
  5. From where did the fund receive most of its resources?

Exercise 4-6:

The accounting for contributions may depend on how they will be used.

Green Hills County received the following two contributions during a year:

  • A developer (in exchange for exemptions to zoning restrictions) donated several acres of land that the county intended to convert to a park. The land had cost the developer $1.7 million. At the time of the contribution, its fair market value was $3.2 million.
  • A local resident donated several acres of land to the county with the understanding that the county would sell the land and use the proceeds to fund construction of a county health center. The land had cost the resident $2.5 million. The county sold the land intended for the health center for $3 million 30 days after the end of its fiscal year.
  1. Prepare journal entries to record the contributions. Be sure to specify the appropriate fund in which they would likely be made.
  2. Comment on and justify any differences in the way you accounted for the two contributions.
  3. Comment on how each of the contributions would be reported on the county’s government‐wide statements.
  4. How would your answers differ if the land intended for the health center were not sold by the time year‐end financial statements were issued?

Chapter 8:

(CAFR) that I used is The City of Cary, North Carolina. It is in the attachments.


Review the comprehensive annual financial report (CAFR) you obtained.

  1. Per the city’s schedule of long‐term obligations, what is the total long‐term obligation for both governmental and business‐type activities? Does this amount reconcile with the long‐term liabilities as reported on the government wide statement of net position?
  2. In addition to bonds payable, what other kinds of long‐term debt for governmental activities did the city report in its statement of net position?
  3. Did the city increase or decrease its long‐term borrowings during the year? What was the effect on total long‐term liabilities at year end? Explain.
  4. What is the percentage of total net bonded debt to assessed value of property? What is the amount of net debt per capita?
  5. What is the city’s legal debt margin?
  6. Does the city have any lease obligations outstanding? Are these accounted for as operating or financing leases? Can you determine if any of these leases were initiated during this year? What is the amount of payments related to financing leases?
  7. Compute the total amount of the city’s direct and overlapping debt?
  8. Does the city have outstanding any conduit debt?

Problem 8-2:

Governments now report their effective liabilities and interest costs, but do not adjust for changes in market values or rates.

On January 1, a public-school district issued $6 million of 6 percent, 15‐year coupon bonds to finance a new building. The bonds, which require semiannual payments of interest, were issued for $6,627,909—a price that provides an annual yield of 5 percent (a semiannual yield of 2.5 percent).

  1. Prepare the journal entry that the district would make to reflect the issuance of the bonds on its government‐wide statements. Comment on why the net reported liability differs from the face value of the bonds.
  2. Prepare the entry that the district would make to reflect the first payment of interest on its government‐wide statements. Indicate the value at which the bonds would be reported immediately following the payment. Comment on why the reported interest expense is not equal to the amount paid.
  3. Suppose that immediately following the first payment of interest, prevailing interest rates fell to 4 percent. For how much could the district liquidate its obligations by acquiring all outstanding bonds in the open market? [Hint: Determine the present value (based on the prevailing interest rate of 2 percent per period) of the remaining 29 coupon payments of $180,000 and the repayment of the $6 million of principal.] Comment on whether this amount would be reported in the district’s financial statements (both fund and government‐wide). Comment also on why and how this amount might be of interest to statement users.
  4. Comment on how the district would report both the liability and interest costs in its fund statements.

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