Question: On January 1 2015 the balance sheet of a city s

On January 1, 2015, the balance sheet of a city’s funds for the acquisition of library books showed the following (in thousands):

The endowment was established in 2007 with a contribution of cash, securities, and real estate (a building) having a total market value of $24 million. The endowment agreement stated that income only (excluding both realized and unrealized investment gains, and deducting depreciation on a straight-line basis) could be used to acquire library books.
The building has a useful life of 40 years with no expected salvage value. It had a market value of $20 million when acquired.
The following table provides information about cash transactions and other events (excluding depreciation) during 2015 (in thousands):

As of January 1, 2015, all prior-year earnings of the nonexpendable fund had been transferred to the expendable fund and are therefore available for expenditure.
1. Prepare in good form a schedule in which you calculate the total amount available at December 31, 2015, for the acquisition of books.
2. Did you account for the investment gains in the expendable fund in the same way as in the nonexpendable fund? If not, justify any differences.
3. Why is the building not reported on the balance sheet of the permanent fund? How would the building be reported on the city’s government-widestatements?

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  • CreatedAugust 13, 2014
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