(1) Analyze the effects of each of the following transactions on each of the funds and nonfund accounts of the City of Timbuktu. (2) Indicate how each transaction would be reported in the operating statement for each fund affected.
1. Salaries and wages paid to general government employees from unrestricted resources during the year totaled $3,000,000. Salaries and wages payable at the beginning of the year totaled $50,000 and at year-end amounted to $32,000.
2. The city issued $10,000,000 of 10-year, 8% bonds at the beginning of the year. Interest is due semiannually at the beginning of each year and at mid-year. The bonds were issued at par to provide for the construction of a new police and fire facility.
3. Indicate any accruals required at the end of the year that the bonds were issued.
4. Construction costs totaling $5,000,000 were paid during the year related to the police and fire facility. A bill from the contractor requiring an additional payment of $346,500 was received before year end but was not paid by year end.
5. In the beginning of year 2, the city paid the bond interest due and retired $1,000,000 of bonds. Before the payments were made, an adequate amount of General Fund resources was paid to the fund from which the bond payments were made to provide for those payments. (Analyze both transactions.)
6. The city has potential claims and judgments against it that total $17,000,000. Of these claims, it is probable that $7,000,000 will be the total amount of the judgments against the government. Of the $7,000,000, none is due and payable at the end of the year. In addition, $500,000 of claims and judgments were paid for general government activities during the fiscal year.
7. The city sold land that had cost $500,000. The fair value of the land at the sale date was estimated to be $1,800,000, but the city sold it for $1,500,000.
8. The city sold equipment that cost $80,000 and had a remaining book value of $20,000 for $15,000. There are no restrictions on the use of the sale proceeds.