On January 1, 2015, the balance sheet of a citys funds for the acquisition of library books

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?

Transcribed Image Text:

Permanent Revenue (Nonexpendable) (Expendable) S120 160 Cash Marketable securities Total assets Fund balance S 1,400 10,000 Special Permanent Revenue Interest and dividends received (in cash) S 760 S60 Rent received (Gin cash) Cash expenditures for Sales price of Book value of Increase during the year in building maintenance securities sold securities sold market value of securities S1,800 400 800 200 S20 SIS on hand at year-end $ 150 S12