Question

Preston village engage in the following transactions:

1) it issued $20million in bond to purchase a new municipal office building. The proceed were recorded in a capital projects fund

2) it acquired the building for the $20million

3) it recognized, as appropriate,$300,000 of depreciation on municipal vehicle

4) it transferred $2,060,000 from the general fund to a debt service fund

5) it paid $60,000 in interest on long term debt and repaid $2million of principal on the same long term debt

6) it sold for $5million village land that had been acquired for $4million. The proceed were recorded in the general fund.

Required:

A) for each of the transaction, prepare a journal entries to record them in appropriate governmental fund (which are accounted for on a modified accrual basis)

B) prepare journal entries to reflect how the transaction would be reflected in government -wide statement (which are prepared on a full accrual basis)

C) How can government justify preparing two set of financial statements, each on a different basis?

Answer 1