The following is a series of transactions for Berkeley City.Indicate how Berkeley reports each transaction within thegovernment-wide financial statements and then on the fund financialstatements. Assume that Berkeley follows a policy of consideringresources as available if they will be received within 60 days.Incurred Liabilities are assumed to be claims to current resourcesif they will be paid within 60 days.
1. Borrowed money by issuing a 20-year bond for $5 million, itsface value. This money is to be used to construct a highway aroundBerkeley.
2. Transferred cash of $110,000 from the general fund to thedebt service funds to make the first payment of principal andinterest on the bond in (1).
3. Paid the cash in (2) on the bond. Of this total, $80,000represents interest; the remainder reduces the principal of thebond payable.
4. Completed construction of the highway and paid the entire $5million.
5. The highway (in 4) is expected to last 30 years. However, thegovernment qualifies to use the modified approach, which it hasadopted for this system. A $400,000 cost is incurred during theyear to maintain the highway at an appropriate, predeterminedcondition. Of this amount, $300,000 was paid immediately but theother $100,000 will not be paid until the sixth month of thesubsequent year.
6. Received lights for the new highway donated from a localbusiness. The lights are valued at $300,000 and should last 30years. The modified approach is not used for this network ofinfrastructure. Straight-line depreciation is applied using thehalf-year convention.
7. Agreed to stop collecting property taxes from the CharlieCompany for eight years in exchange for the promise that a smallmanufacturing plant will be built within Berkeley to generatecapital investment and new job opportunities for the residents.
8. Recorded cash revenues of $3 million from the local subwaysystem and made salary expense payments of $400,000 to itsemployees.
9. Opened a solid waste landfill at the beginning of the yearthat will be used for 25 years. This year an estimated 5 percent ofthe capacity was filed. The city anticipates closure, andpostclosure requirements will be $3 million based on current costfigures although no costs have been incurred to date.
