Intheyeararoad maintenance districtwasestablished,it engaged in the transactions

Problem # 1Intheyeararoad maintenance districtwasestablished,it engaged in the transactions that follow involving capital assets (all dollar amounts in thousands). The district maintainsonlyasinglegovernmentalfund(ageneralfund).1. Received authority over roads previously ‘‘owned’’ bythe county. The estimatedreplacementcostoftheroadswas $240,000. On average they have a remaining usefullife of 40 years.2. Acquired machinery and equipment for $2,800, with general fund resources. They have a useful life of 10 years.3. Incurred costs of $12,000 to construct a building. The construction was ?nanced with general obligationbonds. The building has a useful life of 30 years.4. Acquired equipment having a fair market value of $240 in exchange for $80 cash (from general-fund resources)plus used equipment for which the district had paid $200.The used equipment had a fair market value at the timeof the trade of $160; depreciation of $100 had previouslybeen recognized.5. Sold land for $280 that had been acquired for $360.6. Received a donation of land from one of the townswithin the district. The land had cost the town $480,but at the time of the contribution had a fair marketvalue of $2,000.7. Incurred $4,800 in road resurfacing costs. The districtestimates that its roads must be resurfaced every fouryears if they are to be preserved in the condition theywere in when they were acquired.8. Recognized depreciation of $400 on its building, $280 onitsmachineryandequipment,and$6,000onitsroads,inaddition to any depreciation relating to the resurfacingcosts.a. Prepareentriestorecordthetransactionssothattheycould be re?ected in the district’s government-widestatements. The district has opted to depreciate itsinfrastructure assets.b. Suppose instead that the district has elected not todepreciate its roads but to record as an expenseonly the costs necessary to preserve the roads in thecondition they were in when acquired. How wouldyour entries differ?c. If, in fact, the roads have a useful life of 40 years, doyou think it is sound accounting not to depreciatethe roads? Explain.d. If, in fact, the preservation costs are suf?cient topreserve the roads in the condition they were inwhen the district acquired them, do you think it issound accounting to depreciate the roads? Explain.Problem # 2A school district constructs a new combined High school and Middle schoolat a cost of $96 million. It ?nances the project by issuing30-yeargeneralobligationserialbonds,payableevenlyoverthe outstanding term ($3,200,000 per year). District of?cialsestimate that the school will have a useful life of 30 years(with no residual value).1. Prepare summary entries, in a capital projects fund, torecord the issuance of the bonds and construction of theschool.2. Assume that the district repays the bonds out of currentrevenues. Prepare the entry that it would make eachyear in its general fund to record the bond principalpayments.3. Assume that the school district must balance its budget; all general-fund expenditures must be covered bygeneral-fund tax and other revenues. A member of thedistrict’s board of trustees pointed out that, owing toan unanticipated increase in property values, the districtenjoyed a budget surplus in the previous two years andconsequently had accumulated $16 million in ‘‘savings.’’its government-wide statements. Suppose that the districtwere required to balance its budget; expenditures could notexceed revenues. With respect to expenditures relating tothenewbuilding,woulditmatterwhethertheexpenditureswere measured on a full or a modi?ed accrual basis? Wouldyour response be the same if the repayment schedule onthe bonds differed from the pattern of depreciation (e.g.,the bonds were repaid over only ten years or depreciationwere charged on an accelerated basis)?