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CHAPTER 9
GENERAL CAPITAL ASSETS;
GENERAL LONG-TERM LIABILITIES; PERMANENT FUNDS:
INTRODUCTION TO INTERFUND-GCA-GLTL ACCOUNTING
ANSWERS TO QUESTIONS
Question 9-1
Fund capital assets are capital assets of specific proprietary or trust funds. They are accounted for
and reported in the financial statements of the funds and, except for capital assets of trust funds, are
also reported in the government-wide financial statements.
General capital assets are general government capital assets. They are accounted for in the General
Capital Assets and General Long-Term Liabilities accounts (or using some similar approach).
General capital assets are not reported in fund financial statements because they relate to activities
accounted for through the governmental funds, which are used only to account for net current
financial resources. General capital assets are reported only in the government-wide financial
statements.
Question 9-2
Capital assets are assets (1) of material and significant value, (2) having a useful life extending
beyond the year of acquisition, and (3) used, or to be used, in the conduct of the government's
activities. Capital assets may be tangible or intangible in nature.
General capital assets are capital assets of the governmental unit as a whole, not of an Enterprise,
Internal Service, or Trust Fund. Stated differently, general capital assets are those capital assets that
are used to carry on the general activities of the governmental unit as distinguished from the assets
used to carry on activities of a trust or of a self-supporting nature, such as those financed from an
Enterprise or Internal Service Fund.
Question 9-3
“Cost” is generally defined as “consideration given or consideration received, whichever is more

clearly determinable.” Importantly, “cost” includes all normal and necessary costs incurred to bring
an asset into a state of readiness for the use for which it is intended. In most cases “consideration
given” is the measure employed, but “consideration received” is the more appropriate measure
where assets are donated to the government.
Copyright © 2018 Pearson Education, Inc.

1
Question 9-4
Intangible capital assets are reported in generally the same manner as other types of capital assets.
Capital assets are not recorded as governmental fund assets, but rather the acquisition of such assets
is reported as an expenditure of governmental fund resources. The capital assets are then capitalized
in the General Capital Assets accounts and reported in the government-wide financial Statements.
Generally, costs incurred to create or produce internally generated capital assets are not capitalized.
However, GAAP does require internally created intangible assets to be capitalized if the following
three (3) conditions are met:
1. Determination of the specific objective of the project and the nature of the service capacity
that is expected to be provided by the intangible asset upon the completion of the project
2. Demonstration of the technical or technological feasibility for completing the project so that
the intangible asset will provide its expected service capacity
3. Demonstration of the current intention, ability, and presence of effort to complete or, in the
case of a multiyear project, continue development of the intangible asset.
Question 9-5
Acquisition of capital assets by eminent domain refers to exercise of a government's power to seize
private property for public use, compensation to the owner normally being determined through the
courts.
Acquisition by escheat occurs when title to property is vested in or reverts to the government
because the rightful owner does not come forward to claim it or dies without known heirs.
Question 9-6
The most common approach used to measure a capital asset impairment loss resulting from physical
damage to the asset is the restoration cost approach. Under this approach, the amount of impairment
is derived from the estimated costs to restore the utility of the capital asset. The restoration cost can
be converted to historical cost by either
1. deflating the restoration cost using an appropriate cost index, or
2. applying a ratio of restoration cost over replacement cost to the carrying value of the capital
asset.

2
Question 9-7
The “modified approach” is an alternative to depreciating infrastructure capital assets. Governments

may use the modified approach for infrastructure capital assets that are part of a subsystem or
network (e.g., highway system) if they meet two requirements. The government must both:
1. Manage the eligible infrastructure assets using an asset management system that has certain
characteristics.
2. Document that the eligible infrastructure assets are being preserved approximately at or
above a condition level established and disclosed by the government.
The asset management system should:
• have an up-to-date inventory of eligible infrastructure assets,

• perform condition assessments of the eligible infrastructure assets in a manner that can
be replicated, and summarize the results using a measurement scale, and
• estimate each year the annual amount to maintain and preserve the eligible infrastructure
assets at the condition level established and disclosed by the government.
The modified approach requires that expenditures made for infrastructure capital assets (other than
for additions and improvements) are expensed (in the government-wide statements and in Enterprise
Fund financial statements). Those expenditures will not be capitalized. In turn, depreciation expense
is not reported on infrastructure capital assets accounted for using the modified approach.
Question 9-8
GASB Statement No. 42 defines a capital asset impairment as significant, unexpected decline in the
service utility of an asset. An impairment does not include normal and expected use of an asset over
the course of its normal service life. Specifically, GAAP identifies the following as common
indicators of capital asset impairment:
• Evidence of physical damage

• Changes in legal or environmental factors
• Technological development or evidence of obsolescence
• A change in the manner or expected duration of use of a capital asset
• Construction stoppage
If a capital asset has any one or more of these indicators (and the impairment is deemed to not be
temporary), GAAP requires a valuation of the impairment and a potential loss to be reflected in the
financial statements of the reporting period in which the impairment occurred.

3
Question 9-9
General capital assets do not represent financial resources available for expenditure and therefore do
not fit the governmental fund flow of current financial resources accounting model. They are not
assets of any fund but of the government as an instrumentality. Including these assets in the financial
statements of a governmental fund would overstate fund balance and potentially mislead statement
users. General long-term liabilities do not require current appropriation and expenditure of
governmental fund financial resources. As with general capital assets, including general long-term
liabilities in a governmental fund is not consistent with the flow of current financial resources
measurement focus and basis of accounting.
Question 9-10
General Long-Term Liabilities (GLTL) are, by definition: (1) the unmatured principal (2) of
“general government” bonds, warrants, notes, or other long-term debt outstanding, such as for claims
and judgments, net pension liability, net OPEB liability, and compensated absences, that (3) are not
deemed a primary obligation of—and thus not carried in the accounts of—any specific fund of the
organization.
Excluded from GLTL are (1) obligations of proprietary and trust funds, and (2) matured debt that
has been set up in the accounts of the Debt Service (or other payor) Fund. These are excluded
because they are liabilities of specific funds, not of the government as a whole, although the
government may be contingently liable for them.
Question 9-11
The bonds should be shown as a liability of the Debt Service (Sinking) Fund. Once default occurs,
the bonds are “due and payable”—and thus are no longer unmatured—and should be reported as
“Defaulted Bonds Payable” in the Debt Service Fund. They should not remain in the General Long-
Term Liabilities accounts.
Question 9-12
Note: The response to this question should be evaluated in terms of its analytical reasonableness
rather than on a specific section(s) of the text. Some of these points might be brought out.
a. Special assessment debt on which the SLG is obligated in some manner is recorded as general
long-term liabilities in order to avoid its being recorded in a governmental fund. This treatment
avoids reporting “artificial deficits” in the related governmental fund. While such debt does not
fit the usual definition of GLTL, the GASB concluded that the benefits of this approach
warranted its being reported as general long-term liabilities. It is reported as “Special
Assessment Debt with Governmental Obligation”—that is, separately from other GLTL.

4
Question 9-12 (continued)
b. Net pension liability may be considered “due” actuarially, but usually is not legally “due and
payable.” The GASB Codification requires that the net pension liability that is “noncurrent”—
that is, it is not due and payable at year end—be reported in as general long-term liabilities.
However, for any portion of the net pension liability to be consider due and payable requires
that benefits due and payable to beneficiaries at year end exceed the net position available to
pay the benefits that are due and payable.
Question 9-13
For General Capital Assets (GCA), GASB standards require that:
1. General capital assets be reported in the governmental activities column of the government-
wide Statement of Net Position.
2. Detailed capital assets information—that distinguishes those associated with governmental

activities and business-type activities—be provided in the notes to the basic financial
statements.
The notes should disclose GCA information by major classes of general capital assets, should
separately disclose any GCA that are not being depreciated, and should include:
1. Beginning- and end-of-year balances (regardless of whether beginning-of-year balances are

presented on the face of the government-wide financial statements), with accumulated
depreciation presented separately from historical cost.
2. Acquisitions of capital assets.
3. Sales or other dispositions.
4. Current-period depreciation expense, with disclosure of the amounts charged to each of the
functions in the Statement of Activities.
For General Long-Term Liabilities, the notes should disclose the following information:
1. Beginning- and end-of-year balances (regardless of whether prior-year data are presented
on the face of the government-wide financial statements).
2. Increases and decreases (separately presented).
3. The portions of each item that are due to be paid within one year of the statement date.
4. Which governmental funds typically have been used to liquidate other long-term liabilities
(such as compensated absences and pension liabilities) in prior years.

5
Question 9-14
While not common, Permanent Funds would be reported by a governmental entity when the
government itself or its citizenry as a whole is the beneficiary of resources held in trust by the
government. Examples could include (not considered to be an all-inclusive list):
• Trust established for the maintenance of a government-owned cemetery

• Trust established as an employee loan fund
• Trust established for maintenance or preservation of a historical site or structure
Though reported as a governmental fund, Permanent Funds fundamentally differ from other
governmental funds in that the operations accounted therein are bound by nonexpendable trust
agreements (their primary defining characteristic). They are reported as a governmental fund
primarily because:
• their resources provide a benefit to the government itself or its citizenry and, in most
cases, the activities benefited are governmental in nature, and
• classification as a governmental fund simplifies the reconciliation between the
government-wide and the fund financial statements.
Question 9-15
General Capital Assets are reported in the governmental activities column of the government-wide
Statement of Net Position. Detailed capital asset information—which distinguishes those assets
associated with governmental activities from those associated with business-type activities—must be
provided in the notes to the basic financial statements. The notes should disclose General Capital
Asset information by major classes of capital assets, differentiating between depreciable and non-
depreciable assets. The information should also include the beginning and ending balances, with
accumulated depreciation presented separately from historical cost, acquisitions of capital assets,
sales and other dispositions, and the current period depreciation expense by functional category.
General Long-Term Liabilities are reported by type in the governmental activities column of the
government-wide Statement of Net Position. Several note disclosures are required for both general
long-term liabilities and for other long-term liabilities. The information should include beginning
and end of year balances, increases and decreases (reported separately), and the portions of each
liability that are due within one year of the financial statement date.
Question 9-16
Total pension liability is defined as the portion of the actuarial present value of projected benefit
payments that is attributed to past periods of employee service. The total pension liability is
estimated based on an actuarial valuation that uses the entry age valuation method applying GASB-
specified guidance. The guidance includes such important variables as (1) the discount rate that must

6
Question 9-16 (continued)
be used to determine the actuarial present value of pension benefits—ranging from the long-term
expected rate of return on pension plan investments to a specified 20-year, AA or better rated
municipal bond index, (2) projections of the timing and amount of benefit payments current
participants will receive, (3) the projected sufficiency of contributions made on behalf of existing
participants and related investment earnings to pay those projected benefits, and (4) attribution of the
actuarial present value of pension benefits to years of past service.
The government’s net pension liability (NPL) for the plan is a single amount—the difference
between the total pension liability of the plan and the fiduciary net position of the plan. Any portion
of the NPL incurred for Enterprise Fund purposes and to be repaid from Enterprise Fund resources
should be reported as Enterprise Fund liabilities, not as general long-term liabilities.
Question 9-17
Net pension liabilities and net OPEB liabilities are unique from most other liabilities in that they
result from the netting of a liability (the total pension liability or the total OPEB liability) and the net
position of a trust in which assets have been accumulated for the purpose of paying the future
benefits represented by this liability.
Question 9-18
Pension expense is included in the functional expenses reported in the government-wide statement of
activities on the accrual basis. GASB Statement No. 68 requires that pension expense include all
changes in the net pension liability during the reporting period except that recognition of certain
specified changes in the net pension liability are deferred and amortized over specified periods. The
pension-related deferred outflows of resources and deferred inflows of resources for a government
that provides pensions to employees through a single-employer defined benefit pension plan for
which the net pension liability is measured as of the end of the reporting period include amounts
resulting from: (1) differences between expected and actual experience, (2) changes of plan
assumptions, and (3) difference between projected and actual returns on plan investments. In effect,
the amortization of such deferred outflows(inflows) increases(decreases) pension expense.
GASB Statement No. 68 requires that pension expenditures and liabilities related to defined benefit
pension plans (in which an employer bears responsibility for some guaranteed level of benefits) be
recognized in the governmental funds on the modified accrual basis. Thus, pension expenditures
equal the total of contributions to the pension plan during the year plus or minus the change during
the year in the amount of the net pension liability that would normally be liquidated with expendable
available financial resources of a governmental fund (i.e., the portion that is due and payable)—
usually zero. The net pension liability is accounted for in the general long-term liabilities, assuming
no part of it is proprietary or fiduciary fund related.

7
SOLUTIONS TO EXERCISES
Exercise 9-1
1. b
2. c
3. a
4. a
5. c
6. b
7. a
8. b—Bonds payable of $10 million less bond discount of $100,000
9. d
10. a—GASBS No. 65 requires these costs to be expensed as incurred.
Exercise 9-2
1. b
2. a
3. d—(The government has a $170,000 loss, but the building was not a General Fund asset.)
4. c
5. d
6. c
7. b
8. c
9. a
10. d
Exercise 9-3
1. d
2. c
3. b
4. a
5. d
6. b
7. c
8. d

8
Exercise 9-4
# Accounts Dr. Cr.

1. Land .......................................................................................... 40,000
Net Position......................................................................... 40,000
To record donated land.
2. No entry is required in the GCA nonfund accounts until the

equipment is received.
3. Furniture and Equipment .......................................................... 47,750

Net Position......................................................................... 47,750
To record purchase of equipment.
4. Accumulated Depreciation—Furniture and Equipment ........... 50,000

Net Position............................................................................... 5,000
Furniture and Equipment .................................................... 55,000
To remove truck from accounts upon sale.
Additional information for government-wide reporting:
Loss on Sale of Capital Assets, $1,700

(Book value of $5,000 less proceeds of $3,300)
5. Accumulated Depreciation—Buildings .................................... 75,000

Net Position............................................................................... 75,000
Buildings ............................................................................. 150,000
To record destruction of building.
Additional information for government-wide reporting:
Loss on Disposal of Building, $75,000

(Depending on circumstances, it may be
an extraordinary loss.)
6. Equipment Under Capital Lease ............................................... 1,200,000

Capital Leases Payable ....................................................... 1,100,000
Net Position......................................................................... 100,000
To record inception of capital lease.

9
Exercise 9-5
# Accounts Dr. Cr.

1. Equipment Under Capital Lease ............................................... 1,400,000
Capital Leases Payable ....................................................... 1,200,000
Net Position......................................................................... 200,000
To record inception of capital lease.
2. Capital Leases Payable ............................................................. 125,000

Net Position......................................................................... 125,000
To record reduction of lease liability
resulting from lease payment.
3. Net Position............................................................................... 1,200,000

Claims and Judgments Payable........................................... 1,200,000
To record increase in long-term liability for
claims and judgments.

10
Exercise 9-6
# Accounts Dr. Cr.

1. Capital Projects Fund
Cash .......................................................................................... 5,090,000
Expenditures—Debt Service—Bond Issue Costs ..................... 30,000
Other Financing Sources—Bonds ...................................... 5,000,000
Other Financing Sources—Bond Premium ........................ 120,000
To record receipt of bond issue.
Other Financing Uses—Transfer to Debt Service Fund ........... 90,000

Cash .................................................................................... 90,000
To record transfer of premium to DSF.
Debt Service Fund

Cash .......................................................................................... 90,000
Other Financing Sources—Transfer from
Capital Projects Fund ...................................................... 90,000
To record transfer of premium from CPF.
GLTL accounts
Net Position............................................................................... 5,120,000
Bonds Payable..................................................................... 5,000,000
Premium on Bonds Payable ................................................ 120,000
To record liability for bonds issued.

Encumbrances ........................................................................... 4,850,000
Encumbrances Outstanding ................................................ 4,850,000
To record construction contract.

Encumbrances Outstanding ...................................................... 4,850,000
Expenditures—Capital Outlay .................................................. 4,890,000
Encumbrances ..................................................................... 4,850,000
Cash .................................................................................... 4,890,000
To record construction expenditures and
reverse encumbrances for contract.
GCA accounts
Improvements Other than Buildings (Fountain) ....................... 4,890,000
Net Position......................................................................... 4,890,000
To record asset constructed.

11
Exercise 9-6 (continued)
# Accounts Dr. Cr.

Other Financing Uses—Transfer to Debt Service Fund ........... 110,000
Cash .................................................................................... 110,000
To record transfer of premium to DSF.
Debt Service Fund

Cash .......................................................................................... 110,000
Capital Projects Fund ...................................................... 110,000
To record transfer of premium from CPF.

12
Exercise 9-7
# Accounts Dr. Cr.

1. Debt Service Fund
Cash .......................................................................................... 3,000,000
Other Financing Sources—Refunding Bonds..................... 3,000,000
To record issuance of refunding bonds.
GLTL accounts
Net Position............................................................................... 3,000,000
Refunding Bonds Payable ................................................... 3,000,000
2. General Fund
Other Financing Uses—Transfer to Debt Service Fund ........... 1,850,000
Cash .................................................................................... 1,850,000
To record transfer to Debt Service Fund.
Debt Service Fund

Cash .......................................................................................... 1,850,000
General Fund................................................................... 1,850,000
To record transfer from General Fund.

Other Financing Uses—Payment to Refunded
Bond Escrow Agent ............................................................... 3,000,000
Expenditures—Debt Service—Payment to Refunded
Bond Escrow Agent ............................................................... 1,850,000
Cash .................................................................................... 4,850,000
To record payment to trust to defease bonds.
GLTL accounts
Bonds Payable (Old) ................................................................. 5,000,000
Net Position......................................................................... 5,000,000
To record defeasance of bonds.

13
Exercise 9-8
Accounts Dr. Cr.

General Fund
Expenditures—Operating—(Various Functions) ..................... 878,894
Cash .................................................................................... 878,894
To record pension expenditures during the year
(detailed by function).
GLTL accounts
Net Position............................................................................... 2,450,000
Deferred Outflows of Resources—Investment Income Less
than Projected .................................................................. 50,000
Net Pension Liability .......................................................... 2,000,000
Deferred Inflows of Resources—Assumption Changes ..... 500,000
To record the increase in the net pension liability
during the year.
GLTL accounts
Deferred Inflows of Resources—Assumption Changes ........... 62,500
Deferred Outflows of Resources—
Investment Income Less than Projected ......................... 10,000
Net Position......................................................................... 52,500
To record amortization of current period deferrals.
Note:
• Deferrals resulting from differences between expected and actual plan investment income
must be amortized over a closed 5-year period, beginning in the year that the difference
arises. $10,000 = $50,000 / 5 years
• Most other pension-related deferred outflows of resources and deferred inflows of
resources must be amortized over a closed period equal to the average service lives of plan
participants. $62,500 = $500,000 / 8 years
• The net pension liability of $12 million, deferred outflows of resources of $40,000
($50,000 ‒ $10,000), and deferred inflows of resources of $437,500 ($500,000 ‒ $62,500)
are reported in the government-wide statement of net position.

14
Exercise 9-9
(a) The total cost should be allocated among the various assets acquired in proportion to the best
available approximation of their relative fair market values. Approximations of relative fair
market values may be obtained from:
1. documents related to the acquisition of the assets,

2. inquiry of those involved in the acquisition,
3. appraisal by a reputable appraiser,
4. valuations made by the governing board or a responsible official of the governmental unit,
or
5. other sources such as property tax assessment records.
(b) An increase in the value of general capital assets should not be recorded in the GCA nonfund
accounts and should not be reported in the financial statements. The reason is that these
accounts do not show the “value” of the assets; rather, they show the cost, estimated cost, or
acquisition value (if donated) of the asset at the time of its acquisition less accumulated
depreciation (on depreciable assets).
(c) Proceeds from the sale of the asset originally financed out of a Special Revenue Fund logically
should be recorded in the Special Revenue Fund. If the asset is to be replaced, it would probably
be advisable to use the money for that purpose; otherwise it can be used for any of the
authorized purposes of the Special Revenue Fund. This capital asset was financed by the Special
Revenue Fund, and the SRF should take preference over any other fund in disposition of the
proceeds from its sale.
If, however, the proceeds from the sale clearly are unrestricted, they should be recorded in the
General Fund.
(d) Since a Capital Projects Fund ceases to exist as soon as the project is completed, the proceeds
should be recorded in some fund now in use other than a Capital Projects Fund, assuming the
original one has been terminated. If bonds issued to finance the project through which the asset
was acquired are still outstanding, the proceeds typically should be recorded in the Debt Service
Fund from which they are to be retired. If the bonds have already been retired, the proceeds
normally should be recorded in the General Fund and used for such purposes as the governing
board may determine to be appropriate.

15
(e)
20X5 Entries
Accounts Dr. Cr.

General Fund
Expenditures—Capital Outlay ................................................. 15,000
Vouchers Payable (or Cash) .............................................. 15,000
To record acquisition of automobile.
GCA accounts
Furniture and Equipment ......................................................... 15,000
Net Position......................................................................... 15,000
To record acquisition of automobile.
20X6 Entries
GCA accounts
Depreciation Expense (detailed by function)............................ 2,000
Accumulated Depreciation—Furniture and Equipment ..... 2,000
To record depreciation on vehicle.
Accumulated Depreciation—Furniture and Equipment ........... 2,000

Net Position............................................................................... 13,000
Furniture and Equipment .................................................... 15,000
To record disposal of wrecked vehicle.
General Fund
Cash ......................................................................................... 1,000
Other Financing Sources—Sales of
General Capital Assets ................................................... 1,000
To record receipt of salvage proceeds upon sale
of wrecked vehicle.
In the government-wide financial statements, the government should report a loss equal to the
book value of the vehicle ($15,000 ‒ $2,000, or $13,000) less the salvage proceeds ($1,000), or
$12,000.

16
Exercise 9-10
1. Net Pension Liability Calculation:

Total Plan Net
Pension Fiduciary Pension
Liability Net Position Liability
Balances at 6/30/20X5 $2,534,855 $2,052,589 $482,266
Balances at 6/30/20X6 $2,648,850 $2,204,590 $444,260
Net Change $(38,006)
# Accounts Dr. Cr.

2. General Fund
Cash .................................................................................... 77,913
To record pension expenditures (detailed by function).
3. GLTL accounts
Net Pension Liability ................................................................ 38,006
Net Position............................................................................... 197,354
Deferred Inflows of Resources—Investment Gains ........... 195,610
Deferred Inflows of Resources—Differences
Between Expected and Actual Experience ..................... 39,750
To record the decrease in the net pension liability
during the year.

17
# Accounts Dr. Cr.

4. GLTL accounts
Deferred Inflows of Resources—Investment Gains ................. 39,122
Deferred Inflows of Resources—Differences
Between Expected and Actual Experience ............................ 3,975
Net Position......................................................................... 43,097
To record the amortization of current period deferrals.
Note:
arises. $39,122 = $195,610 / 5 years
• Most other pension-related deferred outflows of resources and deferred inflows of
resources must be amortized over a closed period equal to the average service lives of plan
participants. $3,975 = $39,750 / 10 years
• The net pension liability of $444,260 and deferred inflows of resources of $192,263
($195,610 + $39,750 ‒ $39,122 ‒ $3,975) are reported in the government-wide statement
of net position.
5. Decrease in Net Pension Liability .................... $( 38,006)

Add: Contributions......................................... $ 77,913
Unrecognized investment gain
for the year ........................................ 195,610
Unrecognized experience gain
for the year ........................................ 39,750 313,273
275,267
Less: Amortization of unrecognized
investment gain for the year.............. 39,122
Amortization of unrecognized
experience gain for the year .............. 3,975 43,097
Pension expense ................................................ $232,170

18
Exercise 9-11
# Accounts Dr. Cr.

1. General Fund
Cash .................................................................................... 19,051
To record OPEB expenditures (detailed by function).
2. GLTL accounts
Net Position............................................................................... 17,852
Net OPEB Liability............................................................. 2,852
Deferred Inflows of Resources—Investment Gains ........... 15,000
To record the increase in the net OPEB liability
during the year.
3. GLTL accounts
Deferred Inflows of Resources—Investment Gains ................. 3,000
Net Position......................................................................... 3,000
To record the amortization of current period deferrals.
Note:
arises. $3,000 = $15,000 / 5 years
• Most other OPEB-related deferred outflows of resources and deferred inflows of resources
must be amortized over a closed period equal to the average service lives of plan
participants (active employees and inactive employees).
• The net OPEB liability of $12,218 and deferred inflows of resources of $12,000 ($15,000 ‒
$3,000) are reported in the government-wide statement of net position.
4. Increase in Net OPEB Liability ........................ $ 2,852

Add: Contributions......................................... $19,051
Unrecognized investment gain
for the year ........................................ 15,000 34,051
36,903
Less: Amortization of unrecognized
investment gain for the year.............. 3,000
OPEB expense .................................................. $33,903

19
SOLUTIONS TO PROBLEMS
Problem 9-1
# Accounts Dr. Cr.

1. Equipment Under Capital Lease ........................................... 150,000
Capital Leases Payable ................................................... 120,000
Net Position .................................................................... 30,000
To record acquisition of equipment under
capital lease.
2. Land ...................................................................................... 18,500

Net Position .................................................................... 18,500
To record acquisition of land by foreclosure.
3. Construction in Progress ....................................................... 8,000,000

Net Position .................................................................... 8,000,000
To record construction in progress at year end.
4. Buildings ............................................................................... 17,800,000

Construction in Progress ................................................ 8,000,000
Net Position .................................................................... 9,800,000
To record completion of building.
5. Net Position............................................................................ 75,000

Accumulated Depreciation—Furniture and Equipment ........ 225,000
Furniture and Equipment ............................................... 300,000
To record sale of capital assets.
Note: An other financing source of $65,000 should be
reported in the governmental fund receiving the proceeds
from the sale. There is no loss in the governmental fund
financial statements. However, a loss of $10,000 should be
reported for governmental activities in the government-wide
financial statements.
6. Net Position............................................................................ 46,000

Accumulated Depreciation—Infrastructure ........................... 46,000
Infrastructure .................................................................. 92,000
To record destruction of a bridge by tornado.
Note: A loss of $46,000 should be reported in the
government-wide financial statements.

20
Problem 9-1 (continued)
# Accounts Dr. Cr.

7. Furniture and Equipment ...................................................... 80,000
Accumulated Depreciation—Furniture and Equipment . 31,000
Net Position .................................................................... 49,000
To record donation of Enterprise Fund truck.
Calculation:
(1) Accumulated Depreciation
$80,000 ‒ $18,000
2 = $31,000
(2) Book Value = $80,000 ‒ $31,000 = $49,000
Note: A nonoperating expense of $49,000 should be reported

in the Enterprise Fund. In the government-wide financial
statements, this transaction will be reclassified and reported
as a transfer of $49,000 between governmental activities and
business-type activities.
8. Net Position............................................................................ 5,000

To record transfer of equipment to golf course
Enterprise Fund.
Note: A capital contributions revenue of $5,000 should be
reported in the Enterprise Fund. In the government-wide
financial statements, this transaction will be reclassified and
reported as a transfer between governmental activities and
business-type activities.

21
Problem 9-2
# Accounts Dr. Cr.

1. Net Position............................................................................ 5,000,000
Bond Anticipation Notes Payable ................................... 5,000,000
To record issuance of “long-term” BANs.
2. Special Assessment Bonds Payable ...................................... 50,000

Net Position .................................................................... 50,000
To record retirement of SA bonds.
3. Serial Bonds Payable ............................................................ 75,000

Net Position .................................................................... 75,000
To record removal of matured bonds from the long-term
liabilities accounts.
Note: The defaulted bonds payable should be recorded and
reported in the DSF.
4. Capital Leases Payable ......................................................... 70,000

Net Position .................................................................... 70,000
To record reduction of capital lease principal.
5a. Net Position............................................................................ 10,000,000

Refunding Bonds Payable .............................................. 10,000,000
5b. School Bonds Payable ........................................................... 11,500,000

Net Position. ................................................................... 11,500,000
To record advance refunding of school bonds.
6. Net Position............................................................................ 10,000,000

Refunding Bonds Payable .............................................. 10,000,000
To record issuance of refunding bonds. [Same as 5a.]

22
Problem 9-3
# Accounts Dr. Cr.

20X1
Cash ....................................................................................... 52,500,000
Other Financing Sources—Bonds ................................. 50,000,000
Other Financing Sources—Bond Premium .................... 2,500,000
To record receipt bond proceeds.
Other Financing Uses—Transfer to Debt Service Fund ....... 2,500,000

Cash ............................................................................... 2,500,000
To record transfer of bond premium to Debt Service Fund.
Debt Service Fund

Cash ....................................................................................... 2,500,000
Capital Projects Fund ................................................. 2,500,000
To record receipt of bond premium from CPF.
General Fund
Expenditures—Debt Service—Bond Issue Costs .................. 75,000
Cash ................................................................................ 75,000
To record payment of bond issue costs by the General
Fund.
GLTL accounts
Net Position............................................................................ 52,500,000
Term Bonds Payable ...................................................... 50,000,000
Premium on Term Bonds ................................................ 2,500,000
To record long-term liability for issuance of term bonds.

Encumbrances ....................................................................... 55,000,000
Encumbrances Outstanding ........................................... 55,000,000
To record encumbrances outstanding.
Encumbrances Outstanding .................................................. 18,000,000

Encumbrances ................................................................ 18,000,000
To record the cancellation of encumbrances.
Expenditures—Capital Outlay .............................................. 18,000,000

Cash ............................................................................... 16,200,000
Contracts Payable—Retainage ....................................... 1,800,000
To record office building construction expenditures.

23
# Accounts Dr. Cr.

GCA accounts
Construction in Progress ....................................................... 18,000,000
Net Position .................................................................... 18,000,000
To record cost of construction on progress.
End of 20X1 adjustment:

GLTL accounts
Premium on Term Bonds ....................................................... 93,750
Expenses—Interest (($2,500,000 / 20 years) × 9/12) ..... 93,750
To amortize bond premium. (Close interest expense
to Net Position.)
20X2
Expenditures—Debt Service—Interest ................................. 2,000,000
Cash ............................................................................... 2,000,000
To record annual payment of interest on 4% term bond
on March 31, 20X2.
4. General Fund
Other Financing Uses—Transfer to Capital Projects Fund .. 5,000,000
Cash ............................................................................... 5,000,000
To record transfer to CPF.
Capital Projects Fund

Cash ....................................................................................... 5,000,000
General Fund ............................................................. 5,000,000
To record transfer from GF.

Encumbrances Outstanding .................................................. 37,000,000
Expenditures—Capital Outlay .............................................. 36,500,000
Contracts Payable—Retainage............................................... 1,800,000
Encumbrances ................................................................ 37,000,000
Cash ............................................................................... 38,300,000
To record reversal of encumbrances, office building
construction expenditures, and payment of vouchers.

24
# Accounts Dr. Cr.
Other Financing Uses—Transfer to Debt Service Fund ....... 500,000

Cash ............................................................................... 500,000
To record transfer of remaining fund assets to DSF.
Debt Service Fund

Cash ....................................................................................... 500,000
Capital Projects Fund ................................................. 500,000
To record receipt of transfer from CPF.
GCA accounts
Buildings ............................................................................... 54,500,000
Construction in Progress ................................................ 18,000,000
Net Position .................................................................... 36,500,000
To record cost of completed office building.

GLTL accounts
Expenses—Interest ($2,500,000 / 20 years) ................... 125,000
to Net Position.)
20X3
6. General Fund
Cash ............................................................................... 3,300,000
To record transfer to DSF.
Debt Service Fund

Cash ....................................................................................... 3,300,000
General Fund ............................................................. 3,300,000

Cash ............................................................................... 2,000,000
To record annual payment of interest on 4% term bond
on March 31, 20X3.

25
# Accounts Dr. Cr.

GLTL accounts
Expenses—Interest ($2,500,000 / 20 years) ................... 125,000
to Net Position.)
20Z1
8. General Fund
Cash ............................................................................... 6,000,000
To record transfer to DSF.
Debt Service Fund

Cash ....................................................................................... 6,000,000
General Fund ............................................................. 6,000,000
Expenditures—Debt Service—Principal .............................. 50,000,000

Cash ............................................................................... 52,000,000
To record payment of interest and retirement of bonds.
GLTL accounts
Term Bonds Payable ............................................................. 50,000,000
Net Position .................................................................... 50,000,000
Expenses—Interest ........................................................ 31,250
To record retirement of term bonds and amortization of
bond premium. (Close interest expense to Net Position.)

26
Problem 9-4
# Accounts Dr. Cr.
1. General Fund
Cash ....................................................................................... 127,000
General Capital Assets ................................................ 127,000
To record proceeds from sale of old equipment.
GCA accounts
Net Position............................................................................ 200,000
To remove the cost of equipment sold.
Note: There is no loss in the governmental fund financial
statements. However, a loss of $73,000 should be reported
in the government-wide financial statements.
2. General Fund
Expenditures—Capital Outlay .............................................. 780,000
Other Financing Sources—Capital Lease ...................... 680,000
Cash ............................................................................... 100,000
To record capital lease.
GCA-GLTL accounts
Equipment—Under Capital Lease ........................................ 780,000
Capital Leases Payable ................................................... 680,000
Net Position .................................................................... 100,000
To record long-term capital lease.
3. General Fund
Encumbrances ....................................................................... 100,000
Encumbrances Outstanding ........................................... 100,000
To record encumbrance for patrol cars.
4. General Fund
Encumbrances Outstanding .................................................. 100,000
Encumbrances ................................................................ 100,000
Vouchers Payable .......................................................... 101,200
To reverse encumbrance entry and record expenditure
for patrol cars.
GCA accounts
Furniture and Equipment ...................................................... 101,200
Net Position .................................................................... 101,200
To record purchase of patrol cars.

27
# Accounts Dr. Cr.

5. GCA accounts
Land ...................................................................................... 90,000
Net Position .................................................................... 90,000
To record receipt of donated land.
Note: No current financial resources are used in acquiring
donated property; so, there is no entry in the governmental
funds. However, a capital contributions revenue of $90,000
should be reported for governmental activities in the
government-wide financial statements.
6. Enterprise Fund
Cash ....................................................................................... 2,000,000
Bonds Payable ............................................................... 2,000,000
To record issuance of bonds backed by the full faith and
credit of the county.
Note: The pledge of the full faith and credit of the
government must be disclosed. However, the debt was issued
for Enterprise Fund purposes and is to be repaid from
Enterprise Fund resources. Therefore, it is Enterprise Fund
debt.

28
Problem 9-5
# Accounts Dr. Cr.

20X6
1. General Fund
Correction of Prior Year Errors ............................................ 440,000
Cash ............................................................................... 440,000
To reimburse Special Revenue Fund #4 for 20X5
expenditures charged in error to that fund.
Special Revenue Fund #4

Cash ....................................................................................... 440,000
Correction of Prior Year Errors ..................................... 440,000
To record reimbursement from General Fund for
expenditures improperly charged to this fund.
2. Special Revenue Fund #2

Other Financing Sources—Capital Lease ...................... 500,000
Cash ................................................................................ 100,000
To record equipment acquired under capital lease.
GCA-GLTL accounts
Equipment—Under Capital Lease ........................................ 600,000
Capital Leases Payable .................................................. 500,000
Net Position .................................................................... 100,000
To record equipment acquired under capital lease.

Cash ....................................................................................... 700,000
Expenditures—Operating—Highways and Streets ....... 700,000
To record reimbursement for Highway Department
employees' salaries and wages while working on bridge
project.
Capital Projects Fund #7

Cash ............................................................................... 700,000
To record expenditures for Highway Department
assistance on bridge project.
GCA accounts
Construction in Progress ....................................................... 700,000
Net Position .................................................................... 700,000
To record construction in progress on bridge project.

29
# Accounts Dr. Cr.

Expenditures—Debt Service—Principal .............................. 70,000
Expenditures—Debt Service—Interest ................................. 30,000
Cash ............................................................................... 100,000
To record annual payment under capital lease.
(Interest = $500,000 × 6% = $30,000)
GLTL accounts
Capital Leases Payable ......................................................... 70,000
Net Position .................................................................... 70,000
To record reduction of the principal of the capital lease
liability.
Expenses—Depreciation (detailed by function) .................... 60,000

Accumulated Depreciation—Leased Equipment ........... 60,000
To record depreciation on leased equipment.
(Close depreciation expense to Net Position.)
5. General Fund
Advance to Debt Service Fund #12 ...................................... 500,000
Cash ............................................................................... 500,000
To record three-year advance to Debt Service Fund #12.
Note: Nonspendable fund balance must be increased by
$500,000 and unassigned fund balance reduced by that same
amount.
Debt Service Fund #12

Cash ....................................................................................... 500,000
Advance from General Fund .......................................... 500,000
To record three-year advance from General Fund.
6. Capital Projects Fund #7

Cash ....................................................................................... 3,840,000
Other Financing Uses—Bond Discount................................. 160,000
Other Financing Sources—Bonds ................................. 4,000,000
To record Other Financing Sources—Bonds, net of discount.
GLTL accounts
Net Position............................................................................ 3,840,000
Discount on Serial Bonds……………………………………. 160,000
Serial Bonds Payable ..................................................... 4,000,000
To record liability for serial bonds issued.

30
# Accounts Dr. Cr.
Note: The bond discount would be amortized at year end

as follows:
Expenses—Interest ................................................................ XXX
Discount on Serial Bonds ............................................... XXX
7. Debt Service Fund #1

Other Financing Uses—Transfer to
Debt Service Fund #14 ...................................................... 375,000
Cash ............................................................................... 375,000
To record transfer of net position to Debt Service Fund #14.
Fund Balance ........................................................................ 375,000

Debt Service Fund #14 ............................................... 375,000
To close the remaining accounts and terminate the fund.
Debt Service Fund #14

Cash ....................................................................................... 375,000
Debt Service Fund #1 ................................................ 375,000
To record transfer of net position from Debt Service
Fund #1.

Cash ....................................................................................... 12,000,000
General Capital Assets ................................................ 12,000,000
To record the proceeds of sale of land and buildings.
GCA accounts
Net Position............................................................................ 200,000
Accumulated Depreciation—Buildings ................................. 300,000
Land ............................................................................... 50,000
Buildings ........................................................................ 450,000
To remove the accounts of capital assets sold.
Note: There is no gain in the governmental fund financial
statements. However, a gain of $11,800,000 should be
reported in the government-wide financial statements. (This
may well be reported as a special item.)

31
Problem 9-6 (a)
Town of Rego
General Fund
General Journal
Adjusting and Closing Journal Entries
(Numbered in accordance with data in the problem)
# General Fund Dr. Cr.

1a. Allowance for Uncollectible Taxes—Delinquent ................. 2,200
Revenues ........................................................................ 2,200
To reduce balance of estimated losses on prior year
taxes receivable to amount of receivables, $8,000.
1b. Taxes Receivable—Delinquent ............................................ 59,200

Allowance for Uncollectible Taxes—Current ...................... 18,000
Taxes Receivable—Current ........................................... 59,200
Allowance for Uncollectible Taxes—Delinquent ......... 18,000
To reclassify current taxes as delinquent.
2. Revenues ............................................................................... 27,000

Donated Land ................................................................. 27,000
To remove accounts related to general capital assets.
3. Expenditures—Capital Outlay .............................................. 50,000

Building Addition .......................................................... 50,000
To reclassify as expenditures.
4. Expenditures—Debt Service—Principal .............................. 9,000

Expenditures—Debt Service—Interest .................................. 7,000
Serial Bonds Paid ........................................................... 16,000
To reclassify as expenditures.
5. Fund Balance ........................................................................ 8,800

Appropriations ............................................................... 8,800
To record appropriations equal to purchase orders
outstanding at June 30, 20X7.
[Alternatively, an Appropriations—20X7 (or Prior Year)
account may be credited $8,800 and that amount of the
Expenditures reclassified as Expenditures—20X7 (or Prior
Year).]
6. Encumbrances ....................................................................... 2,100

Encumbrances Outstanding ........................................... 2,100
To record encumbrances of appropriations for purchase
orders outstanding at June 30, 20X8.

32
Problem 9- 6 (a) (continued)
# General Fund Dr. Cr.
7. Special Assessment Bonds Payable ...................................... 100,000

Due to Street-Paving Capital Projects Fund ................... 100,000
To record liability to CPF for cash obtained from
sale of Special Assessment bonds.
8. Revenues ............................................................................... 20,000

Tax Anticipation Notes Payable .................................... 20,000
To record liability for tax anticipation notes payable.
9. Closing Entries
C1. Appropriations ...................................................................... 356,800
Encumbrances Outstanding ................................................... 2,100
Estimated Revenues ....................................................... 310,000
Encumbrances ................................................................. 2,100
Fund Balance ................................................................. 46,800
To close the encumbrances and budgetary accounts, and
adjust the Fund Balance account to its actual preclosing
balance.
C2. Revenues ............................................................................... 309,200

Fund Balance ......................................................................... 36,800
Expenditures—Operating ............................................... 280,000
Expenditures—Capital Outlay ........................................ 50,000
Expenditures—Debt Service—Principal ........................ 9,000
Expenditures—Debt Service—Interest .......................... 7,000
To close the general ledger proprietary (nonbudgetary)
accounts.

33
Problem 9-6 (b)
# Street-Paving Capital Projects Fund Dr. Cr.

7. Due from General Fund ........................................................ 100,000
Other Financing Sources—
Special Assessment Bonds ....................................... 100,000
To record the proceeds of the Special Assessment Bonds
and the receivable due from GF for these proceeds.
General Capital Assets and

# General Long-Term Liabilities accounts Dr. Cr.
2. Land ...................................................................................... 27,000

Net Position .................................................................... 27,000
To record donation of land by the state.
3. Buildings and Improvements ................................................ 50,000

Net Position .................................................................... 50,000
To record the cost of addition to town hall.
4. Serial Bonds Payable ............................................................ 16,000

Net Position .................................................................... 16,000
To reduce bond liability by the amount of the
bonds matured and paid.
7. Net Position............................................................................ 100,000

Special Assessment Bonds Payable ............................... 100,000
To record Special Assessment bonds outstanding.

34
Problem 9-7
# Accounts Dr. Cr.

Cash........................................................................................ 2,525,000
Expenditures—Debt Service—Bond Issue Costs .................. 10,000
Other Financing Sources—Bonds .................................. 2,500,000
Other Financing Sources—Premium on Bonds .............. 35,000
To record the issue of term bonds at a premium.
GLTL accounts
Net Position............................................................................ 2,535,000
Term Bonds Payable ....................................................... 2,500,000
Premium on Term Bonds ............................................... 35,000
To record liability for term bonds issued.

Other Financing Uses—Transfer to Debt Service Fund ........ 25,000
Cash ................................................................................ 25,000
To record transfer of cash representing premium on bonds
to the Debt Service Fund.
Debt Service Fund

Cash........................................................................................ 25,000
Capital Projects Fund .................................................. 25,000
To record receipt of cash representing premium on bonds.
3. General Fund
Other Financing Uses—Transfer to Debt Service Fund ........ 400,000
Cash ................................................................................ 400,000
To record payment of contribution to the Debt Service Fund.
Debt Service Fund

Cash........................................................................................ 400,000
General Fund .............................................................. 400,000
To record receipt of contribution from the Debt Service Fund.

35
# Accounts Dr. Cr.

Expenditures—Capital Outlay ............................................... 2,480,000
Vouchers Payable .......................................................... 2,480,000
To record bridge construction expenditures.
GCA accounts
Infrastructure ......................................................................... 2,480,000
Net Position .................................................................... 2,480,000
To record bridge construction.

Other Financing Uses—Transfer to Debt Service Fund ....... 20,000
Cash ............................................................................... 20,000
To record transfer of balance from the Capital Projects
Fund to the Debt Service Fund.
Debt Service Fund

Cash ....................................................................................... 20,000
Capital Projects Fund .................................................. 20,000
To record receipt of transfer from Capital Projects Fund.

Expenditures—Debt Service—Principal ............................... 50,000
Cash ................................................................................ 80,000
To record.
GLTL accounts
Notes Payable......................................................................... 50,000
Net Position……………………………………. ........... 50,000
To record retirement of notes payable.

36
# Accounts Dr. Cr.

7. General Fund
Expenditure—Capital Outlay................................................. 1,250,000
Other Financing Sources—Capital Lease ....................... 1,125,000
Cash ................................................................................ 125,000
To record the inception of a capital lease and the initial
down payment.
GCA-GLTL accounts
Equipment Under Capital Lease ............................................ 1,250,000
Capital Leases Payable ................................................... 1,125,000
Net Position .................................................................... 125,000
To record capital lease.
8. General Fund
Expenditures—Debt Service—Principal .............................. 150,000
Cash ................................................................................ 250,000
To record periodic lease payments.
GLTL accounts
Capital Leases Payable .......................................................... 150,000
Net Position .................................................................... 150,000
To record retirement of a portion of the capital lease liabilities.
9. General Fund
Expenditures—Operating—(Various Functions) ................. 400,000
Cash ............................................................................... 400,000
To record payment of retiree benefits (detailed by function).
GLTL accounts
Net Position............................................................................ 2,800,000
Net OPEB Liability ........................................................ 2,800,000
To record an increase in the long-term net OPEB liability.

37
# Accounts Dr. Cr.

10. General Fund
Due from Capital Projects Fund ............................................ 3,000
Revenues—Charges for Services ................................... 3,000
To record revenues for inspection services for Capital
Projects Fund.

Expenditures—Capital Outlay ............................................... 3,000
Due to General Fund ...................................................... 3,000
To record cost of inspection services provided by the
General Fund.
GCA accounts
Construction in Progress ........................................................ 3,000
Net Position .................................................................... 3,000
To record inspection cost as capital asset cost.

Due from General Fund ........................................................ 1,800
Expenditures—Capital Outlay ........................................ 1,800
To record reduction of expenditures that should be reported
in the General Fund.
General Fund
Expenditures—Operating—Maintenance .............................. 1,800
Due to Capital Projects Fund .......................................... 1,800
To record amount due to the Capital Projects Fund.
GCA accounts
Net Position............................................................................ 1,800
Construction in Progress ................................................. 1,800
To record reduction of construction cost by reimbursement.
12. General Fund

Due from Debt Service Fund ................................................ 400,000
Cash ............................................................................... 400,000
To record short-term loan to the Debt Service Fund.
Debt Service Fund

Cash........................................................................................ 400,000
Due to General Fund ....................................................... 400,000
To record short-term loan from the General Fund.

38
# Accounts Dr. Cr.

13. General Fund
Advance to Capital Projects Fund ......................................... 2,000,000
Cash ................................................................................ 2,000,000
To record two-year advance to the Capital Projects Fund.
Note: Nonspendable fund balance must be increased by
$2,000,000 and unassigned fund balance reduced by that
same amount.

Cash........................................................................................ 2,000,000
Advance from General Fund .......................................... 2,000,000
To record two-year advance from the General Fund.
14. General Fund

Cash........................................................................................ 65,000
General Capital Assets ................................................ 65,000
To record proceeds from sale of general capital assets.
GCA accounts
Net Position............................................................................ 96,000
Accumulated Depreciation..................................................... 384,000
Furniture and Equipment ................................................ 480,000
To remove general capital assets upon sale.
15. General Fund

Expenditures—Operating—(Various Functions) .................. 2,100,000
Cash ................................................................................ 2,000,000
Claims and Judgments Payable ...................................... 100,000
To record claims and judgments incurred and paid, as well
as due and payable (detailed by function).
GLTL accounts
Claims and Judgments Payable .............................................. 335,000
Net Position .................................................................... 335,000
To record the decrease in long-term claims and judgments
liability.

39
Problem 9-8
Summary reports on this research and analysis problem should be evaluated in terms of the specific
requirements. The depth of analysis and understanding should be apparent—particularly if several
reports are evaluated concurrently.
Problem 9-9
1. The GASB defines pollution remediation obligations as obligations “to address the current
or potential detrimental effects of existing pollution by participating in pollution remediation
activities” such as site assessments and cleanups. Remediation could include activities such
as precleanup, cleanup, government oversight, operation, and remedy maintenance.
2. If identified, pollution remediation obligations would typically be reported as an expense and

a liability on an accrual basis when a range of expected outlays is reasonably estimable.
These would be reported in both proprietary funds, as well as the government-wide financial
statements. An expenditure and a liability would be recognized in governmental funds
consistent with GAAP requirements for the modified accrual basis of accounting. There are
three specific situations where the outlays for pollution remediation obligations would be
capitalized rather than being expensed—(a) outlays to prepare property for sale; (b) outlays
to prepare property for use when it was purchased with the expectation that remediation
would be necessary; and (c) outlays to restore service loss due to asset impairment.
3. An obligating event occurs when a governmental entity “knows or reasonably believes a site
is polluted or contaminated”. An obligating event has occurred when
• imminent endangerment has caused a governmental entity to take remedial action, or

• the government has violated a pollution prevention-related permit or license, or
• the government has been named, or evidence indicates that the government will be
named, as a responsible party or potential responsible party by a regulator, or
• the government has been named, or evidence indicates that the government will be
named, in a lawsuit to enforce cleanup, or
• the government begins, or obligates itself to begin, cleanup, monitoring, or maintenance
and operation activities.
4. Liabilities for pollution remediation obligations and the related expenditures/expenses are
potentially accrued when a range of expected outlays is reasonably estimable.

40
SOLUTIONS TO CASES
Case 9-1
# Accounts Dr. Cr.

Cash........................................................................................ 136,507
Expenditures—Debt Service—Bond Issue Costs .................. 343
Other Financing Sources—Bonds .................................. 132,000
Other Financing Sources—Premium on Bonds .............. 4,850
To record the issue of bonds at a premium.
GLTL accounts
Net Position............................................................................ 136,850
Bonds Payable ................................................................ 132,000
Premium on Bonds ........................................................ 4,850
To record liability for bonds issued.

Encumbrances ........................................................................ 168,000
Encumbrances Outstanding ............................................ 168,000
To record construction contract.

Vouchers Payable .......................................................... 120,000
To record construction costs incurred on capital projects.
GCA accounts
Buildings ................................................................................ 100,000
Construction in Progress ........................................................ 20,000
Net Position .................................................................... 120,000
To record general capital assets completed and under
construction.

Cash ................................................................................ 162,818
To record debt service on bonds.
GLTL accounts
Bonds Payable........................................................................ 113,781
Net Position .................................................................... 113,781
To record retirement of bond principal.

41
Case 9-1 (continued)
# Accounts Dr. Cr.
5. GCA accounts
Accumulated Depreciation—Buildings ......................... 2,500
To record depreciation for buildings placed in service.
($100,000 / 40 Years)
6. General Fund
Cash........................................................................................ 230,000
Enterprise Fund ........................................................... 230,000
To record receipt of transfer from Enterprise Fund.
Enterprise Fund
Transfer to General Fund ....................................................... 230,000
Cash……………………………………. ....................... 230,000
To record transfer to the General Fund.
7. General Fund
Cash ................................................................................ 34,892
To record the inception of a capital lease and the initial
down payment.
GCA accounts
Land ....................................................................................... 22,241
Furniture and Equipment ($7,670 + $4,981) ......................... 12,651
Net Position .................................................................... 34,892
To record general capital assets purchased.

To record depreciation for general capital assets placed in
service.
[Vehicles ($7,670 / 5) + Equipment ($4,981 / 4) = $2,779]
8. General Fund
Expenditures—Operating—(Various Functions) ................. 556,089
Cash ................................................................................ 556,089
To record claims paid (detailed by function).
GLTL accounts
Net Position............................................................................ 6,352
Claims and Judgments Payable ...................................... 6,352
To record claims and judgments liability.

42
Case 9-2
# Accounts Dr. Cr.

1. General Fund
Expenditures—Capital Outlay ............................................... 2,349,688
Cash ................................................................................ 2,349,688
To record infrastructure maintenance.
2. General Fund
Cash........................................................................................ 54,538
General Capital Assets ............................................... 54,538
To record proceeds from sale of general capital assets.
Note: A $210,864 loss is reported in the government-wide
financial statements.
GCA accounts
Net Position............................................................................ 265,402
Furniture and Equipment ................................................ 800,000
To remove general capital assets upon sale.
3. GCA accounts
Expenses—Depreciation (detailed by function) .................... 1,683,476
Accumulated Depreciation—Buildings .......................... 875,924
Accumulated Depreciation—Leased Equipment ........... 23,448
To record depreciation for general capital assets.
Calculation:
Buildings ($35,036,945 / 40 years) ........................................ $ 875,924
Leased Equipment ($46,896 / 2 years) .................................. 23,448
Other Equipment ($9,409,251 / 12 years) .............................. 784,105
Total depreciation expense ............................................. $1,683,476

Cash ................................................................................ 1,170,034
To record payment of debt service on bonds.
GLTL accounts
Bonds Payable........................................................................ 425,000
Net Position .................................................................... 425,000
To record retirement of bond principal.

43
Case 9-2 (continued)
# Accounts Dr. Cr.

5. General Fund
Special Revenue Fund........................................................ 508,122
Capital Projects Fund ......................................................... 2,299
Other Financing Uses—Transfer to Enterprise Fund ............ 192,505
Internal Service Fund ......................................................... 2,782
Cash ................................................................................ 705,708
To record transfers made to various funds.
Note: The journal entry in each recipient fund is a debit to
cash and a credit to transfers from the General Fund for the
amount shown above for that fund.

44
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CHAPTER X.—A VERY SURPRISING
OCCURRENCE.
The ruins of the west wing were clearly visible from the great
wooden building erected by Mr Summerhayes in the park where the
tenants were to dine. It was too cold in March for a tent; and there
was no room in Fontanel large enough for these festivities, except the
great double suite of drawing-rooms where the doors had been
removed, and where there was to be a ball at night. Much was the
talk about the alarming event of the previous day, which had shaken
half the country with personal terrors, much warmer than are
generally awakened by the intelligence of a fire at a friend’s house.
On hearing of it, every soul within twenty miles had sighed with
resignation or cried out with impatience, giving up all hopes of the
festivities to which everybody had been looking forward; but Mr
Summerhayes’s messengers with the intimation that all was going on
as before, came about as soon as the news of the calamity. Mr
Summerhayes himself was more gracious, more cordial, than
anybody had ever known him. He spoke of “our dear boy” in his
speech to the farmers, and described Charley in such terms, that the
heart of Charley’s mother was altogether melted, and she felt ready
to commit the fate of her children a dozen times over into her
husband’s hands. Nothing could be more manly, more honourable,
more affectionate, than the way in which Mr Summerhayes spoke of
his own position. He was, he said, his wife’s steward and his son’s
guardian; such a position might have been painful to some men—but
love made everything sweet; and he was happy in having always had
the entire confidence of his beloved clients. He even referred to the
honoured husband of the Queen, as in something of a similar
position to his own, and brought down storms of applause. Charley
made his little speech with great difficulty after his stepfather. The
poor boy looked ghastly, and could scarcely get the words out; but
his pleased retainers, who believed him overwhelmed by his feelings,
applauded all the same. When he had done what was required of
him, Charley managed to steal away unperceived by anybody except
Loo, who went wistfully after her brother. She overtook him by the
time he had got to the woods which skirted the park, and put her arm
softly within his without saying anything. The two young creatures
wandered under the bristling budded trees in silence, with
unspeakable sadness in their hearts. They had nothing to say to
console each other—or rather Loo, whose very heart wept over her
brother, could think of nothing to say to him. At last, caressing his
arm with her tender, timid, little hand, Loo ventured upon one
suggestion: “Oh, Charley, poor mamma!” said the girl, in her heart-
breaking young voice. “Yes—poor mamma!” said Charley, with a
groan. Poor Mary! it was all her doing, yet her children cast no
reproach upon her. She, after all, would be the greatest sufferer.
“But, Loo, I can’t stop here after what has happened,” said Charley
when they had both recovered a little; “he may be going to do
everything that’s right for anything we can tell. Don’t let us talk as if
it were anybody’s fault; but I can’t stop here, you know, about
Fontanel, doing nothing, as if—— Don’t cry, Loo. You would not like,
anyhow, to have an idle fellow for a brother. Harry is the clever one;
but I daresay my godfather, the old general, could get me a
commission; and I could live on my pay,” said Charley, with a slight
quiver in his upper lip, “and perhaps get on. I don’t think I should
make a bad soldier—only that there’s the examinations, and all that.
It’s very hard, Loo, to have lost all this time.”
“Oh, Charley, Charley dear! I can’t bear it—it’s too hard to put up
with,” cried poor little passionate Loo.
“Now don’t you go and take away what little strength a fellow has,”
remonstrated Charley; “it must be put up with, and what’s the use of
talking? Now look here, Loo; if you make a fuss, it will do no good in
the world, but only vex mamma; she can’t mend it, you know. I mean
to put the best face on it, and say I want to see the world, and that
sort of thing; and believe exactly as if—as if the fire had never
happened,” said Charley, with a dark momentary cloud upon his
face. “I can make my mother believe me; and it will be a comfort to
her to have me out of the way,” said the heroic lad, with something
like a suppressed sob, “and to think I don’t suspect anything. It is
hard—I don’t say anything else; but, Loo, we must bear it all the
same.”
And so they went wandering through the bare woods, poor Loo
stooping now and then unawares to gather some violets according to
her girlish habits, and Charley, even in the depths of his distress,
following with his eye the startled squirrel running along a branch.
They were profoundly, forlornly, exquisitely sad, but they could not
ignore the alleviations of their youth. Amid all the sudden shock of
this disinheritance—in which there mingled so cruel a sense of
wrong, so warm an indignation and resentment—Charley still
thought, with a rising thrill of courage and pride, that he might carve
out for himself a better fortune; while Loo, her brother’s sole
confidante and supporter, was herself supported by that exquisite
consciousness of being able to console and encourage him, which
almost atones to a girl’s heart for every misfortune. They could hear
the distant echoes of the cheers and laughter and loud cordial talk of
the guests, while they strayed along silent, with hearts too full to
speak. Very different anticipations had the two entertained of this
famous day so long looked forward to. They were to be the first in all
the rejoicings undertaken in their honour—for the glory of the heir-
apparent could not fail to be shared by the Princess Royal, the eldest
daughter of Fontanel; they had pictured to themselves a brilliant
momentary escape out of the embarrassments and restraints which
they could not but be conscious of at home, and Charley had even
been prepared to feel magnanimous to Mr Summerhayes, who, after
all, was but a temporary interloper, and had no right to that
inheritance of which the young Clifford was heir indisputable. Now,
the sound of the merrymaking went to Charley’s heart with acute
blows of anguish. It was an aggravation of the sudden misery, cold-
blooded and odious; what were they rejoicing about? Because a poor
boy had come to the coveted years of manhood, to learn bitterly, on
the eve of what should have been his triumph, that he was an
absolute dependant, a beggar, at the mercy of a stepfather. No
wonder he could not speak; no wonder he put up his hands to his
ears, and uttered a groan of rage and wretchedness when that burst
of cheering came upon the wind, and Loo, speechless, could but cry
and clench her little hands in the bitterness of her heart. This was
between the tenants’ dinner and the ball in the evening, which was to
be the gayest ever known in the county. Poor Charley would gladly
have faced a tiger, or led a forlorn hope, could he have had such an
alternative, instead of arraying himself in sumptuous raiment and
appearing at that ball, where his presence would be indispensable.
He seized poor Loo’s little hands harshly in his own, and pressed
them till she could have screamed for pain. “Don’t cry; your eyes will
be red at the ball—your first ball, Loo!” cried her brother, with a kind
of savage tenderness; and Loo, half afraid of this strange new
development of the man out of the boy, was fain to dry her poor eyes
and cling to his arm, and coax him to go in to prepare for the greater
trial of the night.
While these two forlorn young creatures were thus engaged,
another conversation was taking place at a distance from the scene of
the festivities, in the park of Fontanel. Mr Courtenay Gateshead had
come down to be present at the tenants’ dinner in his capacity as
legal adviser to Mr Summerhayes; but the young lawyer looked on
with a preoccupied air, sometimes casting a keen look of inspection
at the master of the feast. When the party from the great house left
the humble revellers, Courtenay, instead of joining Mr
Summerhayes, beckoned aside his uncle and partner. Old Gateshead
had stayed for the children’s sake; but had found it totally impossible
to change Mr Summerhayes’s first determination. He would not
consent to read, much less to sign the document hastily prepared by
the anxious old lawyer. He would think it over, he repeated, and see
Courtenay, with an implied slight upon the powers and skill of
Courtenay’s uncle, which galled the old man to the last degree. The
young lawyer found his relative exceedingly sulky and out of temper.
“I have something particular to consult you about,” Courtenay said,
who did not yet know anything about the destruction of the deed;
and Mr Gateshead, who had that disclosure to make, followed him
with no very pleasant feelings to the verge of the wood, not very far
from where Charley and Loo were wandering in the despair of their
hearts. But the old lawyer was much taken by surprise by the
question which his nephew did not put to him till they were quite
alone, and sheltered from all eavesdroppers by the broad expanse of
the park.
“Uncle, you have a wonderful memory. I suppose you remember
John Clifford, this boy’s grandfather—he who broke the entail,” said
Courtenay, in rather a hurried voice.
“John Clifford—what on earth has he got to do with it?” cried old
Gateshead, whose memory was wonderful, but whose powers of
comprehension were not equally vivid.
“Oh, nothing, I daresay,” said his nephew. “I want to know what
you recollect about him, that’s all—he who joined his father in
breaking the entail——”
“A very silly thing to do, Courtenay—a fatal thing to do. Good Lord,
only think what a different position these poor children might have
been in!” cried old Gateshead.
“Yes, yes—to be sure; but do you recollect anything about John?”
said the young man.
“I recollect everything about him,” said the uncle. “Though he was
Harry Clifford’s father, and they are both dead ages ago, he was no
older than I am. I think we were born in the same year——”
“The same year? and you are seventy; that must have been ‘87.
Was it ‘87, uncle? how can we make sure?” said young Courtenay. “I
must hunt up the register of baptisms to-morrow.”
“Ah! I remember some talk about that,” said the old lawyer. “The
parish books were burned once, and the entry couldn’t be found.
There was some talk about it at the time. Burned! I suppose you
don’t know what’s happened in this fire? Oh! you’ll hear, you’ll hear
quite soon enough. But what has John Clifford’s name come up
about now?”
“It’s something rather important for Summerhayes—he looks in
wonderful force to-day,” said Courtenay; “but if this should turn out
true he will soon sing small enough. I may as well tell you at once,
uncle, for I am almost sure about it. My impression is, that the entail
was never legally broken; and, consequently, that Mr Clifford had no
more right than I have to leave the property to his wife.”
Old Gateshead looked at his nephew with a stupified air. “The
entail was never broken?” he repeated vacantly, looking in the other’s
face.
“No—the entail was never legally broken,” said Courtenay, with the
impatience of an acute and rapid intelligence. “The thing caught my
attention some time ago, but I would not speak of it till I had worked
it out. John Clifford—listen uncle—executed the papers with his
father in the year 1806; and, if I am correct, he was then an infant,
and incapable of doing anything of the sort. I don’t believe he came
of age till 1807. By Jove! what’s the matter? the old man’s mad!”
“No, Courtenay, the old man’s not mad,” said his uncle. “Hurrah!
God save the Queen! Hurrah! why don’t you help them to shout, you
cold-blooded young prig? I tell you the boy’s saved. Hurrah, and long
life to him!” said old Gateshead, waving his hat frantically, and
echoing with the wildest shrill enthusiasm the distant cheers from
the tent. “I declare to you these cheers choked me an hour ago,” cried
the old lawyer; “there’s things a man can’t do even when he’s an
attorney. Courtenay, I say, shake hands. You’re a disgusting young
prig, and you’re a deal too clever for my practice; but if you make it
out, I’ll give in to you all my life. Good Lord, that’s news! tell me all
about it. We’ve got a sharp one to deal with; we’ll have to make very
sure, very sure. Let’s hear every step how you came to find it out.”
Which Courtenay accordingly did, and made it perfectly clear to
the anxious listener. Charley’s grandfather had been in the
unpleasant predicament of having no public legal record of his age;
but fifty years after the occurrence of that fortunate mistake, scraps
of documents had turned up in the hands of the family solicitor,
depositaries for generations of the family secrets and difficulties,
which made it easy to establish, not by one distinct statement, but by
many concurring scraps of evidence, the exact date of John Clifford’s
birth; and to prove, as the young lawyer was now prepared to do, that
the entail had never been legally broken; that all the acts of the last
two reigns were founded on a mistake; that, consequently, Squire
Henry’s will, in so far as it related to the estate of Fontanel, was null
and void, and Charley was no longer heir but bona fide proprietor of
the lands of the Cliffords. Wonderful news—more than ever
wonderful that day.
When Mr Courtenay Gateshead sought Mr Summerhayes to break
to him this startling intelligence, the elder lawyer went to find the
mistress of Fontanel, who was reposing in her dressing-room, to
prepare for the exertions of the evening. Poor Mary was in a very
doubtful state of mind that day. She had wept for delight and
gratitude when she heard her husband’s speech to the farmers; but
when she came to be by herself again, that enthusiastic impression
wore off, and the fact came back to her, striking chill to her heart—
the fact that her children were now at the stepfather’s mercy, and
that poor Charley, the heir, was no longer the heir unless another
man pleased. Alas! poor Mary knew now, to the bottom of her heart,
that it was another man—a man who, though she was his wife, did
not, and could not, look on Charley Clifford as his son. She knew
nothing about law, nor that the deed, though destroyed, might yet in
its ashes form foundation enough for any amount of lawsuits. It was
destroyed, and she had no longer any power, and everything was in
Mr Summerhayes’s hands—that was enough to quench the light out
of the very skies to the poor mother. She dared not say to herself
what she feared, nor what she thought he would do; she only felt that
he had the power, and that Charley was at his mercy—and behind all,
bitterest of all, that it was her fault. She was sitting resting, in a kind
of heavy gloom and stupor, with her head buried in her hands,
feeling to her heart that she was avoided by her children, and that
this day of triumph was to them a day of mockery, when Mr
Gateshead’s message was brought her. He was a very old friend, and
her first thought was that he had at last prevailed on Mr
Summerhayes to consent to the new deed. She got up in eager haste,
and sent her maid to bring him up-stairs. She received the old man
there, in that room where her children no longer came as of old. The
result was, not very long after, a hurried ringing of bells, and
messengers running everywhere for Miss Loo, who was just then
coming in, dark and pale from the woods, a very woe-begone little
figure in her holiday dress. Poor Mary, overcome by a hundred
emotions which she did not dare to tell, had fainted almost in old
Gateshead’s arms, to the great dismay of the old lawyer. It was
deliverance to her boy, but it was utter humiliation and downfall to
her husband. In the struggle of sudden joy, confusion, and pain, her
senses and her mind gave way for the moment. Loo rushing in,
vaguely aware that something had happened which was well for
Charley, believed for the moment, in an overwhelming revulsion of
remorse and repentance, that all was henceforward to be ill for ever,
and that her mother was dead. But Mary was not dead. She
recovered to appear at the ball—very gracious and sweet, as was her
wont, but paler than anybody had ever seen her before, as was
remarked everywhere. It was a pretty ball, every body allowed; but
the family looked more distrait and strange than any family, even
under such an infliction, had ever been seen to look. Charley, who
had most command of himself after his mother, was doing
everything a young man could do to keep his partners amused and
the crowd occupied; but even Charley now and then grew abstracted,
and forgot himself for a moment. As for Loo, though it was her first
ball, and her brown eyes were splendid in the changeable light that
quivered in their depths, she kept behind her mother with a look of
fright and timidity, at which many a more experienced young lady
sneered openly; while Mrs Summerhayes, moving about among her
guests with all her usual sweetness, in her mature beauty, could be
seen sometimes to give strange wistful looks aside to where her
husband stood, mostly in company with Courtenay Gateshead. Mary
was pale, but Mr Summerhayes was flushed and strange to look
upon. He said, in his gentlemanly way, that the ball was his wife’s
business, and that he did not pretend to be able to help Mrs
Summerhayes. He kept aloof from her and from her children,
clinging, as it seemed, to young Gateshead. There had been a fire to
be sure, but a fire only in the west wing, where nothing particular
could have happened. What could it be? for the county people were
all quick to perceive that something unusual was in the air—at least
the ladies did, and did not fail to communicate their suspicions.
There must have been a family quarrel, the more acute imagined;
and Miss Laura and Miss Lydia Summerhayes, whom their brother
dismissed summarily when they attempted sisterly investigations,
were fain to make forlorn attempts to discover from Loo what it was.
The master of the house had never been seen to speak or look at any
of the family all the evening, till the principal guests were in the
supper-room, all wondering, as they discussed the good things there,
what could be the matter. Charley had got in debt at the university—
Charley had formed some unsuitable connexion—and his stepfather
was hard upon him. Thus the company speculated; but the company
held its breath when Mr Summerhayes laid his hand on Charley’s
shoulder, and solved the wonder of the evening in the strangest,
most unexpected manner—to nobody so unexpected as to his
bewildered wife.
“My friends,” said Mr Summerhayes, in his gentlemanly way (and
it must be allowed that, whatever were his faults, Tom Summerhayes
always was a gentleman), “we drank this boy’s health to-day as the
heir of Fontanel; but since then something has happened which has
excited us all considerably, as I daresay you will have perceived; and
I have to tell you that Charley is not only the heir, but the master of
this house. I am sure,” continued Mr Summerhayes, leaning his arm
more heavily upon the shoulder of the astonished youth, “there never
was a more hopeful or promising beginning than he will make, and I
know he will have all your good wishes. The fact is that the property
became my wife’s under a mistake: the entail was supposed to have
been broken, which turns out not to have been the case; and it is an
additional pleasure to us,” said Mary’s husband, turning round with
a smile to meet her look, which was fixed upon him, and then
leisurely surveying the amazed assembly—“it is a great additional
pleasure to us,” continued Mr Summerhayes, “to find ourselves
entitled, on a day every way so happy, to give up our laborious
stewardship, and put our boy in possession of his own. I ask you over
again, my excellent friends and neighbours, to drink the health of
Charles Clifford of Fontanel.”
It was thus that Mr Summerhayes extricated himself from his false
position. The cheers which disturbed all the loiterers in the ball-
room, and brought them in a crowd to see what it was, were more for
the retiring monarch than the new sovereign. Charley himself, in a
warm revulsion of his generous heart, had seized both his
stepfather’s hands, and wrung them with strenuous gratitude. “I will
never forget your generosity,” cried the eager boy, who would have
made over Fontanel there and then had Summerhayes pleased, into
his keeping over again. Charley knew nothing of the stormy scene
with Courtenay—the silent rage and mortification which had thrown
off Mary’s attempts at consolation before necessity and his better
genius warned Mr Summerhayes of this opportunity left him for a
graceful retreat. Charley did not know, nor the world—and the few
who did know had no wish to remember. The whole party was in a
flutter of admiration; and poor Miss Laura and Miss Lydia did all but
go into hysterics between horror at the catastrophe and pride in their
brother. Never before had Mr Summerhayes of the Manor taken so
high a position before the county as that night when he gave up
possession of Fontanel.
CHAPTER XI.—MRS SUMMERHAYES.
“It is not to be expected she can like it much; but she is a good little
woman—she always was a dear little woman,” said the Rector; “and
Mary’s jointure will make a great deal of difference in the manor-
house, and smooth things down considerably. She has been doing all
kinds of upholstery there already.”
“By Jove, I knew how it would be!” said Major Aldborough; “I told
you all how it would be. I said they’d kill him. He may think he’s got
off very easily, in my opinion—cure him of meddling with other
people’s children as long as he lives. What the deuce did he want at
Fontanel? a great deal better to make himself snug, as I suppose he
means to do now, at Summerhayes.”
“Mary will drive down looking just as bright as ever,” said Miss
Amelia Harwood. “I always said she deserved to be happy, poor soul
—she always makes the best of everything. Her heart was breaking
that night of Charley’s birthday. I heard for a certain fact that she
fainted just before the ball—a thing I never heard of Mary doing
before. Heaven knows what all she was afraid of; there was
something very mysterious about that fire; but now, you know, she
has recovered her spirits and her colour, and looks just as she used to
look. I shouldn’t wonder a bit if she began life over again, and was
quite happy in the manor-house now Tom Summerhayes is coming
home.”
“And so she ought to be, Amelia,” said good Miss Harwood. “I am
sure she has many a poor woman’s prayers.”
All these good people were walking on the Fontanel road. It was a
lovely evening in the early summer, more than a year after Charley
Clifford’s birthday. Though it was rather beyond the usual limits of
Miss Harwood’s walk, she was here leaning on Miss Amelia’s arm to
enjoy the air, and to look for somebody who was expected. The
Rector had strolled out on the same errand; and that, or something
similar, had also drawn Major Aldborough from his after-dinner
repose. The old-fashioned gates of the Manor-house were open, and
some expectation was visible within. Miss Laura and Miss Lydia, in
very summery muslin dresses, were to be seen promenading before
the house, and hastened out, when they saw the Miss Harwoods, to
join their friends.
“It is very trying for us,” said Miss Laura. “Oh, Miss Harwood, it is
a very trying occasion; not that our new house is not very nice and
everything very comfortable; but it is very very trying to us,” said
Miss Lydia, joining in; “and oh, on dear Tom’s part, such an
unexpected change.”
“Your brother is expected home to-morrow, Miss Laura?” said the
Rector.
“Yes, to-morrow,” answered Miss Lydia, whose turn it was. “Poor
dear Tom is so fond of travelling on the Continent, it is so good for
his health; and Mrs Summerhayes wishes to be at home to receive
him. Lydia and I are so glad, and yet we are sorry,” chimed in Miss
Laura; “it will be such a change for dear Tom.”
“Not nearly so great a change as for poor Mary,” said Miss Amelia,
“leaving her children, poor soul; but I daresay she won’t complain,
and it must be better for all parties to have it settled. And so you like
your new house? I am told that Mary did all the furnishing herself.”
“Oh yes, she is very kind,” said Miss Laura; “she has made
everything very nice; you must come and see it. Indeed, if it were not
for thinking what a change it is for dear Tom,” cried the sisters both
together, with an evident impression that their brother had been
defrauded of something he had a right to, “we should all be very
happy; for dear Mary,” said Miss Lydia, with a little sob, “is very kind
—and look, here she comes.”
She came driving the pony-carriage, as she had appeared so often
at Summerhayes. Poor Mary! if she had been a wiser woman would
she have been loved as well? She came, all beaming, with the smile
on her lip and the tear in her eye—courageous, affectionate, sweet as
ever. Charley and Loo had ridden down with her till they came in
sight of Summerhayes, and then had taken leave of their mother.
Mary, with little Mary by her side in the pony-carriage, drove on to
her separate fate alone. She was going to take possession of the old
Manor-house, no longer the mistress of Fontanel but Tom
Summerhayes’s wife, to receive him when he came home from his
travels, and to make life bright, if he were capable of seeing it, to that
imperfect and not very worthy man. The agitation in her face was
only enough to heighten a little her sweet colour and brighten her
tearful eyes. On the whole had she not great reason to be happy? She
had forgotten everything but her husband’s virtues while he had
been absent, and her children were safe and prosperous and close at
hand. She smothered the little pang in her heart at parting, and said
to little Mary, with a smile, that she would have had to part with
them all the same when they were married. So the mother and the
daughter drove down through the soft twilight and the dews to the
Manor, not without brightness and good hope; while Charley and
Loo rode away towards the darkening east, with a deeper shadow on
their young faces, not quite sure how their home would look when
their mother was away.
Mary stopped her ponies when she saw the little procession which
had come out to meet her; the tears came into her bright eyes again.
“It is so kind of you all,” she said, kissing her hand to good Miss
Harwood, “and it is so pleasant to think I can see you oftener now.”
“God bless you, my dear!” said the two old ladies who had come for
love. And Mary said “Amen, and the children too;” and so drove her
ponies cheerfully, with smiles and tears, in through the open gates.
Where, however, we will not follow Mrs Summerhayes. Things had
turned out a great deal better than could have been expected. Mr
Summerhayes was a man of the world, and knew how to make a
virtue of necessity. He had given in gracefully and at once, and
gained reputation thereby, nobody knowing what his private feelings
were when Courtenay Gateshead’s discovery came first upon his own
widely-different plans. The fire in the west wing never was explained
—nobody, indeed, inquired very deeply into it—and Mary, for her
part, forgot it, or associated it only with old Gateshead’s nightcap, to
which, she remained firmly convinced, the old man had set fire on
his way to bed. The fire at Fontanel was indeed associated with old
Mr Gateshead throughout the county, as was indeed a natural and
perhaps correct supposition. Anyhow, nothing but the destruction of
the west wing had resulted from it, and that was rather an
improvement than otherwise to the old place, in which Loo, till they
were both married, was to keep house for her brother. Little Mary,
who was easy in her temper and happy as the day was long, went
with Mrs Summerhayes to the Manor—and Alf and Harry were to
have two homes for their holidays. When Tom Summerhayes came
home next day, he thought some fairy change had come over the
manor-house, and forgave his wife with magnanimity for all the
trouble she had brought upon him. Mary accepted the pardon with
gratitude, and Miss Laura and Miss Lydia thought Tom a hero; and
so, with a tolerable amount of content on all sides, life began over
again for the reunited couple. Mary had her own troubles still, like
most people; but perhaps had not been much more happy as Mrs
Clifford than she was as Mrs Summerhayes.
SIR JAMES GRAHAM.[2]
2. ‘The Life and Times of Sir James R. G. Graham, Bart., G.C.B., M.P.’ By
Torrens M’Cullagh Torrens. In 2 vols. London: Saunders & Otley.
These are not exactly the sort of volumes which we could have
wished them to be. Sir James Graham, though never a foremost, was
still a remarkable man in his age, and doubtless left behind, in his
correspondence, and in the memories of his friends, better materials
than we find here for an elaborate biography. Still, let us do justice to
Mr M’Cullagh Torrens. If family archives have not been unlocked to
him, and private friends abstained from telling him more than they
could help, he has made very good use of stores which were open to
all the world, and strung together, with considerable skill, his scraps
of past history. The result is a book which will be much and
approvingly read; though we cannot anticipate that it will fire the
imagination or touch the feelings of any human being.
The family from which Sir James Graham derived his descent is of
long standing in the “debatable land.” Its founder seems to have been
“John with the bright sword,” a son of Malise, Lord of Menteith,
whom a quarrel with the Scottish King induced, in the beginning of
the fifteenth century, to migrate beyond the Scottish border.
Carrying with him a band of stout retainers, he soon acquired a
settlement there, and became by-and-by the boldest and most
successful of the moss-troopers, whose custom it was to harry
indifferently the lands of the two kingdoms.
The descendants of John gradually extended their influence and
enlarged their possessions. Between the Esk and the Eden, and for
some miles to the north of the Esk, there lies a district which, till the
Partition Treaty of 1552, may be said to have belonged neither to
England nor to Scotland. It was there that the Græmes settled, and
there, in spite of many a harsh decree issued against them from both
realms, they grew and prospered. And finally, when peaceable times
came, they were recognised as large landed proprietors, and useful
members of the English community.
The first politician in the family appears to have been Sir Richard
Græme, who, after acting as Master of the Horse to the Duke of
Buckingham, was taken up and enriched by grants from the Crown.
He it was who acquired by purchase Netherby Hall, with various
manors lying contiguous to it. Espousing the cause of his master in
the civil wars, and following him to the field, he was severely
wounded at the battle of Edgehill; yet he contrived, malignant as he
was, to keep his estates together, though not without heavy fines
imposed upon them by Cromwell.
The immediate successor of the first baronet led a quiet life, and
died in his bed. His grandson was more ambitious. He made some
figure in Parliament, and was in 1682 created Viscount Preston in
the peerage of Scotland. This did not oblige him to retire from the
English House of Commons, in which he sat as Knight of the Shire
for Cumberland; and he ultimately, after serving as ambassador in
Paris, took office as Secretary of State under James II. Lord Preston
would never stoop to pay court to William III. He even accepted from
James, after his expulsion from the throne, a patent of English
nobility, which he pleaded in bar of trial before a common jury, when
charged with conspiring to bring back the exiled family. The House
of Lords, however, would not acknowledge the patent, and the
evidence against Lord Preston proved too strong to be rebutted. He
was found guilty, and sentence of death was passed upon him, with
attainder of his peerage and forfeiture of his property. It is creditable
to the memory of Dutch William that he refused to carry the sentence
into execution. Enough of blood had been shed on the scaffold; and
the King, though strongly pressed by some of the leading Whigs to let
the law take its course, adhered to his own determination. Lord
Preston’s daughter, it appears, was one of Queen Mary’s attendants.
The Queen found her one day gazing at the picture of James II., and
weeping bitterly; and desiring to be told why the maiden wept, she
received this answer: “I am thinking how hard it is that my father
should suffer death because he loved your father.”
Preston’s pardon alarmed the Jacobites as much as it disgusted
and offended the Whigs. The former not unnaturally came to the
conclusion that he must have betrayed them. The latter, especially
Bishop Burnet, himself the meanest and basest of intriguers,
clamoured against the act of clemency, as if some wrong had been
done personally to themselves. Both parties were, however, in error.
Preston had not been many months at liberty before he was again
arrested and sent to the Tower as a traitor; and though fortunate
enough in the present instance to show that the charge against him
was groundless, his health sank under disquiet of mind, and he died
soon after his release.
The Scotch peerage became extinct in the third generation from
this, and the estates went to two sisters, one married to Lord
Widrington, the other single. On the death of the unmarried sister,
the whole of the property came to Lady Widrington—a fortunate
circumstance for her lord, for he, like his father-in-law, was a stanch
Jacobite, and took the field against the established Government in
1715. He escaped with his life after the failure of the enterprise, but
found himself landless and a beggar. Happily the law would not
allow Lady Widrington’s possessions to be interfered with, and she
was thus enabled to afford Lord Widrington an adequate
maintenance during the remainder of his life. Finally, Lady
Widrington, dying childless, left the Netherby estates to a first
cousin, the Rev. Robert Graham, D.D., second son of the Dean of
Carlisle. From him, through his second son, the subject of our
present sketch was descended.
Dr Graham was a great improver. Immediately on succeeding to
the property, he set himself to drain the lands, clear out mosses,
build decent houses for his tenantry, and gradually to raise their
rents. He built also, or rather rebuilt, Netherby Hall, carefully
collecting and depositing in a room set apart to receive them, the
many relics of Roman art which were discovered in digging the
foundation. Like improvers in general, however, he worked rather for
posterity than for himself; and he not unnaturally desired that with
their enlarged resources the family should recover the baronetage,
which, for lack of heirs-male, had become extinct. His wish in regard
to this matter was accomplished, though neither in his own person
nor in that of his eldest son. The latter, by name Charles, survived his
father barely a fortnight; and as Charles’s only child happened to be a
daughter, the estate, strictly entailed on heirs-male, passed to his
younger brother James.
There had never been a Whig in the Graham family till the Doctor
professed Whiggish principles. Then, as now, the Whigs took better
care of their friends than the Tories; and as they came into power
within a month of Dr Graham’s death, Dr Graham’s son received
immediate proof that his father’s services were not forgotten. He was
created a baronet, and gave, of course, his political support to Fox
and his friends. But before the year 1782 was out, Fox made way at
the Exchequer for Pitt, and such a breaking up and reconstruction of
parties ensued as might have easily perplexed men of stronger minds
than Sir James Graham. The result was, that, after some wavering,
Sir James attached himself to the great Minister, and continued to
the end of his days a stanch Tory in the sense which Mr Pitt and the
best of Pitt’s friends were accustomed to apply to the term.
In 1785 Sir James Graham married Lady Catherine Stuart, the
eldest daughter of John, seventh Earl of Galloway. Remarkable for
her personal attractions, Lady Catherine was gifted at the same time
with an excellent understanding and a very genial nature. A little
rigid she seems to have been in her religious opinions; a great friend,
for example, of Dean Milner, the author of a Church History of which
it has been justly observed, that in seeking to achieve an impossible
object it effected nothing. Her Calvinistic tendencies, however, never
interfered with the exercise of a large and widely-extended
benevolence. Neither were her prejudices so rooted as to stand in the
way of more worldly friendships. Archdeacon Paley, certainly not
religious over-much, found a ready and frequent welcome at
Netherby. So did Dr Vernon, the Bishop of Carlisle, whose great idea
of Episcopal dignity was to maintain as strict a discipline among his
clergy as the temper of the times would admit, and to dispense a
generous hospitality at Rose Castle. Thus, the geniality of the laird
and the high religious temperament of the lady worked well together,
and Netherby Hall became, under their united influence, the centre
of everything that was kind and good in the social intercourse of the
neighbourhood.
Sir James Graham the first married early. He was barely twenty-
two, and Lady Catherine twenty, when they came together, and a
large family followed. Daughters arrived first, and by-and-by, on the
1st of June 1792, their eldest son was born. Great rejoicings took
place on that occasion, and the child was named at his baptism
James Robert George—James, after his father; Robert, after his
paternal grandfather; and George, in memory of the man among his
ancestors who had least claim to the distinction, his only merit
having been this, that in difficult times he exercised great prudence,
and managed, in consequence, to keep himself from getting into
trouble. Young James’s early education seems to have been
conducted at home, though how, we are not told. But in 1802 he was
sent with his brother William to a private school at Dalston, a village
of which the Rev. Walter Fletcher, Chancellor of the Diocese, was the
incumbent.
At Mr Fletcher’s school young Graham failed to make the progress
in classics which his friends expected from him. The previous
training afforded to him at Netherby may perhaps account for this
circumstance. At ten years of age he was already an expert angler and
a good shot, accomplishments not to be despised in their proper
place, but scarcely conducive to rapid advancement in the path of
early scholarship. Hence, when removed to Westminster in 1806, he
cut but an indifferent figure at entrance, and, though not idle, never
managed afterwards to take a foremost place among his
contemporaries. It is fair to add that the place which he did take was
always a respectable one. He quite held his own against the late Duke
of Richmond, then Lord Charles Lennox, to whom he was fag, and
suffered nothing in comparison with the present Earl Russell, the
occupant with him of the same form.
Westminster boys have always enjoyed the privilege of admission
to the debates in the House of Commons; and among them all,
between the years 1806 and 1809, none took more frequent
advantage of it than young Graham. He came just in time to listen to
some of the last speeches of Pitt and Fox, and to be stirred by the
scarcely less exciting harangues of Windham, Grattan, Sheridan, and
Canning. These, with Wilberforce’s persuasive appeals against
slavery, and Romilly’s stern denunciations of the cruelty of the penal
code, took a strong hold of his imagination. He yearned for the time
when he, in like manner, might be able to carry the House along with
him, and already determined that nothing should on his part be
wanting to bring about the accomplishment of the dream. It was the
memory of what he had himself felt on such occasions, which
induced him, at one of the meetings of the old Westminsters, to
argue as he did, with great force, against the project for removing the
school into the country. No considerations of physical health ought,
in his opinion, to be weighed against the abandonment of an
intellectual impulse so powerful as was supplied to the boys by their
proximity to the Houses of Parliament; and believing, as we do, that
the sanitary drawbacks to Westminster where it now stands are
grossly exaggerated, we believe also that Sir James Graham took a
wise and even a benevolent view of the matter then under discussion.
In 1809 young Graham quitted Westminster, and became a private
pupil in the family of the Rev. G. Richards, Vicar of Bampton, near
Farringdon, in Berkshire. There he made the acquaintance of Sir
John Throckmorton, one of the most eminent agriculturists of the
day, and learned from him how much was to be gained by the
application of science and capital to the culture of the soil. His
sojourn in Bampton did not, however, extend beyond a year. In 1810
he entered as a gentleman-commoner at Christ Church, and in 1812
quitted Oxford without having at all distinguished himself there, or
even passed for a degree.
It must not be supposed from all this that Mr Graham was either
an idler or a dreamer. In his own way he picked up a large amount of
knowledge. He was a good Latin and a very fair Greek scholar. In
pure mathematics he never advanced far, but he was rapid in
calculation, and possessed considerable skill in the arrangement of
his own ideas. With all this, he was either indifferent about
academical honours, or he disliked the order of studies which led to
them. In private life he was somewhat reserved, and what ill-natured
people might call stately. His style of dress was in the extreme of
fashion; and being tall and well made, with a countenance singularly
handsome, it is not to be wondered at if, among casual
acquaintances, he was set down as a considerable coxcomb. Nobody,
however, could lay to his charge that there was any lack of manliness
about him. His vacations he usually spent in the north, where he
threw himself keenly into field-sports, and was as forward with the
fox-hounds as he was successful on the moor and by the river-side.
At the same time, his desire to take an active part in the war of
politics never grew cold. His father, a consistent supporter of Mr Pitt,
had sat in Parliament as the Tory member for Ripon from 1802 to
1807. Mr Graham’s prejudices were all on the other side; a bias
which they seem to have acquired partly through the deference in
which he held the opinions of his relative, Lord Archibald Hamilton,
partly because he met at his father’s table not always the most
eloquent or well-instructed advocates of Toryism. Be the causes,
however, what they might, he gave himself up to the Whigs, and in
1812 swore fealty to them, by being admitted, on the
recommendation of Lord Morpeth, into Brookes’s Club. It was too
soon for him as yet to aspire to a seat in the House of Commons; he
determined, therefore, to devote a year or two to foreign travel; and
as the only portion of the Continent then open to British subjects was
the Spanish Peninsula, he set out with the intention of visiting one
after another the principal seaports in Portugal and Spain.
Among these seaports there was none which offered to him so
many attractions as Cadiz. It was there that the Central Junta met,
and Graham not only became a frequent auditor at its sittings, but
formed the personal acquaintance of some of its most distinguished
members. The circumstance, however, on which, in after years, he
used to dwell with the greatest delight, was this—that in Cadiz he
received his first introduction to the Duke of Wellington. That great
man, it will be remembered, in the winter of 1812, repaired to Cadiz
for the purpose of entering with the Spanish Government into
arrangements, to which the Spanish Government never adhered.
And Mr Graham, being at the time the guest of Sir Henry Wellesley,
had the gratification of conversing with the British hero, not in
public only, but amid that entire unreserve into which the Duke was
apt to throw himself when he felt or fancied that he was among
friends, and could therefore give free and safe utterance to his
sentiments on all subjects.
From Cadiz Mr Graham proceeded to Palermo, where Major-
General Lord Montgomery held a military command. It will be
recollected that Sicily was then occupied by an English army, and
that Lord William Bentinck, though absent at the moment, was,
properly speaking, at the head of it. To Lord Montgomery, however,
besides his military command, a high political trust had been
committed; and imagining that he saw in Mr Graham a remarkable
aptitude for business, he offered to his acceptance the post of private
secretary. Nothing could better fall in with the wishes of the young
tourist. He accepted the office, and realised fully the expectations of

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Governmental and Nonprofit

Accounting 11th Edition Freeman

Governmental and Nonprofit Accounting 11th Edition

Governmental and Nonprofit Accounting 10th Edition

Accounting for Governmental and Nonprofit Entities 17th

Accounting for Governmental and Nonprofit Entities 15th

Accounting For Governmental And Nonprofit Entities 18th

Governmental and Nonprofit Accounting 10th Edition

Accounting for Governmental and Nonprofit Entities 16th

Accounting for Governmental and Nonprofit Entities 17th

“Cost” is generally defined as “consideration given or consideration received, whichever is more

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1. deflating the restoration cost using an appropriate cost index, or

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The “modified approach” is an alternative to depreciating infrastructure capital assets. Governments

The asset management system should:

• have an up-to-date inventory of eligible infrastructure assets,

• Evidence of physical damage

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Copyright © 2018 Pearson Education, Inc.

For General Capital Assets (GCA), GASB standards require that:

2. Detailed capital assets information—that distinguishes those associated with governmental

1. Beginning- and end-of-year balances (regardless of whether beginning-of-year balances are

2. Acquisitions of capital assets.

3. Sales or other dispositions.

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• Trust established for the maintenance of a government-owned cemetery

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# Accounts Dr. Cr.

2. No entry is required in the GCA nonfund accounts until the

3. Furniture and Equipment .......................................................... 47,750

4. Accumulated Depreciation—Furniture and Equipment ........... 50,000

Additional information for government-wide reporting:

Loss on Sale of Capital Assets, $1,700

5. Accumulated Depreciation—Buildings .................................... 75,000

Additional information for government-wide reporting:

Loss on Disposal of Building, $75,000

6. Equipment Under Capital Lease ............................................... 1,200,000

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# Accounts Dr. Cr.

2. Capital Leases Payable ............................................................. 125,000

3. Net Position............................................................................... 1,200,000

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# Accounts Dr. Cr.

Other Financing Uses—Transfer to Debt Service Fund ........... 90,000

Debt Service Fund

2. Capital Projects Fund

3. Capital Projects Fund

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# Accounts Dr. Cr.

Debt Service Fund

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# Accounts Dr. Cr.

Debt Service Fund

3. Debt Service Fund

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Accounts Dr. Cr.

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1. documents related to the acquisition of the assets,

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Accounts Dr. Cr.