Listed Below Are Various Transactions Affecting the City of Highland

question 26

Essay

Listed below are various transactions affecting the City of Highland Flats General Fund for the fiscal year ending June 30, 20X4.
Transactions:
1. Near the beginning of the year, the City was sued by one of its residents claiming that the resident was injured due to a hazardous sidewalk. The resident is asking for damages of $500,000. The City expects to win the case.
2. Later in the year, the City decided to settle the aforementioned lawsuit on the advice of its legal counsel. The government settled the suit for $300,000, paying $100,000 now, and $50,000 on August 1 for each of the next 4 years. For these types of lawsuits, the City is self-insured for the first $50,000 and 100% insured for the remaining payments. Because of a cash flow issue, the city borrowed $50,000 on a 6 month, 3% note that comes due 2 months after year-end. No money was received from the insurance company by year-end, but the total amount due was expected by August 15.
3. The city's employees earned $25,000 in compensated absences during the year. Of this amount, $10,000 was paid during the year. In addition, $5,000 due at the end of last year was paid this year, and another $7,500 will be paid in the first 45 days of the following fiscal year. Finally, $7,000 earned in earlier years was paid this year.
4. The actuarial amount owed to the City's OPEB Plan for the year is $20,000. Of this amount, only $5,000 - the approximate amount of retiree healthcare costs paid for the year - was paid to the plan. The balance will be paid in later years.
Requirements:
1. Prepare the journal entries for the above events, including any necessary year-end adjusting entries. If a transaction requires no entry, state "No entry required" and explain why.
2. Demonstrate the effects of these transactions on the accounting equation for the General Fund and the General Capital Assets and General Long-term Liabilities accounts.

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Definitions:

High Visibility

The state of being highly noticeable or exposed to a large audience, often used in the context of public figures or media coverage.

Rapid Promotion

Rapid promotion involves quickly advancing in rank or position within an organization, typically as a result of outstanding performance or recognition of potential.

Contextual Power

The influence or authority derived from an individual's or group's ability to understand and leverage the dynamics of a specific context or situation.

Major Sources

The main origins or causes of information, data, or phenomena, which are integral for understanding a given context or situation.