Answer the Following Questions with Regard to the Preparation of Fund

question 58

Essay

Answer the following questions with regard to the preparation of fund financial statements. At fiscal year-end, a city holds an investment portfolio in its general fund that has a fair market value of $15 million and a historical cost of $28 million. The portfolio had a fair value of $18 million at the beginning of the current fiscal year. The portfolio is composed of a variety of bonds with a face value $29 and a due date five years in the future. The bonds were acquired to meet a $29 million debt due five years in the future.
a.) At what amount should the portfolio be valued on the balance sheet?
b.) What amount, if any, should appear on the operating statement?
c.) Defend the valuation method required by GAAP.
d.) Argue against the valuation method required by GAAP.
e.) At what amount would the city want to record these investments on its financial statements for the current year? Why?

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Definitions:

Piaget's Formal Operations

A stage in Jean Piaget's theory of cognitive development, occurring from age 12 onwards, where an individual develops the ability to think abstractly, logically, and systematically.

Cognitive Development

The process of growth and change in intellectual capabilities such as thinking, reasoning, and understanding.

Suicide

The act of intentionally causing one's own death, often resulting from despair or mental health conditions.

Adolescence

The span of time marked by significant bodily and emotional growth, stretching from the start of puberty to the point of legal maturity.