New York Codes, Rules and Regulations › Title 9 - EXECUTIVE DEPARTMENT › Subtitle S - Division of Housing and Community Renewal › Chapter III - Low Rent Housing › Subchapter D - Accounting Manual For Public Housing Agencies › Part 1645 - Investments › Subpart 1645-2 - Accounting For Investments › Section 1645-2.5 - Disposition of investments

Current through Register Vol. 46, No. 28, July 10, 2024
(a)
						Investments which are held to maturity present no particular accounting
						problems on maturity. The proceeds, representing face value, will be credited,
						when received, to the applicable investment account through the cash receipts
						register. During the holding period, except for U.S. Treasury bills, for which
						see section
						1645-2.3,
supra,
the purchase price will have been adjusted to face value at maturity through
						the periodic amortization of premium or discount. Interest will also have been
						accrued to the date of maturity, except for U.S. Treasury bills, the credit for
						the interest payment received, on maturity, going to account 1144, Accrued
						Interest Receivable.
(b)
						Investments sold prior to the date of maturity, as duly authorized by
						resolution of the local agency, present other elements to be accounted for.
						These elements, some or all of which will be present in cash sales transaction,
						and the accounting treatment of each element are as follows:
Element
Accounting
										treatment
Sales price
Credit to the appropriate account in the 1170,
									 Investments, group of accounts.
Accrued interest sold
Credit to account 1144, Accrued Interest
									 Receivable on Investments.
Expenses of disposition
Charge to the same account that the interest
									 earned has been credited to. See section
									 1645-2.4.
Gain or loss on disposition
Development Fund Investments. Charge or credit
									 account 1480, Other Charges and Credits to Development Costs.
Administration Fund Investments. Charge losses to
									 account 6100, Miscellaneous Losses; credit gains to account 3590, Miscellaneous
									 Project Income.
Reserve Fund Investments. Charge or credit
									 account 2512, Gain or Loss on Reserve Fund Investments.
(c) Whether the investments have been sold at
						a price expressed in terms of yield or a stated amount per $1,000 face value,
						the statement of the bank or broker handling the transaction will give the
						sales price in dollars. The statement will also give, separately, the accrued
						interest (to the date of disposition) sold and the expense of disposition, if
						any. The remarks made in section
						1645-2.2 in connection with the
						expenses of acquisition and the avoidance of broker's commissions by dealing
						directly with banks are also applicable to the expenses of disposition.
						Reference should also be made to section
						1645-2.2 for an explanation of the
						date of disposition, which is controlling with respect to the accrued interest
						sold and the premium or discount amortized. Gain or loss on disposition is
						defined as the difference between the book value of the investment, as of the
						date of disposition, and the sales price. Gain or loss on disposition of
						development fund investments is charged or credited to account 1480, Other
						Charges and Credits to Development Costs, whether the sale was made prior or
						subsequent to the date of substantial completion. Gain or loss on the
						disposition of reserve fund investments is considered a gain or loss on the
						disposition of replacement reserve investments, notwithstanding that the
						investment may actually have been for the account of some other
						reserve.
(d) To illustrate the
						analysis of a transaction for the sale of investments and the entries to the
						accounts affected, assume that $10,000 face value of bonds, maturing July 1,
						1962, were bought as a replacement reserve investment on March 1, 1955, at a
						price of 103. The interest rate on the bonds is two and one-half per cent, the
						interest payment dates being January 1 and July 1. The bonds were sold on
						October 1, 1955, at a price of 102 1/2 and the local agency received $10,285.04
						from the bank handling the transaction, representing the net proceeds of the
						sale, for deposit in the reserve fund. An analysis of the bank's statement
						shows that the net proceeds were arrived at, as follows:
Sales price of bonds-$10,000 face value at
									 1021/2
$10,250.00
Add: Interest accrued from July 1, 1955, the last
									 interest payment date to the date of disposition
62.50
$10,312.50
Deduct: Expenses of disposition
27.46
Net proceeds of sale
$10,285.04
The entry to record the transaction is made through the
						  cash receipts register as follows:
Entry (2):
Debit: Account 1113, Reserve Fund
$10,285.04
Debit: Account 2511, Interest Earned on Reserve
									 Fund Investments
$27.46
Credit: Account 1176, Reserve Fund
									 Investments
$10,250.00
Credit: Account 1144, Accrued Interest Receivable
									 of Investments
$62.50
Gain or loss on disposition of this
									 investment is computed, as follows:
Purchase price ($10,000 face value, at 103)
$10,300.00
Less: Premium amortized to date of disposition
									 (7/64 of $300)
32.81
Book value of investment at date of disposition,
									 as reflected in investment account
$10,267.19
Sales price ($10,000 face value at 1021/2)
10,250.00
Loss on disposition of investment
($17.19)
The entry to record the loss on disposition is made by
						  a journal voucher, as follows:
Entry (3):
Debit: Account 2512, Gain or Loss on Reserve Fund
									 Investments
$16.75
Credit: Account 1176, Reserve Fund
									 Investments
$16.75
Explanation:
To record the loss
									 on disposition of $10,000 face value U.S. Treasury bonds, 1962/60, computed, as
									 follows:
Sales price
$10,250.00
Book value at date of disposition
10,266.75
Loss on disposition
($16.75)
Note that, in recording gain or loss on disposition of
						  investments, the applicable investment account is credited directly for a loss
						  and charged for a gain.