Advanced accounting Ch 10 Solutions Final

CHAPTER 10 SOLUTIONS TO MULTIPLE CHOICE QUESTIONS, EXERCISES AND PROBLEMS

MULTIPLE CHOICE QUESTIONS

1.

c

2.

c

3.

a

4.

a

5.

d Appropriations (= 20,000,000 + 500,000) Less expenditures Less encumbrances Available funds

6.

$ 20,500,000 (7,600,000) (75,000) $ 12,825,000

b The budget entry added $243,000 to fund balance, as follows: Estimated revenues Estimated other financing sources

1,290,000 60,000 Appropriations Estimated other financing uses Fund balance — unassigned

1,085,000 22,000 243,000

Therefore the fund balance prior to the budget entry was $285,000 - $243,000 = $42,000.

S olutions Manual, C hapter hapter 10

©Cambridge Cambridge B usines s P ublis ublis hers, 2013 2013 1

7.

d Closing entries are: Property tax revenues Speeding ticket revenues Transfers in Bond proceeds

950,000 400,000 8,000 50,000 Estimated revenues Estimated other financing sources Fund balance — unassigned

Appropriations Estimated other financing uses

1,290,000 60,000 58,000 1,085,000 22,000

General expenditures Capital outlay Debt service: principal Debt service: interest Transfers out Fund balance — unassigned

1,015,000 25,000 2,000 8,000 20,000 37,000

$58,000 + $37,000 = $95,000 8.

d General expenditures Capital outlay Debt service: principal payments Debt service: interest payments Total expenditures

9.

$1,015,000 25,000 2,000 8,000 $1,050,000

b Cash Taxes receivable, net Due from other funds Total

©Cambridg Cambridg e Bus iness Publishers , 2013 2013 2

$371,000 68,000 12,000 $451,000

A dvanced Acc ounting , 2nd E dition

10.

b Original assessment of 2013 taxes $1,000,000 - $25,000 End of year adjustment in allowance ($60,000 - $15,000) - $25,000 Excess cash collected on 2012 taxes $30,000 - $21,000 Total property tax revenue for 2013

$975,000 (20,000) 9,000 $964,000

Or alternatively, 2013 taxes collected Uncollected 2013 taxes expected to be collected in early 2014 Excess collections on 2012 taxes $30,000 - $21,000 Total property tax revenue for 2013


$940,000 15,000 9,000 $964,000


EXERCISES E10.1

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

E10.2

1. 2. 3. 4.

5. 6. 7. 8. 9. 10. 11. 12. 13.

Identify Appropriate Fund

special revenue capital project enterprise agency internal service pension trust agency capital project debt service or general fund general special revenue debt service permanent private-purpose trust

Identify Appropriate Fund(s)

debt service fund special revenue fund general fund (for transfer to capital projects fund and for processing and receiving the assessments), capital projects fund (for construction activities) general fund (for processing assessments and receiving and distributing money from the assessments), capital projects fund (for construction activities), and (a) debt service fund (for receiving the assessments from the general fund and servicing the debt); (b) agency fund (for processing the assessments, accounting for and servicing the debt) capital projects fund general fund (for transfer of withheld wages), pension trust fund general fund internal service fund general fund general fund general fund (for transfer of withheld wages), agency fund general fund (if museum activities are reported in the general fund), permanent fund investment trust fund



E10.3

Property Tax Rate and Revenues

a.

Last year’s property tax revenue revenue was: $7,920,000 $7,920,000 = $.88 x ($900,000,000/$100)

b.

Property tax revenue required is $8,645,000 = $9,500,000 - $855,000 $8,645,000/($950,000,000/$100) = $0.91 per $100 of assessed valuation

c.

$0.88 x ($950,000,000/$100) = $8,360,000

E10.4

Computing Available Funds

All dollar amounts amounts in thousands thousands

a.

Funds available for encumbrance consist of: appropriations - expenditures - outstanding encumbrances Appropriations are $3,800,000 (= estimated revenue of $4,000,000 – $4,000,000 – budgetary budgetary surplus of $200,000). Thus, available funds = $3,800,000 - 2,500,000 - 225,000 = $1,075,000 The other numerical data given are irrelevant to this calculation.

b.

Yes, the budget appears ripe for cutting. Operating costs average about $248,000 per month [= (2,500,000 + 225,000)/11]. Yet there is $1,075,000 remaining to cover operating costs of $248,000 in the last month of the fiscal year.



E10.5

Reconstruct Budget Entry, Compute Fund Balance

The detailed budget may be reconstructed as follows: Over (Under) Budget

Actual

Revenues: Property taxes Fines Intergovernmental Fees and service charges Miscellaneous Total Expenditures: Administration Public safety Health and environment Total a.

Budget

$2,975,000 6,000 12,000 500,000 4,000 $3,497,000

$125,000 6,000 0 (75,000) (1,000) (1,000) $ 55,000

$2,850,000 0 12,000 575,000 5,000 $3,442,000

$ 500,000 2,050,000 950,000 $3,500,000

$

$ 501,000 2,056,000 954,000 $3,511,000

1,000 6,000 4,000 $ 11,000

Therefore, the budget entry was: Estimated revenues Fund balance-unassigned

3,442,000 69,000 Appropriations

3,511,000

b. Fund balance, beginning of year Budget entry effect (planned decrease) Excess of actual revenues over budgeted revenues Excess of budgeted expenditures over actual expenditures Fund balance, end of year Alternative calculation: Fund balance, beginning of year Excess of expenditures over revenues Fund balance, end of year


$2,100,000 (69,000) 55,000 11,000 $2,097,000

$2,100,000 (3,000) $2,097,000


E10.6

Transactions, Closing Entries, and Budgetary Comparison Schedule

All dollar amounts amounts in thousands thousands

a.

Journal entries: (1) Estimated revenues

51,000 Appropriations

51,000

Taxes receivable

41,000 Property tax revenues

41,000

(2) Cash

18,500 Taxes receivable

18,500

Cash


26,500

(3) Encumbrances

50,300 Fund balance — assigned assigned

(4) Fund balance — assigned assigned

50,300

37,300 Encumbrances

37,300

($50,300 - $13,000 = $37,300) Expenditures

37,500 Accounts payable

37,500

(5) Accounts payable

44,000 Cash

44,000

(6) Cash

11,000 Fee and service revenues


11,000


b.

Closing entries: Property tax revenues Fee and service revenues

41,000 11,000 Fund balance — unassigned unassigned Estimated revenues

1,000 51,000

Appropriations

51,000 Fund balance — unassigned unassigned Expenditures Encumbrances

c.

500 37,500 13,000

$38,500 = $37,000 + $1,000 + $500

d. Budgetary Comparison Schedule For the Year Ended December 31, 2013 Variance — Favorable Budget Actual (Unfavorable) Revenues $51,000 $52,000 $ 1,000 Expenditures 51,000 37,500 13,500 Change in fund balance (1) $ 0 $14,500 $14,500 (1) Closing entries $1,000 + $500 plus increase in fund balance — assigned assigned $13,000.



E10.7

Property Tax Transactions

a. Taxes receivable — current

30,000,000

Allowance for uncollectible taxes — current current Revenues To record tax levy and establish allowance for uncollectible taxes. Cash Revenues

1,200,000 28,800,000

9,009,000 91,000

Taxes receivable — current current 9,100,000 To record collection of taxes prior to due d ue date and reduction of revenues by 1% discount ($9,100,000 = $9,009,000/.99). Cash

18,900,000

Taxes receivable — current current To record collection of taxes prior to January 1; $18,900,000 = $30,000,000 - $9,100,000 - $2,000,000.

18,900,000

Taxes receivable — delinquent

2,000,000

Taxes receivable — current current To reclassify taxes declared delinquent on January 1.

2,000,000

Allow. for uncollectible taxes — current current Revenues

1,200,000 600,000

Allow. for uncollectible taxes — delinquent delinquent 1,800,000 To adjust the allowance for delinquent taxes to $1,800,000 (= $2,000,000 - $200,000). Cash Allow. for uncollectible taxes — delinquent delinquent

300,000 1,800,000

Taxes Receivable — delinquent Revenues To record collection of delinquent taxes subsequent to January 1. Expenditures Cash To record cash expenditures for the year.


2,000,000 100,000

25,000,000 25,000,000


b.

Balance sheet accounts Cash ($850,000 + $9,009,000 + $18,900,000 + $300,000 - $25,000,000) Fund balance: Actual revenues ($28,800,000 - $91,000 - $600,000 + $100,000) Estimated revenue Decrease in fund balance with closing entry Beginning fund balance after the budget entry Ending fund balance

E10.8

$ 4,059,000

$28,209,000 29,000,000 (791,000) 5,200,000 $ 4,409,000

Inventory Accounting

a.

Consumption method

Expenditures (1) Inventory (2)

17,900,000 100,000 Cash Accounts payable

Fund balance – balance – unassigned unassigned (2)

15,500,000 2,500,000 100,000

Fund balance — nonspendable (2)

100,000

Purchases method

Expenditures

18,000,000 Cash Accounts payable

Inventory (2)

15,500,000 2,500,000 100,000

Fund balance — nonspendable (2)

100,000

(1) 17,900,000 = 1,000,000 + 18,000,000 – 18,000,000 – 1,100,000 1,100,000 (2) 100,000 = 1,100,000 – 1,100,000 – 1,000,000 1,000,000



E10.9

Closing Entries

a. Revenues

3,501,000 Estimated revenues

3,501,000

Appropriations

3,449,000 Expenditures

3,449,000

b. Revenues

3,501,000 Estimated revenues

3,501,000

Appropriations

3,449,000 Expenditures Fund balance — unassigned unassigned

3,427,000 22,000

c. Revenues Fund balance — unassigned unassigned

3,440,000 61,000 Estimated revenues

3,501,000

Appropriations


3,440,000 9,000

d. Revenues Fund balance — unassigned unassigned

3,495,000 6,000 Estimated revenues

3,501,000

Appropriations



3,443,000 6,000


E10.10

a.

Carryover Encumbrances

Legal budgetary basis Expenditures — prior year encumbrances

1,965,000

Accounts payable To record invoices for goods and services ordered in 2012. Fund Balance — assigned assigned Fund balance — unassigned unassigned

1,965,000

1,900,000 65,000

Expenditures — prior year encumbrances To close encumbrances carried over from 2012 and related expenditures. b.

1,965,000

GAAP budgetary basis Encumbrances

1,900,000

Fund balance — unassigned unassigned To restore encumbrances carried over from 2012. Fund balance — assigned assigned

1,900,000

1,900,000

Encumbrances To reverse encumbrances for goods and services received. Expenditures Accounts payable To record invoices for goods and services.

1,900,000

1,965,000 1,965,000

No special closing entry is required; expenditures are closed in the normal manner.

E10.11

1. 2. 3. 4. 5. 6.

Interfund Transactions

Balance sheet asset: Due from special revenue fund Statement of revenues, expenditures, and changes in fund balances: Transfers out, listed under other financing uses Statement of revenues, expenditures, and changes in fund balances: Transfer in, listed under other financing sources Statement of revenues, expenditures, and changes in fund balances: Expenditures Balance sheet asset: Due from enterprise fund Balance sheet: reduces Due from special revenue fund



E10.12

Adjusting and Closing Entries, Balance Sheet

a. Taxes receivable — delinquent

800,000

Taxes receivable — current current To reclassify receivables outstanding at year end as deli nquent. Allowance for uncollectible taxes — current current Revenues

800,000

450,000 350,000

Allowance for uncollectible taxes — delinquent delinquent To fully reserve delinquent taxes. Fund balance — nonspendable

800,000

30,000

Supplies To adjust ending supplies balance.

30,000

Fund balance — assigned assigned

450,000

Expenditures — prior year Fund balance — unassigned unassigned To close prior year encumbrances and related expenditures. Revenues

420,000 30,000

13,650,000 Estimated revenues Fund balance — unassigned unassigned

13,000,000 650,000

To close revenues. Appropriations

11,000,000

Expenditures Encumbrances Fund balance — unassigned unassigned To close expenditures and encumbrances.


10,500,000 300,000 200,000


b. Assets Cash Taxes receivable-delinquent (less $800,000 allowance for uncollectible delinquent taxes) Due from other funds Supplies

Total

$3,500,000

0 120,000 250,000 ________ $3,870,000

Liabilities and Fund Balances Accounts payable $1,800,000

Due to other funds Fund balances: Nonspendable Assigned Unassigned Total

Graystone General Fund Analysis of changes in fund balance - unassigned (not required) Fund balance (deficit), beginning (See Note 1) Excess of revenues over expenditures: Revenues $13,650,000 Expenditures (including encumbrances of $300,000) 10,800,000 Fund balance, ending

Note 1: The beginning unassigned fund balance bala nce is calculated as follows: Fund balance, beginning (plug) Add: amount credited in budget entry ($13,000,000 estimated revenues less $11,000,000 appropriations) Balance per trial balance Beginning balance implied above Add: adjustment for excess prior year's encumbrance over expenditure Beginning balance as adjusted


210,000 250,000 300,000 1,310,000 $3,870,000

($1,540,000)

2,850,000 $ 1,310,000

$(1,570,000) 2,000,000 430,000 (1,570,000) 30,000 $(1,540,000)


E10.13

a.

General Fund Capital Asset and Long-Term Debt Transactions

1. Capital outlay

2,250,000 Cash, accounts payable

2,250,000

2. Cash

370,000 Proceeds from sale of capital assets

3. Debt service: interest Debt service: principal

2,000,000 500,000 Cash

b.

370,000

2,500,000

All transactions are reported in the general fund s Statement of Revenues, Expenditures, and Changes in Fund Balances. =

Capital outlay of $2,250,000 is reported as an expenditure. Proceeds from sale of capital assets of $370,000 is reported as other financing sources. Debt service: principal of $500,000 and debt service: interest of $2,000,000 are reported as expenditures. c.

Effect on general fund unassigned fund balance: $(4,380,000) = - $2,250,000 + $370,000 $2,000,000 - $500,000.



E10.14

Identifying the Reporting Entity

1.

The school district is a discretely presented component unit. The city is financially accountable for the school district — — the the city approves its budget and is legally liable for its debt. The city also provides significant funding. Financial results are discretely presented rather than blended because the district has a different governing body.

2.

The housing authority is not a component unit of the city. The city is not financially accountable for it.

3.

The landfill is a discretely presented component unit. The city is financially accountable because it controls the board and sets landfill rates.

4.

The sewer district is not a component unit of the city, since the city does not control its board, and is not financially liable for its activities. activities.

5.

The building authority is a blended component unit of the city. It is a component unit because the city appoints the board and is liable for the authority s debts. The building authority s financial information is blended with that of the city because the authority provides services entirely to the city. =

=



PROBLEMS P10.1

Determining the Reporting Entity

1.

Megalopolis is the primary government. The T he Convention Authority (CA) should be included with Megalopolis for financial reporting purposes. purposes. The city appoints the CA's governing board and, even though it appears that the city c ity will not be subsidizing the CA, bonds issued by the CA and backed (guaranteed) by the city impose a financial burden on the city. Megalopolis is financially accountable to its constituents for the activities of the CA.

2.

Megalopolis remains the primary government. However, the CA now appears to be a separate financial reporting entity. Even though the city appoints the governing board, the activities of the CA are essentially independent of the city. The CA may levy its own own sales tax and issue its own bonds. The bonds are not backed by the city and, presumably, will be repaid with the CA's CA's revenue. Council has no authority to approve or disapprove the CA's plans and is neither financially impacted by nor financially financially accountable accountab le for the CA's activities.

3.

Gigantic County is the primary government. Each volunteer fire department is a separate not-for-profit financial reporting entity, not a component of the Gigantic county reporting entity. The county has no control over the fire departments departments and contracts for their services voluntarily. County expenditures for the capital equipment become become analogous to the contractual expenditures for fire-fighting services.

4.

The City of Winitville is the primary government. The Winitville Board of Education is included with the city for financial reporting purposes. Separate election of school board members is more than offset by the city's influence over the Board's ability to spend, through its annual appropriation. Moreover, because the city provides the funding for the Board of Education, the Board is fiscally dependent upon the city. city. In effect, the city is accountable to taxpayers and creditors for the school board's operations.

5.

The State of Michigan is the primary government. The Great Lakes Protection Fund (GLPF) is a separate joint venture not included with the state for financial reporting purposes. Although Michigan is represented on the Board of the GLPF, the GLPF has its own Articles of Incorporation and Michigan does not have control over decisions made. The GLPF is also not fiscally dependent on the State of Michigan.

6.

The State of Georgia is the primary government. The Georgia Public Telecommunications Commission is included included as a component unit in the the State financial reports. The State has control over the Commission's ability to spend, and the Commission is financially accountable to the State.



P10.2

a.

General Fund Entries and Financial Statements

Journal entries for 2013: Estimated revenues Fund balance — unassigned unassigned

7,450,000 1,650,000

Appropriations 9,100,000 To record 2013 budget. Estimated revenues are ($2,700,000 + $3,500,000 + $1,000,000 + $250,000) and appropriations are ($6,700,000 + $1,150,000 + $750,000 + $350,000 + $150,000). Taxes receivable

2,700,000 Tax revenues

2,700,000

To accrue taxes receivable. Cash

2,700,000

Taxes receivable To record collection of property taxes.

2,700,000

Waste management expenditures

6,680,000

Cash To record expenditures for waste management.

6,680,000

Court expenditures

1,120,000

Cash To record expenditures for court costs.

1,120,000

Cash

400,000

Accounts receivable — waste waste management To record receipt of payment on 2012 waste management bills. Cash Accounts receivable — waste management

400,000

3,390,000 210,000

Waste management revenues To record revenues from waste management. Cash Court fines To record revenues from court fines.


3,600,000

920,000 920,000


Salaries and operating expenditures

745,000

Cash To record salaries and operating expenditures.

745,000

Investments

235,000

Interest revenue To record interest revenue from investments.

235,000

Miscellaneous expenditures

149,000

Cash To record miscellaneous expenditures.

149,000

Supplies expenditures

340,000

Waste management supplies To record consumption of supplies inventory. Fund balance — nonspendable

340,000

340,000

Fund balance — unassigned unassigned To adjust the nonspendable fund balance. Closing entries: Tax revenues Water revenues Court fines Interest revenue

340,000

2,700,000 3,600,000 920,000 235,000

Estimated revenues Fund balance — unassigned unassigned To close revenues to fund balance. Appropriations

9,100,000

Waste management expenditures Court expenditures Salaries and operating expenditures Miscellaneous expenditures Supplies expenditures Fund balance — unassigned unassigned To close expenditures to fund balance.


7,450,000 5,000

6,680,000 1,120,000 745,000 149,000 340,000 66,000


b.

Town of Amherst General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance For the Year Ended December 31, 2013

Revenues: Property taxes Waste management service Court fines Interest

$ 2,700,000 3,600,000 920,000 235,000 $ 7,455,000

Expenditures: Waste management department Court costs Salaries and expenditures Supplies Miscellaneous Total expenditures Excess of revenues over (under) expenditures Fund balance — January January 1, 2013 Fund balance — December December 31, 2013

$ 6,680,000 1,120,000 745,000 340,000 149,000 9,034,000 (1,579,000) 10,280,000 $ 8,701,000

Town of Amherst General Fund Balance Sheet December 31, 2013 Assets

Cash (1) Investments Accounts receivable — waste waste management Waste management supplies

Liabilities and fund balance

$2,216,000 6,235,000 210,000 40,000 $8,701,000

Fund balance — nonspendable nonspendable Fund balance – balance – unassigned unassigned (2)

$ 40,000 8,661,000

________ $8,701,000

(1) $2,216,000 = $3,500,000 + $2,700,000 - $6,680,000 - $1,120,000 + $400,000 + $3,390,000 + $920,000 - $745,000 - $149,000. (2) $8,701,000 = $9,900,000 - $1,650,000 + $5,000 + $66,000 + $340,000.



P10.3

General Fund Adjustments and Financial Statements

(in thousands)

a.

Adjusting and closing entries for the general fund: (1) Due from enterprise fund

2,000

Accounts receivable To reclassify receivable from Golf Course Fund for advance. (2a) Taxes receivable — delinquent delinquent

2,000

10,000

Taxes receivable — current current To reclassify outstanding taxes as delinquent. (2b) Revenues

10,000

10,000

Allowance for uncollectible taxes — delinquent delinquent To record allowance for uncollectible taxes. (3) Expenditures

10,000

40,000

Bonds payable 40,000 To correct recording of retirement of general obligation o bligation bonds and payment of interest. (4) Supplies inventory

3,500

Fund balance — nonspendable nonspendable 3,500 To record supplies inventory at year end and classify this amount as fund balance — nonspendable. (5) Encumbrances

4,500

Fund balance — assigned assigned 4,500 To record encumbering of appropriations for purchase orders outstanding at year end. (6) Due from State

9,000

Revenues To record Town's portion of gasoline taxes collected by State.


9,000


(7a) Expenditures

20,000

Town property To correct recording of purchase of equipment.

20,000

(7b) Town property

1,000

Proceeds from sale of capital assets To correct recording of sale of equipment.

1,000

Closing entries: Appropriations

380,000

Expenditures 375,000 Encumbrances 4,500 Fund balance — unassigned unassigned 500 To close expenditures and encumbrances; $375,000 = $315,000 + $40,000 + $20,000. Revenues Proceeds from sale of capital assets Fund balance — unassigned unassigned

439,000 1,000 20,000

Estimated revenues To close revenues accounts; $439,000 = $440,000 - $10,000 + $9,000. b.

460,000

Town of Fountain Inn General Fund Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2014 (in thousands) Revenues $ 439,000 Expenditures 375,000 Excess of revenues over (under) expenditures 64,000 Other financing sources (uses): Proceeds from sale of capital assets 1,000 Excess of revenues and other financing sources over expenditures and other financing uses 65,000 Fund balances — July July 1, 2013 (1) (44,000) Increase in inventories 3,500 Fund balances — June June 30, 2014 (2) $ 24,500



(1) The beginning total fund balance is $(44,000), calculated as follows: Fund balances, beginning (plug) Add: Amount credited in budget entry ($460,000 estimated revenues less $380,000 appropriations) Amount per trial balance (2) Nonspendable Assigned Unassigned Total fund balances

$ (44,000)

$

80,000 36,000

$ 3,500 4,500 16,500 $24,500

Town of Fountain Inn General Fund Balance Sheet June 30, 2014

(in thousands) Assets Cash Taxes receivable — delinquent delinquent Allowance for uncollectible taxes Due from enterprise fund Due from State Supplies inventory Total assets Liabilities and fund balances Accounts payable Fund balances: Nonspendable Assigned Unassigned Total liabilities and fund balances


$ 28,000 $ 10,000 (10,000)

0 2,000 9,000 3,500 $ 42,500 $ 18,000 3,500 4,500 16,500 $ 42,500


P10.4

Reconstructing General Fund Journal Entries

(in thousands)

Cash

23,000

Investments To record liquidation of investments. Due from state government

23,000

49,000 Revenues

49,000

To record anticipated state grant. Cash

105,000

Due from federal government To record receipt of grant from federal government. Expenditures — prior year encumbrances

105,000

7,000

Accounts payable To record expenditures for prior year's encumbrances. Expenditures

7,000


92,000

To record expenditures. Computation of expenditures: Unassigned fund balance decrease ($78,000 - $120,000) Decrease from budget entry Increase from prior year's encumbrances Revenues less than budgeted Expenditures less than appropriations (plug) Unassigned fund balance decrease Appropriations Excess of appropriations over expenditures Expenditures


$ (42,000) (30,000) 1,000 (16,000) 3,000 (42,000) 95,000 (3,000) (3,000) $ 92,000


Accounts payable

109,000

Cash To record payment of accounts payable; $109,000 = $42,000 + $7,000 + $92,000 - $32,000. Revenues Fund balance — unassigned unassigned

109,000

49,000 16,000 Estimated revenues

65,000

To close revenues. Appropriations

95,000 Expenditures Fund balance — unassigned unassigned

92,000 3,000

To close expenditures. Fund balance — assigned assigned

8,000

Expenditures — prior year encumbrances Fund balance — unassigned unassigned To close prior year encumbrance accounts.

P10.5

a.

7,000 1,000

General Fund — Corrections, Corrections, Adjustments, and Financial Statements

Reclassification and adjusting entries for general fund (in thousands) : (1) Due from Water Utility Fund

1,500

Accounts receivable To reclassify receivable from water utility fund.

1,500

(2a) Taxes receivable — delinquent delinquent

30,000

Taxes receivable — current current To reclassify current taxes now considered delinquent. (2b) Revenues

30,000

24,000

Allow. for uncollectible taxes — delinquent delinquent To establish an allowance account for taxes estimated to be uncollectible.


24,000


(3) Expenditures

52,000

Bonds payable 52,000 To correct recording of retirement of general obligation bonds and payment of interest. (4) Supplies inventory

44,000

Fund balance — nonspendable 44,000 To record supplies inventory at June 30, 2013: Inventory on hand at June 30, 2013 = $128,000 - $84,000 = $44,000. (5a) Expenditures — prior year encumbrances

11,200

Expenditures 11,200 To record purchase orders outstanding at June 30, 2012, and charged to expenditures in the following year. (5b) Fund balance — unassigned unassigned

11,200

Fund balance — assigned assigned To adjust fund balance at beginning of year. (5c) Encumbrances

11,200

5,000

Fund balance — assigned assigned To record encumbrances for purchase orders at June 30, 2013. (6) Due from State Revenue Dept.

5,000

34,000

Revenues To record Town's portion of state tax due from State. (7) Expenditures

34,000

90,000

General property To correct recording of purchase of equipment. General property Proceeds from sale of capital assets To correct recording of sale of equipment.


90,000

4,600 4,600


Closing entries: Appropriations

520,000

Expenditures 512,800 Encumbrances 5,000 Fund balance — unassigned unassigned 2,200 To close expenditures and encumbrances;$512,800 = $382,000 + $52,000 - $11,200 + $90,000. Revenues Proceeds from sale of capital assets

570,000 4,600

Estimated revenues 520,000 Fund balance — unassigned unassigned 54,600 To close revenues and other financing sources; $570,000 = $560,000 - $24,000 + $34,000. Fund balance — assigned assigned

11,200

Expenditures — prior year encumbrances To close prior year encumbrance accounts.


11,200


b.

Salleytown Statement of Revenues, Expenditures, and Changes in Fund Balances General Fund For the Year Ended June 30, 2013 (in thousands) Revenues $ 570,000 Expenditures: Operating expenditures (1) $ 370,800 Debt service: principal 40,000 Debt service: interest 12,000 Capital outlay 90,000 512,800 Excess of revenues over expenditures 57,200 Other financing sources (uses): Proceeds from sale of capital assets 4,600 Excess of revenues and other othe r financing sources over expenditures and other financing uses 61,800 Fund balances — July July 1, 2012 (2) 7,700 Prior year expenditures (11,200) Increase in nonspendable fund balance 44,000 Fund balances — June June 30, 2013 (3) $ 102,300

(1) Operating expenditures = total expenditures - debt service payments - capital outlays = $512,800 - 52,000 - 90,000. (2) Fund balances — July July 1, 2012: Because the budget is balanced (estimated revenues = appropriations), the fund balance — unassigned unassigned reported in the trial balance equals the fund balance — unassigned unassigned prior to the budget entry. (3) Fund Balances — June June 30, 2013 = the sum of all fund balances; see Balance Sheet in requirement c.: $102,300 = $5,000 + $44,000 + $53,300.



c.

Salleytown Balance Sheet — General General Fund As of June 30, 2013

(in thousands) Assets Cash Short-term investments Accounts receivable Due from Water Utility Due from State Taxes receivable — delinquent delinquent (net of allowance of $24,000) Supplies Total assets Liabilities and fund balances Accounts payable Fund balances: Nonspendable Assigned Unassigned Total fund balances Total liabilities and fund balances

P10.6

$ 16,800 40,000 10,000 1,500 34,000 6,000 44,000 $152,300 $ 50,000 44,000 5,000 53,300 102,300 $152,300

Comprehensive General Fund Review

Requirement a: 1. D 2. C 3. C 4. C 5. N

Requirement b: 6. D 7. N 8. C 9. C 10. N

Requirement c: 11. D 12. C 13. N 14. N 15. N

Requirement e: 21. N 22. N 23. C 24. D 25. N

Requirement f: 26. C 27. N 28. D 29. D 30. C 31. D 32. C 33. N 34. N 35. N 36. N

Requirement g: 37. C 38. N 39. D


Requirement d: 16. C 17. D 18. D 19. C 20. N


P10.7

a.

Comprehensive General Fund — Entries Entries and Statements

Journal entries for fiscal 2014 (in thousands) : (1a) Estimated revenues Fund balance — unassigned unassigned

30,000 2,000 Appropriations Estimated other financing uses

31,200 800

To record budget. (1b) Taxes receivable — current current

37,000 Revenues Allow. for uncollectible taxes — current current

30,000 7,000

To record tax levy. (2) Cash

30,500 Taxes receivable — current current

30,500

To record collection of taxes. (3a) Allowance for uncollectible taxes — current current

1,250

Revenues 500 Taxes receivable — current current 750 To increase revenue by the additional $500 (= $5,500 - $5,000) collected on 2013 taxes, and write off remaining 2013 receivables. (3b) Allowance for uncollectible taxes — current current

4,600

Revenues 4,600 To correct allowance account. Taxes receivable = $6,250 + $37,000 - $30,500 - $750 = $12,000. Allowance account = $7,000. Ending balance in allowance account should be 20% x $12,000 = $2,400. Adjustment = $4,600. (4) Cash

100 Proceeds from sale of capital assets

100

To record sale of old desks. ©Cambridg Cambridg e Bus iness Publishers , 2013 2013 30


(5) Expenditures

300 Cash

300

To record purchase of desks. (6) Expenditures

400

Accounts payable To record expenditures for repairs and cleaning.

400

(7) Expenditures


28,000

To record expenditures. (8a) Expenditures

500

Inventory To adjust inventory to year-end balance of $1,500.

500

(8b) Fund balance — nonspendable nonspendable

500

Fund balance — unassigned unassigned To adjust nonspendable fund balance to $1,500. (9a) Accounts payable

500

31,400

Cash To record payment of accounts payable; $31,400 = $3,000 + $400 + $28,000. (9b) Encumbrances

31,400

600 Fund balance — assigned assigned

600

To record purchase orders. (10) Fund balance — assigned assigned

500 Fund balance — unassigned unassigned

500

To cancel 2013 encumbrances. (11) Transfer out

750 Cash

750

To record transfer to enterprise fund.



Closing entries at June 30, 2014: Revenues Proceeds from sale of capital assets

35,100 100

Fund balance — unassigned unassigned 5,200 Estimated revenues 30,000 To close revenues and other financing sources; $35,100 = $30,000 + $500 + $4,600. Appropriations Estimated other financing uses

31,200 800

Expenditures Encumbrances Transfer out Fund balance — unassigned unassigned To close expenditures and encumbrances; $29,200 = $300 + $400 + $28,000 + $500. b.

29,200 600 750 1,450

Quarryville School District General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30, 2014

Revenues Expenditures Excess of revenues over expenditures Other financing sources (uses): Transfer out Proceeds from sale of capital assets Excess of revenues and other financing sources over expenditures and other financing uses Fund balances — July July 1, 2013 Fund balances — June June 30, 2014 * $2,000 + $500 + $5,500


$ 35,100 29,200 5,900 (750) 100 5,250 8,000* $ 13,250


Quarryville School District General Fund Balance Sheet June 20, 2014

(in thousands) Assets Cash Taxes receivable — current current (net of $2,400 allowance for uncollectible taxes) Inventory Total Liabilities and fund balances Fund balance: Nonspendable Assigned Unassigned Total

$ 2,150 9,600 1,500 $13,250

$ 1,500 600 11,150 $13,250

The T-accounts below show computations for ending balances bala nces of cash, taxes receivable, allowance for uncollectible taxes, and fund balance. The numbers are keyed keyed to the journal entries from requirement a. Cash Beginning balance

Ending balance

4,000 (2) 30,500 (4) 100

300 (5) 31,400 (9a) 750 (11)

2,150 Taxes receivable — current current

Beginning balance

Ending balance

6,250 (1b) 37,000

30,500 (2) 750 (3a)

12,000 Allowance for uncollectible taxes — current current Beginning balance

1,250 7,000 (1b)

Ending balance

2,400

(3a) 1,250 (3b) 4,600



Fund Balance — unassigned unassigned Beginning balance

5,500 500 (8b) 500 (10) 5,200 (c) 1,450 (c)

(1a) 2,000

Ending balance

11,150

(Note: c-closing entry)

P10.8

Employee Compensated Absences

a. Expenditures for compensated absences

25,000,000 Cash

25,000,000

No liability for future future compensated absence payments is reported. b. Compensated absence expense Liability for compensated absences

(1)19,164,000 5,836,000

Cash (1) $19,164,000 = $214,113,000 - $219,949,000 + $25,000,000.

25,000,000

The general fund would report a total liability for compensated absences at fiscal year-end of $214,113,000. c.

The general fund balance sheet, prepared using modified accrual accounting, will not reveal any information concerning the State’ State’s future obligation for compensated absences. Expenditures are recorded as incurred.



P10.9

a.

General Fund Reporting

Budget and encumbrance entries Estimated revenues Estimated other financing sources Fund balance — unassigned unassigned

8,500,000 500,000 50,000 Appropriations Estimated other financing uses

8,800,000 250,000

To record budget entry. Encumbrances

78,000

Fund balance — unassigned To re-establish beginning of year encumbrances.

78,000

Net effect on fund balance — unassigned: unassigned: $78,000 - $50,000 = $28,000 cr b.

Entries made during 2014 for property taxes (not required): Property taxes receivable — current

8,600,000 Allow. for uncoll. taxes — current Property tax revenues

100,000 8,500,000

To accrue property taxes for 2014. Allowance for uncollectible taxes — current current

60,000

Property taxes receivable — current current To write off current property taxes. Allowance for uncollectible taxes — delinquent delinquent Property taxes receivable — delinquent delinquent To write off delinquent property taxes.


60,000

10,000 10,000


Cash Allowance for uncollectible taxes — delinquent delinquent

15,000 15,000

Property taxes receivable — delinquent delinquent Property tax revenues To record collection of delinquent property taxes.

15,000 15,000

Cash

8,420,000 Property taxes receivable — current current

8,420,000

To record collection of current property taxes; $8,420,000 = $8,600,000 - ($100,000 - $40,000) - $120,000. Property taxes receivable — delinquent Allowance for uncollectible taxes — current current Property tax revenues

120,000 40,000 80,000 Allow. for uncoll. taxes — delinquent Property taxes receivable — current current

120,000 120,000

To fully reserve unpaid property taxes and reclassify them as delinquent. Property tax revenues revenues for 2014 = $8,500,000 + $15,000 - $80,000 = $8,435,000. Cash collected for 2014 = $8,420,000 + $15,000 = $8,435,000. c.

Zero. Interest is not accrued until the year it will be paid.

d.

Other entries for 2014 (not required): Cash

500,000 Bond proceeds

500,000

To record issuance of bonds. Cash

6,000 Proceeds from sale of capital assets

6,000

To record sale of equipment. ©Cambridg Cambridg e Bus iness Publishers , 2013 2013 36


Transfers out

250,000

Cash To record transfers to capital projects and enterprise funds. Expenditures

250,000

8,720,000 Cash or accounts payable 8,720,000

To record expenditures for the year. Encumbrances

50,000

Fund balance — assigned assigned To record net increase in encumbrances for the year. Closing entries for 2014: Property tax revenues Bond proceeds Proceeds from sale of capital assets Fund balance — unassigned unassigned

50,000

8,435,000 500,000 6,000 59,000

Estimated revenues Estimated other financing sources To close revenue and other financing sources accounts. Appropriations Estimated other financing uses Fund balance — unassigned unassigned

8,500,000 500,000

8,800,000 250,000 50,000

Expenditures Transfers out Encumbrances To close expenditure, encumbrance, and other financing uses accounts.


8,720,000 250,000 130,000


e.

City of Middletown Budgetary Comparison Schedule For the year 2014

Property tax revenues Expenditures Excess of revenues over (under) expenditures Other financing sources (uses): Transfers out Proceeds from sale of capital assets Bond proceeds Total other financing sources Excess of revenues & other sources over (under) expenditures & other uses

P10.10

a.

Budget $ 8,500,000 8,800,000

Actual $8,435,000 8,720,000

Variance B Favorable (Unfavorable) $ (65,000) 80,000

(300,000)

(285,000)

15,000

(250,000)

(250,000)

---

--500,000 250,000

6,000 500,000 256,000

$ (50,000)

6,000 --6,000

$ (29,000)

$

21,000

General Fund — Entries Entries and Financial Statements

2014 journal entries Beginning of year: Encumbrances

6,000

Fund balance — unassigned unassigned To restore beginning of year encumbrances. Estimated revenues — property taxes Estimated revenues — licenses and fines Estimated revenues — federal federal grants Fund balance — unassigned unassigned

6,000

500,000 35,000 100,000 31,000 Appropriations — general government Appropriations — human services Estimated other financing uses

250,000 402,000 14,000

To establish budget. ©Cambridg Cambridg e Bus iness Publishers , 2013 2013 38


Property taxes receivable — current

500,000 Allowance for uncollectible taxes — current current Property tax revenues

50,000 450,000

To accrue property taxes. Cash

430,000

Property taxes receivable — current To record collection of current property taxes. Cash Allowance for uncollectible taxes — delinquent delinquent

430,000

60,000 40,000

Property taxes receivable — delinquent Property tax revenues To record collection of delinquent property taxes and write-off of remainder. Property taxes receivable — delinquent Allowance for uncollectible taxes — current current Property tax revenues

65,000 35,000

70,000 50,000 5,000

Property taxes receivable — current 70,000 Allowance for uncollectible taxes — delinquent delinquent 55,000 To reclassify uncollected taxes as delinquent and provide for a $55,000 allowance. Due from federal government

100,000 Revenues — federal federal grants

100,000

To accrue federal grants. Cash

95,000

Due from federal government To record collection of federal grants. Cash

34,000

Revenues — licenses licenses and fines To record collection of license and fine revenues.


95,000

34,000


Expenditures — general general government Expenditures — human human services Inventories ($18,000 $15,000) Accounts payable ($30,000 $15,000)

234,000 400,000 3,000 15,000 Cash

652,000

To record cash expenditures. Fund balance — unassigned unassigned

3,000

Fund balance — nonspendable nonspendable To adjust the nonspendable fund balance to the ending $18,000 inventory balance. Fund balance — assigned assigned

2,000

Encumbrances To record net reduction in encumbrances for the year. Transfers out

2,000

14,000

Cash To record transfers to debt service fund. Cash

14,000

2,000

Due from other funds To record collection of cash advance to enterprise fund. Due from other funds

2,000

5,000

Cash To record advance to capital projects fund. Cash Due to other funds To record advance from enterprise fund.


3,000

5,000

25,000 25,000


Closing entries: Property tax revenues ($450,000 + $35,000 $5,000) Revenues — licenses licenses and fines Revenues — federal federal grants Fund balance — unassigned unassigned

480,000 34,000 100,000 21,000 Estimated revenues — property taxes Estimated revenues — licenses licenses and fines Estimated revenues — federal federal grants

500,000 35,000 100,000

To close revenues. Appropriations — general government Appropriations — Human Services Estimated other financing uses

250,000 402,000 14,000

Expenditures — general general government Expenditures — human human services Transfers out Encumbrances Fund balance — unassigned unassigned To close expenditures, encumbrances and transfers.


234,000 400,000 14,000 4,000 14,000


b.

(1) City of Los Alvos Statement of Revenues, Expenditures, and Changes in Fund Balances CGeneral Fund For the Year Ended December 31, 2014 Revenues Property taxes Licenses and fines Federal grants Total revenues Expenditures General government Human services Total expenditures Excess of revenues over (under) expenditures Other financing sources (uses) Transfers out Total other financing sources (uses) Excess of revenues and other financing sources over (under) expenditures and other financing uses Fund balances — December December 31, 2013 Fund balances — December December 31, 2014

$ 480,000 34,000 100,000 614,000 234,000 400,000 634,000 (20,000) (14,000) (14,000) (34,000) 52,000 $ 18,000

(2) City of Los Alvos Balance Sheet CGeneral Fund December 31, 2014 Assets Cash Property taxes receivable — delinquent delinquent (net) Due from other funds Due from federal government Inventories Total assets Liabilities and fund balances Accounts payable Due to other funds Total liabilities Fund balances: Nonspendable Assigned Unassigned Total fund balances Total liabilities and fund balances ©Cambridg Cambridg e Bus iness Publishers , 2013 2013 42

$

5,000 15,000 5,000 15,000 18,000 $ 58,000 $ 15,000 25,000 40,000 18,000 4,000 (4,000) 18,000 $ 58,000 A dvanced Acc ounting , 2nd E dition

(3) City of Los Alvos Budgetary Comparison Schedule CGeneral Fund For the Year Ended December 31, 2014

Revenues Property taxes Licenses and fines Federal grants Total revenues Expenditures General government Human services Total expenditures Excess of revenues over (under) expenditures Other financing sources (uses) Transfers out Total other financing sources (uses) Excess of revenues and other financing sources over (under) expenditures and other financing uses Fund balance — December December 31, 2013 Fund balance — December December 31, 2014


Variance-Favorable (Unfavorable)

Budget

Actual

$ 500,000 35,000 100,000 635,000

$ 480,000 34,000 100,000 614,000

250,000 402,000 652,000

234,000 400,000 634,000

16,000 2,000 18,000

(17,000)

(20,000)

(3,000)

14,000 (14,000) (14,000)

14,000 (14,000)

(31,000) 52,000 $ 21,000

(34,000) 52,000 $ 18,000

$ (20,000) ( 1,000) -(21,000)

---

(3,000) -$ (3,000)


P10.11

General Fund — Budget Budget and Closing Entries, Financial Statements

a. Estimated revenues Estimated other financing sources

260,000 2,000 Appropriations Estimated other financing uses Fund balance — unassigned

257,000 4,800 200

To establish budget. b.

In addition to the budget entry, an entry was made at the beginning of the year to reverse the encumbrances write-off from 2013: Encumbrances

800 Fund balance — unassigned

800

Therefore the beginning fund balance — unassigned unassigned was $23,000 - $200 - $800 = $22,000. c. Revenues — property taxes Revenues — income income taxes Revenues — fines fines and licenses Revenues — state state grants Proceeds from sale of capital assets Fund balance — unassigned unassigned

55,000 180,000 18,000 6,000 2,300 700

Estimated revenues Estimated other financing sources To close revenues and other financing sources. Appropriations Estimated other financing uses

2,000

257,000 4,800

Encumbrances Expenditures — general general government Capital outlay Transfers out Debt service — interest interest Debt service — principal Fund balance — unassigned To close expenditures and other financing uses. ©Cambridg Cambridg e Bus iness Publishers , 2013 2013 44

260,000

500 130,400 11,000 4,500 35,000 80,000 400


d.

City of Akron General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended December 31, 2014 (in thousands) Revenues Property taxes $ 55,000 Income taxes 180,000 Fines and licenses 18,000 State grants 6,000 Total revenues 259,000 Expenditures General government 130,400 Capital outlay 11,000 Debt service Interest payments 35,000 Principal payments 80,000 Total expenditures 256,400 Excess of revenues over (under) expenditures 2,600 Other financing sources (uses) Proceeds from sale of capital assets 2,300 Transfers out (4,500) Total other financing sources (uses) (2,200) Excess of revenues and other financing sources over expenditures and other financing uses 400 Fund balance — December December 31, 2013 (1) 22,800 Fund balance — December December 31, 2014 (2) $ 23,200

(1) Fund balance — unassigned unassigned = Fund balance — assigned assigned =

$22,000 800 $22,800

(2) Fund balance — unassigned: unassigned: $23,000 - $700 + $400 = Fund balance — assigned assigned =

$22,700 500 $23,200



e.

City of Akron General Fund Balance Sheet At December 31, 2014

(in thousands) Assets Cash Investments Property taxes receivable (net) Due from other funds Total assets Liabilities and fund balances Accounts payable Due to other funds Total liabilities Fund balances: Assigned Unassigned Total fund balances Total liabilities and fund balances

P10.12

$

5,000 14,000 36,000 9,000 $ 64,000 $ 33,200 7,600 40,800 500 22,700 23,200 $ 64,000

General Fund — Entries Entries and Financial Statements

a. Estimated revenues Fund balance — unassigned unassigned

410,500 9,500 Appropriations Estimated other financing uses

370,000 50,000

To establish budget. Encumbrances

3,000

Fund balance — unassigned To reverse outstanding encumbrance closing entry from last year. State grant receivable

3,000

40,000 State grant revenue

40,000

To accrue state grant.



b.

Transactions for the year: Taxes receivable

300,000 Property tax revenue Allowance for uncollectible taxes

285,000 15,000

To record property tax bills. Cash


280,000

To record property tax collection. Cash

25,000 State grant receivable

25,000

To record state grant cash received. Cash

10,000 Property tax revenue

10,000

To record collection of delinquent taxes. Allowance for uncollectible taxes — delinquent

22,500

Taxes receivable — delinquent To write off uncollected delinquent taxes. Transfers out

22,500

50,000

Cash To record transfer to special revenue fund.

50,000

Cash

65,000

Fee and license revenue To record fee and license revenue received in cash. Fund balance — assigned assigned

65,000

3,000 Encumbrances

3,000

Expenditures

3,200

Accounts payable To record receipt of inventories on purchase orders sent last year.


3,200


Due from capital projects fund

8,000

Cash To record advance to capital projects fund.

8,000

Cash

12,000

Due from special revenue fund To record collection of loan to special revenue fund.

12,000

Expenditures

45,000

Accounts payable To record inventories purchased on account.

45,000

Expenditures

320,000

Accounts payable To record other expenditures for the year.

320,000

Encumbrances

4,000

Fund balance — assigned assigned To record purchase orders outstanding at year-end. Accounts payable

4,000

367,000 Cash

367,000

To record payment of accounts payable. Adjusting entries at year-end: Fund balance — nonspendable nonspendable

1,500

Inventories To adjust the inventories balance to current year-end amount. Property tax revenue

1,500

5,000

Allowance for uncollectible taxes To fully reserve uncollected taxes at year-end.

5,000

Taxes receivable — delinquent delinquent Allowance for uncollectible taxes

20,000 20,000

Taxes receivable Allowance for uncollectible taxes — delinquent To reclassify uncollected taxes as delinquent.


20,000

20,000


c.

Closing entries: Property tax revenue Fee and license revenue State grant revenue Fund balance — unassigned unassigned

290,000 65,000 40,000 15,500

Estimated revenue To close revenues against estimated revenues. Appropriations Estimated other financing uses Fund balance — unassigned unassigned

410,500

370,000 50,000 2,200

Transfers out 50,000 Expenditures 368,200 Encumbrances 4,000 To close expenditures and other financing uses against appropriations app ropriations and estimated other financing uses. d.

Montana County General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30, 2013 (in thousands) Revenues: Property taxes $ 290,000 Fees and licenses 65,000 State grant 40,000 Total revenues 395,000 Expenditures (368,200) Excess of revenues over (under) expenditures 26,800 Other financing sources (uses) Transfers out (50,000) Excess of revenues over (under) expenditures and other financing uses (23,200) Fund balances — July July 1, 2012 (1) 135,000 Change in fund balance — nonspendable nonspendable (1,500) Fund balances — June June 30, 2013 (2) $ 110,300

(1) Fund balance — assigned assigned Fund balance — nonspendable nonspendable Fund balance — unassigned unassigned

3,000 7,500 124,500 $135,000

(2) Fund balance — assigned assigned Fund balance — nonspendable nonspendable Fund balance — unassigned unassigned

$


$

4,000 6,000 100,300 $110,300


e.

Montana County General Fund Balance Sheet At June 30, 2013

(in thousands) Assets Cash Property taxes receivable (net of $20,000 allowance for uncollectibles) State grant receivable Due from special revenue fund Due from capital projects fund Inventories Total assets Liabilities and fund balances Accounts payable Fund balances: Assigned Nonspendable Unassigned Total fund balances Total liabilities and fund balances


$ 87,000 -15,000 3,000 8,000 6,000 $ 119,000

$

8,700

4,000 6,000 100,300 110,300 $ 119,000


Advanced accounting Ch 10 Solutions Final

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