CHAPTER 18

GOVERNMENTAL ENTITIES: OTHER GOVERNMENTAL

FUNDS AND ACCOUNT GROUPS

The title of each problem is followed by the estimated time in minutes required for completion and by a difficulty
rating. The time estimates are applicable for students using the partially filled-in working papers.

Pr. 18–1 Ridge City (20 minutes, easy)

Journal entries for a governmental entity's general capital assets account group.
Pr. 18–2 Town of Dilbey (30 minutes, medium)
Financial statements for a governmental entity's capital projects fund at end of its first year of
operations.
Pr. 18–3 Town of Logan (30 minutes, medium)
Journal entries for two construction projects, in capital projects fund for project financed by general
obligation bonds and in special revenue fund for project financed by special assessments bonds, of
a governmental entity.
Pr. 18–4 Webster Village (30 minutes, medium)
Given journal entries for a governmental entity general fund, prepare journal entries for other
affected funds and account groups.
Pr. 18–5 Calabash County (30 minutes, medium)
Prepare journal entries for funds and account groups for four transactions or events of a
governmental entity.
Pr. 18–6 City of Arlette (30 minutes, medium)
Journal entries for affected funds and account groups for a capital lease of a governmental entity.
Pr. 18–7 City of Ordway (40 minutes, medium)
Preparation of journal entries and balance sheet for capital projects fund of a governmental entity.
Pr. 18–8 City of Wilmont (40 minutes, medium)
Journal entries, including closing entries (explanations omitted), for capital projects fund of a
governmental entity.
Pr. 18–9 Angelus School District (50 minutes, strong)
Journal entries for transactions and events of general fund, capital projects fund, general capital
assets account group, and general long-term debt account group of a governmental entity.

ANSWERS TO REVIEW QUESTIONS

1. Fees for rubbish collection, state gasoline taxes, and traffic violation fines, and proceeds of special
assessments (including related bonds) are among the taxes or fees that often are accounted for in
special revenue funds of a governmental entity.
2. The Town of Groman General Fund credits the Expenditures ledger account because the amount
receivable from the Special Revenue Fund is a reimbursement of General Fund expenditures.
3. Proceeds of general obligation bonds issued at face amount by a governmental entity are accounted
for as other financing sources of a capital projects fund because the proceeds are not revenues of
that fund.
4. A separate debt service fund is not established for every issue of general obligation bonds of a
governmental entity. In the absence of legal requirements for a debt service fund or of a formal
plan for accumulation of a sinking fund, a debt service fund may be unnecessary.

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5. The probable explanation of the illustrated journal entry is to record payment of cash to a bank
trust department acting as fiscal agent for the payment of bond principal and interest.
6. The recognition of depreciation of plant assets is appropriate for all assets of a governmental
entity's general capital assets account group except for certain infrastructure and inexhaustible
(land and certain works of art) assets.
7. The Investment in General Capital Assets from Gifts ledger account is credited for the current fair
value of plant assets donated to a governmental entity for its general use, as opposed to use by a
proprietary fund or a trust fund.
8. A balance sheet is not issued for a governmental entity's general capital assets account group
because an account group is not a fund.
9. The journal entry in the Village of Marvell General Long-Term Debt Account Group is incorrect;
Amount Available in Debt Service Fund should be debited, and Amount to Be Provided should be
credited.
10. For a capital lease for fire engines, a governmental entity's general fund records the appropriations
and expenditures for the lease payments; the general long-term debt account group records the
liability under the capital lease; and the general capital assets account group records the leased
assets under the capital lease and the related depreciation.
11. A liability for special assessment bonds is recorded in a governmental entity's general long-term
debt account group if the governmental entity is obligated in some manner for the payment of the
bonds if the assessed property owners default.

SOLUTIONS TO EXERCISES
Ex. 18–1 1. a 9. d
2. b 10. b
3. b 11. d
4. c 12. d
5. a 13. c
6. a 14. c
7. b 15. d
8. b 16. b
Ex. 18–2 Journal entries for County of Larchmont Special Revenue Fund, July, 2005:
Taxes ReceivableCurrent 480,000
Allowance for Uncollectible Current Taxes ($480,000
x 0.015) 7,200
Revenues 472,800
To accrue property taxes billed and to provide for estimated
uncollectible portion.

Cash 142,700
Taxes ReceivableCurrent 142,700
To record collection of property taxes during July, 2005
Ex. 18–3 Computation of present value of City of Garbo 6% serial bonds, July 1, 2005:
July 1, 2003 payment [($200,000 + $60,000) x 0.925926*)] $240,741
July 1, 2004 payment [($200,000 + $48,000) x 0.857339*)] 212,620
July 1, 2005 payment [($200,000 + $36,000) x 0.793832*)] 187,344
July 1, 2006 payment [($200,000 + $24,000) x 0.735030*)] 164,647
July 1, 2007 payment [($200,000 + $12,000) x 0.680583*)] 144,284
Present value of 6% serial bonds $949,636
*From present value tables.

Ex. 18–4 Journal entry for County of Pinecrest Capital Projects Fund, July 1, 2005:
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 Cash 1,200,000
Other Financing Sources 1,200,000
To record receipt of proceeds of 30-year, 5% general obligation
bonds issued at face amount.
Journal entry for County of Pinecrest General Long-Term Account Group, July 1, 2005:
Amount to Be Provided 1,200,000
Term Bonds Payable 1,200,000
To record liability for 30-year, 5% general obligation bonds issued
to finance construction of public health center.
Ex. 18–5 Journal entry for Town of Wallen Debt Service Fund, Apr. 30, 2006:
Matured Bonds Payable 50,000
Matured Interest Payable ($50,000 x 0.08 x ½) 2,000
Cash with Fiscal Agent 52,000
To record fiscal agent's payment of bond principal and interest.
Ex. 18–6 Journal entry in Bucolic Township General Fund, Mar. 18, 2006:
Other Financing Uses—Transfers Out 140,000
Cash 140,000
Journal entry in Bucolic Township Debt Service Fund, Mar. 18, 2006:
Cash 140,000
Other Financing Sources—Transfers In 140,000
Journal entry in Bucolic Township General Long-Term Debt Account Group, Mar. 18, 2006:
Amount Available in Debt Service Fund 140,000
Amount to Be Provided 140,000
Ex. 18–7 Journal entries for Nemo County, Sept. 1, 2005:
GF Expenditures 80,000
Cash 80,000
Fund Balance Reserved for Encumbrances 79,600
Encumbrances 79,600
GCAAG Machinery and Equipment 80,000
Investment in General Capital Assets from
General Fund Revenues 80,000
Ex. 18–8 Journal entries in Wildwood Village General Fund, Mar. 24, 2006:
Cash 40,000
Other Financing Sources 40,000

Expenditures 450,000
Cash 450,000
Fund Balance Reserved for Encumbrances 446,000
Encumbrances 446,000

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Solutions Manual, Chapter 18 234
 Journal entries in Wildwood Village General Capital Assets Account Group, Mar. 24, 2006:
Investment in General Capital Assets from General Fund
Revenues 20,000
Accumulated Depreciation of Machinery and Equipment 180,000
Machinery and Equipment 200,000
Machinery and Equipment 450,000
Investment in General Capital Assets from General Fund
Revenues 450,000
Ex. 18–9 Journal entry for Town of Backwoods General Capital Assets Account Group, June 30, 2006:
Construction in Progress 950,000
Investment in General Capital Assets from Capital Projects
Funds 950,000
To record construction work in progress on town hall.
Ex. 18–10 Journal entry for Hays City General Capital Assets Account Group:
Land 850,000
Investment in General Capital Assets from Gifts 850,000
To record gift of 10 acres of undeveloped land for future school
site.
Ex. 18–11 Journal entry for Town of Noblisse General Fund, Apr. 30, 2006:
Cash 30,000
Other Financing Sources 30,000
To record proceeds of disposal of computer.
Journal entry for Town of Noblisse General Capital Assets Account Group, Apr. 30, 2006:
Investment in General Capital Assets from General Fund
Revenues 40,000
Accumulated Depreciation of Machinery and Equipment
($100,000 – $40,000) 60,000
Machinery 100,000
To record disposal of computer.
Ex. 18–12 Journal entry for City of Rogell General Fund, July l, 2005:
Expenditures 20,000
Cash 20,000
To record first lease payment on five-year capital lease for
firefighting equipment.
Journal entries for City of Rogell General Long-Term Debt Account Group, July l, 2005:
Amount to Be Provided ($20,000 x 4.312127*) 86,243
Liability under Capital Lease (net) 86,243
To record liability under five-year capital lease for firefighting
equipment.
Liability under Capital Lease (net) 20,000
Amount to Be Provided 20,000
To record General Fund payment of first lease payment on five-
year capital lease for firefighting equipment.
*Present value of annuity due of one for five periods at 8%.
Journal entry for City of Rogell General Capital Assets Account Group, July l, 2005:
Leased Machinery and EquipmentCapital Lease 86,243

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 Investment in General Capital Assets from General Fund
Revenues 86,243
To record acquisition of firefighting equipment under five-year
capital lease.
Ex. 18–13 Journal entry for Town of Warren Capital Projects Fund, July l, 2005:
Cash ($254,000 x 0.909091*) + ($236,000 x 0.826446*) +
($218,000 x 0.751315*) 589,737
Other Financing Uses: Discount on Bonds Issued 10,263
Other Financing Sources: Bonds Issued 600,000
To record issuance of $600,000 face amount of three-year, 9%
special assessment bonds to yield 10%.
*From present value tables.
Journal entry for Town of Warren General Long-Term Debt Account Group, July l, 2005:
Amount to Be Provided 600,000
Special Assessment Bonds Payable 600,000
To record issuance of 9% special assessment bonds for street
improvement project; the town is obligated to honor deficiencies
on payment of the bonds.

Ex. 18–14 1. d, f 5. a, b
2. a, b, c 6. a, b
3. f 7. a, b
4. e

CASES
Case 18–1 The accounting for the installment contract proposed by the City of Darby controller results in
an understatement of the city's plant assets and long-term debt. The installment contract may
be considered a borrowing of cash repayable in installments and use of the cash to acquire the
parking-lot equipment. The cost of the equipment should be recorded in the City of Darby
voluntarily maintained General Capital Assets Account Group with a debit to Equipment and a
credit to Investment in General Capital Assets from General Fund Revenues. The unpaid
balance (including interest, if applicable) of the installment contract should be recorded in the
City of Darby voluntarily maintained General Long Term Debt Account Group with a debit to
Amount to Be Provided and a credit to Installment Contracts Payable. The monthly payments
on the contract should be debited to the General Fund's Expenditures ledger account, as the
controller proposes, with accompanying reductions in the memorandum accounts of the
General Long-Term Debt Account Group.
Case 18–2 The proceeds of the special assessment for streetlighting and maintenance services to selected
residents of the Town of Minimus should be accounted for in a special revenue fund, with
reimbursements from that fund to the General Fund, together with expenditures for the
streetlighting and maintenance services, accounted for in the City of DelVille General Fund.
Similarly, a special revenue fund should be established to account for the proceeds of the
special assessment to finance construction of the new town hall. Expenditures for construction,
together with amounts received from the special revenue fund, should be accounted for in a
capital projects fund. At the end of each fiscal year during the construction period, costs of the
town hall construction should be recorded in the voluntarily maintained City of DelVille
General Capital Assets Account Group.
Case 18–3 TO: James Milton, Controller, Wilburton
FROM: _____________________________, CPA
DATE: _____________________________
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Solutions Manual, Chapter 18 236
 SUBJECT: Possible Closure of Selected Special Revenue Funds
After reviewing Sections 1300.105 of Governmental Accounting and Financial Reporting
Standards, Governmental Accounting Standards Board (Norwalk: 2003), I have concluded
that any Wilburton special revenue funds not mandated by state constitutional provisions or
statutes or by Wilburton charter, ordinances, or governing body orders might possibly be
closed. As pointed out in Section 1300.105: “Resources restricted to expenditure for purposes
normally financed from the general fund may be accounted for through the general fund
provided that applicable legal requirements can be appropriately satisfied . . .” Accordingly, I
recommend that you undertake a review of Wilburton's 25 special revenue funds to ascertain
which ones are legally mandated. All others may be candidates for closure, with their revenues
and expenditures accounted for in the Wilburton General Fund. As indicated in the excerpt
from Section 1300.105, any current special revenue fund whose expenditures generally are
made by a governmental entity's general fund may be closed. Please call me if you need further
consultation in this matter.
Case 18–4 Students who answer “No” to Professor Newton's question might rely on the rationale of the
following excerpt from Section 1600.120 of Governmental Accounting and Financial
Reporting Standards, GASB (Norwalk: 2003):
The major exception to the general rule of expenditure accrual…relates to unmatured
principal and interest on general long-term debt, which includes special assessment
debt for which the government is obligated in some manner. …Financial resources
usually are appropriated in other funds for transfer to a debt service fund in the period
in which maturing debt principal and interest must be paid. Such amounts thus are not
current liabilities of the debt service fund as their settlement will not require
expenditure of existing fund assets. Further, to accrue the debt service fund
expenditure and liability in one period but record the transfer of financial resources for
debt service purposes in a later period would be confusing and would result in
overstatement of debt service fund expenditures and liabilities and understatement of
the fund balance. Thus, disclosure of subsequent year debt service requirements is
appropriate, but they usually are appropriately accounted for as expenditures in the
year of payment.
However, students who answer “Yes” to Professor Newton's question might point out that interest
expenditures over the period general obligation term bonds are outstanding may exceed the total
principal of the bonds. For example, total interest expenditures of $1,200,000 must be made on an
issue of $1,000,000 face amount of 20-year general obligation term bonds ($1,000,000 x 0.06 x 20
= $1,200,000). Thus, inclusion of the obligation for unmatured interest on general obligation term
and serial bonds outstanding might well be appropriate for the accounting records of the general
long-term debt account group instead of being relegated to a note to financial statements of the
appropriate debt service fund.

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Case 18–5 The engagement manager of the CPA firm that audited the City of Martinburg financial
statements should explain to the Martinburg City Council that the Clinic Capital Projects Fund
has insufficient resources to pay for the fund's present and potential liabilities. The negative
balance of the Unreserved and Undesignated Fund Balance ledger account measures the
approximate shortfall. The City Council will have to authorizeperhaps through a
supplemental appropriationa subsidy from the City of Martinburg General Fund to enable
the construction of the clinic to be completed.

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Solutions Manual, Chapter 18 238
20 Minutes, Medium
Ridge City Pr. 18–1
Ridge City General Capital Assets Account Group
Journal Entries

20 05
Oct 31 Machinery and Equipment 2 0 0 0 0
Investment in General Capital Assets from
General Fund Revenues 2 0 0 0 0
To record acquisition of equipment by General Fund.

Dec. 10 Land 1 0 0 0 0 0
Buildings 5 0 0 0 0 0
Investment in General Capital Assets from Gifts 6 0 0 0 0 0
To record, at current fair value, private citizen’s gift of
land and a building.

20 06
June 30 Construction in Progress 9 7 0 0 0 0
Investment in General Capital Assets from
Capital Projects Funds 9 7 0 0 0 0
To record construction work in progress.

30 Investment in General Capital Assets from General

Fund Revenues 6 0 0 0 0
Investment in General Capital Assets from Capital
Projects Funds 1 4 0 0 0 0
Investment in General Capital Assets from Gifts 9 0 0 0 0
Accumulated Depreciation of Buildings 2 5 0 0 0 0
Accumulated Depreciation of Machinery and
Equipment 4 0 0 0 0
To recognize depreciation of buildings and machinery
and equipment.

30 Investment in General Capital Assets from Capital

Projects Funds 8 5 0 0 0 0
Accumulated Depreciation of Infrastructure 8 5 0 0 0 0
To recognize depreciation of infrastructure.

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30 Minutes, Medium
Town of Dilbey Pr. 18–2
Town of Dilbey Capital Projects Fund
Statement of Revenues, Expenditures, and Changes in Fund Balance
For Year Ended June 30, 2006
Revenues:
Miscellaneous $ 3 0 0 0 0
Expenditures:
Construction contracts $ 5 7 5 2 0 0
Engineering and other 1 8 0 8 0 0
Total expenditures $ 7 5 6 0 0 0
Excess (deficiency) of revenues over expenditures $( 7 2 6 0 0 0 )
Other financing sources (uses):
Face amount of general obligation bonds $1 0 0 0 0 0 0
Discount on general obligation bonds ( 9 8 9 6 4 )
Excess of revenues and other sources over
expenditures and other uses (fund balance, end of year) $ 1 7 5 0 3 6

Town of Dilbey Capital Projects Fund

Balance Sheet
June 30, 2006
Assets
Cash $ 2 7 6 0 3 6
Liabilities & Fund Balance
Liabilities:
Vouchers payable $ 1 0 1 0 0 0
Fund balance:
Reserved for encumbrances $ 2 2 7 6 0 0
Unreserved and undesignated ( 5 2 5 6 4 ) 1 7 5 0 3 6
Total liabilities & fund balance $ 2 7 6 0 3 6

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Solutions Manual, Chapter 18 240
30 Minutes, Medium
Town of Logan Pr. 18–3
a. Town of Logan Town Hall Capital Projects Fund
Journal Entries
For Year Ended June 30, 2006
Cash 6 0 0 0 0 0
Other Financing Sources 6 0 0 0 0 0
To record issuance, at face amount, of 20-year, 7%
general obligation term bonds due July 1, 2025,
interest payable Jan. 1 and July 1.

Encumbrances 5 3 0 2 0 0
Fund Balance Reserved for Encumbrances 5 3 0 2 0 0
To record encumbrances for the year.

Expenditures 3 8 0 6 0 0
Vouchers Payable 3 8 0 6 0 0
To record expenditures for the year.

Fund Balance Reserved for Encumbrances 3 8 2 1 0 0

Encumbrances 3 8 2 1 0 0
To reverse encumbrances applicable to vouchered
expenditures.

Vouchers Payable 3 2 2 7 0 0
Cash 3 2 2 7 0 0
To record payment of vouchers during the year.

b. Town of Logan Special Revenue Fund

Journal Entries
For Year Ended June 30, 2006
Special Assessments Receivable—Current
($400,000 ÷ 5) 8 0 0 0 0
Special Assessments Receivable—Deferred 3 2 0 0 0 0
Revenue 8 0 0 0 0
Deferred Revenues 3 2 0 0 0 0
To record special assessment levied on property
owners benefited by curbing project.

Cash 8 0 0 0 0
Special Assessment Receivable—Current 8 0 0 0 0
To record receipt of current special assessment
payments.

Other Financing Uses 8 0 0 0 0

Cash 8 0 0 0 0
To record transfer of cash for financing of curbing
project to Capital Projects Fund established for
that purpose.
(Continued on page 498.)

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Town of Logan (concluded) Pr. 18–3
Town of Logan Special Revenue Fund
Journal Entries (concluded)
For Year Ended June 30, 2006
Interest Receivable ($320,000 x 0.08) 2 5 6 0 0
Revenue 2 5 6 0 0
To accrue interest on deferred special assessments
on June 30, 2006.

Expenditures [$80,000 + ($320,000 x 0.075)] 1 0 4 0 0 0

Matured Bonds Payable 8 0 0 0 0
Matured Interest Payable 2 4 0 0 0
To record expenditures for principal and interest on
special assessment bonds due July 1, 2006.

Special Assessment Receivable—Current 8 0 0 0 0

Deferred Revenues 8 0 0 0 0
Special Assessments Receivable—Deferred 8 0 0 0 0
S
Revenues 8 0 0 0 0
To transfer special assessment installment receivable
on July 1, 2006, and related revenue to the current
category from the deferred category.

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Solutions Manual, Chapter 18 242
30 Minutes, Medium
Webster Villiage Pr. 18–4
Webster Village Capital Projects Fund
Journal Entry

20 05
July 3 Receivable from General Fund 1 5 0 0 0
Other Financing Sources—Transfers In 1 5 0 0 0
To record receivable from General Fund for
transfer to make up cash deficiency.

Webster Village Debt Service Fund

Journal Entry

20 05
Aug 31 Cash 2 1 0 0 0 0
Other Financing Sources—Transfers In 2 1 0 0 0 0
To record receipt of cash from General Fund for
payment of term bond principal ($200,000) and interest
($10,000) maturing on August 31, 2005.

Webster Village General Long-Term Debt Account Group

Journal Entry

20 05
Aug 31 Amount Available in Debt Service Fund 2 0 0 0 0 0
Amount to Be Provided 2 0 0 0 0 0
To record amount received by Debt Service Fund
from General Fund for retirement of principal of
general obligation term bonds.

Webster Village General Capital Assets Account Group

Journal Entries

20 05
Nov 30 Machinery and Equipment 6 0 0 0 0
Investment in General Capital Assets from
General Fund Revenues 6 0 0 0 0
To record acquisition of computer by General Fund.

20 06
June 30 Investment in General Capital Assets from General
Fund Revenues ($60,000 x 1/5 x 7/12) 7 0 0 0
Accumulated Depreciation of Machinery and
Equipment 7 0 0 0
To recognize depreciation of computer for seven
months ended June 30, 2006.

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Webster Village (concluded) Pr. 18–4
Webster Village Special Revenue Fund
Journal Entry

20 06
Jan 2 Cash 2 0 0 0 0
Other Financing Sources—Transfers In 2 0 0 0 0
To record transfer from General Fund for
share of street-paving project cost in Westside section.

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Solutions Manual, Chapter 18 244
30 Minutes, Medium
Calabash County Pr. 18–5
Calabash County Gasoline Tax Special Revenue Fund
Journal Entry

20 05
July 1 Estimated Revenues 6 4 0 0 0 0
Appropriations 6 0 0 0 0 0
Budgetary Fund Balance 4 0 0 0 0
To record annual budget adopted for Fiscal Year 2006.

Calabash County Capital Projects Fund

Journal Entry

20 05
July 5 Encumbrances 5 0 0 0 0 0 0
Fund Balance Reserved for Encumbrances 5 0 0 0 0 0 0
To record execution of contract for construction of
new public library.

Calabash County Special Assessment Special Revenue Fund

Journal Entry

20 05
Aug 1 Special Assessments Receivable—Current
($400,000 ÷ 5) 8 0 0 0 0
Special Assessments Receivable—Deferred 3 2 0 0 0 0
Revenue 8 0 0 0 0
Deferred Revenues 3 2 0 0 0 0
To record special assessment on property owners of
North Subdivision for construction of sidewalks;
special assessments receivable and related revenue
applicable to year ending June 30, 2006, are current,
and the balance is deferred.

Calabash County General Fund

Journal Entries

20 05
Sept 1 Expenditures 2 0 0 0 0
Cash (or Vouchers Payable) 2 0 0 0 0
To record acquisition of equipment.

1 Fund Balance Reserved for Encumbrances 1 9 6 0 0

Encumbrances 1 9 6 0 0
To reverse encumbrances applicable to expenditure
for equipment
(Continued on page 502.)

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Calabash County (concluded) Pr. 18–5
Calabash County General Capital Assets Account Group
Journal Entry

20 05
Sept 1 Machinery and Equipment 2 0 0 0 0
Investment in General Capital Assets from
General Fund Revenues 2 0 0 0 0
To record acquisition of equipment by General Fund.

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Solutions Manual, Chapter 18 246
30 Minutes, Medium
City of Arlette Pr. 18–6
City of Arlette General Fund
Journal Entries

20 05
July 1 Expenditures 3 0 0 0
Cash 3 0 0 0
To record first lease payment on three-year capital
lease for computer.

20 06
July 1 Expenditures ($510 interest + $2,490 principal) 3 0 0 0
Cash 3 0 0 0
To record second lease payment on three-year capital
lease for computer.

20 07
July 1 Expenditures ($268 interest + $2,714 principal) 3 0 0 0
Cash 3 0 0 0
To record third lease payment on three-year capital
lease for computer.

20 08
June 30 Expenditures ($41 interest + $459 principal) 5 0 0
Cash 5 0 0
To record payment of bargain-purchase option under
capital lease for computer.

City of Arlette General Long-Term Debt Account Group

Journal Entries

20 05
July 1 Amount to Be Provided [($3,000 x 2.759111) +
($500 x 0.772183)] 8 6 6 3
Liability under Capital Lease (net) 8 6 6 3
To record liability under three-year capital lease for
computer.

1 Liability under Capital Lease (net) 3 0 0 0

Amount to Be Provided 3 0 0 0
To record General Fund payment of first lease
payment on three-year capital lease for computer.
20 06
July 1 Liability under Capital Lease (net) 2 4 9 0
Amount to Be Provided 2 4 9 0
To record General Fund payment of second lease
payment on three-year capital lease for computer.

(Continued on page 504.)

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City of Arlette (concluded) Pr. 18–6
City of Arlette General Long-Term Debt Account Group
Journal Entries (concluded)

20 07
July 1 Liabilities under Capital Lease (net) 2 7 1 4
Amount to Be Provided 2 7 1 4
To record General Fund payment of third lease
payment on three-year capital lease for computer.

20 08
June 30 Liability under Capital Lease (net) 4 5 9
Amount to Be Provided 4 5 9
To record General Fund payment of bargain-purchase
option under three-year capital lease for computer.

City of Arlette General Capital Assets Account Group

Journal Entries

20 05
July 1 Leased Equipment—Capital Lease 8 6 6 3
Investment in General Capital Assets from
General Fund Revenues 8 6 6 3
To record acquisition of computer under three-year
capital lease.

20 06
June 30 Investment in General Capital Assets from General
Fund Revenues ($8,663 ÷ 4) 2 1 6 6
Accumulated Depreciation of Equipment 2 1 6 6
To recognized depreciation of leased computer for
the year ended June 30, 2006.

(The same depreciation journal entries would be

prepared on June 30, 2007, June 30, 2008, and June
20, 2009.)

40 Minutes, Medium
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Solutions Manual, Chapter 18 248
City of Ordway Pr. 18–7
a. City of Ordway Library Capital Projects Fund
Journal Entries
For Year Ended June 30, 2007
20 06
July 1 Cash 5 1 0 0 0 0 0
Other Financing Sources: Bonds Issued 5 0 0 0 0 0 0
Other Financing Sources: Premium on Bonds
Issued 1 0 0 0 0 0
To record issuance of 30-year, 9%, $5,000,000 face
amount general obligation term bonds due July 1, 2036
interest payable June 30 and December 31.

3 Investments 4 9 0 0 0 0 0
Cash 4 9 0 0 0 0 0
To record acquisition of $4,900,000 face amount of
short-term notes.

5 Encumbrances 4 9 8 0 0 0 0
Fund Balance Reserved for Encumbrances 4 9 8 0 0 0 0
To record construction-type contract with Premier
Construction Company.

20 07
Jan 15 Cash 3 0 4 0 0 0 0
Investments 3 0 0 0 0 0 0
Payable to Library Debt Service Fund 4 0 0 0 0
To record receipt of cash for matured short-term notes.

15 Payable to Library Debt Service Fund 4 0 0 0 0

Cash 4 0 0 0 0
To record transfer of cash to Library Debt Service
Fund.

20 Expenditures 3 0 0 0 0 0 0
Vouchers Payable 3 0 0 0 0 0 0
To record billing from Premier Construction Company.

20 Fund Balance Reserved for Encumbrances 3 0 0 0 0 0 0

Encumbrances 3 0 0 0 0 0 0
To reverse encumbrance applicable to vouchered
expenditure.

20 Vouchers Payable 2 7 0 0 0 0 0
Cash 2 7 0 0 0 0 0
To record payment to Premier Construction Company.

June 30 Interest Receivable ($140,000 – $40,000) 1 0 0 0 0 0

Payable to Library Debt Service Fund 1 0 0 0 0 0
To accrue interest on short-term notes.

30 Unreserved and Undesignated Fund Balance

($4,980,000 – $3,000,000) 1 9 8 0 0 0 0
Encumbrances 1 9 8 0 0 0 0
To close Encumbrances ledger account.
(Continued on page 506.)

City of Ordway (concluded) Pr. 18–7

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249 Modern Advanced Accounting, 10/e
 City of Ordway Library Capital Project Fund
Journal Entries (concluded)
For Year Ended June 30, 2007
20 07
June 30 Other Financing Sources: Bonds Issued 5 0 0 0 0 0 0
Other Financing Sources: Premium on Bonds Issued 1 0 0 0 0 0
Expenditures 3 0 0 0 0 0 0
Unreserved and Undesignated Fund Balance 2 1 0 0 0 0 0
To close Other Financing Sources and Expenditures
ledger accounts.

b. City of Ordway Library Capital Projects Fund

Balance Sheet
June 30, 2007
Assets
Cash $ 5 0 0 0 0 0
Interest receivable 1 0 0 0 0 0
Investments 1 9 0 0 0 0 0
Total assets $2 5 0 0 0 0 0
Liabilities & Fund Balance
Liabilities:
Vouchers payable $ 3 0 0 0 0 0
Payable to Library Debt Service Fund 1 0 0 0 0 0 $ 4 0 0 0 0 0
Fund balance:
Reserved for encumbrances $1 9 8 0 0 0 0
Unreserved and undesignated 1 2 0 0 0 0 2 1 0 0 0 0 0
Total liabilities & fund balance $2 5 0 0 0 0 0

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Solutions Manual, Chapter 18 250
40 Minutes, Medium
City of Wilmont Pr. 18–8
City of Wilmont Civic Center Capital Projects Fund
Journal Entries
For Year Ended June 30, 2006
(1) Receivable from State Government 5 0 0 0 0 0 0
Revenue 5 0 0 0 0 0 0

Cash 5 0 0 0 0 0
Payable to General Fund 5 0 0 0 0 0

(2) Expenditures 3 2 0 0 0 0
Cash 3 2 0 0 0 0

(3) Cash [($10,000,000 x 0.171929) + ($400,000 x

18.401584)] 9 0 7 9 9 2 4
Other Financing Uses: Discount on Bonds Issued 9 2 0 0 7 6
Other Financing Sources: Bonds Issued 10 0 0 0 0 0 0

(4) Encumbrances 12 0 0 0 0 0 0
Fund Balance Reserved for Encumbrances 12 0 0 0 0 0 0

(5) Encumbrances 5 5 0 0 0
Fund Balance Reserved for Encumbrances 5 5 0 0 0

(6) Cash 2 5 0 0 0 0 0
Receivable from State Government 2 5 0 0 0 0 0

(7) Expenditures 5 1 0 0 0
Vouchers Payable 5 1 0 0 0

Fund Balance Reserved for Encumbrances 5 5 0 0 0

Encumbrances 5 5 0 0 0

Vouchers Payable 5 1 0 0 0
Cash 5 1 0 0 0

(8) Expenditures 2 0 0 0 0 0 0
Vouchers Payable 2 0 0 0 0 0 0

Fund Balance Reserved for Encumbrances 2 0 0 0 0 0 0

Encumbrances 2 0 0 0 0 0 0

(9) Payable to General Fund 5 0 0 0 0 0

Cash 5 0 0 0 0 0

Unreserved and Undesignated Fund Balance

($12,000,000 – $2,000,000) 10 0 0 0 0 0 0
Encumbrances 10 0 0 0 0 0 0

Revenue 5 0 0 0 0 0 0
Other Financing Sources: Bonds Issued 10 0 0 0 0 0 0
Expenditures ($320,000 + $51,000 +
$2,000,000) 2 3 7 1 0 0 0
Unreserved and Undesignated Fund Balance 11 7 0 8 9 2 4
Other Financing Uses: Discount on Bonds
Issued 9 2 0 0 7 6

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251 Modern Advanced Accounting, 10/e
50 Minutes, Strong
Angelus School District Pr. 18–9
a. Angelus School District General Fund
Journal Entries

20 05
Jan 1 Estimated Revenues ($112,000 + $4,000) 1 1 6 0 0 0
Budgetary Fund Balance ($128,000 – $72,880) 5 5 1 2 0
Appropriations ($120,000 + $1,120 + $50,000) 1 7 1 1 2 0
To record annual budget adopted for 2005.

1 Taxes Receivable—Current 1 1 2 0 0 0
Revenues 1 1 2 0 0 0
To accrue property taxes billed.

Feb 28 Cash 4 9 5 0 0
Expenditures 5 0 0
Taxes Receivable—Current ($49,500 ÷ 0.99) 5 0 0 0 0
To record collections of property taxes received from
county treasurer, net of 1% fee.

Apr 1 Cash (or Receivable from Capital Projects Fund) 2 8 7 5 0

Revenues ($1,000,000 x 0.01) 1 0 0 0 0
Expenditures ($1,000,000 x 0.075 x 3/12) 1 8 7 5 0
To record receipt of bond premium and accrued
interest from Capital Projects Fund.

May 1 Cash 3 0 0 0
Revenues 3 0 0 0
To record receipt of interest on short-term investments
($100,000 x 0.06 x ½ = $3,000).

July 1 Expenditures 3 7 5 0 0
Cash 3 7 5 0 0
To record payment of interest on general obligation
bonds ($1,000,000 x 0.075 x ½ = $37,500).

Aug 31 Cash 5 9 4 0 0
Expenditures 6 0 0
Taxes Receivable—Current ($59,400 ÷ 0.99) 6 0 0 0 0
To record collections of property taxes received from
county treasurer, net of 1% fee.

Nov 1 Cash 3 0 0 0
Revenues 3 0 0 0
To record receipt of interest on temporary investments
($100,000 x 0.06 x ½ = $3,000).

Dec 31 Expenditures 1 1 5 0 0 0
Cash 1 1 5 0 0 0
To record operating expenditures paid during year.

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Solutions Manual, Chapter 18 252
Angelus School District (continued) Pr. 18–9
b. Angelus School District Capital Projects Fund
Journal Entries

20 05
Apr 1 Cash 1 0 2 8 7 5 0
Other Financing Sources: Bonds Issued 1 0 0 0 0 0 0
Other Financing Sources: Premium on Bonds
Issued ($1,000,000 x 0.01) 1 0 0 0 0
Accrued Interest ($1,000,000 x 0.075 x 3/12) 1 8 7 5 0
To record receipt of proceeds of general obligation
term bonds issued at 101.

1 Premium on Bonds Issued 1 0 0 0 0

Accrued Interest 1 8 7 5 0
Cash (or Payable to General Fund) 2 8 7 5 0
To record payment of bond premium and accrued
interest to General Fund.

2 Expenditures 1 4 7 0 0 0
Cash 1 4 7 0 0 0
To record acquisition of site for new school.

3 Encumbrances 8 5 0 0 0 0
Fund Balance Reserved for Encumbrances 8 5 0 0 0 0
To record estimated cost of construction of new school
under contract signed.

Nov 1 Expenditures 2 0 0 0 0 0
Cash 2 0 0 0 0 0
To record payment of progress billing under
construction contract.

1 Fund Balance Reserved for Encumbrances 2 0 0 0 0 0

Encumbrances 2 0 0 0 0 0
To reverse encumbrances applicable to payment to
contractor.

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253 Modern Advanced Accounting, 10/e
Angelus School District (concluded) Pr. 18–9
c. Angelus School District General Capital Assets Account Group
Journal Entry

20 05
Apr 2 Land 1 4 7 0 0 0
Investment in General Capital Assets from
Capital Projects Fund 1 4 7 0 0 0
To record cost of land for site of new school.

d. Angelus School District General Long-Term Debt Account Group

Journal Entry

20 05
Apr 1 Amount to Be Provided 1 0 0 0 0 0 0
Term Bonds Payable 1 0 0 0 0 0 0
To record issuance of general obligation term bonds
for new school.

Note to Instructor: Because closing entries are not

required, there is no Dec. 31, 2005, journal entry in the
General Capital Assets Account Group for the
accumulated construction costs for the new school
in the Capital Projects Fund on that date, and no Dec.
31, 2005, journal entry in the General Long-Term Debt
Account Group for cash available in the General Fund
for payment of general obligation bonds.

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Solutions Manual, Chapter 18 254