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CHAPTER 18 GOVERNMENTAL ENTITIES: SPECIAL FUNDS AND GOVERNMENT-WIDE FINANCIAL STATEMENTS

ANSWERS TO QUESTIONS Q18-1 A governmental unit would use a special revenue fund rather than a general fund when the resources earmarked for the fund, such as federal or state government grants or special tax levies, are restricted for specific purposes. Q18-2 Operating budgets are prepared for the general fund, special revenue funds, and debt service fund. Capital budgets are prepared for the capital projects fund. Q18-3 Interest on long-term debt is accounted for in the debt service fund for only the interest which is due and legally payable as an expenditure. Interest is not accrued on the outstanding balance of the long-term debt. Q18-4 The major differences between a special revenue fund and an enterprise fund are Special Revenue Fund Management focus Accounting basis Budgetary basis Long-term assets Long-term debt Encumbrances Financial statements Financial resources Modified accrual Operating budget No No Yes Governmental type Enterprise Fund Economic resources Accrual None required Yes Yes No Commercial type

Q18-5 The basis of accounting used in the proprietary funds is the accrual basis because the focus of the governmental unit is on capital maintenance rather than budgetary spending authority. Q18-6 The financial statements that must be prepared for the governmental funds are the balance sheet and the statement of revenue, expenditures, and changes in fund balance. The financial statements that must be prepared for the enterprise funds are the statement of net assets, the statement of revenue, expenses, and changes in fund net assets, and the statement of cash flows.

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Q18-7 Proceeds from a bond issue are accounted for as an other financing source in the fund which issued the bonds. However, some governments have a policy that the capital projects fund may not keep any bond premium, in which case the bond premium is typically transferred to a debt service fund. Other financing sources and uses are reported separately below operations, but above special items, on the governmental funds statement of revenues, expenditures, and changes in fund balance. Q18-8 A permanent fund is a governmental fund for which the principal is maintained, but the income in the fund can be used by the government for its programs that benefit all of its citizens. The basis of accounting in permanent funds is the modified accrual method. Private-purpose trust funds are established to benefit specific individuals or organizations, as specified by the donor. These private-purpose trust funds may have an expendable principal, or the principal may be non-expendable. The accrual basis of accounting is used for private-purpose funds. Thus, a major difference between these funds is the specificity of who the beneficiaries of the fund are. Q18-9 GASB 34 specifies that only governmental and enterprise funds determined to be major funds need to be separately disclosed in their own columns on the government-wide financial statements. There are two tests to determine which individual governmental and enterprise funds are considered major if they meet both tests. First, the general fund is always considered a major fund. The first test is total assets, liabilities, revenues, or expenditures/expenses of that individual fund are at least 10 percent or more of the governmental or enterprise category. The second test is that total assets, liabilities, revenues, or expenditures/expenses of the individual governmental or enterprise fund are at least 5 percent of the total for all governmental and enterprise funds combined. Any individual funds that are not considered major may be aggregated and presented in a single column. Management may, at any time, separately disclose even those non-major funds for which they feel the additional disclosure will provide information value to the readers of the financial statements. Q18-10 Contributions from external parties to endowments or permanent fund principal in governmental funds are reported along with special items and extraordinary items below operations, but above the net change in fund balance line in the statement of revenues, expenditures, and changes in fund balance. Contributions that are not limited or restricted are reported as revenue. Special items are those significant transactions within the control of management that are either unusual in nature or infrequent in occurrence. Extraordinary items are transactions or events that are both unusual and infrequent in occurrence. Q18-11 Agency funds must be self-balancing with assets equaling liabilities. Therefore, agency funds do not have a net fund balance.

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

Q18-12 Component units are separate government units for which the primary government is financially accountable. The financial presentation of these component units is dependent on the separability from the primary government. If the component unit is virtually inseparable, then the component units financial information is blended into the primary governments financial statements. However, if the component unit is distinguishable, and has its own taxing authority, then the component units financial information is presented in a separate column in the government-wide financial statements. Q18-13 Two reconciliation schedules are required by GASB 34. The first reconciles the net assets reported in the governmental funds to the net assets reported on the government-wide financial statements. For example, internal service funds are not a governmental fund, but the accounts for internal service funds are blended into the governmental activities that are reported on the government-wide financial statements. The second reconciliation schedule reconciles the net change in fund balances reported in the governmental funds statements to the change in net assets reported in the government-wide financial statements. These two reconciliation schedules are part of the required supplementary information (RSI) required by GASB 34. Q18-14 The budgetary comparison schedule reports, for the general fund and any other governmental fund that has a legally adopted budget, the initially approved budget, the final budget of the year, and the actual amounts, for each line item in the statement of revenues, expenditures, and changes in fund balance. A variance column may also be used to compare the actual against the final budget. This budgetary comparison schedule is part of the required supplementary information (RSI) required by GASB 34. Q18-15 The government-wide financial statements present the infrastructure assets, such as roads, bridges, tunnels, sewer and water systems, etc., and other long-term assets of the government entity, such as buildings, equipment, vehicles, etc. The capital assets should be reported at historical cost, or fair value at the time of donation, if donated. Because the basis of accounting for the government-wide financial statements is the accrual method, depreciation is recorded on the other long-term assets and these are reported net of depreciation. For infrastructure assets, the government unit may elect to use a modified approach in which depreciation is not recorded. The modified approach requires an assessment of the current condition of the infrastructure assets and an estimate of the annual amount required to maintain and preserve the infrastructure assets. In addition, the government-wide financial statements present the general long-term debt obligations of the governmental entity at the present value of the debt principal and future interest, just as computed under the accrual basis of accounting that is used for commercial entities.

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

SOLUTIONS TO CASES C18-1 Basis of Accounting and Reporting Issues

a. In the accrual basis of accounting, revenue should be recognized in the accounting period in which it is earned and becomes measurable. In the modified accrual basis of accounting, revenue should be recognized in the accounting period in which it becomes susceptible to accrual__that is, when it becomes both measurable and available to finance expenditures of the fiscal period. "Available" means collectible within the current period or soon enough thereafter to be used to pay current period liabilities.

b. For the general fund, the modified accrual basis of accounting should be used because it is a governmental fund, which is, in essence, an accounting segregation of financial resources. For the special revenue fund, the modified accrual basis of accounting should be used because it is a governmental fund, which is, in essence, an accounting segregation of financial resources. For the enterprise fund, the accrual basis of accounting should be used because it is a proprietary fund, with similar activities to those in the commercial, profit-seeking sector.

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

C18-2

Capital Projects, Debt Service, and Internal Service Funds

a. Capital projects funds account for the acquisition or construction of major capital facilities or improvements. A separate capital projects fund is created at the time the project is approved and ceases at the completion of the project. Accounting for capital projects funds is similar to accounting for the general fund. The modified accrual basis of accounting is used; no fixed assets, depreciation, or long-term debt is recorded in these funds. The bond proceeds are not revenue to the capital projects fund; they are reported as Other Financing Sources. A premium on the sale of bonds is transferred to the debt service fund. When the expenditure is recorded, Contract Payable is credited for the current portion due and Contract Payable__Retained Percentage is credited for the amount held back to ensure that the contractor fully completes the project to the satisfaction of the governmental unit. The financial statements for capital projects funds are a balance sheet and a statement of revenues, expenditures, and changes in fund balance. No budget versus actual is required because capital projects funds use a capital budget rather than an operating budget. b. Debt service funds account for the accumulation and use of resources for the payment of general long-term debt principal and interest. Accounting for the debt service fund is similar to accounting for the general fund. The modified accrual basis of accounting is used; no fixed assets or long-term debt is recorded, only current maturities are recorded in the fund. The bond premium received from the capital projects fund is recorded as another financing source__transfer in. The matured portion of a serial bond is recognized as an expenditure and Matured Bonds Payable is credited. Interest legally due and payable is recorded as an expenditure and Matured Interest Payable is credited. The financial statements of the debt service fund are a balance sheet and a statement of revenue, expenditures, and changes in fund balance. c. Internal service funds account for the financing of goods or services provided by one department to other departments on a cost-reimbursement basis. Separate internal service funds are established for each type of service. Accounting for internal service funds is the same as for enterprise funds or commercial entities. The accrual basis is used; these funds record fixed assets, depreciation, and long-term debt. The internal service fund may be started with a transfer in from the general fund. The billings are recorded in "Due from" accounts and the revenue account, Charges for Services. The closing entries involve a Profit and Loss Summary or Excess of Net Revenues over Costs account. The financial statements of an internal service fund are a statement of net assets; a statement of revenues, expenses, and changes in fund net assets; and, a statement of cash flows.

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

SOLUTIONS TO EXERCISES E18-1 1. 2. 3. 4. 5. 6. b c c b a a Multiple-Choice Questions on Budgets [AICPA Adapted]

E18-2 1. 2. 3. 4. 5. 6. d b a c c b

Multiple-Choice Questions on Governmental Funds [AICPA Adapted]

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

E18-3 1. 2. 3. 4. 5. 6. 7. 8. 9. b d d b c d b c c

Multiple-Choice Questions on Proprietary Funds [AICPA Adapted]

E18-4 1.

Multiple-Choice Questions on Various Funds $35,000

c The operating revenues include the $50,000 of dividends and the of interest earned.

2.

a The entries in the trust fund to record the resources spent would appear as follows: Expenses Vouchers Payable Vouchers Payable Cash 75,000 75,000 75,000 75,000

3. 4.

d d Income is determined as follows: Revenue__Charges for Services Operating Expenses Depreciation Expense Interest Expense Income $100,000 (45,000) (40,000) (5,000) $ 10,000

5.

The assets at June 30, 20X7 appear as follows: Cash Due from Other Funds Computer Equipment (net) Total Assets $ 96,000 7,000 610,000 $713,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

E18-4 6.

(continued) provided or used

b This is an example of an interfund services transaction. The general fund would debit expenditures.

7.

a This is an example of an interfund services provided or used transaction. The enterprise fund would debit operating expenses. b The net assets would be for the $600,000 transfer in plus the $10,000 of income for the period.

8.

E18-5 1. 2. 3. 4. 5. 6. d c d b a b

Multiple-Choice Questions on Various Funds [AICPA Adapted]

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

E18-6 a.

Capital Projects Fund Entries

Entries to record receipt of grant and bond sale: Cash Revenue__County Grant Cash Other Financing Source__Bond Issue Proceeds Other Financing Use__Transfer Out to Debt Service Fund Cash Transfer premium to debt service fund. 205,000 205,000 100,000 100,000

5,000 5,000

b.

Entries to record construction: March 1, 20X1 ENCUMBRANCES BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES November 10, 20X1 BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES ENCUMBRANCES Expenditures Contract Payable Expenditures Vouchers Payable December 15, 20X1 Contract Payable Vouchers Payable Cash

275,000 275,000

275,000 275,000 282,000 282,000 7,400 7,400

282,000 7,400 289,400

c.

Close nominal accounts: Revenue__County Grant Other Financing Source__Bond Issue Proceeds Unreserved Fund Balance Unreserved Fund Balance Expenditures Other Financing Use__Transfer Out to Debt Service Fund 100,000 205,000 305,000 294,400 289,400 5,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

E18-6 d.

(continued)

Transfer of ending balance and close transfer account: Other Financing Use__Transfer Out to Debt Service Fund Cash Unreserved Fund Balance Other Financing Use__Transfer Out to Debt Service Fund

10,600 10,600 10,600 10,600

E18-7 a.

Debt Service Fund Entries and Statement

Entries for debt service fund during 20X1: 1. ESTIMATED REVENUES CONTROL ESTIMATED OTHER FINANCING SOURCE__TRANSFER IN APPROPRIATIONS CONTROL BUDGETARY FUND BALANCE UNRESERVED Record budget. 38,000 5,000 38,000 5,000

2.

Property Taxes Receivable Allowance for Uncollectibles Revenue__Property Tax Record tax levy. Cash Property Taxes Receivable Record tax collections. Property Taxes Receivable__Delinquent Allowance for Uncollectibles Property Taxes Receivable Allowance for Uncollectibles__Delinquent Revenue__Property Tax Revise estimate of uncollectibles and reclassify remaining receivables. Cash Other Financing Source__Transfer In from Capital Projects Fund Receive bond premium.

40,000 4,000 36,000

36,000 36,000

4,000 4,000 4,000 1,000 3,000

5,000 5,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

E18-7 3.

(continued) Expenditures Matured Bonds Payable Matured Interest Payable Record matured principal and interest. Matured Bonds Payable Matured Interest Payable Cash Pay matured principal and interest. Expenditures Vouchers Payable Record other expenditures. Vouchers Payable Cash Pay approved vouchers. 38,000 20,000 18,000

20,000 18,000 38,000

1,800 1,800

1,500 1,500

4.

Cash Other Financing Source__Transfer In From Capital Projects Fund Record transfer of unspent funds in capital projects fund to debt service fund.

10,600 10,600

5.

APPROPRIATIONS CONTROL BUDGETARY FUND BALANCE UNRESERVED ESTIMATED REVENUES CONTROL ESTIMATED OTHER FINANCING SOURCE__TRANSFER IN Close budgetary accounts. Revenue__Property Tax Other Financing Source__Transfer In from Capital Projects Fund Unreserved Fund Balance Expenditures Close nominal accounts. Other Financing Source__Transfer In from Capital Projects Fund Unreserved Fund Balance Close transfers in.

38,000 5,000 38,000 5,000

39,000 5,000 4,200 39,800

10,600 10,600

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

E18-7

(continued)

b.City of York Debt Service Fund Statement of Revenues, Expenditures, and Changes in Fund Balance For Fiscal Year Ended December 31, 20X1 Revenue: Property Taxes Expenditures__Debt Service: Principal Retirement Interest Expense Miscellaneous Total Expenditures Deficiency of Revenue over Expenditures Other Financing Sources (Uses): Transfer In From Capital Projects Fund Net Change in Fund Balance Fund Balance, January 1 Fund Balance, December 31

$39,000 $20,000 18,000 1,800 $39,800 $ (800) 15,600 $14,800 -0$14,800

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

E18-8 a.

Enterprise Fund Entries and Statements

Entries for enterprise fund: 1. Accounts Receivable Revenue Record charges to customers. Cash Accounts Receivable Record collections on account. 420,000 420,000

432,000 432,000

2.

Cash Due to General Fund Receive loan from general fund.

30,000 30,000

3.

Plant and Equipment Contracts Payable Record extension of water and gas lines. Contracts Payable Cash Record payment for extended lines.

75,000 75,000

75,000 75,000

4.

Inventory of Supplies Operating Expenses Interest Expense Due to Central Stores Fund Vouchers Payable Interest Payable Record expenses. Due to Central Stores Fund Vouchers Payable Interest Payable Cash Record payment of approved vouchers, interest, and payment to central stores.

12,400 328,000 30,000 12,400 328,000 30,000

12,400 325,000 30,000 367,400

5.

Bad Debts Expense Allowance for Uncollectibles Adjust for bad debts expense. Depreciation Expense Accumulated Depreciation Adjust for depreciation for period. Supplies Expense Inventory of Supplies Adjust for supplies on hand.

6,300 6,300

32,000 32,000

15,200 15,200

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

E18-8

(continued)

Closing entries: Revenue Operating Expenses Interest Expense Bad Debts Expense Depreciation Expense Supplies Expense Profit and Loss Summary Close nominal accounts. Profit and Loss Summary Net Assets Close profit and loss summary. 420,000 328,000 30,000 6,300 32,000 15,200 8,500

8,500 8,500

b.

Augusta MUD Enterprise Fund Statement of Net Assets December 31, 20X1

Assets: Cash Accounts Receivable Less: Allowance for Uncollectibles Inventory of Supplies Land Plant and Equipment Less: Accumulated Depreciation Total Assets Liabilities: Vouchers Payable Due to General Fund Bonds Payable, 6% Total Liabilities Net Assets: Invested in Capital Assets, net of Related Debt Unrestricted Total Net Assets

$111,600 $ 13,000 (6,300) 6,700 5,200 120,000 443,000 $686,500

$555,000 (112,000)

$ 18,000 30,000 500,000 $548,000

$ 63,000 75,500 $138,500

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

E18-8 c.

(continued) Augusta MUD Enterprise Fund Statement of Revenue, Expenses, and Changes in Fund Net Assets For Fiscal Year Ended December 31, 20X1

Revenue: Revenue from Services Expenses: Operating Depreciation Supplies Bad Debts Interest Income and Change in Net Assets Net Assets, January 1 Net Assets, December 31

$420,000 $328,000 32,000 15,200 6,300 30,000

411,500 8,500 130,000 $138,500 $

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

E18-8

(continued) d.Augusta MUD Enterprise Fund Statement of Cash Flows For the Year Ended December 31, 20X1

Cash Flows from Operating Activities: Cash Received from Customers Cash Payments for Goods and Services Cash Paid to Internal Service Fund for Supplies Cash Paid for Interest Net Cash Provided by Operating Activities Cash Flows from Noncapital Financing Activities: Cash Received from General Fund for Noncapital Loan Net Cash Provided by Noncapital Financing Activities Cash Flows from Capital and Related Financing Activities: Extension of Service Lines Net Cash Used for Capital and Related Financing Activities Cash Flows from Investing Activities Net Increase in Cash Cash at Beginning of Year Cash at End of Year

$432,000 (325,000) (12,400) (30,000) $ 64,600

$ 30,000 30,000

$(75,000) (75,000) -0$ 19,600 92,000 $111,600

Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Income Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation Provision for Uncollectible Accounts Change in Assets and Liabilities: Decrease in Inventory and Supplies Decrease in Accounts Receivable Increase in Vouchers Payable Total Adjustments Net Cash Provided by Operating Activities $ 8,500

$ 32,000 6,300 2,800 12,000 3,000 56,100 $ 64,600

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

E18-9

Interfund Transfers and Transactions

General Fund 1. a. March 1, 20X8, Transfer out: Other Financing Use__Transfer Out to Building Maintenance Fund Cash June 30, 20X8, Closing entry: Unreserved Fund Balance Other Financing Use__Transfer Out to Building Maintenance Fund

12,000 12,000

b.

12,000 12,000

2.

a.

April 1, 20X8, Financing transaction: Due from Building Maintenance Fund Cash

8,000 8,000

b.

Shown on the general fund balance sheet on June 30, 20X8

3.

a.

April 15, 20X8, Transfer out: Other Financing Use__Transfer Out to Debt Service Fund Cash June 30, 20X8, Closing entry: Unreserved Fund Balance Other Financing Use__Transfer Out to Debt Service Fund

2,400 2,400

b.

2,400 2,400

4.

a.

May 5, 20X8, Interfund services provided or used: Expenditures 825 Due to Transportation Service Fund Due to Transportation Service Fund Cash 825

825

825

b.

June 30, 20X8, Closing entry: Unreserved Fund Balance Expenditures

825 825

Other Fund 1. Building Maintenance Internal Service Fund a. March 1, 20X8, Transfer in: Cash Transfer In from General Fund

12,000 12,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

E18-9 b.

(continued) June 30, 20X8, Closing entry: Transfer In from General Fund Net Assets

12,000 12,000

2.

Building Maintenance Fund a. April 1, 20X8, Financing transaction: Cash Due to General Fund

8,000 8,000

3.

Debt Service Fund a. April 15, 20X8, Transfer in: Cash Other Financing Source__ Transfer In from General Fund June 30, 20X8, Closing entry: Other Financing Source__ Transfer In from General Fund Unreserved Fund Balance

2,400 2,400

b.

2,400 2,400

4.

Transportation Service Fund a. May 5, 20X8, Interfund services provided or used: Due from General Fund 825 Revenue from Billings Cash Due from General Fund b. June 30, 20X8, Closing entry: Revenue from Billings Net Assets 825 825

825

825 825

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

E18-10 a.

Internal Service Fund Entries and Statements

Entries for 20X2, including closing entries: 1. Inventory of Supplies Furniture and Equipment Vouchers Payable Record acquisitions of supplies, furniture, and office equipment. 96,000 4,700 100,700

2.

Due from Other Funds Billings to Departments Record billings for jobs completed. Cash Due from Other Funds Record collections on billings. Costs of Printing Jobs Operating Expenses Inventory of Supplies Vouchers Payable Record costs of printing jobs. Depreciation Expense Accumulated Depreciation Record depreciation for period. Vouchers Payable Cash Pay approved vouchers.

292,000 292,000

287,300 287,300

204,000 38,000 92,400 149,600

23,000 23,000

243,000 243,000

Closing entries: Billings to Departments Costs of Printing Jobs Operating Expenses Depreciation Expense Profit and Loss Summary Close nominal accounts. Profit and Loss Summary Net Assets Close profit and loss summary. 292,000 204,000 38,000 23,000 27,000

27,000 27,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

E18-10 b.

(continued) Bellevue Printing Shop Fund Statement of Net Assets December 31, 20X2

Assets: Cash Due from Other Funds Inventory of Supplies Furniture and Equipment Less: Accumulated Depreciation Total Assets Liabilities: Vouchers Payable Total Liabilities Net Assets: Invested in Capital Assets, Net of Related Debt Unrestricted Total Net Assets

$ 68,900 20,300 13,400 $264,700 (73,000) 191,700 $294,300

$ 19,300 $ 19,300

$191,700 83,300 $275,000

c.

Bellevue Printing Shop Fund Statement of Revenue, Expenses, and Changes in Fund Net Assets For Fiscal Year Ended December 31, 20X2

Revenue: Billings to Departments Expenses: Costs of Printing Jobs Operating Depreciation Income Net Assets, January 1 Net Assets, December 31

$292,000 $204,000 38,000 23,000

265,000 $ 27,000 248,000 $275,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

E18-10 d.

(continued)

Bellevue City Internal Service Fund __ Printing Shop Statement of Cash Flows For the Year Ended December 31, 20X2 Cash Flows from Operating Activities: Cash Received from Customers Cash Payments for Printing Jobs Net Cash Provided by Operating Activities Cash Flows from Noncapital Financing Activities Cash Flows from Capital and Related Financing Activities Acquisition of Capital Assets (furniture and copier) Net Cash Used for Capital and Related Financing Activities Cash Flows from Investing Activities Net Increase in Cash Cash at Beginning of Year Cash at End of Year

$287,300 (238,300) $49,000 -0-

$ (4,700) (4,700) -0$44,300 24,600 $68,900

Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Income Adjustments to Reconcile Operating Income to Net Cash Used by Operating Activities: Depreciation Change in Assets and Liabilities: Increase in Due from Other Funds from Billings Increase in Inventory of Supplies Increase in Vouchers Payable Total Adjustments Net Cash Provided by Operating Activities $27,000

$ 23,000

(4,700) (3,600) 7,300 22,000 $49,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

E18-11 1. F

True/False Questions The budgetary comparison schedule requires both the initial budget and the final budget.

2. T 3. F 4. F A component unit is financially accountable to the primary government. The net assets in the government-wide statement of net assets would be categorized by: invested in capital assets, net of related debt; restricted by outside donors in specific funds; and, unrestricted. The tests for a major governmental, or enterprise fund, for which separate disclosure is required in the government-wide financial statements are: (a) total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least 10 percent or more of the governmental or enterprise category, and (b) total assets, liabilities, revenues, or expenditures/expenses of the individual governmental or enterprise fund are at least 5 percent of the total for all governmental and enterprise funds combined.

5. F

6. T 7. T 8. F The internal service fund is blended into the governmental activities columns of the government-wide financial statement of net assets and statement of activities.

9. T 10. F In the reconciliation schedule for the expenditures, and changes in fund balances, subtracted because they were included as other governmental funds, but are an addition government-wide financial statements. T F Depreciation on fixed assets of a government unit may be computed by any method deemed appropriate, such as straight-line or an accelerated method, but depreciation of fixed assets is not equal to the expenditures for fixed assets made in the governmental funds. statement of revenues, bond proceeds would be financing sources in the to liabilities in the

11. 12.

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

13.

F Managements Discussion and Analysis is a required supplementary information (RSI) disclosure in the new government reporting model. F Fiduciary funds are not part of the government-wide statement of net assets, but would be separately reported in the fiduciary funds section of the fund-based financial statements. T

14.

15.

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

SOLUTIONS TO PROBLEMS P18-12 a. Capital Projects Fund Entries and Balance Sheet [AICPA Adapted]

Entries to record transactions: July 1, 20X6: Cash Due to General Fund Record cash borrowed from the general fund. July 9, 20X6: Expenditures Vouchers Payable Record invoice from Dunn Associates. July 16, 20X6: Vouchers Payable Cash Pay invoice from Dunn Associates. December 1, 20X6: Cash Other Financing Source__Bond Issue Proceeds Record issuance of general obligation bonds at 101. Due from State Government Revenues Record grant from state. April 30, 20X7: ENCUMBRANCES BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES Record contract with Craft Construction Company. May 9, 20X7: Cash Due from State Government Record cash received from state grant.

300,000 300,000

200,000 200,000

200,000 200,000

6,060,000 6,060,000

3,000,000 3,000,000

7,000,000 7,000,000

1,000,000 1,000,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-12

(continued)

June 10, 20X7: Due to General Fund Cash Repay loan to general fund. BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES ENCUMBRANCES Reverse encumbrances for progress billing.

300,000 300,000

1,200,000 1,200,000

Expenditures 1,200,000 Contracts Payable 1,152,000 Contracts Payable__Retained Percentage 48,000 Record construction expenditures and 4% retainage until project completion.

b. Closing entries as of June 30, 20X7: Revenues Other Financing Source__Bond Issue Proceeds Unreserved Fund Balance Close resource inflows to unreserved fund balance. Unreserved Fund Balance Expenditures Close expenditures to unreserved fund balance. BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES ENCUMBRANCES Close lapsing encumbrances at year-end. Unreserved Fund Balance Fund Balance Reserved for Encumbrances Reserve fund balance for encumbrances. 3,000,000 6,060,000 9,060,000

1,400,000 1,400,000

5,800,000 5,800,000

5,800,000 5,800,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-12 c.

(continued) Balance sheet for capital projects fund Elizabeth Township Administration Center Capital Projects Fund Balance Sheet At June 30, 20X7

Assets Cash Due from State Government Total Assets

$6,860,000 2,000,000 $8,860,000

Liabilities and Fund Balance Liabilities: Contracts Payable Contracts Payable, Retained Percentage Total Liabilities Fund Balance: Reserved for Encumbrances Unreserved Total Fund Balance Total Liabilities and Fund Balance

$1,152,000 48,000 $1,200,000 $5,800,000 1,860,000 $7,660,000 $8,860,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-13

Adjusting Entries for General Fund [AICPA Adapted]

Adjusting entries to correct the general fund: 1. No entry required.

2.

Expenditures Buildings Correct for state grant expended for buildings. Expenditures Capital Outlays (equipment) Correct for expenditures for playground equipment.

300,000 300,000

22,000 22,000

3.

Bonds Payable Buildings Correct for bonds used to construct buildings. Other Financing Use__Transfer Out to Debt Service Fund Debt Service from Current Funds Correct for transfer to debt service fund.

1,000,000 1,000,000

130,000 130,000

4.

ENCUMBRANCES BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES Correct for unrecorded encumbrances.

2,800 2,800

5.

Expenditures Inventory of Supplies Correct for supplies used in period. Unreserved Fund Balance Fund Balance Reserved for Inventory Correct for reserve for ending inventory.

4,950 4,950

6,500 6,500

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-14 a.

Adjusting Entries for General Fund

[AICPA Adapted]

Reclassification and adjusting entries for the general fund: 1. Revenue Due to Water Utility Fund Recognize payable to water utility fund. Taxes Receivable__Delinquent Taxes Receivable__Current Year Reclassify taxes receivable. Revenue Allowance for Uncollectibles__Delinquent Recognize estimated uncollectible taxes. 3. Expenditures Bonds Payable Correct bonds payable for expenditures made. Supplies Inventory Expenditures Correct for supplies used: Purchases charged to expenditures $128,000 Supplies used (84,000) Supplies inventory $ 44,000 Unreserved Fund Balance Fund Balance Reserved for Inventories Correct for reserve for inventories. 5. Unreserved Fund Balance Fund Balance Reserved for Encumbrances__Prior Year Adjust unreserved fund balance at beginning of year for failure to establish a fund balance reserved for nonlapsing encumbrances from the prior year. Expenditures__Prior Year Expenditures (current year) Correct for expenditures chargeable to prior year. ENCUMBRANCES BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES Reserve budgetary fund balance for purchase orders on June 30, 20X2. 1,500 1,500

2.

30,000 30,000

24,000 24,000

52,000 52,000

4.

44,000 44,000

44,000 44,000

11,200 11,200

11,200 11,200

17,500 17,500

(Note: The balance sheet account for reserve for encumbrances will be established later during the closing entry process.)

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-14 6.

(continued) 34,000 34,000

Due from State Revenue Department Revenue Record receivable for shared tax. Expenditures General Property Revenue General Property Correct for property sold and for expenditures for new equipment. No entry required in the general fund.

7.

90,000 4,600 4,600 90,000

8.

b.

Closing entries for general fund. 1. APPROPRIATIONS CONTROL ESTIMATED REVENUES CONTROL BUDGETARY FUND BALANCE UNRESERVED Close budgetary revenue and appropriations. Revenue Unreserved Fund Balance Expenditures Close operating revenue and expenditures. Fund Balance Reserved for Encumbrances__Prior Year Expenditures__Prior Year Close expenditures encumbered in prior year. BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES ENCUMBRANCES Close remaining budgeted encumbrances. Unreserved Fund Balance Fund Balance Reserved for Encumbrances Reserve fund balance for nonlapsing encumbrances to be honored next year. 400,000 320,000 80,000

2.

373,100 95,700 468,800

3.

11,200 11,200

4.

17,500 17,500

5.

17,500 17,500

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-15

Entries for Funds

[AICPA Adapted]

Fund 1. General Fund

Journal Entries ESTIMATED REVENUES CONTROL 695,000 APPROPRIATIONS CONTROL 650,000 BUDGETARY FUND BALANCE UNRESERVED 45,000 Taxes Receivable__Current Allowance for Uncollectibles__Current Revenue__Taxes ENCUMBRANCES BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES ENCUMBRANCES Expenditures Vouchers Payable 160,000 1,600 158,400 2,390 2,390

2.

Special Revenue Fund

3.

General Fund

2,390 2,390 2,500 2,500 1,000 40 1,040 1,040

4.

General Fund

Due to Other Funds Expenditures Cash Cash Due from Other Funds Nonoperating Revenue

Enterprise Fund (Utility)

1,000 40

5. The contribution of land to the city is not recorded in any fund. Rather it is shown only on the government-wide financial statements as part of the assets, and a contribution to the city. 6. Capital Projects Fund Cash Other Financing Source__Bond Issue Proceeds Expenditures Contracts Payable 7. PrivatePurpose Trust Fund Investments Contributions Cash Revenue 84,000 84,000 32,000 32,000 1,100 1,100 90,000 90,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-15 Fund 8.

(continued) Journal Entries Cash Other Financing Source__Bond Issue Proceeds Other Financing Use__Transfer Out to Debt Service Fund Cash 308,000 308,000

Capital Projects Fund

8,000 8,000

Debt Service Fund Capital Projects Fund

Cash Other Financing Source__Transfer In from Capital Projects Fund ENCUMBRANCES BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES ENCUMBRANCES

8,000 8,000 300,000 300,000

300,000 300,000

Expenditures Cash

297,000 297,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-16

Entries for Funds [AICPA Adapted] Journal Entries ESTIMATED REVENUES CONTROL 400,000 APPROPRIATIONS CONTROL BUDGETARY FUND BALANCE UNRESERVED Taxes Receivable__Current Revenue__Taxes Allowance for Uncollectibles__Current Investments Contributions Cash Revenue__Interest 390,000 382,200 7,800 50,000 50,000 5,500 5,500

Fund 1. General Fund

394,000 6,000

2.

General Fund

3.

PrivatePurpose Trust Fund

4.

General

Other Financing Use__Transfer Out to Internal Service Fund Cash Cash Transfer In from General Fund

5,000 5,000 5,000 5,000

Internal Service Fund 5. Capital Projects Fund

Cash Other Financing Source__Bond Issue Proceeds Due from General Fund Other Financing Source__ Transfer In from General Fund

72,000 72,000 3,000 3,000 24,000 24,000

Debt Service Fund General

Special Assessments Receivable Revenue__Special Assessments

Other Financing Use__Transfer Out to Capital Projects Fund Due to Capital Projects Fund Due to Capital Projects Fund Cash Cash Due from General Fund

3,000 3,000 3,000 3,000 3,000 3,000

6.

General Fund Capital Projects Fund Debt Service Fund

Cash Special Assessments Receivable

24,000 24,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-16

(continued) Journal Entries ENCUMBRANCES BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES ENCUMBRANCES Expenditures Contracts Payable Contracts Payable Cash 75,000 75,000

Fund 7. Capital Projects Fund

75,000 75,000 75,000 75,000 75,000 75,000 1,900 1,900

8.

Internal Service Fund General Fund

Inventory of Supplies Cash (or Vouchers Payable)

9.

Cash Taxes Receivable__Current Revenue__Licenses and Fees Allowance for Uncollectibles__Current Revenue__Taxes Estimate $7,800 Actual (4,000) Correction $3,800

393,000 386,000 7,000 3,800 3,800

10. Capital Projects Fund 11. General Fund

Cash Other Financing Source__Bond Issue Proceeds BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES ENCUMBRANCES Expenditures Cash

500,000 500,000

15,000 15,000 15,000 15,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-17 a.

Entries to Adjust Account Balances [AICPA Adapted] General Fund

Adjusting entries: 1. Allowance for Uncollectibles__Delinquent Unreserved Fund Balance Reduce estimated losses on prior year's taxes to amount of receivables of $8,000. Revenue Donated Land Remove accounts belonging only in the government-wide financial statements. Unreserved Fund Balance Fund Balance Reserved for Encumbrances__20X0 Record purchase orders outstanding on June 30, 20X0. Expenditures__20X0 Other Expenditures Reclassify purchases of supplies chargeable to prior year's appropriations. Excess of $600 actual cost over estimate is approved and charged to current year expenditures. 4. ENCUMBRANCES BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES Record encumbering of appropriations for purchase orders outstanding on June 30, 20X1. Special Assessment Bonds Payable Due to Capital Projects Fund Record liability to capital projects fund for cash obtained from sale of special assessment bonds. Revenue Tax Anticipation Notes Payable Due to Water Utility Fund Record tax anticipation notes payable and liability to water utility fund for funds obtained from sale of scrap. 2,200 2,200

2.

27,000 27,000

3.

8,800 8,800

8,800 8,800

2,100 2,100

5.

100,000 100,000

6.

21,000 20,000 1,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-17

(continued)

Closing entries: APPROPRIATIONS CONTROL ESTIMATED REVENUES CONTROL BUDGETARY FUND BALANCE UNRESERVED BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES ENCUMBRANCES Unreserved Fund Balance Fund Balance Reserved for Encumbrances Revenue Unreserved Fund Balance Other Expenditures Expenditures__Building Addition Constructed Expenditures__Serial Bonds Paid Fund Balance Reserved for Encumbrances__20X0 Expenditures__20X0 b. Adjusting Journal Entries Capital Projects Fund: 5. Due from General Fund Other Financing Source__ Bond Issue Proceeds Record receivable due from general fund for proceeds of sale of bonds. 348,000 310,000 38,000

2,100 2,100 2,100 2,100 306,000 31,200 271,200 50,000 16,000

8,800 8,800

100,000 100,000

Water Utility Fund: 6. Due from General Fund Revenue__Miscellaneous Record receivable from general fund for cash obtained from sale of scrap.

1,000 1,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-18 a.

Capital Projects Fund Entries and Statements

Journal entries: 1. CPF Cash Other Financing Source__Bond Issue Proceeds Other Financing Use__Transfer Out to Debt Service Fund Cash DSF Cash Other Financing Source__Transfer In from Capital Projects Fund 2. CPF Expenditures Vouchers Payable Vouchers Payable Cash 45,000 45,000 45,000 45,000 5,080,000 5,080,000

80,000 80,000 80,000 80,000

(Note: It is not necessary to first establish, and then immediately reverse an encumbrance account.) 3. CPF ENCUMBRANCES BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES ENCUMBRANCES Expenditures Contracts Payable Contracts Payable__Retained Percentage CPF Contracts Payable Cash 4,500,000 4,500,000

4. CPF

2,000,000 2,000,000 2,000,000 1,800,000 200,000 1,800,000 1,800,000

Closing entries for Capital Projects Fund: Other Financing Source__Bond Issue Proceeds Expenditures Other Financing Use__Transfer Out to Debt Service Fund Unreserved Fund Balance BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES ENCUMBRANCES P18-18 (continued)
The McGraw-Hill Companies, Inc., 2002

5,080,000 2,045,000 80,000 2,955,000

2,500,000 2,500,000

McGraw-Hill/Irwin

Unreserved Fund Balance Fund Balance Reserved for Encumbrances

2,500,000 2,500,000

b.

West City Capital Projects Fund Balance Sheet June 30, 20X3 Assets Cash Total Assets Liabilities and Fund Balance Contracts Payable__Retained Percentage Fund Balance: Reserved for Encumbrances $2,500,000 Unreserved 455,000 Total Liabilities and Fund Balance $3,155,000 $3,155,000

200,000

2,955,000 $3,155,000

c.

West City Capital Projects Fund Statement of Revenues, Expenditures, and Changes in Fund Balance For Fiscal Year Ended June 30, 20X3 Expenditures: Capital Outlays: Building Removal Building Construction Total Expenditures Deficiency of Revenues over Expenditures Other Financing Sources (Uses): Proceeds of Serial Bonds Transfer Out to Debt Service Fund Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance, July 1, 20X2 Fund Balance, June 30, 20X3

45,000 2,000,000 $ 2,045,000 $(2,045,000) 5,080,000 (80,000) $ 5,000,000 $ 2,955,000 -0$ 2,955,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-19 1.

Recording Entries in Various Funds [AICPA Adapted]

Entries made in the capital projects fund for 20X8: Cash Other Financing Source__Bond Issue Proceeds Issued $800,000 of bonds at their face value. ENCUMBRANCES BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES Contractors bid is accepted. 750,000 750,000 800,000 800,000

BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES 250,000 ENCUMBRANCES One-third of the project was completed during 20X8. Expenditures Contracts Payable Actual construction cost incurred in 20X8. 246,000

250,000

246,000

2.

Entries made in the special revenue fund for 20X8: ESTIMATED REVENUES CONTROL APPROPRIATIONS CONTROL BUDGETARY FUND BALANCE UNRESERVED Record the budget for 20X8. Cash Revenues Collected hotel room taxes. Expenditures Vouchers Payable Incurred expenditures for general promotion and motor vehicle. Vouchers Payable Cash Paid expenditures. 103,000 103,000 112,000 108,000 4,000

109,000 109,000

103,000 103,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-19 3.

(continued)

Entry made in the general fund for 20X8: Other Financing Use__Transfer Out to Debt Service Fund 313,500 Cash Record transfer of resources to debt service fund. Entries made in the debt service fund for 20X8: Cash Other Financing Source__Transfer In from General Fund Record transfer of resources from general fund. Expenditures__Interest Matured Interest Payable Record interest legally due and payable. Expenditures__Principal Matured Bonds Payable Record principal legally due and payable. Matured Bonds Payable Matured Interest Payable Cash Record payment of matured bonds and interest. 13,500 13,500 313,500 313,500

313,500

300,000 300,000

300,000 13,500 313,500

4.

Closing entries in the general fund for 20X8: BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES ENCUMBRANCES Close outstanding encumbrances at year-end. Unreserved Fund Balance Fund Balance Reserved for Encumbrances Reserve actual fund balance for encumbrances expected to be honored in 20X9. 83,000 83,000

83,000 83,000

5.

Adjusting entry in the general fund for 20X8: Fund Balance Reserved for Inventories Inventory of Supplies Adjust inventory of supplies to balance at December 31, 20X8. 3,000 3,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-20 a.

Analysis of Transactions in Various Funds

[AICPA Adapted] 6,000,000 4,600,000 700,000 500,000 200,000

ESTIMATED REVENUES CONTROL APPROPRIATIONS CONTROL ESTIMATED OTHER FINANCING USE__ TRANSFER OUT TO ENTERPRISE FUND ESTIMATED OTHER FINANCING USE__ TRANSFER OUT TO CAPITAL PROJECTS FUND BUDGETARY FUND BALANCE UNRESERVED

b. The amount debited to Property taxes receivable at the date of the original tax levy was $4,750,000. The following entry was made: Property Taxes Receivable__Current Allowance for Uncollected Taxes__Current Revenues__Property Taxes 4,750,000 50,000 4,700,000

Cash collected from property taxes during 20X8 amounted to $4,330,000. The following schedule shows how this amount is determined: Property taxes receivable at the levy date Less: Balance at December 31, 20X8 Property taxes collected during 20X8 $4,750,000 420,000 $4,330,000

c.

Other Financing Use__Transfer Out to Enterprise Fund Cash* Other Financing Use__Transfer Out to Capital Projects Fund Cash*

700,000 700,000 500,000 500,000

*The credit may be made to a liability account (for example: Due to Capital Projects Fund) before cash is transferred to the capital projects and enterprise funds.

d. The amount reported for unreserved fund balance on the December 31, 20X8, balance sheet is $50,000. This amount is determined by subtracting the total resource outflows of $5,700,000 from the total revenues of $5,750,000. The closing entries would appear as follows: Revenues__Property Taxes Revenues__Other Expenditures Other Financing Use__Transfer Out to Capital Projects Fund Other Financing Use__Transfer Out to Enterprise Fund Unreserved Fund Balance 4,700,000 1,050,000 4,500,000 500,000 700,000 50,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-20 e.

(continued)

The general fund would record the billing in the following manner: Expenditures Due to Enterprise Fund 2,000 2,000

The enterprise fund would record the billing in the following manner: Due from General Fund Revenue__Water Sales 2,000 2,000

f. The water utility following manner: Cash

would

record

the

sale

of

the

revenue

bonds

in

the

4,000,000 Revenue Bonds Payable 4,000,000

The water utility would record the transfer in using the following way: Cash Transfer In from the General Fund 700,000 700,000

g. The amount reported for bonds payable in the government-wide financial statements for general long-term debt at December 31, 20X8, is $1,200,000. This is the amount of the general long-term debt that was issued to finance the construction of the civic center.

h. The amount reported in the government-wide financial statements for general fixed assets (reported as construction in progress) from the capital projects fund at December 31, 20X8, is $1,080,000. This is the amount of the expenditures incurred in Gels capital projects fund during 20X8.

i. Total encumbrances recorded during 20X8 amounted to $2,422,000. This amount is determined in the following manner: Outstanding encumbrances at December 31, 20X8 Encumbrances related to work done in 20X8 ($1,080,000 + 42,000) Total encumbrances recorded during 20X8 $ 1,300,000 1,122,000 $ 2,422,000

j. The unreserved fund balance at December 31, 20X8, was $120,000. This amount is determined in the following manner: Unreserved fund balance from the closing entry Less: Outstanding encumbrances at December 31, 20X8 Unreserved fund balance at December 31, 20X8 $1,420,000 1,300,000 $ 120,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-20

(continued)

k. The state capital grant for the civic center was $800,000. This is the amount of the revenue closed out in the closing entry given for the capital projects fund.

l. The completed cost of the civic center was $2,473,000. This amount is determined in the following manner: Total resources received by the capital projects fund in 20X8 Less: Premium transferred to debt service fund Transfer to general fund at project completion Completed cost of the civic center

$2,530,000 $30,000 27,000 (57,000) $2,473,000

m. The general fund would record the following entry for the transfer: Cash Other Financing Source__ Transfer In from Capital Projects Fund 27,000 27,000

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-21

Matching Questions Involving Various Funds

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

P18-22

Questions on Fund Transactions [AICPA Adapted]

1. $104,500

(stated in item #3)

2. $17,000

(stated in item #4)

3. $125,000 (item #5 states that $83,000 is reserved for encumbrances. To this is added the $42,000 reserve for the ending inventory.)

4. $236,000 (item 1 states that $600,000 of bond proceeds were received in the capital project fund, less $364,000 of construction expenditures in the period.)

5. $6,000 (item #2 states that $109,000 tax revenues were received from which $81,000 and $22,000 were expended.)

6. $104,500
McGraw-Hill/Irwin

(stated in item #3)


The McGraw-Hill Companies, Inc., 2002

7. $386,000 (item #1 states construction expenditures of $364,000 plus item #2 states a motor vehicle purchase of $22,000)

8. $100,000 (item #3 states a reduction in long-term debt principal of $100,000)

9. $181,000 (item 6 states that $181,000 was used to purchase supplies during the period)

10. $190,000

(item 6 states encumbrances of $190,000)

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-23

Matching Questions Involving the Statement of Cash Flows for a Proprietary Fund

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

C A C A E A C B B C A E D D C

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-24

Matching Questions Involving the Statement of Revenues, Expenditures, and Changes in Fund Balance for a Capital Projects Fund and a Debt Service Fund

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

C D C C B A C D A C B B D

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-25 a. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. b. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

Questions on Fund Transactions

[AICPA Adapted]

G K L L E J D A F B

B F C J B G A D I H

and J and J and J and J and J

and J and J

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002

P18-26

Questions on Fund Transactions [AICPA Adapted]

1. $70,000 Estimated revenues of $8,000,000 less estimated expenditures of $7,500,000 and estimated transfers out of $250,000 for courthouse improvement and $180,000 for solid waste landfill enterprise fund. 2. $430,000 $250,000 to capital projects fund plus $180,000 to landfill enterprise fund 3. $0 Under the modified accrual basis, interest is not recognized until it is matured and legally payable. $10,000 is paid on July 1, 20X2.

4. $10,000

5. $5,018,000 Of the $5,060,000 taxes receivable, which is the $5,000,000 revenue plus the allowance of $60,000, $4,000 were written off which is the difference between the $60,000 initial estimate and the $56,000 balance of the allowance that was closed in item #5 in the problem. And the remaining balance of $38,000 in the receivables was matched with a related balance for uncollectibles of $38,000. 6. $450,000 Item #3 in the problem states the $450,000 entitlement. The transfer in and the bond proceeds are other financing sources. 7. $868,000 $800,000 of bonds payable for the capital projects plus $78,000 for the fire department equipment less $10,000 paid in 20X2 for the lease payment. 8. $1,580,000 Courthouse improvement of $1,527,000 plus leased equipment of $78,000 less $25,000 for the police car that was sold. 9. $107,000 Computed as the percentage of total cubic yard usage filled multiplied times the actual costs to date ($300,000) plus the estimated future costs ($1,700,000), with that amount reduced by the expense recognized previously ($973,000): _ _ _ _ 500,000 + 40,000 yards x $300,000 actual + - $973,000 1,000,000 yards $1,700,000 estimated _ _ _ _ $107,000 = ( 54% x $2,000,000) - $973,000

10. $780,000 $973,000 expense incurred previously plus $107,000 expense for 20X2, less $300,000 closure costs paid to date.

McGraw-Hill/Irwin The McGraw-Hill Companies, Inc., 2002