CHAPTER 19GOVERNMENTAL ENTITIES: PROPRIETARY FUNDS,
FIDUCIARY FUNDS, AND COMPREHENSIVE ANNUAL FINANCIAL REPORT
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. 19–1 Kaspar City (30 minutes, medium)
Journal entries for general fund, enterprise fund, internal service fund, and general capital assets account group of a governmental entity.
Pr. 19–2 Town of Tolliver (30 minutes, medium)
Preparation of a statement of revenues, expenses, and changes in net assets and a statement of net assets for the enterprise fund of a governmental entity.
Pr. 19–3 Diggs County (30 minutes, medium)
Working paper summarizing journal entries for an agency fund of a governmental entity and for general funds of other governmental entities serviced by the agency fund.
Pr. 19–4 Town of Northville (40 minutes, medium)
Given selected transactions and events of a governmental entity's funds and account groups, prepare working paper summarizing journal entries (explanations omitted) for the transactions and events. Affected fund or account group must be identified.
Pr. 19–5 City of Cavendish (40 minutes, medium)
Journal entries for operations of the internal service fund of a governmental entity.
Pr. 19–6 Town of Novis (60 minutes, strong)
Adjusting and closing entries for general fund, and adjusting entries for enterprise fund, general long-term debt account group, and general capital assets account group, when all governmental entity transactions are inappropriately accounted for in a general fund. Post-closing trial balance for general fund.
Pr. 19–7 Village of Rosner (50 minutes, strong)
Statement of cash flows (indirect method) for a governmental entity's enterprise fund.
ANSWERS TO REVIEW QUESTIONS
1. General obligation bonds payable of a governmental entity are recorded in the governmental entity's enterprise fund if that fund is obligated to pay the bonds at maturity. This situation arises when the general obligation bond proceeds are used to finance plant additions of the enterprise fund.
2. Differences between the accounting for a governmental entity's enterprise fund and the accounting for a business enterprise include the following (only three required):
(1) Enterprise funds are not subject to federal and state income taxes.
(2) There is no capital stock in an enterprise fund's statement of net assets.
(3) An enterprise fund has restricted assets.
(4) Current liabilities payable from restricted assets are segregated from other current liabilities of an enterprise fund.
The McGraw-Hill Companies, Inc., 2006Solutions Manual, Chapter 19 511
(5) A restricted portion of net assets generally is included in the accounting records of an enterprise fund. (Appropriations of retained earnings are rare for business enterprises.)
(6) A transfers section is included in the statement of revenues, expenses, and changes in net assets of an enterprise fund.
3. An enterprise fund has restricted assets in its statement of net assets because of the need to assure that customer advances and proceeds of revenue bonds are used for the purposes intended for the advances or bonds proceeds.
4. The four categories of cash flows in the statement of cash flows for a governmental entity's enterprise fund are (a) from operating activities, (b) from noncapital financing activities, (c) from capital and related financing activities, and (d) from investing activities.
5. The excess of total assets over total liabilities of a governmental entity's internal service fund is displayed as net assets on the statement of net assets because the internal service fund does not have owners' equity.
6. The statement of net assets of a governmental entity's internal service fund does not have a restricted assets section or a liabilities payable from restricted assets section, as does the statement of net assets of an enterprise fund. Further, a restricted portion of net assets for revenue bond retirement, which typically is displayed in the balance sheet of a governmental entity's enterprise fund, is not relevant for an internal service fund.
7. Because an agency fund does not have operations, a statement of revenues, expenses, and changes in fiduciary net assets is not appropriate for it. Instead, a statement of changes in assets and liabilities is issued for an agency fund.
8. The principal of a nonexpendable private-purpose trust must be maintained intact by the custodian governmental entity, but the revenues produced by the trust principal may be expended to carry out the purposes of the trust. Therefore, separate trust principal and trust revenues funds are required to distinguish between trust activities applicable to principal and to revenues.
9. Contributions in the statement of changes in pension plan net assets of a governmental entity's pension trust fund represents the amounts received by the trust fund from both the governmental entity and its employees under a contributory pension plan of the governmental entity or from the governmental entity only under a noncontributory pension plan.
10. In addition to fund financial statements, government-wide financial statements are included in the comprehensive annual financial report of a governmental entity.
11. No, required supplementary information is a separate section of the comprehensive annual financial report of a governmental entity.
The McGraw-Hill Companies, Inc., 2006512 Modern Advanced Accounting, 10/e
SOLUTIONS TO EXERCISES
Ex. 19–1 1. a 8. c2. d 9. c3. a 10. a4. b 11. d5. d 12. a6. a 13. d7. b
Ex. 19–2 Journal entry for Orchard City General Fund, May 31, 2006:
Expenditures 16,400Payable to Enterprise Fund 16,400
To record billing for services received from Enterprise Fund.
Journal entry for Orchard City Enterprise Fund, May 31, 2006:
Receivable from General Fund 16,400Charges for Services 16,400
To record billing for services to General Fund.
Ex. 19–3 Computation of required balance of Town of Goland Enterprise Fund Net Assets Restricted for Revenue Bonds Retirement ledger account, June 30, 2006:
Total restricted assets ($42,300 + $168,100) $210,400Less: Total liabilities payable from restricted assets ($24,400 + $62,600) 87,000Restriction of net assets $123,400
Ex. 19–4 Journal entry for Wilbert Township General Fund, June 18, 2006:
Cash 120,000Revenues 120,000
To record payment in lieu of property taxes received from Enterprise Fund.
Journal entry for Wilbert Township Enterprise Fund, June 18, 2006:
Payment in Lieu of Property Taxes 120,000Cash 120,000
To record payment in lieu of property taxes to General Fund.
Ex. 19–5 Cash flows from operating activities exhibit for Town of Liddell Enterprise Fund, year ended June 30, 2006:
Operating income $125,400Adjustments to reconcile operating income to net cash provided by operating activities:
Depreciation expense 81,700Increase in accounts receivable (36,800)Decrease in receivable from General Fund 21,700Decrease in inventory of supplies 42,600Increase in short-term prepayments (11,600)Decrease in vouchers payable (12,200)Increase in accrued liabilities 8,100
Net cash provided by operating activities $218,900
The McGraw-Hill Companies, Inc., 2006Solutions Manual, Chapter 19 513
Ex. 19–6 TOWN OF DILBEY INTERNAL SERVICE FUNDStatements of Revenues, Expenses, and Changes in Net Assets
For Year Ended June 30, 2006
Operating revenues:Charges for services $ 324,800
Operating expenses 320,000Increase in net assets $ 4,800Net assets, beginning of year 1,273,600Net assets, end of year $1,278,400
TOWN OF DILBEY INTERNAL SERVICE FUNDStatement of Net Assets
June 30, 2006
AssetsCurrent assets:
Cash $ 17,200Receivable from General Fund 12,000Inventory of supplies 128,600
Total current assets $ 157,800Plant assets $1,804,800Less: Accumulated depreciation 655,600
Net plant assets 1,149,200Total assets $1,307,000
Liabilities & Net Assets
Current liabilities:Vouchers payable $ 28,600
Net assets $1,278,400Total liabilities & net assets
Ex. 19–7 Journal entries for Roark City Endowment Principal Nonexpendable Private-Purpose Trust
Fund:
2005July 1 Investments 620,000
Additions—Contributions 620,000
Dec. 14 Cash 42,000Additions—Investment Earnings 42,000
14 Transfers Out 42,000Payable to Revenues Private-Purpose Trust
Fund 42,000
Journal entry for Roark City Endowment Revenues Expendable Private-Purpose Trust Fund:
2005Dec. 14 Receivable from Endowment Principal Private-
Purpose Trust Fund 42,000Transfers In 42,000
The McGraw-Hill Companies, Inc., 2006514 Modern Advanced Accounting, 10/e
Ex. 19–8 CITY OF CARVELL PENSION TRUST FUNDStatement of Changes in Fiduciary Net Assets
For Year Ended June 30, 2006
Additions:Employee contributions $211,600Employer contributions 318,500Investment revenues (net) 163,900
Total additions $694,000Deductions:
Annuity benefits $284,300Disability benefits 52,800Refunds of contributions 61,600Administrative expenses 294,600
Total deductions 693,300Net increase $ 700Net assets held in trust for benefits, beginning of year 841,000Net assets held in trust for benefits, end of year $841,700
Ex. 19–9 Journal entries for Local Town Enterprise Fund:
2005Nov. 3 Cash 1,000,000
General Obligation Bonds Payable 1,000,000
30 Accounts Receivable 80,000Charges for Services 80,000
Journal entries for Local Town General Fund:
2005Nov. 5 Expenditures 25,000
Vouchers Payable 25,000
5 Fund Balance Reserved for Encumbrances 24,700Encumbrances 24,700
Journal entry for Local Town General Capital Assets Account Group:
2005Nov. 5 Machinery and Equipment 25,000
Investment in General Capital Assets from General Fund Revenues 25,000
Journal entry for Local Town Internal Service Fund:
2005Nov. 7 Inventory of Supplies 50,000
Cash 50,000
CASES
Case 19–1 In view of the contribution of the Ashburn City Special Revenue Fund, it is inappropriate for the Ashburn City Electric Utility Enterprise Fund to absorb the entire $80,000 interest on the 8% general obligation serial bonds. It is preferable to account for the required Special Revenue Fund payment of 80% of the $80,000 interest, or $64,000, as a reduction of the Interest Expense ledger account balance of the Electric Utility Enterprise Fund, rather than as a credit to the equity-type Contribution from Special Revenue Fund ledger account. Accounting for the $64,000 as a reduction of interest expense would result in an increase in
The McGraw-Hill Companies, Inc., 2006Solutions Manual, Chapter 19 515
net assets of $24,000 for the Electric Utility Enterprise Fund instead of a decrease in net assets of $40,000 ($64,000 – $40,000 = $24,000). This treatment reflects the nature of the $64,000it is a subsidy for current operating expenses of the Electric Utility Enterprise Fund, rather than a contribution for plant asset additions.
Case 19–2 The Stuarts' gift is nonexpendable; thus two separate private-purpose trust fundsone for principal and one for revenuesmust be established by officials of Colby City. The trust indenture should govern the proper allocation of transactions and events associated with the Greystone tours to the principal trust fund or the revenue trust fund.
Because the trust indenture requires recognition of depreciation on Greystone, the journal entry should be made in the Colby City Endowment Principal Nonexpendable Trust Fund with a debit to Net Assets Reserved for Endowment and a credit to Accumulated Depreciation. It would be inappropriate to charge depreciation to the Colby City Endowment Revenues Expendable Trust Fund because the trust indenture provides that only operating expenditures associated with the tours and maintenance and repair costs are chargeable to that fund.
The McGraw-Hill Companies, Inc., 2006516 Modern Advanced Accounting, 10/e
30 Minutes, MediumKaspar City Pr. 19–1
Kaspar City General Fund
Journal Entries
20 05
July 1 Taxes Receivable—Current 1 6 0 0 0 0 0
Allowance for Uncollectible Current Taxes
($1,600,000 x 0.05) 8 0 0 0 0
Revenues 1 5 2 0 0 0 0
To accrue property taxes billed and to provide for
estimated uncollectible portion.
Sept 1 Expenditures 1 0 0 0 0
Vouchers Payable 1 0 0 0 0
To record expenditure for computer.
1 Fund Balance Reserved for Encumbrances 1 0 2 0 0
Encumbrances 1 0 2 0 0
To reverse encumbrance applicable to vouchered
expenditure.
Oct 1 Inventory of Supplies 1 2 0 0
Payable to Internal Service Fund 1 2 0 0
To record invoice for supplies received from Internal
Service Fund.
Kaspar City Enterprise Fund
Journal Entry
20 05
Aug 1 Cash [($1,000,000 x 0.306557) + ($35,000 x 23.11472)] 1 1 1 5 5 7 4
General Obligation Bonds Payable 1 0 0 0 0 0 0
Premium on General Obligation Bonds Payable 1 1 5 5 7 4
To record issuance of 20–year, 7% general obligation
bonds to finance construction of power-generating facility.
Kaspar City General Capital Assets Account Group
Journal Entry
20 05
Sept 1 Machinery and Equipment 1 0 0 0 0
Investment in General Capital Assets from
General Fund Revenues 1 0 0 0 0
To record acquisition of computer by General Fund.
Kaspar City Internal Service Fund
Journal Entry
20 05
Oct 1 Receivable from General Fund 1 2 0 0
Charges for Services 1 2 0 0
To record billing for supplies sent to General Fund.
The McGraw-Hill Companies, Inc., 2006Solutions Manual, Chapter 19 517
30 Minutes, MediumTown of Tolliver Pr. 19–2
Town of Tolliver Enterprise Fund
Statement of Revenues, Expenses, and Changes in Net Assets
For Year Ended June 30, 2006
Operating revenues:Charges for services $ 6 4 3 0 0 0
Operating expenses:
Personal services $ 2 8 1 0 0 0
Contractual services 1 4 3 0 0 0
Material and supplies 4 6 0 0 0
Heat, light, and power 3 8 0 0 0
Depreciation 5 7 0 0 0
Total operating expenses 5 6 5 0 0 0
Operating income $ 7 8 0 0 0Nonoperating revenues (expenses):
Operating grants $ 5 0 0 0 0
Investment revenue and net gains 1 2 0 0 0
Interest expense and fiscal agent fees ( 8 3 0 0 0 )
Total nonoperating revenues (expenses) ( 2 1 0 0 0 )
Increase in net assets $ 5 7 0 0 0Net assets, beginning of year 7 5 9 0 0 0
Net assets, end of year $ 8 1 6 0 0 0
The McGraw-Hill Companies, Inc., 2006518 Modern Advanced Accounting, 10/e
Town of Tolliver (concluded) Pr. 19–2
Town of Tolliver Enterprise Fund
Statement of Net Assets
June 30, 2006
AssetsCurrent assets:
Cash $ 2 2 0 0 0
Short-term investments, at fair value 6 4 0 0 0
Accounts receivable (net) 5 2 0 0 0
Receivable from other funds 4 4 0 0 0
Inventory of supplies, at average cost 4 7 0 0 0
Short-term prepayments 8 0 0 0
Total current assets $ 2 3 7 0 0 0Restricted assets:
Cash $ 3 8 0 0 0
Short-term investments, at fair value 9 7 0 0 0
Total restricted assets 1 3 5 0 0 0Plant assets:
Land $ 1 6 0 0 0 0
Buildings 8 3 0 0 0 0
Machinery and equipment 2 4 7 0 0 0
Subtotal $1 2 3 7 0 0 0Less: Accumulated depreciation 2 4 8 0 0 0
Net plant assets 9 8 9 0 0 0
Total assets $1 3 6 1 0 0 0
LiabilitiesCurrent liabilities:
Vouchers payable and contracts payable $ 6 5 0 0 0
Accrued liabilities 1 8 0 0 0
Total current liabilities $ 8 3 0 0 0Liabilities payable from restricted assets:
Interest payable $ 2 4 0 0 0
Current portion of revenue bonds 4 0 0 0 0
Customers’ deposits 3 8 0 0 0
Total liabilities payable from restricted assets 1 0 2 0 0 0Long-term debt:
Revenue bonds, less current portion 3 6 0 0 0 0
Total liabilities $ 5 4 5 0 0 0
Net Assets
Net assets:
Invested in Capital, net of related debt $ 5 8 9 0 0 0
Restricted for revenue bonds retirement 7 3 0 0 0
Unrestricted 1 5 4 0 0 0
Total net assets $ 8 1 6 0 0 0
The McGraw-Hill Companies, Inc., 2006Solutions Manual, Chapter 19 519
30 Minutes, MediumDiggs County Pr. 19–3
Diggs County, Evans City, and Hickman TownshipJournal Entries
For Three Months Ended October 1, 2005
HickmanDiggs County Diggs County Evans City Township
Tax Agency Fund General Fund General Fund General FundAccount titles dr (cr) dr (cr) dr (cr) dr (cr)
Taxes Receivable—Current 3 6 0 0 0 0 0 1 8 0 0 0 0 0 6 0 0 0 0 0Allowance for Uncollectible Current Taxes ( 1 0 0 0 0 0 ) ( 6 0 0 0 0 ) ( 4 0 0 0 0 )Revenues (3 5 0 0 0 0 0 ) (1 7 4 0 0 0 0 ) ( 5 6 0 0 0 0 )
To accrue property taxes billed and to provide for estimated uncollectible portion.
Cash 1 4 4 0 0 0 0Expenditures 8 6 4 0 (1) 2 8 8 0 (2)Receivable from Diggs County Tax Agency Fund 8 7 5 5 2 0 4 2 3 3 6 0 1 4 1 1 2 0
Payable to Diggs County General Fund ( 8 7 5 5 2 0 )(3)Payable to Evans City General Fund ( 4 2 3 3 6 0 )(4)Payable to Hickman Township General Fund ( 1 4 1 1 2 0 )(5)Taxes Receivable—Current ( 8 6 4 0 0 0 )(6) ( 4 3 2 0 0 0 )(7) ( 1 4 4 0 0 0 )(8)Revenues ( 1 1 5 2 0 )(9)
To record Tax Agency Fund’sreceipt of first-quarter propertytaxes, net of administrative fee.
Payable to Diggs County General Fund 8 7 5 5 2 0Payable to Evans City General Fund 4 2 3 3 6 0Payable to Hickman Township General Fund 1 4 1 1 2 0Cash 8 7 5 5 2 0 4 2 3 3 6 0 1 4 1 1 2 0
Receivable from Diggs County Tax Agency Fund ( 8 7 5 5 2 0 ) ( 4 2 3 3 6 0 ) ( 1 4 1 1 2 0 )Cash (1 4 4 0 0 0 0 )
To record Tax Agency Fund’scash remittances.
Computation:(1) ($432,000 x 0.02) = $8,640(2) ($144,000 x 0.02) = $2,880(3) ($1,440,000 x 0.60) + ($432,000 x 0.02) + ($144,000 x 0.02) = $875,520(4) ($1,440,000 x 0.30) x 0.98 = $423,360(5) ($1,440,000 x 0.10) x 0.98 = $141,120(6) ($1,440,000 x 0.60) = $864,000(7) ($1,440,000 x 0.30) = $432,000(8) ($1,440,000 x 0.10) = $144,000(9) ($432,000 x 0.02) + ($144,000 x 0.02) = $11,520
The McGraw-Hill Companies, Inc., 2006520 Modern Advanced Accounting, 10/e
40 Minutes, MediumTown of Northville Pr. 19–4
Town of Northville
Journal Entries
For Year Ended June 30, 2006
Fund or
Transaction account
no. group Account titles Debit Credit
(1) GF Estimated Revenues 4 0 0 0 0 0
Appropriations 3 9 4 0 0 0
Budgetary Fund Balance 6 0 0 0
(2) GF Taxes Receivable—Current 3 9 0 0 0 0
Allowance for Uncollectible Current
Taxes 7 8 0 0
Revenues 3 8 2 2 0 0
(3) EPF Investments 5 0 0 0 0
Additions—Contributions 5 0 0 0 0
EPF Cash 5 5 0 0
Additions—Investment earnings 5 5 0 0
EPF Other Financing Uses—Transfers Out 5 5 0 0
Payable to Endowment Revenues
Private-Purpose Trust Fund 5 5 0 0
EPF Payable to Endowment Revenues
Private-Purpose Trust Fund 5 5 0 0
Cash 5 5 0 0
ERF Receivable from Endowment Principal
Private-Purpose Trust Fund 5 5 0 0
Other Financing Sources—Transfers In 5 5 0 0
ERF Cash 5 5 0 0
Receivable from Endowment Principal
Private-Purpose Trust Fund 5 5 0 0
(4) GF Other Financing Uses—Transfers Out 5 5 0 0 0
Cash 5 5 0 0 0
ISF Cash 5 5 0 0 0
Other Financing Sources—Transfers In 5 5 0 0 0
(5) SRF Special Assessment Receivable—Current 7 2 0 0 0
Receivable from General Fund 3 0 0 0
Revenues 7 2 0 0 0
Other Financing Sources—Transfers In 3 0 0 0
SRF Cash 7 5 0 0 0
Special Assessment Receivable—
Current 7 2 0 0 0
Receivable from General Fund 3 0 0 0
(Continued on page 522.)
The McGraw-Hill Companies, Inc., 2006Solutions Manual, Chapter 19 521
Town of Northville (concluded) Pr. 19–4
Town of Northville
Journal Entries (concluded)
For Year Ended June 30, 2006
Fund or
Transaction account
no. group Account titles Debit Credit
GF Other Financing Uses—Transfers Out 3 0 0 0
Payable to Special Revenue Fund 3 0 0 0
GF Payable to Special Revenue Fund 3 0 0 0
Cash 3 0 0 0
(6) TPL Encumbrances 7 5 0 0 0
Fund Balance Reserved for
Encumbrances 7 5 0 0 0
TPL Expenditures 7 5 0 0 0
Vouchers Payable 7 5 0 0 0
TPL Fund Balance Reserved for Encumbrances 7 5 0 0 0
Encumbrances 7 5 0 0 0
TPL Vouchers Payable ($75,000 x 0.95) 7 1 2 5 0
Cash 7 1 2 5 0
GFA Improvements Other than Buildings 7 5 0 0 0
Investment in General Capital Assets
from Capital Projects Funds 7 5 0 0 0
(7) ISF Inventory of Supplies 4 1 9 0 0
Cash 4 1 9 0 0
(8) GF Cash 3 9 3 0 0 0
Taxes Receivable—Current 3 8 6 0 0 0
Revenues 7 0 0 0
(9) TH Cash 5 0 0 0 0 0
Other Financing Sources 5 0 0 0 0 0
GLTD Amount to Be Provided 5 0 0 0 0 0
Term Bonds Payable 5 0 0 0 0 0
(10) GF Expenditures 1 6 0 0 0
Vouchers Payable 1 6 0 0 0
GF Fund Balance Reserved for Encumbrances 1 5 0 0 0
Encumbrances 1 5 0 0 0
GF Vouchers Payable 1 6 0 0 0
Cash 1 6 0 0 0
GCA Machinery and Equipment 1 6 0 0 0
Investment in General Capital Assets
from General Fund Revenues 1 6 0 0 0
The McGraw-Hill Companies, Inc., 2006522 Modern Advanced Accounting, 10/e
40 Minutes, MediumCity of Cavendish Pr. 19–5
City of Cavendish Internal Service Fund
Journal Entries
For Year Ended June 30, 2006
(1) Inventory of Material and Supplies 7 4 0 0 0
Vouchers Payable 7 4 0 0 0
(2) Operating Expenses ($80,000 + $74,000 – $58,000) 9 6 0 0 0
Inventory of Material and Supplies 9 6 0 0 0
(3) Operating Expenses 2 3 0 0 0 0
Cash 2 3 0 0 0 0
(4) Operating Expenses 3 0 0 0 0
Payable to Enterprise Fund 3 0 0 0 0
Payable to Enterprise Fund 3 0 0 0 0
Cash 3 0 0 0 0
(5) Operating Expenses 1 3 0 0 0
Accumulated Depreciation of Building 5 0 0 0
Accumulated Depreciation of Machinery and
Equipment 8 0 0 0
(6) Receivable from General Fund 2 6 2 0 0 0
Receivable from Enterprise Fund 8 4 0 0 0
Receivable from Special Revenue Fund 3 2 0 0 0
Charges for Services 3 7 8 0 0 0
(7) Cash 3 7 6 0 0 0
Receivable from General fund
($20,000 + $262,000 – $6,000) 2 7 6 0 0 0
Receivable from Enterprise Fund 8 4 0 0 0
Receivable from Special Revenue Fund
($32,000 – $16,000) 1 6 0 0 0
(8) Vouchers Payable ($38,000 + $74,000 – $14,000) 9 8 0 0 0
Cash 9 8 0 0 0
The McGraw-Hill Companies, Inc., 2006Solutions Manual, Chapter 19 523
60 Minutes, StrongTown of Novis Pr. 19–6
a. Town of Novis General Fund
Adjusting and Closing Entries
June 30, 2006
Receivable from Water Utility Enterprise Fund 1 2 0 0
Accounts Receivable 1 2 0 0
To correct classification of amount receivable from
Water Utility Enterprise Fund.
Revenues 8 0 0 0
Allowance for Uncollectible Current Taxes 8 0 0 0
To establish allowance for uncollectible current taxes.
$8,000 allowance divided by $270,000 total tax levy
equals 2.96%, which approximates 3% average loss
on uncollectible taxes in recent years.
Expenditures 4 8 0 0 0
Bonds Payable 4 8 0 0 0
To correct classification of $30,000 principal and
$18,000 interest paid on 12% general obligation serial
bonds issued July 1, 2001.
Inventory of Supplies ($12,300 – $8,400) 3 9 0 0
Expenditures 3 9 0 0
To establish supplies inventory at end of year.
Unreserved and Undesignated Fund BalanceuF
3 9 0 0
Fund Balance Reserved for Inventory of
Supplies 3 9 0 0
To provide reserve for inventory at end of year.
Unreserved and Undesignated Fund Balance 2 6 0 0
Expenditures 2 6 0 0
To charge expenditure applicable to prior fiscal year to
Unreserved and Undesignated Fund Balance account
because Fund Balance Reserved for Encumbrances
account was not established.
Encumbrances 4 1 0 0
Fund Balance Reserved for Encumbrances 4 1 0 0
To record encumbrances for purchase orders
outstanding on June 30, 2006.
Receivable from State Government 8 2 0 0
Revenues 8 2 0 0
To accrue revenues for share of state gasoline taxes
for Fiscal Year 2006.
(Continued on page 525.)
The McGraw-Hill Companies, Inc., 2006524 Modern Advanced Accounting, 10/e
Town of Novis (continued) Pr. 19–6
Town of Novis General Fund
Adjusting and Closing Entries (concluded)
June 30, 2006
Expenditures 1 7 0 0 0
Other Financing Sources 9 0 0
Town Property 1 6 1 0 0
To correct journal entries for disposal of old equipment
for $900 and acquisition of new equipment for
$17,000.
Taxes Receivable—Delinquent 8 0 0 0
Allowance for Uncollectible Current Taxes 8 0 0 0
Taxes Receivable—Current 8 0 0 0
Allowance for Uncollectible Delinquent Taxes 8 0 0 0
To transfer delinquent taxes and related estimated
uncollectible amounts from the current classification.
Unreserved and Undesignated Fund Balance 4 1 0 0
Encumbrances 4 1 0 0
To close Encumbrances ledger account.
Appropriations 3 5 0 0 0 0
Estimated Revenues 2 9 0 0 0 0
Unreserved and Undesignated Fund Balance 6 0 0 0 0
To close budgetary ledger accounts.
Revenues (320,000 – $8,000 + $8,200) 3 2 0 2 0 0
Other Financing Sources 9 0 0
Unreserved and Undesignated Fund Balance 6 9 4 0 0
Expenditures ($332,000 + $48,000 – $3,900 –
$2,600 + $17,000) 3 9 0 5 0 0
To close Revenues, Expenditures, and Other
Financing Sources ledger accounts.
b. Town of Novis General Fund
Post-Closing Trial Balance
June 30, 2006
Cash $ 1 2 9 0 0
Receivable from state government 8 2 0 0
Receivable from Water Utility Enterprise Fund 1 2 0 0
Taxes receivable—delinquent 8 0 0 0
Allowance for uncollectible delinquent taxes $ 8 0 0 0
Inventory of supplies 3 9 0 0
Vouchers payable 1 5 0 0 0
Fund balance reserved for inventory of supplies 3 9 0 0
Fund balance reserved for encumbrances 4 1 0 0
Unreserved and undesignated fund balance 3 2 0 0
Totals $ 3 4 2 0 0 $ 3 4 2 0 0
The McGraw-Hill Companies, Inc., 2006Solutions Manual, Chapter 19 525
Town of Novis (concluded) Pr. 19–6
c. Town of Novis General Long-Term Debt Account Group
Adjusting Entry
June 30, 2006
Serial Bonds Payable 3 0 0 0 0
Amount to Be Provided 3 0 0 0 0
To record payment of matured 12% general obligation
serial bonds by General Fund.
Town of Novis General Capital Assets Account Group
Adjusting Entry
June 30, 2006
Investment in General Capital Assets from General
Fund Revenues 7 5 0 0
Equipment 7 5 0 0
To remove cost of equipment disposed of by General
Fund.
Equipment 1 7 0 0 0
Investment in General Capital Assets from
General Fund Revenues 1 7 0 0 0
To record cost of equipment acquired by General
Fund.
Town of Novis Water Utility Enterprise Fund
Adjusting Entry
June 30, 2006
Cash 1 2 0 0
Payable to General Fund 1 2 0 0
To record liability to General Fund for proceeds from
disposal of obsolete equipment.
The McGraw-Hill Companies, Inc., 2006526 Modern Advanced Accounting, 10/e
50 Minutes, StrongVillage of Rosner Pr. 19–7
Village of Rosner Enterprise Fund
Statement of Cash Flows (indirect method)
For Year Ended June 30, 2006
Net cash provided by operating activities (Exhibit 1) $ 1 4 6 0 0 0
Cash flows from noncapital financing activities:
Operating grant $ 2 0 0 0 0
Transfer (out) to General Fund ( 5 5 0 0 0 )
Net cash used in noncapital financial
activities ( 3 5 0 0 0 )
Cash flow from capital and related financing activities:
Acquisition of machinery and equipment $ ( 8 5 0 0 0 )
Disposal of machinery and equipment 2 2 0 0 0
Payment of interest on revenue bonds ( 4 0 0 0 0 )
Customers’ deposits received 7 0 0 0
Customers’ deposits refunded ( 2 0 0 0 )
Net cash used in capital and related financing
activities ( 9 8 0 0 0 )
Cash flows from investing activities:
Revenue and net gains from short-term
investments 8 0 0 0
Increase in cash and cash equivalents $ 2 1 0 0 0
Cash and cash equivalents, beginning of year 1 3 8 0 0 0
Cash and cash equivalents, end of year $ 1 5 9 0 0 0
Exhibit 1 Cash flows from operating activities:
Operating income $ 1 1 6 0 0 0
Adjustments to reconcile operating income to net
cash provided by operating activities:
Depreciation expense 3 6 0 0 0
Increase in accounts receivable (net) ( 6 0 0 0 )
Increase in receivable from General Fund ( 4 0 0 0 )
Decrease in inventory of supplies 2 0 0 0
Decrease in short-term prepayments 1 0 0 0
Decrease in vouchers payable ( 6 0 0 0 )
Increase in accrued liabilities 7 0 0 0
Net cash provided by operating activities $ 1 4 6 0 0 0
The McGraw-Hill Companies, Inc., 2006Solutions Manual, Chapter 19 527