fischer11e smchap15 final

7/22/2019 Fischer11e SMChap15 Final

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CHAPTER 15

UNDERSTANDING THE ISSUES

1. GASB Statement No. 34 stipulates anew reporting model that includes twoseparate, but related sets of financialstatements. The first set, the fund financialstatements,focuses on reporting activity as a collectionof separate funds with a current workingcapital focus that uses a modified accrualbasis of accounting. The second setcontains government-wide statements thatconcentrate on the government as a wholewith an economic long-term focus using fullaccrual-basis accounting. The value of bothperspectives is the retention of a near cashor working capital focus on fundinggovernment with a longer-term focus thatmeasures whether such services cancontinue without attention to condition of allcapital assets and recognition of andplanning for increased expenditures infuture periods. Capital assets and long-termliabilities are not accounted for in thegovernmental funds but will be accountedfor and reported in the government-widefinancial statements. Thus, the workingcapital fund balance will be replaced with along-term notion of net assetsbroken intounrestricted, restricted, and capital, net of related debt.

2. Separating activity into governmental,proprietary, and fiduciary funds allows for detailed reporting of resources andspending. Separating of activities alsoallows for a different measurement focusand basis of accounting depending onwhether activities are general governmentor business-type activities. In addition,since the govern-mental activities areaccounted for using a modified accrualbasis of accounting inorder to capture financial resourceinformation, the account groups haveserved to record (i.e., list) the long-termcapitalassets and liabilities. Proponents of thismodel argue that information generated

best serves the budget-planning processand answers questions relating to howmuch resources are needed to pay for thecurrent level of services.

3. Budgets are the legal authorization toraise revenue, incur long-term debt, andappropriate resources. Authorizedexpenditures are termed appropriations.Budgetary totals, including appropriations,are recorded in the general ledger ascontrol accounts to allow for budgetary

comparisons in the ledgers as well as tofacilitate financial reporting of a budgetarycomparison statement.

4. The advantage of reporting designationsof the fund balance is improvedcommunications of decisions made by thecommon council or town/village board thatwill impact the availability of resources for other purposes. Categorizing the fundbalance first into nonspendable allowsusers of the financial statements to assessthe governments ability to cover financialobligations and invest in future assets.Further classifying the fund balance byrestriced, committed, assigned, andunassigned allows the user to assess theextent to which the spendable fund balancemay be appropriate for future uses of thegovernment.

5. The encumbrance system is designedas an early indicator or an expectedexpenditure to prevent overspending andto plan for payment of an expectedliability. It is an estimate of an expenditurethat may or may not be realized by year-end but will require the use of existing or future financial resources.

6. The governmental funds are designed tocapture financial resources information.Therefore, when a capital asset is acquiredor sold, the resources (financial resourcesused or acquired) are recorded in thefunds. The account groups are designed toprovide information on the number andcondition of these capital assets. The same

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Ch. 15Exercises

is true for long-term liabilities. When debt isincurred, the cash is recorded in the fund tocapture the inflow of financial resources.But the debt is recorded in the accountgroup. When debt is repaid, the outflow of cash is recorded in the fund, and the debtis removed from the account group. Sincethe fund and account groups capturedifferent information, making a journal entryonly in the fund would adequately recordflows of financial resources but not recordthe balances of long-term liabilities and/or capital assets.

7. (Appendix) The 13 basic principles of government accounting are found in GASBStatement No. 1 and in Codification of Governmental Accounting and Financial Reporting Standards . They form a model of fund accounting theory and help anchor thesubsequent work of the GASB as detailedin Chapters 1517 of this text.

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EXERCISES

EXERCISE 15-1

(1) c Items (a) and (b) are Other Financing Sources, while (d) is a reduction of Expenditures.(2) d (a), (b), and (c) represent outflows of financial resources to acquire goodsand services. The consumption, not the purchase of inventory, is an expenditure.

(3) b Representing potential inflow of assets, Estimated Revenues is debited.

(4) b Taxes ReceivableCurrent is debited with offsetting credits to anallowance for uncollectible taxes and revenues.

(5) a Donated fixed assets are recorded in the general fixed asset accountgroup at their estimated fair value when received.

(6) c Long-term debt related to governmental funds may be operating debt or

general long-term capital debt.(7) b The purchase of equipment is an outflow of resources from the generalfund. An additional entry to record the fixed asset will be made in the account group.

(8) b Expenditures are closed along with the other nominal accounts todetermine an increase or a decrease in the fund balance from the current-periodoperations.

(9) d When a purchase order is approved, Encumbrances is debited to reflectthe expected expenditure. A reserve is also established by a credit to Fund BalanceReserved for Encumbrances.

(10) a The lease obligation is long-term debt and should be recorded in theaccount group.

EXERCISE 15-2

(1) a Grants without restriction are recorded as revenue when received.

(2) e These pension expenditures will be recorded in the internal service fund.

(3) b This is an expenditure by the general fund.

(4) c This is recorded as a transfer to the swimming pool fund.

(5) e A loan only affects the balance sheet accounts.

(6) c This is a general fund contribution to establish an internal service fund and not anexpenditure for services.

(7) b Payments on an operating lease are expenditures for the general fund.


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Ch. 15Exercises

EXERCISE 15-3

Estimated Revenues ($205,000 + $7,000 + $90,000 + $50,000) 352,000Estimated Other Financing Sources ($100,000 + $15,000) 115,000Budgetary Fund Balance

63,000 Appropriations

500,000Estimated Other Financing Uses ($20,000 + $10,000)

30,000

(Note to Instructor: Property taxes paid by a proprietary fund are considered revenue.)

EXERCISE 15-4

Jan. Cash 275,000Tax Anticipation Notes Payable 275,000

To record borrowing.

Feb. Cash 12,000Tax Liens Receivable 10,000Revenues 2,000

To record collection of tax liens.

Cash 13,000Tax Liens Receivable 13,000

To record collection of tax liens, sale of property.

Allowance for Uncollectible Tax Liens 23,000Tax Liens Receivable 17,000Revenues 6,000

To close allowance.

Apr. Cash 104,500Delinquent Property Taxes Receivable 100,000Revenues 4,500

To record collection of delinquent property taxes.

Tax Liens Receivable 35,000Delinquent Property Taxes Receivable 35,000

To transfer delinquent property taxes to tax liens.

Allowance for Uncollectible Delinquent Taxes 40,000 Allowance for Uncollectible Tax Liens 35,000Revenues 5,000

To transfer allowance for uncollectible delinquenttaxes to allowance for uncollectible tax liens.

July Property Taxes Receivable 422,000 Allowance for Property Taxes Receivable 21,100


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Revenues 400,900To record current property tax levy.


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Ch. 15Exercises

Exercise 15-4, Concluded

Sept. Cash 345,000Property Taxes Receivable 345,000

To collect current property taxes.

Tax Anticipation Notes Payable 275,000Expenditures 18,000

Cash 293,000To pay off tax anticipation notes.

EXERCISE 15-5

(1)...........................................................................................Cash 45,000........................................................................................................Other Financing Sources........................................................................................................ 45,000........................................................................................................ To transfer from municipal trust fund.

(2)......No entry in the general fund for land. Record in the general.............................................................fixed assets account group:

................................................................................................Land 75,000

........................................................................................................ Investment in General Fixed AssetsDonations.......................................................................... 75,000........................................................................................................ To recorddonation of park.

(3)............................................................................Due from State 30,000........................................................................................................ Revenues

........................................................................................................ 30,000........................................................................................................ To recordstate grant.

(4)...........................................................................................Cash 9,000........................................................................................................Other Financing Sources........................................................................................................ 9,000........................................................................................................ To record saleof fire truck.

.............................Additional entry in General Fixed Assets Group:

......Investment in General Fixed AssetsGeneral Fund Revenues 36,000

........................................................................................................ Equipment........................................................................................................ 36,000

(5)...........................................................................................Cash 5,000........................................................................................................ Revenues........................................................................................................ 2,500........................................................................................................Deferred Revenue........................................................................................................ 2,500


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........................................................................................................ To record saleof park stickers.


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Ch. 15Exercises

EXERCISE 15-6

(1)........Expenditures ($100,000 + $50,000 + $125,000 + $13,000) 288,000.......................................................Tax Anticipation Notes Payable 200,000....................................................................... Inventory of Supplies 45,000........................................................................................................Vouchers Payable........................................................................................................ 533,000........................................................................................................ To recordpayment of vouchers.

(2).................................................................Other Financing Uses 50,000........................................................................................................ Cash........................................................................................................ 50,000........................................................................................................ To transfer todebt service fund.

(3)...............................................................................Expenditures 43,000........................................................................................................ Inventory of Supplies........................................................................................................ 43,000........................................................................................................ To recordconsumption of inventory.

............................................................ Fund BalanceUnassigned 2,000

........................................................................................................Fund BalanceNonspendable................................................................................. 2,000........................................................................................................ To adjust fundbalance to match inventory balance.

EXERCISE 15-7

(1)............................................................................Encumbrances 18,000........................................................................................................Fund BalanceUnassigned........................................................................................................ 18,000........................................................................................................ To restoreprevious years encumbrances.

(2)............................................................................Encumbrances 70,000........................................................................................................Fund BalanceAssigned or Committed....................................................................................... 70,000........................................................................................................ To recordcurrent encumbrances.

(3).....................................Fund BalanceAssigned or Committed 88,000........................................................................................................Encumbrances........................................................................................................ 88,000........................................................................................................ To reverseencumbrances for orders received.

....................................................................... Inventory of Supplies 82,000

........................................................................................................Vouchers Payable

........................................................................................................ 82,000


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........................................................................................................ To recordpurchase of inventory.

(4).............................Expenditures ($25,000 + $82,000 $30,000) 77,000........................................................................................................ Inventory of Supplies........................................................................................................ 77,000........................................................................................................ To record useof inventory.

............................................................ Fund BalanceUnassigned 5,000

........................................................................................................Fund BalanceNonspendable................................................................................. 5,000........................................................................................................ To adjustnonspendable fund balance to match inventory.


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Ch. 15Exercises

EXERCISE 15-8

Encumbrances UnobligatedDate Item Debit Credit Balance Expenditures Balance

January 1 Budget 23,000

January 15 Encumbrances 14,000 14,000 9,000February 1 Vouchers 5,000 4,000February 15 Vouchers 12,000 2,000 12,300

3,700June 3 Vouchers 2,000 4,300

1,400December 31 Inventory (1,500)

2,900

EXERCISE 15-9

(a)...................................................................Estimated Revenues 520,000........................................................................................................Appropriations........................................................................................................ 515,000........................................................................................................Budgetary Fund BalanceUnassigned..................................................................................... 5,000........................................................................................................ To recordbudget for the year.

(b)........................................................Taxes ReceivableCurrent 378,788........................................................................................................Allowance for UncollectibleCurrent Taxes.................................................................................. 3,788........................................................................................................ Revenues

........................................................................................................ 375,000........................................................................................................ To record taxlevy.

(c)............................................................................Encumbrances 240,000........................................................................................................Fund BalanceAssigned or Committed....................................................................................... 240,000........................................................................................................ To recordpurchase orders authorized.

(d)...........................................................................................Cash 280,000........................................................................................................Taxes ReceivableCurrent

........................................................................................................ 280,000........................................................................................................ To recordreceipt of tax payments.

(e).....................................Fund BalanceAssigned or Committed 223,000........................................................................................................Encumbrances........................................................................................................ 223,000........................................................................................................ To reverseencumbrance entry for items invoiced.


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...................................................................................Expenditures 225,000

........................................................................................................Vouchers Payable

........................................................................................................ 225,000

........................................................................................................ To recordinvoices vouchered.

(f)................................................................................Expenditures 135,000........................................................................................................Vouchers Payable........................................................................................................ 135,000........................................................................................................ To recordsalaries approved for payment.

(g)...........................................................................................Cash 100,000........................................................................................................ Revenues........................................................................................................ 100,000........................................................................................................ To recordreceipt of a grant-in-aid.


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Ch. 15Exercises


(h)...........................................................................................Cash 10,000........................................................................................................ Revenues........................................................................................................ 10,000

........................................................................................................ To recordreceipt of miscellaneous revenues.

(i)................................................................................Expenditures 120,000........................................................................................................ Cash........................................................................................................ 120,000........................................................................................................ To recordpurchase of property. (The property would also........................................................................................................ be entered inthe general fixed assets account group.)

(j)..No entry. Recorded only in general fixed assets account group.

(k)..................................................................Other Financing Uses 12,000........................................................................................................Due to Other Funds........................................................................................................ 12,000........................................................................................................ To recordamount due other funds and approved for ........................................................................................................ payment.

(l).............................................................................Due from State 30,000........................................................................................................ Revenues........................................................................................................ 30,000........................................................................................................ To recordshare of state sales taxes receivable.

(m)......................................................................Vouchers Payable 175,000........................................................................................................ Cash........................................................................................................ 175,000........................................................................................................ To recordvouchers paid.

(n)......................................Budgetary Fund BalanceUnassigned 5,000.................................................................................Appropriations 515,000........................................................................................................Estimated Revenues........................................................................................................ 520,000........................................................................................................ To reversebudgetary entry.

........................................................................................Revenues 515,000

........................................................................................................ Expenditures

........................................................................................................ 480,000

........................................................................................................Other Financing Uses

........................................................................................................ 12,000

........................................................................................................Fund BalanceUnassigned

........................................................................................................ 23,000


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............................................................Fund BalanceUnassigned 17,000

........................................................................................................Encumbrances

........................................................................................................ 17,000

........................................................................................................ To closenominal accounts.


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Ch. 15Exercises

EXERCISE 15-10

(1) Closing entries:

.................................................................................Appropriations 650,000

.....................................................Estimated Other Financing Uses 50,000

.................................................................Budgetary Fund Balance 50,000

........................................................................................................Estimated Revenues

........................................................................................................ 600,000

........................................................................................................Estimated Other FinancingSources........................................................................................... 150,000

.................................................................Other Financing Sources 166,500

........................................................................................Revenues 595,000

........................................................................................................ Expenditures

........................................................................................................ 588,000


........................................................................................................ 46,500


........................................................................................................ 127,000


........................................................................................................Encumbrances

........................................................................................................ 60,000

(2) Shorewood VillageGeneral FundBudgetary Comparison ScheduleFor Fiscal Year Ended June 30,

2019VarianceFavorable

Budget Actual (Unfavorable)Revenues $ 600,000$ 595,000 $ (5,000)Expenditures 650,000

588,000 62,000Excess (shortage) of revenues over

expenditures $(50,000 ) $ 7,000 $57,000Other financing sources $ 150,000$ 166,500 $ 16,500Other financing uses 50,000

46,500 3,500Total other financing sources (uses) $ 100,000

$ 120,000 $ 20,000


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Fund balances, July 1, 2018 $ 92,000$ 92,000 $ 0Fund balances, June 30, 2019 $ 142,000$ 219,000 $ 77,000


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Ch. 15Exercises


(3) Shorewood VillageGeneral Fund Balance Sheet

June 30, 2019

Assets Liabilities and Fund Equity

Cash................................ $190,000 Liabilities: Vouchers payable.. .... ..... $91,000Receivables (net)............. 120,000 Fund balances:

................Assigned or committed$ 60,000

.................................Unassigned159,000 *

..........................Total fund equity$219,000

................................................... Total assets $310,000..................................... Total

liabilities and fund equity............. $310,000*$92,000 balance plus $761,500 inflows minus $634,500 outflows minus $60,000encumbrances

EXERCISE 15-11

Event Fund or Group Entry

Purchase General Fund Expenditures........................................ 65,000Cash................................................ 65,000

Fund BalanceAssigned or Committed 70,000Encumbrances................................ 70,000

General Land..................................................... 65,000Fixed Assets Investment in General Fixed Assets

Account Group General Fund Revenues.......... ... 65,000

Sale General Fund Cash.................................................... 105,000(10 years Other Financing Sources................. 65,000

later) Revenues........................................ 40,000

General Investment in General Fixed Assets

Fixed Assets General Fund Revenues................. 65,000 Account Group Land............................................ 65,000


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EXERCISE 15-12

(a) Land325,000

Buildings975,000

Investmentin General Fixed AssetsGeneral Funds

1,300,000

To record property purchase.

(b) Land330,000

Buildings220,000

Investmentin General Fixed AssetsDonations

550,000

To record donated property at its fair value.

(c) Construction in Progress800,000

Investmentin General Fixed AssetsCapital Projects Funds

(General Obligation Bonds)800,000

To recordcost of work to date.

(d) Machinery and Equipment190,000

Investmentin General Fixed AssetsGeneral Fund

Revenues190,000

To record

fire engine purchase at full value.Investment in General Fixed AssetsGeneral Fund Revenues

100,000Machinery

and Equipment100,000

To record trade-in.


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Ch. 15Exercises

(e) Infrastructure250,000

Investmentin General Fixed AssetsCapital Projects Funds

250,000

To record cost of new street.

(f) Computer Software70,000

Investmentin General Fixed AssetsGeneral Fund Revenues

70,000

EXERCISE 15-13

(1) Amount to Be Provided for Compensated Absences2,200,000

UnfundedCompensated Absences

2,200,000

To record the noncurrent portion of the obligation for

vacations.

(2) Unfunded Compensated Absences400,000

Amount toBe Provided for Compensated Absences

400,000

To reduce the long-term obligation for vacations.

(3) Amount to Be Provided for Claims and Judgments11,000,000

Claims andJudgments Payable

11,000,000

To record the noncurrent portion of the judgment against

the city.


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(4)...............................Amount to Be Provided for Payment of Bonds 100,000,000........................................................................................................... General Obligation BondsPayable.............................................................................................. 100,000,000

........................................................................................................... To record theissuance of general obligation bonds at

........................................................................................................... maturityvalue.

(5)...................................Amount Available in the Debt Service Fund 1,000,000........................................................................................................... Amount to Be Provided for Payment of Bonds.............................................................................. 1,000,000........................................................................................................... To recordaccumulation of resources in the debt service........................................................................................................... fund for bondprincipal.

(6)...................................Amount Available in the Debt Service Fund 4,800,000........................................................................................................... Amount to Be Provided for Payment of Bonds.............................................................................. 4,800,000........................................................................................................... To recordinterest earned and appreciation in fair value........................................................................................................... of investments in the debt service fund.

EXERCISE 15-14

(a)......................Amount to Be Provided for Payment of Term Bonds 13,000,000

........................................................................................................... Term Bonds Payable........................................................................................................... 13,000,000

........................................................................................................... To recordissuance of general obligation bonds at........................................................................................................... maturityvalue to finance construction of an art center.

(b)................Amount Available in Debt Service FundsTerm Bonds 1,300,000........................................................................................................... Amount to Be Provided for Payment of Term Bonds..................................................................... 1,300,000........................................................................................................... To recordallocation to debt service fund.

(c).....................Amount to Be Provided for Payment of Serial Bonds 6,000,000........................................................................................................... Serial Bonds Payable........................................................................................................... 6,000,000........................................................................................................... To recordserial bonds issued to finance construction of ........................................................................................................... a healthcenter.


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Ch. 15Exercises

....................Amount Available in Debt Service FundsSerial Bonds 600,000

........................................................................................................... Amount to Be Provided for Payment of Serial Bonds.................................................................... 600,000........................................................................................................... To recordallocation to debt service fund ($6,000,000/10).

(d).....................................................................Serial Bonds Payable 600,000........................................................................................................... Amount Available in DebtService FundsSerial Bonds............................................................. 600,000........................................................................................................... To recordretirement of serial bond issue.

EXERCISE 15-15

(Note to Instructor: The GASB Web site lists all of the pronouncements of the board. Individualstandards can be purchased, but current exposure drafts and discussion memoranda can beobtained for no fee. In addition, the GASB mission, board membership, and meeting schedules

are found on the site.)


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Ch. 15Problems

PROBLEMS

PROBLEM 15-1

(1) b Funds are used to separate reporting of the diverse variety of governmentalactivities and to meet legal provisions stipulating use of resources imposed on thegovernmental unit.

(2) a The Governmental Accounting Standards Board is the authoritative body for financial reporting standards used by state and local governments.

(3) b The GASB stipulated that the measurement focus for governmental funds is theflow of financial resources.

(4) c Interperiod equity seeks to determine whether current-year revenues aresufficient to pay for current-year services or whether future taxpayers will be required toassume burdens for services previously provided. The flow of financial resourcesmeasurement focus measures the extent to which financial resources obtained during aperiod are sufficient to cover claims incurred during that period against financialresources of a governmental fund. The GASB recognized that because budgetary andfund accounting practices cause costs of government activities to be spread among anumber of funds, general purpose financial reporting must also include themeasurement of the cost of services provided during a period.

(5) a Long-term debt used to purchase fixed assets is recorded in the general fund asan other financial resource, but the debt itself is recorded in the general long-term debtaccount group.

(6) d Current standards specify that neither interest nor principal on long-term debtshould be accrued in advance of the year in which it is due. Governments may,however, opt to accrue principal if resources are available in the debt service fund byyear-end.

(7) b Reporting outstanding encumbrances as a fund balance reserve indicates thatnot all of the resources in the fund are available for new expenditures.

PROBLEM 15-2

(1) a Encumbrance control is increased when an order is placed and decreased when thevoucher is recorded. When encumbrances are closed at year-end, they are decreased.

(2) a Grants from outside units are revenues unless they require the prior recording of an expenditure that is then reimbursed.

(3) c The appropriation still available for use is the original appropriation less

expenditures and encumbrances.(4) c These notes are short-term operating debt that will be repaid out of current

revenues.

(5) d When supplies are received, the original entry to encumber the estimated cost isreversed.

(6) b A hypothetical entry to record the tax levy is:

Taxes ReceivableCurrent 100,000


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Ch. 15Problems

Allowance for Uncollectible Current Taxes 4,000Revenues 96,000


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Ch. 15Problems

Problem 15-2, Concluded

Because revenues are estimated and recorded net of the uncollectible, adecrease in the allowance is a revision (in this case an increase) of revenues. This istrue even if the revenues were recorded in a prior period.

(7) b Revenues are recognized when measurable and available to meet current-periodexpenditures. This is interpreted to include collections of the current period or shortlyafter year-end (usually within 60 days of year-end).

(8) a The general fixed assets account group records the fixed assets of governmentalfunds but not proprietary funds or trust funds.

(9) c Expenditures are recorded when the liability is incurred. Under the modifiedaccrual basis of accounting, the noncurrent liability is recorded in the general long-termdebt account group.

(10) d The fixed asset is recorded in the account group at its fair value with a credit toInvestment in General Fixed Assets identifying the original funding source.

PROBLEM 15-3

(1) At inception of the lease:

General Fund Expenditures................................................ 800,000Other Financing Sources........................ 800,000

To record the acquisition of theequipment under capital lease.

General Leased Equipment ....................................... 800,000Fixed Assets Investment in General Fixed

Account Group AssetsCapital Leases................. .... 800,000

To record the equipment.General Amount to Be Provided................................. 800,000

Long-Term Capital Lease Obligation......................... 800,000Debt Account To record the capital lease

Group obligation.

(2) First interest payment:

General Fund Expenditures (interest) ($800,000 6%)...... 48,000Expenditures (principal)................................ 60,694

Cash....................................................... 108,694To record the first lease paymentof principal and interest.

General Investment in GeneralFixed Assets Fixed AssetsCapital Leases................ 80,000

Account Group Leased Equipment............................ 80,000To record the depreciation on theleased equipment (optional entryunder current standards).


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Ch. 15Problems


General Capital Lease Obligation............................... 60,694Long-Term Amount to Be Provided........................... 60,694

Debt Account To record the reduction of the lease

Group principal .Note: Each lease payment reducesthe principal balance of the obligation.,Therefore each subsequent paymentwill allocate a smaller portion to interestand a larger portion to principal.

PROBLEM 15-4

(1) (a) EstimatedRevenues 400,000

Appropriations362,000

Budgetary Fund BalanceUnassigned38,000

To recordbudget.

Encumbrances16,000

Fund BalanceUnassigned16,000

To reinstateencumbrance.

(b) Fund BalanceAssigned 16,000

Encumbrances16,000

To reverseencumbrance entry.

Expenditures16,400

Vouchers Payable16,400


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Ch. 15Problems

To recordvoucher.

(c) TaxesReceivableCurrent 300,000

Allowance for Uncollectible Current Taxes (4%)12,000

Revenues288,000

To record taxlevy.

(d) Cash355,600

Taxes ReceivableCurrent250,000

Taxes ReceivableDelinquent84,000

Interest and Penalties Receivable on Taxes7,600

Due from Other Funds14,000

To recordreceipts.

Allowance for Uncollectible Delinquent Taxes 12,000

Allowance for Uncollectible Interest and Penalties 800

Revenues3,600

Taxes ReceivableDelinquent16,000

Interest and Penalties Receivable on Taxes400


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Ch. 15Problems


(e)Encumbrances

276,000

Fund BalanceAssigned276,000

To recordencumbrances.

SuppliesInventory 16,000

Expenditures244,000

Vouchers Payable

260,000

To recordvouchers.

Fund BalanceAssigned 254,000

Encumbrances254,000

To recordencumbrance entry.

(f) Expenditures50,000

VouchersPayable 280,000

Cash330,000

To recordpayments.

(g) Expenditures16,000

Vouchers Payable16,000

To recordvoucher for automobile.


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Ch. 15Problems

(h) Expenditures10,000

Inventory of Supplies10,000

To record useof inventory.

Fund BalanceUnassigned 6,000

Fund BalanceNonspendable6,000

To establishdesired fund balance designation.

(2) Appropriations362,000

Budgetary Fund BalanceUnassigned38,000

EstimatedRevenues

400,000


Revenues284,400

Expenditures

336,400


Encumbrances22,000

(3) Statement of Revenues, Expenditures, and Changes in Fund Balance:

Revenues $284,400

Expenditures 336,400Excess of Revenues over Expenditures* $ (52,000)

Fund Balances, July 1, 2018 76,000Fund Balances, June 30, 2019 $ 24,000

* In practice, this title remains as shown even though the result is negative (a deficit).However, alternate wording, such as Excess of Expenditures over Revenues, could beused.


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Ch. 15Problems

PROBLEM 15-5

(a) Estimated Revenues 400,000Estimated Other Financing Sources 200,000

Appropriations 560,000Estimated Other Financing Uses 20,000Budgetary Fund BalanceUnassigned 20,000

Encumbrances 12,000Fund BalanceUnassigned 12,000

(b) Taxes ReceivableCurrent ($220,800/96%) 230,000 Allowance for Uncollectible Current Taxes 9,200Revenues 220,800

(c) Encumbrances 316,000Fund BalanceAssigned 316,000

(d) Fund BalanceUnassigned 20,000Fund BalanceDesignated for Capital Outlays 20,000

(e) Cash 664,000 Allowance for Uncollectible Delinquent Taxes 8,000

Taxes ReceivableDelinquent 46,000Taxes ReceivableCurrent 226,000Expenditures 4,000Revenues 178,000Other Financing Sources 200,000Other Financing Sources 18,000

(f) Fund BalanceAssigned 302,000Encumbrances 302,000

Expenditures 308,000Vouchers Payable 308,000

(g) Inventory 40,000Expenditures 204,000Other Financing Uses 20,000

Vouchers Payable 244,000Due to Debt Service Fund 20,000

(h) Revenues 2,000Deferred Revenues 2,000

Allowance for Uncollectible Current Taxes 5,200Revenues ($226,000 $220,800) 5,200


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Ch. 15Problems


(i) Vouchers Payable 580,000Cash 580,000

(j) Expenditures 46,000Inventory 46,000

Fund BalanceNonspendable 6,000Fund BalanceUnassigned 6,000

PROBLEM 15-6

(1)...............................................................................................(a)Estimated Revenues...........................................................................................900,000........................................................................................................Estimated Other FinancingSources........................................................................................... 27,000

........................................................................................................ Appropriations........................................................................................................ 875,000

........................................................................................................ EstimatedOther Financing Uses...................................................................... 20,000........................................................................................................ BudgetaryFund BalanceUnassigned............................................................ 32,000..............................................................................................................................................................To record the approved budget.

....................................................................................................(b)Encumbrances

.............................................................................................15,000

........................................................................................................ Fund BalanceUnassigned.................................................................................. 15,000

........................................................................................................

..............................To return encumbered amount to fund balance.

.................................................................................................... (c)Taxes ReceivableCurrent

...........................................................................................650,000

........................................................................................................ Allowance for Uncollectible Current Taxes............................................................ 6,500........................................................................................................ Revenues........................................................................................................ 643,500...................................................................................................................................................................................To record tax levy.

.................................................................................................... (d)Fund BalanceReserved for Encumbrances................................................................................ 25,000

........................................................................................................

................................................................................Encumbrances

.............................................................................................25,000

........................................................................................................

.......................................To return reserve to unassigned balance.


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........................................................................................................ Expenditures

.............................................................................................24,000

........................................................................................................ VouchersPayable........................................................................................... 24,000.................................................................................................................................................................To voucher invoices received.

....................................................................................................(e) Cash

..........................................................................................644,000

........................................................................................................ TaxesReceivableCurrent....................................................................... 624,000........................................................................................................ TaxesReceivableDelinquent.................................................................. 20,000............................................................................................................................................To record receipt of property tax payments.

........................................................................................................Taxes ReceivableDelinquent....................................................................................... 26,000

........................................................................................................Allowance for UncollectibleCurrent Taxes.................................................................................. 6,500

........................................................................................................ TaxesReceivableCurrent....................................................................... 26,000........................................................................................................ Allowance for Uncollectible Delinquent Taxes....................................................... 6,500

............................................................................ To recorddelinquent taxes and reclassify relatedestimated uncollectibles.


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Problem 15-6, Continued

........................................................................................................Tax Liens Receivable

..............................................................................................8,000

........................................................................................................Allowance for Uncollectible

Delinquent Taxes............................................................................ 3,000........................................................................................................ TaxesReceivableDelinquent.................................................................. 8,000........................................................................................................ Allowance for Uncollectible Tax Liens.................................................................... 3,000

............................................................................ To record taxliens and reclassify relateduncollectibles.

........................................................................................................

.....................................................................................................(f)Encumbrances

..........................................................................................700,000

........................................................................................................ Fund BalanceAssigned...................................................................................... 700,000..................................................................................................................................................To record issuance of purchase orders.

........................................................................................................Fund BalanceAssigned

..........................................................................................680,000

........................................................................................................

................................................................................Encumbrances

..........................................................................................680,000

........................................................................................................

..........................To reverse encumbrance entry for items invoiced.

........................................................................................................ Expenditures

..........................................................................................675,000

........................................................................................................Supplies Inventory

............................................................................................10,000

........................................................................................................ VouchersPayable........................................................................................... 685,000.................................................................................................................................................................To voucher invoices received.

.................................................................................................... (g) Expenditures

...............................................................................................8,000

........................................................................................................ SuppliesInventory......................................................................................... 8,000.......................................................................................................................................................To record consumption of inventory.........................................................................................................Fund BalanceUnassigned...............................................................................................2,000........................................................................................................ Fund BalanceNonspendable.............................................................................. 2,000.................................................................................................................................................................To establish supplies reserve.


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.................................................................................................... (h) Expenditures

...........................................................................................250,000

........................................................................................................ Cash

........................................................................................................ 250,000............................................................................ To recordpurchase of land. (Also requiresentry in general fixed assets account group.)

.....................................................................................................(i) Cash

...........................................................................................300,000

........................................................................................................Due from State Government

.............................................................................................60,000

........................................................................................................ Revenues

........................................................................................................ 360,000

........................................................................................................

.............................................To record federal and state revenues.

..................................................................................................... (j)Other Financing Uses

.............................................................................................20,000

........................................................................................................ Cash

........................................................................................................ 20,000............................................................................ To recordtransfers made to other funds.(Requires entries in other funds.)

.................................................................................................... (k) Expenditures

.............................................................................................50,000

........................................................................................................ Cash

........................................................................................................ 50,000............................................................................ To record

mortgage payment. (Requires entryin general long-term debt account group.)


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.....................................................................................................(l) Cash

...........................................................................................100,000

........................................................................................................Notes Receivable

...........................................................................................280,000........................................................................................................ Other Financing Sources........................................................................... 250,000........................................................................................................ Revenues........................................................................................................ 130,000

............................................................................ To record saleof land. Only the $130,000 gain isnew revenue. (Requires entry in general fixedassets account group.)

...................................................................................................(m) Cash

.............................................................................................23,000

........................................................................................................ Other Financing Sources........................................................................... 23,000

............................................................................ To recordcash received from other funds.(Requires entries in other funds.)

....................................................................................................(n) Cash

...........................................................................................285,600

........................................................................................................ NotesReceivable...................................................................................... 280,000........................................................................................................ Revenues($280,000 8% 1/4 year) ............................................................ 5,600................................................................................................................................................To record cash received from developer.

(2).............................................................................Appropriations 875,000.....................................................Estimated Other Financing Uses 20,000...........................................Budgetary Fund BalanceUnassigned 32,000........................................................................................................Estimated Revenues........................................................................................................ 900,000........................................................................................................Estimated Other FinancingSources........................................................................................... 27,000........................................................................................................ To reverseentry recording budget.

........................................................................................Revenues 1,139,100

.................................................................Other Financing Sources 273,000

........................................................................................................ Expenditures

........................................................................................................ 1,007,000


........................................................................................................ 20,000


........................................................................................................ 385,100


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........................................................................................................Encumbrances

........................................................................................................ 20,000

........................................................................................................ To closenominal accounts.


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(3) City of TomaGeneral Fund

Budgetary Comparison Schedule

For Year Ended December 31, 2019VarianceFavorable

Budget Actual (Unfavorable)Revenues $900,000 $1,139,100 $239,100Expenditures875,000 1,007,000(132,000 )Excess of revenues over expenditures $25,000 $ 132,100 $107,100Other financing sources 27,000

273,000 246,000Other financing uses(20,000 ) (20,000 ) 0Excess of revenues and other sources over

expenditures and other uses $32,000 $ 385,100 $

353,100*Fund balances, January 1, 2019(165,000 ) (165,000 ) 0

*Fund balances, December 31, 2019 $(133,000 ) $ 220,100 $353,100

January 1 December 31

*The total of the fund balances consists of:Fund balancenonspendable................................................... $ 0 $

2,000Fund balanceassigned........................................................... 15,000

20,000Fund balanceunassigned....................................................... (180,000 )

198,100Total fund balances............................................................ $ (165,000 ) $220,100

PROBLEM 15-7

(1) Year 1:


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..................................................................................General Fund Expenditures

......................................................................................12,000,000

........................................................................................................ Cash

........................................................................................................ 12,000,000To record the pension benefitsfinanced by current-year resources.

GeneralLong-Term Amount to Be Provided................................. 10,000,000

Debt Account Unfunded Pension Obligation................. 10,000,000Group To record the portion of the actuarial

required contribution not financed inthe current period.


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(2) Year 2:

General Fund Expenditures................................................ 14,000,000Cash....................................................... 14,000,000

To record the pension benefits paidin year 2.

General Unfunded Pension Obligation....................... 2,000,000Long-Term Amount to Be Provided........................... 2,000,000

Debt Account To record the payment of Group $2,000,000 over the actuarial

required contribution in year 2.

PROBLEM 15-8

(1) Expenditures

(2) Investment in General Fixed AssetsCapital Leases

(3) Amount to Be Provided for Lease Payments 120,000Capital Lease Payable 120,000


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PROBLEM 15-9

Entry in General FixedEntry in General Fund Assets Account Group

(a) Expenditures 80,000 ..................Machinery and Equipment80,000

Voucher Payable 80,000.................................................Investment inGeneral Fixed

To record voucher. ............................................................ AssetsGeneral Fund

............................................................Revenues80,000

............................................................ Torecord purchase.

Fund Balances Assigned or CommittedEncumbrances 75,000

Encumbrances 75,000To reverse encumbrance.

(b) Cash 6,000 Investment in General Fixed AssetsOther Financing Sources.... 6,000 ....................General Fund Revenues

15,000To record proceeds ............................................................Machinery

and Equipment 15,000from equipment sale. ............................................................ To

remove equipment sold.

(c) No entry. Land.................................................... 100,000

.............Investment in General Fixed

............................................................ AssetsDonations ...............................................100,000

............................................................ Torecord donated land.

Construction in Progress.................... 300,000.............Investment in General Fixed............................................................ Assets

Donations ............................................................ 300,000.To record partially finisheddonated building.

(d) Expenditures 92,000 Investment in General Fixed AssetsCash 92,000................................................. Special

Revenue Funds 66,000To record payment for ............................................................Machinery

and Equipment 66,000snow plow. ............................................................ To

remove traded snow plow.


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Machinery and Equipment.................. 110,000.............Investment in General Fixed............................................................ Assets

General Fund............................................................Revenues...............................................110,000

. .To record new snow plowacquired.


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PROBLEM 15-10

Trans- Fund or action Group Entry

(a) GLTDAG......................Amount to Be Provided for Payment.......................................................................................of Term Bonds

2,700,000....................................................................................... Term Bonds

Payable ....................................................................................... 2,700,000

(b) General..............................................Other Financing Uses 200,000Fund................................................................................... Cash

200,000

GLTDAG............Amount Available in Debt Service Funds....................................................................................... Term Bonds

200,000....................................................................................... Amount to Be

Provided for Payment....................................................... of Term

Bonds ..........................................200,000

(c) General..............................................Other Financing Uses 135,000Fund................................................................................... Cash

135,000

GLTDAG............Amount Available in Debt Service Funds....................................................................................... Serial Bonds

135,000

....................................................................................... Amount to BeProvided for Payment....................................................... of Serial

Bonds ..........................................135,000

(d) General............................................................Expenditures 22,000Fund................................................................................... Cash

22,000

GFAAG...............................................................Equipment 25,000....................................................................................... Investment in General

Fixed Assets....................................................................................... General Fund

Revenues ....................................................................................... 25,000

...........................Investment in General Fixed Assets

.......................................................................................General Fund Revenues15,000

....................................................................................... Equipment

............................................................................15,000


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(e) GLTDAG.............................................Serial Bonds Payable 135,000.......................................................................................Amount Available in Debt

Service Funds....................................................................................... Serial Bonds..........................................................................135,000

(f) GFAAG..........................................Construction in Progress 450,000....................................................................................... Investment in General

Fixed Assets....................................................................................... Capital

Projects Fund..................................................................................... 450,000


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PROBLEM 15-11

(1) (a) Buildings850,000

Construction in Progress250,000

Investment in General Fixed Assets

CapitalProjects Funds

600,000

To record completion of new school.

(b) Land140,000

Investment in General Fixed AssetsDonations140,000

To recorddonation of land.

(c) Proprietary funds maintain their own record of fixed assets as will be illustrated inthe next chapter. These business-type activities will not be recorded in the general fixedassets account group, but will be shown on the capital assets schedule.

(d) Machinery

and Equipment 120,000


General FundRevenues

120,000

To record purchase of new engine.

Investment inGeneral Fixed AssetsGeneral

Fund Revenues65,000

Machineryand Equipment

65,000

To record trade-in of old engine.


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(e) Buildings40,000


General FundRevenues

40,000

To record capital improvements on city hall.

(f)Infrastructure Assets 20,000


SpecialRevenue Funds

20,000

To record improvements other than buildings.

(g)Investment inGeneral Fixed Assets 175,000

Accumulated DepreciationBuildings100,000

Accumulated DepreciationMachinery and Equipment

50,000

Accumulated DepreciationInfrastructure25,000


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(2) City of ElmcreekSchedule of Capital Assets

December 31, 2019

Beg. Balance Additions Retirements End.Balance

Governmental activities:Land.................................................. $1,000,000 $ 140,000

$1,140,000Buildings........................................... 2,150,000 890,000

3,040,000Construction in progress................... 250,000 $ 250,000 0Machinery and equipment................. 800,000 120,000 65,000

855,000Infrastructure assets......................... 1,400,000 20,000

1,420,000Total general fixed assets........... $5,600,000 $1,170,000 $ 315,000

$6,455,000Less accumulated depreciation:

Buildings........................................... $ 400,000 $ 100,000 $500,000

Machinery and equipment................. 300,000 50,000350,000

Infrastructure..................................... 500,000 25,000525,000

Total depreciation........................ $1,200,000 $ 175,000 $ 0$1,375,000Governmental capital assets................... $4,400,000 $ 995,000 $ 315,000$5,080,000

PROBLEM 15-12

(1) (a) 2014July 1 Amount to Be Provided for Payment of Term Bonds............ 1,500,000

Term Bonds Payable.................................................................................................................1,500,000To record issuance of term bonds for school project.

(b) 2016Jan. 1 Amount to Be Provided for Payment of Serial Bonds........... 1,000,000

Serial Bonds Payable................................................................................................................1,000,000...To record issuance of serial bonds to finance cityhall and center.

2 Amount Available in Debt Service FundsSerial Bonds..... 70,000 Amount to Be Provided for Payment of Serial Bonds......................................................................70,000


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.To record January 2, 2016, deposit in debt servicefund. The same entry would be repeated at thebeginning of each year until maturity.


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Dec.31 Amount Available in Debt Service FundsSerial Bonds..... 5,600 Amount to Be Provided for Payment of Serial Bonds........................................................................5,600

.................To record 2016 earnings of sinking fund($70,000 8%). This same entry would berepeated at the end of each year, using thefollowing annual earnings:

Serial Annual Cumulative Annual Amount AvailableRedemption Deposit Balance Earnings for Serial Bond

Year January 1 January 2 January 2 at 8% Redemption December 312016 $70,000$ 70,000 $ 5,600$75,6002017 70,000 145,600 11,648157,2482018 70,000 227,248 18,180 245,428

2019 $100,000 70,000 215,428 17,234 232,6622019Jan. 1 Serial Bonds Payable 100,000

Amount Available in Debt Service FundsSerial Bonds

100,000...................To record retirement of serial bondsmaturing January 1, 2019.

(c) No entry in general long-term debt account group, because proprietary funds maintaintheir own records of long-term debt.

(d) 2017Jan. 1 Amount to Be Provided for Payment of Term Bonds 400,000

Term Bonds Payable400,000

To record issuance of term bonds.

Note: The following entry would be made annually to record the contribution to the sinkingfund:

Amount Available in Debt Service FundsTerm Bonds 40,000 Amount to Be Provided for Payment of Term Bonds

40,000Note: The general long-term debt account group would not record the earnings of thesinking fund because they are to be applied to the semiannual interest payments.


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(2) City of ClintonSchedule of General Long-Term Liabilities

December 31, 2019

General Long-Term LiabilitiesBeginning EndingBalance Additions Deductions Balance

Term bonds payable........................... $1,900,000 $ 0$1,900,000Serial bonds payable.......................... 1,000,000 0 $100,000900,000Total general long-term liabilities

payable......................................... $2,900,000 $ 0 $100,000$2,800,000

PROBLEM 15-13

(1) Purchase MethodThe purchase method is the preferred accounting treatment. When thepurchase method is used, a portion of the fund balance is reserved for the amount ininventory at year-end. This reflects the expected expenditure in future periods as inventoryis consumed or expended.

(2) $811,000 = $825,000 less $14,000 net balance in receivables.

(3) $89,000Vouchers payable is the amount due suppliers.

(4) $100,000The capital outlay expenditures amount is capitalized in the general fixedassets account group.

(5) $52,000The debt service principal is calculated as $74,000 debt service expendituresless $22,000 interest amount.

(6) $1,392,000 = $1,349,000 expenditures for 2019 + $43,000 open encumbrances.


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Ch. 15Problems

PROBLEM 15-14

(1) Oneida TownshipGeneral Fund Worksheet

For Six Months Ended June 30, 2018

Revenues andTrial Balance Operating Entries Expenditures Balance Sheet

Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

Cash....................................................................................................................... 45,000 ..........................................................(b)........120,000....(h)..................................................................................................................204,000 ........................................................................................................................................................................................................................................................................................................................................................... ....................(d)...........................4,000............................................................................................................................................................. ........................................................................................................................................................................................................................... .....................(f).......................344,000............................................................................................................................................................. ...............................................................................309,000...............................................................................................................................Taxes ReceivableDelinquent.............................................................................. 20,000................. .........................................................................................(f)............................................................................................................................... 20,000................. ............................................................................................................................................................................................................................

Allowance for Uncollectible Delinquent Taxes...................... ........ ..... ...................... ...... ..... ..2,000....... ...... .(f).......... ........ .... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .2,000 . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ....... ..... ..... ..... ..... ..... ..... ..... ..... ..... ...... ..... ..... ..... ..... ..... ..... ..... ..... ..... ...... ... ..... ..... ..... ... .. ..Tax Liens Receivable............................................................................................. ..............4,000 ........................................................................................................................................................................................................................(d) ..............4,000 ............................................................................................................................................................................................................................ .......................

Allowance for Uncollectible Tax Liens.......................................... ...... ...................... ...... ..... ..1,000....... ...... (d)............. ......... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .1,000 . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ....... ..... ..... ..... ..... ..... ..... ..... ..... ..... ...... ..... ..... ..... ..... ..... ..... ..... ..... ..... ...... ... ..... ..... ..... ... .. ..Due from Parks Fund............................................................................................. 12,000................. .........................................................................................................................................................................................................................(f) ............11,000 ............................................................................................................................................................................................................................ 1,000..................Inventory of Supplies.............................................................................................. 5,000....................................................................................(g)............................................................................................................................... 26,000 (i).................................................10,000............................................................................................................................................................. ...................................................21,000.............................................................................................................................................................Vouchers Payable. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . .. . ..43,000. .. .. .. .. .. .. .. .. (h)... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 151,000 (g).... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . . . .186,000..... .. .. .. .. .. .. .. ... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..

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