Solution manual advanced accounting 10e by beams ch19

Chapter 19
ACCOUNTING FOR STATE AND LOCAL GOVERNMENTAL UNITS —
GOVERNMENTAL FUNDS
Questions
1

The governmental fund accounting equation is:
Current Assets – Current Liabilities = Fund Balance

2

Taxpayers are billed the full $200,000. The amount recorded as Revenue would be $194,000 with $6,000
recorded as Allowance for Uncollectible Taxes.

3

Encumbrance means “commitment,” and encumbrance accounting records commitments made for goods
on order and for unperformed contracts in order to provide additional control over expenditures.

4

The required governmental fund financial statements include a statement of net assets or balance sheet and
a statement of revenues, expenditures, and changes in fund balance. The fund financial statements for the
governmental funds are prepared on the modified accrual basis of accounting.

5

Capital projects funds are used to account for the financing and acquisition of major general government
capital facilities (general fixed assets) of a governmental unit. They are not used to account for the
acquisition of capital facilities financed through internal service or enterprise funds. General fixed assets
may be purchased through the general fund or special revenue funds. General fixed assets may be acquired

by donation in which case the capital projects fund would not likely be involved.

6

Capital projects funds may receive resources from numerous sources such as the proceeds of general
obligation bond issues, state and federal grants, shared revenues, and transfers from other funds. A CPF is
terminated when the capital facilities have been acquired and project liabilities settled. This may involve a
short period of time in the case of assets acquired by purchase and several years in the case of assets
acquired by construction. Assets remaining after a capital project has been completed and paid for are
ordinarily transferred to the general fund or to the debt service fund with responsibility for servicing the
debt issued to finance the project.

7

A government may treat supply acquisitions as expenditures either when purchased (purchases method) or
when used (consumption method), as long as it reports significant amounts of inventory in the balance
sheet. While the consumption method is similar to the manner in which commercial businesses record
supplies, the purchases method better allows for comparison of expenditures and appropriations. Under the
purchases method, a government with significant inventory balances at year end will recognize the balances
as assets in the fund balance sheet and establish an accompanying reservation of fund balance to reflect the
fact that the supply amount is not an available financial asset. This reservation of fund balance is optional
under the consumption method.

8

Debt service funds may be used to account for debt service on any long-term, general government liabilities
including debt service on special assessment debt for which the government is obligated in some manner.
Debt issued for and intended to be repaid from resources of enterprise, internal service, or trust funds is
accounted for in those funds.

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19-1


19-2
9

A transfer of resources by the general fund to the debt service fund to be used to retire all or a portion of the
general long-term debt would affect the general fund and the debt service fund at the same time. Assuming
that the amount of the transfer is $10,000, the entries would be:
GF
Nonreciprocal operating transfer to debt service fund
Cash
DSF
Cash

10,000
10,000
10,000

Nonreciprocal operating transfer from general fund

10,000

10

Special assessment levies are charges made against specific property owners (or citizens) to pay for
improvements (or services) that provide special benefits to the property owners. Such improvements are
usually requested by those who receive the benefits and agree to pay their share of the cost.
General tax levies are levied against all citizens of the governmental unit on a uniform basis to

finance the general cost of government. General tax levies are determined by elected officials, apply to all
(or virtually all) property in the jurisdiction, and may have little or no relationship to the actual benefits
received by individual taxpayers.
A final difference is that property taxes are levied each year for that year (or sometimes the
following year). Special assessment levies often are for amounts to be collected over several years.

11

Capital project funds are used to account for the construction activities of general government special
assessment projects and the debt service fund is used to account the related debt service if the government
is obligated in some manner. Debt service for special assessment liabilities for which the government is not
obligated in any manner is accounted for in agency funds, with the special assessment obligation being
disclosed in notes to the financial statements.

12

When governments enter into capital lease agreements, the governmental fund acquiring the general fixed
asset records an expenditure and other financing source, as if long-term debt had been issued. At the same
time, the town notes a liability (capital lease payable) in the general long-term debt account records for the
amount remaining due and adds an asset to the general fixed asset account records at the present value of
the minimum lease payments determined by FASB 13 criteria. The asset and liability, as well as associated
depreciation, will appear in the government-wide financial statements; however, only an expenditure and
other financing source appear in the governmental fund statements. The town may record future capital
lease payments as expenditures of principal and interest in the general fund or transfer resources to the debt
service fund, which will recognize the expenditures. The notes to the financial statements disclose
minimum lease payments for each of the following five years and in five-year increments thereafter.

13
Expenditures
Supplies Inventory

To adjust the supplies inventory and supplies expenditures accounts.
14

20,000
20,000

Governments record details of the planned revenues (such as property taxes, sales taxes, and license
revenue) and appropriations (such as police supplies, mayor’s office expenses, and maintenance of the town
hall) in subsidiary revenue and expenditure ledgers. The detail allows for better control over expenditures,
as appropriations can be compared to expenditures and encumbrances at any time.

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19-3
15

The amount that city officials can order prior to year end is $75,000 ($250,000 – $175,000). If they have
not spent the full $250,000 in appropriations prior to year end, depending on the laws of the Village of
Lester, all appropriations lapse at the end of the year for which they are made, with the exception of
committed appropriations (encumbrances outstanding), which can continue to serve as authorizations for
items on order or under contract. Since total expenditure and encumbrance amounts are closed to fund
balance at year end, reserve for encumbrance credits remain in the accounting records as reservations of
fund balance within the governmental fund statements.

16

Reserve for encumbrances
Reserve for encumbrances – prior year
To reclassify encumbrances from the prior year

60,000

Expenditures – prior year
Vouchers Payable
To record expenditures for prior year

59,800

Reserve for encumbrances – prior year
Expenditures – prior year
Unreserved fund balance
To close excess reserve to fund balance.

60,000

60,000

59,800

59,800
200

17

Permanent funds (PF) account for contributions for which the grantor specifies that a principal amount
must be maintained but for which interest accumulation or asset appreciation, or both, are to be used for a
specified purpose. Funds that are expendable are accounted for in a special revenue fund. If contributions
benefit parties external to the government, they are accounted for in private purpose trust funds.

18

The general fund is always a major fund. Other funds are considered major funds if they meet both of the
following criteria:
1.
Total assets, liabilities, revenues, or expenditures/expenses (excluding extraordinary items) of that
individual governmental or enterprise fund are at least 10% of the corresponding total (assets,
liabilities, etc.) for all funds of that category or type.
2.
Total assets, liabilities, revenues, or expenditures/expenses (excluding extraordinary items) of that
individual governmental or enterprise fund are at least 5% of the corresponding total for all
governmental and enterprise funds combined.

19

A budgetary comparison schedule, which is required supplementary information for the general fund and
for all special revenue funds with legally adopted budgets, includes columns for the original budget, the
final budget, actual balances (on the budgetary basis) and variances (optional). The budgetary comparison
schedule includes the same classifications as the GAAP operating statement, however, the amounts
reported for revenues, expenditures, and fund balances often differ between the two statements. Differences
exist when a government uses a non-GAAP basis of accounting for budgeting purposes.

20

Since the government-wide statements are prepared on the accrual basis of accounting while the fund
financial statements for the governmental funds are prepared on the modified accrual basis of accounting,
governments must convert governmental fund financial information to the accrual basis of accounting for
inclusion in the government-wide statements of activities and net assets. A conversion worksheet is an
optional tool that facilitates reconciliation of the two statements.

21

Examples of items that might appear on the reconciliation between the governmental fund balance sheet
and the government-wide statement of net assets include:
1.
Governmental fund fixed assets are recorded as expenditures in the fund statements and must be
recorded at cost in the government-wide statements.
2.
The depreciation associated with the governmental fixed assets must be recorded in the
government-wide statements.

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19-4
3.

Capital project fund construction expenditures should be recorded as “construction in progress” in
the government-wide statements.

Examples of items that might appear on the reconciliation between the governmental fund operating
statement and the government-wide statement of activities include:
1.
Governments must also adjust for instances where revenue recognition differs between the
modified accrual and accrual bases of accounting.
2.
It is necessary to eliminate interfund balances within the governmental funds.
3.
Bond proceeds provide current financial resources in the fund statement, but issuing debt increases
long-term liabilities in the statement of net assets.

EXERCISES
E19-1
1
2
3
4
5

E19-2
a
b
b
a
c

1
2
3
4
5

a
c
d
a
a

E19-5
[AICPA adapted]
1

c
2
c
3
b
4
c
5
c

E19-4
1
2
3
4
5

E19-3
[AICPA adapted]
c
d
a
a
b

1
2
3
4
5

b
d
d
d
a

E19-6
[AICPA adapted]
1
c
2
b
3
c, if u/c relates to 2009&10
4
b
5
b

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19-5
E19-7
1

Journal entries to account for property taxes in the general fund
March 21, 2008
Taxes receivable — current

Allowance for uncollectible current taxes
Revenue
To record the property tax levy.
May 4, 2008
Cash

2,500,000
50,000
2,450,000

1,900,000

Taxes receivable — current
To record collection of property taxes.
Taxes receivable-delinquent
Allowance for uncollectible current taxes
Taxes receivable — current
Allowance for uncollectible delinquent taxes
To reclassify uncollected taxes as delinquent.
May 5-December 31, 2008
Cash
Taxes receivable — delinquent
To record collection of property taxes.
November 1, 2008
Allowance for uncollectible taxes — delinquent
Taxes receivable — delinquent
To write off tax receivable determined to be uncollectible.

1,900,000
600,000

50,000
600,000
50,000

150,000
150,000

5,000
5,000

Adjusting Entry
Revenue

312,250
Deferred revenue
312,250
To record deferred revenues for taxes not collected within 60 days after year end. ($2,500,000 $1,900,000 - $150,000 - $5,000 - $45,000 - $87,750)

January 1, 2008 — February 28, 2008
Cash
Taxes receivable — delinquent
To record collection of 2006 taxes.
2

87,750
87,750

Jedville Township
Partial Balance Sheet
December 31, 2008

Assets
Taxes receivable — delinquent (net of $45,000
estimated uncollectible taxes)

$ 400,000

Liabilities
Deferred tax revenues

$ 312,250

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19-6
3

Revenue would equal tax levy less uncollectible amounts less amounts not collected within 60 day period.
Since governmental units rarely complete the closing process within 60 days of year end, the amounts
collected within 60 days of year end will be known.
($2,500,000 - $50,000 - $312,250 = $2,137,750)

E19-8
Closing entries:
Unreserved fund balance
Appropriations
Estimated revenues
To reverse entry to record budget.

500

17,500

Reserve for encumbrances — prior year
Revenues
Nonreciprocal transfer in
Expenditures — current year
Expenditures — prior year
Encumbrances
Unreserved fund balance
To close accounts, including the prior year’s reserve for encumbrances.

2,000
17,380
3,200

18,000

16,450
1,900
1,000
3,230

E19-9
Millar City
General Fund
Balance Sheet
June 30, 2008
Assets
Cash
Taxes receivable

Less: Allowance for uncollectible
Accounts
Due from other funds
Supplies inventory
Total assets
Liabilities and Fund Balance
Liabilities:
Vouchers payable
Due to other funds
Total liabilities
Fund balance:
Reserved for:
Encumbrances
Inventory of supplies
Unreserved fund balance
Total fund balance
Total liabilities and fund balance

$12,000
$30,000
2,000

28,000
3,000
4,000
$47,000

$15,000
5,000
$20,000

$ 6,000
4,000

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10,000
17,000
27,000
$47,000


19-7
Check:
Estimated revenues
Encumbrances
Expenditures
Expenditures—prior year
Adjust—Reserve for inventory of supplies
Ending balance

Unreserved Fund Balance
$300,000
$ 10,000
6,000
300,000
290,000
5,000
5,000
305,000

2,000
17,000
$620,000

Preclosing balance
Appropriations
Reserve for encumbrances— prior year
Revenues

$620,000

E19-10
McGwire City General Fund
Statement of Revenues, Expenditures, and Changes in Fund Balance
for the year ended December 31, 2008
Revenues
Expenditures
Excess of revenues over expenditures
Other financing sources (uses):
Reciprocal transfers in
Nonreciprocal transfers out
Excess of revenues and other financing sources over
(under) expenditures and other financing uses
Total fund balance, January 1, 2008
Total fund balance, December 31, 2008
Estimated revenues
Encumbrances
Expenditures
Expenditures—prior year
Nonreciprocal transfers out

Ending balance

Unreserved Fund Balance
$100,000
$ 25,000
4,000
95,000
94,000
5,000
4,800
101,000
18,000
27,000
32,200
$253,000
$253,000

$101,000
98,800
2,200
27,000
(18,000)
$ 11,200
25,000
$ 36,200
Preclosing balance
Appropriations
Reserve for encumbrances— prior year
Revenues
Reciprocal transfers in

Total ending fund balance = $32,200 + $4,000 (Reserve for encumbrances) = $36,200.

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19-8
E19-11
Journal entries in the general fund:
1

2

3

Estimated revenues
Appropriations
Unreserved fund balance
To record the annual budget.

250,000

Taxes receivable—current
Revenues
Allowance for uncollectible taxes—Current
To record tax levy for the year (1% estimated uncollectible).

200,000

Cash

150,000

248,000
2,000

198,000
2,000

Taxes receivable—current
To record tax collections.
4

5

150,000

Due from special revenue fund
Cash
To record loan to SRF.

15,000

Encumbrances

18,000

15,000

Reserve for encumbrances

To encumber orders for supplies.
6

18,000

Reserve for encumbrances
Encumbrances
To reverse encumbrance entry on receipt of supplies ordered.

18,000

Expenditures

18,150

18,000

Vouchers payable
To record purchase of supplies.
7

Expenditures

18,150
800

Due to stores fund (ISF)
To record materials acquired from the stores fund.
8

9

Operating transfer to debt service fund
Cash
To record payment to DSF for debt service.
Expenditures

800
5,000
5,000
15,000

Cash
To record purchase of equipment.
10

Cash

15,000
3,000

Revenues
To record collection of license revenue.
11

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

3,000
50,000
2,000

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50,000
2,000


19-9
E19-11 (continued)
12

Cash

30,000
Taxes receivable—delinquent
To record collection of delinquent taxes.

30,000

Revenues ($20,000 - $2,000)/2
9,000
Deferred revenues
To defer revenue recognition on taxes expected to be collected after the 60 day revenue
recognition cutoff.

9,000

E19-12
1

Cash

75,000
Tax anticipation notes payable
To record issuance of short-term notes.

2

Encumbrances

75,000

33,000

Reserve for encumbrances
To record order of equipment.
3

4

5

6

Reserve for encumbrances
Expenditures

Encumbrances
Vouchers payable
To record receipt of equipment.
Operating transfer to DSF
Cash
To record transfer to debt service fund.
Property taxes receivable—current
Allowance for uncollectible current Taxes
Deferred revenues
Revenues
To record property tax levy.
Cash

33,000

33,000
33,250
33,000
33,250

200,000
200,000

1,000,000
50,000
50,000
900,000

100,000
Deferred revenues

To record receipt of restricted grant.

7

Expenditures

$100,000

75,000

Vouchers payable (or cash)
To record expenditures for grant program.
Deferred revenues
Revenues
To record revenues to date on the grant.

75,000
75,000

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75,000


19-10
E19-13
1

CPF
Cash

769,000
Other financing sources—proceeds from bond issue
To record issuance of bonds.

769,000

CPF
Other financing uses—nonreciprocal transfer to DSF
Cash
To transfer the premium to the debt service fund.
DSF
Cash

19,000
19,000

19,000
Other financing sources— nonreciprocal transfer from CPF
To record receipt of bond premium.

19,000

2

SRF
Cash (or Grants receivable)
33,000
Grant revenue
33,000

To record grant revenue. (This entry assumes that the appropriate expenditures will take place
within the same fiscal year.)

3

GF
Other financing uses—(non)reciprocal transfer to CPF
Cash
To record transfer to establish CPF.

500,000
500,000

CPF
Cash

500,000
Other financing sources— (non)reciprocal transfer from GF
To record the transfer from the GF.

4

PF
Cash

500,000

10,000,000
Revenue – contribution/endowment
To record a permanent fund contribution.

5

GF
Expenditures

10,000,000

375,000

Vouchers payable (or cash)
To record vehicle purchases.
6

GF
Cash

375,000

30,000
Other financing sources – sale of assets
30,000
To record the sale of governmental assets. (This is a governmental fund entry. Under accrual
accounting, the asset would be removed and a gain on sale recognized.)
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19-11
7

8

GF
Cash

1,200
Other financing sources – sale of assets
1,200
To record the sale of governmental assets. (This is a governmental fund entry. Under accrual
accounting, the asset would be removed and a gain on sale recognized.)

GF
Other financing uses—nonreciprocal transfer to DSF
Cash
To record transfer to debt service.

50,000
50,000

DSF
Cash

50,000
Other financing sources— nonreciprocal transfer from GF
To record receipt of transfer from GF.

50,000

DSF
Expenditures

Cash
To record interest payment.

50,000
50,000

E19-14

Cash
Investments
Tax receivable—delinquent
Accounts receivable
Supplies inventory
Allowances for uncollectible
taxes—delinquent
Vouchers payable
Deferred revenue
Note payable (short-term)
Reserve for encumbrances
Unreserved fund balance

Trial Balance
DR
CR
$410,000
300,000
150,000
30,000
60,000
10,000

140,000
40,000
150,000
90,000
520000
$950,000

Fixed Assets
Accumulated depreciation
Long term debt payable
Capital Lease payable

Adjustments
DR
CR

10,000
140,000
0
150,000
90,000
420,000

d) 40,000

b) 100,000
c) 75,000

a) 35,000
d) 40,000

$950,000
a) 100,000

$315,000
Total Net Assets

GW Stmt of Net Assets
DR
CR
410,000
300,000
150,000
30,000
60,000

100,000
a) 65,000
b) 100,000
c) 75,000
$315,000

65,000
100,000
75,000
$1,050,00
0

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$1,050,000


19-12
E19-15
Net change in fund balance—total governmental funds
Amounts reported for governmental activities in the statement of net
assets differ from those in the governmental fund balance sheet because:
Governmental funds report capital outlays as expenditures; the assets
are capitalized and depreciated in the government-wide statements
Grant revenues in the statement of activities that do not provide current
financial resources are not reported as revenues in the funds
Debt proceeds provide current financial resources in the fund statement,
but issuing debt increases long-term liabilities in the statement of net assets
A capital lease is treated as an expenditure in the governmental funds
in the year that the lease agreement is entered into; however, it
increases long-term liabilities in the statement of net assets
Change in net assets of governmental activities

$1,408,950

225,000
165,000
(350,000)
(55,000)
$1,033,950

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19-13
PROBLEMS
P19-1
City of Orchard Park
General Fund
Balance Sheet
December 31, 2008
Assets
Cash
Taxes receivable — delinquent (net of $30,000 allowance
for uncollectible taxes)
Accounts receivable (net of $2,000 allowance for bad debts)
Supplies on hand
Due from Agency Fund

$ 40,000
180,000
23,000
3,000
10,000
$256,000

Liabilities and Fund Balance
Vouchers payable
Due to Utility Fund
Taxes received in advance
Liabilities

$155,000
20,000

10,000
185,000

Reserve for encumbrances
Reserve for supplies
Unreserved fund balance
Fund balance
Total liabilities and fund balance

50,000
3,000
18,000
71,000
$256,000

Supporting computations
Adjusting entry:
Supplies on hand
Reserve for supplies
To record supplies on hand and related reserve.
Closing entries
Appropriations
Unreserved fund balance
Estimated revenues
To reverse budget entry.
Revenues
Expenditures
Encumbrances
Unreserved fund balance

3,000
3,000

900,000
10,000
910,000
910,000

Ending fund balance:
Unreserved fund balance = $26,000 (preclosing balance) - $10,000 + 2,000 = $18,000
Reserve for encumbrances = $50,000
Reserve for supplies = $3,000
Total ending fund balance = $18,000 + $50,000 + $3,000 = $71,000

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858,000
50,000
2,000


19-14
P19-2
City of Batavia
General Fund
Statement of Revenues, Expenditures, and Changes in Fund Balance
For the year ended June 30, 2009
Revenues
Expenditures
Excess revenues over expenditures

Other financing sources (uses):
Nonreciprocal transfers out
Excess of revenues and other financing sources over
(under) expenditures and other financing uses
Total fund balance, July 1, 2008 (given)
Total fund balance, June 30, 2009

$980,000
940,000
40,000
(10,000)
30,000
80,000
$110,000

City of Batavia
General Fund
Balance Sheet
June 30, 2009
Assets
Cash
Taxes receivable — delinquent
Less: Allowance for uncollectible taxes
Due from County
Total assets

$ 80,000
$160,000
30,000

Liabilities and Fund Balance
Liabilities:
Vouchers payable
Notes payable
Total liabilities
Fund balance:
Reserve for encumbrances
Unreserved fund balance
Total fund balance
Total liabilities and fund balance

130,000
18,000
$228,000

$ 58,000
60,000
118,000
$ 20,000
90,000

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110,000
$228,000


19-15
P19-3
1

Journal entries for the Town of Tyler
Estimated Revenues
Appropriations
Unreserved Fund Balance
To record the budget for the year July 1, 2008 to June 30, 2009.
Reserve for Encumbrances
Reserve for Encumbrances–prior year
To reclassify the prior year reserve.
a

Taxes Receivable

400,000
395,000
5,000
9,000
9,000
200,000

Revenue — Taxes
Allowance for uncollectible taxes
To record tax levy for the year.
b

Cash

198,000
2,000
190,000

Taxes Receivable — current
Taxes Receivable — delinquent
To record cash collections for the year.
c

d

Allowance for uncollectible taxes — Delinquent
Taxes Receivable — delinquent
To record write-off of uncollectible account.
Cash

176,000
14,000
1,000
1,000
20,000

Licenses and Permits
To record hunting licenses.
e

Cash

20,000
200,000

Miscellaneous Revenues
To record Miscellaneous revenues.

f

Expenditures

200,000
20,000

Vouchers Payable
To record salaries for the year.
g

Encumbrances

20,000
15,000

Reserve for encumbrances
To record order of equipment.
h

i

Reserve for encumbrances
Expenditures
Encumbrances
Vouchers Payable
To record receipt of equipment.

15,000
15,000

14,000
15,000
14,000

Expenditures–prior year
9,500
Vouchers Payable
9,500
To record receipt of equipment ordered during the prior year and chargeable against the
prior year’s reserve for encumbrances.

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19-16
P19-3 (continued)
j

Encumbrances

11,000

Reserve for encumbrances
To record the purchase order for operating supplies.

k

11,000

Reserve for encumbrances

Encumbrances
To reverse the encumbrance entry upon receipt of the supplies.

5,000

Supplies inventory
Vouchers Payable
To record receipt of operating supplies.

5,000

Note Payable

5,000

5,000
15,000

Cash
To record payment of note payable.
l

Expenditures

15,000
348,040

Cash
To record payment of various expenditures.
m

Expenditures

348,040
8,000

Supplies inventory
To adjust the supplies inventory & expenditures.
n

Taxes Receivable–delinquent
Allowance for uncollectible taxes–current
Taxes Receivable — current
Allowance for uncollectible
taxes–delinquent
To reclassify past-due taxes receivable as delinquent.

8,000
24,000
2,000
24,000
2,000

Closing Entries
o

Appropriations
Unreserved Fund Balance
Estimated Revenues

395,000
5,000

Revenues
Expenditures
Encumbrances
Unreserved Fund Balance

418,000

Unreserved Fund Balance
Reserve for encumbrances–prior year
Expenditures–prior year

400,000
390,040
6,000
21,960
500
9,000

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9,500


19-17
P19-3 (continued)
2
Town of Tyler

General Fund
Statement of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual (Budgetary Basis)
For the year ended June 30, 2009
Original
Budget

Final
Budget

Actual
(Budgetary
Basis)

Variance
Positive
(Negative)

Revenues
Taxes
Licenses and permits
Miscellaneous revenue
Total Revenues

$250,000
20,000
130,000
400,000

$250,000

20,000
130,000
400,000

$198,000
20,000
200,000
418,000

$(52,000)
70,000
18,000

Expenditures
Total expenditures (not detailed)

$395,000

$395,000

$396,040*

(1,040)

5,000
16,000

5,000
16,000

21,960
16,000

16,960
-

$ 21,000

$ 21,000

(9,500)
28,460

(9,500)
$ 7,460

Excess of revenues over expenditures
Budgetary fund balance June 30, 2008
Less excess prior year’s encumbrance over
actual expenditure
Budgetary Fund Balance at June 30, 2008
Encumbrances outstanding
Fund balance June 30, 2009
*

6,000
$ 34,460

Actual expenditures on a budgetary basis includes the $6,000 supplies purchase commitment chargeable against
the 2008-9 appropriations, but excludes the $9,500 expenditures chargeable against the prior year’s carryover

appropriation.

3. Given the limited information, the reconciling items which are certain include the playground equipment
in item h and the other equipment in item i.

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P19-4

Cash and cash equivalents
Investments
Taxes receivable
Accounts receivable
Due from other governments
Supplies inventory
Vouchers payable
Contracts payable
Deferred revenue
Fund balance/Net Assets, beg
Revenues
Expenditures
OFS—Bond proceeds
OFS—Capital lease
OFS—Transfers in
OFU—Transfers out

DR
541,100
520,000

520,000
187,500
364,970
290,000

CR

379,500
47,500
55,000
912,720
3,507,450

Adjustments
DR

75,250
5,542,420

Statement of
Activities
DR

Statement of
Activities
CR

Statement of
Net Assets
DR

541,100
520,000
520,000
187,500
364,970
290,000

b) 30,000
f) 55,000
a) 9,000
c) 20,000

3562450
3,014,600

d) 500,000
e) 65,000
g) 75,250

0
0
0
0

g) 75,250
5,542,420
a) 9,000
b) 95,000

Fixed Assets

104,000
b) 65,000

Accumulated Depreciation
Construction in Progress
Bonds Payable
Capital leases payable

65,000

c) 20,000

819,250
11,084,840

Statement of
Net Assets
CR

379,500
47,500
0
942,720

f) 55,000

3,043,600
500,000
65,000

75,250

Adjustments
CR

20,000
d) 500,000
e) 65,000
819,250

500,000
65,000

11,084,840

2,547,570

1,999,720
547,850

2,547,570

2,547,570

547,850

Change in net assets

New net asset balance = 942,720 + 547,850 = 1,490,570
a) Assume no depreciation in the first year, since no depreciation policy is provided.

© 2009 Pearson Education, Inc. publishing as Prentice Hall
19-1


P19-5 [AICPA adapted]
Oslo School District General Fund Transactions
July 1, 2007 — June 30, 2008
a

b

Estimated revenues
Appropriations
Unreserved fund balance
To record the budget for the year.

3,000,000

Taxes receivable

2,870,000

2,980,000
20,000

Revenues — taxes
Allowance for uncollectible taxes
To record tax levy for the year.
c

d

Estimated uncollectible taxes
Taxes receivable
To write-off uncollectible taxes.
Cash

2,800,000
70,000
40,000
40,000
2,940,000

Taxes receivable
Miscellaneous revenues
To record cash collections for the year.
e

Vouchers payable

2,810,000
130,000
2,640,000

Cash
To record cash payments for the year.
f

Encumbrances

2,640,000
2,700,000

Reserve for encumbrances
To record encumbrances.
g

h

2,700,000

Reserve for encumbrances
Encumbrances
To reverse encumbrances.

2,700,000

Expenditures

2,700,000

2,700,000

Vouchers payable
To record vouchers for payment of current operations.
i

j

k

l

2,700,000

Expenditures — prior year
Vouchers payable
To record expenditures for prior year.

58,000

Reserve for encumbrances
Expenditures — prior year
Unreserved fund balance
To close excess reserve to fund balance.

60,000

Due to other funds
Vouchers payable
To record vouchers for payment to other funds.

58,000

58,000
2,000
210,000

142,000

Due to other funds
To record expenditures for amounts due other funds.
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19-1

210,000

Expenditures

142,000


19-211
m

Encumbrances

91,000

Reserve for encumbrances
To record encumbrances for new contract.

91,000

P19-6 [AICPA adapted]
Journal entries for the City of Lahti General Fund
1

2

Estimated revenues
Appropriations
Unreserved fund balance
To record the budget.

2,000,000

Taxes receivable

1,870,000

1,940,000
60,000

Revenues
Allowance for uncollectible taxes
To record the property tax levy.
3

4

Allowance for uncollectible taxes
Taxes receivable
To write off uncollectible taxes receivable.
Cash

1,860,000
10,000
8,000
8,000

1,820,000

Taxes receivable
To record property tax collections.
5

Encumbrances

1,820,000
1,070,000

Reserve for encumbrances
To record purchase commitments.
6

7

1,070,000

Reserve for encumbrances
Expenditures
Encumbrances
Vouchers payable
To record actual expenditures.

1,000,000
1,840,000

Vouchers payable

1,852,000

1,000,000
1,840,000

Cash
To record payment of vouchers.
8

9

1,852,000

Revenues
Unreserved fund balance
Estimated revenues
To close revenues accounts.

1,860,000
140,000

Appropriations

1,940,000

2,000,000

Expenditures
Encumbrances
Unreserved fund balance

To close expenditure — related accounts

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1,840,000
70,000
30,000


19-212
P19-7
Volendam County
General Fund
Statement of Revenues, Expenditures, and Changes in Fund Balance
For the year ended December 31, 2008
Revenues:
Taxes
Licenses and permits
Intergovernmental grants
Total revenues
Expenditures:
Current operating:
General government
Public safety
Judicial
Health and welfare
Total current operating
Capital outlay
Total expenditures

$10,000,000
2,000,000
300,000
$12,300,000

$ 8,000,000
1,500,000
1,000,000
1,200,000
11,700,000
600,000
12,300,000

Excess of revenues over expenditures

0

Other financing sources (uses):
Operating transfer to debt service fund

(320,000)

Excess (Deficiency) of revenues and other
sources over expenditures and other uses

(320,000)

Fund balance, January 1, 2008
Residual equity transfer from other fund
Fund balance, December 31, 2008

3,130,000
2,000,000
$ 4,810,000

Note: The short-term note affects only the balance sheet. The interfund collection affects the balance sheet only.

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19-213
P19-8
1

2

3

Cash ($3,000,000 ´ .06 ´ .5)
OFS - Nonreciprocal transfer from GF
To record transfer from general fund.

90,000

Expenditures — interest
Cash
To record interest payment.

90,000

Cash

90,000

90,000
1,090,000

OFS - Nonreciprocal transfer from GF
To record transfer from general fund.
4

Expenditures — interest
Expenditures — principal retirement
Cash
To record payment of principal and interest.

1,090,000
90,000
1,000,000
1,090,000

5

None.

6

Cash ($2,000,000 ´ .06 ´ .5)
OFS - Nonreciprocal transfer from GF
To record transfer from general fund.

60,000

Expenditures — interest
Cash
To record interest payment.

60,000

7

60,000

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60,000


19-214
P19-9
1

October 1, 2008
GF
OFU – nonreciprocal transfer to CPF
Cash
To record transfer of cash to CPF.
CPF

Cash

200,000
200,000
200,000

OFS – (Non)reciprocal transfer from general fund
To record receipt of cash from GF.
2

November 1, 2008
CPF
Encumbrances

200,000

580,000

Reserve for encumbrances
To record encumbrances for the amount of the contract.
3

April 15, 2009
CPF
Cash

580,000

401,000
Proceeds from bond issue
To record sale of bonds.

CPF

DSF

401,000

OFU - nonreciprocal transfer to debt service fund
Cash
To transfer of bond premium to the DSF.

1,000

Cash

1,000

1,000

OFS - nonreciprocal transfer from CPF
To record receipt of bond premium.
4

May 2, 2009
CPF
Expenditures — capital outlay
Contracts payable
To record expenditures on the municipal building project.
Reserve for encumbrances
Encumbrances

To remove encumbrances when construction is complete.

5

1,000

580,000
580,000
580,000
580,000

May 12, 2009
CPF
Contracts payable

580,000
Cash
To record payment to Crooked Construction for building contract.

CPF

CPF

Residual equity transfer to general fund
Cash
To record transfer to general fund.
OFS - nonreciprocal transfer from general fund
Proceeds from bond issue
Expenditures
Residual equity transfer to general fund

OFU - nonreciprocal transfer to debt service fund
To close the books of the CPF.

580,000

20,000
20,000
200,000
401,000

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580,000
20,000
1,000


19-215
GF

Cash

20,000
Residual equity transfer from CPF
To record receipt of cash from CPF.

20,000

P19-10
1

Journal entries for Malmo City
July 1, 2008
CPF
Encumbrances

480,000

Reserve for encumbrances
To encumber the construction contract.
CPF

Cash

480,000
255,000

OFS - Proceeds from bond issue
To record proceeds of bond issue.
CPF

DSF

255,000

OFU - nonreciprocal transfer to debt service fund
Cash
To transfer premium to the DSF.
(This premium transfer is commonly presumed in problems.)

5,000

Cash

5,000

5,000

OFS - nonreciprocal transfer from CPF
To record receipt of premium transferred from CPF.
December 20, 2008
CPF
Reserve for encumbrances
Encumbrances
To reduce encumbrances for work completed.
CPF

Expenditures

5,000

160,000
160,000
160,000

Contracts payable
To record expenditures for one-third of Gunnarsson contract.
January 1, 2009
CPF
Contracts payable

160,000

160,000

Contracts payable — retained percentage
Cash
To record partial payment on the contract.
GF

OFS - nonreciprocal transfer to debt service fund
Cash
To transfer funds to DSF for January 1, 2009 interest payment.

16,000
144,000
2,500

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2,500


19-216
P19-10 (continued)
DSF

Cash ($250,000 ´ .06 ´ .5) - $5,000
2,500
OFS - nonreciprocal transfer from general fund

To receive funds from GF for the January 1, 2009 interest payment.

2,500

Expenditures–interest
7,500
Cash
To record the January 1, 2009 interest payment on the 6% serial bonds ($250,000 ´ 6% ´ 1/2 year).

7,500

DSF

June 30, 2009
CPF
Encumbrances

160,000

Reserve for encumbrances
To reduce encumbrances for work completed.
CPF

2

160,000

Expenditures — capital outlay
Contracts payable
To record billing for work completed.

160,000
160,000

Closing entry
CPF

OFS - Proceeds from bond issue
Unreserved fund balance
Expenditures–capital outlay
Encumbrances
OFU - nonreciprocal transfer to debt service fund
To close the books of CPF at end of fiscal year.

255,000
230,000
320,000
160,000
5,000

At June 30, 2009 the balance sheet of the CPF would appear as follows:
Assets
Cash

$106,000
$106,000

Total assets
Liabilities
Contracts payable

Contracts payable — retained percentage
Fund balance
Reserve for encumbrances
Unreserved*
Total liabilities and fund balance
*

$160,000
16,000
$160,000
(230,000)

$176,000

(70,000)
$106,000

This deficit will be provided for by issuing the additional $250,000 of bonds.

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