Solution manual advanced accounting 10e by fischer taylor CH15

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CHAPTER 15
UNDERSTANDING THE ISSUES
as control accounts to allow for budgetary
comparisons in the ledgers as well as to facilitate financial reporting of a budgetary comparison statement.

1. GASB Statement No. 34 stipulates a new reporting model that includes two separate, but
related sets of financial statements. The first
set, the fund financial statements, focuses on
reporting activity as a collection of separate
funds with a current working-capital focus that
uses a modified accrual basis of accounting.
The second set contains government-wide
statements that concentrate on the government
as a whole with an economic long-term focus
using full accrual-basis accounting. The value
of both perspectives is the retention of a near
cash or working capital focus on funding government with a longer term focus that measures whether such services can continue
without attention to condition of all capital assets and recognition of and planning for
increased expenditures in future periods. Capital assets and long-term liabilities are not accounted for in the governmental funds but will
be accounted for and reported in the
government-wide financial statements. Thus,
the “working capital” fund balance will be replaced with a long-term notion of net assets—
broken into unrestricted, restricted, and capital,
net of related debt.

4. The advantage of reporting designations of the
fund balance is improved communications of
decisions made by the common council or
town/village board that will impact the availability of resources for other purposes. While not

restricted by external grantors or donors, these
funds are internally designated for specific purposes, e.g., planned purchases, reduction of
taxes, and improvements in services.
5. The encumbrance system is designed as an
early indicator or an “expected expenditure” to
prevent overspending and to plan for payment
of an “expected liability.” It is an estimate of an
expenditure that 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 to capture financial resources information. Therefore,
when a capital asset is acquired or sold, the resources (financial resources used or acquired)
are recorded in the funds. The account groups
are designed to provide information on the
number and condition of these capital assets.
The same is true for long-term liabilities. When
debt is incurred, the cash is recorded in the
fund to capture the inflow of financial resources. But the debt is recorded in the account group. When debt is repaid, the outflow
of cash is recorded in the fund, and the debt is
removed from the account group. Since the
fund and account groups capture different information, making a journal entry only in the
fund would adequately record flows of financial
resources but not record the balances of longterm liabilities and/or capital assets.

2. Separating activity into governmental, proprietary, and fiduciary funds allows for detailed reporting of resources and spending. Separating
of activities also allows for a different
measurement focus and basis of accounting
depending on whether activities are general
government or business-type activities. In addition, since the governmental activities are
accounted for using a modified accrual basis of

accounting in order to capture financial resource information, the account groups have
served to record (i.e., list) the long-term capital
assets and liabilities. Proponents of this model
argue that information generated best serves
the budget-planning process and answers
questions relating to how much resources are
needed to pay for the current level of services.

7. (Appendix) The 13 basic principles of government accounting are found in GASB Statement
No. 1 and in Codification of Governmental Accounting and Financial Reporting Standards.
They form a model of fund accounting theory
and help anchor the subsequent work of the
GASB as detailed in Chapters 15–17 of this
text.

3. Budgets are the legal authorization to raise
revenue, incur long-term debt, and appropriate
resources. Authorized expenditures are termed
appropriations. Budgetary totals, including appropriations, are recorded in the general ledger

651


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Ch. 15—Exercises

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 goods and services. The
consumption, not the purchase of inventory, is an expenditure.

(3) b

Representing potential inflow of assets, Estimated Revenues is debited.

(4) d

Taxes Receivable—Current is debited with offsetting credits to an allowance for uncollectible
taxes and revenues.

(5) a

Donated fixed assets are recorded in the general fixed asset account group 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 general fund. 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 to determine an increase or a
decrease in the fund balance from the current-period operations.

(9) d

When a purchase order is approved, Encumbrances is debited to reflect the expected expenditure. A reserve is also established by a credit to Fund Balance—Reserved for Encumbrances.

(10) a

The lease obligation is long-term debt and should be recorded in the account 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 an expenditure
for services.

(7) b

Payments on an operating lease are expenditures for the general fund.

652


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Ch. 15—Exercises

EXERCISE 15-3
Estimated Revenues ($355,000 + $7,000 + $90,000 + $50,000) ....
Estimated Other Financing Sources ($100,000 + $15,000) .............
Appropriations ............................................................................
Estimated Other Financing Uses ($30,000 + $15,000) ..............
Budgetary Fund Balance ...........................................................

502,000

115,000
500,000
45,000
72,000

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

EXERCISE 15-4
Jan.

Feb.

Apr.

July

Cash .....................................................................................
Tax Anticipation Notes Payable .....................................
To record borrowing.

275,000

Cash .....................................................................................
Tax Liens Receivable .....................................................
Revenues .......................................................................
To record collection of tax liens.

14,000

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

Tax Liens Receivable .....................................................
To record collection of tax liens, sale of property.

16,000

Allowance for Uncollectible Tax Liens..................................
Tax Liens Receivable .....................................................
Revenues .......................................................................
To close allowance.

23,000

Cash .....................................................................................
Delinquent Property Taxes Receivable ..........................
Revenues .......................................................................
To record collection of delinquent property taxes.

104,500

Tax Liens Receivable ...........................................................
Delinquent Property Taxes Receivable ..........................
To transfer delinquent property taxes to tax liens.

35,000

Allowance for Uncollectible Delinquent Taxes .....................
Allowance for Uncollectible Tax Liens ............................
Revenues .......................................................................
To transfer allowance for uncollectible delinquent
taxes to allowance for uncollectible tax liens.

40,000

Property Taxes Receivable ..................................................
Allowance for Property Taxes Receivable .....................
Revenues .......................................................................
To record current property tax levy.

422,000

653

275,000

12,000
2,000

16,000

17,000
6,000

100,000
4,500

35,000

35,000
5,000

21,100
400,900


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Ch. 15—Exercises

Exercise 15-4, Concluded
Sept. Cash .....................................................................................
Property Taxes Receivable ............................................
To collect current property taxes.

365,000

Tax Anticipation Notes Payable ...........................................
Expenditures ........................................................................
Cash ...............................................................................
To pay off tax anticipation notes.

275,000
18,000

365,000

293,000

EXERCISE 15-5
(1) Cash ...............................................................................................
Other Financing Sources ..........................................................

To transfer from municipal trust fund.

45,000
45,000

(2) No entry in the general fund for land. Record in the general
fixed assets account group:
Land................................................................................................
Investment in General Fixed Assets—Donations .....................
To record donation of park.

75,000

(3) Due from State ...............................................................................
Revenues .................................................................................
To record state grant.

30,000

(4) Cash ...............................................................................................
Other Financing Sources ..........................................................
To record sale of fire truck.

9,000

75,000

30,000

9,000

Additional entry in General Fixed Assets Group:
Investment in General Fixed Assets—General Fund Revenues ....
Equipment ................................................................................

36,000

(5) Cash ...............................................................................................
Revenues .................................................................................
Deferred Revenue ....................................................................
To record sale of park stickers.

5,000

654

36,000

2,500
2,500


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Ch. 15—Exercises

EXERCISE 15-6
(1) Expenditures ($120,000 + $60,000 + $125,000 + $13,000) ...........
Tax Anticipation Notes Payable......................................................
Inventory of Supplies ......................................................................

Vouchers Payable ....................................................................
To record payment of vouchers.

318,000
200,000
45,000

(2) Other Financing Uses .....................................................................
Cash .........................................................................................
To transfer to debt service fund.

57,000

(3) Expenditures...................................................................................
Inventory of Supplies ................................................................
To record consumption of inventory.

42,500

Fund Balance—Unreserved, Undesignated ...................................
Fund Balance—Reserved for Inventory ...................................
To adjust reserve to match inventory balance.

2,500

563,000

57,000

42,500

2,500

EXERCISE 15-7
(1) Encumbrances................................................................................
Fund Balance—Unreserved, Undesignated .............................
To restore previous year’s encumbrances.

18,000

(2) Encumbrances................................................................................
Fund Balance—Reserved for Encumbrances ..........................
To record current encumbrances.

70,000

(3) Fund Balance—Reserved for Encumbrances ................................
Encumbrances ..........................................................................
To reverse encumbrances for orders received.

88,000

Inventory of Supplies ......................................................................
Vouchers Payable ....................................................................
To record purchase of inventory.

87,000

(4) Expenditures ($31,000 + $87,000 – $35,000) ................................
Inventory of Supplies ................................................................

To record use of inventory.

83,000

Fund Balance—Unreserved, Undesignated ...................................
Fund Balance—Reserved for Inventory ...................................
To adjust reserved fund balance to match inventory.

4,000

655

18,000

70,000

88,000

87,000

83,000

4,000


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Ch. 15—Exercises

EXERCISE 15-8

Date
January 1
January 15
February 1
February 15
June 3
December 31

Item
Budget
Encumbrances
Vouchers
Vouchers
Vouchers
Inventory

Encumbrances
Debit
Credit
—
14,000
—
—
—
—

Balance

—

—
—
12,000
2,000
—

Expenditures

—
14,000
—
2,000
—
—

Unobligated
Balance

—
—
5,000
12,300
4,300
(1,500)

23,000
9,000
4,000
3,700
1,400

2,900

EXERCISE 15-9
(a) Estimated Revenues ......................................................................
Appropriations ..........................................................................
Budgetary Fund Balance—Unreserved ....................................
To record budget for the year.

520,000

(b) Taxes Receivable—Current ...........................................................
Allowance for Uncollectible Current Taxes ...............................
Revenues .................................................................................
To record tax levy.

378,788

(c) Encumbrances................................................................................
Fund Balance—Reserved for Encumbrances ..........................
To record purchase orders authorized.

240,000

(d) Cash ...............................................................................................
Taxes Receivable—Current .....................................................
To record receipt of tax payments.

280,000

(e) Fund Balance—Reserved for Encumbrances ................................

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

223,000

Expenditures...................................................................................
Vouchers Payable ....................................................................
To record invoices vouchered.

225,000

Expenditures...................................................................................
Vouchers Payable ....................................................................
To record salaries approved for payment.

135,000

(g) Cash ...............................................................................................
Revenues .................................................................................
To record receipt of a grant-in-aid.

100,000

(f)

656

515,000
5,000

3,788
375,000

240,000

280,000

223,000

225,000

135,000

100,000


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Ch. 15—Exercises

Exercise 15-9, Concluded
(h) Cash ...............................................................................................
Revenues .................................................................................
To record receipt of miscellaneous revenues.
(i)

(j)

Expenditures...................................................................................
Cash .........................................................................................

To record purchase of property. (The property would also
be entered in the general fixed assets account group.)

10,000
10,000

120,000
120,000

No entry. Recorded only in general fixed assets account group.

(k) Other Financing Uses .....................................................................
Due to Other Funds ..................................................................
To record amount due other funds and approved for
payment.

12,000

(l)

Due from State ...............................................................................
Revenues .................................................................................
To record share of state sales taxes receivable.

30,000

(m) Vouchers Payable ..........................................................................
Cash .........................................................................................
To record vouchers paid.

175,000

(n) Budgetary Fund Balance—Unreserved ..........................................
Appropriations ................................................................................
Estimated Revenues ................................................................
To reverse budgetary entry.

5,000
515,000

Revenues .......................................................................................
Expenditures .............................................................................
Other Financing Uses ...............................................................
Fund Balance—Unreserved, Undesignated .............................

515,000

Fund Balance—Unreserved, Undesignated ...................................
Encumbrances ..........................................................................
To close nominal accounts.

17,000

657

12,000

30,000

175,000

520,000

480,000
12,000
23,000
17,000


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Ch. 15—Exercises

EXERCISE 15-10
(1) Closing entries:

(2)

Appropriations ..................................................................................
Estimated Other Financing Uses .....................................................
Budgetary Fund Balance .................................................................
Estimated Revenues ................................................................
Estimated Other Financing Sources .........................................

650,000
50,000
50,000

Other Financing Sources .................................................................
Revenues .........................................................................................

Expenditures .............................................................................
Other Financing Uses ...............................................................
Fund Balance—Unreserved, Undesignated .............................

166,500
605,000

Fund Balance—Unreserved, Undesignated ....................................
Encumbrances ..........................................................................

60,000

600,000
150,000

598,000
46,500
127,000

60,000

Marshal Village
General Fund
Budgetary Comparison Schedule
For Fiscal Year Ended June 30, 20X9

Revenues ....................................................................
5,000
Expenditures ...............................................................
52,000

Excess (shortage) of revenues over
expenditures..........................................................
57,000
Other financing sources ..............................................
16,500
Other financing uses ...................................................
3,500
Total other financing sources (uses) .....................
20,000
Fund balances, July 1, 20X8 .......................................
0
Fund balances, June 30, 20X9 ...................................
77,000

658

Budget
Actual
$
600,000
$
650,000

Variance—
Favorable
(Unfavorable)
605,000$
598,000

$

(50,000)

$

7,000 $

$

150,000

$

166,500$

50,000

46,500

$

100,000

$

120,000$

$

92,000

$

92,000 $

$

142,000

$

219,000$


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Ch. 15—Exercises

Exercise 15-10, Concluded
(3)

Marshal Village
General Fund Balance Sheet
June 30, 20X9
Liabilities and Fund Equity

Assets
Cash......................................
Receivables (net) ..................

Total assets ........................

$210,000 Liabilities: Vouchers payable ............
134,000 Fund balances:
Reserved for encumbrances .........
Unreserved, undesignated ............
Total fund equity ...............................
$344,000 Total liabilities and fund equity ......

$125,000
$

60,000
159,000*
$219,000
$344,000

*$92,000 balance plus $771,500 inflows minus $644,500 outflows minus $60,000 encumbrances

EXERCISE 15-11
Event

Fund or Group

Purchase

General Fund

Sale
(10 years

later)

Entry
Expenditures ....................................................
Cash ...........................................................

75,000

Fund Balance—Reserved for Encumbrances ..
Encumbrances ...........................................

80,000

General
Fixed Assets
Account Group

Land .................................................................
Investment in General Fixed Assets—
General Fund Revenues ......................

75,000

General Fund

Cash.................................................................
Other Financing Sources ...........................
Revenues ...................................................

117,000

General
Fixed Assets
Account Group

Investment in General Fixed Assets—
General Fund Revenues ............................
Land .....................................................

659

75,000

80,000

75,000

75,000
42,000

75,000
75,000


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Ch. 15—Exercises

EXERCISE 15-12
(a) Land................................................................................................

Buildings .........................................................................................
Investment in General Fixed Assets—General Funds..............
To record property purchase.

325,000
975,000

(b) Land................................................................................................
Buildings .........................................................................................
Investment in General Fixed Assets—Donations .....................
To record donated property at its fair value.

330,000
220,000

(c) Construction in Progress ................................................................
Investment in General Fixed Assets—Capital Projects Funds
(General Obligation Bonds) ................................................
To record cost of work to date.

800,000

(d) Machinery and Equipment ..............................................................
Investment in General Fixed Assets—General Fund
Revenues............................................................................
To record fire engine purchase at full value.

190,000

Investment in General Fixed Assets—General Fund Revenues ....

Machinery and Equipment ........................................................
To record trade-in.

100,000

(e) Infrastructure ..................................................................................
Investment in General Fixed Assets—Capital Projects Funds .....
To record cost of new street.

250,000

(f)

Computer Software.........................................................................
Investment in General Fixed Assets—General Fund Revenues ..

1,300,000

550,000

800,000

190,000

100,000

250,000

70,000
70,000

EXERCISE 15-13
(1) Amount to Be Provided for Compensated Absences .....................
Unfunded Compensated Absences ..........................................
To record the noncurrent portion of the obligation for
vacations.
(2) Unfunded Compensated Absences ................................................
Amount to Be Provided for Compensated Absences ...............
To reduce the long-term obligation for vacations.
(3) Amount to Be Provided for Claims and Judgments ........................
Claims and Judgments Payable ...............................................
To record the noncurrent portion of the judgment against
the city.

660

2,200,000
2,200,000

400,000
400,000

11,000,000
11,000,000


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Ch. 15—Exercises

Exercise 15-13, Concluded
(4) Amount to Be Provided for Payment of Bonds ...............................
General Obligation Bonds Payable ..........................................
To record the issuance of general obligation bonds at
maturity value.

100,000,000
100,000,000

(5) Amount Available in the Debt Service Fund ...................................
Amount to Be Provided for Payment of Bonds .........................
To record accumulation of resources in the debt service
fund for bond principal.

1,000,000
1,000,000

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

4,800,000
4,800,000

EXERCISE 15-14
(a) Amount to Be Provided for Payment of Term Bonds......................
Term Bonds Payable ................................................................
To record issuance of general obligation bonds at maturity
value to finance construction of an art center.

13,000,000
13,000,000

(b) Amount Available in Debt Service Funds—Term Bonds ................
Amount to Be Provided for Payment of Term Bonds ................
To record allocation to debt service fund.

1,300,000
1,300,000

(c) Amount to Be Provided for Payment of Serial Bonds .....................
Serial Bonds Payable ...............................................................
To record serial bonds issued to finance construction of
a health center.

6,000,000
6,000,000

Amount Available in Debt Service Funds—Serial Bonds ...............
Amount to Be Provided for Payment of Serial Bonds ...............
To record allocation to debt service fund ($6,000,000/10).

600,000

(d) Serial Bonds Payable .....................................................................
Amount Available in Debt Service Funds—Serial Bonds .........
To record retirement of serial bond issue.

600,000

600,000

600,000

EXERCISE 15-15
(Note to Instructor: The GASB Web site lists all of the pronouncements of the board. Individual standards can be purchased, but current exposure drafts and discussion memoranda can be obtained for
no fee. In addition, the GASB mission, board membership, and meeting schedules are found on the
site.)

661


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Ch. 15—Problems

PROBLEMS
PROBLEM 15-1
(1) b

Funds are used to separate reporting of the diverse variety of governmental activities and to
meet legal provisions stipulating use of resources imposed on the governmental 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 the flow of financial resources.

(4) c

Interperiod equity seeks to determine whether current-year revenues are sufficient to pay for
current-year services or whether future taxpayers will be required to assume burdens for services previously provided. The flow of financial resources measurement focus measures the
extent to which financial resources obtained during a period are sufficient to cover claims
incurred during that period against financial resources of a governmental fund. The GASB recognized that because budgetary and fund accounting practices cause costs of government activities to be spread among a number of funds, general purpose financial reporting must also
include the measurement 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 as an other financial resource, but the debt itself is recorded in the general long-term debt account group.

(6) d

Current standards specify that neither interest nor principal on long-term debt should 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 by year-end.

(7) b

Reporting outstanding encumbrances as a fund balance reserve indicates that not all of the
resources in the fund are available for new expenditures.

PROBLEM 15-2
a

Encumbrance control is increased when an order is placed and decreased when the voucher 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 is reversed.

(6) b

A hypothetical entry to record the tax levy is:

(1)

Taxes Receivable—Current ...............................................
Allowance for Uncollectible Current Taxes ...................
Revenues......................................................................

662

100,000
4,000

96,000


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Ch. 15—Problems

Problem 15-2, Concluded
Because revenues are estimated and recorded net of the uncollectible, a decrease in the allowance is a revision (in this case an increase) of revenues. This is true even if the revenues
were recorded in a prior period.
(7) b

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

(8) a

The general fixed assets account group records the fixed assets of governmental funds but not
proprietary funds or trust funds.

(9) c

Expenditures are recorded when the liability is incurred. Under the modified accrual basis of
accounting, the noncurrent liability is recorded in the general long-term debt account group.

(10) d

The fixed asset is recorded in the account group at its fair value with a credit to Investment in
General Fixed Assets identifying the original funding source.

PROBLEM 15-3
(1) At inception of the lease:
General Fund

Expenditures .............................................................
Other Financing Sources ....................................
To record the acquisition of the
equipment under capital lease.

800,000

General
Fixed Assets
Account Group

Leased Equipment ...................................................
Investment in General Fixed
Assets—Capital Leases .................................
To record the equipment.

800,000

General
Long-Term
Debt Account
Group

Amount to Be Provided .............................................
Capital Lease Obligation .....................................

To record the capital lease
obligation.

800,000

Expenditures (interest) ($800,000 × 6%) ..................
Expenditures (principal) ............................................
Cash....................................................................
To record the first lease payment
of principal and interest.

48,000
60,694

800,000

800,000

800,000

(2) First interest payment:
General Fund

General
Fixed Assets
Account Group

Investment in General
Fixed Assets—Capital Leases ............................
Leased Equipment ........................................

To record the depreciation on the
leased equipment (optional entry
under current standards).

663

108,694

80,000
80,000


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Ch. 15—Problems

Problem 15-3, Concluded
General
Long-Term
Debt Account
Group

Capital Lease Obligation ...........................................
Amount to Be Provided .......................................
To record the reduction of the lease principal.
Note: Each lease payment reduces the
principal balance of the obligation. Therefore,
each subsequent payment will allocate a
smaller portion to interest and a larger
portion to principal.

60,694
60,694

PROBLEM 15-4
(1) (a) Estimated Revenues ................................................................
Appropriations ...................................................................
Budgetary Fund Balance—Unreserved.............................
To record budget.

450,000

Encumbrances ..........................................................................
Fund Balance—Unreserved, Undesignated ......................
To reinstate encumbrance.

16,000

(b) Fund Balance—Reserved for Encumbrances ..........................
Encumbrances ..................................................................
To reverse encumbrance entry.

16,000

Expenditures .............................................................................
Vouchers Payable .............................................................
To record voucher.

16,400

(c) Taxes Receivable—Current .....................................................
Allowance for Uncollectible Current Taxes (4%) ...............
Revenues ..........................................................................
To record tax levy.

300,000

(d) Cash .........................................................................................
Taxes Receivable—Current ..............................................
Taxes Receivable—Delinquent .........................................
Interest and Penalties Receivable on Taxes .....................
Due from Other Funds.......................................................
To record receipts.

409,600

Allowance for Uncollectible Delinquent Taxes ..........................
Allowance for Uncollectible Interest and Penalties ...................
Revenues .................................................................................
Taxes Receivable—Delinquent .........................................
Interest and Penalties Receivable on Taxes .....................

12,000
800
3,600

664

392,000
58,000

16,000

16,000

16,400

12,000
288,000

270,000
104,000
7,600
28,000

16,000
400


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Ch. 15—Problems

Problem 15-4, Concluded
(e) Encumbrances ..........................................................................
Fund Balance—Reserved for Encumbrances ...................
To record encumbrances.

276,000

Supplies Inventory ....................................................................
Expenditures .............................................................................
Vouchers Payable .............................................................
To record vouchers.

16,000
244,000

Fund Balance—Reserved for Encumbrances ..........................
Encumbrances ..................................................................
To record encumbrance entry.

254,000

Expenditures .............................................................................
Vouchers Payable ....................................................................
Cash ..................................................................................
To record payments.

50,000
280,000

(g) Expenditures .............................................................................
Vouchers Payable .............................................................
To record voucher for automobile.

16,000

(h) Expenditures .............................................................................
Inventory of Supplies .........................................................

To record use of inventory.

10,000

Fund Balance—Unreserved, Undesignated .............................
Fund Balance—Reserved for Inventory of Supplies .........
To establish desired reserve.

6,000

(2) Appropriations ..................................................................................
Budgetary Fund Balance—Unreserved ...........................................
Estimated Revenues ................................................................

392,000
58,000

Fund Balance—Unreserved, Undesignated ....................................
Revenues .........................................................................................
Expenditures .............................................................................

52,000
284,400

Fund Balance—Unreserved, Undesignated ....................................
Encumbrances ..........................................................................

22,000

(f)

276,000

260,000

254,000

330,000

16,000

10,000

6,000

450,000

336,400
22,000

(3) Statement of Revenues, Expenditures, and Changes in Fund Balance:
Revenues .....................................................................................................
Expenditures ................................................................................................
Excess of Revenues over Expenditures* .....................................................

$

Fund Balances, July 1, 20X8 .......................................................................
Fund Balances, June 30, 20X9 ....................................................................

$

$284,400
336,400
(52,000)
76,000
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 be used.

665


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Ch. 15—Problems

PROBLEM 15-5
(a) Estimated Revenues ..................................................................
Estimated Other Financing Sources ..........................................
Appropriations ......................................................................
Estimated Other Financing Uses .........................................
Budgetary Fund Balance—Unreserved ...............................

400,000
200,000

Encumbrances ...........................................................................
Fund Balance—Unreserved, Undesignated.........................

12,000

(b) Taxes Receivable—Current ($220,800/96%) ............................
Allowance for Uncollectible Current Taxes ..........................
Revenues .............................................................................

230,000

(c) Encumbrances ...........................................................................
Fund Balance—Reserved for Encumbrances ......................

316,000

(d) Fund Balance—Unreserved, Undesignated ..............................
Fund Balance—Designated for Capital Outlays...................

20,000

(e) Cash...........................................................................................
Allowance for Uncollectible Delinquent Taxes ...........................
Taxes Receivable—Delinquent ............................................
Taxes Receivable—Current .................................................
Expenditures ........................................................................
Revenues .............................................................................
Other Financing Sources .....................................................
Other Financing Sources .....................................................

664,000
8,000

(f) Fund Balance—Reserved for Encumbrances ............................
Encumbrances .....................................................................

302,000

Expenditures ..............................................................................
Vouchers Payable ................................................................

308,000

(g) Inventory ....................................................................................
Expenditures ..............................................................................
Other Financing Uses ................................................................
Vouchers Payable ................................................................
Due to Debt Service Fund ....................................................

40,000
204,000
20,000

(h) Revenues ...................................................................................
Deferred Revenues ..............................................................

2,000

Allowance for Uncollectible Current Taxes ................................
Revenues ($226,000 – $220,800)........................................

5,200

666

560,000
20,000
20,000
12,000

9,200
220,800

316,000

20,000

46,000
226,000
4,000
178,000
200,000
18,000

302,000
308,000

244,000
20,000

2,000
5,200

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Ch. 15—Problems

Problem 15-5, Concluded
(i) Vouchers Payable ......................................................................
Cash .....................................................................................

580,000

(j) Expenditures ..............................................................................
Inventory ..............................................................................

46,000

Fund Balance—Reserved for Inventory .....................................
Fund Balance—Unreserved, Undesignated.........................

6,000

580,000

46,000
6,000

PROBLEM 15-6
(1) (a) Estimated Revenues ................................................................
Estimated Other Financing Sources .........................................
Appropriations ...................................................................

Estimated Other Financing Uses.......................................
Budgetary Fund Balance—Unreserved.............................
To record the approved budget.

900,000
27,000

(b) Encumbrances ..........................................................................
Fund Balance—Unreserved, Undesignated ......................
To return encumbered amount to fund balance.

15,000

(c) Taxes Receivable—Current .....................................................
Allowance for Uncollectible Current Taxes........................
Revenues ..........................................................................
To record tax levy.

650,000

(d) Fund Balance—Reserved for Encumbrances ..........................
Encumbrances ..................................................................
To return reserve to unreserved balance.

25,000

Expenditures .............................................................................
Vouchers Payable .............................................................
To voucher invoices received.

24,000

(e) Cash .........................................................................................
Taxes Receivable—Current ..............................................
Taxes Receivable—Delinquent .........................................
To record receipt of property tax payments.

644,000

Taxes Receivable—Delinquent ................................................
Allowance for Uncollectible Current Taxes ...............................
Taxes Receivable—Current ..............................................
Allowance for Uncollectible Delinquent Taxes ..................
To record delinquent taxes and reclassify related
estimated uncollectibles.

26,000
6,500

667

875,000
20,000
32,000

15,000

6,500
643,500

25,000

24,000

624,000
20,000

26,000
6,500


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Ch. 15—Problems

Problem 15-6, Continued
Tax Liens Receivable ...............................................................
Allowance for Uncollectible Delinquent Taxes ..........................
Taxes Receivable—Delinquent .........................................
Allowance for Uncollectible Tax Liens ...............................
To record tax liens and reclassify related
uncollectibles.

8,000
3,000

Encumbrances ..........................................................................
Fund Balance—Reserved for Encumbrances ...................
To record issuance of purchase orders.

700,000

Fund Balance—Reserved for Encumbrances ..........................
Encumbrances ..................................................................
To reverse encumbrance entry for items invoiced.

680,000

Expenditures .............................................................................
Supplies Inventory ....................................................................
Vouchers Payable .............................................................
To voucher invoices received.

675,000
10,000

(g) Expenditures .............................................................................
Supplies Inventory .............................................................
To record consumption of inventory.

8,000

Fund Balance—Unreserved, Undesignated .............................
Fund Balance—Reserved for Inventory of Supplies .........
To establish supplies reserve.

2,000

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

To record purchase of land. (Also requires
entry in general fixed assets account group.)

250,000

(i)

Cash .........................................................................................
Due from State Government .....................................................
Revenues ..........................................................................
To record federal and state revenues.

300,000
60,000

Other Financing Uses ...............................................................
Cash ..................................................................................
To record transfers made to other funds.
(Requires entries in other funds.)

20,000

(k) Expenditures .............................................................................
Cash ..................................................................................
To record mortgage payment. (Requires entry
in general long-term debt account group.)

50,000

(f)

(j)

668

8,000
3,000

700,000

680,000

685,000

8,000

2,000

250,000

360,000

20,000

50,000


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Ch. 15—Problems

Problem 15-6, Continued
(l)

Cash .........................................................................................
Notes Receivable .....................................................................
Other Financing Sources...................................................
Revenues ..........................................................................
To record sale of land. Only the $130,000 gain is
new revenue. (Requires entry in general fixed assets
account group.)

100,000
280,000

(m) Cash .........................................................................................
Other Financing Sources...................................................
To record cash received from other funds.
(Requires entries in other funds.)

23,000

(n) Cash .........................................................................................
Notes Receivable ..............................................................
Revenues ($280,000 × 8% × 1/4 year) ............................
To record cash received from developer.

285,600

(2) Appropriations ..................................................................................

Estimated Other Financing Uses .....................................................
Budgetary Fund Balance—Unreserved ...........................................
Estimated Revenues ................................................................
Estimated Other Financing Sources .........................................
To reverse entry recording budget.

875,000
20,000
32,000

Revenues .........................................................................................
Other Financing Sources .................................................................
Expenditures .............................................................................
Other Financing Uses ...............................................................
Fund Balance—Unreserved, Undesignated .............................
Fund Balance—Unreserved, Undesignated ....................................
Encumbrances ..........................................................................
To close nominal accounts.

669

250,000
130,000

23,000

280,000
5,600

900,000

27,000
1,139,100
273,000
1,007,000
20,000
385,100
20,000
20,000


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Ch. 15—Problems

Problem 15-6, Concluded
(3)

City of Wautoma
General Fund
Budgetary Comparison Schedule
For Year Ended December 31, 20X9

Revenues ....................................................................
239,100
Expenditures ...............................................................
(132,000)
Excess of revenues over expenditures .......................
107,100
Other financing sources ..............................................
246,000

Other financing uses ...................................................
0
Excess of revenues and other sources over
expenditures and other uses .................................
353,100
*Fund balances, January 1, 20X9 ................................
0
*Fund balances, December 31, 20X9 ..........................
353,100

Variance—
Favorable
Budget
Actual
(Unfavorable)
$
900,000
$1,139,100
$
875,000
$

$

1,007,000

25,000

$

27,000

273,000

(20,000)

(20,000)

32,000

$

(165,000)
$

132,100 $

(165,000)
$

(133,000)

January 1
*The total of the fund balances consists of:
Fund balance—reserved for inventory .......................................
Fund balance—reserved for encumbrances ..............................
Fund balance—unreserved, undesignated ................................
Total fund balances ............................................................

385,100 $

$

$

220,100 $

December 31

0
$
2,000
15,000
20,000
(180,000)
198,100
(165,000) $220,100

PROBLEM 15-7
(1) Year 1:
General Fund

General
Long-Term
Debt Account
Group

Expenditures.............................................................
Cash ...................................................................
To record the pension benefits

financed by current-year resources.

5,000,000
5,000,000

Amount to Be Provided.............................................
Unfunded Pension Obligation .............................
To record the portion of the actuarial

1,000,000
1,000,000

670


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Ch. 15—Problems

required contribution not financed in
the current period.

671


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Ch. 15—Problems

Problem 15-7, Concluded

(2) Year 2:
General Fund

Expenditures.............................................................
Cash ...................................................................
To record the pension benefits paid
in year 2.

General
Long-Term
Debt Account
Group

Unfunded Pension Obligation ...................................
Amount to Be Provided .......................................
To record the payment of
$500,000 over the actuarial
required contribution in year 2.

6,000,000
6,000,000

500,000
500,000

PROBLEM 15-8
(1) Expenditures
(2) Investment in General Fixed Assets—Capital Leases
(3) Amount to Be Provided for Lease Payments .............................
Capital Lease Payable .........................................................

672

150,000
150,000


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Ch. 15—Problems

PROBLEM 15-9

Entry in General Fixed
Assets Account Group

Entry in General Fund
(a) Expenditures ...........................
Voucher Payable ................
To record voucher.

Fund Balances Reserved for
Encumbrances ...................
Encumbrances ..............
To reverse encumbrance.
(b) Cash ........................................
Other Financing Sources ...
To record proceeds
from equipment sale.

80,000

80,000
80,000

75,000
75,000

6,000

(c) No entry.

(d) Expenditures ...........................
Cash ...................................
To record payment for
snow plow.

Machinery and Equipment .................
80,000
Investment in General Fixed Assets
—General Fund Revenues......
To record purchase.

92,000

Investment in General Fixed Assets—
6,000
General Fund Revenues .........
Machinery and Equipment .......
To remove equipment sold.

15,000
15,000

Land...................................................
Investment in General Fixed
Assets—Donations ..................
To record donated land.

100,000

Construction in Progress ...................
Investment in General Fixed
Assets—Donations ..................
To record partially finished
donated building.

300,000

Investment in General Fixed Assets—
92,000
Special Revenue Funds ..........
Machinery and Equipment.......
To remove traded snow plow.
Machinery and Equipment .................
Investment in General Fixed
Assets—General Fund
Revenues ................................
To record new snow plow
acquired.

673

100,000

300,000

66,000
66,000
110,000

110,000


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Ch. 15—Problems

PROBLEM 15-10
Transaction

Fund or
Group

(a)

GLTDAG

(b)

(c)

(d)

Entry
Amount to Be Provided for Payment
of Term Bonds ....................................................
Term Bonds Payable ....................................

General
Fund

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

GLTDAG

Amount Available in Debt Service Funds—
Term Bonds ........................................................
Amount to Be Provided for Payment
of Term Bonds ........................................

General
Fund

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

GLTDAG

Amount Available in Debt Service Funds—
Serial Bonds .......................................................
Amount to Be Provided for Payment
of Serial Bonds........................................

(f)

200,000
200,000
200,000
200,000
135,000
135,000
135,000
135,000

General
Fund

Expenditures.............................................................
Cash ...................................................................

22,000

GFAAG

Equipment ................................................................
Investment in General Fixed Assets—
General Fund Revenues ...............................

25,000

Investment in General Fixed Assets—
General Fund Revenues.....................................
Equipment .....................................................
(e)

2,700,000
2,700,000

GLTDAG

GFAAG

22,000

25,000
15,000
15,000

Serial Bonds Payable ...............................................
Amount Available in Debt Service Funds—
Serial Bonds .................................................

135,000

Construction in Progress ..........................................
Investment in General Fixed Assets—
Capital Projects Fund ...................................

450,000

674

135,000

450,000


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Ch. 15—Problems

PROBLEM 15-11
(1) (a) Buildings ...................................................................................
Construction in Progress ...................................................
Investment in General Fixed Assets—
Capital Projects Funds ...............................................
To record completion of new school.

850,000

(b) Land ..........................................................................................
Investment in General Fixed Assets—Donations ..............
To record donation of land.

140,000

250,000
600,000

140,000

(c) Proprietary funds maintain their own record of fixed assets as will be illustrated in the next
chapter. These business-type activities will not be recorded in the general fixed assets account
group, but will be shown on the capital assets schedule.
(d) Machinery and Equipment ........................................................
Investment in General Fixed Assets—
General Fund Revenues ............................................
To record purchase of new engine.
Investment in General Fixed Assets—General
Fund Revenues .................................................................
Machinery and Equipment .........................................
To record trade-in of old engine.

120,000
120,000

65,000
65,000

(e) Buildings ...................................................................................
Investment in General Fixed Assets—
General Fund Revenues ............................................
To record capital improvements on city hall.

40,000

(f)

Infrastructure Assets .................................................................
Investment in General Fixed Assets—
Special Revenue Funds .............................................
To record improvements other than buildings.

20,000

(g) Investment in General Fixed Assets .........................................
Accumulated Depreciation—Buildings ..............................
Accumulated Depreciation—Machinery and Equipment ...
Accumulated Depreciation—Infrastructure........................

175,000

675

40,000

20,000

100,000
50,000
25,000