Chapter 17, Modern Advanced accounting-review Q & exr

CHAPTER 17 GOVERNMENTAL ENTITIES: GENERAL FUND The title of each problem is followed by the estimated time in minutes required for completion and by a difficulty rating. The time estimates are applicable for students using the partially filled-in working papers. Pr. 17–1

Pr. 17–2

Pr. 17–3

Pr. 17–4

Pr. 17–5

Pr. 17–6

Pr. 17–7

Pr. 17–8

Pr. 17–9

Weedpatch County (30 minutes, medium) Preparation of a statement of revenues, expenditures, and changes in fund balance and a balance sheet for a governmental entity general fund. City of Lory (40 minutes, medium) Preparation of journal entries to record budgeted and actual transactions and events of a governmental entity general fund, given post-closing trial balances at beginning and end of fiscal year and aggregate transactions and events and closing entries. City of Riverdale (30 minutes, medium) Journal entries to correct accounting records of general fund of a governmental entity whose accountant failed to maintain separate funds. Canning County (50 minutes, medium) Preparation of journal entries for transactions and events of a governmental entity general fund for a fiscal year. Arden School District (50 minutes, medium) Preparation of financial statements and closing entries for a governmental entity general fund, given a trial balance for the fund. Melton School District (60 minutes, medium) Reconstruction of journal entries for a governmental entity general fund, from the general fund's post-closing trial balance at the end of the preceding fiscal year, pre-closing trial balance at the end of the current fiscal year, and other data. Preparation of closing entries and postclosing trial balance. City of Romaine (30 minutes, medium) Computation of property tax levy required for a governmental entity general fund for the forthcoming fiscal year. Town of Tosca (50 minutes, medium) Reconstruction of journal entries for a governmental entity general fund, from analysis of changes in ledger account balances of the general fund for the current fiscal year and from other data. City of Douglas (50 minutes, medium) Journal entries for transactions and events of a governmental entity general fund, and closing entry for the fund.

Solutions Manual, Chapter 17

The McGraw-Hill Companies, Inc., 2006 209

ANSWERS TO REVIEW QUESTIONS 1. 2.

3.

4.

5.

6.

No, the Financial Accounting Standards Board does not establish accounting standards for government entities. The Governmental Accounting Standards Board performs that function. Characteristics of governmental entities that have a significant influence on the accounting for such entities are the following: (1) Governmental entities exist to serve the citizens subject to their jurisdiction. (2) With few exceptions, governmental entities render services to the citizenry without the object of profiting from these services. (3) The citizens subject to a governmental entity's jurisdiction provide resources to the governmental entity principally through taxation. (4) Operations of governmental entities are for the most part initiated by various legislative enactments. (5) Governmental entities' primary responsibility in financial reporting is to demonstrate adequate stewardship for resources provided by their citizenry. The Government Accounting Standards Board has defined a fund for governmental entities accounting purposes as a "fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations." a. Support for the use of the modified accrual basis of accounting for general funds of governmental entities lies in the importance of the annual budget as a control device for those funds. The modified accrual basis of accounting requires the recognition of revenues when they are measurable and available to achieve a better matching with the estimated revenues in the annual budget. b. The encumbrance technique is supported by the need for control over expenditures to assure that they do not exceed appropriated amounts. If purchase orders and other commitments against appropriations were not recorded in the expenditures subsidiary ledger, an unexpended balance of a budgetary appropriation might accidentally be overexpanded or overcommitted. c. Recording the budget in the accounting records of the various funds permits the legislative authority to exercise control over the expenditures of the funds. Actual revenues and expenditures are compared with budgeted revenues and appropriations during a fiscal year and in the comprehensive annual financial report for the fiscal year. a. A program budget stresses measurement of the total cost of a governmental program, regardless of how many governmental entity departments are involved in the program. In contrast, a performance budget relates input of resources to a specific governmental entity department against the output of services of that department. b. A budgetary deficit is an excess of appropriations and estimated other financing uses over estimated revenues and estimated other financing sources in an annual deficit budget. The Estimated Revenues ledger account of a governmental entity general fund sometimes is alluded to as a pseudo asset because it reflects revenues expected to be received by the general fund during the fiscal year. However, the Estimated Revenues account does not fit the accounting definition of an asset. The Appropriations ledger account may be considered a pseudo liability because it reflects the legislative body's commitments to expend resources for the general fund. However, the Appropriations account does not fit the accounting definition of a liability.

The McGraw-Hill Companies, Inc., 2006 210

Modern Advanced Accounting, 10/e

7.

8.

9. 10.

11.

12.

13.

14.

The Budgetary Fund Balance ledger account of a general fund is used to balance the debit and credit entries to accounts (Estimated Revenues, Appropriations, Estimated Other Financing Sources, Estimated Other Financing Uses) in the journal entry to record the general fund's annual budget. At the end of the fiscal year, the Budgetary Fund Balance account is closed by a journal entry that reverses the original budget entry. A general fund is residual because it is used to account for all transactions and events of a governmental entity not accounted for in one of the other ten types of funds. Although the general fund is residual, it generally accounts for the largest aggregate dollar amounts of the governmental entity's revenues and expenditures. Revenues of a governmental entity's general fund that generally are accrued include property taxes, fines, charges for services, investment income, and operating lease rents. The Expenditures ledger account of a governmental entity general fund records amounts paid or to be paid in cash by the general fund under the appropriations authorized by the legislative branch of the governmental entity. The Expenditures account of a general fund does not show the cost expirations chargeable to revenues, as do the expense accounts of a business enterprise. The Other Financing Sources ledger account is used to record nonrevenue items such as transfers in to the general fund from other funds. The Other Financing Uses account reflects amounts of transfers out from the general fund to other funds; these transfers are not expenditures of the general fund. The Fund Balance Reserved for Inventory of Supplies ledger account of a general fund represents a restriction of the Unreserved and Undesignated Fund Balance account to guard against the financing of a deficit budget with general fund resources not available for expenditure. The Unreserved and Undesignated Fund Balance ledger account of a general fund shows the net amount of a general fund's resources available for appropriation by the legislative branch to finance a budgetary deficit. A reservation of the fund balance of a governmental entity general fund is a mandatory restriction of the fund balance for such items as inventory of supplies and outstanding encumbrances. A designation of the fund balance is a voluntary earmarking of the fund balance for planned future appropriations such as acquisition of equipment. a. The financial statements for a governmental entity general fund are a statement of revenues, expenditures, and changes in fund balance, and a balance sheet. b. The principal differences between the financial statements of a governmental entity general fund and the financial statements of a business enterprise are as follows: (l) Some revenues, such as fees for licenses and permits, are recognized on the cash basis in the general fund. (2) The general fund does not record the governmental entity's plant assets or long-term debt. (3) General fund inventories are offset by a fund balance reserve. (4) The encumbrance technique often is used to segregate a portion of the general fund's Unreserved and Undesignated Fund Balance ledger account for the amounts of unfilled purchase orders. (5) Neither of the general fund's financial statements is designed to present the general fund's operating results in terms of net income or net loss.

Solutions Manual, Chapter 17

The McGraw-Hill Companies, Inc., 2006 211

SOLUTIONS TO EXERCISES Ex. 17–1

1. b 2. d 3. a 4. a 5. b 6. d

7. b 8. c 9. d 10. a 11. a 12. a

Ex. 17–2

General GovernmentSupplies

Date 2005 July 1 2 3 5

8 Ex. 17–3

Explanation Budgeted appropriation P.O. 4–1 to Crosby Company Inv. 6392 from Crosby Company Defective supplies returned to Crosby CompanyD.M. 4–6 P.O. 4–14 to Lassen Company

Appropriation, credit

Encumbrance, debit

Expenditure, debit

100,000

100,000 20,000

80,000

(20,000)

20,120

(640) 18,000

79,880

80,520 62,520

Journal entry for Winston County General Fund, July l, 2005: Taxes ReceivableCurrent Allowance for Uncollectible Current Taxes ($640,000 x 0.04) Revenues To accrue property taxes billed and to provide for estimated uncollectible portion.

Ex. 17–4

Unexpended, unencumbered balance, credit

640,000 25,600 614,400

Journal entries for City of Gaskill General Fund: 2005 July 25

Aug. 9

9

Encumbrances Fund Balance Reserved for Encumbrances To record purchase order issued for office supplies for city manager's office.

2,390

Inventory of Supplies Vouchers Payable To record expenditure for office supplies for city manager's office.

2,500

Fund Balance Reserved for Encumbrances Encumbrances To reverse encumbrance applicable to vouchered expenditure of $2,500.

2,390

The McGraw-Hill Companies, Inc., 2006 212

2,390

2,500

2,390

Modern Advanced Accounting, 10/e

Ex. 17–5

Journal entries for Glengarry School District General Fund for year ended June 30, 2006: Encumbrances 168,400 Fund Balance Reserved for Encumbrances 168,400 Inventory of Supplies Vouchers Payable

170,900

Fund Balance Reserved for Encumbrances Encumbrances

168,400

Expenditures ($60,200 + $170,900 – $78,300) Inventory of Supplies

152,800

170,900 168,400 152,800

Unreserved and Undesignated Fund Balance ($78,300 – $60,200) Fund Balance Reserved for Inventory for Supplies Ex. 17–6

Ex. 17–7

18,100 18,100

Correcting journal entries for Rainbow County General Fund, June 30, 2006: Other Financing Uses Accounts Receivable To correct July 1, 2005, journal entry for operating transfer of cash to Internal Service Fund.

800,000

Expenditures Equipment To transfer amount of Sept. 1, 2005, acquisition of equipment to appropriate ledger account.

120,000

800,000

120,000

Closing entries for Town of Irving General Fund, June 30, 2006: Unreserved and Undesignated Fund Balance Encumbrances To close Encumbrances ledger account.

10,000 10,000

Appropriations Budgetary Fund Balance ($1,600,000 – $1,520,000) Estimated Revenues To close budgetary ledger accounts.

1,520,000 80,000

Revenues Expenditures Unreserved and Undesignated Fund Balance To close Revenues and Expenditures ledger accounts.

1,616,000

Solutions Manual, Chapter 17

1,600,000

1,500,000 116,000

The McGraw-Hill Companies, Inc., 2006 213

Ex. 17–8

Closing entries for Bixby Village General Fund, June 30, 2006: Unreserved and Undesignated Fund Balance Encumbrances

Ex. 17–9

Ex. 17–10

1,000 1,000

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

400,000 6,000 30,000

Revenues Other Financing Sources Expenditures Other Financing Uses Unreserved and Undesignated Fund Balance

440,000 14,000

426,000 10,000

395,000 5,000 54,000

Closing entries for Village of Mortimer General Fund, June 30, 2006: Unreserved and Undesignated Fund Balance Encumbrances To close Encumbrances ledger account.

11,400 11,400

Appropriations Budgetary Fund Balance Estimated Revenues To close budgetary ledger accounts.

890,000 90,000

Revenues Expenditures Unreserved and Undesignated Fund Balance To close Revenues and Expenditures ledger accounts.

976,700

980,000

896,200 80,500

TOWN OF PARKSIDE GENERAL FUND Balance Sheet June 30, 2006 Assets Cash Taxes receivable, net of allowance for estimated uncollectible amounts, $5,000 Inventory of supplies Total assets Liabilities & Fund Balance Liabilities: Vouchers payable Payable to Enterprise Fund Total liabilities Fund balance: Reserved for encumbrances Reserved for inventory of supplies Unreserved and undesignated Total liabilities & fund balance

The McGraw-Hill Companies, Inc., 2006 214

$150,000 45,000 60,000 $255,000

$ 80,000 20,000 $100,000 $ 4,000 60,000 91,000

155,000 $255,000

Modern Advanced Accounting, 10/e

Ex. 17–11 Computation of balance of City of Winkle General Fund Unreserved and Undesignated Fund Balance ledger account, June 30, 2006: Balance , beginning of year Add: Decrease in balance of Fund Balance Reserved for Encumbrances ledger account ($18,100 – $14,800) Excess of revenues over expenditures Subtotal Less: Increase in balance of Fund Balance Reserved for Inventory of Supplies ledger account ($88,200 – $80,600) Balance, end of year Ex. 17–12 Journal entries for Town of Oldberry General Fund, June 30, 2006: Fund Balance Reserved for Inventory of Supplies Unreserved and Undesignated Fund Balance To decrease inventory of supplies reserve to agree with balance of Inventory of Supplies ledger account at end of year. Unreserved and Undesignated Fund Balance Encumbrances To close Encumbrances ledger account.

$214,700 3,300 37,600 $255,600 7,600 $248,000

3,700 3,700

6,200 6,200

Revenues Expenditures Unreserved and Undesignated Fund Balance To close Revenues and Expenditures ledger accounts.

840,200 764,800 75,400

Unreserved and Undesignated Fund Balance Fund Balance Designated for Replacement of Equipment To designate a portion of the fund balance for the replacement of equipment.

60,000 60,000

CASES Case 17–1 Deficiencies of the financial statements of Corbin City General Fund include the following: (1) The "income statement" and statement of changes in fund balance should be combined in a statement of revenues, expenditures, and changes in fund balance on a budget, actual, and variance basis. (2) "Expenses" should be titled "expenditures." (3) "Net income" should be titled "excess of revenues over expenditures." (4) Depreciation should not be included in the financial statements of a general fund. (5) Plant assets should not be included in the financial statements of a general fund. (6) The $20,000 "reserve" for delinquent property taxes should be offset against the $80,000 property taxes receivable, with the $60,000 net amount displayed in the assets section of the balance sheet. (7) The amount of $110,000 should be segregated in the liabilities and fund balance (with reserves deleted) section of the balance sheet as "fund balance reserved for inventory of supplies." The amount of $160,000 ($4,890,000 fund balance – $4,620,000 plant assets – $110,000 reserved for inventory of supplies = $160,000) should be displayed in the liabilities and fund balance section of the balance sheet as unreserved and undesignated fund balance. Case 17–2 Student Ella apparently supports the adage "Don't count the chickens before they hatch." That philosophy supports the modified accrual basis of accounting for general funds of governmental entities, under which revenues are not recognized unless they are measurable Solutions Manual, Chapter 17

The McGraw-Hill Companies, Inc., 2006 215

and available. Those requirements preclude the accrual of self-assessed taxes such as income taxes and sales taxes, for which the governmental entity does not bill the taxpayers unless the taxes are delinquent or underpaid when reported. Given that estimated revenues in general fund budgets do include amounts expected to be collected for income taxes and sales taxes, the modified accrual basis of accounting causes inconsistent budget variances, as recognized by student Janice. Further, given that the accrual basis of accounting is used for proprietary funds of governmental entities, consistent application of accounting principles supports the use of accrual accounting for general funds and other governmental funds of governmental entities. Case 17–3 Fund accounting by governmental entities is justified because of the need for careful monitoring of revenues and expenditures or expenses of various departments and activities of governmental entities. Unlike publicly owned business enterprises, governmental entities do not have oversight provided by audit committees of boards of directors, or regulatory agencies such as the Securities and Exchange Commission. Some governmental entities do not have audits by independent certified public accountants because no federal laws mandate such audits, which are required for publicly owned companies. Further, not all governmental entities have internal audit staffs. Given such lack of oversight, prudence dictates that functions in governmental entities be separated more than would be necessary for business enterprises; funds help provide such separation.

The McGraw-Hill Companies, Inc., 2006 216

Modern Advanced Accounting, 10/e

30 Minutes, Medium Weedpatch County

Pr. 17–1 Weedpatch County General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance For Year Ended June 30, 2006 (amounts in thousands) Variance favorable Budget

Actual

(unfavorable)

Revenues Expenditures

$ 8 0 0 7 8 0

$ 8 3 0 7 5 0

$

3 0 3 0

Net change in fund balance Fund balance, beginning of year

$

2 0 6 8

$

8 0 6 8

$

6 0

Fund balance, end of year

$

8 8

$ 1 4 8

$

6 0

Weedpatch County General Fund Balance Sheet June 30, 2006 (amounts in thousands) Assets Cash Taxes receivable, net of allowance for estimated uncollectible amounts, $10 Inventory of supplies

$ 1 0 0 5 0 5 0

Total assets

$ 2 0 0

Liabilities & Fund Balance Liabilities: Vouchers payable Payable to other funds Total liabilities Fund balance: Reserve for encumbrances Reserve for inventory of supplies Unreserved and undesignated

$

Total liabilities & fund balance

*Balance, July 1, 2005 Add: Decrease in encumbrances reserve ($6,000 – $4,000) Excess of revenues over expenditures Subtotal Less: Increase in inventory reserve ($50,000 – $40,000) Balance, June 30, 2006 (after closing)

Solutions Manual, Chapter 17

4 5 0 9 4 *

$

4 0 1 2

$

5 2

1 4 8 $ 2 0 0

$ 22,000 2,000 80,000 $104,000 10,000 $ 94,000

The McGraw-Hill Companies, Inc., 2006 217

40 Minutes, Medium City of Lory

Pr. 17–2 City of Lory General Fund Journal Entries For Year Ended June 30, 2006

Estimated Revenues Appropriations Budgetary Fund Balance To record annual budget adopted for fiscal year ending June 30, 2006.

2 0 0 0 0 0 0

Taxes Receivable Allowance for Uncollectible Taxes Revenues To accrue property taxes billed and to provide for estimated uncollectible portion.

1 8 7 0 0 0 0

Cash

1 8 2 0 0 0 0

1 9 4 0 0 0 0 6 0 0 0 0

1 0 0 0 0 1 8 6 0 0 0 0

Taxes Receivable To record collections of property taxes for the year. Allowance for Uncollectible Taxes Taxes Receivable To write off receivables for property taxes that are uncollectible.

1 8 2 0 0 0 0

8 0 0 0 8 0 0 0

Encumbrances Fund Balance reserved for Encumbrances To record purchase orders for nonrecurring expenditures issued during the year.

1 0 7 0 0 0 0

Expenditures Vouchers Payable To record expenditures for the year.

1 8 4 0 0 0 0

Fund Balance Reserved for Encumbrances Encumbrances To reserve encumbrances applicable to vouchered expenditures.

1 0 0 0 0 0 0

Vouchers Payable Cash To record payment of vouchers during the year.

1 8 5 2 0 0 0

1 0 7 0 0 0 0

1 8 4 0 0 0 0

1 0 0 0 0 0 0

1 8 5 2 0 0 0

(Continued on page 475.)

The McGraw-Hill Companies, Inc., 2006 218

Modern Advanced Accounting, 10/e

City of Lory (concluded)

Pr. 17–2 City of Lory General Fund Journal Entries (concluded) For Year Ended June 30, 2006

Unreserved and Undesignated Fund Balance Encumbrances To close Encumbrances ledger account.

7 0 0 0 0 7 0 0 0 0

Appropriations Budgetary Fund Balance Estimated Revenues To close budgetary ledger accounts.

1 9 4 0 0 0 0 6 0 0 0 0

Revenues Expenditures Unreserved and Undesignated Fund Balance To close Revenues and Expenditures ledger accounts.

1 8 6 0 0 0 0

Solutions Manual, Chapter 17

2 0 0 0 0 0 0

1 8 4 0 0 0 0 2 0 0 0 0

The McGraw-Hill Companies, Inc., 2006 219

30 Minutes, Medium City of Riverdale

Pr. 17–3 City of Riverdale General Fund Correcting Journal Entries December 31, 2006

(1) Estimated Revenues Appropriations Budgetary Fund Balance To record annual budget adopted for year ending Dec. 31, 2006. (2) Encumbrances Fund Balance Reserved for Encumbrances To record outstanding purchase orders for operating expenditures.

8 1 5 0 0 0 7 7 5 0 0 0 4 0 0 0 0

2 5 0 0 2 5 0 0

(3) Revenues Donated Land To remove donated land erroneously recorded as an asset in General Fund.

1 9 0 0 0 0

River Bridge Bonds Payable Contract Payable—River Bridge Construction in Progress—River Bridge To remove accounts relating to river bridge construction project erroneously recorded in General Fund.

1 0 0 0 0 0 3 0 0 0 0

(4) Taxes Receivable—Delinquent Allowance for Uncollectible Current Taxes Taxes Receivable—Current Allowance for Uncollectible Delinquent Taxes To transfer delinquent taxes and related estimated uncollectible amounts from the current classification.

The McGraw-Hill Companies, Inc., 2006 220

1 9 0 0 0 0

1 3 0 0 0 0

1 4 8 5 0 0 6 0 0 0 1 4 8 5 0 0 6 0 0 0

Modern Advanced Accounting, 10/e

50 Minutes, Medium Canning County

Pr. 17–4 Canning County General Fund Journal Entries For Year Ended June 30, 2006

(1) Estimated Revenues Appropriations Budgetary Fund Balance To record annual budget adopted for fiscal year ending June 30, 2006.

5 0 0 0 0 0 0

(2) Taxes Receivable—Current Fines Receivable Allowance for Uncollectible Current Taxes Revenue To accrue property taxes and fines billed and to provide for estimated uncollectible portion.

4 6 5 0 0 0 0 2 0 0 0 0 0

(3) Cash

3 9 0 0 0 0 0

4 8 0 0 0 0 0 2 0 0 0 0 0

1 5 0 0 0 0 4 7 0 0 0 0 0

Taxes ReceivableCurrent To record collections of property taxes for the year. Taxes Receivable—Delinquent Allowance for Uncollectible Current Taxes Taxes Receivable—Current Allowance for Uncollectible Delinquent Taxes To transfer delinquent taxes and related estimated uncollectible amounts from the current classification. (4) Cash

3 9 0 0 0 0 0

6 3 0 0 0 0 1 5 0 0 0 0 6 3 0 0 0 0 1 5 0 0 0 0

4 8 5 0 0 0

Fines Receivable Revenues Other Financing Sources To record collections of other revenues and proceeds of disposal of equipment for the year.

2 0 0 0 0 0 2 7 0 0 0 0 1 5 0 0 0

(5) Encumbrances Fund Balance Reserved for Encumbrances To record purchase orders for nonrecurring expenditures issued during the year.

2 1 5 0 0 0 0

(6) Expenditures Vouchers Payable To record expenditures for the year.

4 5 6 5 0 0 0

Fund Balance Reserved for Encumbrances ($2,150,000 – $115,000) Encumbrances To reverse encumbrances applicable to vouchered expenditures. (7) Vouchers Payable Cash To record payment of vouchers during the year.

Solutions Manual, Chapter 17

2 1 5 0 0 0 0

4 5 6 5 0 0 0

2 0 3 5 0 0 0 2 0 3 5 0 0 0

4 6 0 0 0 0 0 4 6 0 0 0 0 0

The McGraw-Hill Companies, Inc., 2006 221

50 Minutes, Medium Arden School District a. (1)

Pr. 17–5 Arden School District General Fund

Statement of Revenues, Expenditures, and Changes in Fund Balance For Year Ended December 31, 2006 Variance favorable Budget

Actual

(unfavorable)

Revenues Expenditures

$1 0 0 7 0 0 0 9 8 5 0 0 0

$1 0 0 8 2 0 0 9 9 0 2 0 0

$

1 2 0 0 ( 5 2 0 0 )

Excess of revenues over expenditures Other financing uses

$

2 2 0 0 0 1 5 0 0 0

$

1 8 0 0 0 1 0 0 0 0

$ ( 4 0 0 0 ) 5 0 0 0

Net change in fund balance Fund balance, beginning of year

$

7 0 0 0 7 0 8 5 0 *

$

8 0 0 0 7 0 8 5 0

$

1 0 0 0

Fund balance, end of year

$

7 7 8 5 0

$

7 8 8 5 0

$

1 0 0 0

*$59,400 + ($11,450 – $9,500) = $61,350; $61,350 + $9,500 = $70,850

(2)

Arden School District General Fund Balance Sheet December 31, 2006

Assets Cash Short-term investments Property taxes receivable (no allowance) Inventory of supplies

$

Total assets

Total liabilities & fund balance

7 1 0 1

2 3 0 4

5 0 0 5

0 0 0 0

$ 1 0 0 0 0 0

Liabilities & Fund Balance Liabilities: Vouchers payable Payable to Internal Service Fund Total liabilities Fund balance: Reserved for encumbrances Reserved for inventory of supplies Unreserved and undesignated

4 1 3 1

$

2 8 0 0 1 1 4 5 0 6 4 6 0 0 †

$

2 0 2 0 0 9 5 0

$

2 1 1 5 0

7 8 8 5 0 $ 1 0 0 0 0 0

† $78,850 – $2,800 – $11,450 = $64,600

The McGraw-Hill Companies, Inc., 2006 222

Modern Advanced Accounting, 10/e

Arden School District (concluded) b.

Pr. 17–5 Arden School District General Fund Closing Entries December 31, 2006

Unreserved and Undesignated Fund Balance Encumbrances To close Encumbrances ledger account. Appropriations Estimated Other Financing Uses Budgetary Fund Balance Estimated Revenues To close budgetary ledger accounts. Revenues Expenditures Other Financing Uses Unreserved and Undesignated Fund Balance To close Revenues, Expenditures, and Other Financing Uses ledger accounts.

2 8 0 0 2 8 0 0

9 8 5 0 0 0 1 5 0 0 0 7 0 0 0 1 0 0 7 0 0 0

1 0 0 8 2 0 0 9 9 0 2 0 0 1 0 0 0 0 8 0 0 0

Note to Instructor: After the foregoing closing entries are posted, the balance of the Unreserved and Undesignated Fund Balance ledger account is $64,600 ($59,400 – $2,800 + $8,000 = $64,600), the amount in the balance sheet in a (2).

Solutions Manual, Chapter 17

The McGraw-Hill Companies, Inc., 2006 223

60 Minutes, Medium Melton School District a.

Pr. 17–6 Melton School District General Fund Journal Entries For Year Ended June 30, 2006

Estimated Revenues Estimated Other Financing Uses Appropriations Budgetary Fund Balance To record annual budget adopted for fiscal year ending June 30, 2006.

3 0 0 0 0 0 0

Taxes Receivable Allowance for Uncollectible Taxes Revenues from Taxes To accrue property taxes billed and to provide for estimated uncollectible portion.

2 8 7 0 0 0 0

Cash

2 9 4 0 0 0 0

1 7 0 0 0 0 2 8 1 0 0 0 0 2 0 0 0 0

7 0 0 0 0 2 8 0 0 0 0 0

Taxes Receivable Other Revenues To record collections of property taxes and other revenues for the year. Allowance for Uncollectible Taxes Taxes Receivable To write off receivables for taxes that are uncollectible.

2 8 1 0 0 0 0 1 3 0 0 0 0

4 0 0 0 0 4 0 0 0 0

Encumbrances ($2,700,000 + $91,000) Fund Balance Reserved for Encumbrances To record purchase orders for nonrecurring expenditures issued during the year.

2 7 9 1 0 0 0

Fund Balance Reserved for Encumbrances Expenditures Payable to Other Funds Unreserved and Undesignated Fund Balance ($60,000 – $58,000) Vouchers Payable To record vouchers prepared during the year.

6 0 0 0 0 2 7 0 0 0 0 0 2 1 0 0 0 0

Fund Balance Reserved for Encumbrances Encumbrances To reserve encumbrances applicable to vouchered expenditures for year ended June 30, 2006.

2 7 0 0 0 0 0

Vouchers Payable Cash To record payment of vouchers during the year.

2 6 4 0 0 0 0

Other Financing Uses Payable to Other Funds

2 7 9 1 0 0 0

2 0 0 0 2 9 6 8 0 0 0

2 7 0 0 0 0 0

2 6 4 0 0 0 0

1 4 2 0 0 0 1 4 2 0 0 0

To record amounts payable to other funds.

The McGraw-Hill Companies, Inc., 2006 224

Modern Advanced Accounting, 10/e

Melton School District (concluded) b.

Pr. 17–6 Melton School District General Fund Closing Entries June 30, 2006

Unreserved and Undesignated Fund Balance Encumbrances To close Encumbrances ledger account.

9 1 0 0 0 9 1 0 0 0

Appropriations Estimated Other Financing Uses Budgetary Fund Balance Estimated Revenues To close budgetary ledger accounts.

2 8 1 0 0 0 0 1 7 0 0 0 0 2 0 0 0 0

Revenues from Taxes Other Revenues Expenditures Other Financing Uses Unreserved and Undesignated Fund Balance To close Revenues and Expenditures ledger accounts.

2 8 0 0 0 0 0 1 3 0 0 0 0

c.

3 0 0 0 0 0 0

2 7 0 0 0 0 0 1 4 2 0 0 0 8 8 0 0 0

Melton School District General Fund Post-Closing Trial Balance June 30, 2006 Cash Taxes receivable Allowance for uncollectible taxes Vouchers payable Payable to other funds Fund balance reserved for encumbrances Unreserved and undesignated fund balance ($162,000 – $91,000 + $88,000) Totals

Solutions Manual, Chapter 17

$ 7 0 0 0 0 0 1 7 0 0 0 0 $

7 0 4 0 8 1 4 2 9 1

0 0 0 0

0 0 0 0

0 0 0 0

1 5 9 0 0 0 $ 8 7 0 0 0 0

$ 8 7 0 0 0 0

The McGraw-Hill Companies, Inc., 2006 225

30 Minutes, Medium City of Romaine

Pr. 17–7 City of Romaine General Fund Computation of Property Tax Levy Required For Year Ending June 30, 2006

General Fund requirements: Estimated expenditures, Jan. 1 to June 30, 2005 Proposed appropriations, July 1, 2005 to June 30, 2005 Cash balance required for July 1, 2006 Repayment of 30-day tax-anticipation notes: Principal Interest ($200,000 x 0.12 x 30/360) Total General Fund requirements General Fund resources other than property tax levy: Estimated General Fund cash balance, Jan 1, 2005 Estimated receipts from property taxes, Jan. 1, 2005 to June 30, 2005 Estimated revenues from investments, Jan. 1, 2005 to June 30, 2006 Issuance of 30-day tax-anticipation notes Total General Fund resources other than property tax levy Property tax levy required for year ending June 30, 2006

The McGraw-Hill Companies, Inc., 2006 226

$1 9 0 0 0 0 0 4 3 0 0 0 0 0 1 7 5 0 0 0 2 0 0 0 0 0 2 0 0 0

$ 3 5 2 2 2 4 4 2 0

2 2 2 0

0 0 0 0

0 0 0 0

$6 5 7 7 0 0 0 0

0 0 0 0 3 2 1 6 0 0 0 $3 3 6 1 0 0 0

Modern Advanced Accounting, 10/e

50 Minutes, Medium Town of Tosca

Pr. 17–8 Town of Tosca General Fund Journal Entries For Year Ended June 30, 2006

Estimated Revenues Appropriations Budgetary Fund Balance To record annual budget adopted for fiscal year ending June 30, 2006.

1 0 0 0 0 0 0 9 6 5 0 0 0 3 5 0 0 0

Taxes Receivable Allowance for Uncollectible Taxes Revenues To accrue property taxes billed and to provide for estimated uncollectible portion.

8 0 9 0 0 0

Cash Allowance for Uncollectible Taxes Taxes Receivable Revenues ($955,000 – $775,000) To record collections of property taxes and other revenues for the year, and to write off uncollectible taxes.

9 5 5 0 0 0 6 0 0 0

Fund Balance Reserved for Encumbrances Payable to Internal Service Fund Payable to Enterprise Fund Expenditures [$889,000 – ($37,000 + $7,000 + $60,000)] Vouchers Payable Unreserved and Undesignated Fund Balance ($40,000 – $37,000) To record vouchers prepared during the year.

9 0 0 0 8 0 0 0 0 0

7 8 1 0 0 0 1 8 0 0 0 0

4 0 0 0 0 7 0 0 0 6 0 0 0 0 7 8 5 0 0 0 8 8 9 0 0 0 3 0 0 0

Vouchers Payable Cash To record payment of vouchers during the year.

8 8 0 0 0 0

Expenditures Payable to Internal Service Fund Payable to Enterprise Fund To record amounts payable to other funds.

1 1 0 0 0 0

Encumbrances Fund Balance Reserved for Encumbrances To record encumbrances for purchase orders outstanding on June 30, 2006.

8 8 0 0 0 0

1 0 0 0 0 1 0 0 0 0 0

4 7 0 0 0 4 7 0 0 0

(Continued on page 484.)

Solutions Manual, Chapter 17

The McGraw-Hill Companies, Inc., 2006 227

Town of Tosca (concluded)

Pr. 17–8 Town of Tosca General Fund Journal Entries (concluded) For Year Ended June 30, 2006

Unreserved and Undesignated Fund Balance Encumbrances To close Encumbrances ledger account.

4 7 0 0 0 4 7 0 0 0

Appropriations Budgetary Fund Balance Estimated Revenues To close budgetary ledger accounts.

9 6 5 0 0 0 3 5 0 0 0

Revenues ($800,000 + $180,000) Expenditures ($785,000 + $110,000) Unreserved and Undesignated Fund Balance To close Revenues and Expenditures ledger accounts.

9 8 0 0 0 0

1 0 0 0 0 0 0

8 9 5 0 0 0 8 5 0 0 0

Note to Instructor: All cash payments, including amounts payable to other funds, were vouchered before payment.

The McGraw-Hill Companies, Inc., 2006 228

Modern Advanced Accounting, 10/e

50 Minutes, Medium City of Douglas

Pr. 17–9 City of Douglas General Fund Journal Entries For Year Ended June 30, 2006

(1) Estimated Revenues Estimated Other Financing Sources Appropriations Estimated Other Financing Uses Budgetary Fund Balance To record annual budget for fiscal year ending June 30, 2006.

4 0 0 0 0 0 2 0 0 0 0 0

(2) Taxes Receivable—Current ($220,800 ÷ 0.96) Allowance for Uncollectible Current Taxes ($230,000 x 0.04) Revenues To accrue property taxes billed and to provide for estimated uncollectible portion.

2 3 0 0 0 0

(3) Encumbrances Fund Balance Reserved for Encumbrances To record purchase orders for nonrecurring expenditures issued during the year.

5 1 8 0 0 0

(4) Cash

6 6 4 0 0 0

5 6 0 0 0 0 2 0 0 0 0 2 0 0 0 0

9 2 0 0 2 2 0 8 0 0

5 1 8 0 0 0

Taxes Receivable—Delinquent Taxes Receivable—Current Expenditures Revenues Other Financing Sources To record collection of property taxes, other revenue, other financing sources, and refund from a vendor for the year. (5) Fund Balance Reserved for Encumbrances Inventory of Supplies Expenditures ($298,000 – $80,000 + $244,000) Other Financing Uses Unreserved and Undesignated Fund Balance ($12,000 – $10,000) Payable to Capital Projects Fund Vouchers Payable ($572,000 – $20,000) To record expenditures and other vouchered items for the year.

3 8 0 2 2 6 0 4 0 1 9 6 0 2 0 0 0

1 8 4 6 2

2 0 2 0

0 0 0 0

0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 2 0 0 0 2 0 0 0 0 5 5 2 0 0 0

(Continued on page 486.)

Solutions Manual, Chapter 17

The McGraw-Hill Companies, Inc., 2006 229

City of Douglas (continued)

Pr. 17–9 City of Douglas General Fund Journal Entries (continued) For Year Ended June 30, 2006

Fund Balance Reserved for Encumbrances Encumbrances To reverse encumbrances applicable to vouchered expenditures.

2 9 2 0 0 0 2 9 2 0 0 0

(6) Vouchered Payable Cash To record payment of vouchers during the year.

5 8 0 0 0 0

(7) Expenditures ($18,000 + $80,000 – $12,000) Inventory of Supplies To record cost of supplies used during the year. fcccccfefcccfccvcxreredfrsswfrfs

8 6 0 0 0

Fund Balance Reserved for Inventory of Supplies ($18,000 – $12,000) Unreserved and Undesignated Fund Balance To decrease inventory of supplies reserve to $12,000 to agree with balance of Inventory of Supplies ledger account at end of year. (8) Unreserved and Undesignated Fund Balance Fund Balance Designated for Acquisition of Equipment To designate a portion of the fund balance for the acquisition of equipment during the year ending June 30, 2006. (9) Taxes Receivable—Delinquent ($230,000 – $226,000) Allowance for Uncollectible Current Taxes Allowance for Uncollectible Delinquent Taxes Taxes Receivable—Current Unreserved and Undesignated Fund Balance ($9,200 – $4,000) To transfer delinquent taxes and related estimated uncollectible amounts from the current classification, and to restore unneeded allowance to fund balance.

5 8 0 0 0 0

8 6 0 0 0

6 0 0 0 6 0 0 0

2 0 0 0 0 2 0 0 0 0

4 0 0 0 9 2 0 0 4 0 0 0 4 0 0 0 5 2 0 0

(Continued on page 487.)

The McGraw-Hill Companies, Inc., 2006 230

Modern Advanced Accounting, 10/e

City of Douglas (concluded)

Pr. 17–9 City of Douglas General Fund Journal Entries (concluded) For Year Ended June 30, 2006

Unreserved and Undesignated Fund Balance ($518,000 – $292,000) Encumbrances To close Encumbrances ledger account.

2 2 6 0 0 0 2 2 6 0 0 0

Appropriations Estimated Other Financing Uses Budgetary Fund Balance Estimated Revenues Estimated Other Financing Sources To close budgetary ledger accounts.

5 6 0 0 0 0 2 0 0 0 0 2 0 0 0 0

Revenues ($220,800 + $196,000) Other Financing Sources Expenditures ($462,000 + $86,000 – $4,000) Other Financing Uses Unreserved and Undesignated Fund Balance To close Revenues, Other Financing Sources, Expenditures, and Other Financing Uses ledger accounts.

4 1 6 8 0 0 2 0 0 0 0 0

Solutions Manual, Chapter 17

4 0 0 0 0 0 2 0 0 0 0 0

5 4 4 0 0 0 2 0 0 0 0 5 2 8 0 0

The McGraw-Hill Companies, Inc., 2006 231