Following are descriptions of transactions and other financial events for the City of Tetris for the year ending December 2017. Not all transactions have been included here. Only the general fund formally records a budget. No encumbrances were carried over from 2016.
Paid salary for police officers | $ 21,000 |
Received government grant to pay ambulance drivers | 40,000 |
Estimated revenues | 232,000 |
Received invoices for rent on equipment used by fire department during last four months of the year | 3,000 |
Paid for newly constructed city hall | 1,044,000 |
Made commitment to acquire ambulance | 111,000 |
Received cash from bonds sold for construction purposes | 300,000 |
Placed order for new sanitation truck | 154,000 |
Paid salary to ambulance drivers—money derived from state government grant given for that purpose | 24,000 |
Paid for supplies for school system | 16,000 |
Made transfer from General Fund to eventually pay off a long-term debt | 33,000 |
Received but did not pay for new ambulance | 120,000 |
Levied property tax receivables for 2017. City anticipates that 95% ($ 190,000) will be collected during the year and 5% will be uncollectible | 200,000 |
Acquired and paid for new school bus | 40,000 |
Received cash from business licenses and parking meters (not previously accrued) | 14,000 |
Approved appropriations | 225,000 |
The following questions are independent although each is based on the preceding information. Assume that the government is preparing information for its fund financial statements.
- a. What is the balance in the Budgetary Fund Balance account for the budget for the year? Is it a debit or credit?
- b. Assume that 60 percent of the school supplies are used during the year so that 40 percent remain. If the consumption method is being applied, how is this recorded?
- c. The sanitation truck that was ordered was not received before the end of the year. The commitment will be honored in the subsequent year when the truck arrives. What reporting is made at the end of 2015?
- d. Assume that new ambulance was received on December 31, 2017. Provide all necessary journal entries on that date.
- e. Prepare all journal entries that should have been made when the $33,000 transfer was made for the eventual payment of a long-term debt.
- f. What amount of revenue would be recognized for the period? Explain the composition of this total.
- g. What are the total expenditures? Explain the makeup of this total. Include response to (b) here.
- h. What
journal entry or entries were prepared when the bonds were issued?
a.
Find the balance in the Budgetary Fund Balance account for the budget for the year.
Explanation of Solution
The balance in the Budgetary Fund Balance account for the budget for the year:
Particulars | Amount |
Estimated Revenues | $ 232,000 |
Appropriations | $ (225,000) |
Budgetary Fund Balance | $ 7,000 |
Table: (1)
The amount of appropriations is more than that of estimated revenues. Thus, the balance of fund is credit balance.
b.
Explain if the consumption method is being applied, how this is recorded.
Explanation of Solution
The amount which is currently being used is recorded as an asset under the consumption method. The 40% amount is not being used which will be transferred to the Fund Balance-Unassigned.
Computation of the amount of supplies being used currently:
c.
Identify the reporting which is made at the end of 2015.
Explanation of Solution
The truck is being purchased at the end of year due to which it will be delivered in the next year. Thus, the amount of encumbrances and the Fund Balance-Reserved for encumbrances will be eliminated from the reporting as there had been no transaction. Earlier the encumbrance was recorded in order to reserve the amount for specific purpose.
d.
Provide all necessary journal entries on that date.
Explanation of Solution
The journal entries as on December 31, 2107 are as follows:
Date | Account Title and Explanation | Post ref. | Debit ($) | Credit ($) |
12/31/2017 | Fund Balance-Reserved for encumbrances | $ 111,000 | ||
Encumbrances | $ 111,000 | |||
(being encumbrance removed) | ||||
Expenditures Control | $ 120,000 | |||
Vouchers Payable | $ 120,000 | |||
(being expenditures control recorded) |
Table: (2)
e.
Prepare all journal entries that should have been made when the $33,000 transfer was made for the eventual payment of a long-term debt.
Explanation of Solution
The journal entries that should have been made when the $33,000 transfer was made for the eventual payment of a long-term debt:
Date | Account Title and Explanation | Post ref. | Debit ($) | Credit ($) |
12/31/2017 | Other Financing Uses-Transfer Out | 33,000 | ||
Cash | 33,000 | |||
(being the other financing used recorded) | ||||
Cash | 33,000 | |||
Other Financing Sources-Transfer in | 33,000 | |||
(being the other financing used recorded) |
Table: (3)
f.
Find the amount of revenue which would be recognized for the period. Explain the composition of this total.
Explanation of Solution
The amount of revenue which would be recognized for the period:
Particulars | Amount |
Property tax collected | $ 190,000 |
Cash received from business licenses | $ 14,000 |
Grant for ambulance drivers | $ 24,000 |
Total revenues | $ 228,000 |
Table: (4)
g.
Find the total expenditures. Explain the makeup of this total.
Explanation of Solution
Computation of the total expenditures:
Particulars | Amount |
Paid salaries to police officers | $ 21,000 |
Salaries paid to ambulance drivers | $ 24,000 |
Equipment rental | $ 3,000 |
Cost of used supplies | $ 9,600 |
New school bus acquired | $ 40,000 |
New ambulance acquired | $ 120,000 |
New C' Hall acquired | $ 1,044,000 |
Total expenditure | $ 1,261,600 |
Table: (5)
h.
Identify the journal entry or entries which were prepared when the bonds were issued.
Explanation of Solution
The journal entry or entries which were prepared when the bonds were issued:
Date | Account Title and Explanation | Post ref. | Debit ($) | Credit ($) |
Cash | 300,000 | |||
Other Financing Uses | 300,000 | |||
(being the other financing used recorded) |
Table: (6)
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Chapter 16 Solutions
Soft Bound Version for Advanced Accounting 13th Edition
- The general ledger of the County of Konstantin contains the following selected account balances: $91400 $35600 $16500 $5700 Appropriations Outstanding Encumbrances Expenditures Vouchers Payable Konstantin wants to order additional goods and services before the fiscal year end. What is the unencumbered balance (i.e., the remaining authority) of the budget that may be expended by Konstantin? BE SURE TO TYPE A SIMPLE NUMBER WITH NO COMMAS OR DOLLAR SIGNS. FOR EXAMPLE, TYPE 1000 INSTEAD OF $1,000.arrow_forwardHere is the pre closing December 31, 2017 trial balance for the general fund of Lancaster County: All numbers are in thousands. Debit Credit Cash $ 225,000 Taxes receivable 150,000 Estimated revenues 750,000 Estimated other financing sources 30,000 General expenditures 620,000 Capital outlay 10,000 Debt service: principal paym 1,000 Debt service: interest payments 6,000 Transfers out 15,000 Due from other funds 20,000 Allowance for uncollectible taxes $25,000 Accounts payable 20,000 Due to other funds 15,000 Property tax revenues 725,000 Speeding ticket revenues 200,000 Transfers in 10,000 Bond proceeds 12,000 Appropriations 650,000 Estimated other financing uses 20,000 Fund balance-unassigned 150,000 Totals $1,827,000 $1,827,000 By how much do the closing entries at the end of 2017 increase fund balance-unassigned? si8,000 S167,000 $203,000 s185,000arrow_forwardHere is the preclosing December 31, 2017 trial balance for the general fund of Lancaster County: All numbers are in thousands. Debit Credit Cash $ 449,000 Taxes receivable 310,000 Estimated revenues 1,500,000 Estimated other financing sources 75,000 General expenditures 1,250,000 Capital outlay Debt service: principal payments 25,000 3,000 Debt service: interest payments 9,000 Transfers out 30,000 Due from other funds 15,000 Allowance for uncollectible taxes $75,000 Accounts payable 75,000 Due to other funds 30,000 Property tax revenues 1,250,000 Speeding ticket revenues 500,000 Transfers in 15,000 Bond proceeds 80,000 Appropriations Estimated other financing uses 1,295,000 36,000 Fund balance-unassigned 310,000 Totals $3,666,000 $3,666,000 By how much do the closing entries at the end of 2017 increase fund balance- unassigned? $14,000 $270,000 $298,000 $284,000arrow_forward
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