a.
Prepare debt service fund and government wide entries in general journal form to record the transactions.
a.
Explanation of Solution
Government wide financial statements: This statement provides an aggregated overview of the government net position and their changes in the net position. This statement reports on the government as a whole and assess whether the government has used the resources efficiently and effectively (operational accountability) to meet the operating objectives.
Prepare debt service fund and government wide entries in general journal form to record the transactions:
Date | Account Title and Explanation | PostRef. | Debit ($) | Credit ($) |
1. | Serial bond debt service fund: | |||
Estimated other financing sources | $416,250 | |||
Estimated revenue | $1,020,000 | |||
Appropriations | $1,416,250 | |||
Budgetary fund balance | $20,000 | |||
(To record the appropriations for interest payments and bond redemptions) | ||||
Governmental activities: | ||||
No entry. | ||||
2. | Serial bond debt service fund: | |||
Cash | $213,750 | |||
Other financing sources –inter fund transfers in | $213,750 | |||
(To record the receipt of cash from general fund) | ||||
Expenditures –Bond interest | $213,750 | |||
Expenditures –Bond principal | $500,000 | |||
Cash | $713,750 | |||
(To record the payment of interest expense and principal amount) | ||||
Governmental activities: | ||||
Interest Payable | $213,750 | |||
Bonds Payable | $500,000 | |||
Cash | $713,750 | |||
(To record the payment of interest expense and principal amount) | ||||
3. | Serial bond debt service fund: | |||
Taxes receivable-current | $1,020,000 | |||
Revenues | $1,020,000 | |||
(To record the property taxes levied) | ||||
Governmental activities: | ||||
Taxes receivable-current | $1,020,000 | |||
General Revenues- Property taxes | $1,020,000 | |||
(To record the property taxes levied) | ||||
4. | Serial bond debt service fund: | |||
Cash | $1,019,000 | |||
Taxes receivable-current | $1,019,000 | |||
(To record the property taxes levied) | ||||
Governmental activities: | ||||
Cash | $1,019,000 | |||
Taxes receivable-current | $1,019,000 | |||
(To record the property taxes levied) | ||||
5. | Serial bond debt service fund: | |||
Cash | $202,500 | |||
Other financing sources –inter fund transfers in | $202,500 | |||
(To record the receipt of cash from general fund) | ||||
Expenditures –Bond interest | $202,500 | |||
Expenditures –Bond principal | $500,000 | |||
Cash | $702,500 | |||
(To record the payment of interest expense and principal amount) | ||||
Governmental activities: | ||||
Interest on long term debt | $202,500 | |||
Bonds Payable | $500,000 | |||
Cash | $702,500 | |||
(To record the payment of interest expense and principal amount) | ||||
6. | Serial bond debt service fund: | |||
Budgetary fund balance | $20,000 | |||
Appropriations | $1,416,250 | |||
Estimated other financing sources | $416,250 | |||
Estimated revenue | $1,020,000 | |||
(To record the closing entry) | ||||
Taxes receivable—delinquent | $1,000 | |||
Taxes receivable—current | $1,000 | |||
(To record adjustment for uncollected taxes) | ||||
Revenues | $1,000 | |||
Deferred inflows of resources - unavailable revenues | $1,000 | |||
(To record the closing entry) | ||||
Other financing sources-inter fund transfers in | $416,250 | |||
Revenues | $1,019,000 | |||
Expenditures—bond interest | $416,250 | |||
Expenditures—bond principal | $1,000,000 | |||
Fund balance—restricted | $19,000 | |||
(To record the closing entry) | ||||
Governmental activities: | ||||
Expenses—interest on long–term debt | $191,250 | |||
Interest payable | $191,250 | |||
(To record the interest expense) | ||||
Taxes receivable—delinquent | $1,000 | |||
Taxes receivable—current | $1,000 | |||
(To record adjustment for uncollected taxes) |
Table (1)
b.
Prepare a statement of revenues, expenditures and changes in fund balances for the debt service fund for the year ended December 31, 2020.
b.
Explanation of Solution
Debt service fund: The debt service fund is a fund that provides government to account for transactions related with the payment of principle and interest on its liabilities or debt.
Prepare a statement of revenues, expenditures and changes in fund balances for the debt service fund for the year ended December 31, 2020:
Company SB | ||
Debt service fund | ||
Statement of revenues, expenditures and Changes in fund balances | ||
For the year ended December 31, 2020 | ||
Particulars | Amount | Amount |
Revenues: | ||
Property taxes | $1,019,000 | |
Expenditures: | ||
Bond interest | $416,250 | |
Bond principal | $1,000,000 | |
Less: Total expenditures | ($1,416,250) | |
Excess of expenditures under revenues | $397,250 | |
Other financing sources (uses): | ||
Inter fund transfers in | ($416,250) | |
Increase in fund balances | $19,000 | |
Fund balances, July 1, 2020 | $509,000 | |
Fund balances, December 31, 2020 | $528,000 |
Table (2)
c.
Prepare a balance sheet for the debt service fund for the year ended December 31, 2020.
c.
Explanation of Solution
Balance sheet: Balance Sheet is one of the financial statements that summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.
Prepare a balance sheet for the debt service fund for the year ended December 31, 2020:
Company SB | ||
Debt service fund | ||
Balance sheet | ||
As on December 31, 2020 | ||
Particulars | Amount | Amount |
Assets: | ||
Cash | $528,000 | |
Taxes receivable -delinquent | $1,000 | |
Total assets | $529,000 | |
Deferred inflows of resources: | ||
Unavailable revenues | $1,000 | |
Fund balances: | ||
Fund balance- restricted for debt service | $528,000 | |
Total deferred inflows of resources and fund balance | $529,000 |
Table (3)
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Chapter 6 Solutions
Accounting For Governmental & Nonprofit Entities
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