Accounting for Governmental

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Quiz 4 :

Accounting for the General and Special Revenue Funds

Quiz 4 :

Accounting for the General and Special Revenue Funds

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Prepare journal entries in the General Fund of the Brownville School District. a. The District had outstanding encumbrances of $13,000 for band instruments from the previous year. It is the District's policy to re-establish those encumbrances in the subsequent year. b. The District ordered textbooks at an estimated cost of $87,000. c. The band instruments arrived at an invoice price of $12,500 plus $225 shipping. d. Textbooks originally estimated to cost $77,000 were received with an invoice price of $76,900. The remaining portion of the order is backordered. e. A contract was signed with a CPA to provide the annual audit in the amount of $11,000.
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BROWNVILLE SCHOOL DISTRICT
GENERAL FUND
GENERAL JOURNAL
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The following transactions relate to the General Fund of the City of Buffalo Falls for the year ended December 31, 2012: 1. Beginning balances were: Cash, $150,000; Taxes Receivable, $200,000; Accounts Payable, $50,000; and Fund Balance, $300,000. 2. The budget was passed. Estimated revenues amounted to $2,000,000 and appropriations totaled $1,980,000. All expenditures are classified as General Government. 3. Property taxes were levied in the amount of $1,200,000. All of the taxes are expected to be collected before February 2013. 4. Cash receipts totaled $1,200,000 for property taxes and $740,000 from other revenue. 5. Contracts were issued for contracted services in the amount of $900,000. 6. Contracted services were performed relating to $765,000 of the contracts with invoices amounting to $759,000. 7. Other expenditures amounted to $950,000. 8. Accounts payable were paid in the amount of $1,700,000. 9. The books were closed. Required: a. Prepare journal entries for the above transactions. b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the General Fund. c. Prepare a Balance Sheet for the General Fund assuming there are no restricted or assigned net resources and outstanding encumbrances are committed by contractual obligation.
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Government Accounting
It is the method of accounting all financial transactions of the government which includes the revenues and expenditures of the government entity.
a. Journal Entries
1. Estimated Revenues
The journal entry for current year estimated revenues is as follows -
img Explanation
The revenues estimated by the entity for the current year is reported by debiting the estimated revenues control. Appropriations made by the entity is credited and balance is transferred to budgetary fund balance.
2. Current year taxes
The journal entry for accruing current year taxes is as follows -
img Explanation
The amount receivable in the form of property taxes in the current year is accrued as the amount is yet to be received. This is recorded by debiting taxes receivable - current as the amount is yet to be received thus creating an asset and crediting revenues control the revenues increase.
3. Amount Received
The journal entry for amount received in the form of taxes is as follows -
img Explanation
The amount received in the form of property taxes and other revenue in the current year is recorded by debiting cash as the amount is received in cash and crediting taxes receivables as the asset decreases and the receivable amount decreased and crediting revenues control as the revenues increase.
4. Issue of contracts
The journal entry for issue of contracts is as follows -
img Explanation
The entity entered in service contracts in the current year. This is recorded by debiting encumbrances as the asset is created. The budgetary fund balance for the purchases is credited by the amount.
5.
Receipt of services
The journal entry for receipt of services is as follows -
img Explanation
The services in contract were received by the entity. This is recorded by crediting encumbrances as the asset is reduced. The budgetary fund balance for the purchases is debited.
Payment due on services
The journal entry for amount payable on services received is as follows -
img Explanation
The shipping expenditure incurred by the entity on the arrival of shipment is recorded by debiting expenditures control as they have been incurred by the entity. The accounts payable is credited as these are yet to be paid by the entity.
6. Expenditures incurred
The journal entry for expenditures incurred is as follows -
img Explanation
The amount payable on expenditures incurred is recorded by debiting expenditures control as they have been incurred by the entity. The accounts payable is credited as these are yet to be paid by the entity.
7. Payment to creditors
The journal entry for payment to creditors is as follows -
img Explanation
The entity paid its creditors for the amount due in the current as well as previous year. This is recorded by debiting accounts payables as the liability reduces. Cash is credited as the payment is made in cash.
8. Closure of revenues
The journal entry for closure of revenues is as follows -
img Explanation
The revenues that were estimated are now closed by passing the reverse entry. That is why, budgetary fund balance and appropriation control are debited and revenues control is credited.
Balance amount for services
The journal entry for balance amount for services is as follows -
img Explanation
The services that are not yet received result in creation of asset, this asset is reversed at the end of the year. That is why, budgetary fund balance is debited and encumbrances control is credited by
img .
Revenues Appropriations
The journal entry for appropriation of revenues is as follows -
img Explanation
The revenues earned is adjusted towards expenditures incurred and the balance is transferred to fund balance. That is why, revenues control is debited and expenditures control and fund balance are credited.
b. Statement of Revenues, Expenditures and Changes in Fund Balance
The City's Statement of Revenues, Expenditures and Changes in Fund Balance is prepared below -
img c. Balance Sheet
The City's Balance Sheet is prepared below -
img

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The General Fund trial balance of the City of Cordes as of January 1, 2012, was as follows: img The following data pertain to General Fund operations for the City of Cordes for the fiscal year ended December 31, 2012: 1. Budget adopted: img 2. Encumbrances outstanding at the end of 2011 were re-established. 3. Property taxes of $430,000 were levied. Two percent of the tax levy is expected to be uncollectible. 4. Purchase orders issued in 2012: img 5. Cash collections and transfers: img 6. Purchase orders issued in 2012 were filled in the following amounts: img 7. Purchase orders issued in 2011 in the following amounts were filled in 2012: img 8. Additional accounts payable for salaries and wages (not encumbered): img 9. Accounts paid amounted to $570,000; the transfer out, $30,000, was made in cash. 10. Reclassify Taxes Receivable-Current and Estimated Uncollectible Taxes-Current as delinquent. Required: a. Prepare journal entries to record the effects of the foregoing data. Omit explanations and subsidiary accounts. b. Prepare closing entries. c. Prepare for the General Fund of the City of Cordes (1) A Statement of Revenues, Expenditures, and Changes in Fund Balance for the year ended December 31, 2012. (2) A Balance Sheet as of December 31, 2012, assuming there are no restricted or committed net resources and the only assigned net resources are the outstanding encumbrances.
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CITY OF CORDES
GENERAL FUND
GENERAL JOURNAL
img CITY OF CORDES
GENERAL FUND
PRE-CLOSING GENERAL LEDGER (Not Required)
img part C (1).
CITY OF CORDES - GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED DECEMBER 31, 2012
img part C (2).
img CITY OF CORDES
GENERAL FUND
BALANCE SHEET
AS OF DECEMBER 31, 2012
img

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Assume at the beginning of 2012, the Ashlawn Village Street and Highway Fund (a special revenue fund) has cash of $300,000 offset by assigned fund balance in the same amount. 1. During the year, the State notified the Village that $450,000 for the street and highway fund will be awarded for work performed on several bridges over the next two years. The grant is a cost reimbursement arrangement (no budget entry is necessary). 2. During the year, the Village signed contracts for bridge repairs that amounted to $340,000. 3. The bridge repairs were completed and an invoice was received for $333,000, of which $320,000 was paid in cash. 4. The special revenue fund reimbursed the General Fund for a payment the General Fund made on behalf of the Street and Highway Fund in the amount of $7,000. This amount is not related to the bridge repairs under the state grant. 5. The state government paid the Village $300,000 on work completed under the grant before year-end. a. Prepare the journal entries for the above transactions. Prepare Closing entries for year-end. b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the Special Revenue Fund. c. Prepare a Balance Sheet.
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On January 1, 2012, the first day of its fiscal year, the City of Carter received notification that a federal grant in the amount of $650,000 was approved. The grant was restricted for the payment of wages to teenagers for summer employment. The terms of the grant permitted reimbursement only after qualified expenditures have been made; the grant could be used over a two-year period in equal amounts of $325,000 each. The following data pertain to operations of the Summer Employment Grant Fund, a special revenue fund of the City of Carter, during the year ended December 31, 2012. Show entries in general journal form to record the following events and transactions in the accounts of the Summer Employment Grant Fund: 1. The budget was recorded. It provided for Estimated Revenues for the year in the amount of $325,000, and for Appropriations in the amount of $325,000. 2. A temporary loan of $325,000 was received from the General Fund. 3. During the year, teenagers earned and were paid $312,000 under terms of the Summer Employment program. An additional $5,000 is accrued as payable on December 31. Recognize the receivable and revenue (include the $5,000 of wages payable). 4. Each month a properly documented request for reimbursement was sent to the federal government; checks for $298,000 were received. 5. Necessary closing entries were made.
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The following transactions relate to Newport City's special revenue fund. 1. In 2012, Newport City created a special revenue fund to help fund the 911 emergency call centers. The center is to be funded through a legally restricted tax on cellular phones. No budget is recorded. 2. During the first year of operations, revenues from the newly imposed tax totaled $450,000. Of this amount, $380,000 has been received in cash and the remainder will be received within 60 days of the end of the fiscal year. 3. Expenditures (salaries) incurred through the operation of the 911 emer­gency call center totaled $370,000. Of this amount, $320,000 was paid before year-end. 4. During the year the state government awarded Newport City a grant to reimburse the City's costs (not to exceed $150,000) for the purpose of training new 911 operators. During the year, the City paid $147,500 (not reflected in the expenditures above) to train new operators for the 911 emergency call center and billed the state government. 5. $134,000 of the amount billed to the state had been received by year- end. a. Prepare the journal entries for the above transactions. It is not neces­sary to use control accounts and subsidiary ledgers. Prepare Closing entries for year-end. b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the Special Revenue Fund. c. Prepare a Balance Sheet, assuming there are no committed or assigned net resources.
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The Village of Seaside Pines prepared the following General Fund Trial Bal­ance as of December 31, 2012, the last day of its fiscal year. img a. Prepare the closing entries for December 31. (It is not necessary to use control accounts and subsidiary ledgers.) b. Prepare the Statement of Revenues, Expenditures, and Changes in Fund Balance for the General Fund for the year ended December 31. c. Prepare the Fund Balance Section of the December 31 Balance Sheet assuming there are no restricted or committed net resources and the out­standing encumbrances are for capital additions.
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The Town of Quincy's fiscal year ends on June 30. The following data relate to the property tax levy for the fiscal year ended June 30, 2012. Prepare journal entries for each of the dates as indicated. a. he balance in deferred property tax revenue was $182,000 at the end of the previous year. This was recognized as revenue in the current year in a reversing journal entry. b. On July 1, 2011, property taxes in the amount of $10,000,000 were levied. It was estimated that 3 percent would be uncollectible. The property taxes were intended to finance the expenditures for the year ended June 30, 2012. c. October 31, $4,600,000 in property taxes was collected. d. December 31, $4,800,000 in additional property taxes was collected. e. Receivables totaling $12,000 were deemed to be uncollectible and written off. f. On June 30, $175,000, was transferred from Revenues Control to Deferred Revenues, because it was not expected to be collected within 60 days.
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Using the annual financial report obtained for Exercise 1-1, answer the following questions: a. Look at the General Fund column of the Balance Sheet for governmental funds. What are the major assets Liabilities What reserves have been established for fund balance Are any designations shown Are taxes receivable offset by Deferred Revenues Are the amounts the same (If so, this would indicate cash accounting for property taxes.) b. Look at the General Fund column of the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances. Prepare a schedule showing percentages of revenues by source. Prepare a schedule showing percentages of expenditures by function. Does your government have significant transfers in or out Can you identify the fund that provides or receives these resources Does your government have any other financing sources or uses Special and/or extraordinary items c. Does your government report any special revenue funds as major funds in the governmental fund statements What are they What are the major revenue sources Expenditure functions d. Review the notes to the financial statements to determine the measurement focus and basis of accounting used to prepare the governmental fund financial statements. Do the notes describe modified accrual accounting in a manner consistent with this book Which revenue sources are subject to accrual Are expenditures generally recognized when goods and services are received Which specific modifications to accrual accounting are mentioned in the notes e. Look at the General Fund column of the governmental fund statements from the point of view of a financial analyst. Is the Fund Balance as of the bal­ance sheet date larger or smaller than at the beginning of the year Are rea­sons for the change apparent from the statements Compute a ratio of fund balance/general fund revenues and compare it with your class members'.
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The following information was abstracted from the accounts of the General Fund of the City of Rome after the books had been closed for the fiscal year ended June 30, 2012. img During the year, purchase orders were placed in the amount of $1,070,000. These purchase orders were filled in the amount of $1,000,000 leaving $70,000 open at year-end. There were no transfers into the General Fund, but one transfer out. Prepare journal entries to record the budgeted and actual transactions for the fiscal year ended June 30, 2012. Include closing entries. (AICPA, adapted)
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Jefferson County General Fund began the year 2012 with the following ac­count balances: img During 2012, Jefferson experienced the following transactions: 1. The budget was passed by the County Commission, providing estimated revenues of $250,000 and appropriations of $180,000 and estimated other financing uses of $40,000. Classify expenditures in the General Fund as either General Government or Capital Outlay. Make entries directly to these and the individual revenue accounts; do not use sub­sidiary ledgers. 2. The encumbrances outstanding at December 31, 2011, were re­established. 3. The deferred revenue at December 31, 2011, is recognized as revenue in the current period. 4. Property taxes in the amount of $260,000 were levied by the County. It is estimated 0.5% (1/2 of 1 percent) will be uncollectible. 5. Property tax collections totaled $247,000. Accounts totaling $950 were written off as uncollectible. 6. Encumbrances were issued for supplies in the amount of $36,000. 7. Supplies in the amount of $39,800 were received. Jefferson County records supplies as an asset when acquired. The related encumbrances for these items totaled $40,000 and included the $4,800 encumbered last year. The County paid $35,650 on accounts payable during the year. 8. The County contracted to have alarm systems (capital assets) installed in the administration building at a cost of $46,600. The systems were installed and the amount was paid. 9. Paid wages totaling $131,970, including the amount payable at the end of 2011. (These were for general government operations.) 10. Paid other general government operating items of $7,600. 11. The General Fund transferred $38,500 to the debt service fund in anticipa­tion of bond interest and principle payments. Additional Information 12. Wages earned but unpaid at the end of the year amounted to $2,200. 13. Supplies of $250 were on hand at the end of the year. (Supplies are used for general government operations.) 14. A review of property taxes receivable indicates that $17,500 of the out­standing balances would likely be collected more than 60 days after year-end and should be deferred. Required Use the Excel template provided on the textbook Web site to complete the following requirements. A separate tab is provided in Excel for each of these steps. a. Prepare journal entries to record the information described in items 1 to 14. b. Post these entries to T-accounts. c. Prepare closing journal entries; post to the T-account provided. Clas­sify fund balances assuming there are no restricted or committed net resources and the only assigned net resources are the outstanding encumbrances. d. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the General Fund for the year ending 2012. Use Excel formu­las to calculate the cells shaded in blue. e. Prepare a Balance Sheet for the General Fund as of December 31, 2012. Use Excel formulas to calculate the cells shaded in blue.
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The State Government administers a special revenue fund, the Fish and Game Fund. By legislation, revenue in this fund can be used only for the purpose of protection, propagation, and restoration of sport fish and game resources and the expenses of administering sport fish and wildlife programs. Revenues are received from the sale of State sport fishing and hunting licenses and special permits as well as money received in settlement of a claim or loss caused by damage to fish and game purposes. The fund began in 2012 with the follow­ing balances: img 1. The State adopted a budget for the Fish and Game Fund providing estimated revenues of $1,400,000, appropriations of $1,680,000, and anticipated transfers from the State's General Fund of $300,000. All ex­penditures, other than capital expenditures, are to be charged to Current Expenditures-Wildlife Management. 2. The beginning Budgetary Fund Balance-Reserve for Encumbrances represents outstanding purchase orders for hatchery supplies that will be received in the current year. It is the State's policy to honor outstanding purchase orders from the previous year. 3. Hunting and fishing licenses are sold by outfitters and outdoor equipment retailers and are remitted to the State by the 15th of the following month. During 2012, the State received $1,150,000 in cash for licenses, which includes the amount accrued at the end of the previous year. In addition, it is estimated $137,000 will be received in January 2013 for December 2012 sales. 4. During the year, the State received an additional $255,000 for fines levied against individuals violating state hunting and fishing laws. 5. The State operates fish hatcheries for its stocking program. During the year, the State placed orders totaling $260,000 for hatchlings, feed, and other supplies. These are in addition to the outstanding purchase orders from 2011. 6. The State received supplies at an invoice cost totaling $286,000 for hatch­ery supplies. The related encumbrances for these items totaled $289,000 (this includes the $36,000 issued in 2011). 7. Payments of accounts payable totaled $303,000 in 2012. 8. The General Fund provided $300,000 to the Fish and Game Fund for the acquisition of a new fish hatchery. This amount was received in 2012. 9. A purchase order was awarded to Aquatics Construction Company for the new hatchery in the amount of $305,000. The contract was completed and capital expenditures for the new hatchery were paid in the amount of $305,000. 10. Wages were paid during the year in the amount of $990,000. This includes the unpaid amounts accrued at the end of the previous year. 11. Unpaid wages related to the last pay period of 2012 totaled $42,000 and will be paid in January 2013. 12. At December 31, the unused hatchery supplies on hand totaled $6,700. Required Use the Excel template provided. A separate tab is provided in Excel for each of these steps. a. Prepare journal entries to record the information described in items 1 to 12. b. Post these entries to T-accounts. c. Prepare closing journal entries; post to the T-account provided. Clas­sify fund balances assuming all spendable net resources are classified as Restricted d. Prepare a Statement of Revenues, Expenditures and Changes in Fund Balance for the Special Revenue Fund for the year ending 2012. e. Prepare a Balance Sheet for the Special Revenue Fund as of December 31, 2012.
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