Accounting for Governmental Study Set 1

Business

Quiz 7 :
Fiduciary Trust Funds

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Quiz 7 :
Fiduciary Trust Funds

The answers to this, and to the first exercise of Chapters 1 through 9, will vary from student to student, assuming each has a different CAFR.

Agency funds Agency funds are assets which are held by government on behalf of another person, organization or other government units. Government act as agent for the fund and provides it back as per the instruction of the person on whose behalf government is holding the fund. As per GASB standard, it wold be appropriate to account for special assessment activities in agency fund if there is no obligation nor primary nor secondary obligation on part of government to repay the debt payment in case the owner defaults. Thus, the amount would be reported in agency fund if government does not have to pay for the loan.

a. 1. First, record the journal entries required for the Tax Agency Fund. Prepare the journal entry to record the levy of all taxes. Use the total amount of tax levied because the government is expected to try to collect all taxes, even if a certain amount is estimated as uncollectible. Exclude the amount for B. County General Fund since it is not due to another government. Therefore, the total is: $51,300,000 - $11,500,000 = $39,800,000 Debit Taxes Receivable for Other Governments-Current to establish the receivable for all taxes due. Credit Due to Other Governments to establish the liability that will be required for payment to other governments when collected. img 2. Prepare the journal entry to record the total cash collected for all taxes. Debit Cash and credit Taxes Receivable for Other Governments-Current to reduce the receivable. img 3. Prepare the journal entry to record the liability amount due to each government for cash collected. First, calculate the amount due to each government. B. County General Fund charges the other governments 1.5% of all collections for the cost of billing and administration. Calculate the remaining 98.5% of collections due to each government: img The total fees due to the General Fund equal 1.5% of all collections excluding the General Fund collections: img Debit Due to Other Governments to reduce the total liability created. Credit a liability account for each government with the specific amount due after collections. img 4. Prepare the journal entry to record the payment of cash for amounts due to each government (established in 3. above). Debit the individual government liability accounts and credit Cash for the total paid. img b. 1. Next, record the journal entries required for the B. County General Fund. Prepare the journal entry to record the levy of all taxes. For the General Fund, debit Taxes Receivable-Current for the amount of taxes levied only for the county (excluding all other governments). Credit Estimated Uncollectible Current Taxes for the amount of taxes estimated to be uncollectible (2%). Credit Revenues Control for the 98% expected to be collected. img 2. Prepare the journal entry to record the cash collected for taxes for the County General Fund. Debit Cash and credit Taxes Receivable-Current to reduce the receivable. img 3. Prepare the journal entry to establish a receivable and recognize revenues for fees due from the Tax Agency Fund for billing and administrative costs of other government's tax collection. Debit Due from Tax Agency Fund and credit Revenues Control. img 4. Prepare the journal entry to record the cash collected for the fees. Debit Cash and credit Due from Tax Agency Fund. img c. 1. Record the journal entries required for the Town of T. First, prepare the journal entry to record the levy of taxes for the town. Debit Taxes Receivable-Current for the amount of taxes levied only for the Town of T. Credit Estimated Uncollectible Current Taxes for the amount of taxes estimated to be uncollectible (2%). Credit Revenues Control for the 98% expected to be collected. img 2. No entry is required for this transaction for the Town of T. This transaction only gives the total amount of collections for all other governments combined, but does not indicate the amount collected for the Town. 3. Prepare the journal entry to record the amount of taxes collected for the Town of T. and the fees due to the County for collecting the taxes. The total taxes collected for the Town of T. is $4,070,000. Fees of 1.5% (or $61,050) are deducted from the amount to be received. Debit Due from Tax Agency Fund to establish a receivable for the amount due of $4,008,950 and Expenditures Control for the fees withheld of $61,050. Credit Taxes Receivable-Current for the total taxes collected by the County. img 4. Prepare the journal entry to record the cash received from the Tax Agency Fund for taxes collected less fees. Debit Cash and credit Due from Tax Agency Fund. img