Continuous Problem – City of Monroe
Essentials of Accounting for
Governmental
and Not-for-Profit
Organizations:
Twelfth Edition
Chapters
2 through 8 describe accounting and financial reporting by state and local
governments. A continuous problem is presented to provide an overview of the
reporting process, including preparation of fund basis and government-wide
statements. The problem assumes the
government is using fund accounting for its internal record-keeping and then at
year-end makes necessary adjustments to prepare the government-wide statements.
The problem that follows is presented in the same order as the textbook
(beginning with Chapters 3, and 4).
Each
chapter requires the preparation of journal entries to record the events and
transactions of governmental, proprietary, or fiduciary funds. For the General Fund, use control accounts
for the budgetary accounts, revenues, expenditures and encumbrances. For all other funds, use separate accounts
for each type of revenue and expenditure/expense. At appropriate stages, preparation of the
fund and government-wide statements are required. The following funds are included
in this series of problems:
Governmental
Funds
Ø
General
Ø
Special revenue—Street and Highway Fund
Ø
Capital projects—City Hall Annex Construction
Fund
Ø
Debt service—City Jail Annex Debt Service Fund
Ø
Debt service—City Hall Debt Service Fund
Proprietary
Funds
Ø
Internal service—Stores and Services Fund
Ø
Enterprise—Water
and Sewer Fund
Fiduciary
Funds
Ø
Private-purpose—Student Scholarship Fund
Ø Pension
trust—Fire and Police Retirement Fund
Chapters 3 & 4
The
Balance Sheets of the General Fund and the Street and Highway Fund of the City
of Monroe as of December 31, 2014, follow. These (beginning) balances have been
entered in the proper general ledger accounts, as of 1/1/2015.
|
CITY OF MONROE |
|
|
General Fund |
|
|
As of December |
|
|
Assets |
|
|
Cash |
$502,000 |
|
Taxes receivable |
$210,000 |
|
Less: Estimated uncollectible taxes |
(42,000) |
|
net |
168,000 |
|
Interest and penalties receivable on taxes |
5,200 |
|
Less: Estimated uncollectible interest and penalties |
(950) |
|
net |
4,250 |
|
Due from state government |
210,000 |
|
Total assets |
$884,250 |
|
Liabilities, |
|
|
Liabilities: |
|
|
Accounts |
$ 99,000 |
|
Due |
27,000 |
|
Total |
126,000 |
|
Deferred inflows – Property taxes |
21,000 |
|
Fund equity: |
|
|
Fund (for outstanding encumbrances) |
$17,000 |
|
Fund |
720,250 |
|
Total |
737,250 |
|
Total liabilities, deferred inflows and fund equity |
$884,250 |
|
CITY OF MONROE |
|
|
Street and |
|
|
As of December |
|
|
Assets |
|
|
Cash |
$21,000 |
|
Investments |
59,000 |
|
Due from state government |
109,000 |
|
Total assets |
$189,000 |
|
Liabilities and |
|
|
Liabilities: |
|
|
Accounts |
$9,000 |
|
Fund equity: |
|
|
Fund highways |
180,000 |
|
Total |
$189,000 |
3–C. This
portion of the continuous problem continues the General Fund and special revenue
fund examples by requiring the recording and posting of the budgetary entries. To
reduce clerical effort required for the solution use control accounts for the
budgetary accounts, revenues, expenditures and encumbrances. Subsidiary accounts are not required. Budget
information for the City includes:
a)
As of January 1, 2015, the City Council approved and
the mayor signed a budget calling for $11,250,000 in property tax and other
revenue, $9,300,000 in appropriations for expenditures, and $1,700,000 to be
transferred to two debt service funds for the payment of principal and
interest. Record the budget for the General Fund and post to the ledger.
b) Also as of January 1, 2015, the
City Council approved and the mayor signed a budget for the Street and Highway
Fund that provided for estimated revenues from the state government in the
amount of $1,068,000 and appropriations of $1,047,000. Record the budget and post
to the ledger.
4–C. Part
1. General Fund Transactions
Required:
a. Record journal entries for the following
transactions for FY 2015. Make any computations to the nearest dollar. Journal
entry explanations are not required. Use
control accounts for revenues, expenditures and budgetary accounts. It is not necessary to reflect subsidiary
ledger entries.
(1) Encumbrances
of $ 17,000 for purchase orders outstanding at the end of 2014 were re-established.
(2) The January 1, 2015, balance in Deferred Inflows
– Property Taxes relates to the amount of the 2014 levy that was expected to be
collected more than 60 days after December 31. This amount should be recognized
as 2015 revenues.
(3) A general tax levy in the amount of $6,800,000
was made. It is estimated that 2 percent of the tax will be uncollectible.
(4) Tax anticipation notes in the amount of $500,000
were issued.
(5) Goods and supplies related to all encumbrances
outstanding as of December 31, 2014 were received, along with invoices
amounting to $16,600; the invoices were approved for payment. The City maintains immaterial amounts in supply
inventories and it is the practice of the City to charge supplies to
expenditure when received.
(6) All accounts payable and the amount due other
funds were paid.
(7) The General Fund collected the following ($
10,811,500) in cash:
oprior
year taxes, $158,000;
ointerest
and penalties receivable on prior year taxes, $3,500;
ocurrent
taxes, $6,400,000;
o$210,000
previously recorded as due from the state government;
olicenses
and permits, $800,000;
osales
taxes, $2,890,000; and
omiscellaneous
revenues, $350,000.
(8) Purchase orders and contracts were issued in the
amount of $3,465,000.
(9) Payrolls for the General Fund totaled $5,070,000.
Of that amount, $498,000 were withheld for employees’ federal income taxes and $357,000
were withheld for employees’ FICA and Medicare tax liability; the balance was
paid in cash. The encumbrance system is not used for payrolls.
(10) The liability for the city’s share of FICA and
Medicare taxes, $357,000, was recorded as was the liability for state
unemployment taxes in the amount of $28,000.
(11) Invoices for most of the supplies and services
ordered in transaction 8 were received in the amount of $3,375,300 and approved
for payment. The related encumbrance amounted to $3,407,000.
(12) Tax anticipation notes were paid at maturity,
along with interest in the amount of $18,000.
(13) Notification was received that an unrestricted
state grant in the amount of $332,000 would be received during the first month
of the next year.
(14) The General Fund recorded a liability to the
Water and Sewer Fund for services in the amount of $37,000 and to the Stores
and Services Fund for supplies in the amount of $313,200; $310,000 of the amount
due the Stores and Services Fund was paid.
(15) The General Fund recorded an amount due of $52,000
from the state government, representing sales taxes to be collected from retail
sales taking place during the last week of the year.
(16) The General Fund paid accounts payable in the
amount of $3,015,000 and paid the amounts due the federal and state
governments. The General Fund also transferred to the debt service funds cash
in the amount of $1,662,000 for the recurring payment of principal and
interest.
(17) All required legal steps were accomplished to
increase appropriations by the net amount of $212,000. Estimated revenues were
increased by $73,000.
(18) The City Council authorized a write-off of $51,000
in delinquent property taxes and corresponding interest and penalties amounting
to $1,600.
(19) Interest and penalties receivable on taxes were
accrued in the amount of $17,200; $1,100 of this amount is expected to be
uncollectible.
(20) It is estimated that $27,500 of the outstanding
taxes receivable will be collected more than 60 days beyond the fiscal
year-end.
b. Post the entries to the general ledger.
c. Prepare and post the closing entries for
the General Fund. Outstanding
encumbrances at year end are classified as Assigned Fund Balance and all
remaining net resources are classified as Unassigned Fund Balance.
d. Prepare a Statement of Revenues,
Expenditures, and Changes in Fund Balance for the year ended December 31, 2015.
Confirm that the revenue and expenditure control accounts agree with the
following detail and use this information in the Statement:
|
Revenues |
Expenditures |
||
|
Property Taxes . . . . . . |
$6,657,500 |
General Government . . . |
$1,646,900 |
|
Sales Taxes |
2,942,000 |
Public Safety . . . . . . . . . |
3,026,900 |
|
Interest and Penalties on Taxes . . . . . . . . . . . |
16,100 |
Highways and Streets . . |
1,441,400 |
|
Licenses and Permits . |
800,000 |
Sanitation . . . . . . . . . . . . |
591,400 |
|
Intergovernmental Revenue . . . . . . . . . . . |
332,000 |
Health . . . . . . . . . . . . . . |
724,100 |
|
Miscellaneous Revenue |
350,000 |
Welfare . . . . . . . . . . . . . |
374,300 |
|
Total . . . . . . . . . . . . |
$11,097,600 |
Culture and Recreation . |
917,300 |
|
Capital Outlay . . . . . . . . |
492,800 |
||
|
Total . . . . . . . . . . . . . |
$9,215,100 |
e. Prepare
in good form a Balance Sheet for the General Fund as of the end of fiscal year,
December 31, 2015.
4–C. Part 2. Special Revenue
Fund Transactions
Required:
a.
Record journal
entries for the following transactions for FY 2015 and post to the general
ledger. As there are relatively few revenues and expenditures, the use of
control accounts is not necessary. (Make
entries directly to individual revenue and expenditure accounts).
(1)
The state government notified the City that $1,072,000 will be available for
street and highway maintenance during 2015 (i.e. the City has met eligibility
requirements). The funds are not
considered reimbursement-type as defined by GASB standards.
(2)
Cash in the total amount of $985,000 was received from the state government.
(3)
Contracts, all eligible for payment from the Street and Highway Fund, were
signed in the amount of $1,062,000.
(4)
Contractual services (see transaction 3) were received; the related contracts
amounted to $1,043,000. Invoices amounting to $1,030,500 for these items were
approved for payment. The goods and services all were for street and highway
maintenance.
(5)
Investment revenue of $5,120 was earned and received.
(6)
Accounts payable were paid in the amount of $923,000.
(7)
All required legal steps were accomplished to increase appropriations in the
amount of $4,500.
b.
Prepare and
post the necessary closing entries for the Street and Highway Fund.
c.
Prepare a
Statement of Revenues, Expenditures, and Changes in Fund Balances for the
Street and Highway Fund for the fiscal year ended December 31, 2015.
d.
Prepare a
Balance Sheet for the Street and Highway Fund as of December 31, 2015. Assume any unexpended net resources are
classified as Restricted Fund Balance.
Chapter 5
5–C. Part 1. Capital Projects Fund
Transactions
The
voters of the City of Monroe approved the issuance of tax-supported bonds in
the face amount of $4,000,000 for the construction and equipping of a new City
Jail. Architects were to be retained, and construction was to be completed by
outside contractors. In addition to the bond proceeds, a $1,320,000 grant was
expected from the state government.
Required:
a. Open a general journal for the City Jail
Annex Construction Fund. Record the following transactions and post to the
general ledger. Control accounts are not
necessary.
(1) On January 1, 2015, the total face amount of
bonds bearing an interest rate of 8 percent was sold at a $200,000 premium. Principal amounts of $200,000 each will come
due annually over a 20-year period commencing January 1, 2016. Interest payment
dates are July 1 and January 1. The first interest payment will be July 1, 2015.
The premium was transferred to the City Jail Debt Service Fund for the future
payment of principal on the bonds.
(2) The receivable from the state government was
recorded.
(3) Legal and engineering fees early in the project
were paid in the amount of $116,000. This amount had not been encumbered.
(4) Architects were engaged at a fee of $250,000.
(5) Preliminary plans were approved, and the
architects were paid 20 percent of the fee.
(6) The complete plans and specifications were
received from the architects and approved. A liability in the amount of $150,000to the architects was approved and
paid.
(7) Bids were received and opened in public session.
After considerable discussion in City Council, the low bid from Hardhat
Construction Company in the amount of $4,500,000 was accepted, and a contract was
signed.
(8) The contractor required partial payment of $1,350,000.
Payment was approved and vouchered with the exception of a 5 percent retainage.
(9) Cash in the full amount of the grant was received
from the state government.
(10) Furniture and equipment for the annex were
ordered at a total cost of $439,500.
(11)
Payment was made to the contractor for the amount payable (see 8 above).
(12)
The contractor completed construction and requested payment of the balance due
on the contract. After inspection of the work, the amount, including the past
retainage, was approved for payment and then paid.
(13)The
furniture and equipment were received at a total actual installed cost of $439,300.
Invoices were approved for payment.
(14)
The remainder of the architects’ fees was approved for payment.
(15)
The City Jail Construction Fund paid all outstanding accounts payables ($ 489,300)
on December 31, 2015.
(16)
The remaining cash was transferred to the City Jail Debt Service Fund.
b.
Post the
entries to the City Jail Construction Fund general ledger.
c. Prepare and post an entry
closing all nominal accounts to Fund Balance.
5–C. Part 2. Existing Debt Service Fund
Transactions
The
City Hall Debt Service Fund of the City of Monroe has been open for five years;
it was created to service an $16,000,000, 3 percent tax-supported bond issue.
As of December 31, 2014, this serial bond issue had a balance of $12,000,000.
Semiannual interest payments are made on January 1 and July 1, and a principal
payment of $400,000 is due on January 1 and July 1 of each year.
As
this is a regular serial bond debt service fund, the only accounts with balances
as of January 1, 2015, were Cash with Fiscal Agent and Fund Balance—Assigned for
Debt Service, each with balances of $580,000. (Revenues were raised and
collected in cash in 2014 in order to be able to pay bond principal and
interest due on January 1, 2015.) The government chose not to accrue interest
payable.
Required:
a. Open a general journal for the City Hall
Debt Service Fund and prepare journal entries for the following transactions. Control
accounts are not necessary
(1) The fiscal agent reported that $180,000 in checks
had been mailed to bondholders for interest due on January 1, and $400,000 in
checks were mailed for bonds maturing that day.
(2) Cash in the amount of $574,000 was received from
the General Fund on June 30 and was transferred to the fiscal agent.
(3) The fiscal agent reported that checks dated July
1 had been mailed to bondholders for interest of $ 174,000 due that day and
$400,000 in checks were mailed for bonds maturing that day.
(4) Cash in the amount of $568,000 was received from
the General Fund on December 31 and transferred to the fiscal agent to be used
for the interest and principal due on January 1 (next fiscal year). The
government elected to not accrue the interest or principal at year-end.
b.
Post the entries to the City Hall Debt Service Fund ledger (t-accounts).
c.
Prepare and post an entry closing all nominal accounts to Fund Balance.
5–C. Part 3. New Debt Service Fund Transactions
On the advice of the city
attorney, a City Jail Debt Service Fund is opened to account for debt service
transactions related to the bond issue sold on January 1, 2015 (see Part 1).
Required:
a.
Open a general
journal for the City Jail Debt Service Fund. Record the following transactions,
as necessary. Control accounts are not necessary
(1)
The premium described in transaction 1 of Part 1 was received as a transfer
from the capital projects fund.
(2)
Cash in the amount of $160,000 was received from the General Fund on June 30
and was transferred to the fiscal agent.
(3)
The fiscal agent reported that checks dated July 1 had been mailed to bondholders
for interest due that day.
(4)
The transfer described in part c of Part 1 was received.
(5)
Cash in the amount of $360,000 was received from the General Fund on December
31 and transferred to the fiscal agent to be used for interest and principal
payments due on January 1 (next fiscal year). The government elected to not
accrue the interest at year-end.
(6)
$ 200,000 of the remaining cash on hand was invested.
b. Post the entries to the City
Jail Debt Service Fund ledger (t-accounts).
c. Prepare and post an entry
closing all nominal accounts to Fund Balance.
Assume any remaining net resources are classified as Fund Balance –
Assigned for Debt Service.
5–C. Part 4.
Governmental Funds Financial Statements
Required:
a.
Prepare a
Balance Sheet for the governmental funds for the City of Monroe as of December 31, 2015. Include the
General Fund, the Street and Highway Fund (P4–C), the City Hall Debt Service
Fund, and the City Jail Debt Service Fund. Use the balances computed in 4-C for
the General Fund and special revenue fund portions of this statement.
b.
Prepare a
Statement of Revenues, Expenditures, and Changes in Fund Balances for the
governmental funds for the City of Monroe
for the Year Ended December 31, 2015. Include the same funds as listed in
requirement a plus the City Jail Construction Fund.
Chapter 6 – Proprietary Funds
6–C. Part 1. Internal Service Fund Transactions
The Stores and Service Fund of
the City of Monroe
had the following account balances as of January 1, 2015:
|
Debits |
Credits |
|
|
Cash |
$31,000 |
|
|
Due |
27,000 |
|
|
Inventory |
27,500 |
|
|
Land |
18,000 |
|
|
Buildings |
84,000 |
|
|
Accumulated |
$33,000 |
|
|
Equipment |
46,000 |
|
|
Accumulated |
25,000 |
|
|
Accounts |
19,000 |
|
|
Advance |
30,000 |
|
|
Net |
126,500 |
|
|
Totals |
$233,500 |
$233,500 |
Required:
a.
Open a general
journal for the City of Monroe Stores
and Service Fund and record the following transactions.
(1)
A budget was prepared for FY 2015. It was estimated that the price charged
other departments for supplies should be 1.25% of cost to achieve the desired
breakeven for the year.
(2)
The amount due from other funds as of January 1, 2015, was collected in full.
(3)
During the year, supplies were ordered and received in the amount of $303,500.
This amount was posted to accounts payable.
(4)
$15,000 of the advance from the Water Utility Fund, originally provided for
construction, was repaid. No interest is charged.
(5)
During the year, supplies costing $250,560 were issued to the General Fund, and
supplies costing $46,400 were issued to the Water Utility Fund. These funds were charged based on the
previously determined markup ($ 313,200 to General Fund and 58,000 to the Water
Utility Fund).
(6)
Operating expenses, exclusive of depreciation, were recorded in accounts payable
as follows: Purchasing, $15,000; Warehousing, $16,000; Delivery, $17,500; and
Administrative, $9,200.
(7)
Cash was received from the General Fund in the amount of $310,000 and from the
Water Utility Fund in the amount of $50,000.
(8)
Accounts payable were paid in the amount of $355,700.
(9)
Depreciation in the amount of $11,000 was recorded for buildings and $4,600 for
equipment.
b.
Post the
entries to the Stores and Service Fund ledger (t-accounts).
c.
Prepare and
post an entry closing all nominal accounts to Net Assets. Compute the balance in the net asset accounts,
assuming there are no Restricted Net
Assets.
6–C. Part 2. Enterprise Fund Transactions
The City of Monroe maintains a Water and Sewer Fund to
provide utility services to its citizens. As of January 1, 2015, the City of Monroe Water and Sewer
Fund had the following account balances:
|
Debits |
Credits |
|
|
Cash |
$105,000 |
|
|
Customer Accounts Receivable |
77,000 |
|
|
Estimated Uncollectible Accounts Receivable |
$4,000 |
|
|
Materials and Supplies |
28,000 |
|
|
Advance to Stores and Services Fund |
30,000 |
|
|
Restricted Assets |
117,000 |
|
|
Water Treatment Plant in Service |
4,200,000 |
|
|
Construction Work in Progress |
203,000 |
|
|
Accumulated Depreciation – Utility Plant |
1,200,000 |
|
|
Accounts Payable |
97,000 |
|
|
Revenue Bonds Payable |
2,500,000 |
|
|
Net Assets |
959,000 |
|
|
Totals |
$4,760,000 |
$4,760,000 |
Required:
a. Open a general journal for the City of Monroe Water and Sewer
Utility Fund and record the following transactions.
(1) During the year, sales of water to non-government
customers amounted to $1,002,000 and sales of water to the General Fund
amounted to $37,000.
(2) Collections from non-government customers amounted
to $962,000.
(3) The Stores and Services Fund repaid $15,000 of
the long-term advance to the Water and Sewer Fund.
(4) Materials and supplies in the amount of $257,000
were received. A liability in that amount was recorded.
(5) Materials and supplies were issued and were
charged to the following accounts: cost of sales and services, $164,900;
selling, $15,000; administration, $18,000; construction work in progress, $50,000.
(6) Payroll costs for the year totaled $416,200 plus
$34,200 for the employer’s share of payroll taxes. Of that amount, $351,900 was
paid in cash, and the remainder was withheld for taxes. The $450,400 (416,200 +
34,200) was distributed as follows: cost of sales and services, $265,800;
sales, $43,900; administration, $91,400; construction work in progress, $49,300.
(7) Bond interest (6½%) in the amount of $162,500 was
paid.
(8) Interest in the amount of $17,000 (included in 7
above) was reclassified to Construction Work in Progress.
(9) Construction projects at the water treatment
plant (reflected in the beginning balance of construction in process) were completed
in the amount of $203,000, and the assets were placed in service. Payments for
these amounts were made in the previous year (no effect on 2015 Statement of
Cash Flows).
(10) Collection efforts were discontinued on bills
totaling $3,020. The unpaid receivables were written off.
(11) An analysis of customer receivable balances
indicated the Estimated Uncollectible Accounts needed to be increased by $5,500.
(12) Payment of accounts payable amounted to $297,900.
Payments of payroll taxes totaled $95,200.
(13) Supplies transferred from the Stores and
Services Fund amounted to $58,000. Cash in the amount of $50,000 was paid to
the Stores and Services Fund for supplies.
(14) Depreciation expense for the year was computed
to be $275,000.
(15) In accord with the revenue bond indenture, $25,000
cash was transferred from operating cash to restricted assets.
b. Post the entries to the Water and Sewer
Fund ledger (t-accounts).
c. Prepare and post an entry closing all
nominal accounts to Net Assets. Compute
the balance in the net asset accounts, assuming the only restricted assets are
those identified with the bond indenture and the outstanding bonds are
associated with the purchase of capital assets.
6–C. Part 3. Proprietary Fund Financial
Statements
Required:
Prepare, in good form, for the
proprietary funds accounted for in Parts 1 and 2, the following:
(1)
A Statement of Revenues, Expenses, and Changes in Fund Net Assets for the Year
Ended December 31, 2015.
(2)
A Statement of Net Assets, as of December 31, 2015.
(3)
A Statement of Cash Flows for the Year Ended December 31, 2015. Include
restricted assets as a part of cash and cash equivalents for this statement.
(Assume any materials and labor attributable to construction in process were
paid by year end).
Chapter 7 – Fiduciary Funds
7–C. Part 1. Private Purpose Trust Fund Transactions
The City of Monroe Scholarship Foundation
private-purpose trust fund had the following account balances on January 1, 2015:
|
Debits |
Credits |
|
|
Cash |
$ 49,500 |
|
|
Accrued |
7,500 |
|
|
Investments |
750,000 |
|
|
Net |
$ 807,000 |
|
|
Totals . . . . . . . . . . . . . . . . . . |
$ 807,000 |
$ 807,000 |
Required:
a.
Open a general
journal for the City of Monroe
Community Foundation Trust Fund and record the
following transactions for the year ending December 31, 2015:
(1)
On May 1, the first semiannual interest payment was received on the corporate
bonds. The bonds pay 6 percent annual interest, semiannually on May 1 and
November 1.
(2)
During the first half of the year, additional contributions from individuals and
foundations amounted to $206,026, in cash. From these funds, $ 200,000 were
invested in RST Corporation stock on June 15.
(3)
On November 1, the second semiannual interest payment was received from the
investment in bonds.
(4)
On November 15, a dividend was declared by RST Corporation in the amount of $4,000
and was received in cash.
(5)
On December 1, RST Corporation stock was sold for $203,500 cash. Those funds
were immediately invested in UVW Corporation stock.
(6)
On December 15, cash scholarships in the amount of $50,000 were made to various
college students.
(7)
On December 31, an accrual was made for year-end interest on the corporate
bonds.
(8)
Also, on December 31, it was determined that the market value of the corporate bonds,
exclusive of accrued interest, was $ 752,100
and that the market value of UVW Company stock was $ 199,000.
b.
Post the
entries to the Community Foundation Trust ledger (t-accounts).
c. Prepare and post an entry
closing all nominal accounts to Net Assets.
7–C. Part 2. Pension Trust Fund
Transactions
The
City of Monroe Police Department pension plan, a single-employer,
defined-benefit plan, reported the following account balances as of January 1, 2015:
|
Debits |
Credits |
|
|
Cash |
$140,000 |
|
|
Accrued Interest Receivable |
72,000 |
|
|
Investments: Bonds |
5,300,000 |
|
|
Investments: Common Stock |
2,790,000 |
|
|
Accounts Payable |
$27,000 |
|
|
Net Assets Held in Trust for Employee Benefits |
8,275,000 |
|
|
Totals |
$ 8,302,000 |
$8,302,000 |
Required:
a. Open a general journal for the City of Monroe Police Department Pension Trust Fund
and record the following transactions for the year ending December 31, 2015:
(1) Member contributions were received in the amount
of $400,000. The City General Fund contributed the same amount.
(2) Interest was received in the amount of $386,900,
including the accrued interest receivable at the beginning of the year. The
interest accrual at year end amounted to $86,000.
(3) During the year, common stock dividends amounted
to $125,000.
(4) Investments were made during the year in common
stock in the amount of $575,000.
(5) Annuity benefits in the amount of $377,400,
disability benefits of $ 82,020 and refunds to nonvested terminated employees
of $39,800 were recorded as liabilities.
(6) Accounts payable, in the amount of $507,500, were
paid in cash.
(7) During the year, common stock valued at $505,000
was sold for $506,800. A portion of these funds, $502,000 were invested in
common stock of a different company.
(8) At year-end, the market value of investments in
bonds increased by $12,750; the market value of investments in stocks decreased
by $5,770.
b. Post the entries to the Police Department
Pension Trust ledger (t-accounts).
c.
Prepare and post an entry closing all nominal accounts to Net Assets.
7–C. Part 3. Fiduciary Fund Financial Statements
Required: Using the balances from Parts 1 and 2 prepare the
following:
- Statement of Changes in Fiduciary Net Assets.
- Statement of Fiduciary Net Assets
Chapter 8 – Government-wide Statements
8–C. Assemble the following from previous continuous problems:
(1) the governmental funds Balance Sheet and Statement of Revenues,
Expenditures, and Changes in Fund Balances from Section 5–C; (3) the
proprietary funds Statement of Net Assets and Statement of Revenues, Expenses, and Changes
in Fund Net Assets from Section 6–C.
Required:Part of this is
already completed if you use the problem templates posted in Bb
- Start a worksheet for adjustments, using the
trial balance format illustrated in the text (i.e. list accounts with
debit balances first, then accounts with credit balances). Enter the balances from the governmental
funds financial statements prepared for Section 5-C. When doing this, follow the following
guidelines:
§ Net Assets: Use a single account for net assets
(which will include the beginning balance of all fund balance accounts).
§ Intergovernmental Revenues: When setting up
the worksheet, set up separate lines for the intergovernmental revenues as
follows:
|
State |
$ 1,072,000 |
|
Operational |
332,000 |
|
Capital |
1,320,000 |
|
total |
$2,724,000 |
§ Capital Assets: It is not necessary to set up
separate lines for different classes of capital (fixed) assets or accumulated
depreciation (simply use one row for Capital Assets and another for Accumulated
Depreciation).
§ Confirm that the total debits
and credits equal.
2.
Prepare worksheet entries and post to the worksheet for the following items.
Identify each adjustment by the letter used in the problem:
a.
Record the January 1, 2015 balances of general fixed assets and related
accumulated depreciation accounts. The City of Monroe had the following balances (excluding
Internal Service Funds):
|
Cost |
Accumulated Depreciation |
|
|
Totals |
$ 65,900,000 |
29,800,000 |
b.
Eliminate the capital
expenditures shown in the governmental funds Statement of Revenues,
Expenditures, and Changes in Fund Balances.
c. Depreciation
expense (governmental activities) for the year totaled $ 5,750,000.
d.
Eliminate the other financing sources from the
sale of bonds by recording a liability for bonds payable and the related
premium.
e.
As of January 1, 2015, the City of Monroe had $12,000,000
in general obligation bonds outstanding.
f.
Eliminate the expenditures for bond principal.
g.
Accrue interest in the amount of $328,000. (Two bond
issues were outstanding; interest payments for both were last made on July 1, 2015.
The computation is as follows: ($11,200,000 × .03 × 6/12) + ($4,000,000 ×. 08 × 6/12) = $328,000).
h.
Adjust for the interest accrued in the prior year
government-wide statements, but recorded as an expenditure in the 2015 fund
basis statements, ($12,000,000 × .03 × 6/12) = $180,000.
i.
Amortize bond premium in the amount of $ 10,000.
j.
Make adjustments for additional revenue accrual.
The only adjustment is for property taxes to eliminate the current year
deferral of property taxes.
k.
Adjust for the $21,000 of property taxes that was
deferred in 2014 and recognized as revenue in the 2015 fund-basis statements.
l.
Assume the City adopted a policy in 2015 of
allowing employees to accumulate compensated absences. Make an adjustment accruing the expense of $
39,500 Charge compensated absences
expense.
m.
Bring in the balances of the
internal service fund balance sheet accounts. Again, use a single account for
all capital assets and a second account for all accumulated depreciation
balances (use a separate column of the worksheet to enter Internal Service Fund
entries).
n.
No revenues from internal service funds were with
external parties. Assume $3,200 of the $11,200 “Due from Other Funds” in the
internal service accounts represents a receivable from the General Fund and the
remaining $8,000 is due from the enterprise fund. Eliminate the $3,200
interfund receivables.
o.
Reduce governmental fund expenses by the net
operating profit of internal service funds. As the amount is small, reduce
general government expenses for the entire amount.
p.
Eliminate transfers that are between departments
reported within governmental activities.
3. Prepare, in good form, a Statement of Activities
for the City of Monroe
for the Year Ended December 31, 2015. For purposes of this statement, assume:
§
$ 332,000 in the General Fund is a state grant specifically
to support general government programs.
§
$ 1,072,000 in the Street and Highway Fund is an
operating grant specifically for highway and street maintenance expenses.
§
$ 1,320,000 in the City Jail Construction Fund
is a capital grant that applies to public safety.
Use the
balances computed from the worksheet completed in part 2 for the governmental
activities portion of the statement. Use
the solution to P6–C (Enterprise
fund) to prepare the business activities portion (net any short-term interfund
payables/receivables).
4. Prepare, in good form, a Statement of Net Assets
for the City of Monroe
as of December 31, 2015. Group all capital assets, net of depreciation. Include
a breakdown in the Net Assets section for (a) capital assets, net of
related debt, (b) restricted, and (c) unrestricted. For purposes
of classifying net assets for the governmental activities, assume:
§
For the governmental activities net assets invested in capital assets, net
of related debt, the related debt includes the bonds payable, the premium on
bonds payable, and the advance from the water utility fund.
§
The special revenue fund resources are
restricted by the granting agency for street and highway maintenance. These ($ 247,000) are the only restricted
resources in the governmental activities.
5.
Prepare the reconciliation necessary to convert from the fund balance reported
in the governmental funds Balance Sheet to the net assets in the
government-wide Statement of Net Assets. EXTRA CREDIT 10 POINTS for both reconciliation
6. Prepare the reconciliation necessary to convert
from the change in fund balances in the governmental funds Statement of
Revenues, Expenditures, and Changes in Fund Balances to the change in net
assets in the government-wide Statement of Activities.
Chapter 13 – Financial Statement Analysis
Assemble
the financial statements prepared for the City of Monroe. These financial statements will be in
the solutions to Exercises 5–C, 6–C, 7–C, and 8–C. Assume a population of 25,000
and fair value of property in the amount of $360 million. Compute the following
ratios, following the guidance used for the Village of Elizabeth
in this chapter:
(1) Financial Position –
Governmental Activities
(2) Financial Position –
General Fund.
(3) Quick Ration – Governmental
Activities
(4) Leverage – Primary
Government
(5) Debt Coverage – Enterprise
Funds
(6) Debt Service to Total
Expenditures
(7) Debt per Capital – Primary
Government
(8) Debt to Assessed Value of
Property – Primary Government
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