Fund account


Question Description:

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2-2 1. Oak Township issued the following bonds during the year: Bonds to acquire equipment for a vehicle repair service accounted for in an internal service fund $ 3,000,000 Bonds to construct a new city hall $ 8,000,000 Bonds to improve its water utility, which is accounted for in a enterprise fund $9,000,000 The amount of debt to be reported in the general fund is b. $3,000,000 2. Oak Township should report depreciation in which of the following funds: d. capital projects fund 3. Assuming that Bevo County receives all of its revenues from unrestricted property taxes, it is most likely to account for the activities of its police department in its d. general fund 4. The city of Alpine incurred the following costs during the year in its property tax collection department: Purchase of computer equipment Salaries and wages Purchase of electricity from the city-owned electric utility Purchase of supplies, all of which were used during the year $ 10,000 $400,000 $ 40,000 $ 10,000 As a consequence of these transactions, the amount that Alpine should report as expenditures n its general fund is c. 450,000 5. Grove City received the following resources during the year: Property taxes A federal grant to acquire police cars Hotel taxes, which must be used to promote tourism Proceeds of bonds issued to improve the city’s electric utility $50,000,000 400,000 3,000,000 12,000,000 The amount that the city should most likely report as revenue in its special revenue fund e. $65,400,000 6. A city issues $20 million of general obligation bonds to improve its streets and roads. In accordance with the bond covenants, it sets aside $1 million to help ensure that it is able to meet its first payment of principal and $0.1 million for its first payment of interest. The amount of liability that the city should report in its debt service fund is b. $18.9 million 7. During the year, Brian County collects $12 million of property taxes on behalf of Urton Township. Of this amount, it remits $10 million to the township, expecting to remit the balance shortly after the end of its fiscal year. The amount of revenue that the County should report is d. $10 million 8. The City of Round Lake receives a contribution of $20 million. The donor stipulates that the money is to be invested. The principal is to remain intact, and the investment proceeds are to be used to support a city-owned nature center. The city should report the contribution in a a. special revenue fund b. permanent fund c. fiduciary fund d. agency fund 9. A city receives a $30 million contribution. The donor stipulates that the money is to be invested. The principal is to remain intact, and the investment proceeds are to be used to provide scholarships for the children of city employees. The contribution should be reported as revenue of a c. fiduciary fund 10. The Summerville Preparatory School (a private school) receives a donation of $14 million. The donor stipulates that the entire amount must be used to construct a new athletic field house. The School should classify the donation as b. temporarily restricted 2-3 A special district’s balance sheet may not capture its economic resources and obligations. A special district accounts for its general fund (its only fund) on a modified accrual basis. In a particular period, it engaged in the following transactions. a. It issued $20 million in long-term bonds. b. It acquired several tracts of land, at a total cost of $4 million, paying the entire amount in cash. c. It sold a portion of the land for $1 million, receiving cash for the entire amount. The tract sold had cost $0.8 million. d. It repaid $2 million of the bonds. e. It lost a lawsuit and was ordered to pay $9 million over three years. It made its first cash payment of $3 million. 1. Prepare journal entries to record the transactions in the general fund. 2. Based on your journal entries, prepare a balance sheet and a statement of revenues, expenditures, and other changes in fund balance. 3. Comment on the extent to which the balance sheet captures the district’s economic resources and obligations. How can you justify such a balance sheet? 4. Comment on the extent to which the statement of revenues, expenditures, and other changes in fund balance captures the district’s cost of services. How can you justify such a financial statement? 2-4 Funds are separate fiscal and accounting entities, each with its own self-balancing set of accounts. The newly established Society for Ethical Teachings maintains two funds”a general fund for operations and a building fund to accumulate resources for a new building. In its first year, it engaged in the following transactions. a. It received cash contributions of $200,000, of which $40,000 was restricted for the acquisition of the new building. b. It incurred operating costs of $130,000, of which it paid $120,000 in cash. c. It earned $3,000 of interest (the entire amount received in cash) on resources restricted for the acquisition of the new building. d. It transferred $17,000 from the operating fund to the new building fund. e. It paid $12,000 in fees (accounted for as expenses) to an architect to draw up plans for the new building. 1. Prepare journal entries to record the transactions. Be certain to indicate the fund in which they would be made. 2. Prepare a statement of revenues, expenditures, and other changes in fund balances and a balance sheet. Use a two-column format, one column for each of the funds. 2-5 Typical transactions can often be identified with specific types of funds. Boxer City maintains the following funds: Genera Special revenue Capital projects Debt service Enterprise Internal service Permanent Agency For each of the following transactions, indicate the fund in which it would most likely be recorded: a.The city collects $3 million of taxes on behalf of the county in which it is located. b. It spends $4 million to pave city streets, busing the proceeds of a city gasoline tax that is dedicated for road and highway improvements. c. It receives a contribution of $5 million. Per the stipulation of the donor, the money is to be invested in marketable securities, and the interest from the securities is to be used to maintain a city park. d. It collects $800,000 in landing fees at the city-owned airport. e. It earns $200,000 on investments that have been set aside to make principal payments on the city’s outstanding bonds. The bonds were issued to finance improvements to the city’s tunnels and bridges. f. It pays $4 million to a contractor for work on one of these bridges. g. It pays $80,000 in wages and salaries to police officers. h. It purchases, from an outside supplier, $40,000 of stationery to ”sell” to its various operating departments. 2-6 Each fund must account for interfund activity as if it were a separate accounting entity. The newly formed Buffalo School District engaged in the following transactions and other events during the year: a. It levied and collected property taxes of $110 million. b. It issued $30 million in long-term bonds to construct a building. It placed the cash received in a special fund that was set aside to account for the bond proceeds. c. During the year, it constructed the building at a cost of $25 million. It expects to spend the $5 million balance in the following year. The building has an estimated useful life of 25 years. d. It incurred $70 million in general operating costs, of which it paid $63 million. It expects to pay the balance early the following year. e. It transferred $12 million from its general fund to a fund established to account for resources that were set aside to service the debt. Of this amount, $10 million was for repayment of the debt; $2 million was for interest. f. From the special fund established to service the debt, it paid $2 million in interest and $6 million in principal. g. It collected $4 million in hotel taxes restricted to promoting tourism. Because the resources were restricted, they were accounted for in a special restricted fund. During the year, the district spent $3 million on promoting tourism. h. The district established a supplies store, to provide supplies to the district’s various departments, by transferring $4 million from the general fund. It accounted for the store in a proprietary fund. During the year, the store purchased (and paid for) $2 million in supplies. Of these, it ”sold” $1 million, at cost (for cash), to departments accounted for in the general fund. During the year, these departments used all of the supplies that they had purchased. 1. Prepare journal entries to record the transactions and other events in appropriate funds. Assume that governmental funds are accounted for on a modified accrual basis, and focus only on current financial resources (and, therefore, do not give balance sheet recognition to either capital assets or longterm debt). Proprietary funds are accounted for on a full accrual basis. 2. Prepare a combined balance sheet”one that has a separate column for each of the funds that you established. 3. Prepare a combined statement of revenues, expenditures, and changes in fund balances for all governmental funds”one column for each fund. Prepare a separate statement of revenues, expenses, and changes in fund balances for any proprietary funds that you established. 2-7 Long-term assets and liabilities are denied recognition on funds statements. Entrepreneurs Consultants, a state agency, was established to provide consulting services to small businesses. It maintains only a single general fund and accounts for its activities on a modified accrual basis. During its first month of operations, the association engaged in, or was affected by, the following transactions and events: a. It received an unrestricted grant of $100,000. b. It purchased five computers at $2,000 each. c. It paid wages and salaries of $6,000. d. It borrowed $24,000 from a bank, to enable it to purchase an automobile. e. It purchased the automobile for $24,000. f. It made its first payment on the note” interest of $200. g. It destroyed one of its computers in an accident. The computer was not insured. 1. Prepare journal entries in the general fund to record each of the transactions or other events. 2. Prepare a balance sheet and a statement of revenues, expenditures, and changes in fund balance for the general fund. 2-8 The more complete presentation is not always the easier to understand. Bertram County maintains a fund accounting system. Nevertheless, its comptroller (who recently retired from a position in private industry) prepared the following balance sheet (in millions): Assets: Cash $ 600 Investments $ 1,800 Construction in progress $ 500 Fixed assets $ 1,200 Total assets $ 4,100 Liabilities and fund balance: Bonds payable $1,700 Fund balance Restricted for capital projects $ 600 Restricted for debt service 200 Unrestricted 1,600 2,400 Total liabilities and fund Balance $4,100 The fund balance restricted for debt service represents entirely principal (not interest) on the bonds payable. 1. Recast the balance sheet, as best you can, into separate balance sheets for each of the funds that are apparently maintained by the county. Assume that the county uses a modified accrual basis of accounting that excludes recognition in its funds of both capital (fixed) assets and long-term debt. Assume also that cash and investments are divided among the funds in proportion to their fund balances. 2. In your opinion, which of the two presentations gives the reader a more complete picture of the county’s financial status? Why? Which presentation is easier to understand

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