To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com CHAPTER 15 UNDERSTANDING THE ISSUES as control accounts to allow for budgetary comparisons in the ledgers as well as to facilitate financial reporting of a budgetary comparison statement GASB Statement No 34 stipulates a new reporting model that includes two separate, but related sets of financial statements The first set, the fund financial statements, focuses on reporting activity as a collection of separate funds with a current working-capital focus that uses a modified accrual basis of accounting The second set contains government-wide statements that concentrate on the government as a whole with an economic long-term focus using full accrual-basis accounting The value of both perspectives is the retention of a near cash or working capital focus on funding government with a longer term focus that measures whether such services can continue without attention to condition of all capital assets and recognition of and planning for increased expenditures in future periods Capital assets and long-term liabilities are not accounted for in the governmental funds but will be accounted for and reported in the government-wide financial statements Thus, the “working capital” fund balance will be replaced with a long-term notion of net assets— broken into unrestricted, restricted, and capital, net of related debt The advantage of reporting designations of the fund balance is improved communications of decisions made by the common council or town/village board that will impact the availability of resources for other purposes While not restricted by external grantors or donors, these funds are internally designated for specific purposes, e.g., planned purchases, reduction of taxes, and improvements in services The encumbrance system is designed as an early indicator or an “expected expenditure” to prevent overspending and to plan for payment of an “expected liability.” It is an estimate of an expenditure that may or may not be realized by year-end but will require the use of existing or future financial resources The governmental funds are designed to capture financial resources information Therefore, when a capital asset is acquired or sold, the resources (financial resources used or acquired) are recorded in the funds The account groups are designed to provide information on the number and condition of these capital assets The same is true for long-term liabilities When debt is incurred, the cash is recorded in the fund to capture the inflow of financial resources But the debt is recorded in the account group When debt is repaid, the outflow of cash is recorded in the fund, and the debt is removed from the account group Since the fund and account groups capture different information, making a journal entry only in the fund would adequately record flows of financial resources but not record the balances of longterm liabilities and/or capital assets Separating activity into governmental, proprietary, and fiduciary funds allows for detailed reporting of resources and spending Separating of activities also allows for a different measurement focus and basis of accounting depending on whether activities are general government or business-type activities In addition, since the governmental activities are accounted for using a modified accrual basis of accounting in order to capture financial resource information, the account groups have served to record (i.e., list) the long-term capital assets and liabilities Proponents of this model argue that information generated best serves the budget-planning process and answers questions relating to how much resources are needed to pay for the current level of services (Appendix) The 13 basic principles of government accounting are found in GASB Statement No and in Codification of Governmental Accounting and Financial Reporting Standards They form a model of fund accounting theory and help anchor the subsequent work of the GASB as detailed in Chapters 15–17 of this text Budgets are the legal authorization to raise revenue, incur long-term debt, and appropriate resources Authorized expenditures are termed appropriations Budgetary totals, including appropriations, are recorded in the general ledger 651 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Exercises EXERCISES EXERCISE 15-1 (1) c Items (a) and (b) are Other Financing Sources, while (d) is a reduction of Expenditures (2) d (a), (b), and (c) represent outflows of financial resources to acquire goods and services The consumption, not the purchase of inventory, is an expenditure (3) b Representing potential inflow of assets, Estimated Revenues is debited (4) d Taxes Receivable—Current is debited with offsetting credits to an allowance for uncollectible taxes and revenues (5) a Donated fixed assets are recorded in the general fixed asset account group at their estimated fair value when received (6) c Long-term debt related to governmental funds may be operating debt or general long-term capital debt (7) b The purchase of equipment is an outflow of resources from the general fund An additional entry to record the fixed asset will be made in the account group (8) b Expenditures are closed along with the other nominal accounts to determine an increase or a decrease in the fund balance from the current-period operations (9) d When a purchase order is approved, Encumbrances is debited to reflect the expected expenditure A reserve is also established by a credit to Fund Balance—Reserved for Encumbrances (10) a The lease obligation is long-term debt and should be recorded in the account group EXERCISE 15-2 (1) a Grants without restriction are recorded as revenue when received (2) e These pension expenditures will be recorded in the internal service fund (3) b This is an expenditure by the general fund (4) c This is recorded as a transfer to the swimming pool fund (5) e A loan only affects the balance sheet accounts (6) c This is a general fund contribution to establish an internal service fund and not an expenditure for services (7) b Payments on an operating lease are expenditures for the general fund 652 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Exercises EXERCISE 15-3 Estimated Revenues ($355,000 + $7,000 + $90,000 + $50,000) Estimated Other Financing Sources ($100,000 + $15,000) Appropriations Estimated Other Financing Uses ($30,000 + $15,000) Budgetary Fund Balance 502,000 115,000 500,000 45,000 72,000 (Note to Instructor: Property taxes paid by a proprietary fund are considered revenue.) EXERCISE 15-4 Jan Feb Apr July Cash Tax Anticipation Notes Payable To record borrowing 275,000 Cash Tax Liens Receivable Revenues To record collection of tax liens 14,000 Cash Tax Liens Receivable To record collection of tax liens, sale of property 16,000 Allowance for Uncollectible Tax Liens Tax Liens Receivable Revenues To close allowance 23,000 Cash Delinquent Property Taxes Receivable Revenues To record collection of delinquent property taxes 104,500 Tax Liens Receivable Delinquent Property Taxes Receivable To transfer delinquent property taxes to tax liens 35,000 Allowance for Uncollectible Delinquent Taxes Allowance for Uncollectible Tax Liens Revenues To transfer allowance for uncollectible delinquent taxes to allowance for uncollectible tax liens 40,000 Property Taxes Receivable Allowance for Property Taxes Receivable Revenues To record current property tax levy 422,000 653 275,000 12,000 2,000 16,000 17,000 6,000 100,000 4,500 35,000 35,000 5,000 21,100 400,900 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Exercises Exercise 15-4, Concluded Sept Cash Property Taxes Receivable To collect current property taxes 365,000 Tax Anticipation Notes Payable Expenditures Cash To pay off tax anticipation notes 275,000 18,000 365,000 293,000 EXERCISE 15-5 (1) Cash Other Financing Sources To transfer from municipal trust fund 45,000 45,000 (2) No entry in the general fund for land Record in the general fixed assets account group: Land Investment in General Fixed Assets—Donations To record donation of park 75,000 (3) Due from State Revenues To record state grant 30,000 (4) Cash Other Financing Sources To record sale of fire truck 9,000 75,000 30,000 9,000 Additional entry in General Fixed Assets Group: Investment in General Fixed Assets—General Fund Revenues Equipment 36,000 (5) Cash Revenues Deferred Revenue To record sale of park stickers 5,000 654 36,000 2,500 2,500 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Exercises EXERCISE 15-6 (1) Expenditures ($120,000 + $60,000 + $125,000 + $13,000) Tax Anticipation Notes Payable Inventory of Supplies Vouchers Payable To record payment of vouchers 318,000 200,000 45,000 (2) Other Financing Uses Cash To transfer to debt service fund 57,000 (3) Expenditures Inventory of Supplies To record consumption of inventory 42,500 Fund Balance—Unreserved, Undesignated Fund Balance—Reserved for Inventory To adjust reserve to match inventory balance 2,500 563,000 57,000 42,500 2,500 EXERCISE 15-7 (1) Encumbrances Fund Balance—Unreserved, Undesignated To restore previous year’s encumbrances 18,000 (2) Encumbrances Fund Balance—Reserved for Encumbrances To record current encumbrances 70,000 (3) Fund Balance—Reserved for Encumbrances Encumbrances To reverse encumbrances for orders received 88,000 Inventory of Supplies Vouchers Payable To record purchase of inventory 87,000 (4) Expenditures ($31,000 + $87,000 – $35,000) Inventory of Supplies To record use of inventory 83,000 Fund Balance—Unreserved, Undesignated Fund Balance—Reserved for Inventory To adjust reserved fund balance to match inventory 4,000 655 18,000 70,000 88,000 87,000 83,000 4,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Exercises EXERCISE 15-8 Date January January 15 February February 15 June December 31 Item Budget Encumbrances Vouchers Vouchers Vouchers Inventory Encumbrances Debit Credit — 14,000 — — — — Balance — — — 12,000 2,000 — Expenditures — 14,000 — 2,000 — — Unobligated Balance — — 5,000 12,300 4,300 (1,500) 23,000 9,000 4,000 3,700 1,400 2,900 EXERCISE 15-9 (a) Estimated Revenues Appropriations Budgetary Fund Balance—Unreserved To record budget for the year 520,000 (b) Taxes Receivable—Current Allowance for Uncollectible Current Taxes Revenues To record tax levy 378,788 (c) Encumbrances Fund Balance—Reserved for Encumbrances To record purchase orders authorized 240,000 (d) Cash Taxes Receivable—Current To record receipt of tax payments 280,000 (e) Fund Balance—Reserved for Encumbrances Encumbrances To reverse encumbrance entry for items invoiced 223,000 Expenditures Vouchers Payable To record invoices vouchered 225,000 Expenditures Vouchers Payable To record salaries approved for payment 135,000 (g) Cash Revenues To record receipt of a grant-in-aid 100,000 (f) 656 515,000 5,000 3,788 375,000 240,000 280,000 223,000 225,000 135,000 100,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Exercises Exercise 15-9, Concluded (h) Cash Revenues To record receipt of miscellaneous revenues (i) (j) Expenditures Cash To record purchase of property (The property would also be entered in the general fixed assets account group.) 10,000 10,000 120,000 120,000 No entry Recorded only in general fixed assets account group (k) Other Financing Uses Due to Other Funds To record amount due other funds and approved for payment 12,000 (l) Due from State Revenues To record share of state sales taxes receivable 30,000 (m) Vouchers Payable Cash To record vouchers paid 175,000 (n) Budgetary Fund Balance—Unreserved Appropriations Estimated Revenues To reverse budgetary entry 5,000 515,000 Revenues Expenditures Other Financing Uses Fund Balance—Unreserved, Undesignated 515,000 Fund Balance—Unreserved, Undesignated Encumbrances To close nominal accounts 17,000 657 12,000 30,000 175,000 520,000 480,000 12,000 23,000 17,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Exercises EXERCISE 15-10 (1) Closing entries: (2) Appropriations Estimated Other Financing Uses Budgetary Fund Balance Estimated Revenues Estimated Other Financing Sources 650,000 50,000 50,000 Other Financing Sources Revenues Expenditures Other Financing Uses Fund Balance—Unreserved, Undesignated 166,500 605,000 Fund Balance—Unreserved, Undesignated Encumbrances 60,000 600,000 150,000 598,000 46,500 127,000 60,000 Marshal Village General Fund Budgetary Comparison Schedule For Fiscal Year Ended June 30, 20X9 Revenues 5,000 Expenditures 52,000 Excess (shortage) of revenues over expenditures 57,000 Other financing sources 16,500 Other financing uses 3,500 Total other financing sources (uses) 20,000 Fund balances, July 1, 20X8 Fund balances, June 30, 20X9 77,000 658 Budget Actual $ 600,000 $ 650,000 Variance— Favorable (Unfavorable) 605,000$ 598,000 $ (50,000) $ 7,000 $ $ 150,000 $ 166,500$ 50,000 46,500 $ 100,000 $ 120,000$ $ 92,000 $ 92,000 $ $ 142,000 $ 219,000$ To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Exercises Exercise 15-10, Concluded (3) Marshal Village General Fund Balance Sheet June 30, 20X9 Liabilities and Fund Equity Assets Cash Receivables (net) Total assets $210,000 Liabilities: Vouchers payable 134,000 Fund balances: Reserved for encumbrances Unreserved, undesignated Total fund equity $344,000 Total liabilities and fund equity $125,000 $ 60,000 159,000* $219,000 $344,000 *$92,000 balance plus $771,500 inflows minus $644,500 outflows minus $60,000 encumbrances EXERCISE 15-11 Event Fund or Group Purchase General Fund Sale (10 years later) Entry Expenditures Cash 75,000 Fund Balance—Reserved for Encumbrances Encumbrances 80,000 General Fixed Assets Account Group Land Investment in General Fixed Assets— General Fund Revenues 75,000 General Fund Cash Other Financing Sources Revenues 117,000 General Fixed Assets Account Group Investment in General Fixed Assets— General Fund Revenues Land 659 75,000 80,000 75,000 75,000 42,000 75,000 75,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Exercises EXERCISE 15-12 (a) Land Buildings Investment in General Fixed Assets—General Funds To record property purchase 325,000 975,000 (b) Land Buildings Investment in General Fixed Assets—Donations To record donated property at its fair value 330,000 220,000 (c) Construction in Progress Investment in General Fixed Assets—Capital Projects Funds (General Obligation Bonds) To record cost of work to date 800,000 (d) Machinery and Equipment Investment in General Fixed Assets—General Fund Revenues To record fire engine purchase at full value 190,000 Investment in General Fixed Assets—General Fund Revenues Machinery and Equipment To record trade-in 100,000 (e) Infrastructure Investment in General Fixed Assets—Capital Projects Funds To record cost of new street 250,000 (f) Computer Software Investment in General Fixed Assets—General Fund Revenues 1,300,000 550,000 800,000 190,000 100,000 250,000 70,000 70,000 EXERCISE 15-13 (1) Amount to Be Provided for Compensated Absences Unfunded Compensated Absences To record the noncurrent portion of the obligation for vacations (2) Unfunded Compensated Absences Amount to Be Provided for Compensated Absences To reduce the long-term obligation for vacations (3) Amount to Be Provided for Claims and Judgments Claims and Judgments Payable To record the noncurrent portion of the judgment against the city 660 2,200,000 2,200,000 400,000 400,000 11,000,000 11,000,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems Problem 15-6, Continued (l) Cash Notes Receivable Other Financing Sources Revenues To record sale of land Only the $130,000 gain is new revenue (Requires entry in general fixed assets account group.) 100,000 280,000 (m) Cash Other Financing Sources To record cash received from other funds (Requires entries in other funds.) 23,000 (n) Cash Notes Receivable Revenues ($280,000 × 8% × 1/4 year) To record cash received from developer 285,600 (2) Appropriations Estimated Other Financing Uses Budgetary Fund Balance—Unreserved Estimated Revenues Estimated Other Financing Sources To reverse entry recording budget 875,000 20,000 32,000 Revenues Other Financing Sources Expenditures Other Financing Uses Fund Balance—Unreserved, Undesignated Fund Balance—Unreserved, Undesignated Encumbrances To close nominal accounts 669 250,000 130,000 23,000 280,000 5,600 900,000 27,000 1,139,100 273,000 1,007,000 20,000 385,100 20,000 20,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems Problem 15-6, Concluded (3) City of Wautoma General Fund Budgetary Comparison Schedule For Year Ended December 31, 20X9 Revenues 239,100 Expenditures (132,000) Excess of revenues over expenditures 107,100 Other financing sources 246,000 Other financing uses Excess of revenues and other sources over expenditures and other uses 353,100 *Fund balances, January 1, 20X9 *Fund balances, December 31, 20X9 353,100 Variance— Favorable Budget Actual (Unfavorable) $ 900,000 $1,139,100 $ 875,000 $ $ 1,007,000 25,000 $ 27,000 273,000 (20,000) (20,000) 32,000 $ (165,000) $ 132,100 $ (165,000) $ (133,000) January *The total of the fund balances consists of: Fund balance—reserved for inventory Fund balance—reserved for encumbrances Fund balance—unreserved, undesignated Total fund balances 385,100 $ $ $ 220,100 $ December 31 $ 2,000 15,000 20,000 (180,000) 198,100 (165,000) $220,100 PROBLEM 15-7 (1) Year 1: General Fund General Long-Term Debt Account Group Expenditures Cash To record the pension benefits financed by current-year resources 5,000,000 5,000,000 Amount to Be Provided Unfunded Pension Obligation To record the portion of the actuarial 1,000,000 1,000,000 670 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems required contribution not financed in the current period 671 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems Problem 15-7, Concluded (2) Year 2: General Fund Expenditures Cash To record the pension benefits paid in year General Long-Term Debt Account Group Unfunded Pension Obligation Amount to Be Provided To record the payment of $500,000 over the actuarial required contribution in year 6,000,000 6,000,000 500,000 500,000 PROBLEM 15-8 (1) Expenditures (2) Investment in General Fixed Assets—Capital Leases (3) Amount to Be Provided for Lease Payments Capital Lease Payable 672 150,000 150,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems PROBLEM 15-9 Entry in General Fixed Assets Account Group Entry in General Fund (a) Expenditures Voucher Payable To record voucher Fund Balances Reserved for Encumbrances Encumbrances To reverse encumbrance (b) Cash Other Financing Sources To record proceeds from equipment sale 80,000 80,000 80,000 75,000 75,000 6,000 (c) No entry (d) Expenditures Cash To record payment for snow plow Machinery and Equipment 80,000 Investment in General Fixed Assets —General Fund Revenues To record purchase 92,000 Investment in General Fixed Assets— 6,000 General Fund Revenues Machinery and Equipment To remove equipment sold 15,000 15,000 Land Investment in General Fixed Assets—Donations To record donated land 100,000 Construction in Progress Investment in General Fixed Assets—Donations To record partially finished donated building 300,000 Investment in General Fixed Assets— 92,000 Special Revenue Funds Machinery and Equipment To remove traded snow plow Machinery and Equipment Investment in General Fixed Assets—General Fund Revenues To record new snow plow acquired 673 100,000 300,000 66,000 66,000 110,000 110,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems PROBLEM 15-10 Transaction Fund or Group (a) GLTDAG (b) (c) (d) Entry Amount to Be Provided for Payment of Term Bonds Term Bonds Payable General Fund Other Financing Uses Cash GLTDAG Amount Available in Debt Service Funds— Term Bonds Amount to Be Provided for Payment of Term Bonds General Fund Other Financing Uses Cash GLTDAG Amount Available in Debt Service Funds— Serial Bonds Amount to Be Provided for Payment of Serial Bonds (f) 200,000 200,000 200,000 200,000 135,000 135,000 135,000 135,000 General Fund Expenditures Cash 22,000 GFAAG Equipment Investment in General Fixed Assets— General Fund Revenues 25,000 Investment in General Fixed Assets— General Fund Revenues Equipment (e) 2,700,000 2,700,000 GLTDAG GFAAG 22,000 25,000 15,000 15,000 Serial Bonds Payable Amount Available in Debt Service Funds— Serial Bonds 135,000 Construction in Progress Investment in General Fixed Assets— Capital Projects Fund 450,000 674 135,000 450,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems PROBLEM 15-11 (1) (a) Buildings Construction in Progress Investment in General Fixed Assets— Capital Projects Funds To record completion of new school 850,000 (b) Land Investment in General Fixed Assets—Donations To record donation of land 140,000 250,000 600,000 140,000 (c) Proprietary funds maintain their own record of fixed assets as will be illustrated in the next chapter These business-type activities will not be recorded in the general fixed assets account group, but will be shown on the capital assets schedule (d) Machinery and Equipment Investment in General Fixed Assets— General Fund Revenues To record purchase of new engine Investment in General Fixed Assets—General Fund Revenues Machinery and Equipment To record trade-in of old engine 120,000 120,000 65,000 65,000 (e) Buildings Investment in General Fixed Assets— General Fund Revenues To record capital improvements on city hall 40,000 (f) Infrastructure Assets Investment in General Fixed Assets— Special Revenue Funds To record improvements other than buildings 20,000 (g) Investment in General Fixed Assets Accumulated Depreciation—Buildings Accumulated Depreciation—Machinery and Equipment Accumulated Depreciation—Infrastructure 175,000 675 40,000 20,000 100,000 50,000 25,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems Problem 15-11, Concluded (2) City of Elmwood Schedule of Capital Assets December 31, 20X9 Beg Balance Governmental activities: Land $1,140,000 Buildings 3,040,000 Construction in progress Machinery and equipment 855,000 Infrastructure assets 1,420,000 Total general fixed assets $6,455,000 Less accumulated depreciation: Buildings 500,000 Machinery and equipment 350,000 Infrastructure 525,000 Total depreciation $1,375,000 Governmental capital assets $5,080,000 Additions $1,000,000 Retirements $ 2,150,000 End Balance 140,000 890,000 250,000 $ 250,000 800,000 120,000 1,400,000 $5,600,000 $ 400,000 65,000 20,000 $1,170,000 $ $ 100,000 300,000 50,000 500,000 25,000 315,000 $ $1,200,000 $ 175,000 $ $4,400,000 $ 995,000 $ 315,000 PROBLEM 15-12 (1) (a) 20X4 July Amount to Be Provided for Payment of Term Bonds Term Bonds Payable To record issuance of term bonds for school project (b) 20X6 Jan Amount to Be Provided for Payment of Serial Bonds Serial Bonds Payable To record issuance of serial bonds to finance city hall and center Amount Available in Debt Service Funds—Serial Bonds Amount to Be Provided for Payment of Serial Bonds To record January 2, 20X6, deposit in debt service fund The same entry would be repeated at the beginning of each year until maturity 676 1,500,000 1,500,000 1,000,000 1,000,000 70,000 70,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems 677 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems Problem 15-12, Continued Dec 31 Amount Available in Debt Service Funds—Serial Bonds Amount to Be Provided for Payment of Serial Bonds To record 20X6 earnings of sinking fund ($70,000 × 8%) This same entry would be repeated at the end of each year, using the following annual earnings: Year 20X6 20X7 20X8 20X9 Serial Redemption January — — — $100,000 5,600 5,600 Annual Cumulative Annual Amount Available Deposit Balance Earnings for Serial Bond January January at 8% Redemption December 31 $70,000 $ 70,000 $ 5,600$ 75,600 70,000 145,600 11,648 157,248 70,000 227,248 18,180 245,428 70,000 215,428 17,234 232,662 20X9 Jan Serial Bonds Payable Amount Available in Debt Service Funds— Serial Bonds To record retirement of serial bonds maturing January 1, 20X9 100,000 100,000 (c) No entry in general long-term debt account group, because proprietary funds maintain their own records of long-term debt (d) 20X7 Jan Amount to Be Provided for Payment of Term Bonds Term Bonds Payable To record issuance of term bonds 400,000 400,000 Note: The following entry would be made annually to record the contribution to the sinking fund: Amount Available in Debt Service Funds—Term Bonds Amount to Be Provided for Payment of Term Bonds 40,000 40,000 Note: The general long-term debt account group would not record the earnings of the sinking fund because they are to be applied to the semiannual interest payments 678 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems Problem 15-12, Concluded (2) City of Chester Schedule of General Long-Term Debt December 31, 20X9 General Long-Term Debt Term bonds payable $1,900,000 Serial bonds payable 900,000 Total general long-term debt payable $2,800,000 Beg Balance Additions $1,900,000 $ 1,000,000 $2,900,000 Deductions End Balance 0 $ $100,000 $100,000 PROBLEM 15-13 (1) Purchase Method—The purchase method is the preferred accounting treatment When the purchase method is used, a portion of the fund balance is reserved for the amount in inventory at year-end This reflects the expected expenditure in future periods as inventory is consumed or expended (2) $79,000 = $21,000 reserved for supplies (equal to the inventory balance as of December 31, 20X8) and $58,000 ($43,000 + $15,000) reserved for encumbrance (3) $811,000 = $825,000 less $14,000 net balance in receivables (4) $89,000—Vouchers payable is the amount due suppliers (5) $100,000—The capital outlay expenditures amount is capitalized in the general fixed assets account group (6) $52,000—The debt service principal is calculated as $74,000 debt service expenditures less $22,000 interest amount (7) $1,392,000 = $1,349,000 expenditures for 20X9 + $43,000 open encumbrances 679 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems PROBLEM 15-14 (1) Cash Taxes Receivable—Delinquent Allowance for Uncollectible Delinquent Taxes Tax Liens Receivable Allowance for Uncollectible Tax Liens Due from Parks Fund Inventory of Supplies Vouchers Payable 78,000 Due to Utility Fund Fund Balance—Reserved for Supplies Inventory Fund Balance—Unreserved, Undesignated 15,000 Tax Anticipation Notes Payable Estimated Revenues Estimated Other Financing Uses Appropriations Budgetary Fund Balance—Unreserved Taxes Receivable—Current Allowance for Uncollectible Current Taxes Revenues Expenditures Encumbrances Croix Township General Fund Worksheet For Six Months Ended June 30, 20X8 Trial Balance Dr Cr 45,000 20,000 4,000 12,000 5,000 (b) (d) (f) 2,000 (f) 1,000 (d) (g) 43,000 (h) 4,000 (h) 5,000 31,000 (i) Operating Entries Dr Cr 120,000 (h) Revenues and Expenditures Dr Cr 204,000 Balance Sheet Dr Cr 4,000 344,000 (f) 2,000 (d) 1,000 (f) 26,000 151,000 20,000 4,000 11,000 (i) 10,000 (g) 186,000 309,000 1,000 21,000 4,000 (i) 16,000 16,000 21,000 120,000 655,000 27,000 620,000 8,000 140,000 86,000 86,000 (a) (c) (b) 655,000 (a) (a) (a) 430,000 120,000 27,000 620,000 8,000 (f) 290,000 (i) (g) (h) (c) (c) (d) (f) (f) 10,000 160,000 49,000 8,600 421,400 1,000 2,000 23,000 447,400 219,000 (e) (g) 680 250,000 183,000 8,600 67,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems Fund Balance—Reserved for Encumbrances 67,000 Excess of Revenues over Expenditures 228,400 1,193,000 (g) 183,000 2,405,000 681 (e) 250,000 228,400 2,405,000447,400 447,400 1,193,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems Problem 15-14, Concluded (2) Croix Township General Fund Balance Sheet June 30, 20X8 Assets and Resources Current Assets: Cash Taxes receivable—current Less: Allowance for uncollectible current taxes Due from Parks Fund Inventory and supplies Total current assets $309,000 $140,000 8,600 131,400 1,000 21,000 $462,400 Liabilities and Fund Equity Liabilities: Tax anticipation notes payable Vouchers payable Total liabilities Fund Balances: Reserved for encumbrances Reserved for supplies Unreserved Total fund balance Total liabilities and fund equity 682 $120,000 78,000 $198,000 $ 67,000 21,000 176,400 264,400 $462,400 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems 683 ... imposed on the governmental unit (2) a The Governmental Accounting Standards Board is the authoritative body for financial reporting standards used by state and local governments (3) b The GASB stipulated... slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems required contribution not financed in the current period 671 To download more slides, ebook, solutions... 70,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ch 15—Problems 677 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com