Question 1 - The Town has two revenue sources, property taxes and charges for service; and two programs, administration and public safety. The Town’s fiscal year 20XX is as follows: The Town General...

Question 1 - The Town has two revenue sources, property taxes and charges for service; and two programs, administration and public safety. The Town’s fiscal year 20XX is as follows:

The Town

General Fund

Operating Budget

Fiscal Year 20XX

Estimated Revenues

Property taxes $2,000,000

Charges for services470,000

$2,470,000

Appropriations

Administration $430,000

Public safety1,900,000

2,330,000

Budgeted Increase in Fund Balance
$140,000

Operating transactions during the year consist of the following:

1. Placed orders for materials and supplies for:

Administration 318,000

Public safety 1,560,000

2. Collected revenues of:

Property taxes 2,500,000

Charges for services 367,500

3. Received items on order for:

Administration 300,000

Public safety 530,000

4. Paid cash for items received for:

Administration 302,000

Public safety 130,000

5. Received items on order for:

Administration 105,000

Public safety --

6. Paid cash for items received for:

Administration 104,000

Public safety --

7. Collected revenues of:

Property taxes --

Charges for services 61,000

Required:Prepare the general journal entries necessary to record the budget and operating transactions 1- 7.

Question 2 - Presented below is the adjusted trial balance for the General Fund of the Town at June 30, 20XX, the end of the fiscal year. Based on this information, prepare, in good form:

a. closing entries

b. the statement of revenues, expenditures, and changes in fund balance for the year

c. the balance sheet at June 30, 20XX. (Classify the fund balance as Unassigned.)

Question 3 - Prepare entries to record the following transactions related to acquisition of capital assets by a county. The county does not use encumbrance accounting. Identify the fund(s) used. Record journal entries for all funds, and label the fund name for each journal entry.

a. The county issues general obligation bonds in the amount of $750,000, receiving cash for the full face amount of the bonds. The cash will be used to buy capital assets.

b. The county buys a prefabricated building for $600,000, using part of the bond proceeds. The building is delivered and the invoice for the building is approved.

c. The invoice approved in b. is paid.

d. The General Fund transfers cash of $85,000 to another fund in anticipation of the payment of the first installment of interest ($40,000) and principal ($45,000) on the debt.

e. The first installment of debt service on bonds issued in a. becomes due and payable.

f. Debt service on the bonds issued in a. is paid.

Question 4 - Prepare journal entries in the Capital Projects Fund to record the following transactions related to the construction of a building by the Village. The Village adopts a formal budget and uses encumbrance accounting.

a. The Village Council adopts a capital budget at the beginning of the year. To finance construction of the building, the Village will transfer $3.5 million from its General Fund and apply for a state grant of $2.5 million. It appropriates $6 million for construction.

b.The General Fund transfers $3.5 million to the Capital Projects Fund for the new project.

c. The state approves the Village’s application for a $2.5 million construction grant and simultaneously sends a check to the Village. The grant is expenditure driven and thus requires that the Village incur qualifying expenditures.

d. The Village awards a construction contract in the amount of $4.75 million.

e. The contractor sends a progress billing to the Village in the amount of $2.75 million. The bill is approved by the Village's engineers and a voucher is prepared, less a 5% retainage pending completion of the building and final approval by the Village. The Village considers 30 percent of the billing to be the state's share of the cost.

f. The voucher in e., above, is paid.

g. The contractor encounters construction problems due to unforeseen soil conditions. As a result, the Village authorizes a change order increasing the cost of the construction contract by $500,000.

h. The contractor completes construction, and sends the Village an invoice for the remaining $2 million. The Village's engineers inspect the building and accept the work. The invoice is approved and paid, together with the amount retained on the progress billing in e., above. The Village considers $500,000 of the billing to be the state's share of the cost.

Question 5 - The Town Debt Service Fund accumulates resources to pay its $4 million general obligation debt. The debt is payable in equal annual installments of principal over 20 years with 4% interest on the unpaid principal. Prepare journal entries to record the following transactions in the Debt Service Fund.

a. The Town levies a special property tax amounting to $500,000 to pay debt service on its long-term general obligation debt. The tax must be accounted for in the Debt Service Fund.

b. All the property taxes levied for debt service purposes are collected.

c. The Town invests $300,000 in a six-month certificate of deposit.

d. Debt service (interest of $125,000 and principal of $175,000) becomes due and payable.

e. The debt service liabilities are paid.

f. The certificate of deposit in c. matures and the Town receives a total of $307,000.

Question 6 - The City establishes an Internal Service Fund (ISF) to account for the costs of printing services that it will provide to the various City departments. Make journal entries to record the following transactions in the ISF only.

a. The General Fund transfers $625,000 to the ISF as a contribution to start the printing activity.

b. The ISF immediately uses $600,000 of the cash to purchase printing equipment. (The printing equipment is estimated to have an average useful life of 10 years.)

c. On various occasions during the year, the ISF buys paper and other supplies in the amount of $82,000 on open account. The supplies are put into inventory.

d. Invoices for the supplies purchased in c., above are paid.

e. Employee salaries for the year amounting to $465,000 are paid

f. The ISF makes a payment of $53,000 to the City's Pension Trust Fund for pensions applicable to the salaries of its personnel.

g. The ISF receives an invoice of $46,000 from the General Fund for occupancy costs, which includes space and utility costs.

h. The ISF sends invoices throughout the year to several City agencies for printing services, as follows:

(1) To General Fund departments $72,000

(2) To the Water Enterprise Fund 48,000

i. The ISF receives payments of $72,000 from General Fund agencies and $48,000 from the Water Enterprise Fund.

To prepare its financial statements, the ISF makes adjusting entries to account for the following:

j. To record nine months of depreciation on the equipment purchased in b., above.

k. To record the expense of paper and supplies consumed during the year. A year-end inventory showed unused paper and supplies amounting to $7,000. (See c., above)

l. To record unpaid salaries of $14,500

Question 7 - These transactions relate to a government operated bus service (The “Bus”), which provides transportation services to residents of the County. The Bus is accounted for as a County Enterprise Fund. Make journal entries to account for the following 20XX transactions in the Enterprise Fund.

a. On April 1, 2013, The Bus borrows $5,000,000 by issuing 20-year revenue bonds. Bond principal is to be paid back in 40 equal semi-annual installments, starting October 1, 2013, together with interest of 5% a year on the unpaid principal.

b. On July 1, The Bus pays cash for 25 buses costing $150,000 each. The Bus also pays cash for a building costing 750,000 to house its repair activity.

c. On July 1, The Bus invests $375,000 of unused cash in a Certificate of Deposit (CD).

d. The Bus pays cash of $56,000 to acquire an inventory of repair parts.

e. The Bus collects bus fares of $850,000, which it deposits in the bank.

f. The Bus sends an invoice for $18,000 to a customer.

g. The Bus pays salaries of $625,000 to its bus operators, mechanics, and administrative staff.

h. The CD (transaction c.) matures and The Bus receives a check for $380,000.

i. On October 1, 20XX, The Bus pays the first installment of principal and interest on the revenue bonds in transaction a.

To prepare financial statements at December 31, 20XX, The Bus makes adjusting journal entries for the following items:

j. To record six months' depreciation on the buses and building bought in transaction b. Estimated lives are: buses - 10 years; building - 30 years.

k. To record consumption of repair parts. A year-end physical inventory shows repair parts on hand amounting to $7,500. (See transaction d.)

l. To accrue for unpaid salaries of $18,000.

m. To accrue interest on the revenue bonds outstanding at December 31, 20XX. (See transactions a. and i.)

Question 8 - The Village maintains a Pension Trust Fund for its employees. At the start of the year, the Fund holds cash of $250,000 and investments that have a fair value of $4,100,000. The Fund has the following transactions. Prepare entries to record them in the Fund's accounts

a. Bills the General Fund $150,000 for the required annual contribution. The pension plan does not require contributions from the employees

b. Receives payment of $150,000 from the General Fund

c. Receives interest and dividend income of $120,000 in cash on its investment portfolio

d. Receives $335,000 from selling investments carried on the books at $310,000

e. Makes new investments totaling $350,000

f. Pays annuity benefits of $185,000 to retirees or their spouses

g. Pays administrative expenses of $160,000 in cash

h. The investments held by the Fund have a fair value of $4,200,000 at year-end.

Question 9 - A state collects sales taxes both for itself and for counties that have elected to "piggy-back" their taxes on the state tax. The state takes several weeks to process returns and determine how much each participating government should receive, so tax collections are temporarily invested. Resulting investment income is distributed to the state to defray processing costs.

Prepare entries to record these transactions in the Custodial Fund.

a. The state collects sales taxes totaling $6,500,000 for itself and participating counties.

b. The entire $6,500,000 is temporarily invested.

c. The state determines that $3,900,000 of the tax collections belong to the state and that the remaining $2,600,000 should be distributed to the counties.

d. The investments are immediately liquidated and $6,600,000 is received in cash.

e. Tax collections and the investment income are forwarded to the state and the counties.

Question 10 - On the following page is the government-wide adjusted trial balance for the Town as of June 30, 20XX, the end of the fiscal year. Prepare in good form (a) the government-wide statement of net position (using a classified format), and (b) the government-wide statement of activities as of, and for the year ended, June 30, 20XX. There are no restricted assets or liabilities; the long-term debt (both portions) is the only debt related to the Town’s capital assets.