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CHAPTER 10

SOLUTIONS TO MULTIPLE CHOICE QUESTIONS, EXERCISES AND PROBLEMS

MULTIPLE CHOICE QUESTIONS

1. c

2. c

3. a

4. a

5. d

Appropriations (= 20,000,000 + 500,000) $ 20,500,000


Less expenditures (7,600,000)
Less encumbrances (75,000)
Available funds $ 12,825,000

6. b

The budget entry added $243,000 to fund balance, as follows:

Estimated revenues 1,290,000


Estimated other financing
sources 60,000
Appropriations 1,085,000
Estimated other financing
uses 22,000
Fund balance—
unassigned 243,000

Therefore the fund balance prior to the budget entry was $285,000 - $243,000 = $42,000.

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7. d

Closing entries are:


Property tax revenues 950,000
Speeding ticket revenues 400,000
Transfers in 8,000
Bond proceeds 50,000
Estimated revenues 1,290,000
Estimated other financing
sources 60,000
Fund balance—
unassigned 58,000

Appropriations 1,085,000
Estimated other financing uses 22,000
General expenditures 1,015,000
Capital outlay 25,000
Debt service: principal 2,000
Debt service: interest 8,000
Transfers out 20,000
Fund balance—
unassigned 37,000

$58,000 + $37,000 = $95,000

8. d

General expenditures $1,015,000


Capital outlay 25,000
Debt service: principal payments 2,000
Debt service: interest payments 8,000
Total expenditures $1,050,000

9. b

Cash $371,000
Taxes receivable, net 68,000
Due from other funds 12,000
Total $451,000

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10. b

Original assessment of 2013 taxes $1,000,000 - $25,000 $975,000


End of year adjustment in allowance ($60,000 - $15,000) - $25,000 (20,000)
Excess cash collected on 2012 taxes $30,000 - $21,000 9,000
Total property tax revenue for 2013 $964,000

Or alternatively,

2013 taxes collected $940,000


Uncollected 2013 taxes expected to be collected in early 2014 15,000
Excess collections on 2012 taxes $30,000 - $21,000 9,000
Total property tax revenue for 2013 $964,000

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EXERCISES

E10.1 Identify Appropriate Fund

1. special revenue
2. capital project
3. enterprise
4. agency
5. internal service
6. pension trust
7. agency
8. capital project
9. debt service or general fund
10. general
11. special revenue
12. debt service
13. permanent
14. private-purpose trust

E10.2 Identify Appropriate Fund(s)

1. debt service fund


2. special revenue fund
3. general fund (for transfer to capital projects fund and for processing and receiving the
assessments), capital projects fund (for construction activities)
4. general fund (for processing assessments and receiving and distributing money from the
assessments), capital projects fund (for construction activities), and (a) debt service fund
(for receiving the assessments from the general fund and servicing the debt); (b) agency
fund (for processing the assessments, accounting for and servicing the debt)
5. capital projects fund
6. general fund (for transfer of withheld wages), pension trust fund
7. general fund
8. internal service fund
9. general fund
10. general fund
11. general fund (for transfer of withheld wages), agency fund
12. general fund (if museum activities are reported in the general fund), permanent fund
13. investment trust fund

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E10.3 Property Tax Rate and Revenues

a. Last year’s property tax revenue was: $7,920,000 = $.88 x ($900,000,000/$100)

b. Property tax revenue required is $8,645,000 = $9,500,000 - $855,000


$8,645,000/($950,000,000/$100) = $0.91 per $100 of assessed valuation

c. $0.88 x ($950,000,000/$100) = $8,360,000

E10.4 Computing Available Funds

All dollar amounts in thousands

a. Funds available for encumbrance consist of:

appropriations - expenditures - outstanding encumbrances

Appropriations are $3,800,000 (= estimated revenue of $4,000,000 – budgetary


surplus of $200,000). Thus,

available funds = $3,800,000 - 2,500,000 - 225,000 = $1,075,000

The other numerical data given are irrelevant to this calculation.

b. Yes, the budget appears ripe for cutting. Operating costs average about $248,000 per
month [= (2,500,000 + 225,000)/11]. Yet there is $1,075,000 remaining to cover operating
costs of $248,000 in the last month of the fiscal year.

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E10.5 Reconstruct Budget Entry, Compute Fund Balance

The detailed budget may be reconstructed as follows:

Over
Actual (Under) Budget Budget
Revenues:
Property taxes $2,975,000 $125,000 $2,850,000
Fines 6,000 6,000 0
Intergovernmental 12,000 0 12,000
Fees and service charges 500,000 (75,000) 575,000
Miscellaneous 4,000 (1,000) 5,000
Total $3,497,000 $ 55,000 $3,442,000
Expenditures:
Administration $ 500,000 $ 1,000 $ 501,000
Public safety 2,050,000 6,000 2,056,000
Health and environment 950,000 4,000 954,000
Total $3,500,000 $ 11,000 $3,511,000

a. Therefore, the budget entry was:

Estimated revenues 3,442,000


Fund balance-unassigned 69,000
Appropriations 3,511,000

b.
Fund balance, beginning of year $2,100,000
Budget entry effect (planned decrease) (69,000)
Excess of actual revenues over budgeted revenues 55,000
Excess of budgeted expenditures over actual expenditures 11,000
Fund balance, end of year $2,097,000

Alternative calculation:
Fund balance, beginning of year $2,100,000
Excess of expenditures over revenues (3,000)
Fund balance, end of year $2,097,000

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E10.6 Transactions, Closing Entries, and Budgetary Comparison Schedule

All dollar amounts in thousands

a. Journal entries:

(1)
Estimated revenues 51,000
Appropriations 51,000

Taxes receivable 41,000


Property tax revenues 41,000

(2)
Cash 18,500
Taxes receivable 18,500

Cash 26,500
Taxes receivable 26,500

(3)
Encumbrances 50,300
Fund balance—assigned 50,300

(4)
Fund balance—assigned 37,300
Encumbrances 37,300
($50,300 - $13,000 = $37,300)

Expenditures 37,500
Accounts payable 37,500

(5)
Accounts payable 44,000
Cash 44,000

(6)
Cash 11,000
Fee and service revenues 11,000

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b. Closing entries:

Property tax revenues 41,000


Fee and service revenues 11,000
Fund balance—unassigned 1,000
Estimated revenues 51,000

Appropriations 51,000
Fund balance—unassigned 500
Expenditures 37,500
Encumbrances 13,000

c. $38,500 = $37,000 + $1,000 + $500

d.
Budgetary Comparison Schedule
For the Year Ended December 31, 2013
Variance—
Favorable
Budget Actual (Unfavorable)
Revenues $51,000 $52,000 $ 1,000
Expenditures 51,000 37,500 13,500
Change in fund balance (1) $ 0 $14,500 $14,500
(1) Closing entries $1,000 + $500 plus increase in fund balance—assigned $13,000.

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E10.7 Property Tax Transactions

a.
Taxes receivable—
current 30,000,000
Allowance for uncollectible
taxes—current 1,200,000
Revenues 28,800,000
To record tax levy and establish allowance for uncollectible taxes.

Cash 9,009,000
Revenues 91,000
Taxes receivable—current 9,100,000
To record collection of taxes prior to due date and reduction of revenues by 1% discount
($9,100,000 = $9,009,000/.99).

Cash 18,900,000
Taxes receivable—current 18,900,000
To record collection of taxes prior to January 1;
$18,900,000 = $30,000,000 - $9,100,000 - $2,000,000.

Taxes receivable—
delinquent 2,000,000
Taxes receivable—current 2,000,000
To reclassify taxes declared delinquent on January 1.

Allow. for uncollectible


taxes—current 1,200,000
Revenues 600,000
Allow. for uncollectible
taxes—delinquent 1,800,000
To adjust the allowance for delinquent taxes to $1,800,000 (= $2,000,000 - $200,000).

Cash 300,000
Allow. for uncollectible
taxes—delinquent 1,800,000
Taxes Receivable—
delinquent 2,000,000
Revenues 100,000
To record collection of delinquent taxes subsequent to January 1.

Expenditures 25,000,000
Cash 25,000,000
To record cash expenditures for the year.

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b. Balance sheet accounts


Cash ($850,000 + $9,009,000 + $18,900,000 + $300,000 - $25,000,000) $ 4,059,000

Fund balance:
Actual revenues ($28,800,000 - $91,000 - $600,000 + $100,000) $28,209,000
Estimated revenue 29,000,000
Decrease in fund balance with closing entry (791,000)
Beginning fund balance after the budget entry 5,200,000
Ending fund balance $ 4,409,000

E10.8 Inventory Accounting

a. Consumption method
Expenditures (1) 17,900,000
Inventory (2) 100,000
Cash 15,500,000
Accounts payable 2,500,000

Fund balance – unassigned (2) 100,000


Fund balance—
nonspendable (2) 100,000

Purchases method
Expenditures 18,000,000
Cash 15,500,000
Accounts payable 2,500,000

Inventory (2) 100,000


Fund balance—
nonspendable (2) 100,000

(1) 17,900,000 = 1,000,000 + 18,000,000 – 1,100,000


(2) 100,000 = 1,100,000 – 1,000,000

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E10.9 Closing Entries

a.
Revenues 3,501,000
Estimated revenues 3,501,000

Appropriations 3,449,000
Expenditures 3,449,000

b.
Revenues 3,501,000
Estimated revenues 3,501,000

Appropriations 3,449,000
Expenditures 3,427,000
Fund balance—unassigned 22,000

c.
Revenues 3,440,000
Fund balance—unassigned 61,000
Estimated revenues 3,501,000

Appropriations 3,449,000
Expenditures 3,440,000
Fund balance—unassigned 9,000

d.
Revenues 3,495,000
Fund balance—unassigned 6,000
Estimated revenues 3,501,000

Appropriations 3,449,000
Expenditures 3,443,000
Fund balance—unassigned 6,000

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E10.10 Carryover Encumbrances

a. Legal budgetary basis

Expenditures—prior year
encumbrances 1,965,000
Accounts payable 1,965,000
To record invoices for goods and services ordered in 2012.

Fund Balance—assigned 1,900,000


Fund balance—unassigned 65,000
Expenditures—prior year
encumbrances 1,965,000
To close encumbrances carried over from 2012 and related expenditures.

b. GAAP budgetary basis

Encumbrances 1,900,000
Fund balance—unassigned 1,900,000
To restore encumbrances carried over from 2012.

Fund balance—assigned 1,900,000


Encumbrances 1,900,000
To reverse encumbrances for goods and services received.

Expenditures 1,965,000
Accounts payable 1,965,000
To record invoices for goods and services.

No special closing entry is required; expenditures are closed in the normal manner.

E10.11 Interfund Transactions

1. Balance sheet asset: Due from special revenue fund


2. Statement of revenues, expenditures, and changes in fund balances: Transfers out, listed
under other financing uses
3. Statement of revenues, expenditures, and changes in fund balances: Transfer in, listed
under other financing sources
4. Statement of revenues, expenditures, and changes in fund balances: Expenditures
5. Balance sheet asset: Due from enterprise fund
6. Balance sheet: reduces Due from special revenue fund

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E10.12 Adjusting and Closing Entries, Balance Sheet

a.
Taxes receivable—
delinquent 800,000
Taxes receivable—current 800,000
To reclassify receivables outstanding at year end as delinquent.

Allowance for uncollectible


taxes—current 450,000
Revenues 350,000
Allowance for uncollectible
taxes—delinquent 800,000
To fully reserve delinquent taxes.

Fund balance—
nonspendable 30,000
Supplies 30,000
To adjust ending supplies balance.

Fund balance—assigned 450,000


Expenditures—prior year 420,000
Fund balance—unassigned 30,000
To close prior year encumbrances and related expenditures.

Revenues 13,650,000
Estimated revenues 13,000,000
Fund balance—unassigned 650,000
To close revenues.

Appropriations 11,000,000
Expenditures 10,500,000
Encumbrances 300,000
Fund balance—unassigned 200,000
To close expenditures and encumbrances.

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b.
Assets Liabilities and Fund Balances
Cash $3,500,000 Accounts payable $1,800,000
Taxes receivable-delinquent
(less $800,000 allowance for
uncollectible delinquent
taxes) 0 Due to other funds 210,000
Due from other funds 120,000 Fund balances:
Supplies 250,000 Nonspendable 250,000
Assigned 300,000
________ Unassigned 1,310,000
Total $3,870,000 Total $3,870,000

Graystone General Fund


Analysis of changes in fund balance - unassigned
(not required)
Fund balance (deficit), beginning (See Note 1) ($1,540,000)
Excess of revenues over expenditures:
Revenues $13,650,000
Expenditures (including encumbrances of $300,000) 10,800,000 2,850,000
Fund balance, ending $ 1,310,000

Note 1: The beginning unassigned fund balance is calculated as follows:


Fund balance, beginning (plug) $(1,570,000)
Add: amount credited in budget entry
($13,000,000 estimated revenues less $11,000,000 appropriations) 2,000,000
Balance per trial balance 430,000
Beginning balance implied above (1,570,000)
Add: adjustment for excess prior year's encumbrance over expenditure 30,000
Beginning balance as adjusted $(1,540,000)

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E10.13 General Fund Capital Asset and Long-Term Debt Transactions

a. 1.
Capital outlay 2,250,000
Cash, accounts payable 2,250,000

2.
Cash 370,000
Proceeds from sale of capital
assets 370,000

3.
Debt service: interest 2,000,000
Debt service: principal 500,000
Cash 2,500,000

b. All transactions are reported in the general fund=s Statement of Revenues, Expenditures,
and Changes in Fund Balances.

Capital outlay of $2,250,000 is reported as an expenditure.

Proceeds from sale of capital assets of $370,000 is reported as other financing sources.

Debt service: principal of $500,000 and debt service: interest of $2,000,000 are reported as
expenditures.

c. Effect on general fund unassigned fund balance: $(4,380,000) = - $2,250,000 + $370,000 -


$2,000,000 - $500,000.

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E10.14 Identifying the Reporting Entity

1. The school district is a discretely presented component unit. The city is financially
accountable for the school district—the city approves its budget and is legally liable for its
debt. The city also provides significant funding. Financial results are discretely presented
rather than blended because the district has a different governing body.

2. The housing authority is not a component unit of the city. The city is not financially
accountable for it.

3. The landfill is a discretely presented component unit. The city is financially accountable
because it controls the board and sets landfill rates.

4. The sewer district is not a component unit of the city, since the city does not control its
board, and is not financially liable for its activities.

5. The building authority is a blended component unit of the city. It is a component unit
because the city appoints the board and is liable for the authority=s debts. The building
authority=s financial information is blended with that of the city because the authority
provides services entirely to the city.

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PROBLEMS

P10.1 Determining the Reporting Entity

1. Megalopolis is the primary government. The Convention Authority (CA) should be


included with Megalopolis for financial reporting purposes. The city appoints the CA's
governing board and, even though it appears that the city will not be subsidizing the CA,
bonds issued by the CA and backed (guaranteed) by the city impose a financial burden on
the city. Megalopolis is financially accountable to its constituents for the activities of the
CA.

2. Megalopolis remains the primary government. However, the CA now appears to be a


separate financial reporting entity. Even though the city appoints the governing board, the
activities of the CA are essentially independent of the city. The CA may levy its own sales
tax and issue its own bonds. The bonds are not backed by the city and, presumably, will be
repaid with the CA's revenue. Council has no authority to approve or disapprove the CA's
plans and is neither financially impacted by nor financially accountable for the CA's
activities.

3. Gigantic County is the primary government. Each volunteer fire department is a separate
not-for-profit financial reporting entity, not a component of the Gigantic county reporting
entity. The county has no control over the fire departments and contracts for their services
voluntarily. County expenditures for the capital equipment become analogous to the
contractual expenditures for fire-fighting services.

4. The City of Winitville is the primary government. The Winitville Board of Education is
included with the city for financial reporting purposes. Separate election of school board
members is more than offset by the city's influence over the Board's ability to spend,
through its annual appropriation. Moreover, because the city provides the funding for the
Board of Education, the Board is fiscally dependent upon the city. In effect, the city is
accountable to taxpayers and creditors for the school board's operations.

5. The State of Michigan is the primary government. The Great Lakes Protection Fund
(GLPF) is a separate joint venture not included with the state for financial reporting
purposes. Although Michigan is represented on the Board of the GLPF, the GLPF has its
own Articles of Incorporation and Michigan does not have control over decisions made.
The GLPF is also not fiscally dependent on the State of Michigan.

6. The State of Georgia is the primary government. The Georgia Public Telecommunications
Commission is included as a component unit in the State financial reports. The State has
control over the Commission's ability to spend, and the Commission is financially
accountable to the State.

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P10.2 General Fund Entries and Financial Statements

a. Journal entries for 2013:

Estimated revenues 7,450,000


Fund balance—unassigned 1,650,000
Appropriations 9,100,000
To record 2013 budget. Estimated revenues are ($2,700,000 + $3,500,000 + $1,000,000 +
$250,000) and appropriations are ($6,700,000 + $1,150,000 + $750,000 + $350,000 +
$150,000).

Taxes receivable 2,700,000


Tax revenues 2,700,000
To accrue taxes receivable.

Cash 2,700,000
Taxes receivable 2,700,000
To record collection of property taxes.

Waste management
expenditures 6,680,000
Cash 6,680,000
To record expenditures for waste management.

Court expenditures 1,120,000


Cash 1,120,000
To record expenditures for court costs.

Cash 400,000
Accounts receivable—waste
management 400,000
To record receipt of payment on 2012 waste management bills.

Cash 3,390,000
Accounts receivable—
waste management 210,000
Waste management revenues 3,600,000
To record revenues from waste management.

Cash 920,000
Court fines 920,000
To record revenues from court fines.

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Salaries and operating


expenditures 745,000
Cash 745,000
To record salaries and operating expenditures.

Investments 235,000
Interest revenue 235,000
To record interest revenue from investments.

Miscellaneous expenditures 149,000


Cash 149,000
To record miscellaneous expenditures.

Supplies expenditures 340,000


Waste management supplies 340,000
To record consumption of supplies inventory.

Fund balance—
nonspendable 340,000
Fund balance—unassigned 340,000
To adjust the nonspendable fund balance.

Closing entries:
Tax revenues 2,700,000
Water revenues 3,600,000
Court fines 920,000
Interest revenue 235,000
Estimated revenues 7,450,000
Fund balance—unassigned 5,000
To close revenues to fund balance.

Appropriations 9,100,000
Waste management
expenditures 6,680,000
Court expenditures 1,120,000
Salaries and operating
expenditures 745,000
Miscellaneous expenditures 149,000
Supplies expenditures 340,000
Fund balance—unassigned 66,000
To close expenditures to fund balance.

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b. Town of Amherst
General Fund
Statement of Revenues, Expenditures, and
Changes in Fund Balance
For the Year Ended December 31, 2013
Revenues:
Property taxes $ 2,700,000
Waste management service 3,600,000
Court fines 920,000
Interest 235,000
$ 7,455,000
Expenditures:
Waste management department $ 6,680,000
Court costs 1,120,000
Salaries and expenditures 745,000
Supplies 340,000
Miscellaneous 149,000
Total expenditures 9,034,000
Excess of revenues over (under) expenditures (1,579,000)
Fund balance—January 1, 2013 10,280,000
Fund balance—December 31, 2013 $ 8,701,000

Town of Amherst
General Fund
Balance Sheet
December 31, 2013
Assets Liabilities and fund balance
Cash (1) $2,216,000 Fund balance—nonspendable $ 40,000
Investments 6,235,000 Fund balance –unassigned (2) 8,661,000
Accounts receivable—waste
management 210,000
Waste management supplies 40,000 ________
$8,701,000 $8,701,000

(1) $2,216,000 = $3,500,000 + $2,700,000 - $6,680,000 - $1,120,000 + $400,000 +


$3,390,000 + $920,000 - $745,000 - $149,000.
(2) $8,701,000 = $9,900,000 - $1,650,000 + $5,000 + $66,000 + $340,000.

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P10.3 General Fund Adjustments and Financial Statements

(in thousands)

a. Adjusting and closing entries for the general fund:

(1)
Due from enterprise fund 2,000
Accounts receivable 2,000
To reclassify receivable from Golf Course Fund for advance.

(2a)
Taxes receivable—delinquent 10,000
Taxes receivable—current 10,000
To reclassify outstanding taxes as delinquent.

(2b)
Revenues 10,000
Allowance for uncollectible
taxes—delinquent 10,000
To record allowance for uncollectible taxes.

(3)
Expenditures 40,000
Bonds payable 40,000
To correct recording of retirement of general obligation bonds and payment of interest.

(4)
Supplies inventory 3,500
Fund balance—nonspendable 3,500
To record supplies inventory at year end and classify this amount as fund balance—
nonspendable.

(5)
Encumbrances 4,500
Fund balance—assigned 4,500
To record encumbering of appropriations for purchase orders outstanding at year end.

(6)
Due from State 9,000
Revenues 9,000
To record Town's portion of gasoline taxes collected by State.

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(7a)
Expenditures 20,000
Town property 20,000
To correct recording of purchase of equipment.

(7b)
Town property 1,000
Proceeds from sale of capital
assets 1,000
To correct recording of sale of equipment.

Closing entries:

Appropriations 380,000
Expenditures 375,000
Encumbrances 4,500
Fund balance—unassigned 500
To close expenditures and encumbrances; $375,000 = $315,000 + $40,000 + $20,000.

Revenues 439,000
Proceeds from sale of capital
assets 1,000
Fund balance—unassigned 20,000
Estimated revenues 460,000
To close revenues accounts; $439,000 = $440,000 - $10,000 + $9,000.

b. Town of Fountain Inn


General Fund
Statement of Revenues, Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2014
(in thousands)
Revenues $ 439,000
Expenditures 375,000
Excess of revenues over (under) expenditures 64,000
Other financing sources (uses):
Proceeds from sale of capital assets 1,000
Excess of revenues and other financing sources over expenditures and
other financing uses 65,000
Fund balances—July 1, 2013 (1) (44,000)
Increase in inventories 3,500
Fund balances—June 30, 2014 (2) $ 24,500

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(1) The beginning total fund balance is $(44,000), calculated as follows:


Fund balances, beginning (plug) $ (44,000)
Add: Amount credited in budget entry ($460,000 estimated revenues
less $380,000 appropriations) 80,000
Amount per trial balance $ 36,000

(2) Nonspendable $ 3,500


Assigned 4,500
Unassigned 16,500
Total fund balances $24,500

Town of Fountain Inn


General Fund
Balance Sheet
June 30, 2014
(in thousands)
Assets
Cash $ 28,000
Taxes receivable—delinquent $ 10,000
Allowance for uncollectible taxes (10,000) 0
Due from enterprise fund 2,000
Due from State 9,000
Supplies inventory 3,500
Total assets $ 42,500
Liabilities and fund balances
Accounts payable $ 18,000
Fund balances:
Nonspendable 3,500
Assigned 4,500
Unassigned 16,500
Total liabilities and fund balances $ 42,500

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P10.4 Reconstructing General Fund Journal Entries

(in thousands)

Cash 23,000
Investments 23,000
To record liquidation of investments.

Due from state government 49,000


Revenues 49,000
To record anticipated state grant.

Cash 105,000
Due from federal
government 105,000
To record receipt of grant from federal government.

Expenditures—prior year
encumbrances 7,000
Accounts payable 7,000
To record expenditures for prior year's encumbrances.

Expenditures 92,000
Accounts payable 92,000
To record expenditures.

Computation of expenditures:
Unassigned fund balance decrease ($78,000 - $120,000) $ (42,000)
Decrease from budget entry (30,000)
Increase from prior year's encumbrances 1,000
Revenues less than budgeted (16,000)
Expenditures less than appropriations (plug) 3,000
Unassigned fund balance decrease (42,000)
Appropriations 95,000
Excess of appropriations over expenditures (3,000)
Expenditures $ 92,000

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Accounts payable 109,000


Cash 109,000
To record payment of accounts payable; $109,000 = $42,000 + $7,000 +
$92,000 - $32,000.

Revenues 49,000
Fund balance—unassigned 16,000
Estimated revenues 65,000
To close revenues.

Appropriations 95,000
Expenditures 92,000
Fund balance—unassigned 3,000
To close expenditures.

Fund balance—assigned 8,000


Expenditures—prior year
encumbrances 7,000
Fund balance—unassigned 1,000
To close prior year encumbrance accounts.

P10.5 General Fund—Corrections, Adjustments, and Financial Statements

a. Reclassification and adjusting entries for general fund (in thousands):

(1)
Due from Water Utility Fund 1,500
Accounts receivable 1,500
To reclassify receivable from water utility fund.

(2a)
Taxes receivable—delinquent 30,000
Taxes receivable—current 30,000
To reclassify current taxes now considered delinquent.

(2b)
Revenues 24,000
Allow. for uncollectible
taxes—delinquent 24,000
To establish an allowance account for taxes estimated to be uncollectible.

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(3)
Expenditures 52,000
Bonds payable 52,000
To correct recording of retirement of general obligation bonds and payment of interest.

(4)
Supplies inventory 44,000
Fund balance—
nonspendable 44,000
To record supplies inventory at June 30, 2013: Inventory on hand at June 30, 2013 =
$128,000 - $84,000 = $44,000.

(5a)
Expenditures—prior year
encumbrances 11,200
Expenditures 11,200
To record purchase orders outstanding at June 30, 2012, and charged to expenditures in the
following year.

(5b)
Fund balance—unassigned 11,200
Fund balance—assigned 11,200
To adjust fund balance at beginning of year.

(5c)
Encumbrances 5,000
Fund balance—assigned 5,000
To record encumbrances for purchase orders at June 30, 2013.

(6)
Due from State Revenue Dept. 34,000
Revenues 34,000
To record Town's portion of state tax due from State.

(7)
Expenditures 90,000
General property 90,000
To correct recording of purchase of equipment.

General property 4,600


Proceeds from sale of
capital assets 4,600
To correct recording of sale of equipment.

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Closing entries:

Appropriations 520,000
Expenditures 512,800
Encumbrances 5,000
Fund balance—unassigned 2,200
To close expenditures and encumbrances;$512,800 = $382,000 + $52,000 - $11,200 +
$90,000.

Revenues 570,000
Proceeds from sale of capital
assets 4,600
Estimated revenues 520,000
Fund balance—unassigned 54,600
To close revenues and other financing sources; $570,000 = $560,000 - $24,000 + $34,000.

Fund balance—assigned 11,200


Expenditures—prior year
encumbrances 11,200
To close prior year encumbrance accounts.

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b. Salleytown
Statement of Revenues, Expenditures, and Changes in Fund Balances
General Fund
For the Year Ended June 30, 2013
(in thousands)
Revenues $ 570,000
Expenditures:
Operating expenditures (1) $ 370,800
Debt service: principal 40,000
Debt service: interest 12,000
Capital outlay 90,000 512,800
Excess of revenues over expenditures 57,200
Other financing sources (uses):
Proceeds from sale of capital assets 4,600
Excess of revenues and other financing sources over
expenditures and other financing uses 61,800
Fund balances—July 1, 2012 (2) 7,700
Prior year expenditures (11,200)
Increase in nonspendable fund balance 44,000
Fund balances—June 30, 2013 (3) $ 102,300

(1) Operating expenditures = total expenditures - debt service payments - capital outlays =
$512,800 - 52,000 - 90,000.
(2) Fund balances—July 1, 2012: Because the budget is balanced (estimated revenues =
appropriations), the fund balance—unassigned reported in the trial balance equals the
fund balance—unassigned prior to the budget entry.
(3) Fund Balances—June 30, 2013 = the sum of all fund balances; see Balance Sheet in
requirement c.: $102,300 = $5,000 + $44,000 + $53,300.

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c. Salleytown
Balance Sheet—General Fund
As of June 30, 2013
(in thousands)
Assets
Cash $ 16,800
Short-term investments 40,000
Accounts receivable 10,000
Due from Water Utility 1,500
Due from State 34,000
Taxes receivable—delinquent (net of allowance of $24,000) 6,000
Supplies 44,000
Total assets $152,300
Liabilities and fund balances
Accounts payable $ 50,000
Fund balances:
Nonspendable 44,000
Assigned 5,000
Unassigned 53,300
Total fund balances 102,300
Total liabilities and fund balances $152,300

P10.6 Comprehensive General Fund Review

Requirement a: Requirement b: Requirement c: Requirement d:


1. D 6. D 11. D 16. C
2. C 7. N 12. C 17. D
3. C 8. C 13. N 18. D
4. C 9. C 14. N 19. C
5. N 10. N 15. N 20. N

Requirement e: Requirement f: Requirement g:


21. N 26. C 37. C
22. N 27. N 38. N
23. C 28. D 39. D
24. D 29. D
25. N 30. C
31. D
32. C
33. N
34. N
35. N
36. N

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P10.7 Comprehensive General Fund—Entries and Statements

a. Journal entries for fiscal 2014 (in thousands):

(1a)
Estimated revenues 30,000
Fund balance—unassigned 2,000
Appropriations 31,200
Estimated other financing
uses 800
To record budget.

(1b)
Taxes receivable—current 37,000
Revenues 30,000
Allow. for uncollectible
taxes—current 7,000
To record tax levy.

(2)
Cash 30,500
Taxes receivable—current 30,500
To record collection of taxes.

(3a)
Allowance for uncollectible
taxes—current 1,250
Revenues 500
Taxes receivable—current 750
To increase revenue by the additional $500 (= $5,500 - $5,000) collected on 2013 taxes,
and write off remaining 2013 receivables.

(3b)
Allowance for uncollectible
taxes—current 4,600
Revenues 4,600
To correct allowance account. Taxes receivable = $6,250 + $37,000 - $30,500 - $750 =
$12,000. Allowance account = $7,000. Ending balance in allowance account should be
20% x $12,000 = $2,400. Adjustment = $4,600.

(4)
Cash 100
Proceeds from sale of
capital assets 100
To record sale of old desks.
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(5)
Expenditures 300
Cash 300
To record purchase of desks.

(6)
Expenditures 400
Accounts payable 400
To record expenditures for repairs and cleaning.

(7)
Expenditures 28,000
Accounts payable 28,000
To record expenditures.

(8a)
Expenditures 500
Inventory 500
To adjust inventory to year-end balance of $1,500.

(8b)
Fund balance—nonspendable 500
Fund balance—unassigned 500
To adjust nonspendable fund balance to $1,500.

(9a)
Accounts payable 31,400
Cash 31,400
To record payment of accounts payable; $31,400 = $3,000 + $400 + $28,000.

(9b)
Encumbrances 600
Fund balance—assigned 600
To record purchase orders.

(10)
Fund balance—assigned 500
Fund balance—unassigned 500
To cancel 2013 encumbrances.

(11)
Transfer out 750
Cash 750
To record transfer to enterprise fund.

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Closing entries at June 30, 2014:

Revenues 35,100
Proceeds from sale of capital
assets 100
Fund balance—unassigned 5,200
Estimated revenues 30,000
To close revenues and other financing sources; $35,100 = $30,000 + $500 + $4,600.

Appropriations 31,200
Estimated other financing uses 800
Expenditures 29,200
Encumbrances 600
Transfer out 750
Fund balance—unassigned 1,450
To close expenditures and encumbrances;
$29,200 = $300 + $400 + $28,000 + $500.

b. Quarryville School District


General Fund
Statement of Revenues, Expenditures, and
Changes in Fund Balances
For the Year Ended June 30, 2014
Revenues $ 35,100
Expenditures 29,200
Excess of revenues over expenditures 5,900
Other financing sources (uses):
Transfer out (750)
Proceeds from sale of capital assets 100
Excess of revenues and other financing sources over expenditures and
other financing uses 5,250
Fund balances—July 1, 2013 8,000*
Fund balances—June 30, 2014 $ 13,250
* $2,000 + $500 + $5,500

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Quarryville School District


General Fund
Balance Sheet
June 20, 2014
(in thousands)
Assets
Cash $ 2,150
Taxes receivable—current (net of $2,400 allowance for uncollectible
taxes) 9,600
Inventory 1,500
Total $13,250
Liabilities and fund balances
Fund balance:
Nonspendable $ 1,500
Assigned 600
Unassigned 11,150
Total $13,250

The T-accounts below show computations for ending balances of cash, taxes receivable,
allowance for uncollectible taxes, and fund balance. The numbers are keyed to the journal
entries from requirement a.

Cash
Beginning balance 4,000
(2) 30,500 300 (5)
(4) 100 31,400 (9a)
750 (11)
Ending balance 2,150

Taxes receivable—current
Beginning balance 6,250
(1b) 37,000 30,500 (2)
750 (3a)
Ending balance 12,000

Allowance for uncollectible taxes—current


Beginning balance 1,250
(3a) 1,250 7,000 (1b)
(3b) 4,600
Ending balance 2,400

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Fund Balance—unassigned
Beginning balance 5,500
(1a) 2,000 500 (8b)
500 (10)
5,200 (c)
1,450 (c)
Ending balance 11,150

(Note: c-closing entry)

P10.8 Employee Compensated Absences

a.
Expenditures for compensated
absences 25,000,000
Cash 25,000,000

No liability for future compensated absence payments is reported.

b.
Compensated absence expense (1)19,164,000
Liability for compensated
absences 5,836,000
Cash 25,000,000
(1) $19,164,000 = $214,113,000 - $219,949,000 + $25,000,000.

The general fund would report a total liability for compensated absences at fiscal year-end
of $214,113,000.

c. The general fund balance sheet, prepared using modified accrual accounting, will not
reveal any information concerning the State’s future obligation for compensated absences.
Expenditures are recorded as incurred.

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P10.9 General Fund Reporting

a. Budget and encumbrance entries

Estimated revenues 8,500,000


Estimated other financing sources 500,000
Fund balance—unassigned 50,000
Appropriations 8,800,000
Estimated other
financing uses 250,000
To record budget entry.

Encumbrances 78,000
Fund balance—
unassigned 78,000
To re-establish beginning of year encumbrances.

Net effect on fund balance—unassigned: $78,000 - $50,000 = $28,000 cr

b. Entries made during 2014 for property taxes (not required):

Property taxes receivable—


current 8,600,000
Allow. for uncoll. taxes—
current 100,000
Property tax revenues 8,500,000
To accrue property taxes for 2014.

Allowance for uncollectible


taxes—current 60,000
Property taxes
receivable—current 60,000
To write off current property taxes.

Allowance for uncollectible


taxes—delinquent 10,000
Property taxes
receivable—delinquent 10,000
To write off delinquent property taxes.

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Cash 15,000
Allowance for uncollectible
taxes—delinquent 15,000
Property taxes
receivable—delinquent 15,000
Property tax revenues 15,000
To record collection of delinquent property taxes.

Cash 8,420,000
Property taxes
receivable—current 8,420,000

To record collection of current property taxes;


$8,420,000 = $8,600,000 - ($100,000 - $40,000) - $120,000.

Property taxes receivable—


delinquent 120,000
Allowance for uncollectible
taxes—current 40,000
Property tax revenues 80,000
Allow. for uncoll. taxes—
delinquent 120,000
Property taxes
receivable—current 120,000

To fully reserve unpaid property taxes and reclassify them as delinquent.

Property tax revenues for 2014 = $8,500,000 + $15,000 - $80,000 = $8,435,000.

Cash collected for 2014 = $8,420,000 + $15,000 = $8,435,000.

c. Zero. Interest is not accrued until the year it will be paid.

d. Other entries for 2014 (not required):

Cash 500,000
Bond proceeds 500,000
To record issuance of bonds.

Cash 6,000
Proceeds from sale of
capital assets 6,000
To record sale of equipment.

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Transfers out 250,000


Cash 250,000
To record transfers to capital projects and enterprise funds.

Expenditures 8,720,000
Cash or accounts payable
8,720,000
To record expenditures for the year.

Encumbrances 50,000
Fund balance—assigned 50,000
To record net increase in encumbrances for the year.

Closing entries for 2014:


Property tax revenues 8,435,000
Bond proceeds 500,000
Proceeds from sale of capital
assets 6,000
Fund balance—unassigned 59,000
Estimated revenues 8,500,000
Estimated other financing
sources 500,000
To close revenue and other financing sources accounts.

Appropriations 8,800,000
Estimated other financing uses 250,000
Fund balance—unassigned 50,000
Expenditures 8,720,000
Transfers out 250,000
Encumbrances 130,000
To close expenditure, encumbrance, and other financing uses accounts.

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e. City of Middletown
Budgetary Comparison Schedule
For the year 2014
VarianceB
Favorable
Budget Actual (Unfavorable)
Property tax revenues $ 8,500,000 $8,435,000 $ (65,000)
Expenditures 8,800,000 8,720,000 80,000
Excess of revenues over (under)
expenditures (300,000) (285,000) 15,000
Other financing sources (uses):
Transfers out (250,000) (250,000) ---
Proceeds from sale of capital
assets --- 6,000 6,000
Bond proceeds 500,000 500,000 ---
Total other financing sources 250,000 256,000 6,000
Excess of revenues & other
sources over (under) expenditures
& other uses $ (50,000) $ (29,000) $ 21,000

P10.10 General Fund—Entries and Financial Statements

a. 2014 journal entries

Beginning of year:

Encumbrances 6,000
Fund balance—unassigned 6,000
To restore beginning of year encumbrances.

Estimated revenues—
property taxes 500,000
Estimated revenues—
licenses and fines 35,000
Estimated revenues—federal
grants 100,000
Fund balance—unassigned 31,000
Appropriations—
general government 250,000
Appropriations—
human services 402,000
Estimated other financing uses 14,000
To establish budget.

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Property taxes receivable—


current 500,000
Allowance for uncollectible
taxes—current 50,000
Property tax revenues 450,000
To accrue property taxes.

Cash 430,000
Property taxes receivable—
current 430,000
To record collection of current property taxes.

Cash 60,000
Allowance for uncollectible
taxes—delinquent 40,000
Property taxes receivable—
delinquent 65,000
Property tax revenues 35,000
To record collection of delinquent property taxes and write-off of remainder.

Property taxes receivable—


delinquent 70,000
Allowance for uncollectible
taxes—current 50,000
Property tax revenues 5,000
Property taxes receivable—
current 70,000
Allowance for uncollectible
taxes—delinquent 55,000
To reclassify uncollected taxes as delinquent and provide for a $55,000 allowance.

Due from federal


government 100,000
Revenues—federal grants 100,000
To accrue federal grants.

Cash 95,000
Due from federal government 95,000
To record collection of federal grants.

Cash 34,000
Revenues—licenses and fines 34,000
To record collection of license and fine revenues.

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Expenditures—general
government 234,000
Expenditures—human
services 400,000
Inventories ($18,000 -
$15,000) 3,000
Accounts payable ($30,000 -
$15,000) 15,000
Cash 652,000
To record cash expenditures.

Fund balance—unassigned 3,000


Fund balance—nonspendable 3,000
To adjust the nonspendable fund balance to the ending $18,000 inventory balance.

Fund balance—assigned 2,000


Encumbrances 2,000
To record net reduction in encumbrances for the year.

Transfers out 14,000


Cash 14,000
To record transfers to debt service fund.

Cash 2,000
Due from other funds 2,000
To record collection of cash advance to enterprise fund.

Due from other funds 5,000


Cash 5,000
To record advance to capital projects fund.

Cash 25,000
Due to other funds 25,000
To record advance from enterprise fund.

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Closing entries:

Property tax revenues


($450,000 + $35,000 -
$5,000) 480,000
Revenues—licenses and
fines 34,000
Revenues—federal grants 100,000
Fund balance—unassigned 21,000
Estimated revenues—property
taxes 500,000
Estimated revenues—licenses
and fines 35,000
Estimated revenues—federal
grants 100,000
To close revenues.

Appropriations—
general government 250,000
Appropriations—
Human Services 402,000
Estimated other financing
uses 14,000
Expenditures—general
government 234,000
Expenditures—human services 400,000
Transfers out 14,000
Encumbrances 4,000
Fund balance—unassigned 14,000
To close expenditures, encumbrances and transfers.

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b. (1)
City of Los Alvos
Statement of Revenues, Expenditures, and
Changes in Fund BalancesCGeneral Fund
For the Year Ended December 31, 2014
Revenues
Property taxes $ 480,000
Licenses and fines 34,000
Federal grants 100,000
Total revenues 614,000
Expenditures
General government 234,000
Human services 400,000
Total expenditures 634,000
Excess of revenues over (under) expenditures (20,000)
Other financing sources (uses)
Transfers out (14,000)
Total other financing sources (uses) (14,000)
Excess of revenues and other financing sources over (under)
expenditures and other financing uses (34,000)
Fund balances—December 31, 2013 52,000
Fund balances—December 31, 2014 $ 18,000

(2)
City of Los Alvos
Balance SheetCGeneral Fund
December 31, 2014
Assets
Cash $ 5,000
Property taxes receivable—delinquent (net) 15,000
Due from other funds 5,000
Due from federal government 15,000
Inventories 18,000
Total assets $ 58,000
Liabilities and fund balances
Accounts payable $ 15,000
Due to other funds 25,000
Total liabilities 40,000
Fund balances:
Nonspendable 18,000
Assigned 4,000
Unassigned (4,000)
Total fund balances 18,000
Total liabilities and fund balances $ 58,000
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(3)
City of Los Alvos
Budgetary Comparison ScheduleCGeneral Fund
For the Year Ended December 31, 2014
Variance--
Favorable
Budget Actual (Unfavorable)
Revenues
Property taxes $ 500,000 $ 480,000 $ (20,000)
Licenses and fines 35,000 34,000 ( 1,000)
Federal grants 100,000 100,000 --
Total revenues 635,000 614,000 (21,000)
Expenditures
General government 250,000 234,000 16,000
Human services 402,000 400,000 2,000
Total expenditures 652,000 634,000 18,000
Excess of revenues over (under)
expenditures (17,000) (20,000) (3,000)
Other financing sources (uses)
Transfers out 14,000 14,000 --
Total other financing sources (uses) (14,000) (14,000) --
Excess of revenues and other
financing sources over (under)
expenditures and other financing uses (31,000) (34,000) (3,000)
Fund balance—December 31, 2013 52,000 52,000 --
Fund balance—December 31, 2014 $ 21,000 $ 18,000 $ (3,000)

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P10.11 General Fund—Budget and Closing Entries, Financial Statements

a.
Estimated revenues 260,000
Estimated other financing sources 2,000
Appropriations 257,000
Estimated other
financing uses 4,800
Fund balance—
unassigned 200
To establish budget.

b. In addition to the budget entry, an entry was made at the beginning of the year to reverse
the encumbrances write-off from 2013:

Encumbrances 800
Fund balance—
unassigned 800

Therefore the beginning fund balance—unassigned was $23,000 - $200 - $800 = $22,000.

c.
Revenues—property taxes 55,000
Revenues—income taxes 180,000
Revenues—fines and licenses 18,000
Revenues—state grants 6,000
Proceeds from sale of capital assets 2,300
Fund balance—unassigned 700
Estimated revenues 260,000
Estimated other
financing sources 2,000
To close revenues and other financing sources.

Appropriations 257,000
Estimated other financing uses 4,800
Encumbrances 500
Expenditures—general
government 130,400
Capital outlay 11,000
Transfers out 4,500
Debt service—interest 35,000
Debt service—principal 80,000
Fund balance—
unassigned 400
To close expenditures and other financing uses.
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d. City of Akron General Fund


Statement of Revenues, Expenditures, and Changes in Fund Balances
For the Year Ended December 31, 2014
(in thousands)
Revenues
Property taxes $ 55,000
Income taxes 180,000
Fines and licenses 18,000
State grants 6,000
Total revenues 259,000
Expenditures
General government 130,400
Capital outlay 11,000
Debt service
Interest payments 35,000
Principal payments 80,000
Total expenditures 256,400
Excess of revenues over (under) expenditures 2,600
Other financing sources (uses)
Proceeds from sale of capital assets 2,300
Transfers out (4,500)
Total other financing sources (uses) (2,200)
Excess of revenues and other financing sources over expenditures and
other financing uses 400
Fund balance—December 31, 2013 (1) 22,800
Fund balance—December 31, 2014 (2) $ 23,200

(1) Fund balance—unassigned = $22,000


Fund balance—assigned = 800
$22,800

(2) Fund balance—unassigned: $23,000 - $700 + $400 = $22,700


Fund balance—assigned = 500
$23,200

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e. City of Akron General Fund


Balance Sheet
At December 31, 2014
(in thousands)
Assets
Cash $ 5,000
Investments 14,000
Property taxes receivable (net) 36,000
Due from other funds 9,000
Total assets $ 64,000
Liabilities and fund balances
Accounts payable $ 33,200
Due to other funds 7,600
Total liabilities 40,800
Fund balances:
Assigned 500
Unassigned 22,700
Total fund balances 23,200
Total liabilities and fund balances $ 64,000

P10.12 General Fund—Entries and Financial Statements

a.
Estimated revenues 410,500
Fund balance—unassigned 9,500
Appropriations 370,000
Estimated other
financing uses 50,000
To establish budget.

Encumbrances 3,000
Fund balance—
unassigned 3,000
To reverse outstanding encumbrance closing entry from last year.

State grant receivable 40,000


State grant revenue 40,000
To accrue state grant.

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b. Transactions for the year:

Taxes receivable 300,000


Property tax revenue 285,000
Allowance for
uncollectible taxes 15,000
To record property tax bills.

Cash 280,000
Taxes receivable 280,000
To record property tax collection.

Cash 25,000
State grant receivable 25,000
To record state grant cash received.

Cash 10,000
Property tax revenue 10,000
To record collection of delinquent taxes.

Allowance for uncollectible taxes—


delinquent 22,500
Taxes receivable—
delinquent 22,500
To write off uncollected delinquent taxes.

Transfers out 50,000


Cash 50,000
To record transfer to special revenue fund.

Cash 65,000
Fee and license revenue 65,000
To record fee and license revenue received in cash.

Fund balance—assigned 3,000


Encumbrances 3,000

Expenditures 3,200
Accounts payable 3,200
To record receipt of inventories on purchase orders sent last year.

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Due from capital projects fund 8,000


Cash 8,000
To record advance to capital projects fund.

Cash 12,000
Due from special
revenue fund 12,000
To record collection of loan to special revenue fund.

Expenditures 45,000
Accounts payable 45,000
To record inventories purchased on account.

Expenditures 320,000
Accounts payable 320,000
To record other expenditures for the year.

Encumbrances 4,000
Fund balance—assigned 4,000
To record purchase orders outstanding at year-end.

Accounts payable 367,000


Cash 367,000
To record payment of accounts payable.

Adjusting entries at year-end:


Fund balance—nonspendable 1,500
Inventories 1,500
To adjust the inventories balance to current year-end amount.

Property tax revenue 5,000


Allowance for
uncollectible taxes 5,000
To fully reserve uncollected taxes at year-end.

Taxes receivable—delinquent 20,000


Allowance for uncollectible taxes 20,000
Taxes receivable 20,000
Allowance for
uncollectible taxes—
delinquent 20,000
To reclassify uncollected taxes as delinquent.

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c. Closing entries:
Property tax revenue 290,000
Fee and license revenue 65,000
State grant revenue 40,000
Fund balance—unassigned 15,500
Estimated revenue 410,500
To close revenues against estimated revenues.

Appropriations 370,000
Estimated other financing uses 50,000
Fund balance—unassigned 2,200
Transfers out 50,000
Expenditures 368,200
Encumbrances 4,000
To close expenditures and other financing uses against appropriations and estimated other
financing uses.

d. Montana County General Fund


Statement of Revenues, Expenditures, and Changes in Fund Balances
For the Year Ended June 30, 2013
(in thousands)
Revenues:
Property taxes $ 290,000
Fees and licenses 65,000
State grant 40,000
Total revenues 395,000
Expenditures (368,200)
Excess of revenues over (under) expenditures 26,800
Other financing sources (uses)
Transfers out (50,000)
Excess of revenues over (under) expenditures and other financing uses (23,200)
Fund balances—July 1, 2012 (1) 135,000
Change in fund balance—nonspendable (1,500)
Fund balances—June 30, 2013 (2) $ 110,300

(1) Fund balance—assigned $ 3,000


Fund balance—nonspendable 7,500
Fund balance—unassigned 124,500
$135,000

(2) Fund balance—assigned $ 4,000


Fund balance—nonspendable 6,000
Fund balance—unassigned 100,300
$110,300

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e. Montana County General Fund


Balance Sheet
At June 30, 2013
(in thousands)
Assets
Cash $ 87,000
Property taxes receivable (net of $20,000 allowance for
uncollectibles) --
State grant receivable 15,000
Due from special revenue fund 3,000
Due from capital projects fund 8,000
Inventories 6,000
Total assets $ 119,000
Liabilities and fund balances
Accounts payable $ 8,700
Fund balances:
Assigned 4,000
Nonspendable 6,000
Unassigned 100,300
Total fund balances 110,300
Total liabilities and fund balances $ 119,000

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50 Advanced Accounting, 2nd Edition