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c. Credit to Inventory of Supplies for $10,000.
d. Credit to Expenditures for $10,000.
3. Goods for which a purchase order had been placed at an estimated cost of
$1,000 were received at an actual cost of $985. The journal entry in the Gen-eral Fund to record the receipt of the goods will include a:
a. Debit to Reserve for Encumbrances for $1,000.
b. Credit to Vouchers Payable for $985.
c. Debit to Expenditures for $985.
d. All of the above are correct.
4. The City of Fenton levied $3,000,000 of General Fund property taxes for the fiscal year ending December 31, 2011, with an estimated uncollectible amount of $200,000. During 2011 and January and February of 2012,
$2,500,000 of the levy is expected to be collected; however, $300,000 of the levy is not expected to be collected until after February 2012. The amount of property tax revenues to be recognized in FY 2011 is:
a. $3,000,000 in governmental activities at the government-wide level and
$2,800,000 in the General Fund.
b. $2,800,000 in governmental activities at the government-wide level and
$2,500,000 in the General Fund.
c. $2,500,000 in governmental activities at the government-wide level and
$2,800,000 in the General Fund.
d. $2,500,000 in governmental activities at the government-wide level and
$2,500,000 in the General Fund.
5. Which of the following items would be reported as a program revenue on the government-wide statement of activities?
a. Sales taxes.
b. Interest and penalties on taxes.
c. Unrestricted federal grants.
d. Fines and forfeits.
6. Internal exchange transactions in which a governmental fund receives goods or services from an enterprise fund are:
a. Reported as expenditures by the governmental fund and as revenues by the enterprise fund.
b. Reported as interfund transfers out by the governmental fund and as inter-fund transfers in by the internal service inter-fund.
c. Reported as expenses by governmental funds and as revenues by the enter-prise fund.
d. Either a or b, depending on local policy.
7. Which of the following revenues would be classified as an imposed nonex-change revenue?
a. Sales taxes.
b. Federal and state grants.
c. Property taxes.
d. Income taxes.
8. Which of the following transactions is reported on the government-wide financial statements?
a. An interfund loan from the General Fund to a special revenue fund.
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b. Equipment used by the General Fund is transferred to an internal service fund that predominantly serves departments that are engaged in govern-mental activities.
c. The City Airport Fund, an enterprise fund, transfers a portion of board-ing fees charged to passengers to the General Fund.
d. An interfund transfer is made between the General Fund and the Debt Service Fund.
9. A special revenue fund that administers a program funded by a reimbursement-type (expenditure-driven) federal grant should recognize revenue:
a. When notified of grant approval.
b. When qualifying expenditures have been made.
c. When cash is received.
d. When the special revenue fund has paid for all of the services it has provided.
10. A city received a $1,000,000 cash contribution under a trust agreement in which investment earnings (but not the principal amount) can be used to maintain the city cemetery. This contribution should be recorded in a (an):
a. Fiduciary fund.
b. Permanent fund.
c. Special revenue fund.
d. Internal service fund.
4–3 Calculating Required Tax Anticipation Financing and Recording Issuance of Tax Anticipation Notes. The City of Perrin collects its annual property taxes late in its fiscal year. Consequently, each year it must finance part of its oper-ating budget using tax anticipation notes. The notes are repaid upon collection of property taxes. On April 1, 2011, the City estimated that it will require
$2,470,000 to finance governmental activities for the remainder of the 2011 fiscal year. On that date, it had $740,000 of cash on hand and $830,000 of current liabilities. Collections for the remainder of FY 2011 from revenues other than current property taxes and from delinquent property taxes, including interest and penalties, were estimated at $1,100,000.
Required
a. Calculate the estimated amount of tax anticipation financing that will be required for the remainder of FY 2011. Show work in good form.
b. Assume that on April 2, 2011, the City of Perrin borrowed the amount cal-culated in part a by signing tax anticipation notes bearing 5 percent per annum to a local bank. Record the issuance of the tax anticipation notes in the general journals of the General Fund and governmental activities at the government-wide level.
c. By October 1, 2011, the City had collected a sufficient amount of current property taxes to repay the tax anticipation notes with interest. Record the repayment of the tax anticipation notes and interest in the general journals of the General Fund and governmental activities at the government-wide level.
4–4 Property Tax Calculations and Journal Entries. The Village of Darby’s bud-get calls for property tax revenues for the fiscal year ending December 31, 2011, of $2,660,000. Village records indicate that, on average, 2 percent of taxes levied
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are not collected. The county tax assessor has assessed the value of taxable prop-erty located in the village at $135,714,300.
Required
a. Calculate to the nearest penny what tax rate per $100 of assessed valuation is required to generate a tax levy that will produce the required amount of revenue for the year.
b. Record the tax levy for 2011 in the General Fund. (Ignore subsidiary detail and entries at the government-wide level.)
c. By December 31, 2011, $2,540,000 of the current property tax levy had been collected. Record the amounts collected and reclassify the uncollected amount as delinquent. Interest and penalties of 6 percent were immediately due on the delinquent taxes, but the finance director estimates that 10 percent will not be collectible. Record the interest and penalties receivable. (Round all amounts to the nearest dollar.)
4–5 Adjusting Entries for Inventory of Supplies. The Village of Baxter uses the purchases method of accounting for its inventories of supplies in the General Fund. GASB standards, however, require that the consumption method be used for the government-wide financial statements. Because its computer system is very limited, the Village uses a periodic inventory system, adjusting inventory balances based on a physical inventory of supplies at year-end. When supplies are received during the year, the Village records expenditures and expenses in the general journals of the General Fund and governmental activities, respec-tively. The Village’s inventory records showed the following information for the fiscal year ending December 31, 2011:
Balance of inventory, December 31, 2010 $140,000
Purchases of inventory during 2011 720,000
Balance of inventory, December 31, 2011 155,000 Required
a. Provide the required adjusting entries at the end of 2011, assuming that the December 31, 2011, balance of Inventory of Supplies has been confirmed by physical count. Make entries in the general journals of both the General Fund (omitting subsidiary detail) and governmental activities at the government-wide level.
b. Assume that the General Fund uses the consumption method for reporting inventories of supplies rather than the purchases method. Make the required adjusting entries for the General Fund and governmental activities at the government-wide level.
4–6 Special Revenue Fund, Voluntary Nonexchange Transactions. The City of Eldon applied for a competitive grant from the state government for park improvements such as upgrading hiking trails and bike paths. On May 1, 2011, the City was notified that it had been awarded a grant of $200,000 for the pro-gram, to be received in two installments on July 1, 2011, and July 1, 2012. The grant stipulates that $100,000 is for use in each of the city’s fiscal years ending June 30, 2012, and June 30, 2013. Any amounts not expended during FY 2012 can be carried over for use in FY 2013. During FY 2012, the city expended
$90,000 for park improvements from grant resources.
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Required
For the special revenue fund, provide the appropriate journal entries, if any, that would be made for the following:
1. May 1, 2011, notification of grant approval.
2. July 1, 2011, receipt of first installment of the grant.
3. During FY 2011 to record expenditures under the grant.
4. July 1, 2012.
4–7 Closing Journal Entries. At the end of a fiscal year, budgetary and operating statement control accounts in the general ledger of the General Fund of Dade City had the following balances: Appropriations, $6,224,000; Estimated Other Financing Uses, $2,776,000; Estimated Revenues, $7,997,000; Encumbrances,
$0; Expenditures, $6,192,000; Other Financing Uses, $2,770,000; and Revenues,
$7,980,000. Appropriations included the authorization to order a certain item at a cost not to exceed $65,000; this was not ordered during the year because it will not be available until late in the following year.
Required
Show in general journal form the entry needed to close all of the preceding accounts that should be closed as of the end of the fiscal year.
4–8 Interfund and Interactivity Transactions. The following transactions affected various funds and activities of the City of Atwater.
1. The Fire Department, a governmental activity, purchased $100,000 of water from the Water Utility Fund, a business-type activity.
2. The Municipal Golf Course, an enterprise fund, reimbursed the General Fund
$1,000 for office supplies that the General Fund had purchased on its behalf and that were used in the course of the fiscal year.
3. The General Fund made a long-term loan in the amount of $50,000 to the Central Stores Fund, an internal service fund that services city departments.
4. The General Fund paid its annual contribution of $80,000 to the debt ser-vice fund for interest and principal on general obligation bonds due during the year.
5. The $5,000 balance in the capital projects fund at the completion of con-struction of a new City Hall was transferred to the General Fund.
Required
a. Make the required journal entries in the general journal of the General Fund and any other fund(s) affected by the interfund transactions described. Also make entries in the governmental activities journal for any transaction(s) affecting a governmental fund. Do not make entries in the subsidiary ledgers.
b. Why is it unnecessary to make entries in a business-type activities journal for any transaction(s) affecting proprietary funds? Are internal service funds any different?
4–9 Transactions and Budgetary Comparison Schedule. The following transac-tions occurred during the 2011 fiscal year for the City of Fayette. For budgetary purposes, the city reports encumbrances in the Expenditures section of its bud-getary comparison schedule for the General Fund but excludes expenditures chargeable to a prior year’s appropriation.
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1. The budget prepared for the fiscal year 2011 was as follows:
Estimated Revenues:
Taxes $1,943,000
Licenses and permits 372,000
Intergovernmental revenue 397,000
Miscellaneous revenues 62,000
Total estimated revenues 2,774,000
Appropriations:
General government 471,000
Public safety 886,000
Public works 650,000
Health and welfare 600,000
Miscellaneous appropriations 86,000
Total appropriations 2,693,000
Budgeted increase in fund balance $ 81,000
2. Encumbrances issued against the appropriations during the year were as follows:
General government $ 58,000
Public safety 250,000
Public works 392,000
Health and welfare 160,000
Miscellaneous appropriations 71,000
Total $931,000
3. The current year’s tax levy of $2,005,000 was recorded; uncollectibles were estimated as $65,000.
4. Tax collections from prior years’ levies totaled $132,000; collections of the current year’s levy totaled $1,459,000.
5. Personnel costs during the year were charged to the following appropriations in the amounts indicated. Encumbrances were not recorded for personnel costs.
Since no liabilities currently exist for withholdings, you may ignore any FICA or federal or state income tax withholdings. (Note: Expenditures charged to Mis-cellaneous Appropriations should be treated as General Government expenses in the governmental activities general journal at the government-wide level.)
General government $ 411,000
Public safety 635,000
Public works 254,000
Health and welfare 439,000
Miscellaneous appropriations 11,100
Credit to Vouchers Payable $1,750,100
6. Invoices for all items ordered during the prior year were received and approved for payment in the amount of $14,470. Encumbrances had been recorded in the prior year for these items in the amount of $14,000. The amount chargeable to each year’s appropriations should be charged to the Public Safety appropriation.
7. Invoices were received and approved for payment for items ordered in docu-ments recorded as encumbrances in Transaction (2) of this problem. The fol-lowing appropriations were affected.
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Actual Estimated Liability Liability
General government $ 52,700 $ 52,200
Public safety 236,200 240,900
Public works 360,000 357,000
Health and safety 130,600 130,100
Miscellaneous appropriations 71,000 71,000
$850,500 $851,200
8. Revenue other than taxes collected during the year consisted of licenses and permits, $373,000; intergovernmental revenue, $400,000; and $66,000 of mis-cellaneous revenues. For purposes of accounting for these revenues at the gov-ernment-wide level, the intergovernmental revenues were operating grants and contributions for the Public Safety function. Miscellaneous revenues are not identifiable with any function and therefore are recorded as General Revenues at the government-wide level.
9. Payments on Vouchers Payable totaled $2,505,000.
Additional information follows: The General Fund Fund Balance account had a credit balance of $82,900 as of December 31, 2010; no entries have been made in the Fund Balance account during 2011.
Required
a. Record the preceding transactions in general journal form for fiscal year 2011 in both the General Fund and governmental activities general journals.
b. Prepare a budgetary comparison schedule for the General Fund of the City of Fayette for the fiscal year ending December 31, 2011, as shown in Illus-tration 4–7. Do not prepare a government-wide statement of activities since other governmental funds would affect that statement.
4–10 Operating Transactions, Special Topics, and Financial Statements. The City of Ashland’s General Fund had the following post-closing trial balance at April 30, 2010, the end of its fiscal year:
Debits Credits
Cash $ 97,000
Taxes Receivable—Delinquent 583,000
Estimated Uncollectible Delinquent Taxes $189,000
Interest and Penalties Receivable 26,280
Estimated Uncollectible Interest and Penalties 11,160
Inventory of Supplies 16,100
Vouchers Payable 148,500
Due to Federal Government 59,490
Reserve for Inventory of Supplies 16,100
Fund Balance 298,130
$722,380 $722,380
During the year ended April 30, 2011, the following transactions, in summary form, with subsidiary ledger detail omitted, occurred:
1. The budget for FY 2011 provided for General Fund estimated revenues totaling $3,140,000 and appropriations totaling $3,100,000.
2. The city council authorized temporary borrowing of $300,000 in the form of a 120-day tax anticipation note. The loan was obtained from a local bank at a discount of 6 percent per annum (debit Expenditures for discount).
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3. The property tax levy for FY 2011 was recorded. Net assessed valuation of taxable property for the year was $43,000,000, and the tax rate was $5 per $100. It was estimated that 4 percent of the levy would be uncollectible.
4. Purchase orders and contracts were issued to vendors and others in the amount of $2,059,000.
5. The County Board of Review discovered unassessed properties with a total taxable value of $500,000. The owners of these properties were charged with taxes at the city’s General Fund rate of $5 per $100 assessed value.
(You need not adjust the Estimated Uncollectible Current Taxes account.) 6. $1,961,000 of current taxes, $383,270 of delinquent taxes, and $20,570 of
interest and penalties were collected.
7. Additional interest and penalties on delinquent taxes were accrued in the amount of $38,430, of which 30 percent was estimated to be uncollectible.
8. Because of a change in state law, the city was notified that it will receive
$80,000 less in intergovernmental revenues than was budgeted.
9. Total payroll during the year was $819,490. Of that amount, $62,690 was withheld for employees’ FICA tax liability, $103,710 for employees’ federal income tax liability, and $34,400 for state taxes; the balance was paid to employees in cash.
10. The employer’s FICA tax liability was recorded for $62,690.
11. Revenues from sources other than taxes were collected in the amount of
$946,700.
12. Amounts due the federal government as of April 30, 2011, and amounts due for FICA taxes, and state and federal withholding taxes during the year were vouchered.
13. Purchase orders and contracts encumbered in the amount of $1,988,040 were filled at a net cost of $1,987,570, which was vouchered.
14. Vouchers payable totaling $2,301,660 were paid after deducting a credit for purchases discount of $8,030 (credit Expenditures).
15. The tax anticipation note of $300,000 was repaid.
16. All unpaid current year’s property taxes became delinquent. The balances of the current tax receivables and related uncollectibles were transferred to delinquent accounts.
17. A physical inventory of materials and supplies at April 30, 2011, showed a total of $19,100. Inventory is recorded using the purchases method in the General Fund; the consumption method is used at the government-wide level.
Required
a. Record in general journal form the effect of the above transactions on the General Fund and governmental activities for the year ended April 30, 2011.
Do not record subsidiary ledger debits and credits.
b. Record in general journal form entries to close the budgetary and operat-ing statement accounts.
c. Prepare a General Fund balance sheet as of April 30, 2011.
d. Prepare a statement of revenues, expenditures, and changes in fund balance for the year ended April 30, 2011. Do not prepare the government-wide financial statements.
4–11 Permanent Fund and Related Special Revenue Fund Transactions. Annabelle Benton, great-granddaughter of the founder of the Town of Benton, made a cash contribution in the amount of $500,000 to be held as an endowment. To account
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for this endowment, the town has created the Alex Benton Park Endowment Fund. Under terms of the agreement, the town must invest and conserve the principal amount of the contribution in perpetuity. Earnings, measured on the accrual basis, must be used to maintain Alex Benton Park in an “attractive manner.” All changes in fair value are treated as adjustments of fund balance of the permanent fund and do not affect earnings. Earnings are transferred peri-odically to the Alex Benton Park Maintenance Fund, a special revenue fund.
Information pertaining to transactions of the endowment and special revenue funds for the fiscal year ended June 30, 2011, follows:
1. The contribution of $500,000 was received and recorded on December 31, 2010.
2. On December 31, 2010, bonds having a face value of $400,000 were pur-chased for $406,300, plus three months of accrued interest of $6,000. A cer-tificate of deposit with a face and fair value of $70,000 was also purchased on this date. The bonds mature on October 1, 2019 (105 months from date of purchase), and pay interest of 6 percent per annum semiannually on April 1 and October 1. The certificate of deposit pays interest of 4 percent per annum payable on March 31, June 30, September 30, and December 31.
3. On January 2, 2011, the town council approved a budget for the Alex Ben-ton Park Maintenance Fund, which included estimated revenues of $13,400 and appropriations of $13,000.
4. On March 31, 2011, interest on the certificate of deposit was received by the endowment fund and transferred to the Alex Benton Park Maintenance Fund.
5. The April 1, 2011, bond interest was received by the endowment fund and transferred to the Alex Benton Park Maintenance Fund.
6. On June 30, 2011, interest on the certificate of deposit was received and transferred to the Alex Benton Park Maintenance Fund.
7. For the year ended June 30, 2011, maintenance expenditures from the Alex Benton Park Maintenance Fund amounted to $2,700 for materials and con-tractual services and $10,150 for wages and salaries. All expenditures were paid in cash except for $430 of vouchers payable as of June 30, 2011.
7. For the year ended June 30, 2011, maintenance expenditures from the Alex Benton Park Maintenance Fund amounted to $2,700 for materials and con-tractual services and $10,150 for wages and salaries. All expenditures were paid in cash except for $430 of vouchers payable as of June 30, 2011.