Introduction to Governmental and Not for Profit Accounting Patton 7th Edition Test Bank

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Introduction to Governmental and Not for Profit Accounting Patton 7th Edition Test Bank

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Chapter 5: The Governmental Fund Accounting Cycle
General and Special Revenue Funds (Continued)

Multiple Choice

1. The measurement focus used by governmental fund measures:
a. capital resources
b. spendable resources
c. spendable resources and capital resources
d. economic resources

Answer: b

2. A government would refer to its property tax calendar to determine whether property taxes receivable at any given time are
a. collectible in part or in full
b. delinquent or current
c. sufficient to finance planned expenditures
d. larger or smaller than those of the prior year

Answer: b

3. At the time a government levies the property tax, an allowance for uncollectible property taxes is established so that
a. probable delinquent taxpayers can be identified individually
b. property tax revenues can be reported at a net collectible amount
c. an expenditure for bad debts is recorded in the accounts
d. property tax revenues will exceed the total amount of the levy

Answer: b

4. A municipality uses the allowance method to record uncollectible property taxes. If it decides to write off an account as uncollectible, it should:
a. debit bad debts expenditures; credit allowance for uncollectible property taxes
b. debit allowance for uncollectible property taxes; credit property taxes receivable
c. debit allowance for uncollectible property taxes; credit property tax revenues
d. debit property tax revenues; credit property taxes receivable

Answer: b

5. If a taxpayer fails to pay his property taxes on time and the city decides to foreclose the property, what accounting entry should the city make?
a. write off the property tax receivable as uncollectible
b. reduce property tax revenues by the amount of the receivable
c. reclassify the property tax receivable account to a delinquent receivable account
d. reclassify the property tax receivable account to a tax lien receivable account

Answer: d

6. A city levies property taxes of $1,050,000, but believes that it will not be able to collect $50,000 of those taxes. What entry should it make when the taxes are levied?
a. Property taxes receivable 1,050,000 Allowance for uncollectible taxes 50,000
Revenues property taxes 1,000,000
b. Revenues property taxes 50,000
Allowance for uncollectible taxes 50,000
c. Property taxes receivable 1,000,000
Revenues property taxes 1,000,000
d. Allowance for uncollectible taxes 50,000
Revenues property taxes 50,000
e. No entry is required because cash has not yet been received.

Answer: a

7. A property owner receives a property tax bill for $4,000 and appeals the assessment. Before he pays the bill, the city reduces his property tax to $3,000. If the city had previously established an allowance for property tax refunds, what entry should it make to record the reduction?
a. Revenues property taxes 3,000
Property taxes receivable 3,000
b. Revenues property taxes 1,000
Property taxes receivable 1,000
c. Allowance for property tax refunds 1,000
Property taxes receivable 1,000
d. Tax liens receivable 1,000
Property taxes receivable 1,000

Answer: c

8. A city uses the allowance method to provide for uncollectible property taxes. At the start of the year, the city established an allowance of $100,000 for uncollectible taxes. During the year, it wrote off $80,000 as uncollectible. At year-end, the city still has some uncollected taxes, but believes it will need an allowance of only $15,000 to cover any receivables that it may need to write off as uncollectible. What adjusting entry should it make?
a. Revenues property taxes 5,000 Allowance for uncollectible property taxes 5,000
b. Revenues property taxes 15,000
Allowance for uncollectible property taxes 15,000
c. Allowance for uncollectible property taxes 15,000
Property taxes receivable 15,000
d. Allowance for uncollectible property taxes 5,000
Revenues property taxes 5,000

Answer: d

9. At the beginning of the year 2013, a town recorded General Fund property tax receivables of $600,000. By year-end (December 31), taxpayers had paid a total $575,000. Based on previous experience, the town expected to collect the $25,000 of delinquent taxes as follows: $10,000 in January and February of 2014 and $15,000 between March and August of 2014. How much should the town report as property tax revenue in its General Fund statements for the year 2013?
a. $585,000
b. $600,000
c. $590,000
d. $575,000

Answer: a

10. On January 1, 2013, a city recorded General Fund property tax revenues of $750,000, but made no provision for uncollectible receivables or tax refunds. During the year, it collected property taxes of $720,000, wrote off $4,000 as uncollectible, and made tax refunds of $3,000. At year-end, the city finance director concluded that $10,000 of the delinquent taxes would be collected in January and February of 2014, $12,000 would be collected later in 2014, and $1,000 would need to be written off as uncollectible. How much should the city report as property tax revenue in its General Fund financial statements for the year 2013?
a. $720,000
b. $730,000
c. $742,000
d. $713,000

Answer: b

11. Which of the following best describes the general principle for recognizing property tax revenues in the General Fund?
a. They should be recognized in the current period to the extent that cash is collected
b. They should be recognized for the entire amount levied for the current period, regardless of when they are collected in cash
c. They should be recognized in the current period, less appropriate allowances for uncollectible accounts, tax refunds, and discounts
d. They should be recognized in the current period to the extent collected and also if collected early in the following year

Answer: d

12. When making its year-end entries, the citys accountant determines that $20,000 of the citys remaining current property taxes receivable would not be collected within the first sixty days of the next fiscal year, but would be collectible later in that year. At year-end, the city should report a $20,000 credit to:
a. revenues property taxes
b. property taxes receivable delinquent
c. deferred revenues property taxes
d. allowance for uncollectible taxes

Answer: c

13. Which of the following is the most likely reason that deferred revenue is reported on the General Fund balance sheet?
a. qualifying expenditures have been incurred in conjunction with a federal grant
b. there are property taxes receivable at year end that probably will not be collected for at least 60 days after the end of the accounting period
c. there are property taxes receivable at year end that will probably be collected within 60 days after the end of the accounting period
d. the government owes refunds to property owners who have successfully appealed their property tax assessments

Answer: b

14. When reporting on the General Fund in the fund financial statements, what is the general principle regarding the accrual of sales taxes collected by merchants but not yet remitted to the taxing government?
a. sales taxes should be recognized only if received by the state by year end
b. sales taxes should be recognized when the merchant makes the sale provided taxes are received early enough in the following year to finance expenditures of the period covered by the statements
c. sales taxes should be accrued provided they are received within 15 days after the end of the accounting period
d. sales taxes should be accrued based on an estimate of amounts received by merchants but not yet remitted to the state, regardless of when the taxes are remitted

Answer: b

15. Which of the following is not considered to be a derived tax revenue based on GASB standards?
a. sales taxes
b. property taxes
c. income taxes
d. all of the above are derived tax revenues

Answer: b

16. A state provides a city with a grant of $500,000 for a special meals for the homeless program. The city will receive payment from the state within 30 days of incurring eligible expenditures for homeless people. When should the city recognize revenues under this grant?
a. when it receives the cash payments from the state
b. at the end of the grant, when all expenditures have been incurred
c. when it sends bills to the state
d. when it incurs expenditures under the grant

Answer: d

17. When counties receive cash advances under grants from the state, what account should they credit?
a. grants receivable
b. revenues grants
c. advance on state grants
d. grant expenditures

Answer: c

18. A school district receives a grant from the federal government to reimburse the district for the salaries of teachers in an English as a Second Language program. The grant has no time requirements. The school district has paid the teachers and expects to receive payment from the federal government within 30 days of year-end. Which of the following journal entries would be needed for the school district?
a. debit cash and credit intergovernmental revenues grants
b. debit deferred revenues grants and credit intergovernmental revenues grants
c. debit due from federal government and credit intergovernmental revenues grants
d. debit due from federal government and credit deferred revenues grants

Answer: c

19. A state government receives a grant from the federal government that it disburses to local governments within the state. To meet federal grant requirements, the state government monitors the local governments to make sure that they comply with federal grant requirements. When the state government disburses the grant monies to the local governments, it should debit:
a. due to local governments
b. deferred revenues grants
c. expenditures federal grant
d. no entry is required

Answer: c

20. A state government receives a grant from the federal government that it disburses to local governments within the state. The state government disburses the cash received from the federal government to the local government, but the state government has no other administrative responsibilities regarding the grant. The state government should report the grant in:
a. an agency fund
b. a special revenue fund
c. internal service fund
d. the general fund

Answer: a

21. Which of the following liabilities normally would not be reported in governmental funds?
a. accrued salaries payable
b. bonds payable
c. vouchers payable
d. all of the above are commonly reported in governmental funds
e. none of the above are commonly reported in governmental funds

Answer: b

22. Governmental fund liabilities are:
a. claims against current financial resources
b. obligations not currently payable
c. both a and b
d. none of the above

Answer: a

23. The attorneys for the City of Hensley believe that a lawsuit filed against the city will be settled late in the next fiscal year. The attorneys believe that it is probable that the city will have to pay the claimants $30,000 to settle the lawsuit, but it is possible that it could be settled for as little as $15,000 or as much as $40,000. How much should the city accrue as a liability in the General Fund for its current fiscal year?
a. $0
b. $15,000
c. $30,000
d. $40,000

Answer: a

24. A towns garbage trucks accidentally sideswiped two parked automobiles in the year ended December 31, 2013. One case was settled for $3,000, and the town expects to pay it in January 2014. In the other case, the claimant originally demanded $15,000. The town attorney thinks they can settle the claim for $10,000, but it probably will take two years to settle the case. What amount should the town report as a claims liability on the General Funds December 31, 2013 balance sheet?
a. $0
b. $3,000
c. $13,000
d. $18,000

Answer: b

25. The General Fund lends cash at the beginning of the year to an Enterprise Fund, expecting to be repaid before the end of the year. What account should be debited in the General Fund?
a. transfer out to enterprise fund
b. due from enterprise fund
c. other financing uses enterprise fund
d. expenditures enterprise fund loans

Answer: b

26. A General Fund receives an invoice from the Electric Utility Fund (an Enterprise Fund) for electricity provided by the Utility Fund. When it receives the invoice, what account should be debited in the General Fund?
a. due from electric utility fund
b. transfer in from electric utility fund
c. expenditures utility services
d. due to electric utility fund

Answer: c

27. The General Fund of a city pays all utility bills received from private companies for services provided to city agencies. It then bills other funds for their shares of the bills. On May 10, the General Fund pays an electric bill for $230,000. It then sends a bill to the Library Special Revenue Fund for $4,000, representing the librarys share of the bill. Which account should the General Fund credit when it sends the bill to the Library Special Revenue Fund?
a. expenditures utilities
b. due from library special revenue fund
c. transfer out to library special revenue fund
d. due to library special revenue fund

Answer: a

28. The city council decides to close the Library Special Revenue fund and send its remaining resources ($45,000 cash) to the General Fund. What account should the Library Special Revenue Fund debit when it sends the cash to the General Fund?
a advance to general fund
b. transfer out to general fund
c. due from general fund
d. expenditures fund closeout

Answer: b

29. The General Fund provides a recurring annual subsidy to the Mass Transit Enterprise Fund to keep bus fares at a reasonable level. How should the General Fund report the subsidy in its financial statements?
a as an expenditure
b. as a long-term advance
c. as a transfer out
d. as a reimbursement

Answer: c

30. Which of the following interfund transactions will be reported as a separate line item in the operating statement of a General Fund?
a. short-term interfund loan received
b. transfer out to a debt service fund
c. reimbursement received from a special revenue fund
d. long-term interfund loan received

Answer: b

31. In the statement of revenues, expenditures, and changes in fund balances, a transfer received by the Debt Service Fund from the General Fund should be reported by the Debt Service Fund as a:
a. transfer in, in the other financing sources/uses section
b. negative expenditure, in the expenditure section
c. direct addition to equity, in the fund balance section
d. reimbursement, in the revenue section

Answer: a

32. A city paid $40,000 for police cars with the expectation that they would have a useful life of four years. After three years, the city sold the cars for $3,000. How should the city account for the sale in the General Fund?
a. debit cash for $3,000, debit accumulated depreciation for $30,000, debit loss on sale of general fixed assets for $7,000, and credit equipment for $40,000.
b. debit cash for $3,000 and credit other financing sourcesale of capital assets for $3,000.
c. debit cash for $3,000, debit loss on sale of general fixed assets for $37,000, and credit equipment for $40,000.
d. debit cash for $3,000, debit other financing uses for $37,000, and credit equipment for $40,000.

Answer: b

33. A city uses the purchases method of accounting for supplies in the General Fund. At year-end, the amount of supplies on hand is material and the city wants to report the inventory in its balance sheet. How should the General Fund record the inventory?
a. debit supplies inventory and credit expendituressupplies used
b. debit supplies inventory and credit vouchers payablesupplies
c. debit supplies inventory and credit unassigned fund balance
d. debit supplies inventory and credit nonspendable fund balance

Answer: d

34. Which of the following describes the proper accounting procedure for supplies in the General Fund?
a. Supplies may be accounted for as expenditures either when purchased or when consumed. In either case, material amounts of inventory are shown on the balance sheet
b. Supplies must be accounted for as expenditures when purchased. Therefore, inventories are not shown on the balance sheet
c. Supplies must be initially recorded as assets, and then charged off as expenditures as the supplies are consumed
d. Supplies may be accounted for as expenditures either when purchased or when consumed. If the purchases method is used, inventories are not shown on the balance sheet.

Answer: a

35. A county has $3,650,000 of outstanding encumbrances related to unassigned resources at year-end, December 31, 2013. It expects to accept delivery on all orders in 2014. How should the county handle the outstanding encumbrances in its General Fund balance sheet at December 31, 2013?
a. it should report encumbrances as if they were expenditures and liabilities of the year 2013
b. it should close the open encumbrances and show them as part of unassigned fund balance
c. it should close the open encumbrances and show them as part of assigned fund balance
d. it should close the open encumbrances and make no adjustments to fund balance

Answer: c

36. Which of the following best describes an assignment of fund balance?
a. it is a governments intent to spend resources for specific purposes
b. it is another term for a budgetary fund balance reserved for encumbrances
c. it is constrained as a result of a formal action by a governments legislative body
d. it is a legal segregation of fund balance, and must be used for the purpose assigned

Answer: a

37. The City of Maysvilles General Fund balance sheet for its December 31, 2013 year end shows inventory of $28,000 and prepaid rent of $10,000. The city also had $60,000 of outstanding encumbrances related to unassigned resources in its General Fund at year-end. In December 2013, a grantor provided the City with $42,000 that must be used to pay musicians who perform in the citys series of summer concerts in the park during 2014. How much should the city report as assigned fund balance in its General Fund on December 31, 2013?
a. $28,000
b. $38,000
c. $42,000
d. $60,000
e. $98,000

Answer: d

38. The City of Maysvilles General Fund balance sheet for its December 31, 2013 year end shows inventory of $28,000 and prepaid rent of $10,000. The city also had $60,000 of outstanding encumbrances in its General Fund at year-end. In December 2013, a grantor provided the City with $42,000 that must be used to pay musicians who perform in the citys series of summer concerts in the park during 2014. How much should the city report as nonspendable fund balance in its General Fund on December 31, 2013?
a. $10,000
b. $28,000
c. $38,000
d. $42,000
e. $60,000

Answer: c

39. The City of Maysvilles General Fund balance sheet for its December 31, 2013 year end shows inventory of $28,000 and prepaid rent of $10,000. The city also had $60,000 of outstanding encumbrances in its General Fund at year-end. In December 2013, a grantor provided the City with $42,000 that must be used to buy musical instruments for the citys youth orchestra. No instruments had been purchased at year-end. How much should the city report as restricted fund balance in its General Fund on December 31, 2013?
a. $28,000
b. $38,000
c. $42,000
d. $60,000
e. $102,000

Answer: c

40. The highest level of decision-making authority for the City of Palo Pinto passes an ordinance that states that all royalty payments received from oil or gas production on city property must be used for street maintenance or improvements. As of the end of its current fiscal year, the city has $1,250,000 of unspent royalty payments. These amounts should be reported as part of:
a. nonspendable fund balance
b. restricted fund balance
c. committed fund balance
d. assigned fund balance
e. unassigned fund balance

Answer: c

41. A city has only one special revenue fund. All the fund balance classifications that it reports have positive balances. Which of the following fund balance classifications would not be reported by the city?
a. unassigned fund balance
b. assigned fund balance
c. committed fund balance
d. restricted fund balance

Answer: a

42. For the general fund, the residual fund balance classification is:
a. unassigned fund balance
b. assigned fund balance
c. committed fund balance
d. restricted fund balance

Answer: a

43. The citys governing body gives the citys finance director the authority to set aside excess amounts in the General Fund to provide funds to build a new fire station. The finance director sets aside $200,000 for that purpose during the current fiscal year. This should be reported as part of:
a. unassigned fund balance
b. assigned fund balance
c. committed fund balance
d. restricted fund balance
e. nonspendable fund balance

Answer: b

44. The city council appropriates a portion of the governments current year-end fund balance to eliminate an anticipated budget deficit in next years budget. Projected expenditures are anticipated to be greater than expected revenues next year. The appropriated portion of the current years fund balance should be reported as:
a. unassigned fund balance
b. assigned fund balance
c. committed fund balance
d. restricted fund balance
e. nonspendable fund balance

Answer: b

Problems

45. (Journal entries property tax accounting)

Prepare entries to record the following transactions and events related to Dominguez Countys property taxes for the year beginning January 1, 2013:

a. To raise property tax revenues of $940,000, the County sends bills to property owners totaling $950,000. This will provide $10,000 for uncollectible taxes and refunds. The County makes no provision for possible tax refunds.
b. Shortly after receiving his $5,000 tax bill, Harold appeals his assessment. His tax bill is reduced by $1,000. He then pays the remaining $4,000 that is due.
c. Dominguez County receives $900,000 in cash from taxpayers (other than Harold) who make timely payment on their taxes.
d. Browns home is destroyed by fire. He declares bankruptcy and the County writes off his $3,000 tax bill as uncollectible.
e. C. Blacke and D. Wight, who received bills totaling $8,000, are unable to pay on time. The County bills them $300 for interest. They subsequently pay the taxes plus interest. (Do not make an adjustment for delinquent taxes receivable for C. Blacke and D. Wight as this entry is only made at year-end.)
f. At year-end, the County declares all unpaid property taxes to be delinquent. Interest and penalties amounting to $1,500 is assessed against the delinquent taxpayers and is considered available.
g. The County decides to increase its allowance for uncollectible taxes by $1,000.

Answer (Problem 45):
a. Property taxes receivable 950,000
Allowance for refunds and uncollectible taxes 10,000
Revenues property taxes 940,000

b. Cash 4,000
Allowance for refunds and uncollectible taxes 1,000
Property taxes receivable 5,000

c. Cash 900,000
Property taxes receivable 900,000

d. Allowance for refunds and uncollectible taxes 3,000
Property taxes receivable 3,000

e. Interest and penalties receivable 300
Revenues interest and penalties 300

Cash 8,300
Property taxes receivable 8,000
Interest and penalties receivable 300

f. Property taxes receivable delinquent 34,000
Property taxes receivable 34,000

Interest and penalties receivable 1,500
Revenues interest and penalties 1,500

Allowance for refunds and uncollectible taxes 6,000
Allowance for refunds and uncollectible taxes delinquent 6,000

g. Revenues property taxes 1,000
Allowance for refunds and uncollectible taxes delinquent 1,000

46. (Journal entries tax revenue accounting year-end adjustments)

Prepare entries to record the following transactions and events related to Colfax Countys tax revenues for the year beginning January 1, 2013:
a. To raise property tax revenue of $800,000, the County bills its property owners a total of $802,000, providing $2,000 for uncollectible and refundable taxes.
b. During the year, taxpayers pay a total of $750,000 in property taxes.
c. E. Bloodworth declares bankruptcy, owing the County $2,000 in property taxes. The County writes off the unpaid amount as uncollectible.
d. The state collects sales taxes on behalf of Colfax County. It sends the County $150,000 for sales taxes collected during the year.
e. At year-end, the County declares all unpaid property taxes to be delinquent.
f. To prepare financial statements for the year, the County comptroller makes the following determinations regarding tax revenues:
(1) She estimates that Colfax will receive $20,000 in delinquent 2013 property taxes before the end of February, 2014. The other delinquent taxes will trickle in later in 2014.
(2) She learns that the state will remit $10,000 to Colfax in January 2014 for sales taxes collected by merchants in December 2013.

Answer:
a. Property taxes receivable 802,000
Allowance for refunds and uncollectible taxes 2,000
Revenues property taxes 800,000

b. Cash 750,000
Property taxes receivable 750,000

c. Allowance for refunds and uncollectible taxes 2,000
Property taxes receivable 2,000

d. Cash 150,000
Revenues sales taxes 150,000

e. Property taxes receivable delinquent 50,000
Property taxes receivable 50,000

f1. Revenues property taxes 30,000
Deferred revenues property taxes 30,000

f2. Sales taxes receivable 10,000
Revenues sales taxes 10,000

47. (Journal entries interfund transactions)

Theodore County uses a General Fund, a Special Revenue Fund, and an Enterprise Fund. The Special Revenue Fund is financed by a grant from the state to provide care for the elderly. The Enterprise Fund provides bus service both to the public and to government agencies. Prepare entries to record these transactions. Indentify the funds involved in each case.
a. The Enterprise Fund bills the Special Revenue Fund $15,000 for bus service provided to the elderly.
b. The General Fund receives an electricity bill for $20,000 and prepares a voucher to pay the bill. The General Fund then bills the Special Revenue Fund for $3,000, representing the portion of the electricity bill applicable to the senior citizens building.
c. The Enterprise Fund is short of cash to pay its bills. The General Fund lends the Enterprise Fund $50,000 in cash, which will be repaid before the end of the year.
d. The General Fund pays cash of $100,000 to the Enterprise Fund as a subsidy to help meet the operating costs of the Enterprise Fund.

Answer:
a. Enterprise fund
Due from Special Revenue Fund 15,000
Revenues bus services 15,000

Special revenue fund
Expenditures bus services 15,000
Due to Enterprise Fund 15,000

b. General fund
Expenditures utilities 20,000
Vouchers payable 20,000

Due from Special Revenue Fund 3,000
Expenditures utilities 3,000

Special revenue fund
Expenditures utilities 3,000
Due to General Fund 3,000

c. General fund
Due from Enterprise Fund 50,000
Cash 50,000

Enterprise fund
Cash 50,000
Due to General Fund 50,000

d. General fund
Transfer out to Enterprise Fund 100,000
Cash 100,000

Enterprise fund
Cash 100,000
Transfer in from General Fund 100,000

48. (Property tax revenue recognition)

In its General Fund balance sheet at December 31, 2013, Marathon City reported Property taxes receivable of $40,000, deferred property tax revenues of $15,000, and an allowance for uncollectible taxes of $0. At the start of the year 2014, Marathon City made the following journal entry to record its property tax levy:
Property taxes receivable 950,000
Allowance for refunds and uncollectible taxes 10,000
Revenues property taxes 940,000

During the year 2014, the city collected all the property taxes receivable outstanding at December 31, 2013. It also collected $920,000 of the receivables recognized at the beginning of 2014, and wrote off $6,000 of receivables against the allowance account. On December 31, 2014, the Marathon City finance director made the following determinations regarding the property taxes outstanding at that date:
a. All outstanding property taxes would be collected, so there was no need for the allowance for uncollectible property taxes.
b. The City would collect about $15,000 of the outstanding property taxes receivable during the first 60 days of 2015 and the remainder during the latter part of 2015.

Required: Calculate how much property tax revenues Marathon City should recognize in 2014.

Answer:
Recognize in 2014 the amount deferred in 2013 $ 15,000
Recognize at time of 2014 tax levy 940,000 Recognize unused portion of allowance for uncollectible taxes 4,000
Defer recognition of portion of outstanding taxes that will not be
collected in first 60 days of 2015 (outstanding taxes of $24,000,
less $15,000 expected to be collected in first 60 days) (9,000)
Property taxes recognized in 2014 $950,000

(Note: Alternative calculation: Deferred from 2013 [$15,000] plus collected in cash in 2014 [$920,000] plus collected in first 60 days of 2015 [$15,000] = $950,000)

49. (Journal entries comprehensive problem)

The Town of Elderville accounts for its revenues and day-to-day operating expenditures in its General Fund. The Town uses encumbrance accounting to keep budgetary control over the appropriation for other expenditures. Prepare journal entries to record these transactions in the General Fund for the calendar year 2013.
a. The following budget is adopted at the beginning of the year:
Estimated revenues:
Property taxes $315,000
Sales taxes 85,000
Appropriations:
Personal services 250,000
Supplies 43,000
Interest expenditures 3,000
Other financing uses 85,000
b. To raise the required $315,000 in property taxes, property owners are billed for a total of $317,000. This will allow $2,000 for estimated uncollectible property taxes and refunds.
c. To provide cash at the start of the year, the Town borrows $100,000 on a tax anticipation note. The note will be repaid in six months with interest at 4% per annum.
d. The Town sends a purchase order for $4,000 to a vendor for supplies.
e. The General Fund pays $85,000 to the Debt Service Fund (DSF) to enable the DSF to pay interest and principal on Town debt.
f. The vendor in d., above, delivers the supplies ordered by the Town, and bills the Town for $4,200. The Town accepts delivery and prepares a voucher for the full amount of the bill.
g. Property owners pay property taxes in the amount of $300,000.
h. The Town repays the $100,000 borrowed in c., above, together with interest for six months.
i. The voucher in f., above, is paid.

j. The Town receives $80,000 for sales taxes collected by the state on behalf of the Town.
k. S. Sparrow, a long-time resident, is unable to pay his $3,000 property tax bill in full. He pays $1,000, and the Town writes off the remaining $2,000 as uncollectible.
l. The Town declares all remaining unpaid property taxes to be delinquent. It also notifies delinquent property owners that they owe penalties of $2,000 on the delinquent taxes.
m. The Town Council approves a budgetary interchange of $5,000 from the supplies appropriation to the personal services appropriation to meet unforeseen overtime costs.
n. The General Fund receives a bill from the Water Utility Fund for $6,000. (Note: Charge this to supplies expenditures. No encumbrance is necessary.)
o. The Town pays personal services in the amount of $253,000.
p. The Town is notified by the state that it collected an additional $3,000 in December 2013 sales taxes that it will remit to the Town on January 20, 2014.
q. The Town files a tax lien against one of the delinquent taxpayers (in l. above). The taxpayer is past due on $4,000 of property taxes and owes penalties and interest of $400 on delinquent taxes.
r. The city sold the property (in q.) at auction for $6,000. The auctioneer charged $300 for his services, which has not yet been paid.

Answer (Problem 49)
a. Estimated revenues property taxes 315,000
Estimated revenues sales taxes 85,000
Appropriations personal services 250,000
Appropriations supplies 43,000
Appropriations interest expenditures 3,000
Appropriations other financing uses 85,000
Budgetary fund balance 19,000

b. Property taxes receivable 317,000
Allowance for refunds and uncollectible taxes 2,000
Revenues property taxes 315,000

c. Cash 100,000
Tax anticipation notes payable 100,000

d. Encumbrances supplies 4,000
Budgetary fund balance reserved for encumbrances 4,000

e. Transfer out to Debt Service Fund 85,000
Cash 85,000
f. Budgetary fund balance reserved for encumbrances 4,000
Encumbrances supplies 4,000

Expenditures supplies 4,200
Vouchers payable 4,200

g. Cash 300,000
Property taxes receivable 300,000

h. Tax anticipation notes payable 100,000
Expenditures interest 2,000
Cash 102,000

i. Vouchers payable 4,200
Cash 4,200

j. Cash 80,000
Revenues sales taxes 80,000

k. Cash 1,000
Allowance for uncollectible property taxes 2,000
Property taxes receivable 3,000

l. Property taxes receivable delinquent 14,000
Property taxes receivable 14,000

Interest and penalties receivable 2,000
Revenues penalties and interest 2,000

m. Appropriations supplies 5,000
Appropriations personal services 5,000

n. Expenditures supplies 6,000
Due to Water Utility Fund 6,000

o. Expenditures personal services 253,000
Cash 253,000

p. Sales taxes receivable 3,000
Revenues sales taxes 3,000

q. Tax liens receivable 4,400
Property taxes receivable delinquent 4,000
Interest and penalties receivable 400

r. Cash 6,000
Tax liens receivable 4,400
Vouchers payable 1,600

50. (Classification of fund balance)

The General Fund of the City of Davis Fort has a total fund balance of $1,000,000 as of its fiscal year-end, December 31, 2013. Please review the following additional information regarding General Fund activities and determine how much fund balance should be classified as nonspendable, restricted, committed, assigned, and unassigned. Show the calculations necessary for making the fund balance determinations.

1. The balance sheet of the City of Davis Fort showed $100,000 of inventory on December 31, 2013.
2. The highest level of decision making authority for the city (the city council) passed an ordinance that any royalty payments received from oil production on city property must be used for city park maintenance. At year-end, the city had not spent $220,000 of the oil royalty proceeds that it had received.
3. The General Fund made a long-term loan of $60,000 to the Civic Center Capital Projects Fund during 2013. None had been repaid by December 31, 2013, and none is expected to be repaid until 2016.
4. The city council of the City of Davis Fort approves its 2014 budget in December, 2013. It appropriates $110,000 of the December 31, 2013 fund balance to eliminate an anticipated budget deficit in the 2014 budget. The anticipated budget deficit is the result of expected 2014 expenditures exceeding expected 2014 revenues.
5. The General Fund receives a federal grant that must be used to provide low-income housing subsidies. The grant had no time restrictions. At year-end, the General Fund had unspent resources of $40,000.
6. The city council authorized the citys finance director to set aside a portion of General Fund balance for future repairs to the citys administrative building. During 2013, the finance director set aside $20,000; none of which had been spent at year-end.

Answer (Problem 50)
Nonspendable fund balance $160,000
Restricted fund balance 40,000
Committed fund balance 220,000
Assigned fund balance 130,000
Unassigned fund balance 450,000
Total fund balance $1,000,000

Calculations:
Nonspendable fund balance
Inventory (#1) $100,000
Advance to Civic Center Capital Projects Fund (#3) 60,000
Total nonspendable fund balance $160,000

Restricted fund balance low-income housing grant (#5) 40,000

Committed fund balance
City park maintenance (#2) 220,000

Assigned fund balance
Appropriated for 2014 budget (#4) 110,000
City administrative building (#6) 20,000
Total assigned fund balance 130,000

Total nonspendable, restricted, committed, and assigned fund balance $550,000

Unassigned fund balance ($1,000,000 450,000) $450,000

51. (Treatment of inventorypurchases method)

The General Fund of the City of Mineral Wells shows $40,000 in supplies inventory on January 1, 2013. During the year 2013, General Fund cash is used to purchase $110,000 of supplies. On December 31, 2013, the city conducts an inventory count and finds $50,000 of supplies inventory remains. Using the purchases method of accounting for inventory, prepare the journal entries necessary to record (a) the purchase of the inventory and (b) to make the year-end adjustment to inventory.

Answer:
(a) Expenditures supplies 110,000
Cash 110,000

(b) Supplies inventory 10,000
Nonspendable fund balance 10,000

52. (Preparing closing entries and financial statements from a trial balance.)
Presented below is the adjusted trial balance for the General Fund of the Town of Tranquil Bay at December 31, 2013, 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 December 31, 2013.

Town of Tranquil Bay
General Fund
Adjusted Trial Balance
December 31, 2013

Cash
19,750

Taxes receivable, net
137,000

Investments
65,000

Due from other funds
68,000

Vouchers payable

38,750

Due to other funds

142,750

Unassigned fund balance

117,000

Estimated revenues
610,000

Appropriations

590,000

Budgetary fund balance

20,000

Revenues-taxes

590,175

Revenues-charges for services

14,080

Expenditures-personal services
287,125

Expenditures-supplies
29,680

Expenditures-capital outlay
244,000

Transfer in from debt service fund

32,500

Transfers out to capital projects fund
84,700
0

$1,545,255
$1,545,255

Answer (Problem 52)
a. Closing entries

Appropriations 590,000
Budgetary fund balance 20,000
Estimated revenues 610,000

Revenues-taxes 590,175
Revenues-charges for services 14,080
Transfers in from debt service fund 32,500
Unassigned fund balance 8,750
Expenditures-personal services 287,125
Expenditures-supplies 29,680
Expenditures-capital outlay 244,000
Transfers out to capital projects fund 84.700

b. Statement of Revenues, Expenditures, and Changes in Fund Balance

Town of Tranquil Bay
General Fund
Statement of Revenues, Expenditures, and Changes in Fund Balance
For the year ended December 31, 2013

Revenues

Taxes
$590,175

Charges for services
14,080

Total revenues
$ 604,255

Expenditures

Personal services
287,125

Supplies
29,680

Capital outlay
244,000

Total expenditures
560,805

Excess of revenues over (under) expenditures

43,450

Other financing sources (uses)

Transfers in from debt service fund
32,500

Transfers out to capital projects fund
(84,700)

Other financing use, net
(52,200)

Net decrease in fund balance
(8,750)

Fund balance, beginning of year
117,000

Fund balance, end of year
$ 108,250

c. Balance Sheet

Town of Tranquil Bay
General Fund
Balance Sheet
At December 31, 2013

Assets

Cash
$ 19,750

Taxes receivable, net
137,000

Investments
65,000

Due from other funds
68,000

Total assets
$ 289,750

Liabilities

Vouchers payable
$ 38,750

Due to other funds
142,750

Total liabilities
181,500

Fund balance

Unassigned
108,250

Total liabilities and fund balance
$ 289,750

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