Accounting For Governmental & Nonprofit Entities
18th Edition
ISBN: 9781259917059
Author: RECK, Jacqueline L., Lowensohn, Suzanne L., NEELY, Daniel G.
Publisher: Mcgraw-hill Education,
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Question
Chapter 5, Problem 25EP
a.
To determine
Journalize the entries for the given information under general fund and governmental activities.
a.
Expert Solution
Explanation of Solution
Debit: A debit is an accounting term that refers to the left side of an account. The term debit is be denoted by (Dr). The recording amount on the left side of the account is known as debiting.
Credit: A credit is an accounting term that refers to the right side of an account. The term credit is denoted as (Cr). The recording amount on the right side of the account is known as crediting.
Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
- Debit, all the increase in the assets, the expenses and the dividends, all the decrease in liabilities, revenues and the
stockholders’ equities . - Credit, all the increase in the liabilities, the revenues, and the stockholders’ equities, and all decreases in the assets, and the expenses.
Pass the journal entries for the given transactions:
| Date | Description | Debit | Credit |
| 1 | Construction fund: | ||
| Cash | $100,000 | ||
| Other Financing sources - Proceeds of Bonds Anticipation Notes | $100,000 | ||
| (To record the bonds issued) | |||
| Governmental Activities: | |||
| Cash | $100,000 | ||
| Bonds Anticipation Notes Payable | $100,000 | ||
| (To record the issue of bonds) | |||
| 2 | Construction fund: | ||
| Construction Expenditures - Police | $30,000 | ||
| Construction Expenditures - Fire | $30,000 | ||
| Vouchers Payable | $60,000 | ||
| (To record the architect and engineering costs) | |||
| Governmental Activities: | |||
| Construction Expenditures - Police | $30,000 | ||
| Construction Expenditures - Fire | $30,000 | ||
| Vouchers Payable | $60,000 | ||
| (To record the architect and engineering costs) | |||
| 3 | Construction fund: | ||
| Encumbrances - Police | $21,000,000 | ||
| Encumbrances - Fire | $11,000,000 | ||
| Encumbrances Outstanding - Police | $21,000,000 | ||
| Encumbrances Outstanding - Fire | $11,000,000 | ||
| (To record the construction contract) | |||
| Governmental Activities: | |||
| No Entry is required as Budgetary transactions are not recorded in the journal. | |||
| 4 | Construction fund: | ||
| Cash | $30,000,000 | ||
| Other financing sources - Proceeds of Bond | $30,000,000 | ||
| (To record the bonds issued) | |||
| Governmental Activities: | |||
| Cash | $30,300,000 | ||
| Bonds Payable | $30,000,000 | ||
| Premium on Bonds Payable | $300,000 | ||
| (To record the bonds issued) | |||
| 5 | Construction fund: | ||
| Other financing uses - Retirement of BAN | $100,000 | ||
| Interest expenditures | $3,000 | ||
| Encumbrances outstanding | $103,000 | ||
| (To record the payment made for Bonds) | |||
| Governmental Activities: | |||
| Bonds Anticipation Notes Payable | $100,000 | ||
| Expenses - Interest on BAN | $3,000 | ||
| Cash | $103,000 | ||
| (To record the payment made for Bonds) | |||
| 6 | Construction fund: | ||
| Encumbrances Outstanding - Police | $10,000,000 | ||
| Encumbrances Outstanding - Fire | $6,000,000 | ||
| Encumbrances - Police | $10,000,000 | ||
| Encumbrances - Fire | $6,000,000 | ||
| (To record the receipt of contract invoice) | |||
| Encumbrances Expenditures - Police | $10,000,000 | ||
| Encumbrances Expenditures - Fire | $6,000,000 | ||
| Contract Payable | $16,000,000 | ||
| (To record the receipt of contract invoice) | |||
| Governmental Activities: | |||
| Encumbrances Work in Progress - Police | $10,000,000 | ||
| Encumbrances Work in Progress - Fire | $6,000,000 | ||
| Contract Payable | $16,000,000 | ||
| (To record the receipt of contract invoice) | |||
| 7 | Construction fund: | ||
| Cash | $500,000 | ||
| Revenues | $500,000 | ||
| (To record the receipt of federal grant) | |||
| Governmental Activities: | |||
| Cash | $500,000 | ||
| Program Revenue — Economic Development — Capital Grants and Contributions | $500,000 | ||
| (To record the receipt of federal grant) | |||
| 8 | Construction fund: | ||
| Contract Payable | $16,000,000 | ||
| Contract Payable - Retained Percentage | $800,000 | ||
| Cash | $15,200,000 | ||
| (To record the payment of initial construction invoice) | |||
| Governmental Activities: | |||
| Contract Payable | $16,000,000 | ||
| Contract Payable - Retained Percentage | $800,000 | ||
| Cash | $15,200,000 | ||
| (To record the payment of initial construction invoice) | |||
| 9 | Construction fund: | ||
| Encumbrances Outstanding - Fire | $5,000,000 | ||
| Encumbrances - Fire | $5,000,000 | ||
| (To record the final payment for fire station) | |||
| Construction Expenditures - Fire | $5,000,000 | ||
| Contract Payable | $5,000,000 | ||
| (To record the final payment for fire station) | |||
| Governmental Activities: | |||
| Construction Work in Progress - Fire | $5,000,000 | ||
| Contract Payable | $5,000,000 | ||
| (To record the final payment for fire station) | |||
| Buildings | $11,000,000 | ||
| Construction Work in Progress - Fire | $11,000,000 | ||
| (To record the completion of fire station) | |||
| 10 | Construction fund: | ||
| Contract Payable | $5,000,000 | ||
| Contract Payable - Retained Percentage | $300,000 | ||
| Cash | $5,300,000 | ||
| (To record the retained amount on fire station) | |||
| Governmental Activities: | |||
| Contract Payable | $5,000,000 | ||
| Contract Payable - Retained Percentage | $300,000 | ||
| Cash | $5,300,000 | ||
| (To record the retained amount on fire station) | |||
| 11 | Construction fund: | ||
| Encumbrances Outstanding - Police | $7,500,000 | ||
| Encumbrances - Police | $7,500,000 | ||
| (To record the additional costs) | |||
| Construction Expenditures - Police | $7,500,000 | ||
| Contract Payable | $7,500,000 | ||
| (To record the additional costs) | |||
| Governmental Activities: | |||
| Construction Work in Progress - Police | $7,500,000 | ||
| Contract Payable | $7,500,000 | ||
| (To record the additional costs) | |||
| 12 | Construction fund: | ||
| Other Financing sources - Proceeds of BANs | $100,000 | ||
| Other Financing sources - Proceeds of Bonds | $30,000,000 | ||
| Revenues | $500,000 | ||
| Construction Expenditures - Fire | $17,530,000 | ||
| Construction Expenditures - Police | $11,030,000 | ||
| Interest Expenditures | $3,000 | ||
| Other financing uses - Retirement of BAN | $100,000 | ||
| Fund Balance - Restricted | $1,937,000 | ||
| (To record the closing entry) | |||
| Governmental Activities: | |||
| No Closing Entry is passed due to no Temporary Account Balances | |||
Table (1)
Prepare the general ledger for the given journal entries (optional):
| Cash | |||
| (1) | $100,000 | (5) | $103,000 |
| (4) | $30,000,000 | (8) | $15,200,000 |
| (7) | $300,000 | (10) | $5,300,000 |
| Bal. | $9,797,000 | ||
| Contract Payable | |||
| (8) | $16,000,000 | (6) | $16,000,000 |
| (10) | $5,000,000 | (9) | $5,000,000 |
| (11) | $7,500,000 | ||
| Bal. | $7,500,000 | ||
| Vouchers Payable | |||
| (2) | $600,000 | ||
| Bal. | $600,000 | ||
| Contract Payable - Retained Percentage | |||
| (10) | $300,000 | (2) | $800,000 |
| Bal. | $500,000 | ||
| Encumbrances - Police | |||
| (3) | $21,000,000 | (6) | $10,000,000 |
| (11) | $7,500,000 | ||
| Bal. | $3,500,000 | ||
| Encumbrances - Fire | |||
| (3) | $11,000,000 | (6) | $6,000,000 |
| (9) | $5,000,000 | ||
| Bal. | $0 | ||
| Encumbrances Outstanding - Police | |||
| (6) | $10,000,000 | (3) | $21,000,000 |
| (11) | $7,500,000 | ||
| Bal. | $3,500,000 | ||
| Encumbrances Outstanding - Fire | |||
| (6) | $6,000,000 | (3) | $11,000,000 |
| (9) | $5,000,000 | ||
| Bal. | $0 | ||
| Construction Expenditures - Police | |||
| (2) | $30,000 | (12) | $17,530,000 |
| (6) | $10,000,000 | ||
| (11) | $7,500,000 | ||
| Bal. | $0 | ||
| Construction Expenditures - Fire | |||
| (2) | $30,000 | (12) | $11,030,000 |
| (6) | $6,000,000 | ||
| (9) | $5,000,000 | ||
| Bal. | $0 | ||
| Interest Expenditures | |||
| (5) | $3,000 | (12) | $3,000 |
| Bal. | $0 | ||
| Other Financing Uses - Retirement of BANs | |||
| (5) | $100,000 | (12) | $100,000 |
| Bal. | $0 | ||
| Other Financing Sources - Proceeds of BAN | |||
| (12) | $100,000 | (1) | $100,000 |
| Bal. | $0 | ||
| Other Financing Sources - Proceeds of Bonds | |||
| (12) | $30,000,000 | (4) | $30,000,000 |
| Bal. | $0 | ||
| Revenues | |||
| (12) | $500,000 | (7) | $500,000 |
| Bal. | $0 | ||
| Fund Balance - Restricted | |||
| (12) | $1,937,000 | ||
| Bal. | $1,937,000 | ||
Table (2)
b.
To determine
Prepare the Construction Funds Balance sheet for County S.
b.
Expert Solution
Explanation of Solution
Balance sheet: Balance Sheet is one of the financial statements that summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.
Prepare the Balance sheet for County S:
| County S | |
| Construction Fund | |
| Balance sheet | |
| December 31, 2020 | |
| Particulars | Amount ($) |
| Assets | |
| Cash | $9,997,000 |
| Total assets | $9,997,000 |
| Liabilities and Fund Balances | |
| Liabilities | |
| Vouchers payable | $60,000 |
| Contracts payable | $7,500,000 |
| Contracts payable - Retained Percentage | $500,000 |
| Total liabilities | $8,060,000 |
| Fund Balances | |
| Fund Balances - Restricted | $1,937,000 |
| Total liabilities and Fund Balances | $9,997,000 |
Table (3)
c.
To determine
Draft the statement of revenues, expenditures, and changes in fund balances for the year end.
c.
Expert Solution
Explanation of Solution
Statement of Revenues, Expenditures and Changes in the fund balances: Statement of Revenues, Expenditures and Changes in the fund balances provides the overview of all the transactions carried out by the government in a consolidated format. It provides the all the balances and the final balance of the funds available.
Prepare the Statement of Revenues, Expenditures and Changes in the fund balances:
| County S | |
| Construction Fund | |
| Statement of Revenues, Expenditures and Changes in the fund balances | |
| For the year End | |
| Particulars | Amount ($) |
| Revenues | $500,000 |
| Expenditures: | |
| Construction Expenditures—Police | $17,530,000 |
| Construction Expenditures—Fire | $11,030,000 |
| Interest Expenditures | $3,000 |
| Total Expenditures | $28,563,000 |
| Excess of Expenditures Over Revenues | $28,063,000 |
| Other Financing Sources (Uses): | |
| Proceeds of Bond Anticipation Notes | $100,000 |
| Proceeds of Bonds | $30,000,000 |
| Retirement of Bond Anticipation Notes | ($100,000) |
| Total Other Financing Sources (Uses) | $30,000,000 |
| Excess Of Revenues And Other Financing Sources And Uses Over Expenditures | $1,937,000 |
| Fund Balances, January 1, 2020 | $0 |
| Fund Balances, December 31, 2020 | $1,937,000 |
Table (4)
d.
To determine
Describe the method of reporting the expenditures for police and fire facilities in the government-wide statements of net position and activities of County S.
d.
Expert Solution
Explanation of Solution
Government-wide financial statements: These are the financial statements that report the government’s net position and changes in net position. These statements report the governmental activities, business-type activities, and the activities related to proprietary funds and fiduciary funds. These statements are prepared based on the accrual accounting. The two government-wide financial statements are Statement of Net Position and Statement of Activities.
The government-wide financial statement will disclose the following information:
- The fires station shall be reported under buildings under the governmental activities column, in the statement of net position.
- The police station will be reported as construction work in progress under the capital assets section in the statement of net position.
- The depreciation if applicable in the first year, will be shown under the governmental activities column, in the statement of activities.
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