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ACC - City of Everlasting Sunshine & Ch13 Problems

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Question;ESSENTIALS OF ACCOUNTING FOR GOVERNMENTAL AND NOT-FOR-PROFIT ORGANIZATIONS:TENTH EDITIONChapters 2 through 8 describe accounting and financial reporting by state and local governments. A continuous problem is presented to provide an overview of the reporting process, including preparation of fund basis and government-wide statements. The problem assumes the government is using fund accounting for its internal record-keeping and then at year-end makes necessary adjustments to prepare the government-wide statements. The problem that follows is presented in the same order as the textbook (beginning with Chapters 3, and 4).Each chapter requires the preparation of journal entries to record the events and transactions of governmental, proprietary, or fiduciary funds. For the General Fund, use control accounts for the budgetary accounts, revenues, expenditures and encumbrances. For all other funds, use separate accounts for each type of revenue and expenditure/expense. At appropriate stages, preparation of the fund and government-wide statements are required. The following funds are included in this series of problems:Governmental FundsGeneralSpecial revenue?Street and Highway FundCapital projects?City Hall Annex Construction Fund3?C. This portion of the continuous problem continues the General Fund and special revenuefund examples by requiring the recording and posting of the budgetary entries. Toreduce clerical effort required for the solution use control accounts for the budgetaryaccounts, revenues, expenditures and encumbrances. Subsidiary accounts are notrequired. Budget information for the City includes:a) As of January 1, 2012, the City Council approved and the mayor signed a budgetcalling for $10,700,000 in property tax and other revenue, $9,300,000 inappropriations for expenditures, and $1,280,000 to be transferred to two debt servicefunds for the payment of principal and interest. Record the budget for the GeneralFund and post to the ledger.b) Also as of January 1, 2012, the City Council approved and the mayor signed a budgetfor the Street and Highway Fund that provided for estimated revenues from the stategovernment in the amount of $950,000 and appropriations of $925,000. Record thebudget and post to the ledger.4?C. Part 1. General Fund TransactionsRequired:a. Record journal entries for the following transactions for FY 2012. Make any computationsto the nearest dollar. Journal entry explanations are not required. Use control accounts forrevenues, expenditures and budgetary accounts. It is not necessary to reflect subsidiaryledger entries.(1) Encumbrances of $ 31,000 outstanding at the end of 2011 were re-established.(2) The January 1, 2012, balance of $20,000 in Deferred Revenues relates to theamount of the 2011 levy that was expected to be collected more than 60 daysafter December 31. This amount should be recognized as 2012 revenues.(3) A general tax levy in the amount of $6,700,000 was made. It is estimated that 3percent of the tax will be uncollectible.(4) Tax anticipation notes in the amount of $500,000 were issued.(5) Goods and supplies related to all encumbrances outstanding as of December 31,2011 were received, along with invoices amounting to $30,000, the invoiceswere approved for payment. The City maintains immaterial amounts in supplyinventories and it is the practice of the City to charge supplies to expenditurewhen received.(6) All vouchers and the amount due other funds were paid.(7) The General Fund collected the following in cash:prior year taxes, $180,000,interest and penalties receivable on prior year taxes, $16,500,current taxes, $6,400,000,$330,000 previously recorded as due from the state government,licenses and permits, $800,000,sales taxes, $3,080,000, andmiscellaneous revenues, $270,000.(8) Purchase orders and contracts were issued in the amount of $4,266,000.(9) Payrolls for the General Fund totaled $4,600,000. Of that amount, $506,000 were withheld for employees? federal income taxes and $361,100 were withheld for employees? FICA and Medicare tax liability, the balance was paid in cash. The encumbrance system is not used for payrolls.(10) The liability for the city?s share of FICA and Medicare taxes, $361,100, was recorded as was the liability for state unemployment taxes in the amount of $35,000.(11) Invoices for most of the supplies and services ordered in transaction 8 were received in the amount of $4,037,300 and approved for payment. The related encumbrance amounted to $4,038,200.(12) Tax anticipation notes were paid at maturity, along with interest in the amount of $22,000.(13) Notification was received that an unrestricted state grant in the amount of $288,000 would be received during the first month of the next year.(14) The General Fund recorded a liability to the Water and Sewer Fund for services in the amount of $45,000 and to the Stores and Services Fund for supplies in the amount of $313,200, $300,000 of the amount due the Stores and Services Fund was paid.(15) The General Fund recorded an amount due of $35,000 from the state government, representing sales taxes to be collected from retail sales taking place during the last week of the year.(16) The General Fund paid vouchers in the amount of $3,980,000 and paid the amounts due the federal and state governments. The General Fund also transferred to the debt service funds cash in the amount of $1,256,000 for the recurring payment of principal and interest.(17) All required legal steps were accomplished to increase appropriations by the net amount of $360,000. Estimated revenues were increased by $330,000. (18) The City Council authorized a write-off of $30,000 in delinquent property taxes and corresponding interest and penalties amounting to $4,000. (19) Interest and penalties receivable on taxes were accrued in the amount of $33,000, $5,000 of this amount is expected to be uncollectible.(20) It is estimated that $50,000 of the outstanding taxes receivable will be collected more than 60 days beyond the fiscal year-end.b. Post the entries to the general ledger.c. Prepare and post the closing entries for the General Fund. Outstanding encumbrances at year end are classified as Assigned Fund Balance and all remaining net resources are classified as Unassigned Fund Balance.d. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the year ended December 31, 2012. Confirm that the revenue and expenditure control accounts agree with the following detail and use this information in the Statement:e. Prepare in good form a Balance Sheet for the General Fund as of the end of fiscal year, December 31, 2012.4?C. Part 2. Special Revenue Fund TransactionsRequired:a. Record journal entries for the following transactions for FY 2012 and post to the general ledger. As there are relatively few revenues and expenditures, the use of control accounts is not necessary. (Make entries directly to individual revenue and expenditure accounts). (1) The state government notified the City that $975,000 will be available for street and highway maintenance during 2012 (i.e. the City has met eligibility requirements). The funds are not considered reimbursement-type as defined by GASB standards.(2) Cash in the total amount of $950,000 was received from the state government. (3) Contracts, all eligible for payment from the Street and Highway Fund, were signed in the amount of $923,000.(4) Contractual services (see transaction 3) were received, the related contracts amounted to $897,500. Invoices amounting to $896,000 for these items were approved for payment. The goods and services all were for street and highway maintenance.(5) Investment revenue of $4,000 was earned and received.(6) Vouchers were paid in the amount of $898,000.(7) All required legal steps were accomplished to increase appropriations in the amount of $2,500.b. Prepare and post the necessary closing entries for the Street and Highway Fund.c. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balances for the Street and Highway Fund for the fiscal year ended December 31, 2012.d. Prepare a Balance Sheet for the Street and Highway Fund as of December 31, 2012. Assume any unexpended net resources are classified as Restricted Fund Balance.Chapter 5 ? Accounting for Other Governmental Fund Types: CapitalProjects, Debt Service, and Permanent5?C. Part 1. Capital Projects Fund TransactionsThe voters of the City of Everlasting Sunshine approved the issuance of tax-supported bonds in the face amount of $4,000,000 for the construction and equipping of a new annex to the City Hall. Architects were to be retained, and construction was to be completed by outside contractors. In addition to the bond proceeds, a $500,000 grant was expected from the state government.Required:a. Open a general journal for the City Hall Annex Construction Fund. Record the following transactions and post to the general ledger. Control accounts are not necessary.(1) On January 1, 2012, the total face amount of bonds bearing an interest rate of 8 percent was sold at a $50,000 premium. The bonds are to mature in blocks of $200,000 each year over a 20-year period commencing January 1, 2013. Interest payment dates are July 1 and January 1. The first interest payment will be July 1, 2012. The premium was transferred to the City Hall Annex Debt Service Fund for the future payment of principal on the bonds.(2) The receivable from the state government was recorded.(3) Legal and engineering fees early in the project were paid in the amount of $53,000. This amount had not been encumbered.(4) Architects were engaged at a fee of $210,000.(5) Preliminary plans were approved, and the architects were paid 20 percent of the fee.(6) The complete plans and specifications were received from the architects and approved. A liability in the amount of $126,000 to the architects was approved and paid.(7) Bids were received and opened in public session. After considerable discussion in City Council, the low bid from Hardhat Construction Company in the amount of $3,800,000 was accepted, and a contract was signed.(8) The contractor required partial payment of $2,000,000. Payment was approved and vouchered with the exception of a 5 percent retainage.(9) Cash in the full amount of the grant was received from the state government.(10) Furniture and equipment for the annex were ordered at a total cost of $410,000.(11) Payment was made to the contractor for the amount vouchered (see 8 above).(12) The contractor completed construction and requested payment of the balance due on the contract. After inspection of the work, the amount, including the past retainage, was vouchered and paid.(13) Furniture and equipment were received at a total actual installed cost of $405,550. Invoices were approved for payment.(14) The remainder of the architects? fees was approved for payment.(15) The City Hall Annex Construction Fund paid all outstanding liabilities on December 31, 2012. The remaining cash was transferred to the City Hall Annex Debt Service Fund.b. Post the entries to the City Hall Annex Construction Fund general ledger.c. Prepare and post an entry closing all nominal accounts to Fund Balance.5?C. Part 2. Existing Debt Service Fund TransactionsThe City Hall Debt Service Fund of the City of Everlasting Sunshine has been open for five years, it was created to service an $8,000,000, 6 percent tax-supported bond issue. As of December 31, 2011, this serial bond issue had a balance of $6,000,000. Semiannual interest payments are made on January 1 and July 1, and a principal payment of $400,000 is due on January 1 of each year.As this is a regular serial bond debt service fund, the only accounts with balances as of January 1, 2012, were Cash with Fiscal Agent and Fund Balance?Assigned for Debt Service, each with balances of $580,000. (Revenues were raised and collected in cash in 2011 in order to be able to pay bond principal and interest due on January 1, 2012.) The government chose not to accrue interest payable.Required:a. Open a general journal for the City Hall Debt Service Fund and prepare journal entries for the following transactions. Control accounts are not necessary (1) The fiscal agent reported that $180,000 in checks had been mailed to bondholders for interest due on January 1, and $400,000 in checks were mailed for bonds maturing that day.(2) Cash in the amount of $168,000 was received from the General Fund on June 30 and was transferred to the fiscal agent.(3) The fiscal agent reported that checks dated July 1 had been mailed to bondholders for interest due that day.(4) Cash in the amount of $568,000 was received from the General Fund on December 31 and transferred to the fiscal agent to be used for the interest and principal payments due on January 1, 2012. The government elected to not accrue the interest or principal at year-end.b. Post the entries to the City Hall Debt Service Fund ledger (t-accounts).c. Prepare and post an entry closing all nominal accounts to Fund Balance.Continuous Problem ? City of Everlasting Sunshine5?C. Part 3. New Debt Service Fund TransactionsOn the advice of the city attorney, a City Hall Annex Debt Service Fund is opened to account for debt service transactions related to the bond issue sold on January 1, 2012 (see Part 1).Required:a. Open a general journal for the City Hall Annex Debt Service Fund. Record the following transactions, as necessary. Control accounts are not necessary(1) The premium described in transaction 1 of Part 1 was received as a transfer from the capital projects fund.(2) Cash in the amount of $160,000 was received from the General Fund on June 30 and was transferred to the fiscal agent.(3) The fiscal agent reported that checks dated July 1 had been mailed to bondholders for interest due that day.(4) The transfer described in part c of Part 1 was received.(5) Cash in the amount of $360,000 was received from the General Fund on December 31 and transferred to the fiscal agent to be used for interest and principal payments due on January 1, 2010. The remaining cash on hand was invested. The government elected to not accrue the interest at year-end. b. Post the entries to the City Hall Annex Debt Service Fund ledger (t-accounts).c. Prepare and post an entry closing all nominal accounts to Fund Balance. Assume any remaining net resources are classified as Fund Balance ? Assigned for Debt Service.5?C. Part 4. Governmental Funds Financial StatementsRequired:a. Prepare a Balance Sheet for the governmental funds for the City of Everlasting Sunshine as of December 31, 2012. Include the General Fund, the Street and Highway Fund (P4? C), the City Hall Debt Service Fund, and the City Hall Annex Debt Service Fund. Use the balances computed in 4-C for the General Fund and special revenue fund portions of this statement.b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balances for the governmental funds for the City of Everlasting Sunshine for the Year Ended December 31, 2012. Include the same funds as listed in requirement a plus the City Hall Annex Construction Fund.Chapter 13 ? Auditing, Tax-Exempt Organizations, and EvaluatingPerformanceAssemble the financial statements prepared for the City of Everlasting Sunshine. Thesefinancial statements will be in the solutions to Exercises 5?C, 6?C, 7?C, and 8?C. Assume apopulation of 20,000 and fair value of property in the amount of $300 million. Compute thefollowing ratios, following the guidance used for the Village of Elizabeth in this chapter:(1) Net debt per capita.(2) Net debt to fair value of property.(3) Net debt to assets.(4) Debt service to total expenditures?General and debt service funds.(5) Net assets/expenses.(6) Unrestricted net assets/expenses.(7) Unreserved fund balance/revenues?General Fund.(8) Governmental revenues per capita.(9) Interest coverage?revenue bonds.(10) Operating ratio?enterprise funds.

 

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