Find more slides, ebooks, solution manual and testbank on www.downloadslide.com Chapter 20 ACCOUNTING FOR STATE AND LOCAL GOVERNMENTAL UNITS — GOVERNMENTAL FUNDS Questions The governmental fund accounting equation is: Current Assets – Current Liabilities = Fund Balance GASB 54 no longer allows the use of “reserved” or “unreserved” fund balance The allowable classifications are nonspendable, restricted, committed, assigned and unassigned Taxpayers are billed the full $200,000 The amount recorded as Revenue would be $194,000 with $6,000 recorded as Allowance for Uncollectible Taxes Encumbrance means “commitment,” and encumbrance accounting records commitments made for goods on order and for unperformed contracts in order to provide additional control over expenditures The required governmental fund financial statements include a statement of net assets or balance sheet and a statement of revenues, expenditures, and changes in fund balance The fund financial statements for the governmental funds are prepared on the modified accrual basis of accounting Capital projects funds are used to account for the financing and acquisition of capital facilities or other capital assets (general fixed assets) of a governmental unit They are not used to account for the acquisition of capital facilities financed through internal service or enterprise funds General fixed assets may be purchased through the general fund or special revenue funds General fixed assets may be acquired by donation in which case the capital projects fund would not likely be involved Capital projects funds may receive resources from numerous sources such as the proceeds of general obligation bond issues, state and federal grants, shared revenues, and transfers from other funds A CPF is terminated when the capital facilities have been acquired and project liabilities settled This may involve a short period of time in the case of assets acquired by purchase and several years in the case of assets acquired by construction Assets remaining after a capital project has been completed and paid for are ordinarily transferred to the general fund or to the debt service fund with responsibility for servicing the debt issued to finance the project A government may treat supply acquisitions as expenditures either when purchased (purchases method) or when used (consumption method), as long as it reports © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-2 significant amounts of inventory in the balance sheet While the consumption method is similar to the manner in which commercial businesses record supplies, the purchases method better allows for comparison of expenditures and appropriations Under the purchases method, a government with significant inventory balances at year-end will recognize the balances as assets in the fund balance sheet and establish an accompanying fund balance-nonspendable to reflect the fact that the supply amount is not an available financial asset 10 Debt service funds may be used to account for debt service on any long-term, general government liabilities including debt service on special assessment debt for which the government is obligated in some manner Debt issued for and intended to be repaid from resources of enterprise, internal service, or trust funds is accounted for in those funds A transfer of resources by the general fund to the debt service fund to be used to retire all or a portion of the general long-term debt would affect the general fund and the debt service fund at the same time Assuming that the amount of the transfer is $10,000, the entries would be: GF Nonreciprocal operating transfer to debt service fund Cash DSF Cash 10,000 10,000 10,000 Nonreciprocal operating transfer from general fund 10,000 11 Special assessment levies are charges made against specific property owners (or citizens) to pay for improvements (or services) that provide special benefits to the property owners Such improvements are usually requested by those who receive the benefits and agree to pay their share of the cost General tax levies are levied against all citizens of the governmental unit on a uniform basis to finance the general cost of government General tax levies are determined by elected officials, apply to all (or virtually all) property in the jurisdiction, and may have little or no relationship to the actual benefits received by individual taxpayers A final difference is that property taxes are levied each year for that year (or sometimes the following year) Special assessment levies often are for amounts to be collected over several years 12 Capital project funds are used to account for the construction activities of general government special assessment projects and the debt service fund is used to account for the related debt service if the government is obligated in some manner Debt service for special assessment liabilities for which the government is not obligated in any manner is accounted for in agency funds, with the special assessment obligation being disclosed in notes to the financial statements © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-3 13 When governments enter into capital lease agreements, the governmental fund acquiring the general fixed asset records an expenditure and other financing source, as if long-term debt had been issued At the same time, the town notes a liability (capital lease payable) in the general long-term debt account records for the amount remaining due and adds an asset to the general fixed asset account records at the present value of the minimum lease payments determined by FASB 13 criteria The asset and liability, as well as associated depreciation, will appear in the government-wide financial statements; however, only an expenditure and other financing source appear in the governmental fund statements The town may record future capital lease payments as expenditures of principal and interest in the general fund or transfer resources to the debt service fund, which will recognize the expenditures The notes to the financial statements disclose minimum lease payments for each of the following five years and in five-year increments thereafter 14 Expenditures 420,000 Supplies Inventory To adjust the supplies inventory and supplies expenditures accounts 420,000 The closing and reclassification entries will result in a 20,000 decrease in Fund balancenonspendable such as below Note how the amount of unassigned fund balance that was “used up” in this year is the amount actually spent on supplies ($400,000) while the amount in the expenditures account ($420,000) is the amount consumed during the year The difference is reflected in the $20,000 decrease in the fund balance-nonspendable account Fund balance – nonspendable Fund balance – unassigned Expenditures To close and reclassify supply expenditures 20,000 400,000 420,000 15 Governments record details of the planned revenues (such as property taxes, sales taxes, and license revenue) and appropriations (such as police supplies, mayor’s office expenses, and maintenance of the town hall) in subsidiary revenue and expenditure ledgers The detail allows for better control over expenditures, as appropriations can be compared to expenditures and encumbrances at any time 16 The amount that city officials can order prior to year end is $75,000 ($250,000 – $175,000) If they have not spent the full $250,000 in appropriations prior to year end, depending on the laws of the Village of Lester, all appropriations lapse at the end of the year for which they are made, with the exception of committed appropriations (encumbrances outstanding), which can continue to serve as authorizations for items on order or under contract Since governments are longer allowed to report “reserve for encumbrances” in the financial statements due to GASB 54, the government will need to establish a policy for how to record and report on outstanding commitments at the end of the year One approach is to reverse all of the encumbrances and related reserve for encumbrances and report the commitments as Fund balance-committed © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-4 17 Permanent funds (PF) account for contributions for which the grantor specifies that a principal amount must be maintained but for which interest accumulation or asset appreciation, or both, are to be used for a specified purpose Funds that are expendable are accounted for in a special revenue fund If contributions benefit parties external to the government, they are accounted for in private purpose trust funds 18 The general fund is always a major fund Other funds are considered major funds if they meet both of the following criteria: Total assets, liabilities, revenues, or expenditures/expenses (excluding extraordinary items) of that individual governmental or enterprise fund are at least 10% of the corresponding total (assets, liabilities, etc.) for all funds of that category or type Total assets, liabilities, revenues, or expenditures/expenses (excluding extraordinary items) of that individual governmental or enterprise fund are at least 5% of the corresponding total for all governmental and enterprise funds combined 19 A budgetary comparison schedule, which is required supplementary information for the general fund and for all special revenue funds with legally adopted budgets, includes columns for the original budget, the final budget, actual balances (on the budgetary basis) and variances (optional) The budgetary comparison schedule includes the same classifications as the GAAP operating statement, however, the amounts reported for revenues, expenditures, and fund balances often differ between the two statements Differences exist when a government uses a non-GAAP basis of accounting for budgeting purposes It should be included in a CAFR 20 Since the government-wide statements are prepared on the accrual basis of accounting while the fund financial statements for the governmental funds are prepared on the modified accrual basis of accounting, governments must convert governmental fund financial information to the accrual basis of accounting for inclusion in the governmentwide statements of activities and net assets A conversion worksheet is an optional tool that facilitates reconciliation of the two statements 21 Examples of items that might appear on the reconciliation between the governmental fund balance sheet and the government-wide statement of net assets include: Governmental fund fixed assets are recorded as expenditures in the fund statements and must be recorded at cost in the government-wide statements The depreciation associated with the governmental fixed assets must be recorded in the government-wide statements Capital project fund construction expenditures should be recorded as an asset “construction in progress” in the government-wide statements © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-5 Examples of items that might appear on the reconciliation between the governmental fund operating statement and the government-wide statement of activities include: Governments must adjust for instances where revenue recognition differs between the modified accrual and accrual bases of accounting It is necessary to eliminate interfund balances within the governmental funds Bond proceeds provide current financial resources in the fund statement, but issuing debt increases long-term liabilities in the statement of net assets EXERCISES E20-1 E20-2 a b b a c a c d a b E20-5 [AICPA adapted] c c b d b E20-4 E20-3 [AICPA adapted] c d a b b b d c d a E20-6 [AICPA adapted] c b c b c © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-6 E20-7 Journal entries to account for property taxes in the general fund March 21, 2011 Taxes receivable — current Allowance for uncollectible current taxes Revenue To record the property tax levy May 4, 2011 Cash 2,500,000 50,000 2,450,000 1,900,000 Taxes receivable — current To record collection of property taxes Taxes receivable-delinquent Allowance for uncollectible current taxes Taxes receivable — current Allowance for uncollectible delinquent taxes To reclassify uncollected taxes as delinquent May 5-December 31, 2011 Cash Taxes receivable — delinquent To record collection of property taxes November 1, 2011 Allowance for uncollectible taxes — delinquent Taxes receivable — delinquent To write off tax receivable determined to be uncollectible January 1, 2011 — February 28, 2011 Cash Taxes receivable — delinquent To record collection of 2010 taxes 1,900,000 600,000 50,000 600,000 50,000 150,000 150,000 5,000 5,000 87,750 87,750 Jedville Township Partial Balance Sheet December 31, 2011 Assets Taxes receivable — delinquent (net of $45,000 estimated uncollectible taxes) $ 355,000 © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-7 Revenue would equal tax levy less uncollectible amounts less amounts not collected within 60 day period Since governmental units rarely complete the closing process within 60 days of year end, the amounts collected within 60 days of year end will be known ($2,500,000 - $50,000 - $312,250 = $2,137,750) E20-8 Closing entries: Fund balance - unassigned Appropriations Estimated revenues To reverse entry to record budget 500 17,500 18,000 Reserve for encumbrances — prior year 2,000 Reserve for encumbrances 1,000 Revenues 17,380 Nonreciprocal transfer in 3,200 Expenditures — current year 16,450 Expenditures — prior year 1,900 Encumbrances 1,000 Fund balance — committed* 1,000 Fund balance — unassigned 3,230 To close accounts, including the prior year’s reserve for encumbrances *assumes the prior year encumbrance was cleared out with the prior year expenditure and that city policy is to continue any outstanding encumbrances from the current year as committed Fund balance © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-8 E20-9 Millar City General Fund Balance Sheet June 30, 2011 Assets Cash Taxes receivable Less: Allowance for uncollectible Accounts Due from other funds Supplies inventory Total assets $12,000 $30,000 2,000 Liabilities and Fund Balance Liabilities: Vouchers payable Due to other funds Total liabilities 28,000 3,000 4,000 $47,000 $15,000 5,000 $20,000 Fund balance: Committed Nonspendable Unassigned Total fund balance Total liabilities and fund balance $ 6,000 4,000 10,000 17,000 27,000 $47,000 Check: Estimated revenues Encumbrances Expenditures Expenditures—prior year Adjust—nonspendable (for inventory) Ending balance Fund Balance-unassigned $300,000 $ 10,000 6,000 300,000 290,000 5,000 5,000 305,000 2,000 17,000 Preclosing balance Appropriations Reserve for encumbrances— prior year Revenues © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-9 E20-10 Madelyn City General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance for the year ended December 31, 2011 Revenues Expenditures Excess of revenues over expenditures Other financing sources (uses): Reciprocal transfers in Nonreciprocal transfers out Excess of revenues and other financing sources over (under) expenditures and other financing uses Total fund balance, January 1, 2011 Total fund balance, December 31, 2011 Estimated revenues Encumbrances Expenditures Expenditures—prior year Nonreciprocal transfers out Fund Balance - unassigned $100,000 $ 25,000 4,000 95,000 94,000 5,000 4,800 101,000 18,000 27,000 32,200 $101,000 98,800 2,200 27,000 (18,000) $ 11,200 25,000 $ 36,200 Preclosing balance Appropriations Reserve for encumbrances— prior year Revenues Reciprocal transfers in Ending balance Total ending fund balance = $32,200 + $4,000 (Fund balance – committed or restricted or assigned… as a result of encumbrances) = $36,200 © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-10 E20-11 Journal entries in the general fund: Estimated revenues Appropriations Fund balance – unassigned To record the annual budget 250,000 248,000 2,000 Taxes receivable—current 200,000 Revenues Allowance for uncollectible taxes—Current To record tax levy for the year (1% estimated uncollectible) Cash 150,000 Taxes receivable—current To record tax collections 150,000 Due from special revenue fund Cash To record loan to SRF 15,000 Encumbrances 18,000 15,000 Reserve for encumbrances To encumber orders for supplies 18,000 Reserve for encumbrances 18,000 Encumbrances To reverse encumbrance entry on receipt of supplies ordered Expenditures Expenditures 18,000 18,150 Vouchers payable To record purchase of supplies 198,000 2,000 18,150 800 Due to stores fund (ISF) To record materials acquired from the stores fund Operating transfer to debt service fund Cash To record payment to DSF for debt service Expenditures Cash To record purchase of equipment 800 5,000 5,000 15,000 15,000 © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com P20-5 [AICPA adapted] a b c d Oslo School District General Fund Transactions July 1, 2010 — June 30, 2011 Estimated revenues 3,000,000 Appropriations Fund balance – unassigned To record the budget for the year Taxes receivable Revenues — taxes Estimated uncollectible taxes To record tax levy for the year Estimated uncollectible taxes Taxes receivable To write-off uncollectible taxes Cash 2,870,000 2,800,000 70,000 40,000 40,000 2,940,000 Taxes receivable Miscellaneous revenues To record cash collections for the year e f 2,810,000 130,000 Vouchers payable Cash To record cash payments for the year 2,640,000 Encumbrances 2,700,000 2,640,000 Reserve for encumbrances To record encumbrances g h 2,700,000 Reserve for encumbrances Encumbrances To reverse encumbrances 2,700,000 Expenditures 2,700,000 2,700,000 Vouchers payable To record vouchers for payment of current operations i 2,980,000 20,000 Expenditures — prior year Vouchers payable To record expenditures for prior year 2,700,000 58,000 58,000 © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-467 j k l Fund balance — committed Expenditures — prior year Fund balance - assigned To close excess reserve to fund balance 60,000 58,000 2,000 Due to other funds Vouchers payable To record vouchers for payment to other funds 210,000 Expenditures 142,000 210,000 Due to other funds To record expenditures for amounts due other funds m 142,000 Encumbrances 91,000 Fund balance — committed 91,000 To record commitment for new contract NOTE: we usually see encumbrances and reserve for encumbrances in the same entry In the closing entries the encumbrances will be closed and a debit to Fund balance – unassigned (this makes sense as there is less fund balance available due to the commitment) P20-6 [AICPA adapted] Journal entries for the City of Lahti General Fund Estimated revenues Appropriations Fund balance - unassigned To record the budget 2,000,000 Taxes receivable Revenues Allowance for uncollectible taxes To record the property tax levy 1,870,000 Allowance for uncollectible taxes Taxes receivable To write off uncollectible taxes receivable Cash 1,940,000 60,000 1,860,000 10,000 8,000 8,000 1,820,000 Taxes receivable To record property tax collections 1,820,000 © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-468 Encumbrances Fund balance — committed Expenditures Encumbrances Vouchers payable To record actual expenditures 1,000,000 1,840,000 Vouchers payable Cash To record payment of vouchers 1,852,000 Revenues Fund balance - unassigned Estimated revenues To close revenues accounts 1,860,000 140,000 Appropriations Expenditures Encumbrances Fund balance - unassigned To close expenditure — related accounts 1,940,000 1,070,000 Fund balance — committed* 1,070,000 To record purchase commitments * This shows the approach to encumbrances/commitments by making entries during the accounting period directly into the fund balance account The advantage of this method is that the fund balance account will be more accurate throughout the year The disadvantage is that tradition is to offset Encumbrances with Reserve for Encumbrances 1,000,000 1,840,000 1,852,000 2,000,000 1,840,000 70,000 30,000 © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-469 P20-7 Volendam County General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance For the year ended December 31, 2011 Revenues: Taxes Licenses and permits Intergovernmental grants Total revenues Expenditures: Current operating: General government Public safety Judicial Health and welfare Total current operating Capital outlay Total expenditures Excess of revenues over expenditures $10,000,000 2,000,000 300,000 $12,300,000 $ 8,000,000 1,500,000 1,000,000 1,200,000 11,700,000 600,000 12,300,000 Other financing sources (uses): Operating transfer to debt service fund (320,000) Excess (Deficiency) of revenues and other sources over expenditures and other uses (320,000) Fund balance, January 1, 2011 Residual equity transfer from other fund Fund balance, December 31, 2011 3,130,000 2,000,000 $ 4,810,000 Note: The short-term note affects only the balance sheet The interfund collection affects the balance sheet only © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-470 P20-8 Cash ($3,000,000 06 5) OFS - Nonreciprocal transfer from GF To record transfer from general fund 90,000 Expenditures — interest Cash To record interest payment 90,000 Cash 90,000 90,000 1,090,000 OFS - Nonreciprocal transfer from GF To record transfer from general fund Expenditures — interest Expenditures — principal retirement Cash To record payment of principal and interest 1,090,000 90,000 1,000,000 1,090,000 None Cash ($2,000,000 06 5) OFS - Nonreciprocal transfer from GF To record transfer from general fund 60,000 Expenditures — interest Cash To record interest payment 60,000 60,000 60,000 © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-471 P20-9 October 1, 2011 OFU – nonreciprocal transfer to CPF GF Cash To record transfer of cash to CPF CPF Cash 200,000 200,000 200,000 OFS – Nonreciprocal transfer from gen fund To record receipt of cash from GF November 1, 2011 CPF Encumbrances 200,000 580,000 Reserve for encumbrances To record encumbrances for the amount of the contract April 15, 2012 CPF Cash 401,000 Proceeds from bond issue To record sale of bonds CPF DSF 401,000 OFU - nonreciprocal transfer to debt service fund Cash To transfer of bond premium to the DSF 1,000 Cash 1,000 1,000 OFS - nonreciprocal transfer from CPF To record receipt of bond premium 1,000 May 2, 2012 580,000 CPF Expenditures — capital outlay Contracts payable To record expenditures on the municipal building project Reserve for encumbrances 580,000 Encumbrances To remove encumbrances when construction is complete 580,000 580,000 580,000 May 12, 2012 580,000 CPF Contracts payable Cash 580,000 To record payment to Crooked Construction for building contract CPF Residual equity transfer to general fund Cash To record transfer to general fund 20,000 20,000 © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-472 CPF GF OFS - nonreciprocal transfer from general fund Proceeds from bond issue Expenditures Residual equity transfer to general fund OFU - nonreciprocal transfer to DSF To close the books of the CPF 200,000 401,000 580,000 20,000 1,000 Cash 20,000 Residual equity transfer from CPF To record receipt of cash from CPF 20,000 P20-10 Journal entries for Malmo City July 1, 2011 CPF Encumbrances 480,000 Reserve for encumbrances To encumber the construction contract CPF Cash 480,000 255,000 OFS - Proceeds from bond issue To record proceeds of bond issue CPF DSF 255,000 OFU - nonreciprocal transfer to debt service fund 5,000 Cash To transfer premium to the DSF (This premium transfer is commonly presumed in problems.) Cash 5,000 OFS - nonreciprocal transfer from CPF To record receipt of premium transferred from CPF December 20, 2011 CPF Reserve for encumbrances Encumbrances To reduce encumbrances for work completed CPF 5,000 5,000 160,000 160,000 Contracts payable To record expenditures for one-third of Gunnarsson contract 160,000 Expenditures 160,000 © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-473 P20-10 (continued) January 1, 2012 CPF Contracts payable Contracts payable — retained percentage Cash To record partial payment on the contract GF DSF 160,000 16,000 144,000 OFS - nonreciprocal transfer to debt service fund 2,500 Cash To transfer funds to DSF for January 1, 2012 interest payment 2,500 2,500 Cash ($250,000 06 5) - $5,000 OFS - nonreciprocal transfer from GF 2,500 To receive funds from GF for the January 1, 2012 interest payment Expenditures–interest 7,500 Cash 7,500 To record the January 1, 2012 interest payment on the 6% serial bonds ($250,000 6% 1/2 year) DSF June 30, 2012 CPF Encumbrances 160,000 Reserve for encumbrances To reduce encumbrances for work completed CPF Expenditures — capital outlay Contracts payable To record billing for work completed 160,000 160,000 160,000 Closing entry CPF OFS - Proceeds from bond issue Fund balance – unassigned* Reserve for encumbrances Fund balance - restricted Expenditures–capital outlay Encumbrances OFU - nonreciprocal transfer to DSF To close the books of CPF at end of fiscal year 255,000 230,000 160,000 160,000 320,000 160,000 5,000 *Since there is a deficit – we use the unassigned category outside of the general fund As also noted below, the deficit will be covered by issuing the additional $250,000 in bonds © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-474 P20-10 (continued) At June 30, 2012 the balance sheet of the CPF would appear as follows: Assets Cash $106,000 $106,000 Total assets Liabilities Contracts payable Contracts payable — retained percentage Fund balance Restricted Unassigned* Total liabilities and fund balance * $160,000 16,000 $160,000 (230,000) $176,000 (70,000) $106,000 This deficit will be provided for by issuing the additional $250,000 of bonds © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-475 P20-11 [AICPA adapted] City of Cerone Civic Center Construction Fund General Journal July 1, 2011 (1) Cash 500,000 Due to general fund To record the loan from the general fund (2) 500,000 Expenditures 320,000 Cash To record payment of engineering and planning costs December 1, 2011 (3) Cash 10,100,000 OFS - Proceeds from bond issue To record receipt of proceeds from 6% bond issue OFU - nonreciprocal transfer to DSF Cash To transfer bond premium to debt service fund March 15, 2012 (4) Encumbrances 320,000 10,100,000 100,000 100,000 12,000,000 Reserve for encumbrances 12,000,000 To record construction commitment to Candu Construction Company (5) Encumbrances 55,000 Reserve for encumbrances To record commitment for materials on order April 1, 2012 (6) Cash 55,000 2,500,000 Deferred grant revenue To record receipt of state grant for construction (7) 2,500,000 Expenditures 51,000 Reserve for encumbrances 55,000 Vouchers payable Encumbrances To record receipt of materials and elimination of encumbrances Vouchers payable Cash To record payment of voucher 51,000 55,000 51,000 51,000 © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-476 P20-11 (continued) June 15, 2012 (8) Expenditures 2,000,000 Contracts payable — current 1,880,000 Contracts payable — retained percentage 120,000 To record progress billing on contract with a 6% retained percentage Reserve for encumbrances Encumbrances To reduce encumbrances for amounts billed (9) 2,000,000 2,000,000 Due to general fund 500,000 Cash To record repayment of initial financing to the general fund June 30, 2012 Deferred grant revenue Revenue To recognize grant revenue earned 500,000 2,371,000 2,371,000 Note that the entry recognizing grant revenue presumes that the first $5 million of expenditures will be recoverable from the state In some cases, the grantor only agrees to pay a certain percentage of the cost, up to some maximum If this were the case in this problem, the amount of revenue recognized would be one-third of $2,371,000, or approximately $790,000 Closing entries Revenue OFS - Proceeds from bond issue Reserve for encumbrances Fund balance - restricted Expenditures OFU - nonreciprocal transfer to DSF Encumbrances To close the books at June 30, 2012 2,371,000 10,100,000 10,000,000 10,000,000 2,371,000 100,000 10,000,000 © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-477 City of Cerone Civic Center Construction Fund Balance Sheet June 30, 2012 Assets Cash Total assets Liabilities and Fund Balance Deferred state grant Contracts payable — current Contracts payable — retained percentage Total liabilities Fund balance: Restricted Total fund balance Total liabilities and fund balance $12,129,000 $12,129,000 $ 129,000 1,880,000 120,000 $ 2,129,000 $10,000,000 10,000,000 $12,129,000 © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-478 P20-12 CPF Cash 510,000 OFS - Proceeds from bonds To record issuance of bonds at a premium DSF 510,000 OFU - nonreciprocal transfer to debt service fund Cash To record transfer of bond premium to DSF 10,000 Cash 10,000 10,000 OFS - nonreciprocal transfer from CPF To record transfer of bond premium CPF Encumbrances 10,000 960,000 Reserve for encumbrances To encumber contract awarded for construction CPF 960,000 Reserve for encumbrances Encumbrances To reduce encumbrances for work completed 320,000 Expenditures 320,000 320,000 Contracts payable To record expenditures for work completed CPF GF DSF 320,000 Contracts payable 320,000 Contracts payable — retained percent Cash To record partial payment on construction contract OFU - nonreciprocal transfer to DSF Cash To record transfer to DSF 30,000 Cash 30,000 30,000 OFS - nonreciprocal transfer from GF To record transfer from GF DSF 32,000 288,000 Expenditures–interest 20,000 Cash To record payment of interest (500,000 08 5) 30,000 20,000 © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-479 CPF Reserve for encumbrances Encumbrances To reduce encumbrances for work completed 320,000 Expenditures 320,000 320,000 Contracts payable To record expenditures for work completed GF DSF 320,000 OFU - nonreciprocal transfer to DSF Cash To record transfer to DSF 90,000 Cash 90,000 90,000 OFS - nonreciprocal transfer from GF To record transfer from GF 10 DSF CPF 90,000 Expenditures — interest Expenditures — principal retirement Cash To record debt service payment Cash 20,000 50,000 70,000 500,000 OFS - Proceeds from bonds To record issuance of bonds 500,000 City of Catalina Capital Projects Fund Statement of Revenues, Expenditures, and Changes in Fund Balance for the year ended June 30, 2012 Other financing sources: Proceeds from bonds Expenditures: Capital outlay Other financing uses OFS - nonreciprocal transfer out Total expenditures and other financing uses Excess of revenues and other financing sources over expenditures and other financing uses Fund balance, July 1, 2011 Fund balance June 30, 2012 $1,010,000 $640,000 10,000 650,000 360,000 $ 360,000 © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-480 City of Catalina Capital Projects Fund Balance Sheet June 30, 2012 Assets Cash $ 712,000 $ 712,000 Total assets Liabilities and Fund Balance Liabilities: Contracts payable Contracts payable — retained percentage Fund balance: Restricted Committed Total liabilities and fund balance $320,000 32,000 $320,000 40,000 $ 352,000 360,000 $ 712,000 © 2011 Pearson Education, Inc publishing as Prentice Hall ...Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-2 significant amounts of inventory in the balance... levies are determined by elected officials, apply to all (or virtually all) property in the jurisdiction, and may have little or no relationship to the actual benefits received by individual taxpayers... statements © 2011 Pearson Education, Inc publishing as Prentice Hall Find more slides, ebooks, solution manual and testbank on www.downloadslide.com 20-3 13 When governments enter into capital lease