ng reporting on General Fund As the recently appointed chief accountant of the City of York, you asked the bookkeeper for a trial balance of the General Fund as of December 31, 2022. York uses only a General Fund to record all its transactions. This is what you received:
Review problem affecting reporting on General Fund
As the recently appointed chief accountant of the City of York, you asked the bookkeeper for a
balance
all its transactions. This is what you received:
| City of York General Fund Trial Balance December 31, 2022 | ||
|---|---|---|
| Debits | Credits | |
| Cash | $20,800 | |
| Short-term investments | 180,000 | |
| 11,500 | ||
| Taxes receivable—current | 30,000 | |
| Tax anticipation notes payable | $58,000 | |
| Appropriations | 927,000 | |
| Expenditures | 795,200 | |
| Estimated revenues | 927,000 | |
| Revenues | 750,000 | |
| General city property | 98,500 | |
| General obligation bonds payable | 52,000 | |
| Unassigned fund balance | 380,000 | |
| $2,115,000 | $2,115,000 |
After reviewing the trial balance, you realize that the inexperienced bookkeeper made errors on
some transactions and merely guessed at the correct accounting treatment of other transactions.
This is what you found when you reviewed the journal entries and analyzed other transactions
and events that had occurred during the year:
1. On December 1, 2022, the city received notice from the state that it would receive a grant
to help train its police officers. The grant terms stipulated that, to be eligible for the grant,
the city would need to incur certain allowable costs. The city received a check for $20,000
on December 10 as an advance on the grant. The bookkeeper recorded the advance in the
Revenues account. As of December 31, however, the city had not yet started the training
program.
2. On December 31, 2022, the state department of tax and finance advised the city that the
state had collected $58,500 of sales tax revenues on behalf of the city and that a check
would be sent to the city by January 20, 2023. No
3. York collects property taxes on behalf of the county in which it is located. The entire amount
received in November 2022 ( $15,000) was recorded as York’s revenues and was not sent
to the county.
4. Analysis of the Taxes receivable—current account shows the following:
a) The entire $30,000 of receivables is delinquent.
b) Based on the history of delinquent tax collections, you estimate that $15,000 of the
receivables will be collected by the end of February 2023, that $12,000 of the
receivable amount will not be received until much later in 2023, and that $3,000 will
ultimately need to be written off as uncollectible.
5. Analysis of the account General obligation bonds payable shows that the debit balance of
$52,000 arose from a journal entry made on December 30, 2022, to record payment
of debt service ( $40,000 bond principal and $12,000 interest).
6. Analysis of the account General city property shows that the $98,500 debit balance
resulted from two journal entries:
a) Sale of used truck for $6,400.
b) Purchase of new firefighting equipment for $104,900.
7. Although the city’s actuary estimated that the city would need to contribute $45,000 to
its pension fund for the year, the York City Council decided not to make an appropriation
for it because the city needed to conserve its cash. The bookkeeper decided that there
was no need to make an accrual.
8. Two lawsuits were brought against the city as a result of damages caused by its trucks
during trash collection. One case was settled in late December, for which York will pay
$2,000 damages in January 2023. The city attorney believes the city will probably
lose the other case as well and may need to pay out $6,000 to settle it. However, the
case is complex and is not likely to be resolved for another 15 months. The bookeeper
didn’t think any entry was needed because no cash was paid.
a) Prepare journal entries, as necessary, to correct the City of York’s records. Record all
adjustments related to income recognition to the Revenues account. If no adjustment is
necessary, select 'No debit (or credit) entry needed' in the account fields and enter 0 in
the amount fields. Assume all
If an entry affects more than one debit or credit account, enter the accounts in order of
magnitude (largest to smallest balances), debits first.
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