Chapter 10, Problem 40P

a.

To determine

Prepare the journal entries to recognize the following in government-wide financial statements for the required reconciliations:

1. 1. Recognize Capital Assets of $2,848,000 as of the beginning of the year.
2. 2. Record Depreciation Expense of $142,400 for the year and reverse Expenditures of $170,880 for Capital Outlays during the year.
3. 3. Recognize $140,000 of Bonds Payable as of the beginning of the year.
4. 4. Reverse Other Financing Sources of $40,000 and Expenditures—Debt Payments of $4,000 relating to increases and decreases in the bond liability during the year.
5. 5. Reverse Deferred Revenue of $390,000 as of the beginning of the year.
6. 6. Reverse $19,500 of Deferred Revenue recognized during the year.
7. 7. Recognize Compensated Absences of $56,960 as of the beginning of the year and an increase in that liability of $2,848 during the year.
8. 8. Recognize $400 of Accrued Interest Payable as of the beginning of the year and an increase in that liability of $667 during the year.
9. 9. Recognize a liability of $78,320 relating to the Village’s landfill as of the beginning of the year. The estimate for this liability did not change during the year.

Explanation of Solution

Government-wide statements put together financial activities in one location and provide information on accrual-based economic resources. Government-wide statements shall coordinate information whether it applies to government activities or business-type operations. The Government-wide reports consist of a statement of net position and a statement of activities. The statement of net position portrays the local government as a single economic entity rather than a collection of different funds.

Statement of activities is the statement which lists the government revenues and expenses and, in some instances, the difference to show the balance between them. It is practically a running effectively regarding the government's financial condition.

The Statement of Activities presents the reporting government operations in two parts:

• The net expense or revenue of each governmental function
• General revenues

The journal entries are as follows:

Date	Accounting Explanation	Amount ($)	Amount ($)
1.	Capital assets, net	$\$2,848,000$
	Net position		$\$2,848,000$
	(Capital assets, net at beginning of year)
2.	Depreciation expense	$\$142,400$
	Capital assets, net	$\$28,480$
	Expenditures—capital outlay		$\$170,880$
	(Change in capital assets, net)
3.	Net position	$\$140,000$
	Bonds payable		$\$140,000$
	(Bonds Payable at beginning of year)
4.	Other financing sources—proceeds from bonds	$\$40,000$
	Bonds payable		$\$36,000$
	Expenditures—debt principal payments		$\$4,000$
	(Change in bonds payable)
5.	Deferred revenues	$\$390,000$
	Net position		$\$390,000$
	(Deferred revenues at beginning of year)
6.	Deferred revenues	$\$19,500$
	Revenues		$\$19,500$
	(Change in deferred revenues)
7.	Net position	$\$56,960$
	Compensated absence expense	$\$2,848$
	Compensated Absences		$\$59,808$
	(To record beginning of year compensated absences and change for the year)
8.	Net position	$\$400$
	Interest expense	$\$667$
	Accrued interest		$\$1067$
	(To record beginning of year accrued interest and change for the year)
9.	Net position	$\$78,320$
	Landfill closure and post-closure care costs		$\$78,320$
	(Beginning of year landfill closure and post-closure care costs)

b.

To determine

Prepare the government-wide statement of net position and identify the revenues, expenses, and net position change that should be reported in the year's statement of activities of the Village, L.

Explanation of Solution

Government-wide statements put together financial activities in one location and provide information on accrual-based economic resources. Government-wide statements shall coordinate information whether it applies to government activities or business-type operations. The Government-wide reports consist of a statement of net position and a statement of activities. The statement of net position portrays the local government as a single economic entity rather than a collection of different funds.

The difference between assets of an entity plus deferred resource outflows and their liabilities plus deferred resource inflows which represents the net position is known as statements of net position of government-wide financial statements.

The table to render government-wide financial statements from the City of H's fund financial statements is as follows:

	Governmental Funds		DR		CR		Governmental Activities
Statement of Net Position:
ASSETS:
Current:
Cash	$448,853						$448,853
Receivables:
Real estate & personal property	36,000						36,000
Intergovernmental	372,285						372,285
Noncurrent:
Receivables
Capital assets, net of accumulated depreciation		1	2,848,000				2,876,480
		2	28,480
Total Assets	$857,138						$3,733,618
LIABILITIES:
Payables	$42,603						$42,603
Accrued interest				8	1,067		1,067
Bond and notes payable				3	140,000		176,000
				4	36,000
Compensated advances				7	59,808		59,808
Landfill closure and post-closure care costs				9	78,320		78,320
Deferred revenues	409,500	5	390,000				0
		6	19,500
Total Liabilities	452,103						357,798
Fund Balance	405,035						405,035
Adjustments:		3	140,000	1	2,848,000		2,708,000
		7	56,960	5	390,000		333,040
		8	400				(400)
		9	78,320				(78,320)
Net income adjustments				below	8,465		8,465
Net position							3,375,820
							$3,733,618

Statement of Revenues, Expenditures, and Changes in Fund Balances:
	Governmental Activities		DR		CR		Governmental Activities
Total revenues—fund financial statements	$1,591,200						$1,591,200
Adjustments:
Deferred revenues				6	19,500		19,500
Total revenues—statement of activities							1,610,700
Total expenditures	1,536,166						1,536,166
Adjustments:
Debt principal payments				4	4,000		(4,000)
Depreciation expense/ capital outlay		2	142,400	2	170,880		(28,480)
Compensated absences		7	2,848				2,848
Interest expense		8	667				667
Total Expenses—statement of activities							1,507,201
Miscellaneous Adjustments:
Proceeds from bonds	40,000	4	40,000				0
Excess (deficiency) of revenues over expenditures/change in net position	$95,034		185,915		194,380		$103,499