Chapter 4, Problem 24EP

a.

To determine

Journalize the given transactions in General Fund and governmental activities in the general journals for the year ended April 30, 2017.

Explanation of Solution

General Fund: The chief operating fund of state and local government used to record the departmental operating activities and government support services is referred to as General Fund, or General Operating Fund, or General Revenue Fund. The activities recorded in General Funds are police, fire, public works, recreation, education, culture, social services, city office, finance, personnel, and data processing.

Journalize the given transactions in General Fund and governmental activities in the general journals for the year ended April 30, 2017.

1.

Entry to record estimated revenues and appropriations:

		General Ledger
		Debits	Credits
General Fund:
Estimated Revenues		$3,140,000
	Appropriations		$3,100,000
	Budgetary Fund Balance		40,000

Table (1)

2.

Entry to record the receipt of temporary borrowing as loan:

		General Ledger
		Debits	Credits
General Fund:
Cash		$490,000
Expenditures–2017		10,000
	Tax Anticipation Notes Payable		$500,000
Governmental Activities:
Cash		490,000
Expenses–General Government		10,000
	Tax Anticipation Notes Payable		500,000

Table (2)

Note: The local bank charged 6% discount per year on the temporary borrowing of $500,000 which amounts to $10,000$\left(\text{\$500,000×6\%×}\left(\text{120 days÷360 days}\right)\right)$ is reported as Expenditures.

3.

Entries to record property tax levy:

		General Ledger
		Debits	Credits
General Fund:
Taxes Receivable–Current		$2,150,000
	Allowance for Uncollectible Current Taxes		$64,500
	Revenues		2,085,500
Governmental Activities:
Taxes Receivable–Current		2,150,000
	Allowance for Uncollectible Current Taxes		64,500
	Revenues		2,085,500

Table (3)

Working Notes:

Compute gross tax levied.

$\begin{array}{c}\text{Gross tax levy = Assessed valuation×Tax rate}\\ \text{=\$43,000,000×}\frac{\text{\$5}}{\text{\$100}}\\ \text{=\$2,150,000}\end{array}$

Compute uncollectible taxes.

$\begin{array}{c}\text{Uncollectible taxes = Gross levy×Uncollectible percentage}\\ \text{=\$2,150,000×3\%}\\ \text{=\$64,500}\end{array}$

4.

Entry to record supplies ordered at an estimated cost:

		General Ledger
		Debits	Credits
General Fund:
Encumbrances–2017		$2,060,000
	Encumbrances Outstanding–2017		$2,060,000

Table (4)

5.

Entries to record property tax revenues receivable:

		General Ledger
		Debits	Credits
General Fund and Governmental Activities:
Taxes Receivable–Current		$25,000
	Revenues		25,000

Table (5)

Working Notes:

Compute taxes receivable.

$\begin{array}{c}\text{Taxes receivable = Taxable value×Tax rate}\\ \text{=\$500,000×}\frac{\text{\$5}}{\text{\$100}}\\ \text{=\$25,000}\end{array}$

6.

Entry to record collection of delinquent taxes, interest, and penalties:

		General Ledger
		Debits	Credits
General Fund and Governmental Activities:
Cash		$2,364,840
	Taxes Receivable–Current		$1,961,000
	Taxes Receivable–Delinquent		383,270
	Interest and Penalties Receivable on Taxes		20,570

Table (6)

7.

Entry to record accrued interest and penalties:

		General Ledger
		Debits	Credits
General Fund:
Interest and Penalties Receivable on Taxes		$38,430
	Allowance for Uncollectible Interest and Penalties		$11,529
	Revenues		26,901
Governmental Activities:
Interest and Penalties Receivable on Taxes		$38,430
	Allowance for Uncollectible Interest and Penalties		$11,529
	General Revenues–Interest and Penalties on Delinquent Taxes		26,901

Table (7)

8.

Entry to record decrease in the revenues than was budgeted:

		General Ledger
		Debits	Credits
General Fund:
Budgetary Fund Balance		$80,000
	Estimated Revenues		$80,000

Table (8)

9.

Entry to record payment of payroll taxes:

		General Ledger
		Debits	Credits
General Fund:
Expenditures–2017		$819,490
	Due to Federal Government		$166,400
	Due to State Government		34,400
	Cash		618,690
Governmental Activities:
Expenses		$819,490
	Due to Federal Government		$166,400
	Due to State Government		34,400
	Cash		618,690

Table (9)

10.

Entry to record employer’s FICA tax liability:

		General Ledger
		Debits	Credits
General Fund:
Expenditures–2017		$62,690
	Due to Federal Government		$62,690
Governmental Activities:
Expenses		62,690
	Due to Federal Government		62,690

Table (10)

11.

Entry to record revenues other than taxes:

		General Ledger
		Debits	Credits
General Fund:
Cash		$947,000
	Revenues		$947,000
Governmental Activities:
Cash		947,000
	Revenues (program or general)		947,000

Table (11)

12.

Entry to record FICA and state and federal withholding taxes:

		General Ledger
		Debits	Credits
General Fund and Governmental Activities:
Due to Federal Government		$288,580
Due to State Government		34,400
	Vouchers Payable		$322,980

Table (12)

13.

Entry to record purchase orders encumbered:

		General Ledger
		Debits	Credits
General Fund:
Encumbrances Outstanding–2017		$1,988,040
	Encumbrances–2017		$1,988,040
Expenditures–2017		1,987,570
	Vouchers Payable		1,987,570
Governmental Activities:
Expenses		1,987,570
	Vouchers Payable		1,987,570

Table (13)

14.

Entry to record payment of vouchers payable:

		General Ledger
		Debits	Credits
General Fund:
Vouchers Payable		$2,301,660
	Cash		$2,293,630
	Expenditures–2020		8,030
Governmental Activities:
Vouchers Payable		2,301,660
	Cash		2,293,630
	Expenses		8,030

Table (14)

15.

Entry to record the repayment of the tax anticipation notes:

		General Ledger
		Debits	Credits
General Fund and Governmental Activities:
Tax Anticipation Notes Payable		$500,000
	Cash		$500,000

Table (15)

16.

Entries to record reclassification of uncollected taxes as delinquent taxes:

		General Ledger
		Debits	Credits
General Fund and Governmental Activities:
Taxes Receivable–Delinquent		$214,000
Allowance for Uncollectible Current Taxes		64,500
	Taxes Receivable–Current		$214,000
	Allowance for Uncollectible Delinquent Taxes		64,500

Table (16)

17.

Entry to record the repayment of the tax anticipation notes:

		General Ledger
		Debits	Credits
General Fund:
Inventory Supplies		$3,000
	Fund Balance–Nonspendable–Inventory of Supplies		$3,000
Governmental Activities:
Inventory Supplies		$3,000
	Expenses		$3,000

Table (17)

b.

To determine

Prepare journal entries to close budgetary and operating statement accounts in the General Fund.

Explanation of Solution

Prepare journal entries to close budgetary and operating statement accounts in the General Fund.

		General Ledger
		Debits	Credits
General Fund:
Appropriations		$3,100,000
	Estimated Revenues		$3,060,000
	Budgetary Fund Balance		40,000
Revenues		3,084,401
	Expenditures–2017		2,871,720
	Fund Balance–Unassigned		212,681

Table (18)

c.

To determine

Prepare General Fund balance sheet of City H as of April 30, 2017.

Explanation of Solution

General Fund balance sheet: This is the financial statement that reports the financial position of the General Fund, and includes the sections assets, liabilities, deferred inflows of resources, and fund balances.

Prepare General Fund balance sheet of City H, as of April 30, 2017.

City H
General Fund Balance Sheet
As of April 30, 2017
Assets
Cash		$486,520
Taxes receivable–Delinquent	$413,730
Less: Allowance for uncollectible taxes–Delinquent	253,500	160,230
Interest and penalties receivable	44,140
Less: Allowance for uncollectible interest and penalties	22,689	21,451
Inventory of supplies		19,100
Total Assets		$687,301
Liabilities, Deferred Inflows of Resources and Fund Balances
Liabilities:
Vouchers payable		$157,390
Fund balances:
Nonspendable–inventory of supplies	$19,100
Unassigned	510,811
Total fund balances		529,911
Total liabilities, deferred inflows of resources, and fund balances		$687,301

Table (19)

d.

To determine

Prepare a statement of revenues, expenditures, and changes in fund balance of General Fund for City H for the year ended April 30, 2017.

Explanation of Solution

Statement of revenues, expenditures, and changes in fund balance: This is the operating statement that accounts for the revenues and expenditures, and changes in the fund balances of the governmental funds.

Prepare a statement of revenues, expenditures, and changes in fund balance of General Fund for City H for the year ended April 30, 2017.

City H
Statement of Revenues, Expenditures, and Changes in Fund Balance
For the Year Ended April 30, 2017
Revenues
Taxes	$2,110,500
Interest and penalties on taxes	26,901
Other sources	947,000
Total Revenues	$3,084,401
Expenditures
Salaries and wages	$882,180
Interest on note payable	10,000
Other	1,979,540
Total Expenditures	$2,871,720
Excess (deficiency) of revenues over expenditures	212,681
Increase in inventory of supplies	3,000
Fund balances–May 1, 2016	314,230
Fund Balances–April 30, 2017	$529,911

Table (20)