Chapter 9, Problem 20EP

 The City of Lynnwood was recently incorporated and had the following transactions for the fiscal year ended December 31.

1. 1. The city council adopted a General Fund budget for the fiscal year. Revenues were estimated at $2,000,000 and appropriations were $1,990,000.
2. 2. Property taxes in the amount of $1,940,000 were levied. It is estimated that $9,000 of the taxes levied will be uncollectible.
3. 3. A General Fund transfer of $25,000 in cash and $300,000 in equipment (with accumulated depreciation of $65,000) was made to establish a central duplicating internal service fund.
4. 4. A citizen of Lynnwood donated marketable securities with a fair value of $800,000. The donated resources are to be maintained in perpetuity with the city using the revenue generated by the donation to finance an afterschool program for children, which is sponsored by the culture and recreation function. Revenue earned and received as of December 31 was $40,000.
5. 5. The city’s utility fund billed the city’s General Fund $125,000 for water and sewage services. As of December 31, the General Fund had paid $124,000 of the amount billed.
6. 6. The central duplicating fund purchased $4,500 in supplies.
7. 7. Cash collections recorded by the general government function during the year were as follows:

1. 8. During the year, the internal service fund billed the city’s general government function $15,700 for duplicating services and it billed the city’s utility fund $8,100 for services.
2. 9. The city council decided to build a city hall at an estimated cost of $5,000,000. To finance the construction, 6 percent bonds were sold at the face value of $5,000,000. A contract for $4,500,000 has been signed for the project; however, no expenditures have been incurred as of December 31.
3. 10. The general government function issued a purchase order for $32,000 for computer equipment. When the equipment was received, a voucher for $31,900 was approved for payment and payment was made.

Required

 Prepare all journal entries to properly record each transaction for the fiscal year ended December 31. Use the following funds and government-wide activities, as necessary:

 Each journal entry should be numbered to correspond with each transaction. Do not prepare closing entries.

  Your answer sheet should be organized as follows:

To determine

Prepare necessary journal entries to properly record each transaction for the fiscal year ended December 31.

Explanation of Solution

Government-wide financial statement: This statement provides a combined summary of the net position and the changes in the net position of the government.

Fund financial statement: The fund financial statement provides detail financial information on the governmental, proprietary and fiduciary activities of the primary government.

Prepare necessary journal entries to properly record each transaction for the fiscal year ended December 31.

Transaction  Number	Fund or Activity	Account Title	Debit ($)	Credit ($)
1.	GF	Estimated Revenues	2,000,000
		Appropriations		1,990,000
		Budgetary fund balance		10,000
		(To record the general fund receipt)
2.	GF	Taxes receivable-current	1,940,000
		Allowance for uncollectible current taxes		9,000
		Revenues		1,931,000
		(To record the  property tax levy and uncollectible portion)
	GA	Taxes receivable- Current	1,940,000
		Allowance for uncollectible current taxes		9,000
		General revenues-property taxes		1,931,000
		(To record the amount of property tax and amount of general revenue)
3.	GF	Interfund transfers out	25,000
		Cash		25,000
		(To record the general fund transfer)
	ISF	Cash	25,000
		Equipment	300,000
		Accumulated Depreciation		65,000
		Interfund Transfer In		260,000
		(To record the inter-fund  Transfer In)
4.	PF	Investment –marketable securities	800,000
		Revenues-contributions for endowment		800,000
		(To record  the donated marketable security)
		Cash	40,000
		Revenues –Investment earnings		40,000
		(To record  the revenue at the end)
	PF	Interfund Transfer Out	40,000
		Cash		40,000
		(To record the Inter-fund  Transfer Out)
	SRF	Cash	40,000
		Interfund Transfers In		40,000
		(To record the Inter-fund  Transfer In)
	GA	Investment –marketable securities	800,000
		General revenues-contributions for endowment		800,000
		(To record marketable securities and general revenues)
		Cash	40,000
		Programs revenues-culture and recreation- operating grants and  contributions		40,000
		(To record the donation made on culture and creation)
5.	EF	Due from other funds	125,000
		Charges for services		125,000
		(To record the general fund for sewage and water services)
		Cash	124,000
		Due from other  funds		124,000
		(To record the  amount paid)
	GF	Expenditures	125,000
		Due from other funds		125,000
		(To  record the actual due amount)
		Due from other funds	124,000
		Cash		124,000
		(To  record the funds due to other funds)
	GA	Expense-general government	125,000
		Internal balances		125,000
		(To record  the  internal balance)
		Internal balances	124,000
		Cash		124,000
		(To record the cash settlement)
6.	ISF & GA	Inventory of supplies	4,500
		Cash		4,500
		(To record the purchase of  central duplicating fund)
7.	GF	Cash	1,988,000
		Taxes receivable-current		1,925,000
		Revenues		63,000
		(To record the cash collection)
	GA	Cash	1,988,000
		Taxes receivable-current		1,925,000
		Program revenue-general government-charges for services		63,000
		(To record the cash collection)
8.	ISF	Due from other funds	23,800
		Billings to departments		23,800
		(To record the total funds due from department)
	EF	Expense-administrative	8,100
		Due to other funds		8,100
		(To  record the City’s utility fund)
	GF	Expenditures-General government	15,700
		Due to other funds		15,700
		(To record  the  internal service fund)
	GA	Internal balances	8,100
		Program revenues-general government-charges for services		8,100
		(To  record  the  government charges for service)
9.	CPF	Cash	5,000,000
		Proceeds  of bonds		5,000,000
		(To record the sale of  bond)
		Encumbrance	4,500,000
		Encumbrances outstanding		4,500,000
		(To  record the amount of contract)
	GA	Cash	5,000,000
		Bond payable		5,000,000
		(To record the  cash receipt on bond)
10.	GF	Encumbrance	32,000
		Encumbrances outstanding		32,000
		(To record the issue of purchase order)
		Encumbrance Outstanding	32,000
		Expenditures	31,900
		Encumbrances		32,000
		Cash		31,900
		(To record the  cash payment  of purchase)
	GA	Equipment	31,900
		Cash		31,900
		(To record the purchase of  equipment  on cash)

(Table 1)