The scenario: Croton City started its calendar year 2013 with the following General Fund balances (all numbers are in thousands of dollars).
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Croton has adopted the following budgetary and accounting policies:
Encumbrance accounting is used only for the acquisition of supplies and for the award of contracts for construction and construction related activities. Open encumbrances lapse at the end of the year, but are considered in developing the next year budget.
Because final income tax returns are not required to be filed until April 15 of the year following the end of a calendar year, available for income taxes is defined as taxes expected to be collected within 120 days after the end of the calendar year.
Croton allows its employees to accumulate unused vacation days and to receive cash for up to 30 days of unused vacation leave at retirement. Such payments are charged to the department appropriation for salaries.
All revenues received by the library from fines, donations, and fundraising events are credited to Revenues miscellaneous.
Part A
(Croton City maintains separate funds to account for the following activities. State the names of the funds that Croton City uses for each activity.
1. To account for its day to day operating activities
2. To account for its library activities
3. To acquire or construct capital assets
4. To accumulate resources to service long term debt Part B (Chapter 3 General Fund budgetary journal entries) Use the following information to (a) record the opening account balances in T accounts; (b) prepare journal entries to record all five transactions; ( c) post the journal entries to general ledger T accounts; and ( d) prepare an appropriations ledger for the Public safety supplies appropriation.
1. The Croton council adopted the following General Fund budget for 2013:
Revenues property taxes........... $ 9,000
Revenues personal income taxes ...... 5,000
Revenues intergovernmental........ 1,000
Revenues recreation fees ........... 600
Appropriations: Public safety salaries 7,000
Public safety supplies 500
Public works salaries 5,000
Parks salaries 2,300
Transfer to Library Fund 100
Transfer to Debt Service Fund 1,200
2. Croton Public Safety Department placed two purchase orders against its supplies appropriation, one for $ 300 for firearms and one for $ 150 for uniforms.
3. The firearms were received, with an invoice for $ 330. The purchase order allowed shipment of 10 percent over the amount ordered, so the invoice was approved.
4. The invoice for firearms was paid.
5. The Croton Cats won the World Series. To provide more funds for crowd control at the parade, the council increased the Public safety salaries appropriation by $ 100.
Part C
(1) Prepare journal entries, as appropriate, to record these transactions, and post the journal entries to T accounts. 1. Of the $ 800 in property taxes receivable at January 1, $ 780 was collected in cash. The remaining $ 20 was written off as uncollectible. Deferred property taxes at the beginning of the year were recognized as revenue.
2. Accrued salaries from the previous year ($ 700) were paid.
3. Property taxes in the amount of $ 9,030 were levied in order to provide revenues of $ 9,000. Tax bills were sent to the property owners. An allowance for uncollectible taxes was established.
4. During the year, property taxes of $ 8,100 were collected in cash.
5. The state collects personal income taxes on behalf of the city. During the year, Croton received personal income taxes of $ 4,600 from the state.
6. The Parks Department collected $ 700 in recreation fees during the year.
7. Croton paid salaries of $ 13,600, charging the salary appropriations as follows:
Public safety $ 6,700 Public works 4,700 Parks 2,200
8. The state sent the city a check for $ 1,000 to finance a special public safety program, stipulating that the resources could be used at any time during 2013 or 2014. The $ 6,700 in public safety salaries paid in the previous transaction includes $ 800 of salaries for this program, so $ 200 remains available for spending on the program in 2014.
9. Unpaid salaries at year end (to be paid during the first week of 2014) were as follows: Public safety $ 350 Public works 250 Parks 100
10. At year end, the uncollected property taxes were declared delinquent. Croton director of finance estimated that $ 500 of the uncollected taxes would be collected in January and February 2014 and $ 400 would be collected during the rest of 2014. He decided to leave the allowance for uncollectible taxes on the books.
11. In January 2014, the state advised Croton that the state held $ 500 in personal income taxes on the city behalf and that it would send the taxes to Croton by February 10. It also told Croton that it was likely that, by April 30, Croton would receive an additional $ 200 of taxes with final returns, but that tax refunds would probably be $ 300.
12. Police officers who retired at the end of 2013 will be paid $ 10 for unused vacation pay on January 6, 2014.
Part C
(2) The Library Special Revenue Fund commenced calendar year 2013 with a cash balance of $ 5 and zero liabilities. Record the opening account balances in T accounts. Also, prepare appropriate journal entries to record these transactions, and post the journal entries to T accounts.
1. The General Fund transferred $ 100 cash to the Library Special Revenue Fund to help the library finance its activities for the year.
2. The library received a grant of $ 300 from the county. The grant must be used only for library purposes, but there is no requirement as to when it must be spent.
3. The library received $ 20 from fines, donations, and various fundraising events.
4. The library paid $ 350 for salaries and $ 40 to acquire books and periodicals. Charge the expenditures to Culture salaries and Culture supplies, respectively.
Part D
At the start of 2013, Croton Capital Projects Fund had no assets or liabilities. Prepare appropriate journal entries to record these transactions, and post the journal entries to T accounts.
1. Croton undertook construction of a new police station, designed to house both the Croton police and the county sheriff and to serve as a detention center. To finance construction, Croton received a cash grant of $ 1,000 from the county and sold $ 2,000 of 20- year general obligation bonds. The bonds, sold April 1, 2013, were to be redeemed in equal semiannual installments of principal, with interest payable at the same time at the rate of 5 percent per annum, starting October 1, 2013.
2. Croton awarded two contracts, one for architectural and construction supervision services ($ 200) and one for construction ($ 2,800).
3. The construction contract was completed in a timely manner, and the contractor submitted an invoice for $ 2,800. The invoice was paid, except that 5 percent was withheld, pending completion of inspection.
4. All construction and construction supervision work was completed. The construction architect/ supervisor was paid in full, and the contractor was paid the balance due.
Part E
At the start of 2013, Croton Debt Service Fund had no assets or liabilities. Prepare appropriate journal entries to record these transactions, and post the journal entries to T accounts.
1. The General Fund transferred $ 1,200 cash to the Debt Service Fund.
2. The first installment of principal and interest on the bonds sold in Part D came due for payment.
3. That principal and interest due for payment were paid.
4. Debt service on bonds sold by Croton in previous years came due and was paid. Principal and interest payments on those bonds were $ 600 and $ 470, respectively.
Part F
Prepare preclosing trial balances for all funds. Prepare a governmental funds balance sheet; a governmental funds statement of revenues, expenditures, and changes in fund balances; and a General Fund budgetary comparison schedule. Consider all funds as major funds for this exercise, and classify the fund balance for the Debt Service Fund as Assigned fund balance.