Enterprise funds are accounted for like comparable businesses; nevertheless, they have their quirks.
The Green Hills Water District was established on January 1 to provide water service to a suburban development. It accounts for its operations in a single enterprise fund. During the year it engaged in the following transactions:
1. It issued $6,000,000 of revenue bonds.
2. For $4,500,000, it purchased the plant and equipment of the private water company that previously served the area.
3. It incurred $500,000 in costs to improve and expand its plant and equipment.
4. It billed customers for $1.8 million, of which it collected $1.5 million.
5. It billed and collected $200,000 in tap connection fees from developers. The actual cost of the hookups (paid in cash) was $140,000.
6. It incurred the following operating costs (all paid in cash):
• Purchases of water, $850,000
• Labor and contract services, $320,000
• Interest, $80,000
• Supplies and miscellaneous, $60,000
7. It recognized depreciation of $350,000 on its capital assets.
a. Prepare journal entries to record the transactions.
b. Prepare a year-end statement of revenues, expenses, and changes in net assets.
c. Prepare a year-end balance sheet.
d. In some jurisdictions, water districts may account for their operations entirely in an enterprise fund or in several funds, as if they were full-service governments. If a water district chose the latter, then it would report all revenues and operating expenditures in its general fund. Describe briefly how the financial statements of the Green Hills Water District would differ if it chose to prepare its financial statements as if it were a full-service government. Be specific (note changes in capital assets, ling-term debts, etc.)