Chapter 1
Part 1. Capital Projects Fund Transactions
The voters of the City of Monroe approved the issuance of tax-supported bonds in the face amount of $4,000,000 for the construction and equipping of a new City Jail. Architects were to be retained, and construction was to be completed by outside contractors. In addition to the bond proceeds, a $1,340,000 grant was expected from the state government.
Required:
a. Open a general journal for the City Jail Annex Construction Fund. Record the following transactions and post to the general ledger. Control accounts are not necessary.
(1) On January 1, 2017, the total face amount of bonds bearing an interest rate of 8 percent was sold at a $200,000 premium. Principal amounts of $200,000 each will come due annually over a 20-year period commencing January 1, 2018. Interest payment dates are July 1 and January 1. The first interest payment will be July 1, 2017. The premium was transferred to the City Jail Debt Service Fund for the future payment of principal on the bonds.
(2) The receivable from the state government was recorded.
(3) Legal and engineering fees early in the project were paid in the amount of $121,000. This amount had not been encumbered.
(4) Architects were engaged at a fee of $250,000.
(5) Preliminary plans were approved, and the architects were paid $50,000 (20 percent of the fee).
(6) The complete plans and specifications were received from the architects and approved. A liability in the amount of $150,000 to the architects was approved and paid.
(7) Bids were received and opened in public session. After considerable discussion in City Council, the low bid from Hardhat Construction Company in the amount of $4,500,000 was accepted, and a contract was signed.
(8) The contractor required partial payment of $1,350,000. Payment was approved and vouchered with the exception of a 5 percent retainage.
(9) Cash in the full amount of the grant was received from the state government.
(10) Furniture and equipment for the annex were ordered at a total cost of $459,500.
(11) Payment was made to the contractor for the amount payable (see 8 above).
(12) The contractor completed construction and requested payment of the balance due on the contract. After inspection of the work, the amount, including the past retainage, was approved for payment and then paid.
(13)The furniture and equipment were received at a total actual installed cost of $459,300. Invoices were approved for payment.
(14) The remainder of the architects' fees was approved for payment.
(15) The City Jail Construction Fund paid all outstanding accounts payables ($ 509,300) on December 31, 2017.
(16) The remaining cash was transferred to the City Jail Debt Service Fund.
b. Post the entries to the City Jail Construction Fund general ledger.
c. Prepare and post an entry closing all nominal accounts to Fund Balance.
Part 2. Existing Debt Service Fund Transactions
The City Hall Debt Service Fund of the City of Monroe has been open for five years; it was created to service an $16,000,000, 3 percent tax-supported bond issue. As of December 31, 2016, this serial bond issue had a balance of $12,000,000. Semiannual interest payments are made on January 1 and July 1, and a principal payment of $400,000 is due on January 1 and July 1 of each year.
As this is a regular serial bond debt service fund, the only accounts with balances as of January 1, 2017, were Cash with Fiscal Agent and Fund Balance-Assigned for Debt Service, each with balances of $580,000. (Revenues were raised and collected in cash in 2016 in order to be able to pay bond principal and interest due on January 1, 2017.) The government chose not to accrue interest payable.
Required:
a. Open a general journal for the City Hall Debt Service Fund and prepare journal entries for the following transactions. Control accounts are not necessary
(1) The fiscal agent reported that $180,000 in checks had been mailed to bondholders for interest due on January 1, and $400,000 in checks were mailed for bonds maturing that day.
(2) Cash in the amount of $574,000 was received from the General Fund on June 30 and was transferred to the fiscal agent.
(3) The fiscal agent reported that checks dated July 1 had been mailed to bondholders for interest of $ 174,000 due that day and $400,000 in checks were mailed for bonds maturing that day.
(4) Cash in the amount of $568,000 was received from the General Fund on December 31 and transferred to the fiscal agent to be used for the interest and principal due on January 1 (next fiscal year). The government elected to not accrue the interest or principal at year-end.
b. Post the entries to the City Hall Debt Service Fund ledger (t-accounts).
c. Prepare and post an entry closing all nominal accounts to Fund Balance.
Part 3. New Debt Service Fund Transactions
On the advice of the city attorney, a City Jail Debt Service Fund is opened to account for debt service transactions related to the bond issue sold on January 1, 2017 (see Part 1).
Required:
a. Open a general journal for the City Jail Debt Service Fund. Record the following transactions, as necessary. Control accounts are not necessary
(1) The premium described in transaction 1 of Part 1 was received as a transfer from the capital projects fund.
(2) Cash in the amount of $160,000 was received from the General Fund on June 30 and was transferred to the fiscal agent.
(3) The fiscal agent reported that checks dated July 1 had been mailed to bondholders for interest due that day.
(4) The transfer described in part c of Part 1 was received.
(5) Cash in the amount of $360,000 was received from the General Fund on December 31 and transferred to the fiscal agent to be used for interest and principal payments due on January 1 (next fiscal year). The government elected to not accrue the interest at year-end.
(6) $ 200,000 of the remaining cash on hand was invested.
b. Post the entries to the City Jail Debt Service Fund ledger (t-accounts).
c. Prepare and post an entry closing all nominal accounts to Fund Balance. Assume any remaining net resources are classified as Fund Balance - Assigned for Debt Service.
Part 4. Governmental Funds Financial Statements
Required:
a. Prepare a Balance Sheet for the governmental funds for the City of Monroe as of December 31, 2017. Include the General Fund, the Street and Highway Fund (P4-C), the City Hall Debt Service Fund, and the City Jail Debt Service Fund. Use the balances computed in 4-C for the General Fund and special revenue fund portions of this statement.
b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balances for the governmental funds for the City of Monroe for the Year Ended December 31, 2017. Include the same funds as listed in requirement a plus the City Jail Construction Fund.
Chapter 2
Proprietary Funds
Part 1. Internal Service Fund Transactions
The Stores and Service Fund of the City of Monroe had the following account balances as of January 1, 2017:
Debits Credits
Cash $28,000
Due from other funds 27,000
Inventory of supplies 27,500
Land 18,000
Buildings 84,000
Accumulated depreciation-buildings $30,000
Equipment 46,000
Accumulated depreciation-equipment 25,000
Accounts payable 19,000
Advance from water utility fund 30,000
Net position 126,500
Totals $230,500 $230,500
Required:
a. Open a general journal for the City of Monroe Stores and Service Fund and record the following transactions.
(1) A budget was prepared for FY 2017. It was estimated that the price charged other departments for supplies should be 1.25% of cost to achieve the desired breakeven for the year.
(2) The amount due from other funds as of January 1, 2017, was collected in full.
(3) During the year, supplies were ordered and received in the amount of $307,000. This amount was posted to accounts payable.
(4) $15,000 of the advance from the Water Utility Fund, originally provided for construction, was repaid. No interest is charged.
(5) During the year, supplies costing $250,560 were issued to the General Fund, and supplies costing $46,400 were issued to the Water Utility Fund. These funds were charged based on the previously determined markup ($ 313,200 to General Fund and 58,000 to the Water Utility Fund).
(6) Operating expenses, exclusive of depreciation, were recorded in accounts payable as follows: Purchasing, $15,000; Warehousing, $16,900; Delivery, $17,500; and Administrative, $9,000.
(7) Cash was received from the General Fund in the amount of $310,000 and from the Water Utility Fund in the amount of $50,000.
(8) Accounts payable were paid in the amount of $365,000.
(9) Depreciation in the amount of $10,000 was recorded for buildings and $4,600 for equipment.
b. Post the entries to the Stores and Service Fund ledger (t-accounts).
c. Prepare and post an entry closing all nominal accounts to Net position. Compute the balance in the net position accounts, assuming there are no Restricted Net position.
Part 2. Enterprise Fund Transactions
The City of Monroe maintains a Water and Sewer Fund to provide utility services to its citizens. As of January 1, 2017, the City of Monroe Water and Sewer Fund had the following account balances:
Debits Credits
Cash $ 98,000
Customer Accounts Receivable 84,000
Estimated Uncollectible Accounts Receivable $4,000
Materials and Supplies 28,000
Advance to Stores and Services Fund 30,000
Restricted Assets 117,000
Water Treatment Plant in Service 4,200,000
Construction Work in Progress 203,000
Accumulated Depreciation - Utility Plant 1,200,000
Accounts Payable 97,000
Revenue Bonds Payable 2,500,000
Net position 959,000
Totals $4,760,000 $4,760,000
Required:
a. Open a general journal for the City of Monroe Water and Sewer Utility Fund and record the following transactions.
(1) During the year, sales of water to non-government customers amounted to $1,018,000 and sales of water to the General Fund amounted to $37,000.
(2) Collections from non-government customers amounted to $976,000.
(3) The Stores and Services Fund repaid $15,000 of the long-term advance to the Water and Sewer Fund.
(4) Materials and supplies in the amount of $261,000 were received. A liability in that amount was recorded.
(5) Materials and supplies were issued and were charged to the following accounts: cost of sales and services, $169,500; selling, $15,000; administration, $18,000; construction work in progress, $50,000.
(6) Payroll costs for the year totaled $416,200 plus $34,200 for the employer's share of payroll taxes. Of that amount, $351,900 was paid in cash, and the remainder was withheld for taxes. The $450,400 (416,200 + 34,200) was distributed as follows: cost of sales and services, $265,800; sales, $43,900; administration, $91,400; construction work in progress, $49,300.
(7) Bond interest (6½%) in the amount of $162,500 was paid.
(8) Interest in the amount of $17,000 (included in 7 above) was reclassified to Construction Work in Progress.
(9) Construction projects at the water treatment plant (reflected in the beginning balance of construction in process) were completed in the amount of $203,000, and the assets were placed in service. Payments for these amounts were made in the previous year (no effect on 2017 Statement of Cash Flows).
(10) Collection efforts were discontinued on bills totaling $2,890. The unpaid receivables were written off.
(11) An analysis of customer receivable balances indicated the Estimated Uncollectible Accounts needed to be increased by $5,500.
(12) Payment of accounts payable amounted to $302,000. Payments of payroll taxes totaled $95,200.
(13) Supplies transferred from the Stores and Services Fund amounted to $58,000. Cash in the amount of $50,000 was paid to the Stores and Services Fund for supplies.
(14) Depreciation expense for the year was computed to be $282,000.
(15) In accord with the revenue bond indenture, $25,000 cash was transferred from operating cash to restricted assets.
b. Post the entries to the Water and Sewer Fund ledger (t-accounts).
c. Prepare and post an entry closing all nominal accounts to Net position. Compute the balance in the net position accounts, assuming the only restricted assets are those identified with the bond indenture and the outstanding bonds are associated with the purchase of capital assets.
Part 3. Proprietary Fund Financial Statements
Required:
Prepare, in good form, for the proprietary funds accounted for in Parts 1 and 2, the following:
(1) A Statement of Revenues, Expenses, and Changes in Fund Net position for the Year Ended December 31, 2017.
(2) A Statement of Net position, as of December 31, 2017.
(3) A Statement of Cash Flows for the Year Ended December 31, 2017. Include restricted assets as a part of cash and cash equivalents for this statement. (Assume any materials and labor attributable to construction in process were paid by year end).
Attachment:- governmental funds.rar