The scenario: At the start of the year beginning January 1, 2013, Coco City, General Fund had a cash balance of $ 40,000, vouchers payable of $ 35,000, and unassigned fund balance of $ 5,000. There were no balances in either the Capital Projects Fund or the Debt Service Fund. Coco City has adopted the following budgetary and accounting policies:
Encumbrance accounting is used only for the acquisition of supplies. Open encumbrances lapse at the end of the year, but are considered in developing the next year, budget.
For consistency with property taxes available is defined for sales taxes as taxes expected to be collected within the first 60 days of the next year.
Part A .
Coco City uses separate funds for the following activities. State the names of the funds that Coco City will use for each of these activities.
1. To account for its day to day operating activities
2. To acquire or construct major capital assets
3. To accumulate resources to service long term debt
4. To operate a municipal swimming pool
Part B
Use the following information to (a) record the opening account balances; (b) prepare journal entries to record all four transactions; (c) post the journal entries to T accounts; and (d) prepare an appropriations ledger for police supplies and post the budgetary transactions.
1. The Coco City Council adopted the following budget for the General Fund at the beginning of the year:
Revenues property taxes............. $ 400,000
Revenues sales taxes ............. 70,000
Revenues parks admission fees.......... 10,000
Appropriations: Police salaries........... 300,000
Police supplies ................. 40,000
Parks salaries ................. 80,000
Transfer to Debt Service Fund........... 45,000
2. Two purchase orders, one for $ 35,000 and one for $ 4,000, were placed against the appropriation for police supplies.
3. Because the unit price was lower than anticipated, an invoice for $ 33,000 was received and approved for the supplies that had been ordered for $ 35,000.
4. The invoice for $ 33,000 was paid.
Part C
Prepare journal entries, as appropriate, to record these transactions, and post the journal entries to T- accounts.
1. Property taxes were levied in the amount of $ 404,000 in order to provide revenues of $ 400,000. Tax bills were sent to the property owners.
2. The account of a taxpayer who owed $ 3,000 was written off as uncollectible.
3. Property taxes of $ 370,000 were collected in cash.
4. At year end, all uncollected taxes were declared delinquent. The Coco City finance director concluded that all the property taxes would be collected, so there was no need for any allowance for uncollectible taxes. She estimated that $ 21,000 of the delinquent taxes would be collected in January and February 2014 and that the rest of the taxes would be collected later in 2014.
5. The state collects sales taxes on behalf of all cities in the state. During the year, Coco City received $ 68,000 in sales taxes from the state. The state also advised Coco that it would remit an additional $ 6,000 in sales taxes (from sales made in 2013) by January 20, 2014.
6. Coco City collected parks admission fees of $ 18,000 during the year.
7. The unpaid vouchers of $ 35,000 at the beginning of the year were paid.
8. Salaries in the amount of $ 360,000 were paid ($ 290,000 for the Police Department and $ 70,000 for the Parks Department).
9. The payroll for the period ended December 31, 2013, which was included in the year 2013 budget, will be paid on January 5, 2014 ($ 8,000 for the Police Department and $ 5,000 for the Parks Department).
10. A Police Department sedan accidentally sideswiped a citizen, vehicle in November 2013. Coco City, corporation counsel estimated that the city would ultimately settle the citizen, claim for about $ 4,000. It usually takes about 18 months to settle cases of this kind.
Part D
Prepare journal entries for all funds, as appropriate, to record these transactions, and post the journal entries to T- accounts the journal entries to T accounts for each fund.
1. To provide financing for a new police station, Coco City sold bonds on April 1, 2013, in the amount of $ 500,000. Bond principal is payable over a 10 year period in 20 equal semiannual installments of $ 25,000, with interest of 6 percent per annum on the unpaid balance. The first payment is due on October 1, 2013.
2. Coco City purchased a prefabricated police station and paid $ 500,000 for it on delivery. The building, ready for occupancy on July 1, 2013, was expected to have a useful life of 25 years.
3. The General Fund transferred $ 45,000 to the Debt Service Fund in anticipation of the first installment of debt service.
4. The first installment of debt service became due and payable on October 1, 2013. 5. The first installment of debt service was paid.
Part E
Record the opening balances in T accounts, prepare journal entries to record the transactions, and post the journal entries to T accounts.
1. Coco City operates a municipal swimming pool. It started the year with cash of $ 5,000; net capital assets of $ 510,000 (the swimming pool cost $ 600,000, and the accumulated depreciation was $ 90,000); and outstanding bonds of $ 480,000 (the original debt of $ 600,000 was being paid off over 15 years in equal annual installments of $ 40,000 on December 31 of each year, with interest of 5 percent per annum on the outstanding balance).
2. Coco received swimming pool admissions fees of $ 70,000.
3. Salaries totaling $ 8,000 were paid to a lifeguard and a clerk.
4. Coco paid the annual debt service requirement on the swimming pool bonds.
5. Coco recorded depreciation on the swimming pool. The cost of the pool is amortized over 20 years.
Part F
Prepare preclosing trial balances for all funds. Also, prepare the following fund financial statements and schedules:
1. Governmental funds balance sheet
2. Governmental funds statement of revenues, expenditures, and changes in fund balances
3. General Fund budgetary comparison schedule
4. Proprietary funds statement of net position
5. Proprietary funds statement of revenues, expenses, and changes in fund net position