Test Bank - Problems and Essays 2008

ILLUSTRATIVE EXAM QUESTIONS AND PROBLEMS
PROBLEMS AND ESSAY QUESTIONS

PROBLEM 1 (GAAP hierarchy) Chapter 1
Rank the following in terms of their level of authority under government GAAP--from highest
(1) to lowest (5)
___ A GASB Technical Bulletin
___ A GASB Implementation Guide
___ AICPA Industry Audit and Accounting Guide cleared by the GASB
___ An article in the AICPA Journal of Accountancy
___ A GASB Interpretation
PROBLEM 2 (Fund categories) Chapter 2
Indicate how the following funds would be classified as to type: (G) governmental, (P)
proprietary, or as (F) fiduciary
___ Internal service
___ Agency
___ General
___ Special revenue
___ Investment trust
___ Capital projects
___ Debt service
___ Pension trust
___ Permanent
___ Enterprise
___ Private-purpose trust
2009 Pearson Education, Inc. publishing as Prentice Hall
PROBLEM 3 (Transaction analysis) Chapter 2

Part 1Analyze the effects of the following transactions on the accounting equations for the
various governmental funds and nonfund accounts of a state or local government. Also,
identify the fund that would be used to record the transactions.
1.
Retired general government bonds payable upon maturity. The face value was
$2,000,000. Interest of $100,000 was also due and paid. All resources had been
accumulated in a separate fund prior to the retirement date.
Sold land for $300,000, which had been used many years ago as a public park. The land
had been purchased for $140,000. The proceeds of the sale are unrestricted.
The wages of general government employees were paid in the amount of $25,000 during
the month.
Incurred construction costs on a major general government construction project,
$6,000,000; $5,400,000 was paid.
Issued a $800,000, six-month note (6% interest) to provide temporary financing for the
construction of a handicap accessible ramp a city hall.
The six-month note matures and was paid with interest.
Depreciation expense of $80,000 for general capital assets.
General Fund resources of $3,000,000 were paid to a newly established Capital Projects
Fund. The resources will not be repaid to the General Fund.
2.
3.
4.
5.
6.
7.
8.
Governmental Funds
Entry
Fund
FA
RL
FB
1.
2.
3.
4.
5.
6.
7.
8.
8.
General Capital Assets and General Long-Term Liabilities Accounts

Entry
GCA
GLTL
NA
Part 2Indicate how each transaction reported in the governmental funds above would be
reported in the operating statements of the various funds that are affected.
PROBLEM 4 (Transaction analysis) Chapters 2, 3, and 6

a.
b.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Analyze the effects of the following transactions, including year-end interest accruals, on
the accounting equations of the various funds and nonfund accounts of a state or local
government. Unless otherwise indicated, the items are for unrelated entities.
Indicate how each transaction would be reported in the operating statement for each fund
affected. Indicate both the statement and the fund as well as the reporting classification.
Salaries paid to a city's general government employees totaled $3,000,000 for the year.
Accrued salaries at the end of the year were $150,000. There were no accrued salaries at
the beginning of the year.
A government electric utility purchased transmission equipment during the year at a cost
of $5,000,000. One million dollars was paid in cash and the government borrowed the
balance on a two-year, 8% note payable.
The equipment purchase in transaction 2 has a 20-year estimated useful life and no
residual value. The purchase occurred at the beginning of the year.
Benton County issued $8,000,000 of ten-year, 6% bonds at par on July 1, 20X8. The
bonds were issued to finance construction of a high school gymnasium/office building
complex. Interest on the bonds is paid semi-annually.
Benton County paid $3,200,000 during the year to the contractor for the project in
transaction 4.
Benton paid $240,000 from its General Fund to the fund to be used to service the bonds
to provide for the first annual interest payment which will be due in the next fiscal year.
Interest on the Benton County bonds was paid when due.
Albemarle County repaid a $500,000 bond plus interest of $30,000 at the due date, July
1, 20X8. The bond was issued for finance construction of a police station.
Franklin County borrowed $300,000 on a 6-month, 9% note payable dated November 1,
20X8. The note was issued to provide financing for general fund operations and is
considered a fund liability. The Countys fiscal year ends on December 31.
The General Fund loaned $3 million to a fund established to account for the government's
central data processing department. The fund charges users of data processing services a
fee that is calculated to recoup the full cost of providing the data processing services.
The loan is to be repaid in 4 years.
Example: The city paid utilities totaling $60,000 for the current month from its General Fund.
Example Solution:
General Fund
Financial Assets ....................................................................
Related Liabilities..................................................................
Fund Balance.........................................................................
-60,000
-60,000
Statement of revenues, expenditures, and changes in fund balance

Expenditures of $60,000
PROBLEM 5 (Transaction analysis) Chapters 3, 5, 6, and 10

A. Smith County entered into the following transactions. The county's fiscal year end is
December 31. Analyze the effects of each transaction on the accounting equations of each
fund or nonfund accounts affected by the transaction. (Reflect any interest accruals that
Smith County would be required to make at year end.)
B. Indicate how each transaction would be reported in the operating statement of each fund
affected by the transaction.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Smith County issued $10 million of general obligation, 10%, 10-year bonds at 105 on
October 1, 20X8. Bond interest is payable semiannually on March 31 and September 30.
The bonds were issued to finance construction of a new county office building.
The county board of supervisors voted to use the premium on the bonds to pay principal
and interest charges on the debt when it matures. Resources were transferred to the
appropriate fund.
The county paid $2 million to Roger Construction Company during 20X8 for work
completed during the year.
Reflect any interest accrual required or permitted at year end.
The county purchased a police vehicle for $22,000 and paid cash.
The county owned and operated electric utility billed residents and businesses $2,000,000
for electricity sales.
The county owned and operated electric utility billed other departments and agencies of
the county $300,000 for electricity sales.
In 20X9 the county paid $2,000,000 from its general fund to the fund from which the
bonds are to be repaid. The purpose of shifting the resources was to provide for the
principal and interest payments to be made during the fiscal year.
The county paid the first interest payment on the bonds when due, March 31, 20X9.
The county paid the second interest payment on the bonds when due, September 30,
20X9, and also repaid $1 million of bond principal on that date.
Example: Salaries paid to a county's general government employees totaled $3,000,000 for the
year. Accrued salaries at the end of the year were $150,000. There were no accrued
salaries at the beginning of the year.
Example Solution:
General Fund
Fund Balance.........................................................................
-3,000,000
+150,000
-3,150,000

Expenditures of $3,150,000
PROBLEM 6 (Transaction analysis) Chapters 4, 5, 6, and 10

Analyze the effects of the following transactions, including year-end interest accruals, on all the
funds and nonfund accounts of a state or local government. Also, indicate how each transaction
would be reported in the operating statements of the various funds that are affected.
1.
2.
3.
4.
5.
6.
Kibler paid salaries to general government employees, $950,000.

Kibler purchased an automobile for a general government department. Kibler paid
$5,000 down and issued a $35,000, 8% note to the vendor for the balance of the cost of
the automobile. The purchase occurred at mid-year and the note is a 1-year note. The
note is considered a fund liability.
Kibler transferred general fund resources ($2,000,000) to a fund to be used to account for
a new central data processing department that will provide data processing services to all
departments on a cost-reimbursement basis.
The city sold general capital assets (Land) with an original cost of $30,000 for $300,000.
The use of the resources received is not restricted.
In the second fiscal year, the city repaid the principal and interest on the note issued in
no. 2 at the due date of the note.
One million five hundred thousand dollars of "profits" from the Airport Enterprise Fund
were transferred to the general fund of the city to subsidize general fund operations.
Example: Kibler paid utilities totaling $60,000 for the current month from its General Fund.
Example Solution:
General Fund
Fund Balance.........................................................................
-60,000
-60,000

PROBLEM 7 (Transaction Analysis) Chapters 3, 5, 6, 7, 9, and 10

a.
b.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Analyze the effects of the following transactions on the accounting equations of the
various funds and nonfund accounts of a state or local government. Include any
adjustments required at the governments December 31 year-end. Unless otherwise
indicated, the items are for unrelated entities.
Indicate how each transaction would be reported in the operating statement for each fund
affected. Indicate the statement and the fund, as well as the reporting classification.
A government issued $10 million of bonds to finance construction of a plant expansion
for its Water and Sewer Enterprise Fund's water treatment plant. The 20-year bonds bear
interest of 10%, payable semiannually each March 31 and September 30. The bonds
were issued at par on April 1, 20X1. The September payment was made as scheduled.
A government issued $5 million of general obligation bonds to finance construction of an
addition to its courthouse. The 10-year bonds pay interest of 10%, payable semiannually
each March 31 and September 30. The bonds were issued at par on April 1, 20X1. The
September payment was made as scheduled from the appropriate fund.
A government purchased a truck at a cost of $45,000 for a general government
department. The truck was paid for from unrestricted resources.
A government paid $200,000 of its general revenues from its unrestricted fund to the fund
to be used to service its outstanding general government bonds.
A government paid general government bond principal ($500,000) and interest
($1,000,000) when it was due. Resources for the payment were available in the
appropriate fund.
A government paid principal ($50,000) and interest ($3,000) on a 6-month note that had
been issued to provide for a temporary shortfall in General Fund cash.
A government was billed $2,000,000 by a contractor for work performed on a major
general government capital project during the year. The government paid the contractor
all but 10% of the amount billed. The project is not complete at year end.
Salaries for general government employees that were incurred but not paid as of year end
were $50,000.
A government completed a major general government capital project during the year.
The $500,000 of net assets remaining in the construction fund after payment of all project
liabilities was paid over to the fund that is to be used to pay the principal and interest on
the construction bonds.
The long-term liability for general government claims and judgments increased by
$200,000 during the year.
Example: The city paid utilities totaling $60,000 for the current month from its General Fund.
Example Solution:
General Fund
Fund Balance.........................................................................
-60,000
-60,000

PROBLEM 8 (Budgetary subsidiary ledger) Chapter 4

Set up an expenditure subsidiary ledger account for the public works department with the
appropriate columns. Record the following transactions in the expenditure subsidiary ledger
account.
1.
2.
3.
4.
5.
Council approves an appropriation of $25,000 for the public works department.

Issuance of purchase orders of $3,000 for supplies.
Issuance of a purchase order of $1,500 for equipment.
Payment of salaries of $18,000.
Offices supplies ordered in 2 are received at an actual cost of $3,100.
PROBLEM 9 (Financial Statement Presentation) Chapter 3

(a) Prepare, using good form, a skeleton Statement of Revenues, Expenditures, and Changes in
Fund Balances.
(b) Next, insert the number representing each of the following items in the appropriate location
in the statement. If any item is not reported in the statement, explain why not.
1. Property taxes levied for and collected in the current year
2. Estimated cost of goods ordered but not received by year end
3. Transfer to another fund
4. Salary costs incurred during the year
5. Payment to retire long-term note principal
6. Payment of interest on long-term note
7. Accrued interest on long-term note
8. Receipt of proceeds of short-term note
9. Payment of interest on short-term note
10. Accrued interest on short-term note
11. Payment to retire principal of short-term note
12. Payment to establish an Enterprise Fund activity; no repayment expected
13. Long-term loan from the General Fund to an Internal Service Fund
14. Short-term loan from the General Fund to a Capital Projects Fund
15. Purchase of equipment
16. Purchase of temporary investment in securities
17. Receipt of proceeds from sale of fixed asset
18. Property taxes collected in advance on next years tax levy
19. Depreciation of equipment
20. Purchase of electricity from the Electric Enterprise Fund
PROBLEM 10 (General Ledger Entries) Chapter 3

Prepare the general journal entries to
1. Record the following transactions in the General Ledger accounts of the Kessinger County
General Fund.
a. Paid $500,000 to the Bridge Bond Debt Service Fund to provide for upcoming
principal and interest payments.
b. Paid $5,000,000 to the Kessinger County Airport Fund to provide financing for
a major expansion project; $2,000,000 is not required to be repaid, but
$3,000,000 is to be repaid at the end of five years.
c. Loaned $320,000 to the Holstein Skywalk Capital Projects Fundto be repaid
in 90 days.
d. Paid $22,000 to the Highways Special Revenue Fund to repay it for General
Fund employee salaries that were inadvertently recorded as expenditures of
that fund.
e. Received a bill from the County Electric Utility Enterprise Fund for electricity
usage charged to General Fund departments and agencies, $3,000.
2. Explain how each of the foregoing transactions is reported in the Kessinger
County General Fund Statement of Revenues, Expenditures, and Changes in
Fund Balance.
PROBLEM 11 (Property Tax Entries) Chapter 3

Prepare the general journal entries to record the following transactions of the Baker School
District General Fund:
1. On January 1 the school district levied property taxes of $8,000,000.The due date
for the taxes is March 31.The school district expects to collect all except $200,000
either by the end of the fiscal year or within 60 days thereafter. The other
$200,000 is expected to be uncollectible.
2. During the first quarter (ending March 31) the school district collected $6,800,000
of its current years property taxes. The rest of the taxes are past due.
3. On June 12 the school district wrote off $88,000 of property taxes as uncollectible.
4. From March 31 to December 31 the school district collected $700,000 of the property
taxes that were levied on January 1. The school district expects to collect an
additional $300,000 of these taxes during the first two months of the next fiscal
year.
PROBLEM 12 (General Fund entries) Chapters 3 and 4

Prepare the general journal entries required to record the following transactions and information
in the General Fund of a county.
1.
2.
3.
4.
5.
6.
7.
8.
The county adopted the General Fund budget for the year. Estimated revenues were
$250,000, appropriations enacted totaled $240,000.
The county levied property taxes of $250,000 for the fiscal year. The county typically
collects 99% of its levy. This amount is expected to be collected during the fiscal year or
shortly thereafter.
The county placed orders for supplies for General Fund departments. The estimated cost
of these items was $130,000.
The county collects $245,000 of property taxes.
Some of the supplies ordered were received. Invoices totaling $115,000 were received for
supplies ordered at an estimated cost of $113,000. The invoices were approved for
payment, but not paid.
Vouchers totaling $115,000 were paid.
Salaries totaling $125,000 were paid.
Accounts are closed at year end.
10
PROBLEM 13 (General Fund entries) Chapters 4, 5, and 6

Prepare the journal entries required to record the following transactions and information in the
General Fund of a county.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
The county adopted the General Fund budget for the year. Estimated revenues were
$14,000,000, appropriations enacted totaled $13,700,000.
The county levied property taxes of $10,000,000 for the fiscal year. The county typically
collects 98.5% of its levy. Ninety percent of the levy is expected to be collected during
the fiscal year; another 5% of the levy is expected to be collected in the first two months
of the next fiscal year.
Other charges for services billed for inspection services, parking privileges, and similar
items totaled $500,000. All but $3,000 is expected to be collected, but $50,000 probably
will not be collected until the later half of the next fiscal year.
The county placed orders for materials and supplies for General Fund departments. The
estimated cost of these items was $350,000. The county uses the purchases method to
account for materials and supplies.
The county ordered equipment to be used by General Fund departments. The estimated
cost of the equipment was $1,200,000.
The county received half of the materials and supplies ordered and received the
equipment. The actual costs were: for materials and supplies, $175,000; for equipment
$1,205,000.
Payroll was approved for payment (but not yet paid), $7,000,000.
The county collected $9,000,000 of property taxes during the year. The balance of the
taxes receivable is past due.
The county paid vouchers payable totaling $8,150,000.
Interest and penalties of 10% of the unpaid balances were assessed on delinquent taxes;
15% of the interest and penalties assessed are expected to prove uncollectible. The
remainder should be collected when the associated taxes receivable are collected.
Tax liens were formalized on properties with delinquent taxes receivable of $3,000 and
interest and penalties receivable of $300. The fair value of the properties is $6,000.
General Fund cash was used to purchase investments costing $700,000.
Billings for electricity used by General Fund departments were received from the Utility
Enterprise Fund, $542,000.
The Utility Enterprise Fund was paid $500,000 for electricity.
The Capital Projects Fund paid the General Fund $21,000 for expenditures originally
recorded in the General Fund that should be charged to the capital project.
The General Fund paid $680,000 to the fund to be used to service the county's general
government, general obligation bonds.
The General Fund paid $6 million to a newly established enterprise fund. Half of this
amount must be repaid to the General Fund at the end of three years, the other half is not
required to be repaid.
The county borrowed $100,000 on a 6-month note payable to cover a General Fund cash
shortfall. The note was issued one month before year end and bears interest a 12% per
year. The note is not considered long-term debt.
11
19.
20.
21.
22.
23.
The county General Fund entered into a capital lease of equipment. The capitalizable
cost of the equipment was determined to be $90,000. The county made a down payment
of $10,000 at the inception of the lease agreement.
The county received a restricted grant for a literacy program. The amount of the grant
was $300,000, which was received in cash. All eligibility requirements for the grant are
met except for incurring qualifying expenditures.
Qualifying expenditures of $120,000 were incurred and paid for the literacy program.
Cash interest of $6,000 was received on investments during the year. The fair value of
the investments at year end was $698,000.
Materials and supplies on hand at the beginning of the year totaled $77,000. Materials
and supplies on hand at year end totaled $63,000.
12
PROBLEM 14 (General Fund Entries) Chapters 4 and 5

Prepare the General Fund general journal entries required to record the following transactions.
Include entries for any adjusting entries that would be appropriate by the end of the year in
which the transaction occurred.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
The government adopted its General Fund budget. Budgeted revenues were $6,500,000 and
budgeted expenditures were $6,400,000.
Property taxes of $4,000,000 were levied; 1% of the taxes are expected to be uncollectible.
$3,000,000 is expected to be collected from taxpayers by the end of the fiscal year. Another
$500,000 is expected to be collected during the first two months of the next fiscal year.
Three million two hundred thousand dollar of taxes receivable were collected before the due
date. The remaining taxes are past due. (The government has not changed its estimate of the
total taxes to be collected this year and the first 2 months of the next year.)
License and permit revenues collected in cash totaled $300,000.
The government ordered vehicles for general government departments with an estimated cost
of $700,000.
The government paid salaries, $3,600,000. Additional salaries were earned by employees but
not paid by year end--$300,000.
The vehicles ordered in 5 were received. The actual cost was $690,000.
The government paid $500,000 of general revenues over to the fund through which its
general government bonds are serviced to provide for future principal and interest payments.
The government borrowed $90,000 two months before year end on a 6%, 6-month note to
provide additional cash for the General Fund. The note is a fund liability.
General Fund departments were billed $110,000 for water and sewer services provided by the
governments own water and sewer department. One hundred thousand dollars was paid.
Three million dollars of General Fund cash was paid to the Airport Enterprise Fund. This
loan is required to be repaid in 3 years.
Government computers were sold at auction for $13,000. The proceeds are unrestricted. The
original cost of the computers, which were used by general government departments, was
$80,000. They had been used two years longer than originally expected.
13
PROBLEM 15 (General Fund Entries) Chapters 3, 4, and 5

Prepare general journal entries, including appropriate interest accruals, to record the following
transactions in the general ledger of the General Fund of Wick Township.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Township Council adopted the budget for the fiscal year:

Budgeted revenues, $23 million
Appropriations, $24 million
Township levied property taxes for the current year, $20 million. All except the expected
uncollectible portion (1%) are expected to be collected by year end.
Taxes of $12 million were collected before the due date. The remaining taxes were
declared past due.
Taxes receivable of $7 million were collected.
Fines and forfeits of $300,000 were collected in cash.
Police uniforms were ordered at an estimated cost of $15,000.
Salaries and wages paid, $10 million; accrued but not paid, $580,000.
Three million dollars was loaned to an Enterprise Fund. It is to be repaid in 5 years.
Borrowed $500,000 on a 6 month, 12%, interest-bearing note due three months after
year-end. The note is not considered general long-term debt.
Received half of the police uniforms that were ordered. Actual cost was $7,450.
Temporarily invested $400,000 of idle cash in securities.
Purchased goods on account from an Internal Service Fund department, $20,000.
PROBLEM 16 (Debt-Related Transactions) Chapter 4

Prepare the general journal entries to record the following transactions of the Quinones County
General Fund:
1. Quinones County borrowed $1,000,000 by issuing 6-month tax anticipation notes
bearing interest at 6%. The notes are to be repaid from property tax collections
during the fiscal year.
2. The county repaid the tax anticipation notes, along with $30,000 interest, at the
due date.
3. The county ordered a new patrol car for the Sheriffs Department.The purchase
order was for $35,000.
4. The county received the new patrol car two months before the end of the fiscal
year. Its actual cost was $35,000.The county paid $5,000 upon receipt and signed
a 9% short-term note payable for the balance.
5. The county services one of its general obligation serial bond issues directly from
the General Fund, that is, a Debt Service Fund is not used. The annual principal
and interest payment, which is due two months before year end, was paid. The
principal payment was $200,000 and the interest was $120,000. (Next years interest
payment will be $108,000.)
6. Record all appropriate interest accruals.
14
PROBLEM 17 (General Fund Statement of Revenues, Expenditures, and Changes in Fund

Balance) Chapters 3 and 9
Using the following information, prepare the statement of revenues, expenditures, and changes in
fund balance for the General Fund of the City of Richmond for the fiscal year ended December
31, 20X2.
1.
2.
3.
Unreserved Fund Balance at January 1, 20X2, $2,000,000.

Estimated revenues for the year were $10 million, appropriations were $11 million.
Fund balance reserves, January 1
a.
For encumbrances
$125,000
b.
For inventory
100,000
4.
Revenues recorded by the bookkeeper for 20X2 included:

Property taxes, $6 million
License and permits, $550,000
Intergovernmental grant revenues, $1,300,000
Proceeds from sale of capital asset, $222,000
Transfer from enterprise fund, $600,000
Expenditures recorded by the bookkeeper for 20X2 included:
General government expenditures, $2,300,000
Public safety expenditures, $3,000,000
Highways and streets expenditures, $2,500,000
Health and sanitation expenditures, $700,000
Short-term note principal retirement, $200,000
Short-term note interest, $15,000
Payment to provide initial financing for Landfill Enterprise Fund, $640,000
Lease payments on a capital lease (2nd year of lease term), $92,000
Encumbrances outstanding at year end included:
Public safety, $30,000
Highways and streets, $276,000
A long-term note to be repaid from General Fund resources is scheduled to mature on
January 31, 20X3. The amount due will include the principal ($80,000) and one year's
interest, $12,000.
15
PROBLEM 18 (General Fund Statement of Revenues, Expenditures and Changes in Fund

Balance) - Chapters 3, 5, and 6
Presented below is information on the General Fund of the City of Cricket Hill for the year
ended December 31, 20X9. Prepare in good form a statement of revenues, expenditures, and
changes in fund balance for this fund for 20X9.
Taxes collected during 20X9
Cash collected from restricted grants, eligibility requirements met
Proceeds from short-term notes
Proceeds from sale of general capital assets
License and permit fees collected
Interest collected on investments
Pass-through grants received and paid out
Cash received from terminated special revenue fund
Cash paid to other fund to finance debt service on bonds
Interest paid on short-term note
Interest accrued but not paid on short-term note
Expenditures for general administration
Expenditures for public safety
Expenditures for highways and streets
Expenditures for health and welfare
Purchases of capital assets
Payment to fund to be used to finance construction of general
government building
Collection of interfund advance established three years ago
General administration salary costs incurred in 20X9 but not paid
by year end
Materials ordered but not received
Lease payments on capital lease (3rd year of lease)Interest is
$30,000 of total
Taxes receivable, January 20X9
Taxes receivable, December 31 20X9
20X8 taxes collected in January or February 20X9
20X9 taxes expected to be collected in January or February 20Y0
Book value of investments, December 31, 20X9
Fair value of investments, December 31, 20X9
Reserve for Encumbrances, December 31, 20X8
Unreserved Fund Balance, December 31, 20X8
$13,000,000
4,000,000
1,222,000
300,000
70,000
108,000
500,000
635,000
1,100,000
100,000
22,000
1,700,000
4,200,000
2,100,000
3,000,000
270,000
2,500,000
6,000,000
7,000
311,000
102,000
3,000,000
3,500,000
1,300,000
1,700,000
1,080,000
1,112,000
615,000
$3,017,000
None of Cricket Hill's investments qualify for use of the amortized cost approach.
16
PROBLEM 19 (Investment Accounting) Chapter 5

Record the following transactions and events of the General Fund of the County of Gray.
1.
2.
3.
4.
5.
6.
Purchased investments in long-term participating, interest-bearing securities, $3,000,000.

Collected interest on its investments of $200,000.
Sold 10% of the investments for $304,000.
Purchased 6-month U.S. Treasury Bills for $100,000.
Accrued interest at year end amounted to $15,000.
The fair value of the investments in long-term participating, interest-bearing securities at year
end was $2,780,000. The fair value of the investments in U.S. Treasury Bills at year end was
$99,000.
PROBLEM 20 (Property Tax Entries) Chapter 5

Prepare the general journal entries to record the following transactions in the General Ledger
accounts of a General Fund or Special Revenue Fund of a city:
1. The city levied current year property taxes of $1,000,000, of which 5% is estimated
to be uncollectible. Also, 70% of the taxes levied are normally collected
within the 2% discount period; and all collectible taxes are expected to be collected
during the year.
2. Current property taxes billed at $600,000 (gross) were collected within the
recently expired discount period.
3. Assume current property taxes billed at $720,000 (instead of $600,000 in item 2)
were collected before the discount period expired.
4. After item 3, $80,000 of current taxes (not collected in item 3) were collected
after the discount period, and the balance of current property taxes became
delinquent. Interest and penalties of $5,000one-quarter of which is estimated
to be uncollectiblewere assessed on delinquent taxes.
5. $110,000 of delinquent taxes and $1,400 of previously accrued interest and penalties
were collected, and $30,000 was collected on taxes not to be levied or due
until the next fiscal year.
6. A taxpayer is protesting a delinquent property tax billing of $2,000, on which $50
of interest and penalties were assessed in item 4. Although the city expects to collect
the taxes, interest, and penalties, the protest process will probably delay the
collection until late in the following year.
PROBLEM 21 (Property Taxes) Chapter 5
A school district levied property taxes of $5,000,000 on January 1, 20X1 for the 20X1 fiscal
year. The government collected $4,000,000 of the taxes during 20X1; $100,000 of the taxes are
expected to be uncollectible; the other $900,000 is expected to be collected at the rate of
$150,000 per month during the first six months of 20X2. What amount of revenues should be
reported for 20X1? Show computations.
17
PROBLEM 22 (Property Tax Revenues) Chapters 3 and 5

Prepare general journal entries for the general ledger of the Town of Richardson for the
following transactions of its General Fund.
1.
2.
3.
4.
5.
6.
7.
The town levied property taxes for the fiscal year, $14,000,000. Uncollectible taxes are
expected to equal 1% of the total levy; $10,000,000 of the taxes are expected to be
collected within the discount period. A 4% discount is granted to taxpayers who pay by
the end of the discount period, which is the due date for taxes. Another $2,000,000 of
taxes are expected to be collected after the due date but before year end. The remaining
taxes receivable in excess of the uncollectible amount should be collected at a uniform
rate during the first six months of the next fiscal year.
Taxes collected during the discount period totaled $9,800,000. The remaining taxes
become past due.
Taxes receivable of $2,200,000 are collected during the remainder of the year. The
town's expectations regarding collection of the remaining balance have not changed.
The town formalized tax liens against a property with unpaid taxes of $15,000. The
expected salable value of the property is $14,000.
The town formalized tax liens against a second property with unpaid taxes of $35,000
and an estimated salable value of $38,000.
The town sold the first property for $14,200. The balance owed was written off as
uncollectible.
The town decided to keep the second property for use as a town museum. The property
owner approved this arrangement.
18
PROBLEM 23 (Capital leases) Chapter 6

A general government department of the City of Perfater Falls leased specialized equipment
under a multi-year, noncancelable lease agreement that qualifies as a capital lease. The lease
required a down payment of $500,000 and the present value of the minimum lease payments
(i.e., the capitalizable cost of the leased asset) was $5,000,000. The implicit rate of interest on
the lease is 10%. Subsequent lease payments of $750,000 are required annually beginning in
20X2.
1.
2.
3.
Record the inception of the lease, including the down payment in the General Fund of
Perfater Falls. The lease was signed on March 1, 20X1.
Record any adjusting entries required at December 31, 20X1, the end of Perfater Falls
fiscal year.
Record the February 28, 20X2, payment of $750,000 to the lessor per the lease
agreement.
PROBLEM 24 (Materials and Supplies) Chapter 6

A government with a beginning inventory of materials and supplies of $100,000 in its General
Fund had the following transactions during the year.
1.
2.
3.
4.
A.
B.
Ordered materials and supplies with an estimated cost of $3,150,000.

Received materials and supplies with an actual invoice cost of $2,920,000. No payment
was made upon receipt; $2,950,000 was the encumbered amount.
Paid $2,300,000 on account for materials and supplies received in #2.
The ending physical inventory of General Fund materials and supplies found materials
and supplies of $150,000 on hand at year end.
Prepare the general journal entries required to account for the previous information and
transactions assuming the government uses the consumption method of accounting for
materials and supplies.
Prepare the general journal entries required to account for the previous information and
transactions assuming the government uses the purchases method of accounting for
materials and supplies.
19
PROBLEM 25 (Various Expenditure Entries) Chapter 6

Record the following entries for the General Fund of a government.
1.
2.
3.
4.
5.
6.
7.
The General Fund budget was adopted. Estimated revenues were $14,000,000.
Appropriations for the year were $13,200,000. The first month's allotment was
$1,500,000.
The government uses the purchases method to account for materials. Materials with an
estimated cost of $50,000 were ordered.
The government purchased computers for cash, $13,000.
The government paid claims and judgments during the year for general government
departments. The amount paid totaled $600,000; $200,000 was associated with claims
that had been outstanding against the government at the beginning of the year. The
government had deemed the liability probable but had expected it to be another year
before the judgment was made against them by the court and payment was required. No
new judgments were outstanding at the end of the current year.
The government paid $400,000 to general government employees for vacation and sick
leave that became due and payable during the year. The government's unpaid liabilities
for accrued vacation and sick leave grew from $75,000 to $100,000 during the year.
Materials ordered in 2 above were received with an invoice of $51,000.
At the end of the year, $12,000 of materials were still on hand. No materials were on
hand at the beginning of the year.
PROBLEM 26 (Intergovernmental grants) Chapter 5

The government was awarded a $4,000,000 grant to cover a portion of the operating costs of its
special education program. The program is reported in a Special Revenue Fund. During the
year, $2,500,000 of the grant is spent for qualifying expenditures.
1.
2.
3.
Prepare general ledger entries assuming the cash was received for the grant and the
government met all eligibility requirements when the cash was received.
Prepare general ledger entries assuming the cash was received for the grant and the
government met all eligibility requirements when the qualifying expenditures are made.
Prepare general ledger entries assuming the grant is a reimbursement type grant and the
government met all eligibility requirements when the qualifying expenditures are made.
PROBLEM 27 (Revenue Accounting Essay) Chapter 5

What are the revenue recognition criteria for governmental funds? Are these criteria applied to
property taxes? To charges for services? To intergovernmental grants? To investment income?
(If the revenue recognition are not applied in the normal manner to a specific source of revenue,
explain the basis upon which that revenue source is recognized.)
20
PROBLEM 28 (General Ledger Entries) Chapter 7

1. Tang City Council approved construction of a new public park at an expected
cost of $13 million.The park construction is to be financed by issuance of $8 million
of general obligation bonds, a $2.5 million grant from the state, and $2.5 million
of city resources to be transferred from the General Fund. (The state will pay
half of the first $5 million of costs incurred for the park.) The bonds were issued
at par, the resources were transferred from the General Fund, and the state grant
was received. (Record the receipt of all these resources.)
2. Tang City purchased (and paid for) the land that was to be used for the park for
$900,000.
3. Tang signed a contract for construction of the park. The contract was for
$11 million.
4. During the first year,Tang was billed $7 million by the contractor.Tang paid all but
5% of the billing. (Make any year-end adjustments required by Tang at this time.)
Prepare all the entries required to record these transactions in the Capital Projects Fund of Tang
City.
21
PROBLEM 29 (GL Entries; Bond Anticipation Notes) Chapter 7

Prepare all the entries required in the Capital Projects Fund for the County of Shawbreck for the
following transactions and events. Assume that the bond anticipation notes meet the criteria for
being treated as long-term debt.
1. The county issued $2,000,000 of 9-month, 10% bond anticipation notes on June 30,
20X3. The proceeds are to be used to begin construction of a recently approved
addition to the county jail.
2. On July 10, the county signed a contract for $5,000,000 for construction of the
addition.
3. The contractor billed the county $1,600,000 for work completed on the jail addition
in 20X3.The county paid all but $100,000 of the amount billed. The balance is
to be paid upon completion and approval of the project in 20X4.
4. December 31 is the end of the fiscal year for the county.
5. The county issued $5,000,000 of 10-year, 8 percent bonds at par on March 31,
20X4. Bond issue costs of $50,000 were withheld from the proceeds. Interest and
one-tenth of the principal are payable annually on the bonds. The bond proceeds
are to be used to repay the bond anticipation notes and to finance construction of
the jail addition.
6. On March 31, the county transferred $150,000 from the General Fund to the Jail
Construction Fund to provide for payment of the interest on the bond anticipation
notes. The notes and interest also were paid on that date.
7. In May the contractor billed the county $3,250,000 for the remainder of the work
on the jail. The county approved the facility and paid the contractor all amounts
owed.
8. The unused resources in the Jail Construction Fund were transferred on June 12,
20X4, to the fund that is to service the debt.
9. December 31 is the end of the fiscal year.
22
PROBLEM 30 (Bond Anticipation Notes) Chapters 7 and 8

1.
2.
3.
4.
5.
6.
7.
A.
B.
A county issued $5 million of 6-month, 6% bond anticipation notes on September 30,

20X5. The proceeds will be used to begin construction of a major courthouse addition
and improvement.
On October 3, 20X5, the county signed a contract for $9 million for construction of the
courthouse addition.
The contractor billed the county $4 million on December 1, 20X5. The county paid all
but a 5% retainage.
Prepare any entries required at December 31, 20X5, the fiscal year end.
The contractor billed the county $1 million on January 31, 20X5. The county paid all but
a 5% retainage.
The county issued $9 million of courthouse bonds at par on March 20, 20X6.
On the due date for the bond anticipation notes, March 31, 20X6, they were retired as
scheduled.
Prepare the journal entries required in a Capital Projects Fund to record these
transactions, assuming the bond anticipation notes do not qualify for long-term debt
treatment.
Prepare the journal entries required in a Capital Projects Fund to record these
transactions, assuming the bond anticipation notes qualify for long-term debt treatment.
23
PROBLEM 31 (Capital Projects Fund) Chapter 7

Zupancic Township entered into the following transactions during 20X4.
1.
2.
3.
4.
5.
6.
7.
8.
9.
The township authorized a bond issue of $11 million for the construction of a pedestrian
walkway as part of a downtown revitalization project. An additional $1 million of
general revenues is to be used for the project. The authorization was recorded in the
appropriate fund.
One million dollars of general revenues were paid to the construction fund from the
General Fund.
The bonds were issued at 101. The premium was transferred to the fund from which the
debt is to be serviced.
The township entered into a contract with Copfer Construction Company for construction
of the walkway at an estimated cost of $10,350,000.
An engineering design firm was paid $174,000 for design work on the project.
A bill for $4,200,000 was received from Copfer Construction Company for work
completed on the walkway to date. All but a 5% retainage was paid.
The accounts were closed at year end.
The walkway project was completed in 20X5. Copfer Construction billed the township
the remaining $6,150,000 due on the project. The township approved the project and
paid Copfer in full.
The unused resources of the construction fund were set aside for debt service on the
bonds. Accordingly, those resources were paid to the appropriate fund.
Prepare the journal entries required in the Capital Projects Fund to account for the above
transactions.
PROBLEM 32 (General government refundings) Chapter 8
The City of Billsville has $8 million par value of general government, general obligation bonds
payable outstanding. The city has decided to call those bonds at their call date. Record the
following transactions.
SITUATION A
1.
2.
The city issued $8,160,000 refunding bonds at par.

The city paid $8,160,000 to bondholders to retire the bonds at the call date.
SITUATION B
1.
2.
3.
The city issued $4 million of refunding bonds at par.

The city transferred $4,160,000 from its General Fund to its Debt Service Fund to
provide the additional resources needed to call the bonds.
The city paid $8,160,000 to bondholders to retire the bonds at the call date.
For each situation, prepare the journal entries required to record the above transactions.
24
PROBLEM 33 (Default) Chapter 8

Record the following transactions in the Debt Service Fund of the City of Alderman:
1. The city repaid a long-term note ($500,000) and interest ($38,000) at maturity,
November 4, 20X2.The payments were made from a sinking fund established for
the purpose of servicing the note.
2. Bonds payable of $800,000 and interest of $40,000 matured on December 15,
20X2, but could not be paid. The bond debt service is accounted for through a
Debt Service Fund, as required by state law.
PROBLEM 34 (Advanced refunding) Chapter 8
The City of Singleton has decided to refinance $8,000,000 par value of general government,
general obligation bonds outstanding. The city issues $6,000,000 of refunding bonds and
transfers $2,500,000 from the General Fund to the Debt Service Fund. The city paid $8,500,000
from the Debt Service Fund into an irrevocable trust to cover future payments on the original
bonds.
SITUATION A
Record the above transactions in the Debt Service Fund assuming the refinancing meets the
conditions for treatment as a defeasance in substance.
SITUATION B
Record the above transactions in the Debt Service Fund assuming the refinancing does not meet
the conditions for treatment as a defeasance in substance.
PROBLEM 35 (Refunding; Assuming Defeasance and Nondefeasance) Chapter 8
a. Prepare journal entries to record the following transactions of Clownfish County
in the appropriate Debt Service Fund.
1. Clownfish County has $7 million of outstanding general obligation bonds that
were issued 5 years ago to finance courthouse restoration. The courthouse
bonds pay interest semiannually on June 30 and December 31. The county
paid the interest required ($300,000) on June 30, 20X0.
2. The county has decided to refinance the bonds. The county issued $5,000,000
of refunding bonds on July 1, 20X0, and transferred $1,500,000 from the
General Fund to the fund to be used to account for the refunding.
3. The county paid $6,500,000 into an irrevocable trust on July 1, 20X0, to
defease in substance the $7,000,000 of courthouse bonds.
b. How would the entries differ if the payment of the $6,500,000 into the trust did
not meet the conditions for treatment as a defeasance in substance?
25
PROBLEM 36 (GLTL Entries) Chapter 9

Prepare the entries required in the General Long-Term Liabilities accounts for the following
transactions.
1. Principal ($100,000) and interest ($10,000) matured, but were not paid, on a longterm
note that had been issued to provide general government financing.
2. A governments liability for general government claims and judgments at the
beginning of the fiscal year was $900,000, 10% of which was considered current in
nature. The general-government-related claims and judgments liabilities at year
end total $3,400,000, of which $100,000 is considered current.
PROBLEM 37 (Refunding Entries) Chapter 9
The City of Burton has $5 million par value of general government, general obligation bonds
payable outstanding. The city has decided to defease those bonds in substance. Record the
following transactions in all the accounts (both in the funds and in the General Capital Assets and
General Long-Term Liabilities accounts) of the City of Burton that are affected.
1. The city issued $3 million of refunding bonds at par.
2. The city transferred $1,850,000 from its General Fund to its Debt Service Fund to
provide the additional resources needed to defease the bonds in substance.
3. The city paid $4,850,000 into an irrevocable trust established at the First National
Bank of Burton to defease the bonds in substance.
PROBLEM 38 (Servicing General Long-Term Debt) Chapter 9
A government has $10 million of 20-year general obligation bonds outstanding. The bonds bear
interest of 8% per year, payable semiannually each April 1 and September 1. In addition,
principal payments of $500,000 are due on September 1. The debt service on the bonds is
financed by transfers from the General Fund and investment earnings on the investment of
resources being accumulated for eventual retirement of the principal. Record the following
transactions in the Debt Service Fund. Assume December 31 is the end of the fiscal year.
1.
2.
3.
4.
5.
6.
7.
Received a transfer from the General Fund to provide for the April 1 interest payment,
$400,000.
Paid the April 1 interest payment when due, $400,000.
Received a transfer of the remaining assets of a terminated Capital Projects Fund,
$560,000.
Received a second transfer from the General Fund, $850,000.
Received interest on investments of the fund, $100,000.
Paid the September 1 interest payment, $400,000 and principal payment of $500,000.
The fair value of the Debt Service Fund investments decreased during the year by
$36,000.
26
8.
Accounts are closed.
PROBLEM 39 (Special Assessment Debt) Chapter 9

A government issued $1,000,000 of special assessment bonds on April 2. The bonds are backed
by the full faith and credit of the government. The bonds bear interest of 8% per year, payable
semiannually each April 1 and October 1. In addition, principal payments of $50,000 are due on
October 1. On April 2, the government levied a special assessment totaling $1,000,000. Interest
of 12% on the unpaid balance and 50,000 of principal are due each October 1. The governments
year end is December 31. Record the following items in the Special Assessment Debt Service
Fund, include any adjusting entries.
1.
2.
3.
4.
5.
6.
7.
The Debt Service Fund records the special assessment on April 2.

The Debt Service Fund records interest receivable on October 1.
The Debt Service Fund collects $48,000 from special assessments and $58,000 of
interest. Uncollected assessments became delinquent.
Principal and interest payments are made on October 1.
Investments of $10,000 were purchased.
The fair value of the Debt Service Fund investments increased during the year by $600.
Accounts are closed.
PROBLEM 40 (General Capital Asset Entries) Chapter 9

Prepare the journal entries to record the effects of the following transactions on the General
Capital Assets and General Long-Term Liabilities accounts of Floyd County. Assume the
transactions are independent of each other unless otherwise noted.
1.
2.
3.
4.
5.
6.
7.
Land was donated for use as a park. The donor had acquired the land for $23,000 about
20 years earlier. Its estimated fair value when donated to the county was $55,000.
Computer equipment was ordered for General Fund departments. The estimated cost was
$48,000.
The computer equipment was purchased by the General Fund for $27,000.
The county sold a police vehicle that had cost $35,000. Accumulated depreciation on the
vehicle was $30,000. The county sold the vehicle at auction for $2,000.
The county disposed of old office equipment that had a cost of $40,000 and accumulated
depreciation of $39,000. The items were discarded at the landfill.
During the year, the county spent $1,200,000 from the Capital Projects Fund on
construction of a new library. The building will not be completed until next year.
Accumulated depreciation on existing general capital assets increased by $3,000,000 for
the year.
27
PROBLEM 41 (General Long-Term Liabilities Entries) Chapter 9

Prepare the journal entries to record the effects of the following transactions on the General
Capital Assets and General Long-Term Liabilities accounts of Bath County. Assume the
transactions are independent of each other unless otherwise noted.
1.
2.
3.
4.
5.
Issued $40 million of general obligation bonds at par to provide financing for a general
government capital project.
Principal ($100,000) and interest ($10,000) matured, but was not paid, on a long-term
note that had been issued to provide general government financing.
The government leased equipment under a capital lease agreement. The capitalizable
cost was $1,000,000. The county made an initial down payment of $100,000. The
implicit rate of interest on the lease is 8%.
The government in #3 made its first periodic semiannual lease payment of $175,000
when it was due.
The government's liability for general government claims and judgments at the beginning
of the fiscal year was $900,000. The general-government-related claims and judgments
liabilities at year end total $3,400,000. None of the amounts are considered current.
28
PROBLEM 42 (Interfund and General Capital Assets General Long-Term Liabilities)

Chapter 9
Prepare journal entries for all the funds and General Capital Assets and General Long-Term
Liabilities accounts affected by the following transactions. Include any required adjusting
entries.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
The government adopted its General Fund budget. Estimated revenues were
$13,000,000. Appropriations were $12,700,000.
The government levied general property taxes, $8,000,000; 2% is expected to prove
uncollectible; 10% is expected to be collected in the next fiscal year at a rate of $80,000
per month (during the first eight months).
The government issued a 9-month, 10%, $300,000 note to borrow resources to provide
working capital for the General Fund. The borrowing occurred three months before the
end of the fiscal year and is considered a fund liability.
The government ordered materials and supplies for general government purposes with an
estimated cost of $500,000. A police car with an estimated cost of $42,000 was ordered
also.
The materials, supplies, and police car were received and vouchered. The actual cost of
the materials and supplies was $498,500. The actual cost of the police car was $43,000.
The government paid $605,000 from the General Fund to the fund used to service its
general government bonds.
The government invested $265,000 of General Fund resources in the bonds of another
government. The face value of the bonds was $280,000. The remaining term of the
bonds is three years.
The fair value of the bonds at year end was $273,000.
The government received (collected) a restricted operating grant of $983,000 for a
general government department. The department is financed primarily from General
Fund resources. Eligibility requirements are met when qualifying expenditures are
incurred.
Expenditures for the grant purposes totaling $630,000 were incurred and paid.
The government entered a capital lease for equipment with a capitalizable cost of
$700,000. A $150,000 initial payment was made.
The government issued bonds with a par value of $13,000,000 for a premium of
$470,000. The bonds were issued at year end to finance construction of a major public
park.
The government issued bonds at par, $8,000,000, to finance an in substance defeasance of
a previously outstanding, general government bond issue. The par value of the old issue
is $8,750,000. The government paid $9,000,000 to an irrevocable trust to defease in
substance the old $8,750,000 bond issue; $1,000,000 had been accumulated in previous
years to use for servicing the bonds.
29
PROBLEM 43 (Interfund and General Capital Assets General Long-Term Liabilities)

Chapter 9
Prepare journal entries for all the funds and General Capital Assets and General Long-Term
Liabilities accounts affected by the following transactions.
1.
2.
3.
4.
5.
6.
7.
The government purchased new computer equipment for the police department at a cost
of $43,000.
The government paid $605,000 from the General Fund to the fund used to service its
general government bonds.
The government paid $400,000 of principal and $300,000 of interest on general
government bonds.
The government entered a capital lease for equipment with a capitalizable cost of
$700,000. A $150,000 initial payment was made.
The government issued bonds of $13,000,000 at par. The bonds are to be used to finance
construction of a major public park.
The government issued bonds at par, $12,000,000, to finance an in substance defeasance
of a previously outstanding, general government bond issue. The carrying value of the
old issue is $14,000,000. The government paid $13,000,000 to an irrevocable trust to
defease in substance the old $14,000,000 bond issue; $1,000,000 had been accumulated
in previous years to use for servicing the bonds.
The government sold (general government) a vehicle that had cost $25,000.
Accumulated depreciation on the vehicle was $23,000. The government sold the vehicle
at auction for $4,000.
PROBLEM 44 (Permanent Fund Entries) Chapter 9

Record the following transactions and information for a government's permanent fund.
1.
2.
3.
4.
5.
6.
Received contributions of $550,000 to establish a fund whose income is to be used to

purchase library books. The principal of the gift is to be maintained intact in perpetuity.
Interest received on investments of the fund during the year totaled, $38,000.
Transferred $35,000 to the General Fund to purchase books.
The fair value of the investments at the end of the year was $583,000.
Closing entries are made.
30
PROBLEM 45 (Revenues) Chapter 10

(a) Record the following transactions in the Enterprise Fund of a county:
1. Services of $5,000,000 were provided and billed to outside customers.
2. Services of $750,000 were provided and billed to other funds.
3. $750,000 was collected from other funds, and $4,000,000 was collected on account.
4. $20,000 of accounts receivable were written off as uncollectible.
5. Estimated bad debts for the year were $100,000.
(b) Compute the amount of sales revenues that should be reported for the Enterprise
Fund.
PROBLEM 46 (Statement of Cash Flows) Chapter 11

Indicate which of the following an Internal Service Fund should report as cash flows from capital
and related financing activities.
1. Purchase of Internal Service Fund capital assets for cash
2. Sale of Internal Service Fund capital assets for cash
3. Transfers from other funds for the sole and specific purpose of financing Internal
Service Fund capital asset purchases
4. Payment of office workers salaries
5. Transfers to other funds for the sole and specific purpose of financing capital
asset purchases of departments financed from those funds
6. Transfers to other funds for the purpose of financing specific operating costs of
departments financed from those funds
7. Proceeds of bonds issued to finance construction of Internal Service Fund capital
assets
8. Interest paid on bonds issued to finance construction of Internal Service Fund
capital assets
9. Principal retirement payments on bonds issued to finance construction of
Internal Service Fund capital assets
10. Purchases of investments with cash received from issuing bonds to finance construction
of Internal Service Fund capital assets.
31
PROBLEM 47 (Internal Service Fund Entries) Chapter 11

Prepare the journal entries required in an Internal Service Fund to record the following
transactions.
1.
2.
3.
4.
5.
6.
7.
Purchased a building on July 1 by paying $100,000 down and borrowing $350,000 on a

6%, 10-year mortgage. Assume annual mortgage payments are due each July 1,
beginning next year.
Purchased materials and supplies on account, $58,000.
Paid employee salaries, $120,000. Accrued salaries at year end were $13,000. Accrued
salaries at the beginning of the year were $9,000.
Billed General Fund departments $400,000 for services provided to those departments.
Billings to the Enterprise Fund totaled $30,000. All but 10% of these billings were
collected by year end. The remaining 10% is not expected to be collected from the other
funds until the second quarter of the next fiscal year.
Materials on hand at year end have a cost of $4,000. The beginning of the year inventory
was $6,000.
Make any appropriate year end (December 31) adjustments. The useful life of the
building is 20 years.
July 1, Year 2--Paid the annual mortgage payment of $47,555.
PROBLEM 48 (Cash Flow Statement) Chapter 11

Using the information given below, prepare a statement of cash flows for the Central Service
Bureau Internal Service Fund of the City of Isler for 20X8. You do not have to prepare the
required schedules to accompany the statement.
Collections from user departments................................................................
Salaries paid in 20X8.....................................................................................
Salaries accrued at 12/31/X8.........................................................................
Materials purchased in 20X8.........................................................................
Materials used in 20X8..................................................................................
General Fund subsidy received......................................................................
Equipment purchased for cash.......................................................................
Mortgage payment (Includes $8,000 interest)...............................................
Investments purchased...................................................................................
Interest received.............................................................................................
Proceeds of short-term note for working capital............................................
Accrued interest on note................................................................................
Cash balance, January 1, 20X8......................................................................
$400,000
190,000
4,000
80,000
85,000
30,000
50,000
11,000
24,000
800
2,800
120
$34,000
32
PROBLEM 49 (Bond Refunding) Chapter 10

Prepare the journal entries needed in an Enterprise Fund to record the following transactions.
Include any adjusting entries required.
1.
2.
3.
On January 2, issued refunding bonds at par, $3,000,000. The bonds bear interest at 8%
payable annually and mature in five years. (Ignore bond issue costs.)
On January 2, paid the $3,000,000 into an irrevocable trust in order to defease in
substance the previously outstanding bonds payable of the Enterprise Fund. These old
bonds have a par value of $3,200,000 and an unamortized premium of $100,000. The old
bonds are scheduled to mature in six more years.
The annual interest payment on the new bonds was made on December 31 when due.
PROBLEM 50 (Enterprise Fund Grants) Chapter 10

Part A
Prepare the entries required to record the following transactions in an Enterprise Fund.
1.
2.
3.
4.
5.
6.
7.
8.
9.
Received a grant (in cash) to be used to finance half of the cost of expanding the town's
water treatment plant, $10 million. All eligibility requirements have been met.
Received a transfer from the General Fund to cover part of the cost of expanding the
treatment plant, $5 million.
Issued bonds at mid-year at par ($5,000,000) to provide part of the financing for the
treatment plant expansion. The bonds bear interest at 6%, payable semiannually.
Signed a contract for construction of the plant, $20 million.
Received a progress billing from the contractor, $8 million.
Paid the contractor.
Make any necessary adjusting entries.
In the second fiscal year, the government received a grant for its Enterprise Fund that is
to be used to educate users on water conservation measures and to monitor use of water
by a study group. The grant of $40,000 was received in cash. All eligibility reuirements
have been met.
Expenses incurred and paid during the year under this second grant total $30,000.
Part B.
How would these grants be reported in the statement of revenues, expenses, and changes in net
assets of the Enterprise Fund?
33
PROBLEM 51 (Cash Flow Statement) Chapter 10

How should each of the following be reported in an Enterprise Fund statement of cash flow?
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
An Enterprise Fund capital asset was sold for $300,000.

The proceeds from the sale of the asset were transferred to the General Fund.
Cash, $2,800,000, was paid for construction costs. The cash was paid out of unrestricted
cash available for any Enterprise Fund purpose--i.e., was not set aside strictly for capital
asset construction or acquisition.
Paid principal, $18,000, and interest, $59,000, on a mortgage note.
Proceeds of bonds issued to refund previously outstanding bonds which had been issued
to finance plant expansion several years earlier, $18,000,000.
Interest paid on the refunding bonds, $1,080,000.
Cash proceeds from sale of investments, $900,000. Investments were purchased with the
proceeds of debt issued to finance construction of specialized equipment that is almost
completed.
Cash received from a capital grant, $5,000,000.
Cash paid for construction costs that qualify under the capital grant, $1,500,000.
Cash received from operating grants, $500,000.
Cash paid for operating costs covered by operating grant--salaries of $55,000 and
material purchases of $30,000.
Cash paid for equipment purchased with the proceeds of an operating grant, $34,000.
Cash received from the General Fund to cover part of the cost of plant expansion,
$1,000,000.
Cash proceeds from the sale of fund capital assets, $23,000.
Cash received from another fund as a 6-month loan for the sole purpose of financing
purchase of equipment, $90,000.
34
PROBLEM 52 (Statement of Revenues, Expenses, and Changes in Net Assets) Chapter 10

Using the information provided below for the Water Utility Enterprise Fund of the City of Rice,
prepare a statement of revenues, expenses, and changes in net assets for 20X3.
Charges for services.......................................................................................
Interest received.............................................................................................
Increase in fair value of investments.............................................................
Gain on sale of fixed assets............................................................................
Operating transfers from the General Fund...................................................
Capital Grant..................................................................................................
Salaries expense.............................................................................................
Contractual services used...............................................................................
Supplies used.................................................................................................
Depreciation...................................................................................................
Interest expense..............................................................................................
Net Assets -- Unrestricted, January 1, 20X3..................................................
Net Assets -- Restricted, January 1, 20X3.....................................................
Net Assets -- Capital assets net of related debt, January 1, 20X3..................
$3,300,000
105,000
12,000
8,000
450,000
1,200,000
1,000,000
1,300,000
400,000
1,100,000
250,000
1,000,000
200,000
1,800,000
PROBLEM 53 (Agency Fund Entries) Chapter 12

Penn County collects property taxes levied by the county for its General Fund. It also collects
the taxes levied by two towns within the county--Weber's Way and DeCoske Corner. The county
charges the towns a collection fee equal to 1% of taxes collected for those entities. Two percent
of the property taxes have been uncollectible historically. Prepare the entries required in the
Penn County General Fund and in the Penn County Tax Agency Fund to record the following
information.
1.
2.
3.
4.
Taxes levied for 20X6 were $12 million for the county, $5 million for Weber's Way, and
$3 million for DeCoske Corner.
During the year tax collections for the county totaled $9 million; $4 million was collected
for Weber's Way and $2,200,000 was collected for DeCoske Corner.
One percent of the taxes receivable were written off as uncollectible during the year.
All cash collected was remitted to the appropriate fund or entity.
35
PROBLEM 54 (Nonexpendable and Expendable Private-Purpose Trust Funds) Chapter 12

Prepare journal entries to record the following transactions in a citys accounts. Include any
required adjustments.
1. (The city received a $3,000,000 gift of cash ($1,000,000) and investments
($2,000,000). The donor stipulated that the principal of the gift must be maintained
intact. Earnings of the trust may be used only to restore historic buildings
in the community.The buildings are owned and maintained by the local, not-forprofit
historical society, which is not part of the city government entity.
2. Interest and dividends received on the investments during the year totaled
$300,000.
3. At year end the expendable earnings were transferred to a fund established to
account for the use of those resources for restoration of historic buildings.
4. In the next year the city spent $65,000 to restore a historic church building that
had been donated to the historical society in a prior year.
PROBLEM 55 (Pension Trust Fund Entries) Chapter 12
Record the following transactions and information for a government's Pension Trust Fund.
1.
2.
3.
4.
5.
6.
7.
8.
Employer contributions became due from the General Fund, $400,000 and an Enterprise
Fund, $123,000. Equal employee contributions have been withheld from employee
paychecks and also are due to the pension trust fund.
Ninety percent of the amounts due were collected from the other funds.
An employee resigned prior to retirement and withdrew $17,000 from the pension plan.
Retirement benefits of $92,000 were paid during the year. Additional current benefit
payments of $4,000 were accrued but not paid by year end.
The present value of future benefits earned by active employees during the period is
estimated to be $700,000.
The fair value of the pension plan investments increased by $83,000 during the year.
PROBLEM 56 (Reporting of Pension Trust Funds) Chapter 12

Explain, clearly but concisely, the financial reporting requirements for government pension
plans. Include a clear explanation of how government financial reporting communicates the
actuarial status of a plan.
36
PROBLEM 57 (Private-Purpose Trust Fund Entries) Chapter 12

Record the following transactions and information for a government's private-purpose trust
fund.
1.
2.
3.
4.
5.
6.
Received contributions of $150,000 to establish a fund whose income is to be used for

scholarships for children to attend a not-for-profit summer camp. The principal is not
expendable and gains and losses affect principal.
Scholarships of $3,000 were paid during the year.
The fair value of the investments at the end of the year was $153,000
Closing entries are made.
PROBLEM 58 (Program revenues) Chapter 13

The following information was drawn from the records of Wise County.
Local gas tax restricted for street maintenance
State grant restricted for police training
Federal grant for new library
Proceeds from sale of general capital assets
License and permit fees
Interest collected on investments
Fines and forfeitures
Contributions to permanent fund which supports education
Shared state revenues restricted to public health
$13,000,000
4,000,000
1,222,000
300,000
70,000
108,000
500,000
635,000
1,100,000
Prepare a schedule computing the amounts to be reported in each of the three minimum program
revenues classifications by Wise County.
37
PROBLEM 59 (Statement of Activities) Chapter 13

Presented below is information for the governmental activities for the City of Cricket Hill for the
year ended December 31, 20X9. Prepare in good form a statement of activities for governmental
activities only for 20X9.
General property taxes revenue
Unrestricted grants
Restricted grants for public safety
Capital grants for highways
Increase in fair value of investments
Interest on investments
Principal paid on general long-term liabilities
Interest expense on general long-term liabilities
Expenses:
Expenses for general administration
Expenses for public safety
Expenses for highways and streets
Expenses for health and welfare
Fees charged for health and welfare programs
Transfer to Enterprise Fund
Collection of interfund advance to Enterprise Fund established
three years ago
Proceeds from sale of capital assets (book value of $25,000)
Net assets, governmental activities, January 1, 20X9
$13,000,000
4,000,000
1,200,000
300,000
70,000
108,000
1,100,000
100,000
1,700,000
4,200,000
2,100,000
3,000,000
270,000
2,500,000
1,000,000
7,000
$3,017,000
38
PROBLEM 60 (Net Assets Governmental Activities) Chapter 13

Prepare the net assets section for governmental activities for the statement of net assets for the
City of Floyd for the year ended December 31, 20X9, given the following information.
All governmental funds fund balance
Restricted fund balances:
Special Revenue Fund
Capital Projects Fund (unspent bond proceeds)
Debt Service Fund
General capital assets
Accumulated depreciation on capital assets
General long-term liabilities:
Bonds payable for capital assets
Liability for compensated absences
Internal Service Fund serving governmental activities
Net assets
Capital assets net of accumulated depreciation
Liability, capital related
$13,000,000
1,200,000
900,000
1,700,000
10,800,000
4,100,000
5,700,000
3,200,000
3,000,000
1,700,000
500,000
PROBLEM 61 (Major Funds) Chapter 13

Below is information on total assets for various funds of the City of Dublin. Prepare a schedule
computing the threshold for asset amounts that should be used to determine which funds must be
reported as major. Identify which funds are major funds.
Fund
General
Federal Grants Special Revenue
State Grants Special Revenue
City Hall Capital Projects
Debt Service
Fleet Management Internal Service
Water and Sewer Enterprise Fund
Swimming Pool Enterprise Fund
Employee Pension Fund
Assets
$1,300,000
500,000
200,000
900,000
700,000
10,800,000
8,000,000
1,000,000
6,500,000
39
PROBLEM 62 (Worksheet Adjustments for Selected Accounts) Chapter 14

Prepare the worksheet adjustments that would be needed to convert the following governmental
fund data to governmental activities data for the government-wide statements.
Expenditures capital outlay equipment.......................................................
Expenditure bond principal retirement.......................................................
Expenditure interest....................................................................................
Other financing sources proceeds from sale of land...................................
Other financing sources bonds....................................................................
Other financing sources premium on bonds...............................................
Transfers from the General Fund...................................................................
Transfer to the Debt Service Fund.................................................................
Transfer to the Enterprise Fund.....................................................................
Revenue property taxes..................................................................................
Increase in compensated absences reported as general long-term liabilities.
$3,500,000
200,000
200,000
120,000
1,000,000
100,000
1,100,000
1,100,000
250,000
1,500,000
23,000
Additional information:
1. Land sold had a book value of $25,000.
2. Deferred property taxes were $10,000 at the beginning of the year. Deferred property
taxes at the end of the year were $12,000.
3. All of the compensated absence liabilities relate to the education function.
PROBLEM 63 (Statement of Net Assets Reconciliation) Chapter 14
Prepare the reconciliation of total fund balance to net assets for governmental activities for the
City of Floyd, given the following information.
All governmental funds fund balances
Deferred revenue related to property taxes
Accrued interest on long-term liabilities
General capital assets
Accumulated depreciation on capital assets
General long-term liabilities:
Bonds payable for capital assets
Liability for compensated absences
Internal service fund serving governmental activities
Net assets
Capital assets net of accumulated depreciation
Liability, capital related
$13,000,000
2,000,000
1,200,000
10,800,000
4,100,000
5,700,000
3,200,000
3,000,000
1,700,000
500,000
40
PROBLEM 64 (Statement of Activities Reconciliation) Chapter 14

Prepare the reconciliation of change in total fund balance to change in net assets for
governmental activities for the City of Riner, given the following information.
Net increase in all governmental funds fund balances
Increase in deferred revenue all related to property taxes
Increase in accrued interest on long-term liabilities
Expenditures - capital asset
Expenditures - principal on capital related debt
Depreciation expenses on capital assets
Proceeds from general long-term capital debt:
Proceeds from the sale of capital assets (book value of $25,000)
Increase in liability for compensated absences
Internal service net income
$1,300,000
200,000
12,000
5,080,000
3,000,000
4,100,000
3,500,000
40,000
30,000
520,000
PROBLEM 65 (Reporting) Chapter 14

A.
B.
List the potential fund financial statements that would be included in the basic financial
statements. Indicate the fund types reported in each of the statements.
Distinguish among fund financial statements and combining financial statements that
might be included in a government's CAFR. What is the relationship between them?
When is each required?
PROBLEM 66 (Reporting) Chapter 14

A.
B.
List the minimum GAAP requirements for general purpose external financial reporting.
Distinguish between managements discussion and analysis, notes to the financial
statements, other required supplementary information, and narrative explanations.
41
PROBLEM 67 (Reporting Entity) Chapter 15

A city has three related entities. Its finance and accounting staff is trying to determine which, if
any, of those entities must be included in the city reporting entity. Also, for the entities that are
included the staff must determine whether they are to be blended or discretely presented.
Explain how each of the related entities should be treated and why.
1.
2.
3.
The first entity is the city school district. The district has a separately elected board and
is legally separate from the city. The city can establish its own budget except that its
property tax levy must be approved by the city council. The city does not guarantee the
debt of the schools or have any other authority over the school district.
The second entity is the municipal gas utility. The city appoints the seven members of
the utility governing board and can remove them at will. The city must approve the
budget and the rate structure of the utility. The utility cannot issue bonded debt without
the city council's prior approval. The city is entitled to, and regularly receives, the
operating surpluses of the utility.
The third entity is the City Library Commission. According to the commission's charter,
the commission board consists of the city mayor, the city finance director, and the
superintendent of the city schools, and two other members of city council besides the
mayor. City council consists of the mayor and four other council members. The library
commission budget must be approved by the city council, but there are no other formal
constraints placed on the library commission in carrying out its mission.
PROBLEM 68 (Discrete Presentation vs. Blending) Chapter 15

A.
B.
Describe discrete presentation in the context of the government-wide statements. Assume

that a government has five major discretely presented component units. Include the
reporting and disclosures required for each of the major component units.
Describe blending. When is it required? Is it permitted under other circumstances--i.e.,
when is it not required?
42
PROBLEM 69 (CAFR Sections) Chapter 15

Indicate in which section of the CAFR the following items would appear: (I) Introductory, (F)
Financial, or (S) Statistical
___ Computation of legal debt limit
___ Organizational chart
___ Narrative explanation
___ Letter of transmittal
___ Principal taxpayers
___ Auditors report
___ GFOA Certificate of Achievement
___ Managements discussion and analysis
___ Combining financial statements
___ Other required supplementary information
PROBLEM 70 (Nongovernment, Not-for-Profit Entries) Chapter 16
Prepare the journal entries required to record the following transactions of a nongovernment, notfor-profit organization.
1. Unrestricted cash contributions received during the year, $300,000.
2. Restricted cash contributions were received during the year for the following:
Education programs, $43,000
Building fund, $202,000
Endowment, $1,000,000
3. Pledges receivable at year end, all from pledges received during the year, were as follows:
Unrestricted, $3,000,000
Building fund, $5,000,000
Endowment, $20,000,000
10% of pledges receivable typically prove uncollectible.
4. A benefit concert was held to raise resources for the building fund. Receipts totaled
$1,400,000 and direct costs incurred totaled $850,000.
5. Salary expenses incurred for the education programs were paid, $14,000.
6. Materials purchased and used for the education programs total $25,000.
7. Fees paid to an architect for design of the building during the year were $92,000.
8. Payments to the building contractor during the year were $110,000.
9. Earnings on endowment fund investments are restricted to the entitys education programs.
The earnings for the year were $13,000.
10.
Earnings on building fund investments were not restricted by donors but the board
requires that they be used to finance the building. The earnings on those investments for the
year were $25,000.
43
PROBLEM 71 (Restricted Gifts) Chapter 16

Prepare journal entries to record the following:
1. Received pledges of $300,000 and cash gifts of $100,000 during the year to be
used only for alcohol rehabilitation treatment programs.
2. Incurred expenses of $220,000 for its alcohol rehabilitation program but paid the
expenses from unrestricted resources, not from available restricted resources.
PROBLEM 72 (Not-for-Profit Reporting) Chapter 16
Explain the way a nongovernment, not-for-profit organization must report the following items in
its statement of activities:
a.
b.
c.
d.
e.
Receipt of unrestricted contributions

Pledges restricted to a specific program
Collections, in a subsequent year, of pledges restricted to a specific purpose
Pledges restricted to fixed asset construction
Earnings on restricted investments
44
PROBLEM 73 (Nongovernment, Not-for-Profit Statement) Chapter 16

Prepare a statement of activities for the Weinstein Musical Society, a nongovernment, not-forprofit organization for the year ended December 31, 20X4. Information from Weinsteins
accounts for the year is provided below.
Unrestricted cash contributions......................................................................
Unrestricted pledges during year (and outstanding at year end)....................
Membership dues...........................................................................................
Collections of unrestricted pledges from prior year......................................
Cash contributions restricted for Classical Music Appreciation Program.....
Pledges during year (and outstanding at year end) to support Maestro Program
Administrative salaries...................................................................................
Fundraising expenses.....................................................................................
Teacher salariesClassical Music Appreciation Program............................
Teacher salariesMaestro Program..............................................................
DepreciationOffice Equipment..................................................................
DepreciationEquipmentClassical Music Appreciation Program...........
DepreciationMaestro Program...................................................................
Materials and supplies usedMaestro Program...........................................
SalariesProfessional Program....................................................................
RentPerformance HallsProfessional Program........................................
Ticket salesPerformances of Musicians in the Professional Program.......
Payment to retire long-term note that matured during the year.....................
Payment of interest on note............................................................................
Unrestricted net assets, January 1, 20X4.......................................................
Temporarily restricted net assets, January 1, 20X4......................................
Unrestricted earnings on investments of temporarily restricted investments
$800,000
540,000
100,000
300,000
250,000
1,200,000
45,000
75,000
23,000
77,000
1,300
12,000
5,000
330,000
379,000
500,000
150,000
250,000
22,000
320,000
1,100,000
58,000
All expenses of the Maestro and the Classical Music Appreciation Programs are payable from
donor restricted resources.
45
PROBLEM 74 (Nongovernment, Not-for-Profit Entries) Chapter 16

Prepare the journal entries required to record the following transactions of a nongovernment, notfor-profit organization.
1. Received a contribution of stock to establish an endowment fund. The income from the
endowment is unrestricted. The donor had acquired the stock for $23,000 about 20 years
earlier. Its estimated fair value when donated was $250,000.
2. Pledges receivable at year end were $100,000, all from pledges received during the year. The
pledges are unrestricted and 5% percent of the pledges are estimated to be uncollectible.
For questions 3-5, assume that the organization has adopted a policy that restrictions on
donations made for capital purposes are met when the capital item is purchased.
3. A cash gift of $200,000 was received restricted for the purchase of equipment.
4. Equipment of $80,000 was purchased from the gift restricted for this purpose.
5. Deprecation expense for the year on the equipment purchased is $10,000.
For questions 6-8, assume that the organization has adopted a policy that restrictions on
donations made for capital purposes are not met when the capital item is purchased.
6. A cash gift of $200,000 was received restricted for the purchase of equipment.
7. Equipment of $80,000 was purchased from the gift restricted for this purpose.
8. Deprecation expense for the year on the equipment purchased is $10,000.
46
PROBLEM 75 (College and University Entries) Chapter 17

Prepare the necessary journal entries to record each of the following transactions for Mathias
County College. Mathias County College reports as a special government engaged only in
business-type activities.
1.
2.
3.
4.
5.
6.
Tuition and fees charged for the fall 20X0 semester totaled $2,800,000. Of this, $98,000
was waived as a result of scholarship allowances, and another $15,000 is expected to be
uncollectible.
For the winter 20X1 semester Mathias College collected a general student fee of $18,000.
The full amount of this fee is restricted for the purchase of computer equipment and
software needed to establish computer labs at the college.
The college received a reimbursement grant restricted to research on composite materials,
$300,000.
Salaries paid to researchers in the Composite Materials Lab of $40,000 qualified under
the research grant received.
The college purchased equipment for use in its building and grounds maintenance
department at a cost of $40,000. Unrestricted resources were used for this purpose.
The college paid $30,000 interest and $15,000 principal on one of its mortgages.
PROBLEM 76 (College and University Entries) Chapter 17

Prepare all the journal entries required for a government college that reports as a special purpose
government engaged only in business-type activities.
1.
2.
3.
4.
5.
6.
7.
8.
Tuition and fees assessed total $4,500,000 70% is collected, scholarships allowances
are granted for $120,000, and $45,000 is expected to prove uncollectible.
Revenues collected from sales and services of the university bookstore, an auxiliary
enterprise, were $275,000.
Salaries and wages paid, $1,500,000; $62,000 of this was for employees of the university
bookstore.
Tuition remissions were granted in the amount of $35,000 for employees.
Mortgage payments totaled $520,000; $290,000 of this was for interest.
Restricted contributions for a specific academic program were received, $250,000.
Expenditures for the restricted program were incurred and paid, $230,000.
Equipment was purchased from unrestricted resources, $34,000.
47
PROBLEM 77 (College and University Statement) Chapter 17

The following information was derived from the accounts and records of Beaver State College
for 20X3.
Tuition and fees
Total assessed
Expected uncollectible
Appropriations
State
Auxiliary enterprises
Sales
Salaries
Other expenses
Endowment income
Restricted to research
Private gifts and grants
Restricted to student scholarships
Restricted to plant expansion
Unrestricted
Expenses:
Instruction
Research
Student services
Institutional support
Operation of plant
Mortgage payment ($10,000 interest)
Scholarships allowances
Net assets, January 1, 20X3
$4,000,000
80,000
,3,800,000
500,000
280,000
140,000
370,000
0,200,000
2,000,000
180,000
3,100,000
600,000
220,000
190,000
180,000
15,000
200,000
3,827,000
Beaver State College reports as a special purpose government engaged only in business-type
activities.
Required: Prepare a statement of revenues, expenses, and changes in net assets for Beaver State
College for 20X3.
48
PROBLEM 78 (College and University Annuity Gift Entries) Chapter 17

Prepare all the journal entries required of a government college that reports as a special
government engaged only in business-type activities.
1.
2.
3.
4.
5.
At the beginning of the year, the college receives cash of $200,000 with a stipulation that
the donor be paid $25,000 a year for 10 years. The present value of the payment to the
donor is $175,000.
Investments in the amount of $195,000 are purchased.
Payments of $25,000 are made to the donor at year end.
Investment income of $13,000 is received during the year.
The present value of the annuity payable to the donor at year end was $162,000.
PROBLEM 79 (Hospital Entries) Chapter 18

Prepare the journal entries required of a government hospital to record the following
transactions.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
The hospital provided patient services during the year that had standard charges of
$12,500,000. Contractual adjustments awarded to patients under contracts with insurance
companies and under government programs totaled $2,000,000. Uncollectible accounts
are expected to be approximately $800,000.
Nursing and other professional salaries paid during the year totaled $2,300,000.
Depreciation for the year was $500,000 for the building and $900,000 for equipment.
Medical supplies costing $2,600,000 were purchased during the year. The inventory of
supplies increased from $200,000 at the beginning of the year to $300,000 at year end.
The hospital received a $4,000,000 to be used for the purchase of specialized diagnostic
equipment.
The hospital received a $500,000 gift to be used for providing specialized coronary care
services to patients.
The hospital purchased $2,000,000 of diagnostic equipment with the donation received
for that purpose.
The hospital incurred $400,000 of operating expenses for the care of coronary patients
consistent with the purposes of that donation.
The hospital issued $5,000,000 of 20-year, 8% bonds at par at mid-year to finance a new
addition for the hospital.
The hospital estimates that malpractice claims against the hospital of $400,000 ultimately
will result in liabilities of $100,000 that will have to be paidbut probably will not have
to be paid during the next fiscal year.
49
PROBLEM 80 (Hospital Reporting) Chapter 18

1.
2.
Identify the financial statements that must be presented for a government hospital.
How are the financial statements for a government hospital different from the financial
statements for a not-for-profit hospital?
PROBLEM 81 (Hospital Statements)

Prepare a statement of revenues, expenses, and changes in net assets for Patrick County Hospital
for 20X0 given the following information.
Gross patient service charges.........................................................................
Unrestricted contributions..............................................................................
Gain on sale of capital assets.........................................................................
Charity services (at gross amounts) included in the above............................
State appropriationsoperating....................................................................
State appropriationscapital.........................................................................
Estimated uncollectible accounts...................................................................
Contractual adjustments.................................................................................
Nursing services expense...............................................................................
Other professional services expense..............................................................
General services expenses..............................................................................
Administrative expenses................................................................................
Fiscal service expenses..................................................................................
DepreciationBuilding.................................................................................
DepreciationOther......................................................................................
Income from investments of endowmentdonor restricted to heart research
Cafeteria sales .............................................................................................
Federal grant restricted for heart research (all eligibility requirements met)
Proceeds from bond issue for building addition............................................
Unrestricted net assets, January 1..................................................................
Restricted net assets, January 1......................................................................
Invested in capital assets, net of related debt, January 1...............................
$18,000,000
350,000
75,000
500,000
500,000
500,000
710,000
1,100,000
8,000,000
890,000
1,100,000
440,000
300,000
1,400,000
2,740,000
870,000
444,000
1,300,000
22,000,000
9,000,000
3,200,000
15,000,000
50
PROBLEM 82 (Federal Agency Accounting Entries) Chapter 19

Prepare the entries a federal agency should make to record the following transactions and events.
1.
2.
3.
4.
5.
6.
7.
8.
Received a warrant from Treasury for its appropriation for the fiscal year, $300 million.
The OMB apportioned $80 million to the agency.
The agency head allotted $79 million to specific purposes.
Preliminary requests were made within the agency for the purchase of $8 million in
supplies.
Purchase orders were approved and placed for the $8 million of supplies requested.
Salaries of $40 million were paid to agency employees.
Equipment with an estimated cost of $17 million was ordered.
The equipment was received along with an invoice for its $17 million cost.
PROBLEM 83 (Single Audit Essay) Chapter 20

1.
2.
3.
Explain the concept of a single audit.

What is a major federal program? Why does it matter if a federal assistance program is a
major program?
What is a low-risk auditee, and what is the impact of being a low-risk auditee?
PROBLEM 84 (Single Audit Essay) Chapter 20

Explain the process for identifying major federal programs in a single audit of a government that
receives federal financial assistance.
51
PROBLEM 85 (Identifying Major Programs) Chapter 20

1.
A government received and expended federal financial assistance under several programs
during 20X4 as follows:
Program A......................................................
Program B......................................................
Program C......................................................
Program D......................................................
Program E......................................................
Program F.......................................................
Program G......................................................
Total............................................................
A.
B.
C.
$ 100,000
200,000
250,000
475,000
625,000
500,000
600,000
$2,750,000
Is this government required to have a single audit? Why?

If a single audit is performed on the government, what are its Type A programs?
Assume that the two largest Type A programs that you identified in Part B of this question
were audited as major federal financial assistance programs in one of the past two years
and that the audits uncovered no findings or questioned costs. Further assume that each
of the Type B programs could reasonably be assessed as high risk programs. Which
programs should be audited as major programs? Why?
52
PROBLEM AND ESSAY SOLUTIONS

PROBLEM 1
_2_ A GASB Technical Bulletin
_4_ A GASB Implementation Guide
_2_ AICPA Industry Audit and Accounting Guide cleared by the GASB
_5_ An article in the AICPA Journal of Accountancy
_1_ A GASB Interpretation
PROBLEM 2
_P_ Internal service
_F_ Agency
_G_ General
_G_ Special revenue
_F_ Investment trust
_G_ Capital project
_G_ Debt service
_F_ Pension trust
_G_ Permanent
_P_ Enterprise
_F_ Private-purpose trust
53
PROBLEM 3
Part I
Governmental Funds
Entry
Fund
FA
RL
FB
1.
DSF
($2,100,000)
($2,100,000)
2.
GF
300,000
300,000
3.
GF or SRF
(25,000)
(25,000)
4.
CPF
(5,400,000)
$600,000
5.
GF or CPF
800,000
800,000
6.
GF or CPF
(824,000)
(800,000)
7.
No Entry
8.
GF
(3,000,000)
(3,000,000)
8.
CPF
3,000,000
3,000,000
(6,000,000)
(24,000)
General Capital Assets and General Long-Term Liabilities Accounts

Entry
GCA
1.
GLTL
(2,000,000)
NA
2,000,000
2.
(140,000)
(140,000)
4.
6,000,000
6,000,000
7.
(80,000)
(80,000)
54
Problem 3 (continued)
Part II
1.
Debt Service Fund

2.
General Fund
Other financing sourcesproceeds from sale of land of $300,000
3.
General Fund..........................................................................
4.
Capital Projects Fund

Expenditures (capital outlay) of $6,000,000
5.
No effect on fund operating statement.
6.
General Fund or Capital Projects Fund

Expenditures (interest) of $24,000
7.
No effect on fund operating statement.
8.
General Fund
Other financing usestransfers out of $3,000,000
Statement of revenues, expenses, and changes in net assets
Other financing sourcestransfers in of $3,000,000
55
PROBLEM 4
1.
General Fund
Fund Balance.........................................................................
-3,000,000
+150,000
-3,150,000

2.
Enterprise Fund
Current Assets .......................................................................
Noncurrent Assets..................................................................
Current Liabilities..................................................................
Long-Term Liabilities............................................................
Net Assets...............................................................................
-1,000,000
+5,000,000
+4,000,000
No effect on the statement of revenues, expenses, and changes in net assets.

3.
Enterprise Fund
Year End--Depreciation
Current Assets .......................................................................
Noncurrent Assets ($5,000,000/20).......................................
Net Assets...............................................................................
-250,000
-250,000

Operating expenses--Depreciation of $250,000
4.

Current Financial Assets .......................................................
Fund Balance.........................................................................
+8,000,000
+8,000,000

Other financing sources--bonds of $8,000,000
General Capital Assets and General Long-Term Liabilities accounts
General Capital Assets...........................................................
General Long-Term Liabilities.............................................. +8,000,000
Net Assets...............................................................................
-8,000,000
56
Problem 4 (Continued)
5.

Fund Balance.........................................................................
-3,200,000
-3,200,000

General Capital Assets........................................................... +3,200,000
General Long-Term Liabilities..............................................
Net Assets............................................................................... +3,200,000
6.
General Fund
Financial Assets ...................................................................
Fund Balance.........................................................................
-240,000
-240,000

Other financing uses--transfers out of $240,000
Debt Service Fund
Fund Balance.........................................................................
+240,000
+240,000

Other financing sources--transfers in of $240,000
7.
Debt Service Fund

Fund Balance.........................................................................
-240,000
-240,000

8.
Debt Service Fund

Fund Balance.........................................................................
-530,000
-530,000

57
-500,000
Net Assets...............................................................................
+500,000
9.
General Fund
Fund Balance.........................................................................
+300,000
+300,000

Nothing reported
Year End--Interest accrual
Related Liabilities ($300,000 x .09 x 2/12)...........................
Fund Balance.........................................................................
+4,500
-4,500

10.
General Fund
.................................................................................
Related Liablities...................................................................
Fund Balance.........................................................................
-3,000,000
+3,000,000
No effect on the statement of revenues, expenditures, and changes in fund balance

Nothing reported
Internal Service Fund
Current Assets .......................................................................
Net Assets...............................................................................
+3,000,000
+3,000,000
No effect on the statement of revenues, expenses, and changes in net assets.
58
PROBLEM 5
1.

Financial Assets .................................................................... +10,500,000
Fund Balance......................................................................... +10,500,000
Other financing sources--Bond proceeds of $10,000,000
Other financing sources--Bond premium of $500,000
General Long-Term Debt Liabilities...................................... +10,500,000
Net Assets............................................................................... -10,500,000
2.

Fund Balance.........................................................................
-500,000
-500,000

Debt Service Fund
Fund Balance.........................................................................
+500,000
+500,000

3.

Fund Balance.........................................................................
-2,000,000
-2,000,000

Net Assets............................................................................... +2,000,000
59
4.
No expenditures are accrued for principal retirement or interest expenditures on the bonds
in this problem.
5.
General Fund
Fund Balance.........................................................................
-22,000
-22,000

+22,000
Net Assets...............................................................................
+22,000
6.
Enterprise Fund
Current Assets ......................................................................
Net Assets...............................................................................
+2,000,000
+2,000,000

Revenues of $2,000,000
7.
Enterprise Fund
Current Assets........................................................................
Net Assets ..............................................................................
+300,000
+300,000

Revenues of $300,000
General Fund (assumes all billings to General Fund)
Fund Balance.........................................................................
+300,000
-300,000

Expenditures of $300,000 (This is a quasi-external transaction.)
60
8.
General Fund
Fund Balance.........................................................................
-2,000,000
-2,000,000

Other financing uses--transfers out of $2,000,000
Debt Service Fund
Fund Balance.........................................................................
+2,000,000
+2,000,000

Other financing sources--transfers in of $2,000,000
9.
Debt Service Fund

Financial Assets ($10,000,000 x .10 x .5).............................
Fund Balance.........................................................................
-500,000
-500,000

10.
Debt Service Fund

Fund Balance.........................................................................
-1,500,000
-1,500,000

-1,000,000
Net Assets............................................................................... +1,000,000
61
PROBLEM 6
1.
General Fund
Fund Balance.........................................................................
-950,000
-950,000

2.
General Fund
Fund Balance.........................................................................
-5,000
+35,000
-40,000

+40,000
Net Assets...............................................................................
+40,000
General Fund--Year End Interest Accrual ($35,000 x .08 x .5)
Fund Balance.........................................................................
+1,400
-1,400

3.
General Fund
Fund Balance.........................................................................
-2,000,000
-2,000,000

Other financing uses--transfers out of $2,000,000
62
3.
Internal Service Fund

Current Assets .......................................................................
Net Assets...............................................................................
+2,000,000
+2,000,000

Transfer in of $2,000,000
4.
General Fund
Fund Balance.........................................................................
+300,000
+300,000

Other financing sources of $300,000 (Proceeds of general capital asset sales)
-30,000
Net Assets...............................................................................
-30,000
5.
General Fund
Fund Balance.........................................................................
-37,800
-36,400
-1,400

6.
General Fund
Fund Balance.........................................................................
+1,500,000
+1,500,000

Other financing sources--transfers in of $1,500,000
63
6.
Enterprise Fund
Current Assets........................................................................
Net Assets...............................................................................
-1,500,000
-1,500,000

Transfers out of $1,500,000
64
PROBLEM 7
1.
Enterprise Fund
Current Assets........................................................................ +10,000,000
Long-Term Liabilities............................................................ +10,000,000
Net Assets...............................................................................
No effect on the statement of revenues, expenses, and changes in net assets
September 30 Payment
Enterprise Fund
Current Assets........................................................................
Net Assets...............................................................................
-500,000
-500,000

Interest expense of $500,000 in Nonoperating Revenue (Expense) section
Year End Adjustment
Enterprise Fund
Current Assets........................................................................
Current Liabilities ($10,000,000 x .10 x .3/12).....................
Net Assets...............................................................................
+250,000
-250,000

Interest expense of $250,000 in Nonoperating Revenue (Expense) section
2.

Fund Balance.........................................................................
+5,000,000
+5,000,000

Other financing sources--bond issue proceeds of $5,000,000
General Long-Term Liabilities.............................................. +5,000,000
Net Assets...............................................................................
-5,000,000
65
September 30 Interest Payment
Debt Service Fund
Financial Assets ($5,000,000 x .10 x .5)...............................
Fund Balance.........................................................................
-250,000
-250,000

Debt service expenditures of $250,000
3.
General Fund
Fund Balance.........................................................................
-45,000
-45,000

Capital outlay expenditures of $45,000
+45,000
Net Assets...............................................................................
+45,000
4.
General Fund
Fund Balance.........................................................................
-200,000
-200,000

Debt Service Fund
Fund Balance.........................................................................
+200,000
+200,000

66
5.
Debt Service Fund

Fund Balance.........................................................................
-1,500,000
-1,500,000

Interest expenditures of $1,000,000 and principal retirement expenditures of $500,000
-500,000
Net Assets...............................................................................
+500,000
6.
General Fund
Fund Balance.........................................................................
-53,000
-50,000
-3,000

Interest expenditures of $3,000
7.

Fund Balance.........................................................................
-1,800,000
+200,000
-2,000,000

Net Assets............................................................................... +2,000,000
8.
General Fund
Fund Balance.........................................................................
+50,000
-50,000

Current operating expenditures--salaries of $50,000
67
9.

Fund Balance.........................................................................
-500,000
-500,000

Debt Service Fund
Fund Balance.........................................................................
+500,000
+500,000

10.

+200,000
Net Assets...............................................................................
-200,000
PROBLEM 8
Expenditure Subsidiary Ledger
Public Works
Item
1
2
3
4
5
Cr. (Dr.)
Dr.
Dr.
Cr.
Unencumbered
Encumbrances Expenditures Appropriations
Balance
25,000
25,000
3,000
22,000
1,500
20,500
18,000
2,500
(3,000)
3,100
2,400
68
PROBLEM 9
Name of Government
Name of Fund
Statement of Revenues, Expenditures, and Changes in Fund Balance
For the Year Ended
Revenues (By Source)
1
Expenditures (By Function or Program)
4, 5, 6, 9, 10, 15, 20
Excess of Revenues over (under) Expenditures
Other Financing Sources (Uses)
3, 12, 17
Net change in Fund Balance
Fund Balance, beginning of fiscal year
Fund Balance, end of year
Not reported:
2This is an encumbrance, not an expenditure. Encumbrances do not change total fund
balance.
7Interest on general long-term debt is recognized as expenditures in the period that it matures.
It is not accrued except in very restrictive circumstances.
8 and 11Short-term borrowings and repayments thereof do not affect the fund balance of a
governmental fund. Fund assets and fund liabilities increase or decrease by equal amounts.
13 and 14Interfund borrowings create interfund payables and receivables. They do not affect
fund balance. Indeed, to allow them to do so, even if long-term, would make manipulation of
fund balances quite easy.
16This transaction does not change the net assets of a fund or its fund balance.
18These taxes do not meet the availability criterion. A liability, deferred revenues, will be
reported in the balance sheet for the taxes collected in advance.
19Capital assets are not assets of governmental funds. The funds are essentially working
capital entities. Depreciation is not a use of working capital and does not affect the fund.
Depreciation of general capital assets is reported only in the government-wide financial
statements.
69
PROBLEM 10 (1)
#
a.
b.
c.
d.
e.
Accounts
Dr.
Transfer to Debt Service Fund ..............................................

Cash ...............................................................................
To record transfer to Debt Service Fund.
500,000
Transfer to Airport Enterprise Fund ......................................

Advance to Airport Enterprise Fund......................................
Cash ...............................................................................
To record transfer and advance to Enterprise Fund.
2,000,000
3,000,000
Unreserved Fund Balance......................................................

Reserve for Advances to Other Funds............................
To establish reserve for advances.
3,000,000
Due from Capital Projects Fund............................................

Cash................................................................................
To record short-term loan to CPF.
320,000
Expenditures..........................................................................
Cash................................................................................
To record reimbursement of SRF for General
Fund expenditures.
22,000
Expenditures..........................................................................
Due to Electric Utility Enterprise Fund..........................
To record electrical charges.
3,000
Cr.
500,000
5,000,000
3,000,000
320,000
22,000
3,000
PROBLEM 10 (2)
a.
b.
c.
d.
e.
Reported as an other financing use in the GF Statement of Revenues, Expenditures, and

Changes in Fund Balance
Transfer out of $2,000,000 reported as an other financing use
No effect on the statement
Reported as part of expenditures
Reported as expenditures
70
PROBLEM 11
1.
2.
3.
4.
Taxes ReceivableCurrent ....................................................

Allowance for Uncollectible Current Taxes ..................
Revenues ........................................................................
To record property tax levy.
$8,000,000
Cash .......................................................................................
Taxes ReceivableCurrent .............................................
To record tax collections.
6,800,000
Taxes ReceivableDelinquent ...............................................

Allowance for Uncollectible Current Taxes ..........................
Taxes ReceivableCurrent..............................................
Allowance for Uncollectible Delinquent Taxes .............
To reclassify taxes receivable and related allowance
as delinquent.
1,200,000
200,000
Allowance for Uncollectible Delinquent Taxes.....................

Taxes ReceivableDelinquent.......................................
To write-off taxes receivable.
88,000
Cash .......................................................................................
Taxes ReceivableDelinquent ........................................
To record collections of delinquent taxes.
700,000
$ 200,000
7,800,000
6,800,000
1,200,000
200,000
88,000
700,000
No entry is needed to reduce revenues for the $300,000 of uncollected taxes expected to be
collected in the first 60 days of the next fiscal year. The criteria for revenue recognition in this
fiscal year will still be met if collections are received when anticipated.
71
PROBLEM 12
Estimated Revenues....................................................................
Appropriations.......................................................................
250,000
Taxes ReceivableCurrent........................................................
Allowance for Uncollectible Current Taxes...........................
Revenues................................................................................
250,000
Encumbrances.............................................................................
Reserve for Encumbrances....................................................
130,000
4. Cash..............................................................................................
245,000
1.
2.
3.
240,000
10,000
2,500
247,500
130,000
Taxes ReceivableCurrent...................................................
5. Reserve for Encumbrances..........................................................
245,000
113,000
Encumbrances........................................................................
113,000
Expenditures...............................................................................
Vouchers Payable...................................................................
115,000
6. Vouchers Payable.........................................................................
115,000
115,000
Cash........................................................................................
7. Expenditures................................................................................
115,000
125,000
Cash........................................................................................
8. Appropriations.............................................................................
Unreserved Fund Balance..........................................................

Estimated Revenues...............................................................
125,000
240,000
10,000
250,000
Revenues.....................................................................................
Expenditures..........................................................................
247,500
Unreserved Fund Balance...........................................................

Encumbrances........................................................................
17,000
240,000
7,500
17,000
72
PROBLEM 13
1. Estimated Revenues.....................................................................
14,000,000
Appropriations.......................................................................
2. Taxes ReceivableCurrent.........................................................
13,700,000
300,000
10,000,000

Deferred Revenues.................................................................
Revenues................................................................................
3.
4.
5.
6.
7.
8.
9.
150,000
350,000
9,500,000
Accounts Receivable..................................................................
Allowance for Uncollectible Accounts..................................
Revenues................................................................................
500,000
Encumbrances.............................................................................
350,000
Encumbrances.............................................................................
1,200,000
Reserve for Encumbrances.........................................................

Encumbrances........................................................................
1,375,000
Expenditures...............................................................................
1,380,000
Expenditures...............................................................................
7,000,000
Cash............................................................................................
9,000,000
Taxes ReceivableDelinquent...................................................
Allowance for Uncollectible Current Taxes...............................
1,000,000
150,000
Vouchers Payable........................................................................
Cash........................................................................................
8,150,000
3,000
50,000
447,000
350,000
1,200,000
1,375,000
1,380,000
7,000,000
9,000,000
1,000,000
150,000
8,150,000
73
10. Interest and Penalties Receivable...............................................
100,000
Allowance for Uncollectible Interest and Penalties...............

15,000
35,000
Revenues................................................................................*
50,000
*Assumes that interest and penalties associated with taxes receivable collected after the 60 day
cutoff will also be collected after that date.
11. Tax Liens Receivable..................................................................
3,300
Taxes ReceivableDelinquent..............................................
Interest and Penalties Receivable...........................................
12. Investments.................................................................................
3,000
300
700,000
Cash........................................................................................
13. Expenditures...............................................................................
700,000
542,000
Due to Enterprise Fund..........................................................

14. Due to Enterprise Fund...............................................................
542,000
500,000
Cash........................................................................................
15. Cash............................................................................................
500,000
21,000
Expenditures..........................................................................
16. Transfer to Debt Service Fund....................................................
21,000
680,000
Cash........................................................................................
680,000
17. Advance to Enterprise Fund.......................................................

Transfer to Enterprise Fund........................................................
Cash........................................................................................
3,000,000
3,000,000

Reserve for Advances to Other Funds...................................
3,000,000
18. Cash............................................................................................
100,000
6,000,000
3,000,000
Notes Payable.........................................................................
100,000
Expenditures...............................................................................
Interest Payable......................................................................
1,000
19. Expenditures...............................................................................
90,000
Cash........................................................................................
Other Financing SourcesIncrease in Capital Lease Liability
1,000
10,000
80,000
74
20. Cash............................................................................................
300,000
21. Expenditures...............................................................................
300,000
120,000
Cash........................................................................................
120,000
Deferred Revenues......................................................................
Revenues................................................................................
120,000
22. Cash............................................................................................
6,000
120,000
Revenues................................................................................
6,000
Net Decrease in Fair Value of Investments.................................

Investments............................................................................
2,000
23. Reserve for Inventory.................................................................
14,000
Inventory of Materials and Supplies.....................................
2,000
14,000
75
PROBLEM 14
1.
Appropriations.......................................................................
6,500,000
Revenues................................................................................
4,000,000
Cash............................................................................................
Taxes Receivable--Current.....................................................
3,200,000
Taxes Receivable--Delinquent....................................................
800,000
40,000
Cash............................................................................................
Revenues................................................................................
300,000
Encumbrances.............................................................................
700,000
Expenditures...............................................................................
Cash........................................................................................
Salaries Payable.....................................................................
3,900,000

Expenditures--Capital Outlay.....................................................
Encumbrances........................................................................
700,000
690,000
Transfers to Debt Service Fund..................................................

Cash........................................................................................
500,000
9a. Cash............................................................................................
Notes Payable.........................................................................
90,000
2.
3.
4.
5.
6.
7.
8.
9b. Year End Adjustment--Interest

Expenditures--Interest ($90,000 x .06 x 2/12)...........................
6,400,000
100,000
40,000
460,000
3,500,000
3,200,000
800,000
40,000
300,000
700,000
3,600,000
300,000
700,000
690,000
500,000
90,000
900
900
76
10. Expenditures...............................................................................
Cash........................................................................................
Due to Enterprise Fund..........................................................
110,000
11. Advance to Enterprise Fund.......................................................

Cash........................................................................................
Reserve for Advances............................................................
3,000,000
3,000,000
12. Cash............................................................................................
Other Financing Sources--Proceeds of Capital Asset Sales...
13,000
100,000
10,000
3,000,000
3,000,000
13,000
77
PROBLEM 15
1.
Appropriations.......................................................................
23,000,000
1,000,000
Revenues................................................................................
20,000,000
Cash............................................................................................
12,000,000
8,000,000
200,000
Cash............................................................................................
Taxes Receivable--Delinquent...............................................
7,000,000
Cash............................................................................................
Revenues................................................................................
300,000
Encumbrances.............................................................................
15,000
Expenditures...............................................................................
Cash........................................................................................
10,580,000
Advance to Enterprise Fund.......................................................

Cash........................................................................................
Reserve for Advances............................................................
3,000,000
3,000,000
9a. Cash............................................................................................
Notes Payable.........................................................................
500,000
2.
3.
4.
5.
6.
7.
8.
9b. Year End Adjustment--Interest

Expenditures--Interest ($500,000 x .12 x 3/12).........................
24,000,000
200,000
19,800,000
12,000,000
8,000,000
200,000
7,000,000
300,000
15,000
10,000,000
580,000
3,000,000
3,000,000
500,000
15,000
15,000
78
10. Reserve for Encumbrances.........................................................
Expenditures...............................................................................
Encumbrances........................................................................
7,500
7,450
11. Investments.................................................................................
Cash........................................................................................
400,000
12. Expenditures...............................................................................
Due to Other Funds................................................................
20,000
7,500
7,450
400,000
20,000
79
PROBLEM 16
1.
2.
3.
4.
Cash .......................................................................................
Tax Anticipation Notes Payable .....................................
To record issuance of short-term note.
1,000,000
Tax Anticipation Notes Payable ............................................

ExpendituresInterest ...........................................................
Cash ...............................................................................
To record retirement of tax anticipation notes.
1,000,000
30,000
Encumbrances .......................................................................
Reserve for Encumbrances ............................................
To record encumbrance for purchase order.
35,000
Reserve for Encumbrances ...................................................

ExpendituresCapital Outlay ................................................
Encumbrances ................................................................
Cash ...............................................................................
Notes Payable ................................................................
To remove encumbrance and record expenditure upon receipt of
ordered vehicle.
35,000
35,000
1,000,000
1,030,000
35,000
35,000
5,000
30,000
Recall that the patrol car should be recorded in the General Capital Assets and General LongTerm Liabilities accounts.
5.
6.
ExpendituresPrincipal Retirement ......................................

Cash ...............................................................................
To record payment of bond principal and interest that matured
during the year.
Accrued Interest Payable ...............................................
To accrue interest on short-term note outstanding.
($30,000 x .09 x 2/12 = $450)
200,000
120,000
320,000
450
450
Principal and interest expenditures on general long-term debt are recognized in the period that
they become legally due and payable.
80
PROBLEM 17
City of Richmond
General Fund
For the Year Ended December 31, 20X2
Revenues:
Property taxes.........................................................................
Intergovernmental..................................................................
Licenses and permits..............................................................
Total revenues.................................................................
Expenditures:
General government...............................................................
Public safety...........................................................................
Highways and streets.............................................................
Health and sanitation..............................................................
Debt service ($15,000 + $92,000)........................................
Total expenditures...........................................................
$6,000,000
1,300,000
550,000
$7,850,000
2,300,000
3,000,000
2,500,000
700,000
107,000
8,607,000
Excess of Revenues over (under) Expenditures.................................

Other Financing Sources (Uses):
Transfer from Enterprise Fund...............................................
Transfer to Enterprise Fund...................................................
Proceeds from sale of capital asset........................................
( 757,000)
600,000
( 640,000)
222,000
182,000
Net Change in Fund Balance.............................................................
( 575,000)
Fund Balance, January 1, 20X2.........................................................

Fund Balance, December 31, 20X2...................................................
2,225,000
$1,650,000
81
PROBLEM 18
City of Cricket Hill
General Fund
Revenues:
Property taxes ($13,000,000 - $1,300,000 + $1,700,000)....
Intergovernmental grants ($4,000,000 + $500,000).............
Licenses and permits..............................................................
Investment income ($108,000 + $1,112,000 - $1,080,000)...
Total revenues.................................................................
Expenditures:
General administration ($1,700,000 + $7,000).....................
Public safety...........................................................................
Highways and streets.............................................................
Health and welfare.................................................................
Total current operating expenditures..............................
Intergovernmental..................................................................
Debt service:
Principal reduction ($102,000 - $30,000).......................
Interest ($100,000 + $22,000 + $30,000)......................
Capital outlay.........................................................................
Total expenditures...........................................................
$13,400,000
4,500,000
70,000
140,000
$18,110,000
1,707,000
4,200,000
2,100,000
3,000,000
11,007,000
500,000
72,000
152,000
Excess of Revenues over (under) Expenditures.................................

Other Financing Sources (Uses):
Transfer to Debt Service Fund...............................................
Transfer to Capital Projects Fund..........................................
Transfer from Special Revenue Fund....................................
Proceeds from sale of capital assets.......................................
224,000
270,000
12,001,000
6,109,000
(1,100,000)
(2,500,000)
635,000)
300,000
(2,665,000)
Net Change in Fund Balance.............................................................
3,444,000
Fund Balance, January 1, 20X9.........................................................

Fund Balance, December 31, 20X9...................................................
3,632,000
$ 7,076,000
82
PROBLEM 19
1.
2.
3.
4.
5.
6.
Investments............................................................................
Cash................................................................................
3,000,000
Cash........................................................................................
Revenue--Interest............................................................
200,000
Cash........................................................................................
Investments.....................................................................
Revenue--Gain on sale of investments (or Net Increase
(Decrease) in Investments' Fair Value.....................
304,000
Investments............................................................................
Cash................................................................................
100,000
Interest Receivable.................................................................
Revenue--Interest............................................................
15,000
Investments ($2,780,000 2,700,000)).................................

Revenue--Net Increase (Decrease) in Investments'
Fair Value.................................................................
80,000
3,000,000
200,000
300,000
4,000
100,000
15,000
80,000
Note that the amount of investment income reported is:

Interest .................................................................................
Net increase in investments' fair value..................................
215,000
84,000
83
PROBLEM 20
Name of City
General or Special Revenue Fund
General Journal
#
1.
Accounts
Property Taxes ReceivableCurrent ....................................
Allowance for Uncollectible Current
Property Taxes ............................................................
Allowance for Discounts on Taxes ................................
Revenues ........................................................................
To record tax levy.
Dr.
Cr.
1,000,000
50,000
14,000
936,000
Calculations:
(1) Uncollectibles = (.05)($l,000,000)
= $50,000
(2) Discounts
= (.02)(.7)($1,000,000) = $l4,000
2.
3.
4a.
4b.
Cash ($600,000 x .98)...........................................................

Allowance for Discounts on Taxes .......................................
Property Taxes ReceivableCurrent ............................
Revenues ........................................................................
To record property tax collections within discount
period and adjustment of previous discount and
revenues estimate.
588,000
14,000
Cash ($720,000 x .98)...........................................................

Allowance for Discounts on Taxes .......................................
Revenues [($720,000 x .02) - $14,000] ................................
To record collection of property taxes within
discount period and adjustment of previous
discount and revenues estimate.
705,600
14,000
400
Cash .......................................................................................
To record property tax collections after discount
period.
80,000
Property Taxes ReceivableDelinquent ..............................

Allowance for Uncollectible Current
Property Taxes ............................................................
Allowance for Uncollectible Delinquent
Property Taxes ............................................................
To reclassify taxes receivable and related
allowance as delinquent.
200,000
600,000
2,000
720,000
80,000
50,000
200,000
50,000
84
4c.
5.
6.
Interest and Penalties Receivable ..........................................

Allowance for Uncollectible Interest
and Penalties ...............................................................
Revenues ........................................................................
To record assessment of penalties and accrual of
interest on delinquent property taxes.
5,000
Cash. ......................................................................................
Property Taxes ReceivableDelinquent .......................
Interest and Penalties Receivable ..................................
Taxes Collected in Advance ...........................................
To record collections of current property taxes,
interest and penalties thereon, and (deferred) taxes
for next year.
141,400
1,250
3,750
110,000
1,400
30,000
Revenues ...............................................................................
2,050
Deferred Revenues .........................................................
To record deferral of revenues for delinquent property taxes and related
interest and penalties not expected to be collected until late next year.
2,050
PROBLEM 21
All $5,000,000 of the taxes are legally available for expenditure in 20X1. Therefore, the amount
recognized as revenues in 20X1 depends on the timing of collection, as shown below:
Collected in 20X1...........................................................
Collected in first 60 days of 20X2 ($150,000 x 2).........
Revenues Recognized..............................................
$4,000,000
300,000
$4,300,000
85
PROBLEM 22
1.
Allowance for Discounts on Taxes........................................
Revenues................................................................................
Computation of tax revenues:

Collections during discount period ($10,000,000 x .96)............
Additional collections by year end.............................................
Collections in first 60 days of next year
($2,000,000 - $140,000) x 2/6...............................................
Total revenue expected..........................................................
2.
3.
4.
5.
6.
7.
14,000,000
140,000
400,000
1,240,000
12,220,000
$ 9,600,000
2,000,000
620,000
$12,220,000
Cash ($9,800,000 x .96)..............................................................

Allowance for Discounts on Taxes.............................................
9,408,000
392,000
Allowance for Discounts on Taxes.............................................

Revenues................................................................................
8,000
4,200,000
140,000
Cash............................................................................................
2,200,000
Tax Liens Receivable..................................................................

Allowance for Uncollectible Delinquent Taxes..........................
Allowance for Uncollectible Tax Liens.................................
15,000
1,000
Tax Liens Receivable..................................................................

35,000
Cash............................................................................................
Allowance for Uncollectible Tax Liens......................................
Tax Liens Receivable.............................................................
14,200
1,000
Expenditures...............................................................................
Tax Liens Receivable.............................................................
35,000
9,800,000
8,000
4,200,000
140,000
2,200,000
15,000
1,000
35,000
15,000
200
35,000
86
PROBLEM 23
1.
Cash........................................................................................
Other Financing Sources--Capital Leases..............................
5,000,000
500,000
4,500,000
2.
No entry required at December 31. The lease payment due next year is in substance debt
service on general long-term debt. Therefore, there is no accrual of interest or principal
expenditures.
3.
Expenditures--Interest ($4, 050,000 x .1 x 1).............................

Expenditures--Principal Reduction.............................................
Cash........................................................................................
450,000
300,000
750,000
87
PROBLEM 24
A. CONSUMPTION METHOD ENTRIES
1.
Encumbrances.............................................................................
3,150,000
2a. Reserve for Encumbrances.........................................................

Encumbrances........................................................................
2,950,000
2b. Inventory of Materials and Supplies...........................................

2,920,000
3.
Cash........................................................................................
2,300,000
Expenditures ($100,000 + $2,920,000 - $150,000)....................

Inventory of Materials and Supplies......................................
2,870,000
4.
3,150,000
2,950,000
2,920,000
2,300,000
2,870,000
Alternative entries for 2b and 4:

2b. Expenditures...............................................................................
4.
Inventory of Materials and Supplies...........................................

Expenditures..........................................................................
2,920,000
2,920,000
50,000
50,000
B. PURCHASES METHOD ENTRIES

1.
Encumbrances.............................................................................
3,150,000
2a. Reserve for Encumbrances.........................................................

Encumbrances........................................................................
2,950,000
2b. Expenditures...............................................................................
2,920,000
3.
Cash........................................................................................
2,300,000
4a. Inventory of Materials and Supplies...........................................

Other Financing Source - Inventory Increase........................
50,000
4b. Unreserved Fund Balance...........................................................

Reserve for Inventory of Materials and Supplies..................
50,000
3,150,000
2,950,000
2,920,000
2,300,000
50,000
50,000
88
PROBLEM 25
1.
2.
3.
4.
Unallotted Appropriations......................................................
Allotted Appropriations.........................................................
14,000,000
Encumbrances.............................................................................
50,000
Cash........................................................................................
13,000
Expenditures--Claims and Judgments........................................

Cash........................................................................................
600,000
11,700,000
1,500,000
800,000
50,000
13,000
600,000
Note that the $200,000 claim outstanding at the beginning of the year would not have been a
General Fund liability.
5.
Expenditures-Vacation and Sick Leave......................................

Cash........................................................................................
400,000
400,000
Note that the increase in the unpaid liability would be reported in as a general long-term
liability.
6.
7.

Encumbrances........................................................................
50,000
Expenditures...............................................................................
51,000
Inventory of Materials and Supplies...........................................

Reserve for Inventory of Materials and Supplies..................
12,000
50,000
51,000
12,000
89
PROBLEM 26
1.
2.
3.
Cash............................................................................................
Grant Revenues......................................................................
4,000,000
Expenditures...............................................................................
Cash........................................................................................
2,500,000
Cash............................................................................................
Deferred Grant Revenues.......................................................
4,000,000
Expenditures...............................................................................
Cash........................................................................................
2,500,000
Deferred Grant Revenues ..........................................................

Grant Revenues......................................................................
2,500,000
Expenditures...............................................................................
Cash........................................................................................
2,500,000
Due from Other Governments ...................................................

Grant Revenues......................................................................
2,500,000
4,000,000
2,500,000
4,000,000
2,500,000
2,500,000
2,500,000
2,500,000
PROBLEM 27
The revenue recognition criteria for governmental fund revenues require revenues to be
recognized when they become both measurable and available. Available means both legally
available for expenditure in the period and (expected to be) collected during the period or soon
enough thereafter to be able to be used to pay the period's current liabilities. For property taxes,
this cutoff period after year end must not exceed 60 days. Most professionals apply the same
cutoff period to other revenue sources as well.
The criteria clearly apply to property taxes and to charges to services. Many argue that they
apply to grants as well. However, a separate statement was issued dealing with grant
recognition. For restricted grants, qualifying expenditures must have been incurred to justify
revenue recognition. Some experts argue that the collection part of the availability criterion does
not apply to grants because NCGA 2 does not specifically require its application.
For investments accounted for at fair value, the collected within 60 days after year end criterion
clearly does not apply because the fair value changes are recognized as revenue or revenue
reductions without regard to cash collection. Some argue that when the fair value of an
investment changes there is a constructive cash flow. This view is subject to considerable
skepticism.
90
PROBLEM 28
1.
2.
3.
4a.
Cash................................................................................
Other Financing SourcesBonds...........................
Other Financing SourcesTransfer from
General Fund......................................................
Deferred Capital Grant Revenues............................
To record receipt of resources from bond
issuance, transfer in, and grant.
13,000,000
ExpendituresCapital Outlay........................................
Cash.........................................................................
To record purchase of land.
900,000
Encumbrances.................................................................
Reserve for Encumbrances......................................
To record construction contract.
11,000,000
Reserve for Encumbrances.............................................

Expenditures...................................................................
Encumbrances..........................................................
Cash ($7,000,000 x .95)..........................................
Contracts PayableRetained Percentage...............
To record billing and reverse encumbered
amount.
7,000,000
7,000,000
8,000,000
2,500,000
2,500,000
900,000
11,000,000
7,000,000
6,650,000
350,000
YEAR END ADJUSTMENT

Deferred Capital Grant Revenues...................................
RevenuesState Grants..........................................
To record revenue from state grant. (This could
have been recorded as expenditures were
incurred.)
2,500,000
2,500,000
91
PROBLEM 29
1.
2.
3a.
3b.
4.
Cash................................................................................
Other Financing SourcesBANs...........................
To record issuance of BANs.
2,000,000
Encumbrances.................................................................
Reserve for Encumbrances......................................
To record construction contract.
5,000,000

Encumbrances..........................................................
To reverse encumbrances for billings on contract.
1,600,000
Cash.........................................................................
Contracts PayableRetained Percentage...............
To record contract costs incurred.
1,600,000
January 1, Year 2
Encumbrances.................................................................
Unreserved Fund Balance........................................
To re-establish encumbrances in an offsetting
relationship with the reserve.
6a.
5,000,000
1,600,000
1,500,000
100,000
No adjusting entry needed for interest because the BANs are general long-term liabilities.
Therefore, no interest expenditures should be accrued.
Closing Entries:
Other Financing SourcesBANs...................................
Unreserved Fund Balance...............................................
Expenditures............................................................
Encumbrances..........................................................
To close the accounts.
5.
2,000,000
2,000,000
3,000,000
1,600,000
3,400,000
3,400,000
3,400,000
Cash................................................................................
ExpendituresBond Issue Costs...................................
Other Financing SourcesBonds...........................
To record issuance of bonds.
4,950,000
50,000
Cash................................................................................
General Fund......................................................
To record General Fund transfer.
150,000
5,000,000
150,000
92
6b.
7a.
7b.
8.
9.
Other Financing UsesBAN Retirement......................

ExpendituresInterest...................................................
Cash.........................................................................
To record retirement of BANs.
2,000,000
150,000

Encumbrances..........................................................
To reverse encumbrances for contract.
3,400,000
Contracts PayableRetained Percentage.......................
Cash.........................................................................
To record billings and payment.
3,250,000
100,000
Other Financing UsesTransfer to Debt

Service Fund.......................................................
Cash.........................................................................
To record transfer to DSF and termination of the CPF.
Other Financing SourcesBonds..................................
General Fund......................................................
ExpendituresBond Issue Costs............................
ExpendituresInterest............................................
ExpendituresCapital Outlay.................................
Other Financing UsesTransfer to Debt Service Fund
Other Financing UsesBAN Retirement...............
To close the accounts and terminate the fund.
2,150,000
3,400,000
3,350,000
100,000
100,000
5,000,000
150,000
400,000
50,000
150,000
3,250,000
100,000
2,000,000
93
PROBLEM 30
A. BOND ANTICIPATION NOTES TREATED AS SHORT-TERM DEBT
1.
2.
3.
4.
5.
6.
7.
Cash............................................................................................
BANs Payable........................................................................
5,000,000
Encumbrances.............................................................................
9,000,000

Expenditures...............................................................................
Encumbrances........................................................................
Contracts Payable--Retained Percentage...............................
Cash........................................................................................
4,000,000
4,000,000
Expenditures--Interest ($5,000,000 x .06 x 3/12)......................

75,000

Expenditures...............................................................................
Encumbrances........................................................................
Cash........................................................................................
1,000,000
1,000,000
Cash............................................................................................
Other Financing Sources--Bond Proceeds.............................
9,000,000
BANs Payable.............................................................................
Interest Payable...........................................................................
Expenditures--Interest.................................................................
Cash........................................................................................
5,000,000
75,000
75,000
5,000,000
9,000,000
4,000,000
200,000
3,800,000
75,000
1,000,000
50,000
950,000
9,000,000
5,150,000
B. BOND ANTICIPATION NOTES TREATED AS LONG-TERM DEBT

1.
2.
3.
Cash............................................................................................
Other Financing Sources--BAN Proceeds.............................
5,000,000
Encumbrances.............................................................................
9,000,000

Expenditures...............................................................................
Encumbrances........................................................................
Cash........................................................................................
4,000,000
4,000,000
5,000,000
9,000,000
4,000,000
200,000
3,800,000
94
PROBLEM 30 (continued)
4.
No entry. Do not accrue interest on general long-term debt.
5.

Expenditures...............................................................................
Encumbrances........................................................................
Cash........................................................................................
1,000,000
1,000,000
Cash............................................................................................
9,000,000
Other Financing Uses--BAN Principal Retirement....................

Cash........................................................................................
5,000,000
150,000
6.
7.
1,000,000
50,000
950,000
9,000,000
5,150,000
95
PROBLEM 31
1.
2.
3.
4.
5.
6.
7.
Estimated Bond Proceeds...........................................................

Estimated Transfers....................................................................
Appropriations.......................................................................
11,000,000
1,000,000
Cash............................................................................................
Transfers from General Fund.................................................
1,000,000
Cash............................................................................................
Other Financing Sources--Bond Premium.............................
11,110,000
Transfers to Debt Service Fund..................................................

Cash........................................................................................
110,000
Encumbrances.............................................................................
10,350,000
Expenditures--Building Design..................................................
Cash........................................................................................
174,000

Expenditures--Construction Costs..............................................
Encumbrances........................................................................
Cash........................................................................................
4,200,000
4,200,000
Other Financing Sources--Bond Proceeds..................................

Transfer from General Fund.......................................................
Appropriations............................................................................
Estimated Bond Proceeds......................................................
Estimated Transfers In...........................................................
Expenditures ($4,200,000 + $174,000).................................
Encumbrances ($10,350,000 - $4,200,000)...........................
Transfer to Debt Service Fund...............................................
11,110,000
1,000,000
12,000,000
12,000,000
1,000,000
11,000,000
110,000
110,000
10,350,000
174,000
4,200,000
210,000
3,990,000
11,000,000
1,000,000
4,374,000
6,150,000
110,000
1,476,000
96
8. Beginning of 20X5:
Encumbrances.............................................................................
Appropriations ($12,000,000 - 4,374,000)............................
6,150,000
1,476,000
7,626,000
Billing from Copfer:
9.

Expenditures...............................................................................
Contracts Payable--Retained Percentage....................................
Encumbrances........................................................................
Cash........................................................................................
6,150,000
6,150,000
210,000
Transfer to Debt Service Fund....................................................

Cash........................................................................................
1,476,000
6,150,000
6,360,000
1,476,000
PROBLEM 32
SITUATION A
1.
2.
Cash............................................................................................
Other Financing Sources--Refunding Bonds.........................
8,160.000
Other Financing Uses--Bond Principal Retirement....................

Cash........................................................................................
8,160,000
8,160,000
8,160,000
SITUATION B
1.
2.
3.
Cash............................................................................................
Other Financing Sources--Refunding Bonds.........................
4,000.000
Cash............................................................................................
Other Financing Sources--Transfers In..................................
4,160,000
Other Financing Uses--Bond Principal Retirement....................

Expenditures--Bond Principal Retirement..................................
Cash........................................................................................
4,000,000
4,160,000
4,000,000
4,160,000
8,160,000
97
PROBLEM 33
1.
2.
ExpendituresPrincipal Retirement..............................
Cash.........................................................................
To record payment of long-term note and
interest.
500,000
38,000
ExpendituresBond Principal.......................................
Defaulted Bonds Payable........................................
Defaulted Interest Payable.......................................
To record default on bond payment.
800,000
40,000
538,000
800,000
40,000
PROBLEM 34
SITUATION A
1.
2.
3.
Cash............................................................................................
Other Financing Sources--Refunding Bond Proceeds...........
6,000,000
Cash............................................................................................
2,500,000
Other Financing UsesPayment to Bond Escrow Agent..........

ExpendituresPayment to Bond Escrow Agent........................
Cash........................................................................................
6,000,000
2,500,000
6,000,000
2,500,000
8,500,000
SITUATION B
1.
2.
3.
Cash............................................................................................
Other Financing Sources--Refunding Bond Proceeds...........
6,000,000
Cash............................................................................................
2,500,000
Cash with Bond Escrow Agent...................................................

Cash........................................................................................
8,500,000
6,000,000
2,500,000
8,500,000
98
PROBLEM 35
(a)
1.
Cash.........................................................................
300,000
To record payment of interest on courthouse
bonds.
300,000
2.
Cash................................................................................
Other Financing SourcesRefunding Bonds.........
Other Financing SourcesTransfer
From General Fund.............................................
1,500,000
To record bond issue and transfer.
6,500,000
5,000,000
3.
Other Financing UsesPayment to Refunded

Bond Escrow Agent............................................
Expenditures Payment to Refunded
Cash.........................................................................
6,500,000
To record in-substance defeasance of
courthouse bonds.
(a)
5,000,000
1,500,000
The entries for 1 and 2 would not change except that it would not be necessary
to indicate that the other financing source was from refunding bonds. The third
transaction should be recorded as follows:
Investments with Trustee................................................
Cash.........................................................................
6,500,000
To record payment to bond escrow agent to
cover future debt service payments.
6,500,000
PROBLEM 36
1.
2.
Notes Payable.................................................................
Net AssetsInvested in Capital Assets...................
To record maturity of note. (Defaulted notes
payable and defaulted interest payable should
be recorded in the Debt Service Fund.
100,000
Net AssetsUnrestricted................................................
Liability for Claims and Judgments........................
To record increase in long-term liability for
2,490,000
100,000
2,490,000
99
claims and judgments.
PROBLEM 37
1.
Debt Service Fund

Cash................................................................................
Other Financing SourcesRefunding Bonds.........
To record issuance of refunding bonds.
GCA-GLTL accounts
Net AssetsInvested in Capital Assets..........................
Refunding Bonds Payable.......................................
To record issuance of refunding bonds.
2.
General Fund
Other Financing UsesTransfer to Debt
Service Fund.......................................................
Cash.........................................................................
To record transfer to Debt Service Fund.
Debt Service Fund
Cash................................................................................
.........Other Financing SourcesRefunding Bonds
To record transfer from General Fund.
3.
Debt Service Fund

Other Financing UsesPayment to Refunded
Expenditures Payment to Refunded
Cash.........................................................................
To record payment to trust to defease bonds.
GCA-GLTL accounts
Bonds Payable (Old).......................................................
Net AssetsInvested in Capital Assets...................
To record defeasance of bonds.
3,000,000
3,000,000
3,000,000
3,000,000
1,850,000
1,850,000
1,850,000
1,850,000
3,000,000
1,850,000
4,850,000
5,000,000
5,000,000
100
PROBLEM 38
1.
2.
3.
4.
5.
6.
7.
8.
Cash............................................................................................
Transfer from General Fund..................................................
400,000
Cash........................................................................................
400,000
Cash............................................................................................
Transfer from Capital Projects Fund......................................
560,000
Cash............................................................................................
850,000
Cash............................................................................................
Revenues--Interest.................................................................
100,000
Expenditures--Principal..............................................................
Cash........................................................................................
400,000
500,000
Revenues--Net Increase (Decrease) in Fair Value of Investments

Investments............................................................................
36,000
400,000
400,000
560,000
850,000
100,000
900,000
Transfer from General Fund.......................................................

1,250,000
Transfer from Capital project Fund............................................
560,000
Revenues--Interest......................................................................
100,000
Expenditures--Interest............................................................
Expenditures--Principal.........................................................
Revenues--Net Increase (Decrease) in Fair Value of Investments
36,000
800,000
500,000
36,000
574,000
101
PROBLEM 39
1.
2.
3.
4.
5.
6.
7.
Assessments Receivable -- Deferred..........................................

Assessments Receivable -- Current............................................
Deferred Revenue -- Assessments.........................................
Revenue -- Assessments.........................................................
950,000
50,000
Interest Receivable......................................................................
Revenue--Interest...................................................................
60,000
Cash............................................................................................
Assessments Receivable -- Current.......................................
106,000
Assessments Receivable -- Delinquent.......................................

Interest Receivable -- Delinquent...............................................
Assessments Receivable -- Current.......................................
2,000
2,000
Expenditures--Principal..............................................................
Cash........................................................................................
40,000
50,000
Investments.................................................................................
Cash........................................................................................
10,000
Investments.................................................................................
Revenues--Net Increase in Fair Value of Investments...........
600
Revenue -- Assessments.............................................................
Revenues--Net Increase in Fair Value of Investments................
50,000
600
60,000
950,000
50,000
60,000
48,000
58,000
2,000
2,000
90,000
10,000
600
40,000
50,000
20,600
102
PROBLEM 40
1.
Land............................................................................................
Net Assets--Invested in Capital Assets..................................
55,000
55,000
2.
No entry until the equipment is received.
3.
Equipment...................................................................................
Net Assets--Invested in Capital Assets .................................
27,000
Net Assets--Invested in Capital Assets ......................................

Accumulated Depreciation.........................................................
Trucks.....................................................................................
5,000
30,000
Net Assets--Invested in Capital Assets ......................................

Accumulated Depreciation.........................................................
Office Equipment...................................................................
1,000
39,000
Construction in Progress.............................................................
Net Assets Invested in Capital Assets.................................
1,200,000
Depreciation Expense (Net Assets Invested in Capital Assets)

Accumulated Depreciation.....................................................
3,000,000
4.
5.
6.
7.
27,000
35,000
40,000
1,200,000
3,000,000
PROBLEM 41
1.
2.
3.
4.
5.
Net Assets--Invested in Capital Assets.......................................

Bonds Payable........................................................................
40,000,000
Notes Payable--Long-Term........................................................
100,000
Equipment Under Capital Lease..............................................

Capital Lease Liabilities........................................................
1,000,000
Capital Lease Liabilities.............................................................

$175,000 less ($900,000 x .08 x .5)
139,000
Net Assets -- Unrestricted...........................................................

Liability for Claims and Judgments.......................................
2,500,000
40,000,000
100,000
100,000
900,000
139,000
2,500,000
103
PROBLEM 42
1.
2.
3a.
3b.
4.
5.
General Fund (GF)

Estimated Revenues...............................................................
Appropriations................................................................
GF
Property Taxes Receivable--Current......................................
Allowance for Uncollectible Current Taxes...................
Deferred Revenues ($80,000 x 8)..................................
Revenues.........................................................................
GF
Cash........................................................................................
Notes Payable.................................................................
Interest Expenditures ($300,000 x .10 x 3/12).......................
Interest Payable...............................................................
8,000,000
160,000
640,000
7,200,000
300,000
300,000
7,500
7,500
542,000
GF
Encumbrances.................................................................
542,000
General Capital Assets and General Long-Term Liabilities

(GCA-GLTL) accounts
Equipment..............................................................................
Net Assets--Invested in Capital Assets...........................
7.
12,700,000
300,000
GF
Encumbrances........................................................................
Expenditures..........................................................................
Vouchers Payable............................................................
6.
13,000,000
542,000
542,000
541,500
541,500
43,000
43,000
GF
Transfer to DSF......................................................................
Cash................................................................................
605,000
Debt Service Fund (DSF)

Cash........................................................................................
Transfer from GF............................................................
605,000
GF
Investments............................................................................
Cash................................................................................
265,000
605,000
605,000
265,000
104
8.
9.
10.
GF
Investments............................................................................
Net Increase (Decrease) in Fair Value of Investments....
8,000
GF (or SRF)
Cash........................................................................................
Deferred Revenues..........................................................
983,000
GF (or SRF)
Expenditures..........................................................................
Cash................................................................................
630,000
Revenues.........................................................................
11.
GF
Expenditures--Capital Outlay................................................
Cash................................................................................
Other Financing Sources--Increase in Capital Leases....
8,000
983,000
630,000
630,000
630,000
700,000
150,000
550,000

Equipment Under Capital Lease.........................................
700,000
Capital Lease Liabilities.................................................
12.
CPF
Cash........................................................................................
Other Financing Sources--Refunding Bonds..................
Other Financing Sources--Bond Premium......................
13,470,000
13,000,000
470,000

13,470,000
Bonds Payable................................................................
Premium on Bonds Payable............................................
13.
DSF
Cash........................................................................................
8,000,000
Other Financing Uses--Payment to Refunded Bond

Escrow Agent...........................................................
Expenditures--Payment to Refunded Bond Escrow Agent....
Cash................................................................................
8,000,000
1,000,000
550,000
150,000
13,000,000
470,000
8,000,000
9,000,000
105
Bonds Payable (Old)..............................................................
8,750,000
Bonds Payable (new)......................................................
8,000,000
750,000
106
PROBLEM 43
1.
GF
Expenditures..........................................................................
Cash or Vouchers Payable...............................................
General Capital Assets and General Long-Term Liabilities
(GCA-GLTL) accounts
Equipment..............................................................................
2.
3.
4.
43,000
43,000
43,000
GF
Transfer to DSF......................................................................
Cash................................................................................
605,000

Cash
.................................................................................
Transfer from GF............................................................
605,000

Cash................................................................................
300,000
400,000
GCA-GLTL accounts
Bonds Payable........................................................................
400,000
GF
Expenditures--Capital Outlay................................................
Cash................................................................................
Other Financing Sources--Increase in Capital Leases....
GCA-GLTL accounts
Equipment Under Capital Lease.........................................
Capital Lease Liabilities.................................................
5.
43,000
605,000
605,000
700,000
400,000
700,000
150,000
550,000
700,000
550,000
150,000
CPF
Cash........................................................................................
Other Financing Sources--Refunding Bond Proceeds....
13,000,000
GCA-GLTL accounts
Bonds Payable................................................................
13,000,000
13,000,000
13,000,000
107
6.
DSF
Cash........................................................................................
12,000,000
Other Financing Uses--Payment to Refunded Bond

Escrow Agent...........................................................
Expenditures-- Payment to Refunded Bond Escrow Agent...
Cash................................................................................
12,000,000
1,000,000
GCA-GLTL accounts
Bonds Payable (Old)..............................................................
Bonds Payable (new)......................................................
7.
GF
Cash........................................................................................
Other Financing Sources Proceeds from the Sale of
Capital Assets..........................................................
GCA-GLTL accounts
Accumulated Depreciation.....................................................
Vehicles...........................................................................
12,000,000
13,000,000
14,000,000
2,000,000
12,000,000
4,000
4,000
2,000
23,000
25,000
108
PROBLEM 44
1.
2.
3.
4.
5.
6.
Cash............................................................................................
Revenues--Donations.............................................................
550,000
Investments.................................................................................
Cash........................................................................................
540,000
Cash............................................................................................
Revenues--Interest.................................................................
38,000
Transfer to the General Fund......................................................

Cash........................................................................................
35,000
Investments.................................................................................
Revenues--Net Increase (Decrease) in Fair Value
of Investments.................................................................
43,000
Revenues--Donations..................................................................
Revenues--Net Increase (Decrease) in Fair Value
of Investments.................................................................
Transfer to the General Fund.................................................
Fund Balance--Nonexpendable..............................................
Fund Balance--Expendable....................................................
550,000
35,000
550,000
540,000
38,000
35,000
43,000
43,000
35,000
550,000
43,000
109
PROBLEM 45
(a)
1.
2.
3.
4.
5.
(b)
Accounts Receivable.......................................................
Sales.........................................................................
To record sales on account.
5,000,000
Due from Other Funds.....................................................

Sales (Interfund).......................................................
To record interfund services provided.
750,000
Cash................................................................................
Accounts Receivable................................................
Due from Other Funds.............................................
To record collections of receivables.
4,750,000
Allowance for Uncollectible Accounts............................

Accounts Receivable................................................
To writeoff uncollectible accounts.
20,000
Sales................................................................................
Allowance for Uncollectible Accounts.....................
To record the provision for bad debts.
100,000
5,000,000
750,000
4,000,000
750,000
20,000
100,000
Revenue from sales = $5,000,000 - $100,000 = $4,900,000
PROBLEM 46
All except items 4, 5, 6, and 10 should be reported as cash flows from capital and related
financing activities.
110
PROBLEM 47
1.
2.
3.
4.
5.
6.
7.
Buildings.....................................................................................
Cash........................................................................................
Mortgage Note Payable..........................................................
450,000
Materials and Supplies Inventory...............................................

Accounts Payable...................................................................
58,000
Salaries Expense ($120,000 + $13,000 - $9,000)......................

Cash........................................................................................
124,000
Cash ($400,000 +$30,000) x .9..................................................

Due from General Fund..............................................................
Due from Enterprise Fund..........................................................
Revenues--Billings to Departments.......................................
387,000
40,000
3,000
Materials and Supplies Expense.................................................

Materials and Supplies Inventory ($58,000 + $6,000 - $4,000)
100,000
350,000
58,000
120,000
4,000
430,000
60,000
60,000
Year End--Interest Accrual

Interest Expense ($350,000 x .06 x 1/2)....................................
10,500
Year End Adjustment--Depreciation

Depreciation Expense--Building ($450,000 / 20) x .5...............
Accumulated Depreciation--Building....................................
11,250
Mortgage Note Payable ($47,555 - $21,000).............................

Interest Payable...........................................................................
Interest Expense..........................................................................
Cash........................................................................................
10,500
11,250
26,555
10,500
10,500
47,555
111
PROBLEM 48
City of Isler
Central Service Bureau
Statement of Cash Flows
Cash flows from operating activities:
Cash collections from user departments.....................................
Cash paid to employees..............................................................
Cash paid to suppliers.................................................................
$400,000
(190,000)
( 80,000)
$130,000
Cash flows from noncapital financing activities:

Cash received from short-term loan...........................................
Cash received from transfers......................................................
2,800
30,000
Cash flows from capital and related financing activities:

Cash paid for equipment.............................................................
Cash paid to retire mortgage note principal................................
Cash paid for interest on mortgage.............................................
( 50,000)
( 3,000)
( 8,000)
( 61,000)
Cash flows from investing activities:

Cash received from interest........................................................
Cash paid for investments...........................................................
800
( 24,000)
( 23,200)
32,800
Net increase in cash...........................................................................
78,600
Cash, January 1, 20X8.......................................................................
34,000
Cash, December 31, 20X8.................................................................
$112,600
112
PROBLEM 49
1.
2.
3.
Cash............................................................................................
Refunding Bonds Payable......................................................
3,000,000
Bonds Payable............................................................................
Premium on Bonds Payable........................................................
Cash........................................................................................
Deferred Interest Expense Adjustment..................................
3,200,000
100,000
Interest Expense ($3,000,000 x .08 x 1).....................................

Cash........................................................................................
240,000
Deferred Interest Expense Adjustment ($300,000 / 5 years)......

Interest Expense.....................................................................
60,000
3,000,000
3,000,000
300,000
240,000
60,000
113
PROBLEM 50
Part A
1.
2.
3.
Cash............................................................................................
Capital Contributions.............................................................
10,000,000
Cash............................................................................................
5,000,000
Cash............................................................................................
Bonds Payable........................................................................
5,000,000
10,000,000
5,000,000
5,000,000
4.
No entry required.
5.
Construction in Progress.............................................................
Contracts Payable...................................................................
8,000,000
Contracts Payable.......................................................................
Cash........................................................................................
8,000,000
Interest Expense ($5,000,000 x .06 x .5)....................................

150,000
Cash............................................................................................
Operating Grant Revenues.....................................................
40,000
Expenses.....................................................................................
Cash........................................................................................
30,000
6.
7.
8.
9.
8,000,000
8,000,000
150,000
40,000
30,000
Part B
The capital grant would be reported as a separate line item after income before other revenue,
expenses, and transfers. The operating grant is reported as part of nonoperating revenues.
114
PROBLEM 51
Cash Flows from Operating Activities:
11. Cash paid to employees.........................................................
11. Cash paid to suppliers............................................................
Cash Flows from Noncapital Financing Activities:
2. Cash paid for transfer out.......................................................
10. Cash received from operating grants.....................................
55,000
30,000
300,000
500,000
Cash Flows from Capital and Related Financing Activities:

1. Cash received from sale of capital assets...............................
3. Cash paid for construction of capital assets...........................
4. Cash paid to retire principal of mortgage note.......................
4. Cash paid for interest on mortgage note................................
5. Cash received from issuance of refunding bonds to refund
bonds originally issued to finance capital asset construction
6. Interest paid on capital-asset-related refunding bonds...........
8. Cash received from capital grant...........................................
9. Cash paid for construction costs............................................
12. Cash paid for equipment........................................................
13. Cash received from transfer for plant....................................
14. Cash received from sale of capital assets...............................
15. Cash received from short-term interfund loan for equipment
18,000,000
1,080,000
5,000,000
1,500,000
34,000
1,000,000
23,000
90,000
Cash flows from investing activities:

7. Cash received from sale of investments.................................
900,000
300,000
2,800,000
18,000
59,000
115
PROBLEM 52
City of Rice
Water Utility Enterprise Fund
Statement of Revenues, Expenses, and Changes in Net Assets
Operating revenues:
Charges for services....................................................................
Operating expenses:
Salaries........................................................................................
Contractual services....................................................................
Supplies.......................................................................................
Depreciation................................................................................
$3,300,000
$1,000,000
1,300,000
400,000
1,100,000
Operating income (loss).....................................................................

Nonoperating income (expense):
Investment income ($105,000 + $12,000).................................
Interest expense .........................................................................
Gain on sale of fixed assets........................................................
3,800,000
( 300,000)
117,000
(250,000)
8,000
( 125,000)
Income (Loss) before other revenues, expenses and transfers...........
( 425,000)
Transfer from General Fund..............................................................

Capital Contribution...........................................................................
450,000
1,200,000
Increase in net assets..........................................................................
1,225,000
Net assets, January 1, 20X3...............................................................
3,000,000
Net Assets, December 31, 20X3........................................................
$4,225,000
116
PROBLEM 53
1.
2.
3.
4.
Penn County General Fund

Taxes Receivable--Current.........................................................
Revenues................................................................................
12,000,000
240,000
11,760,000
Penn County Tax Agency Fund

Taxes Receivable for Taxing Units.............................................
Due to Taxing Units...............................................................
20,000,000

Cash............................................................................................
Taxes Receivable for Taxing Units........................................
15,200,000

120,000

Due to Taxing Units....................................................................
Taxes Receivable for Taxing Units........................................
200,000

Cash ($9,000,000 + $62,000).....................................................
Revenues--Collection Fees ($4,000,000 + $2,200,000) x .01
Due to Taxing Units....................................................................
Cash........................................................................................
20,000,000
15,200,000
120,000
200,000
9,062,000
9,000,000
62,000
15,200,000
15,200,000
117
PROBLEM 54
1.
2.
3.
Private-Purpose Endowment Trust Fund:

Cash........................................................................................
Investments.............................................................................
AdditionsNonexpendable Contributions......................
To record receipt of trust corpus.
Cash........................................................................................
AdditionsInvestment Income.......................................
To record receipt of dividends and interest from investments.
Transfer to Private-Purpose Earnings Trust Fund...................
Cash................................................................................
To record transfer of expendable earnings.
Private-Purpose Earnings Trust Fund:
Cash........................................................................................
Transfer from Private-Purpose Endowment
Trust Fund..................................................................
To record transfer in of expendable earnings.
4.
Private-Purpose Earnings Trust Fund:

DeductionsRestoration Expenditures..................................
Cash................................................................................
To record expenditures to restore historic buildings.
1,000,000
2,000,000
3,000,000
300,000
300,000
300,000
300,000
300,000
300,000
65,000
65,000
Note that many would consider it preferable to use a single Private-Purpose Trust Fund and to
distinguish between the nonexpendable and expendable portions of the net assets of that single
fund instead of using two separate funds.
118
PROBLEM 55
1.
2.
3.
4.
5.
6.
Due from General Fund..............................................................

Due from Enterprise Fund..........................................................
Additions -- Employer Contributions....................................
Additions -- Employee Contributions....................................
800,000
246,000
Cash............................................................................................
Due from General Fund.........................................................
Due from Enterprise Fund.....................................................
941,400
Investments.................................................................................
Cash........................................................................................
540,000
Cash............................................................................................
Additions -- Interest Income..................................................
380,000
Deductions -- Payments to Resigned Employees.......................

Cash........................................................................................
17,000
Deductions -- Retirement Benefits.............................................

Cash........................................................................................
Benefits Payable.....................................................................
96,000
523,000
523,000
720,000
221,400
540,000
380,000
17,000
92,000
4,000
7.
No entry. This information affects the required supplementary information schedules, not
the accounts or financial statements.
8.
Investments.................................................................................
Additions -- Net Increase Fair Value of Investments.............
83,000
83,000
119
PROBLEM 56
The financial statements for a defined benefit government pension plan include a statement of
net assets (essentially a balance sheet with Net Assets Held in Trust for Pension Benefits serving
as the balancing item). The assets of the fund are mostly investments, which must be reported at
fair value. Only short-term, currently payable liabilities are reported here. No actuarial based
information is presented in the statement.
The other required financial statement is the statement of changes in net assets. The statement
reports additions to net assets held in trust, deductions from net assets held in trust, and the net
increase or decrease for the year. No actuarial based information is reported in this statement.
Two schedules are required to be included in required supplementary information. The schedule
of funding progress reports the market-related value of plan assets, the actuarial accrued liability
for benefits, and the actuarial excess or deficiency among other information. This is the primary
mechanism for reporting on the actuarial status of the plan, therefore. The schedule of employer
contributions reports the required employer contributions to the plan and the extent to which this
is the amount actually funded for a year. These two schedules report data for six years.
PROBLEM 57
1.
2.
3.
4.
5.
6.
Cash............................................................................................
Additions -- Donations...........................................................
150,000
Investments.................................................................................
Cash........................................................................................
140,000
Cash............................................................................................
Additions -- Interest...............................................................
3,000
Deductions -- Scholarships.........................................................
Cash........................................................................................
3,000
Investments.................................................................................
Additions -- Revenues--Net Increase in Fair Value of Investments
Additions -- Donations...............................................................
Additions--Interest......................................................................
Additions--Net Increase in Fair Value of Investments................
Deductions -- Scholarships....................................................
Net Assets Held in Trust -- Nonexpendable...........................
150,000
140,000
3,000
3,000
13,000
13,000
150,000
3,000
13,000
3,000
163,000
120
PROBLEM 58 (Program revenues)

Charges for Services:
License and permit fees
Fines and forfeitures
Total
$ 70,000
500,000
$570,000
Operating Grants and Contributions:

State grant restricted for police training
Shared state revenues restricted to public health
Total
$4,000,000
1,100,000
$5,100,000
Capital Grants and Contributions:

Federal grant for new library
$1,222,000
121
PROBLEM 59
City of Cricket Hill
Statement of Activities
Functions/Programs
Expenses
Governmental activities:
General administration
Public safety
Highways and streets
Health and welfare
Interest on long-term debt
Total governmental activities
1,700,000
4,200,000
2,100,000
3,000,000
100,000
11,100,000
Program Revenues
Operating
Charges for
Grants and
Capital Grants &
Services
Contributions
Contributions
1,200,000
300,000
270,000
270,000
General revenues:
Property taxes, levied for general purposes
Grants and contributions not restricted to specific programs
Interest and investment earnings
Loss on sale of capital assets
Transfers
Total general revenues, special items, and transfers
Change in net assets
Net assets--beginning
Net assets--ending
1,200,000
300,000
Governmental
Activities
$ (1,700,000)
(3,000,000)
(1,800,000)
(2,730,000)
(100,000)
(9,330,000)
13,000,000
4,000,000
178,000
(18,000)
(2,500,000)
14,660,000
5,330,000
3,017,000
$ 8,347,000
122
PROBLEM 60
NET ASSETS:
Invested in capital assets, net of related debt
Restricted for:
Special projects
Debt service
Unrestricted
Total net assets
3,100,000
1,200,000
1,700,000
7,800,000
13,800,000
Net assets: unrestricted

All governmental funds' fund balances $13,000,000
- Restricted fund balances
(3,800,000)
- Liability for compensated absences
(3,200,000)
+ Internal Service Fund
1,800,000
Total
7,800,000
Net assets: restricted
Special projects
Debt service
Capital projects
Less related debt
1,200,000
1,700,000
900,000
(900,000)
Net assets: Capital assets less related debt

+ Capital assets
$10,800,000
- Accumulated depreciation
(4,100,000)
- Bonds payable
(5,700,000)
+ Unspent bond proceeds
900,000
+ Internal Service Fund
1,200,000
$ 3,100,000
123
PROBLEM 61
Governmental Funds 10% test for asset amount

General
Federal Grants Special Revenue
State Grants Special Revenue
City Hall Capital Projects
Debt Service
Total Governmental Funds Assets
10% of Governmental Funds Assets
Assets
$1,300,000
500,000
200,000
900,000
700,000
5,400,000
$ 540,000
Enterprise Funds 10% test for assets amounts

Total Enterprise Funds Assets
10% of Enterprise Funds Assets
Assets
$8,000,000
1,000,000
9,000,000
$ 900,000
5% test for assets amounts

Total Governmental Funds Assets
Total Enterprise Funds Assets
Total Governmental and Enterprise Funds Assets
5% of Governmental and Enterprise Funds Assets
Assets
$ 5,400,000
9,000,000
14,400,000
$ 720,000
The threshold for determining that a governmental fund other than the General Fund is a major
fund is $720,000 (the larger of $720,000 and $540,000). The threshold for determining that an
Enterprise Fund is a major fund is $900,000 (the larger of $900,000 and $720,000). Therefore,
the major funds are those shown in the chart below.
Major Funds
General
Assets
$1,300,000
4,000,000
1,000,000
124
PROBLEM 62
1.
2.
3.
4.
5.
6.
7.
8.
Equipment...................................................................................
Expenditures -- Capital Outlay Equipment............................
3,500,000
Bonds Payable............................................................................
Expenditures -- Bond Principal Retirement...........................
200,000
Other Financing Source -- Proceeds from Sale of Land.............

Land.......................................................................................
Gain on Sale of Land.............................................................
120,000
Other Financing Sources -- Bonds..............................................

Bonds Payable........................................................................
1,000,000
Other Financing Sources -- Premium on Bonds.........................

Premium on Bonds Payable...................................................
100,000
Transfer from the General Fund.................................................

Transfer to the Debt Service Fund.........................................
1,100,000
Deferred revenue........................................................................
Revenue -- Taxes....................................................................
Net Assets (Beginning)..........................................................
12,000
Expense (by functional areas)....................................................

Long-Term Liability for Compensated Absences..................
23,000
3,500,000
200,000
25,000
95,000
1,000,000
100,000
1,100,000
2,000
10,000
23,000
125
PROBLEM 63
City of Floyd
Reconciliation of the Balance Sheet of Governmental Funds
to the Statement of Net Assets
Fund balances--total governmental funds
$ 13,000,000
Amounts reported for governmental activities in the Statement of

Net Assets are different because:
Capital assets used in governmental activities are not
financial resources and therefore are not reported
in the funds ($10,800,000 - $4,100,000).
6,700,000
Other long-term assets are not available to pay for

current-period expenditures and therefore are
deferred in the funds.
2,000,000
Long-term liabilities, including bonds payable, are not

due and payable in the current period and therefore
are not reported in the funds.**
Internal service funds
Net Assets of Governmental Activities
(10,100,000)
3,000,000
$ 14,600,000
** Bonds payable (5,700,000) plus compensated absences (3,200,000) and

accrued interest (1,200,000)
126
127
PROBLEM 64
City of Riner
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balance to the Statement of Activities
Net change in fund balances--total governmental funds
Amounts reported for governmental activities in the Statement of Activities are
different because
Governmental funds report capital outlays as expenditures while governmental
activities report depreciation expense to allocate those expenditures over the life
of the assets.
Add Capital acquisitions
Subtract Depreciation
$ 1,300,000
5,080,000
(4,100,000)
980,000
In the Statement of Activities, only the gain (loss) on capital assets is reported.
In the governmental funds, the proceeds from the sale increase financial
resources. Thus, the change in net assets differs from the change in fund
balance by the book value of the capital asset.
(25,000)
Revenues in the Statement of Activities that do not provide current financial

resources are not reported as revenues in the funds.
200,000
Bond proceeds provide current financial resources to governmental funds, but

issuing debt increases long-term liabilities in the Statement of Net Assets.
Repayment of bond principal is an expenditure in the governmental funds, but
the repayment reduces long-term liabilities in the Statement of Net Assets.
Add debt principal repayment
Subtract debt proceeds
3,000,000
(3,500,000)
(500,000)
Some expenses reported in the Statement of Activities do not require the use of
current financial resources and therefore are not reported as expenditures in
governmental funds (such as compensated absences).
(30,000)
Change in accrued interest on debt
(12,000)
Internal service funds are used by management to charge the costs of certain
services to individual funds. The net revenue (expense) of the internal service
funds is reported with governmental activities.
Change in Net Assets of Governmental Activities
520,00
0
$
2,433,000
128
PROBLEM 65
A. Potential fund financial statements included in the basic financial statements are as follows:
a. Governmental Funds (General Fund, Special Revenue Funds, Debt Service Funds,
Capital Projects Funds, Permanent Funds)
Balance Sheet
Statement of Revenues, Expenditures, and Changes in Fund Balances
Statement of Revenues, Expenditures, and Changes in Fund Balances--Budget and
Actual (General Fund and for each major Special Revenue Fund with legally adopted
annual budgets)
b. Proprietary Funds (Internal Service Funds and Enterprise Funds)
Balance Sheet (Statement of Net Assets)
Statement of Cash Flows
c. Fiduciary Funds (Agency Funds, Private-Purpose Trust Funds, Investment Trust Funds
and Pension Trust Funds)
Statement of Fiduciary Net Assets
Statement of Changes in Fiduciary Net Assets
B. The fund financial statements for governmental funds report separate columns for each major
fund and a single column for nonmajor funds. The fund financial statements for proprietary
funds report separate columns for each major enterprise fund, a single column for nonmajor
enterprise funds, and a single column for internal service funds. The fund financial
statements for fiduciary funds report separate columns for each fund type. The combining
financial statements must report data for each fund that did not appear as a major fund in the
fund financial statements. In addition, the combining financial statements must present total
columns that articulate with the fund financial statements (nonmajor funds for governmental
and enterprise funds; fund type for internal service and fiduciary funds). Fund financial
statements are required as part of basic financial statements. Combining statements are not
required in the basic financial statements. They are required in the comprehensive annual
financial report.
129
PROBLEM 66
A. The minimum requirements for general purpose external financial reports are as follows:
Managements Discussion and Analysis

Government-wide Financial Statements
Fund Financial Statements
Notes to the Financial Statements
Other Required Supplementary Information
B. Managements Discussion and Analysis (MD&A) is required supplementary information

that is presented before the basic financial statements. The purpose of the MD&A is to
introduce the basic financial statements and to provide a fact-based analysis of the
governments activities.
Notes to the basic financial statements are an integral part of the basic financial statements.
The notes present information that is necessary for fair presentation of each of the reports
included in the basic financial statements. The notes inform users of information they
should have in analyzing and interpreting the basic financial statements that is not presented
in the financial statement presentations themselves.
Required supplementary information (RSI), other than Managements Discussion and
Analysis, is information that is considered necessary to supplement the information in the
basic financial statements, but is not part of those statements. RSI is presented immediately
after the notes to the financial statements.
Narrative explanations present information, in either narrative or quantitative form, required
for the information in the combining and individual fund financial statements to be
presented fairly at the individual fund level. The notes inform users of information they
should have in analyzing these statements that is not presented in the combining and
individual fund financial statement presentations themselves.
130
PROBLEM 67
1.
The school district is a component unit of the city. The school district is fiscally dependent
on the city because the city council has substantive approval authority over the district's tax
rate.
The school district should be discretely presented. Because of its public service nature, it
does not meet the criteria for blending which require that a component unit either serve
solely or benefit solely the primary government itself (as opposed to the primary
government's constituency). The third criterion--which is the only one most component
units could reasonably meet--is that a voting majority of the primary government board (the
city council) must serve on and constitute a voting majority of the governing board of the
component unit. Since the school district board members are popularly elected, this
criterion is not met for the school district.
2.
The municipal gas utility clearly is a component unit of the city. It meets, in a fairly extreme
manner, every criterion for inclusion. It is enough to realize that the utility is fiscally
dependent upon the city because of the city's budget approval authority--or, for that matter,
its authority over the rate structure or over issuance of bonded indebtedness.
The gas utility should be discretely presented. As with the school district, the only pertinent
criterion for blending is the substantively the same governing body criterion. Even though
the utility board is appointed by the council and can be removed at will, this criterion is not
met. No council member serves ex officio as a board member of the utility.
3.
The library commission is a component unit of the city because the city has substantive
approval authority over the commission's budget. This means that the commission is
fiscally dependent on the city.
The library commission is to be blended in the city financial report. A majority of city
council (three of five) serves as commission board members and comprise a voting majority
(three of five) of the component unit board.
131
PROBLEM 68
A. Discretely presented component units are presented in the government-wide financial
statements separately from the primary government. They are not included in the fund
financial statements. Governments must report certain information about each major
discretely presented component unit. Governments may meet this requirement by reporting
each of the five component units in separate columns of the government-wide financial
statements. More likely, the government will meet this requirement by either disclosing
condensed financial statements for each of the five component units in the notes to the
financial statements or by providing a combining component unit financial statement.
B. Blending means that a component unit is being reported in substantially the same manner it
would be if the component unit were actually a part of the primary government legal entity.
Each fund of a component unit is reported as an additional fund of the same fund type of the
primary government. The major exception is that the General Fund of a component unit is
reported as a primary government Special Revenue Fund.
Blending is required for component units that serve or benefit only the primary government.
Blending also is required for a component unit with substantively the same governing body
as the primary government. Substantively the same governing body means that a voting
majority of the primary government board must serve on and constitute a voting majority of
the governing board of the component unit. If none of these criteria are met, the government
is not permitted to blend the component unit's data.
PROBLEM 69 (CAFR Sections)
Indicate in which section of the CAFR the following items would appear: (I) Introductory, (F)
Financial, or (S) Statistical
_S_ Computation of legal debt limit
_I_ Organizational chart
_F_ Narrative explanation
_I_ Letter of transmittal
_S_ Principal taxpayers
_F_ Auditors report
_I_ GFOA Certificate of Achievement
_F_ Managements discussion and analysis
_F_ Combining financial statements
_F_ Other required supplementary information
132
PROBLEM 70
1. Cash..............................................................................................
Unrestricted SupportContributions....................................
300,000
300,000
2. Cash..............................................................................................
1,245,000
Temporarily Restricted SupportContributionsEducation
Temporarily Restricted SupportContributionsBuilding.
Permanently Restricted SupportContributionsEndowment
43,000
202,000
1,000,000
3. Pledges Receivable......................................................................
28,000,000
Allowance for Uncollectible Pledges.....................................
Temporarily Restricted SupportTime Restriction (Implied)
Temporarily Restricted SupportContributionsBuilding
2,800,000
2,700,000
4,500,000
18,000,000
4.
5.
6.
7.
8.
Cash........................................................................................
ExpensesDirect Costs of Special Event.............................
Temporarily Restricted SupportSpecial Events..........
550,000
850,000
ExpensesEducation............................................................
Cash................................................................................
14,000
Temporarily Restricted Net AssetsReclassifications Out. .

Unrestricted Net AssetsReclassifications In...............
14,000
ExpensesEducation............................................................
Cash................................................................................
25,000

25,000
Construction in Progress........................................................
Cash................................................................................
92,000

92,000
Construction in Progress........................................................
Cash................................................................................
110,000

110,000
1,400,000
14,000
14,000
25,000
25,000
92,000
92,000
110,000
110,000
133
9.
10.
Cash........................................................................................
Temporarily Restricted RevenueInvestment Income..
13,000
Cash........................................................................................
Unrestricted Revenue Investment Income...................
25,000
Unrestricted Net Assets..........................................................

Unrestricted Net Assets Designated for Building...........
25,000
13,000
25,000
25,000
PROBLEM 71
1.
2a.
2b.
Pledges Receivable.................................................................
Cash........................................................................................
Temporarily Restricted SupportContributions.............
To record contributions for rehabilitation programs.
300,000
100,000
ExpensesAlcohol Rehabilitation.........................................
Cash................................................................................
220,000
Temporarily Restricted Net Assets

Reclassifications Out................................................
Unrestricted Net AssetsReclassifications In.................
To record satisfaction of restrictions on
restricted resources. Note that the FASB considers
the restrictions met if restricted resources could have
been used for the expenseseven if they were not used.
400,000
220,000
220,000
220,000
134
PROBLEM 72
a.
Unrestricted contributions received in cash are reported as revenues in the changes in

unrestricted net assets section of the statement of activities in the period received. If the
unrestricted contributions are pledges that are not received by year end, a time restriction
is implied unless the donor specifies that the resources are contributed to support the
current period. Because of the implied time restrictions, the pledges would be reported
as contributions (at their present value or at their net realizable value) in the changes in
temporarily restricted net assets section. When collected, net assets released from
restrictions is reported as an increase in the changes in unrestricted net assets and as a
decrease in the changes in temporarily restricted net assets section.
b.
Pledges restricted to a specific program are reported as contributions in the changes in

temporarily restricted net assets section of the statement of activities, either at present
value or at net realizable value. When the pledge has been received and expenses
incurred for the restricted purpose, net assets released from restrictions is reported as an
increase in the changes in unrestricted net assets and as a decrease in the changes in
temporarily restricted net assets sections.
c.
This collection is not reflected in the statement of activities. There are two restrictions in
this case when the pledges are made--a time restriction (implied) and a use restriction.
Collection removes the time restriction, but the use restriction remains. Hence, the
assets are not yet released from restrictions.
d.
Pledges restricted to fixed asset construction are reported as contributions in the changes
in temporarily restricted net assets section of the statement of activities, either at present
value or at net realizable value. When construction costs are incurred for the restricted
purpose, an organization must adopt one of two polices. Under the first approach, when
construction costs are incurred, net assets released from restrictions is reported as an
increase in the changes in unrestricted net assets and as a decrease in the changes in
temporarily restricted net assets sections. Under the second approach, when construction
costs are incurred, there is no change in net assets. As the assets are used up
(depreciated), depreciation expense is reported in unrestricted net assets and net assets
released from restrictions is reported as an increase in the changes in unrestricted net
assets and as a decrease in the changes in temporarily restricted net assets sections.
The depreciation expense and the net assets released from restrictions are not necessarily
equal in amount. For instance, while they may be recognized over the same period,
residual value would not be taken into account in computing the net assets released from
restrictions--even if the same time period is appropriate.
e.
Earnings on restricted investments are considered unrestricted unless the donor

specifically restricted their use. Therefore, these earnings are reported as investment
income in the changes in unrestricted net assets section.
135
PROBLEM 73
Weinstein Musical Society
Statement of Activity
Changes in Unrestricted Net Assets
Revenues and gains
Contributions ....................................................................................
Ticket sales ....................................................................................
Investment income............................................................................
Membership dues..............................................................................
Total Revenue and Gains........................................................
Net assets released from restrictions ($300,000 + $412,000 + $35,000)
Increase in Unrestricted Net Assets.........................................
Expenses:
Program Services:
Maestro Program ($77,000 + $5,000 + $330,000).............................
Classical Music Appreciation Program ($23,000 + $12,000)............
Professional Program ($379,000 + $500,000)...................................
Total Program Services...........................................................
Supporting Services:
Management and General ($45,000 + $1,300 + $22,000)..................
Fund raising ....................................................................................
Total Supporting Services.......................................................
Total Expenses........................................................................
Net Increase in Unrestricted Net Assets..................................
$ 800,000
150,000
58,000
100,000
1,108,000
747,000
$1,855,000
$412,000
35,000
879,000
1,326,000
68,300
75,000
143,300
1,469,300
385,700
Changes in Temporarily Restricted Net Assets

Contributions ($540,000 + $250,000 +$1,200,000)..........................
Net Assets Released from Restrictions..............................................
Increase in Temporarily Restricted Net Assets........................
1,990,000
(747,000)
1,243,000
Increase in Net Assets.........................................................................
1,628,700
Net Assets, January 1, 20X4 ($320,000 + $1,100,000)........................

Net Assets, December 31, 20X4..........................................................
1,420,000
$3,048,700
136
Problem 74
1. Investments..................................................................................
250,000
2.
3.
4.
5.
6.
7.
8.
Pledges Receivable................................................................
100,000
Allowance for Uncollectible Pledges.............................
Temporarily Restricted SupportTime Restriction (Implied)
Cash........................................................................................
Temporarily Restricted SupportEquipment................
200,000
Equipment..............................................................................
Cash................................................................................
80,000

80,000
ExpensesDepreciation........................................................
Accumulated Depreciation.............................................
10,000
Cash........................................................................................
Temporarily Restricted SupportEquipment................
200,000
Equipment..............................................................................
Cash................................................................................
80,000
ExpensesDepreciation........................................................
Accumulated Depreciation.............................................
10,000

10,000
250,000
5,000
95,000
200,000
80,000
80,000
10,000
200,000
80,000
10,000
10,000
137
PROBLEM 75
1.
2.
3.
4.
5.
6.
Accounts Receivable..............................................................
Scholarship Allowances.........................................................
RevenuesTuition and Fees..........................................
Allowance for Uncollectible Accounts...........................
2,702,000
98,000
Cash Restricted for Computer Equipment..........................

Revenues--Fees...............................................................
18,000
CashRestricted for Specific Operating Purpose...................

Deferred Revenue--Grants..............................................
300,000
ExpensesEducational and General ......................................

CashRestricted for Specific Operating Purpose...........
40,000
Deferred RevenueGrants......................................................
RevenuesGrants............................................................
40,000
Equipment..............................................................................
Cash................................................................................
40,000
ExpensesEducational and General (Interest).......................

Mortgage Payable..................................................................
Cash................................................................................
30,000
15,000
2,785,000
15,000
18,000
300,000
40,000
40,000
40,000
45,000
138
PROBLEM 76
1.
2.
3.
4.
5.
6.
7.
8.
Accounts Receivable..............................................................
Cash........................................................................................
Scholarship Allowances.........................................................
Revenues--Educational and General...............................
Allowance for Uncollectible Accounts...........................
1,230,000
3,150,000
120,000
Cash........................................................................................
Revenues--Auxiliary Enterprises....................................
275,000
Expenses--Educational and General......................................

Expenses--Auxiliary Enterprises...........................................
Cash................................................................................
1,438,000
62,000
ExpensesEducational and General.....................................

Accounts Receivable......................................................
35,000
Mortgage Payable..................................................................
Cash................................................................................
230,000
290,000
Cash Restricted for Program X..............................................

RevenuePrivate Gifts..................................................
250,000

Cash Restricted for Program X ......................................
230,000
Equipment..............................................................................
Cash................................................................................
34,000
4,455,000
45,000
275,000
1,500,000
35,000
520,000
250,000
230,000
34,000
139
PROBLEM 77
Beaver State College
REVENUES
Operating revenues:
Tuition and fees (net of scholarship allowances of $200,000
and uncollectible accounts of $80,000).................................
Auxiliary enterprise sales...........................................................
Total operating income..........................................................
$3,720,000
500,000
$4,220,000
EXPENSES
Operating expenses:
Educational and General:
Instruction...................................................................................
Research .................................................................................
Student services..........................................................................
Institutional support....................................................................
Operation of plant.......................................................................
Total educational and general................................................
Auxiliary enterprise (280,000 + 140,000)..................................
Total operating expenses........................................................
$3,100,000
600,000
220,000
190,000
180,000
$4,290,000
420,000
$4,710,000
Operating income (loss).....................................................................
( 490,000)
Nonoperating income (expense):

State appropriations....................................................................
Gifts ($200,000 + 180,000)........................................................
Investment income .....................................................................
Interest expense..........................................................................
Net nonoperating income.......................................................
800,000
380,000
370,000
(10,000)
1,540,000
Income before other revenues, expenses and transfers......................
1,050,000
Capital gifts........................................................................................
2,000,000
Increase in net assets..........................................................................
3,050,000
Net assets, January 1, 20X3...............................................................
3,827,000
Net Assets, December 31, 20X3........................................................
$6,877,000
140
PROBLEM 78
1.
2.
3.
4.
5.
Cash ....................................................................................
Annuities Payable...........................................................
RevenuesAnnuity Gifts...............................................
200,000
Investments............................................................................
Cash................................................................................
195,000
Annuities Payable..................................................................
Cash................................................................................
25,000
Cash........................................................................................
Annuities Payable...........................................................
13,000
Annuities Payable..................................................................
RevenueChange in Value of Annuity Payable............
1,000
175,000
25,000
195,000
25,000
13,000
1,000
141
PROBLEM 79
1. Accounts Receivable..............................................................
Patient Service Charges..................................................
12,500,000
Revenue Deductions--Contractual Adjustments....................

Revenue DeductionsProvision for Uncollectible Accounts
Accounts Receivable......................................................
Allowance for Uncollectible Receivables and
Third Party Contractuals..........................................
2,000,000
800,000
2. Expenses--Nursing Services..................................................
Cash................................................................................
2,300,000
3. Expenses--Depreciation--Building........................................
Expenses--Depreciation--Equipment.....................................
Accumulated Depreciation--Building.............................
Accumulated Depreciation--Equipment.........................
500,000
900,000
4. Medical Supplies Inventory...................................................

Cash................................................................................
2,600,000
Expenses--Medical Supplies..................................................
Medical Supplies Inventory............................................
2,500,000
5. CashRestricted for Plant Replacement and Expansion......

Revenues Capital Contributions..................................
4,000,000
6. CashRestricted for Specific Program.................................

Nonoperating Gains--Contributions...............................
500,000
7. Equipment..............................................................................
CashRestricted for Plant Replacement
and Expansion.........................................................
2,000,000
8. Expenses--Nursing Services..................................................
CashRestricted for a Specific Program.......................
400,000
9. Cash........................................................................................
Bonds Payable................................................................
5,000,000
Year End Adjustment

Interest Expense ($5,000,000 x .08 x .5)...............................
Interest Payable...............................................................
10. Expenses--Malpractice Claims..............................................
Liability for Claims and Judgments................................
12,500,000
2,000,000
800,000
2,300,000
500,000
900,000
2,600,000
2,500,000
4,000,000
500,000
2,000,000
400,000
5,000,000
200,000
200,000
100,000
100,000
142
Problem 80
1.
The required statements for a government hospital are:

Balance sheet
Statement of cash flows
2.
Although there are many similarities among the financial statements for a government
hospital and a not-for-profit hospital, the key differences are:
Net assets for not-for-profit hospitals are classified as unrestricted, temporarily
restricted, and permanently restricted. Net assets for government hospitals are
classified as unrestricted, restricted, and invested in capital assets, net of related debt.
Not-for-profit hospitals report a statement of operations and a statement of changes in
net assets. Government hospitals report a statement of revenues, expenses, and
changes in net assets.
Not-for-profit hospitals report changes in all three categories of net assets.
Government hospitals report only changes in total net assets.
Not-for-profit hospitals report assets released from restrictions. Government hospitals
do not report assets released from restrictions.
Not-for-profit hospitals follow FASB cash flow statement guidance. Government
hospitals follow GASB cash flow statement guidance.
Government hospitals defer revenue recognition on reimbursement grants until
qualifying costs are incurred. Nongovernment, not-for-profit hospitals do not.
143
PROBLEM 81
Patrick County Hospital

Net patient service revenues**...................................................................
Other Revenues:
Cafeteria sales...............................................................................
Total operating revenues............................................................................
$15,690,000
440,000
16,130,000
Expenses:
Nursing services............................................................................
Other professional services............................................................
General services............................................................................
Fiscal services...............................................................................
Administrative...............................................................................
Depreciation ($1,400,000 + $2,740,000).......................................
Total expenses.......................................................................
8,000,000
890,000
1,100,000
300,000
440,000
4,140,000
14,870,000
Operating income..........................................................................
1,260,000
Nonoperating Gains and Losses:

State appropriations.......................................................................
Federal grants................................................................................
Investment income........................................................................
Contributions.................................................................................
Gain on sale of capital assets ........................................................
Total nonoperating gains........................................................
500,000
1,300,000
870,000
350,000
75,000
3,095,000
Income before other revenues, expenses and transfers...............................
4,355,000
State appropriations--capital..........................................................
500,000
Increase in net assets..................................................................................
4,855,000
Net Assets, January 1, 20X0.......................................................................
27,200,000
Net Assets, December 31, 20X0.................................................................
$ 32,055,000
** Calculations: Patient service charges ($18,000,000) less charity service ($500,000) less contractual
adjustments ($1,100,000) less uncollectible accounts ($710,000).
144
PROBLEM 82
1.
2.
3.
4.
5.
6.
7.
8.
Fund Balance with Treasury..................................................

Unexpended Appropriations...........................................
300,000,000
Appropriations Realized........................................................
Unapportioned Authority................................................
300,000,000
Unapportioned Authority.......................................................
Apportionments..............................................................
80,000,000
Apportionments......................................................................
Allotments-Realized Resources......................................
79,000,000
Allotments-Realized Resources.............................................
Commitments..................................................................
8,000,000
Commitments.........................................................................
Undelivered Order--Unpaid............................................
8,000,000
Expended Appropriations--Paid......................................
40,000,000
Expenses--Salaries.................................................................
Fund Balances with Treasury..........................................
40,000,000
Unexpended Appropriations..................................................
Appropriations Used.......................................................
40,000,000
Undelivered Orders--Unpaid..........................................
17,000,000
Undelivered Orders--Unpaid.................................................
Expended Appropriations--Unpaid.................................
17,000,000
Equipment..............................................................................
Accounts Payable............................................................
17,000,000
Unexpended Appropriations..................................................
Appropriations Used.......................................................
17,000,000
300,000,000
300,000,000
80,000,000
79,000,000
8,000,000
8,000,000
40,000,000
40,000,000
40,000,000
17,000,000
17,000,000
17,000,000
17,000,000
145
PROBLEM 83
1.
The concept underlying a single audit is that one audit should meet multiple objectives,
including:
Formulating an opinion on the fairness of presentation of an entity's financial
statements
Determining whether the entity has complied with laws and regulations with
which noncompliance may have a material effect on the financial statements of
the entity
Studying and evaluating internal controls of the entity to determine the nature,
extent, and timing of the auditing procedures necessary to express an opinion on
the entity's financial statements
Determining whether the supplementary schedule of federal awards is fairly
presented in relation to the financial statements as a whole
Determining whether the entity has established internal control systems to provide
reasonable assurance that federal monies are managed in compliance with
applicable laws and regulations
Determining whether the entity has complied with the laws and regulations that
may have a material effect on each major federal assistance program
2.
A major federal program is essentially a federal program which has been selected using
guidance established in OMB Circular A-133 for the most intensive level of audit
coverage. The factors that the selections are based on are a combination of size of the
program (in terms of amount of federal expenditures in the audit period) and risk. There
is an overall guideline requiring that programs responsible for at least 50% (or 25% for
low-risk auditees) of federal expenditures be designated as major programs in a single
audit.
Auditors must perform more work and take more responsibility for internal controls and
compliance for major programs than for other programs.
3.
A low-risk auditee is an entity that has had single audits performed for each of the
preceding two years, received unqualified opinions on the financial statements and on the
schedule of expenditures of federal awards, had no material weaknesses in internal
controls per government auditing standards guidance, and had no audit findings on Type
A programs regarding material weaknesses in internal controls over the federal program,
noncompliance with the provisions of laws, regulations, contracts, or grant agreements
that have a material effect on the Type A programs, or known or likely questioned costs
that exceed 5% of the total federal awards expended for Type A programs during the year.
146
PROBLEM 84
Identifying major programs requires a multiple step process.
First, the auditor identifies the larger federal programs, which are called Type A programs. For
most governments, these are programs with federal awards expended during the audit period of
the larger of $300,000 or 3% of the total federal awards expended.
Next, the auditor must identify low-risk Type A programs. These essentially are Type A
programs that have been audited as a major program in at least one of the last two years, with no
audit findings that must be reported in the most recent period.
Type A programs are major programs unless the auditor excludes them because they are low-risk.
All other programs are Type B programs. If no Type A programs are excluded from major
programs because they are low-risk and the total federal expenditures of the Type A programs are
at least 50% (25% for low-risk auditees) of the total federal award expenditures, no Type B
programs need be treated as major.
If no Type A programs are excluded but the total federal expenditures of the Type A programs
does not meet the 50% or 25% criterion, as appropriate, enough Type B programs must be
identified as major to meet the 50% or 25% criterion.
If one or more Type A programs are identified as low-risk programs and not treated as major
programs, an equal number of Type B programs must be treated as major programs--even if not
necessary to meet the 50% or 25% criterion. (If more than an equal number of Type B programs
must be treated as major programs to meet the 50% or 25% criterion, an entity must keep adding
programs to those identified as major until the criterion is met.)
Type B programs are selected for treatment as major programs based upon assessment of risks of
noncompliance occurring that could be material for the federal program.
147
PROBLEM 85
A.
Yes. Federal award expenditures exceed the threshold of $500,000 and more than one
federal program is involved.
B.
The Type A programs are Programs D, E, F, and G.
C.
Programs D and F must be treated as major. Programs B and C are the most likely to be
picked up to replace E and G which can be treated as low-risk Type A and not deemed
major programs. Assuming the government is not a low-risk auditee, the 50% coverage
rule applies; 50% of the total expenditures of federal awards for this government equals
$1,375,000 ($2,750,000 x .5). The sum of expenditures for Programs B, C, D, and
F is $1,425,000. The 50% coverage rule is met.
If the government were a low-risk auditee, only Programs D and F would be major
programs since their total federal expenditures would exceed the 25% threshold
($687,500) for a low-risk auditee.
148

Test Bank - Problems and Essays 2008

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Test Bank - Problems and Essays 2008

Hochgeladen von

Copyright:

Verfügbare Formate

ILLUSTRATIVE EXAM QUESTIONS AND PROBLEMS

PROBLEMS AND ESSAY QUESTIONS

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 3 (Transaction analysis) Chapter 2

2009 Pearson Education, Inc. publishing as Prentice Hall

General Capital Assets and General Long-Term Liabilities Accounts

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 4 (Transaction analysis) Chapters 2, 3, and 6

Statement of revenues, expenditures, and changes in fund balance

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 5 (Transaction analysis) Chapters 3, 5, 6, and 10

Statement of revenues, expenditures, and changes in fund balance

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 6 (Transaction analysis) Chapters 4, 5, 6, and 10

Kibler paid salaries to general government employees, $950,000.

Statement of revenues, expenditures, and changes in fund balance

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 7 (Transaction Analysis) Chapters 3, 5, 6, 7, 9, and 10

Statement of revenues, expenditures, and changes in fund balance

PROBLEM 8 (Budgetary subsidiary ledger) Chapter 4

Council approves an appropriation of $25,000 for the public works department.

PROBLEM 9 (Financial Statement Presentation) Chapter 3

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 10 (General Ledger Entries) Chapter 3

PROBLEM 11 (Property Tax Entries) Chapter 3

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 12 (General Fund entries) Chapters 3 and 4

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 13 (General Fund entries) Chapters 4, 5, and 6

2009 Pearson Education, Inc. publishing as Prentice Hall

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 14 (General Fund Entries) Chapters 4 and 5

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 15 (General Fund Entries) Chapters 3, 4, and 5

Township Council adopted the budget for the fiscal year:

PROBLEM 16 (Debt-Related Transactions) Chapter 4

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 17 (General Fund Statement of Revenues, Expenditures, and Changes in Fund

Unreserved Fund Balance at January 1, 20X2, $2,000,000.

Revenues recorded by the bookkeeper for 20X2 included:

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 18 (General Fund Statement of Revenues, Expenditures and Changes in Fund

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 19 (Investment Accounting) Chapter 5

Purchased investments in long-term participating, interest-bearing securities, $3,000,000.

PROBLEM 20 (Property Tax Entries) Chapter 5

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 22 (Property Tax Revenues) Chapters 3 and 5

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 23 (Capital leases) Chapter 6

PROBLEM 24 (Materials and Supplies) Chapter 6

Ordered materials and supplies with an estimated cost of $3,150,000.

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 25 (Various Expenditure Entries) Chapter 6

PROBLEM 26 (Intergovernmental grants) Chapter 5

PROBLEM 27 (Revenue Accounting Essay) Chapter 5

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 28 (General Ledger Entries) Chapter 7

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 29 (GL Entries; Bond Anticipation Notes) Chapter 7

2009 Pearson Education, Inc. publishing as Prentice Hall

PROBLEM 30 (Bond Anticipation Notes) Chapters 7 and 8

A county issued $5 million of 6-month, 6% bond anticipation notes on September 30,

2009 Pearson Education, Inc. publishing as Prentice Hall