Exam 18: Introduction to Accounting for State and Local Governmental Units

The following activities and transactions are typical of those which may affect the various funds used by a municipal government. Required: Prepare journal entries to record each transaction and identify the fund in which each entry is recorded. 1.The Sparta City Council passed a resolution approving a general operating budget of $6,800,000 for the fiscal year.Total revenues are estimated at $5,800,000. 2.The Sparta City Council passed an ordinance providing a property tax levy of $3.50 per $100 of assessed valuation for the fiscal year.Total property valuation in Sparta City is $320,000,000.Property is assessed at 30% of current property valuation.Property tax bills are mailed to property owners.An estimated 5% will be uncollectible. 3.Sparta City sold a general obligation term bond issue for $1,000,000 at 104 to a major brokerage firm.The stated interest rate is 10%.Construction of a new Municipal Courts Building will be financed by the bond issue proceeds. 4.The premium on bond sale in (3)above is transferred to the Debt Service Fund. 5.At the end of fiscal year,the Sparta City Council approves the write-off of $55,000 of uncollected taxes because of inability to locate the property owners. 6.The Sparta City Municipal Courts Building (3 above)is completed.Contracts and expenses total $1,190,000,and all have been paid and recorded in the Capital Projects Fund.Prepare entries to close this project and record the completion of the project in all other funds and/or account groups affected.Any balance in the Capital Projects Fund is to be applied to payment of interest and principal of the bond issue. 7.On March 1,Sparta City issued 10% serial bonds at par to finance streetlights in an area recently incorporated in the city limits.The face amount of the bonds is $900,000; interest is payable annually,and bonds are to be retired in equal amounts over 6 years from collections from assessments against property affected.In case of default by the property owners,the bond principal will be paid by the city. a.Record the issuance of the bonds on March 1 of the current year. b.Record the payment to bondholders on March 1 of the next year. 8.The street lighting project in (7)above was completed on September 30 at a total cost of $840,000.Record summary entries for expenditure transactions from March 1 - September 30,and on completion of the project.

Internal Service Fund billings to government departments for services rendered is an example of interfund:

What is the underlying reason a governmental unit uses separate funds to account for its transactions?

GASB Statement No.34 specifies how governments report capital assets.Describe where capital assets are reported in government financial statements.

The following schedule of capital assets was prepared for Johnson County. All capital asset acquisitions were made in the capital projects fund and paid in cash.An asset was sold by the general fund for $40,000 cash. Required: Determine how the above information will be reflected on each of the following statements for the year 2014. A.The governmental funds' statement of revenues,expenditures,and changes in fund balances.List the governmental fund and then list the dollar amount within the appropriate heading on the statement (such as Revenues,Expenditures,or Other Financing Sources (Uses)). B.The government-wide statement of net assets. C.The government-wide statement of activities.

The highest level of priority of pronouncements that a government entity should look to for accounting and reporting guidance is:

A city should record depreciation as an expense in its:

The activities of a municipal airport should be accounted for in the:

The liability for general obligation long-term debt is reported in the:

Which of the following should be accrued as revenues by the general fund of a local government?

Which type of fund can be either expendable or nonexpendable?

It is proper to recognize revenues or expenditures resulting from which of the following classifications of interfund activity?

During 2013,the City of Atlantis started a street paving project.The project is being financed by the proceeds from the issue of five-year,6% special assessment bonds payable at a face value of $3,000,000.The bonds were issued July 1,2013 at their par value.One-fifth of the principal plus interest is payable on June 30 of each year beginning June 30,2014.Property owners are assessed to provide the funds to pay the principal and interest on the debt. The following transactions occurred during 2013 and 2014: 1.The bonds for the paving of the streets were issued. 2.The street paving was completed at a cost of $3,000,000. 3.Property owners were assessed and billed for the first installment of principal and interest on the special assessment debt. 4.Assessments for the first installment of principal and interest on the special assessment debt were collected.The June 30,2014,payment of principal and interest was made. Required: Prepare all journal entries for the preceding transactions that are necessary for the City of Atlantis assuming: A.The City of Atlantis has not obligated itself in any manner to the holders of the special assessment bonds. B.The City of Atlantis has made a commitment to the holders of the special assessment bonds to assure the full payment of principal and interest on the due dates.

Prepare entries,in general journal form,to record the following transactions in the proper fund(s)and/or account group(s).Designate the fund or account group in which each entry is recorded. 1.Bond proceeds of $2,000,000 were received to be used in constructing a new City Jail.An equal amount is contributed from general revenues. 2.Serial bonds in the amount of $300,000 matured.Interest of $75,000 was paid on these and other serial bonds outstanding. 3.Insurance proceeds amounting to $19,000 were received as a result of the accidental destruction of a garbage truck costing $33,000.Accumulated depreciation on the truck was $21,000. 4.The City Parks Endowment Fund transferred $160,000 in expendable funds to the City Parks Special Revenue Fund. 5.Proceeds of $21,000 were received from the sale of equipment which had been purchased from general revenues at a cost of $100,000.Accumulated depreciation on the equipment was $75,000. 6.The City Power Company (an enterprise fund)issued a bill for $400,000 for electricity provided to municipal government buildings. 7.The City Power Company transferred excess funds of $90,000 to the General Fund. 8.A central data processing center was established by a contribution of $400,000 from the General Fund,a long-term loan of $130,000 from the City Parks Special Revenue Fund,and general obligation bond proceeds of $180,000. 9.The Data Processing Fund billed the General Fund $20,000 and the City Parks Special Revenue Fund $8,500 for data processing services. 10.The City Power Company received $7,000 as customer deposits during the year.The monies are to be held in trust until customers request that their services be discontinued and final bills are collected. 11.In order to retire general obligation term bonds when they become due,it is determined that the Debt Service Fund will require annual contributions of $40,000 and earnings in the current year of $3,000.