258 CHAPTER 6 Expenditure Accounting-Governmental Funds ECONOMIC DEVELOPMENT SPECIAL REVENUE FUND The beginning trial balance of the Harvey City Economic Development Grants Special Revenue Fund and its 20X4 budget and transactions are presented next. Economic Development Special Revenue Fund Prepare a worksheet for the Hiconomic Development Special Revenue Fund similar to the Requirements and events in the appropriate columns of the worksheet. (A different solution approach may be General Fund worksheet you created in Chapter 4 Enter the effects of the following transactions used if desired by your professor.) Prepare the preclosing trial balance in the appropriate worksheet columns Enter the preclosing trial balance amounts in the closing entry or postclosing trial balance (bat ance sheet data) columns, as appropriate. Prepare the 2014 statement of revenues, expenditures, and changes in fund balance for the Economic Development Special Revenue Fund. Prepare the 20x4 balance sheet for the Economic Development Special Revenue Fund. b c d e. Credit Economic Development The trial balance of the Economic Development Special Revenue Fund of Harvey City at Special Revenue Fund January 1, 20X4, is presented here. Beginning Trial Balance Harvey City Economic Development Special Revenue Fund Trial Balance January 1, 20X4 Debit Cash $342.230 Investments 125,000 Accrued Salaries Payable 450 Vouchers Payable. 82,000 Fund Balance 384,780 Totals... $467,230 $467 230 s Economic Development Special Revenue Fund Budget The Economic Development Special Revenue Fund budget was adopted by the city council The adopted budget included estimated operating grant revenues of 5930,000 and estimated investment income of $40,000. Appropriations of $945,000 were adopted for economic development programs. TRANSACTIONS AND EVENTS-20X4 1. Record the budget 2. The city received a $1,500,000 economic development grant from the state's Department of Economic Development. The grant cash was received and is to be used in certain speci- fied efforts to attract new businesses to the city and surrounding area. 3. The city purchased investments of $1,300,000. The grant requires that all investment income from the investment of the grant proceeds must be used for economic development. 4. The city received interest on its investments, $55,000. 5. The city incurred and vouchered $840,000 of economic development expenditures that qualify under the state grant program. 6. The city paid salaries of $75,000 to economic development personnel. The payment included $450 of accrued salaries payable from the prior year. The salaries expenditures qualify under the grant program. 7. The city sold investments costing $800,000 for $815,000. 8. The city paid $800,000 on vouchers payable for economic development. 9. The fair value of the investments of the Economic Development Special Revenue Fund al year end increased by $1,700. In addition, accrued interesi on the investments at year end was $12.000 10. Accrued salaries payable at year end totaled $200 11. Grant revenues for the year were recorded (if not recorded earlier). 12. The budgetary accounts were closed at year end. (Close the budgetary accounts in the transactions columns.) 07 50 26 13 67 8 2 3 2 Harvey City Comprehensive Case The Harvey City Comprehensive Case consists of the last problem in each chapter from Chapters 4 through 15. Completing this case essentially requires that you account for all the transactions of a moderately complex city for a year (dealing with summary transactions) and that you prepare the basic financial statements and a significant portion of the financial section of the comprehensive annual financial report (CAFR) for that city. If you complete all of the requirements for the Comprehensive Case, you will: Prepare journal entries and financial statements for one or more funds of each type for Harvey City, except Permanent Funds. Like most local governments, Harvey City does not have a Permanent Fund (Chapters 4-8 and 10-12) Account for Harvey City's general capital assets and general long-term liabilities. (Chapter 9) Account for and report the vast majority of transactions that are either unique to governments or are handled in a unique manner by governments (Chapters 4-12) Determine which of Harvey City's funds are major funds. (Chapter 13) Prepare a complete set of fund financial statements for Harvey City, including governmental fund financial statements, proprietary fund financial statements, and fiduciary fund financial statements. (Chapter 13) Prepare worksheets to derive Harvey City's government-wide financial statement data from its fund financial statement data. (Chapter 14) Prepare a complete set of government-wide financial statements for Harvey City, including both a government-wide statement of net position and a government-wide statement of activi- ties. (Chapter 14) Prepare reconciliations of Harvey City's fund financial statements and its government-wide financial statements. (Chapter 14) Prepare combining financial statements that articulate with Harvey City's presentations for nonmajor funds in its fund financial statements. (Chapter 15) Except for the General Fund, the transactions and events affecting each individual fund of Harvey City are dealt with in the chapter on that fund type. Most General Fund transactions are presented in this chapter, but more advanced transactions of the General Fund are presented in Chapters 5 and 6-after the related topics have been covered. 1 1 3 5 HARVEY CITY SOLUTION APPROACH Various approaches may be used to complete the Harvey City Comprehensive Case. We believe that the most efficient approach is to use electronic spreadsheets similar to the worksheet shown in Appendix 4-1 to this chapter in Illustration 4-13 on pages 148-149. The one difference we would suggest is that you use detailed revenue and expenditures accounts in the worksheet instead of using the control account subsidiary ledger approach demon- strated in this chapter. The use of detailed general ledger accounts is illustrated in Appendix 4-2 and is used in several later chapters. You may want to see Illustration 7-3 for an example of a simple detailed general ledger worksheet. Using a worksheet approach to solve the problem will be particularly helpful when you begin to prepare fund financial statements in Chapter 13 and a worksheet to derive government wide financial statement data in Chapter 14. (Worksheet templates are available for the case.) Again, other approaches --use of a general ledger and detailed subsidiary ledgers, for instance--are acceptable, if your professor prefers. X6 he of HARVEY CITY CHAPTER 4 REQUIREMENTS a. Enter the beginning (January 1, 20X4) trial balance of the General Fund of Harvey City in a General Fund worksheet. (A different solution approach may be used if desired by your profes- sor.) The worksheet (which is similar to Illustration 4-13) may be set up as follows: 1. The first column should be used for account titles. 2. Columns 2 and 3 should be the debit and credit columns, respectively, for the beginning trial balance of the General Fund. 3. Column 4 of the worksheet should be a reference column to tie the journal entry debits to the transaction number in this problem. Approp Genere Public Highw Health Parks Total Budge 168 CHAPTER 4 The General Fund and Special Revenue Funds 4 Columns 5 and 6 are the debit and credit columns in which the 20x4 transactions and events of the Harvey City General Fund are to be recorded. Add rows as necessary to provide sufficient room for all transactions. (The solution template should have the proper number of row.) 5.Column 1 of the worksheet should be a reference column to tie the journal entry credits to the transaction number in this problem. Columns 8 and 9 are for the preclosing trial balance of the Harvey City General Fund. They 7. Columns 10 and 11 are to be used to close the noabudgetary accounts of Harvey City. These columns also will contain all balances that are to be reported in the General Fund statement of revenues, expenditures, and changes in fund balances & Columns 12 and 13 are to be used for the postclosing trial balance (balance sheet data). All asset, deferred outflow, liability, deferred inflow, and fund balance amounts should be entered here from the trial balance columns 9. The differences between the closing entry columns and the balance sheet columns should be equal to each other and to the net change in fund balances of the General Fund. This amoum should be entered in the smaller of the closing entry columns and the smaller of the balance sheet columns. (If the closing entry debit column is smaller, the balance sheet credit column should be smaller-and vice versa.) Enter the effects of the following transactions and events in the appropriate columns of the worksheet. (Again, a different solution approach may be used if desired by your professor.) HAR 2. b HARVEY CITY GENERAL FUND TRIAL BALANCE The trial balance of the General Fund of Harvey City at January 1, 20X4, was: 6. Harvey City General Fund Trial Balance January 1, 20X4 Credit Debit $1,000,000 480,000 160,000 $ 20,000 54,500 17.500 Cash Investments Taxes Receivable-Delinquent Allowance for Uncollectible Taxes ---Delinquent Interest and Penalties Receivable. Allowance for Uncollectible Interest and Penalties Accrued Interest Receivable ... Inventory of Materials and Supplies.. Accrued Salaries Payable... Vouchers Payable.... Deferred Revenues Due to Internal Service Fund. Fund Balance Totals. 2,000 53,000 50,000 112,000 100,000 8,000 1,442,000 $1,749.500 $1,749,500 HARVEY CITY GENERAL FUND BUDGET The General Fund budget for 20X4 was adopted by the city council. The city budgets on the modified accrual basis. Transfers are not budgeted. The adopted budget is presented here: Estimated Revenues Taxes. Interest and penalties Licenses and permits. Fines and forfeitures.. Intergovernmental grants Investment income Total estimated revenues $1,500,000 15,500 122,000 50,000 300,000 45,000 $2,032,500 Appropriations: General government Public safety.. Highways and streets Health and sanitation Parks and recreation Total appropriations Budgeted excess of revenues over appropriations. $ 260,000 868,000 290,000 215,000 330,000 1.963.000 $ 69,500 HARVEY CITY GENERAL FUND TRANSACTIONS-20X4 1. Record the budget. (You may use a single Estimated Revenues account and a single Appropriations account.) 2. Reestablish the encumbrances of $19.000 that were closed at the end of last year. -3. The city levied its general property taxes for the year of $1,580,000. The city estimates that $30,000 of the taxes will prove uncollectible. Record the taxes assuming the city will collect the remaining balance later during the fiscal year. -4. The city collected $1,300,000 of property taxes before the due date for taxes. The remainder of the taxes receivable became delinquent. -5. The city received and vouchered the materials and supplies that were on order from the previous year. The actual cost equaled the estimated cost of these materials and supplies. $19,000. The city records expenditures for materials and supplies when they are consumed. A perpetual inventory system is used. 6. The city collected $200,000 when investments matured and also collected the following General Fund revenues during the year: Fines and forfeitures. $ 48,480 Unrestricted grants from the state.. 346,200 Licenses and permits. 122,460 Interest revenue from investments (including $2,000 accrued at the end of 20X3)..... 42,000 Total... $ 559,140 -7. The city incurred and paid salary expenditures as follows: Accrued salaries payable, January 1 General government Public safety.. Highways and streets.. Health and sanitation Parks and recreation Total.... $ 50,000 180,000 580,000 175,000 150,000 220,000 $1,355,000 8. The city ordered General Fund materials and supplies as follows: General government $ 10,000 Public safety.. 40,000 Highways and streets. 75,000 Health and sanitation 40,000 Parks and recreation 30,000 Total.. $ 195,000 9. Billings were received from the Water and Sewer Enterprise Fund as follows: General government. $ 900 Public safety... 13,500 Highways and streets. 3,300 Health and sanitation 2,900 Parks and recreation 1,900 Total.. $ 22,500 258 CHAPTER 6 Expenditure Accounting-Governmental Funds ECONOMIC DEVELOPMENT SPECIAL REVENUE FUND The beginning trial balance of the Harvey City Economic Development Grants Special Revenue Fund and its 20X4 budget and transactions are presented next. Economic Development Special Revenue Fund Prepare a worksheet for the Hiconomic Development Special Revenue Fund similar to the Requirements and events in the appropriate columns of the worksheet. (A different solution approach may be General Fund worksheet you created in Chapter 4 Enter the effects of the following transactions used if desired by your professor.) Prepare the preclosing trial balance in the appropriate worksheet columns Enter the preclosing trial balance amounts in the closing entry or postclosing trial balance (bat ance sheet data) columns, as appropriate. Prepare the 2014 statement of revenues, expenditures, and changes in fund balance for the Economic Development Special Revenue Fund. Prepare the 20x4 balance sheet for the Economic Development Special Revenue Fund. b c d e. Credit Economic Development The trial balance of the Economic Development Special Revenue Fund of Harvey City at Special Revenue Fund January 1, 20X4, is presented here. Beginning Trial Balance Harvey City Economic Development Special Revenue Fund Trial Balance January 1, 20X4 Debit Cash $342.230 Investments 125,000 Accrued Salaries Payable 450 Vouchers Payable. 82,000 Fund Balance 384,780 Totals... $467,230 $467 230 s Economic Development Special Revenue Fund Budget The Economic Development Special Revenue Fund budget was adopted by the city council The adopted budget included estimated operating grant revenues of 5930,000 and estimated investment income of $40,000. Appropriations of $945,000 were adopted for economic development programs. TRANSACTIONS AND EVENTS-20X4 1. Record the budget 2. The city received a $1,500,000 economic development grant from the state's Department of Economic Development. The grant cash was received and is to be used in certain speci- fied efforts to attract new businesses to the city and surrounding area. 3. The city purchased investments of $1,300,000. The grant requires that all investment income from the investment of the grant proceeds must be used for economic development. 4. The city received interest on its investments, $55,000. 5. The city incurred and vouchered $840,000 of economic development expenditures that qualify under the state grant program. 6. The city paid salaries of $75,000 to economic development personnel. The payment included $450 of accrued salaries payable from the prior year. The salaries expenditures qualify under the grant program. 7. The city sold investments costing $800,000 for $815,000. 8. The city paid $800,000 on vouchers payable for economic development. 9. The fair value of the investments of the Economic Development Special Revenue Fund al year end increased by $1,700. In addition, accrued interesi on the investments at year end was $12.000 10. Accrued salaries payable at year end totaled $200 11. Grant revenues for the year were recorded (if not recorded earlier). 12. The budgetary accounts were closed at year end. (Close the budgetary accounts in the transactions columns.) 07 50 26 13 67 8 2 3 2 Harvey City Comprehensive Case The Harvey City Comprehensive Case consists of the last problem in each chapter from Chapters 4 through 15. Completing this case essentially requires that you account for all the transactions of a moderately complex city for a year (dealing with summary transactions) and that you prepare the basic financial statements and a significant portion of the financial section of the comprehensive annual financial report (CAFR) for that city. If you complete all of the requirements for the Comprehensive Case, you will: Prepare journal entries and financial statements for one or more funds of each type for Harvey City, except Permanent Funds. Like most local governments, Harvey City does not have a Permanent Fund (Chapters 4-8 and 10-12) Account for Harvey City's general capital assets and general long-term liabilities. (Chapter 9) Account for and report the vast majority of transactions that are either unique to governments or are handled in a unique manner by governments (Chapters 4-12) Determine which of Harvey City's funds are major funds. (Chapter 13) Prepare a complete set of fund financial statements for Harvey City, including governmental fund financial statements, proprietary fund financial statements, and fiduciary fund financial statements. (Chapter 13) Prepare worksheets to derive Harvey City's government-wide financial statement data from its fund financial statement data. (Chapter 14) Prepare a complete set of government-wide financial statements for Harvey City, including both a government-wide statement of net position and a government-wide statement of activi- ties. (Chapter 14) Prepare reconciliations of Harvey City's fund financial statements and its government-wide financial statements. (Chapter 14) Prepare combining financial statements that articulate with Harvey City's presentations for nonmajor funds in its fund financial statements. (Chapter 15) Except for the General Fund, the transactions and events affecting each individual fund of Harvey City are dealt with in the chapter on that fund type. Most General Fund transactions are presented in this chapter, but more advanced transactions of the General Fund are presented in Chapters 5 and 6-after the related topics have been covered. 1 1 3 5 HARVEY CITY SOLUTION APPROACH Various approaches may be used to complete the Harvey City Comprehensive Case. We believe that the most efficient approach is to use electronic spreadsheets similar to the worksheet shown in Appendix 4-1 to this chapter in Illustration 4-13 on pages 148-149. The one difference we would suggest is that you use detailed revenue and expenditures accounts in the worksheet instead of using the control account subsidiary ledger approach demon- strated in this chapter. The use of detailed general ledger accounts is illustrated in Appendix 4-2 and is used in several later chapters. You may want to see Illustration 7-3 for an example of a simple detailed general ledger worksheet. Using a worksheet approach to solve the problem will be particularly helpful when you begin to prepare fund financial statements in Chapter 13 and a worksheet to derive government wide financial statement data in Chapter 14. (Worksheet templates are available for the case.) Again, other approaches --use of a general ledger and detailed subsidiary ledgers, for instance--are acceptable, if your professor prefers. X6 he of HARVEY CITY CHAPTER 4 REQUIREMENTS a. Enter the beginning (January 1, 20X4) trial balance of the General Fund of Harvey City in a General Fund worksheet. (A different solution approach may be used if desired by your profes- sor.) The worksheet (which is similar to Illustration 4-13) may be set up as follows: 1. The first column should be used for account titles. 2. Columns 2 and 3 should be the debit and credit columns, respectively, for the beginning trial balance of the General Fund. 3. Column 4 of the worksheet should be a reference column to tie the journal entry debits to the transaction number in this problem. Approp Genere Public Highw Health Parks Total Budge 168 CHAPTER 4 The General Fund and Special Revenue Funds 4 Columns 5 and 6 are the debit and credit columns in which the 20x4 transactions and events of the Harvey City General Fund are to be recorded. Add rows as necessary to provide sufficient room for all transactions. (The solution template should have the proper number of row.) 5.Column 1 of the worksheet should be a reference column to tie the journal entry credits to the transaction number in this problem. Columns 8 and 9 are for the preclosing trial balance of the Harvey City General Fund. They 7. Columns 10 and 11 are to be used to close the noabudgetary accounts of Harvey City. These columns also will contain all balances that are to be reported in the General Fund statement of revenues, expenditures, and changes in fund balances & Columns 12 and 13 are to be used for the postclosing trial balance (balance sheet data). All asset, deferred outflow, liability, deferred inflow, and fund balance amounts should be entered here from the trial balance columns 9. The differences between the closing entry columns and the balance sheet columns should be equal to each other and to the net change in fund balances of the General Fund. This amoum should be entered in the smaller of the closing entry columns and the smaller of the balance sheet columns. (If the closing entry debit column is smaller, the balance sheet credit column should be smaller-and vice versa.) Enter the effects of the following transactions and events in the appropriate columns of the worksheet. (Again, a different solution approach may be used if desired by your professor.) HAR 2. b HARVEY CITY GENERAL FUND TRIAL BALANCE The trial balance of the General Fund of Harvey City at January 1, 20X4, was: 6. Harvey City General Fund Trial Balance January 1, 20X4 Credit Debit $1,000,000 480,000 160,000 $ 20,000 54,500 17.500 Cash Investments Taxes Receivable-Delinquent Allowance for Uncollectible Taxes ---Delinquent Interest and Penalties Receivable. Allowance for Uncollectible Interest and Penalties Accrued Interest Receivable ... Inventory of Materials and Supplies.. Accrued Salaries Payable... Vouchers Payable.... Deferred Revenues Due to Internal Service Fund. Fund Balance Totals. 2,000 53,000 50,000 112,000 100,000 8,000 1,442,000 $1,749.500 $1,749,500 HARVEY CITY GENERAL FUND BUDGET The General Fund budget for 20X4 was adopted by the city council. The city budgets on the modified accrual basis. Transfers are not budgeted. The adopted budget is presented here: Estimated Revenues Taxes. Interest and penalties Licenses and permits. Fines and forfeitures.. Intergovernmental grants Investment income Total estimated revenues $1,500,000 15,500 122,000 50,000 300,000 45,000 $2,032,500 Appropriations: General government Public safety.. Highways and streets Health and sanitation Parks and recreation Total appropriations Budgeted excess of revenues over appropriations. $ 260,000 868,000 290,000 215,000 330,000 1.963.000 $ 69,500 HARVEY CITY GENERAL FUND TRANSACTIONS-20X4 1. Record the budget. (You may use a single Estimated Revenues account and a single Appropriations account.) 2. Reestablish the encumbrances of $19.000 that were closed at the end of last year. -3. The city levied its general property taxes for the year of $1,580,000. The city estimates that $30,000 of the taxes will prove uncollectible. Record the taxes assuming the city will collect the remaining balance later during the fiscal year. -4. The city collected $1,300,000 of property taxes before the due date for taxes. The remainder of the taxes receivable became delinquent. -5. The city received and vouchered the materials and supplies that were on order from the previous year. The actual cost equaled the estimated cost of these materials and supplies. $19,000. The city records expenditures for materials and supplies when they are consumed. A perpetual inventory system is used. 6. The city collected $200,000 when investments matured and also collected the following General Fund revenues during the year: Fines and forfeitures. $ 48,480 Unrestricted grants from the state.. 346,200 Licenses and permits. 122,460 Interest revenue from investments (including $2,000 accrued at the end of 20X3)..... 42,000 Total... $ 559,140 -7. The city incurred and paid salary expenditures as follows: Accrued salaries payable, January 1 General government Public safety.. Highways and streets.. Health and sanitation Parks and recreation Total.... $ 50,000 180,000 580,000 175,000 150,000 220,000 $1,355,000 8. The city ordered General Fund materials and supplies as follows: General government $ 10,000 Public safety.. 40,000 Highways and streets. 75,000 Health and sanitation 40,000 Parks and recreation 30,000 Total.. $ 195,000 9. Billings were received from the Water and Sewer Enterprise Fund as follows: General government. $ 900 Public safety... 13,500 Highways and streets. 3,300 Health and sanitation 2,900 Parks and recreation 1,900 Total.. $ 22,500