"It levies taxes of $300, of which it collects $250. It expects to collect the remaining $50 shortly after year- end. The taxes are unassigned as to how they may be used.

2. It incurs $240 in general operating expenditures, of which it pays $170.

3. It issues long-term bonds of $500. The bonds must be used to finance the acquisition of recreational facil- ities. Accordingly, they are recorded in a restricted fund the capital projects fund. The capital projects fund is a governmental fund. As such, it is not accounted for on a full accrual basis. It does not rec- ognize long-term debt as an obligation. Therefore, the inflow of resources is accounted for as bond pro- ceeds, an account that, like a revenue, increases fund balance. The account is classified as other financ- ing sources in a statement of revenues, expenditures, and changes in fund balances to distinguish it from operating revenues.

4. The district acquires $400 of recreational facilities using the resources available in the capital projects fund. Just as the capital projects fund recognizes the bond proceeds similarly to a revenue, so too it records the acquisition of the equipment as an expenditure.

5. The bond indenture (agreement) requires that the dis- trict periodically commit funds to repay the principal

of the debt. The district transfers $40 from the gen- eral fund to the fund specially created to account for resources restricted for debt service. This transaction must be recorded in the two affected independent accounting entities, the general fund and the debt service fund.

6. The repair service, which is accounted for in an inter- nal service fund, acquires $10 of equipment, giving a long-term note in exchange. Internal service funds are proprietary funds and as such are accounted for as if they were businesses. They are accounted for on a full accrual basis; they focus on all economic resources. Hence they recognize both long-term assets and long-term obligations.

7. The repair service bills the districts other departments $15 and collects the full amount in cash. The other departments are all accounted for in the general fund. The service incurs cash operating expenses of $12 and recognizes $2 of depreciation.

a. Prepare appropriate journal entries to record the transactions in individual funds. Governmental funds are accounted for on a modified accrual basis; proprietary funds on a full accrual basis.

b. Based on the entries, prepare for the governmental funds a balance sheet and a statement of revenues, expenditures, and changes in fund balances.

c. Prepare for the one proprietary fund (the internal service fund), a statement of net position (a balance sheet), and a statement of revenues, expenses, and changes in fund net position.

d. Prepare a government-wide statement of net posi- tion (balance sheet) and a government-wide state- ment of activities (statement of revenues and expenses). These statements should consolidate all funds, including the internal service fund, and should be on a full accrual basis. Assume that the district charged depreciation of $40 on recreational facilities (in addition to the amount charged in the internal service fund). Although internal ser- vice funds are categorized as proprietary funds, they typically provide most of their services to govern- mental activities. Hence, in the government-wide statements they are generally consolidated with the governmental funds rather than with enterprise funds."

(Granof 74)

Granof, Michael H. Government and Not-for-Profit Accounting: Concepts and Practices, 6th Edition. Wiley, 12/2012. VitalBook file.