Please assist with questions 6,7 and 8. Kindly show detailed workings

Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Chapter 17 Governmental Entities: Introduction and General Fund Accounting Multiple Choice Questions 1. Which organization has the authority to establish generally accepted accounting principles for state and local government entities? A. The National Council on Governmental Accounting B. The Governmental Accounting Standards Board C. The Financial Accounting Standards Board D. The Municipal Officers Finance Organization Answer: B LO: 17-01 Topic: Differences between Governmental and Private Accounting Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 2. Which of the following characteristics are emphasized in the accounting for state and local government entities? I. Revenues should be matched with expenditures to measure success or failure of the government entity. II. There is an emphasis on expendability of resources to accomplish objectives of the governmental entity. A. I only B. II only C. I and II D. Neither I nor II Answer: B LO: 17-01 Topic: Differences between Governmental and Private Accounting Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 3. All of the following are elements of the statement of financial condition for state and local governments with the exception of: A. Assets and Liabilities B. Deferred inflow and outflow of resources 17-1 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting C. Net position D. Inflow and outflow of resources Answer: D LO: 17-02 Topic: Elements of Financial Statements Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 4. Which of the following statements best describes the reporting process for profit seeking and governmental entities? A. In profit-seeking enterprises the measurement focus is on the flow of all economic resources of the firm, whereas the focus for governmental funds is on current financial resources B. In profit-seeking enterprises the measurement focus is on the flow of current financial resources, whereas the focus for government funds is on all economic resources. C. Both Profit-seeking enterprises and governmental entities have an objective to measure profitability. D. Both Profit-seeking enterprises and governmental entities use the accrual or cash basis of accounting to record and report transactions. Answer: A LO: 17-02 Topic: Expendability of Resources versus Capital Maintenance Objectives Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 5. Which of the following statements is (are) correct about the funds used by governmental entities? A. I only B. II only C. I and II D. Neither I nor II 17-2 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Answer: C LO: 17-03 Topic: Definitions and Types of Funds Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 6. Which of the following funds are classified as fiduciary funds? A. Agency and Special revenue funds. B. Internal service and Enterprise funds. C. Private-purpose trust and Agency funds. D. Capital projects and Debt service funds. Answer: C LO: 17-03 Topic: Definitions and Types of Funds Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 7. Which of the following funds are classified as proprietary funds? A. Agency and special revenue funds. B. Enterprise and internal service funds. C. Debt service and capital projects funds. D. Agency and pension trust funds. Answer: B LO: 17-03 Topic: Definitions and Types of Funds Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 8. Which of the following funds are classified as governmental funds? A. Internal service and capital projects funds. B. Internal service and debt service funds. C. Enterprise and agency funds. D. The general and special revenue funds. 17-3 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Answer: D LO: 17-03 Topic: Definitions and Types of Funds Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 9. Which of the following funds provides goods and services only to other departments or agencies of the government on a cost-reimbursement basis? A. Internal service funds B. Enterprise funds C. Special revenue funds D. The general fund Answer: A LO: 17-03 Topic: Definitions and Types of Funds Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 10. All of the following funds have a financial resources measurement focus with the exception of which fund? A. debt service fund B. special revenue fund C. capital projects fund D. private-purpose trust fund Answer: D LO: 17-03 Topic: Definitions and Types of Funds Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 17-4 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 11. According to the latest GASB exposure draft, which of the following is the only governmental fund type that may report an unassigned fund balance? A. General fund B. Special revenue fund C. Capital projects fund D. Permanent fund Answer: A LO: 17-03 Topic: Definitions and Types of Funds Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 12. Which governmental fund includes resources that are legally restricted so that the governmental entity must maintain the principal and can use only the earnings from the fund's resources to benefit the government's programs for all of its citizens? A. General fund B. Special revenue fund C. Capital projects fund D. Permanent fund Answer: D LO: 17-03 Topic: Definitions and Types of Funds Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 13. The following information was obtained from the general fund balance sheet of Lincoln County on June 30, 20X2, the close of its fiscal year: 17-5 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Vouchers Payable $310,000 Inventory of Supplies 30,000 Fund BalanceAssigned for Encumbrances 50,000 Fund BalanceNonspendable 30,000 Total Assets 516,000 On June 30, 20X2, what was Lincoln's unassigned fund balance in its general fund? A. $96,000 B. $126,000 C. $176,000 D. $206,000 Answer: B LO: 17-04 Topic: Balance Sheet for Governmental Funds Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard 14. The following information was obtained from the general fund balance sheet of Lima Village on June 30, 20X9, the close of its fiscal year: Vouchers Payable $220,000 Inventory of Supplies 10,000 Fund BalanceAssigned for Encumbrances 40,000 Fund BalanceNonspendable 10,000 Total Assets 304,000 17-6 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting On June 30, 20X9, what was Lima's unassigned fund balance in its general fund? A. $84,000 B. $44,000 C. $34,000 D. $24,000 Answer: C LO: 17-04 Topic: Balance Sheet for Governmental Funds Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard 15. In accounting for governmental funds, which of the following items could appear only on government-wide financial statements? A. I only B. I and II C. I and III D. I, II, III Answer: B LO: 17-04 Topic: Financial Reporting of Governmental Entities Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 16. At the end of the fiscal year, uncollected property taxes in the general fund should be: A. reclassified from current to delinquent. B. written off as uncollectible. C. charged against unassigned fund balance. D. reclassified from current to noncurrent. 17-7 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Answer: A LO: 17-04 Topic: Financial Reporting of Governmental Entities Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 17. The Town of Baker reported the following items on the June 30, 20X9, balance sheet of its general fund: Cash $50,000 Property Taxes ReceivableDelinquent (net) 24,000 Inventory Supplies 10,000 Vouchers Payable 34,000 Due to Internal Service Fund 4,000 Fund BalanceAssigned for Encumbrances 6,000 Fund BalanceNonspendable ? Fund BalanceUnassigned ? At June 30, 20X9, what amount should be reported for Fund BalanceUnassigned? A. $46,000 B. $40,000 C. $30,000 D. $16,000 Answer: C LO: 17-04 Topic: Balance Sheet for Governmental Funds Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 17-8 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 18. Which of the financial statements described below is prepared by the general fund of a state or local government? A. A statement of cash flows. B. An income statement. C. A statement of revenues, expenses, and changes in retained earnings. D. A statement of revenues, expenditures, and changes in fund balance. Answer: D LO: 17-04 Topic: Statement of Revenues, Expenditures, and Changes in Fund Balance for Governmental Funds Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 19. Which accounts described below would have non-zero balances after the accounts are closed in the general fund of a state or local government? A. I, II, III. B. I, II, IV. C. IV, V, VI. D. III, IV, V. Answer: C LO: 17-04 Topic: Financial Reporting of Governmental Entities Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 17-9 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 20. In a statement of revenues, expenditures, and changes in fund balance, the unassigned fund balance will be increased by: I. a decrease in the fund balanceNonspendable II. an excess of other financing sources over other financing uses. A. I only B. II only C. Both I and II D. Neither I nor II Answer: C LO: 17-04 Topic: Statement of Revenues, Expenditures, and Changes in Fund Balance for Governmental Funds Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 21. Which of the following items should not be included as revenue for a state government? A. Property taxes levied in the current fiscal year. B. Private property for which a state takes custody when the legal owner cannot be found. C. Amounts received from other financing sources. D. Fines and licensing fees for which amounts cannot be budgeted. Answer: C LO: 17-04 Topic: Statement of Revenues, Expenditures, and Changes in Fund Balance for Governmental Funds Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 22. Under the modified accrual basis of accounting, revenue should be recognized when it is: A. measurable and earned. B. received in cash. C. available and earned. D. measurable and available. 17-10 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Answer: D LO: 17-05 Topic: Basis of Accounting Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 23. Which of the following funds should use the accrual basis of accounting? A. Enterprise and private-purpose trust funds. B. Permanent funds and internal service funds. C. Debt service and agency funds. D. Special revenue and capital projects funds. Answer: A LO: 17-05 Topic: Basis of Accounting Topic: Basis of AccountingProprietary Funds Topic: Basis of AccountingFiduciary Funds Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 24. Which of the following funds should use the modified accrual basis of accounting? A. Private-purpose trust and agency funds. B. Capital projects and special revenue funds. C. Internal service and enterprise funds. D. Debt service and private-purpose trust funds. Answer: B LO: 17-05 Topic: Basis of Accounting Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 17-11 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 25. Under the modified accrual basis of accounting for the general fund, expenditures should be recognized in the period in which the related liability is: A. I only B. II only C. Both I and II D. Neither I nor II Answer: D LO: 17-05 Topic: Basis of AccountingGovernmental Funds Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 26. The general fund of the Town of Dean levied property taxes of $3,000,000 for the fiscal year beginning on January 1, 20X8. It was estimated that 1% of the levy would be uncollectible. During the period January 1, 20X8, through December 31, 20X8, $2,960,000 of the property tax levy was collected. At December 31, 20X8, Dean estimated that $10,000 of property taxes levied in 20X8 would be collected during the first 60 days of 20X9. What amount of property tax revenue should be reported by the general fund for the year ended December 31, 20X8? A. $2,960,000 B. $3,000,000 C. $2,970,000 D. $2,990,000 Answer: C LO: 17-05 Topic: Basis of AccountingGovernmental Funds Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 17-12 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 27. The general fund of the City of Atlanta received a check for $10,000 from an Atlanta resident on July 1, 20X8. Of the amount received, $4,800 represented full payment of property taxes for 20X8, and the remaining $5,200 represented an advance payment for property taxes of 20X9. On July 1, 20X8, the general fund should record the receipt by debiting Cash for $10,000 and by crediting A. Revenue-Property Tax for $10,000. B. Property Taxes Receivable-Current for $4,800 and Deferred Revenue for $5,200. C. Revenue-Property Tax for $4,800 and Deferred Revenue for $5,200. D. Property Taxes Receivable-Current for $4,800 and Revenue- Property Tax for $5,200. Answer: B LO: 17-05 Topic: Basis of AccountingGovernmental Funds Blooms: Understand AACSB: Analytic AICPA: FN Decision Making Difficulty: 2 Medium 28. Which combination of fund and measurement basis is correct? A. Option A B. Option B C. Option C D. Option D Answer: B LO: 17-05 Topic: Basis of Accounting Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 17-13 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 29. Revenues from parking meters and parking fines should be reported in the general fund when: A. received. B. measurable and available. C. measurable and earned. D. available. Answer: A LO: 17-05 Topic: Basis of Accounting Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 30. The general fund of Gillette levied property taxes of $400,000 on November 1, 20X8. However, the property taxes are not collectible until May and August of 20X9. Assume Gillette reports on the calendar year. On Gillette's general fund balance sheet at December 31, 20X8, the property taxes levied on November 1 should: A. be reported as an asset and as a decrease in unassigned fund balance. B. be reported as an asset and as an increase in unassigned fund balance. C. be reported as an asset and as a reservation of fund balance. D. be reported as an asset and as a deferred revenue. Answer: D LO: 17-05 Topic: Basis of AccountingGovernmental Funds Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 31. Which of the following items is not recognized as revenue by a governmental unit? A. sales tax proceeds B. property tax levies C. bond proceeds D. grants received from other governmental units 17-14 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Answer: C LO: 17-05 Topic: Basis of Accounting Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy (Note: Question 32 is a Kaplan CPA Review Question) 32. Pine City's year end is June 30. Pine levies property taxes in January of each year for the calendar year. One-half of the levy is due in May and one-half is due in October. Property tax revenue is budgeted for the period in which payment is due. The following information pertains to Pine's property taxes for the period from July 1, 20X4, to June 30, 20X5: Levy Collected in: May July October December Calendar Year 20X4 20X5 $2,000,000 $2,400,000 950,000 50,000 920,000 80,000 1,100,000 60,000 --- The $40,000 balance due for the May 20X5 installments was expected to be collected in August 20X5. What amount should Pine recognize for property tax revenue for the year ended June 30, 20X5? A. $2,160,000 B. $2,200,000 C. $2,360,000 D. $2,400,000 Answer: B LO: 17-05 Topic: Basis of AccountingGovernmental Funds Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard (Note: Question 33 is a Kaplan CPA Review Question) 33. The following information pertains to property taxes levied by Oak City for 20X4: Collections during 20X4 Expected collections during the first 60 days of 20X5 17-15 $500,000 100,000 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Expected collections during the balance of 20X5 Expected collections during January 20X6 Estimated to be uncollectible Total levy 60,000 30,000 10,000 $700,000 What amount should Oak report for 20X4 net property tax revenues? A. $690,000 B. $700,000 C. $600,000 D. $500,000 Answer: C LO: 17-05 Topic: Basis of AccountingGovernmental Funds Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 34. The following information pertains to property taxes levied by Sycamore City for 20X7: Collections during 20X7 Expected collections during the first 60 days of 20X8 Expected collections during the balance of 20X8 Expected collections during January 20X9 Estimated to be uncollectible Total levy $1,200,000 200,000 110,000 40,000 30,000 $1,580,000 What amount should Sycamore report for 20X7 net property tax revenues? A. $1,200,000 B. $1,400,000 C. $1,550,000 D. $1,580,000 Answer: B LO: 17-05 Topic: Basis of AccountingGovernmental Funds Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 17-16 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 35. In a town's general fund operating budget for the year, the amount of its estimated revenues exceeded the amount of its appropriations. This excess should be: A. credited to Budgetary Fund BalanceUnassigned. B. debited to Budgetary Fund BalanceUnassigned. C. credited to Fund BalanceUnassigned. D. debited to Fund BalanceUnassigned. Answer: A LO: 17-06 Topic: Budgetary Aspects of Governmental Accounting Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 36. The general fund of Caldwell had the following operating budget for the fiscal year beginning July 1, 20X9: When the general fund records its operating budget on July 1, 20X9, Budgetary Fund Balance Unassigned should be A. credited for $600,000. B. debited for $900,000. C. debited for $600,000. D. credited for $900,000. Answer: A LO: 17-06 Topic: Budgetary Aspects of Governmental Accounting Blooms: Apply AACSB: Analytic AICPA: FN Decision Making Difficulty: 3 Hard 17-17 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 37. Assuming there is a budget surplus, which of the following accounts are credited when the general fund records its operating budget at the beginning of the year? A. Appropriations Control and Budgetary Fund BalanceUnassigned. B. Estimated Revenues Control and Estimated Residual Equity Transfer Out. C. Budgetary Fund BalanceAssigned For Encumbrances and Expenditures. D. Estimated Residual Equity Transfer Out and Estimated Transfer In. Answer: A LO: 17-06 Topic: Budgetary Aspects of Governmental Accounting Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium (Note: Question 38 is a Kaplan CPA Review Question) 38. When the budget of a governmental unit, for which the estimated revenues exceed the appropriations, is adopted and recorded in the general ledger at the beginning of the year, the budgetary fund balance account is A. Credited at the beginning of the year and debited at the end of the year. B. Credited at the beginning of the year and no entry made at the end of the year. C. Debited at the beginning of the year and no entry made at the end of the year. D. Debited at the beginning of the year and credited at the end of the year. Answer: A LO: 17-06 Topic: Budgetary Aspects of Governmental Accounting Blooms: Understand AACSB: Reflective Thinking AICPA: FN Reporting Difficulty: 1 Easy (Note: Question 39 is a Kaplan CPA Review Question) 39. A budgetary fund balance - assigned in excess of a balance of encumbrances indicates A. A recording error. B. An excess of vouchers payable over encumbrances. C. An excess of purchase orders over invoices received. D. An excess of appropriations over encumbrances. Answer: A LO: 17-06 Topic: Budgetary Aspects of Governmental Accounting Blooms: Understand AACSB: Reflective Thinking 17-18 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting AICPA: FN Reporting Difficulty: 1 Easy (Note: Question 40 is a Kaplan CPA Review Question) 40. The Board of Commissioners of Vane City adopted its budget for the year ending July 31, comprising estimated revenues of $30,000,000 and appropriations of $29,000,000. Vane formally integrates its budget into the accounting records. What entry should be made for budgeted revenues? A. Memorandum entry only. B. Debit ESTIMATED REVENUES CONTROL, $30,000,000. C. Debit ESTIMATED REVENUES RECEIVABLE CONTROL, $30,000,000. D. Credit ESTIMATED REVENUES CONTROL, $30,000,000. Answer: B LO: 17-06 Topic: Budgetary Aspects of Governmental Accounting Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium (Note: Question 41 is a Kaplan CPA Review Question) 41. The Board of Commissioners of the City of Rockton adopted its budget for the year ending July 31, 20X2, which indicated revenues of $1,000,000 and appropriations of $900,000. If the budget is formally integrated into the accounting records, what is the required journal entry? Dr. A. Memorandum entry only B. APPROPRIATIONS $900,000 GENERAL FUND $100,000 ESTIMATED REVENUES C. ESTIMATED REVENUES $1,000,000 APPROPRIATIONS BUDGETARY FUND BALANCE D. REVENUES RECEIVABLE $1,000,000 EXPENDITURES PAYABLE GENERAL FUND BALANCE 17-19 Cr. $1,000,000 $900,000 $100,000 $900,000 $100,000 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Answer: C LO: 17-06 Topic: Budgetary Aspects of Governmental Accounting Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 42. What is the correct sequence in the expenditure process in governmental accounting? A. Appropriation, Encumbrance, Expenditure, and Disbursement. B. Encumbrance, Expenditure, Disbursement, and Appropriation. C. Expenditure, Encumbrance, Disbursement, and Appropriation. D. Appropriation, Expenditure, Encumbrance, and Disbursement. Answer: A LO: 17-07 Topic: The Expenditure Process Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 43. Which of the following observations concerning encumbrances is NOT true? A. Their purpose is to ensure that the expenditures within a period do not exceed the budgeted appropriations. B. They provide a control system and safeguard for governmental unit administrators. C. They are a unique element of governmental accounting. D. They are recognized only at the time disbursements are made. Answer: D LO: 17-07 Topic: The Expenditure Process Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 17-20 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 44. The City of Ames uses the consumption method to report its inventory of supplies on its general fund balance sheet. What account is debited in the general fund when Ames acquires supplies? A. Expenditures B. Inventory of Supplies C. Supplies Expense D. Fund BalanceNonspendable Answer: A LO: 17-07 Topic: Expenditures for Inventory--Consumption Method Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 45. On July 25, 20X8, the city of Pullman, which reports on a calendar-year basis, ordered five police cars at an estimated cost of $200,000. On August 26, 20X8, the police cars were received, and the actual cost amounted to $197,000. Pullman encumbered the appropriation for police cars in its general fund when the cars were ordered. When the police cars were received, the general fund of Pullman should: A. Credit Budgetary Fund Balance Assigned for Encumbrances for $197,000. B. Debit Encumbrances for $200,000. C. Debit Expenditures for $197,000. D. Credit Budgetary Fund Balance Assigned for Expenditures for $200,000. 17-21 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Answer: C LO: 17-07 Topic: Accounting for Fixed Assets Blooms: Understand AACSB: Analytic AICPA: FN Decision Making Difficulty: 2 Medium 46. What amount should be reported as expenditures for the current fiscal year when accounting for inventories of supplies under the purchase method and under the consumption method? A. Option A B. Option B C. Option C D. Option D Answer: D LO: 17-07 Topic: Expenditures for Inventory--Purchase Method Topic: Expenditures for Inventory--Consumption Method Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 47. The Town of Pasco has no supplies inventory in its general fund on January 1, 20X8. During 20X8, Pasco incurred expenditures of $200,000 for the acquisition of supplies. On December 31, 20X8, Pasco's inventory of supplies amounted to $30,000. Assume Pasco uses the purchase method of accounting for supplies in its general fund and that the village reports on the calendar year. On December 31, 20X8, the general fund of Pasco should credit: A. Expenditures for $170,000. B. Fund BalanceUnassigned for $170,000. C. Fund BalanceNonspendable for $30,000. D. Expenditures for $30,000. 17-22 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Answer: C LO: 17-07 Topic: Expenditures for Inventory--Purchase Method Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 48. The general fund of Park City acquired computer equipment at a cost of $50,000 on May 18, 20X9. To record acquisition of this equipment, the general fund of Park City should debit: A. expenditures. B. encumbrances. C. equipment. D. vouchers payable. Answer: A LO: 17-07 Topic: Accounting for Fixed Assets Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 49. Works of art and historical treasures purchased by the general fund should be reported as: A. I only. B. II only. C. Both I and II D. Neither I nor II. Answer: C LO: 17-07 Topic: Accounting for Fixed Assets Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 17-23 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 50. Identify the legal term that allows the general fund to make expenditures. A. Exceptions B. Appropriations C. Encumbrances D. Consumption Answer: A LO: 17-07 Topic: The Expenditure Process Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 51. The general fund of Hatteras acquired a fire truck during the fiscal year ended June 30, 20X9. The purchase order for the fire truck was recorded on February 15, 20X9. Hatteras' acquisition of the fire truck required which of the following sequences of accounting activities? I. Appropriation II. Encumbrance III. Expenditure A. II, I, III. B. I, III, II. C. III, II, I. D. I, II, III. Answer: D LO: 17-07 Topic: Accounting for Fixed Assets Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 52. Blue Ridge Township uses the consumption method of accounting for its inventory of supplies. On the December 31, 20X7 balance sheet for the general fund, the township reported $10,000 of supplies inventory. During 20X8, expenditures for supplies amounted to $40,000, and, at December 31, 20X8, unused supplies totaled $7,000. In the adjusting entry for supplies at December 31, 20X8, A. Expenditures should be credited for $3,000. B. Expenditures should be debited for $3,000. C. Fund BalanceNonspendable should be debited for $7,000. D. Fund BalanceNonspendable should be credited for $7,000. 17-24 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Answer: B LO: 17-07 Topic: Expenditures for Inventory--Consumption Method Blooms: Apply AACSB: Analytic AICPA: FN Decision Making Difficulty: 3 Hard The following data applies to Questions 53 - 56: Gotham City acquires $25,000 of inventory on November 1, 20X7, having held no inventory previously. On December 31, 20X7, the end of Gotham City's fiscal year, a physical count shows $8,000 still in stock. During 20X8, $6,500 of this inventory is used, resulting in a $1,500 remaining balance of supplies on December 31, 20X8. 53. Based on the preceding information, which of the following would be the correct account balances for 20X7 if Gotham City used the purchase method of accounting for inventories? Answer: D LO: 17-07 Topic: Expenditures for Inventory--Purchase Method Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 54. Based on the preceding information, which of the following would be the correct account balances for 20X8 if Gotham City used the purchase method of accounting for inventories? 17-25 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Answer: B LO: 17-07 Topic: Expenditures for Inventory--Purchase Method Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 55. Based on the preceding information, which of the following would be the correct account balances for 20X7 if Gotham City used the consumption method of accounting for inventories? Answer: A LO: 17-07 Topic: Expenditures for Inventory--Consumption Method Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 56. Based on the preceding information, which of the following would be the correct account balances for 20X8 if Gotham City used the consumption method of accounting for inventories? Answer: C LO: 17-07 Topic: Expenditures for Inventory--Consumption Method Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 17-26 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting The following data applies to Questions 57 - 60: Goshen City acquires $36,000 of inventory on November 1, 20X5, having held no inventory previously. On December 31, 20X5, the end of Goshen City's fiscal year, a physical count shows $7,000 still in stock. During 20X6, $5,000 of this inventory is used, resulting in a $2,000 remaining balance of supplies on December 31, 20X6. 57. Based on the preceding information, which of the following would be the correct account balances for 20X5 if Goshen City used the purchase method of accounting for inventories? A. B. C. D. Expenditures Inventory of Supplies $36,000 $7,000 $29,000 $0 $36,000 $0 $29,000 $7,000 Answer: A LO: 17-07 Topic: Expenditures for Inventory--Purchase Method Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 58. Based on the preceding information, which of the following would be the correct account balances for 20X6 if Goshen City used the purchase method of accounting for inventories? 17-27 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting A. B. C. D. Expenditures Inventory of Supplies $0 $2,000 $0 $7,000 $5,000 $2,000 $7,000 $2,000 Answer: A LO: 17-07 Topic: Expenditures for Inventory--Purchase Method Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 59. Based on the preceding information, which of the following would be the correct account balances for 20X5 if Goshen City used the consumption method of accounting for inventories? A. B. C. D. Expenditures Inventory of Supplies $29,000 $0 $36,000 $0 $29,000 $7,000 $36,000 $7,000 Answer: C LO: 17-07 Topic: Expenditures for Inventory--Consumption Method Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 17-28 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 60. Based on the preceding information, which of the following would be the correct account balances for 20X6 if Goshen City used the consumption method of accounting for inventories? A. B. C. D. Expenditures Inventory of Supplies $5,000 $2,000 $0 $2,000 $0 $7,000 $7,000 $2,000 Answer: A LO: 17-07 Topic: Expenditures for Inventory--Consumption Method Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 61. Which of the following accounts are debited when closing entries are made for the general fund (assume outstanding encumbrances lapse at year-end)? A. I, II, III, VI. B. I, II, IV. C. I, IV, V, VI. D. III, IV, V. Answer: C LO: 17-07 Topic: Outstanding Encumbrances Lapse at Year-End Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 17-29 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 62. The general fund of Athens ordered computer equipment on December 1, 20X8, for $32,000. The order was appropriately encumbered on this date. Athens received the computer equipment on January 25, 20X9, and issued a voucher to pay the vendor $32,400. Athens uses the calendar year for reporting, and all outstanding encumbrances lapse at year-end. Athens' governing board honors all outstanding encumbrances by including them in the following year's appropriations. On January 25, 20X9, the general fund of Athens should debit: A. Encumbrances for $32,000. B. Fund Balanceassigned for Encumbrances for $32,400. C. Expenditures-20X8 for $32,400. D. Expenditures for $32,400. Answer: D LO: 17-07 Topic: Outstanding Encumbrances Nonlapsing at Year-End Blooms: Understand AACSB: Analytic AICPA: FN Decision Making Difficulty: 2 Medium 63. The general fund of Loveland ordered a new fire truck on November 12, 20X8, for $150,000. The order was appropriately encumbered on this date. Loveland received the fire truck on January 15, 20X9, and issued a voucher to the manufacturer for $148,600. Loveland uses the calendar year for reporting, and outstanding encumbrances at December 31, 20X8, are lapsing. On January 15, 20X9, the general fund of Loveland should debit: A. Fund Balanceassigned for Encumbrances for $148,600. B. Expenditures for $148,600. C. Expenditures-20X8 for $148,600. D. Encumbrances for $148,600. 17-30 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Answer: B LO: 17-07 Topic: Outstanding Encumbrances Lapse at Year-End Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 64. The general fund of Wold Township ordered office furniture for the mayor's office on August 1, 20X8. The office furniture was estimated to cost $12,000. The office furniture was received on September 1, 20X8, with the actual cost being $11,800. Which of the following accounts decreased on September 1, 20X8? A. Encumbrances only. B. Expenditures only. C. Encumbrances and Budgetary Fund BalanceAssigned for Encumbrances. D. Expenditures and Budgetary Fund BalanceAssigned for Encumbrances. Answer: C LO: 17-07 Topic: Outstanding Encumbrances Lapse at Year-End Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 65. Due to an error, the general fund of Pueblo did not record an encumbrance for police equipment which had been ordered but not received on June 30, 20X9, the end of its fiscal year. Pueblo's outstanding encumbrances at year-end are nonlapsing. What was the effect of this error on the balance sheet of Pueblo's general fund? A. Assets are overstated. B. Liabilities are understated. C. Total fund balance is overstated. D. Unassigned fund balance is overstated. Answer: D LO: 17-07 Topic: Outstanding Encumbrances Nonlapsing at Year-End Blooms: Apply AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 17-31 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 66. GASB 31 \"Accounting for Financial Reporting for Certain Investments and for External Reporting Investment Pools,\" establishes a general rule that government entities value investments in option contracts, open-ended mutual funds, and debt securities for balance sheet presentation at: A. lower of cost or market. B. fair value. C. cost. D. amortized cost. Answer: B LO: 17-07 Topic: Investments Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 67. The general ledger of Broadway contains the following selected account balances: Broadway wants to order additional goods and services before the fiscal year end. What is the unencumbered balance of the budget that may be expended by Broadway? A. $850,000 B. $760,000 C. $180,000 D. $130,000 Answer: D LO: 17-07 Topic: The Expenditure Process Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard 17-32 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 68. The general ledger of Covington contains the following selected account balances: Appropriations Control Reserve for Encumbrances Vouchers Payable Expenditures $1,500,000 60,000 80,000 830,000 Covington wants to order additional goods and services before the fiscal year end. What is the unencumbered balance of the budget that may be expended by Covington? A. $610,000 B. $670,000 C. $1,360,000 D. $1,440,000 Answer: A LO: 17-07 Topic: The Expenditure Process Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard 69. At any time, the remaining appropriating authority available to the fund managers is equal to: A. Appropriations minus Expenditures B. Appropriations minus (Encumbrances + Expenditures) C. Appropriations minus (Encumbrances - Expenditures) D. Appropriations minus Encumbrances Answer: B LO: 17-07 Topic: The Expenditure Process Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 70. Which of the following describes how a governmental fund (e.g. general fund) accounts for a capital lease? A. noncurrent liability B. bond accounting C. an asset and a lease liability D. none of the above identifies the appropriate way to account for a capital lease. 17-33 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Answer: B LO: 17-07 Topic: Long-Term Debt and Capital Leases Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium (Note: Question 71 is a Kaplan CPA Review Question) 71. The following balances are included in the subsidiary records of Burwood Village's Parks and Recreation Department at March 31st: Appropriations - supplies Expenditures - supplies Encumbrances - supply orders $7,500 4,500 750 How much does the Department have available for additional purchases of supplies? A. $0 B. $2,250 C. $3,000 D. $6,750 Answer: B LO: 17-07 Topic: The Expenditure Process Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium (Note: Question 72 is a Kaplan CPA Review Question) 72. Elm City issued a purchase order for supplies with an estimated cost of $5,000. When the supplies were received, the accompanying invoice indicated an actual price of $4,950. What amount should Elm debit (credit) to the budgetary fund balance account after the supplies and invoice were received? A. $4,950 B. ($50) C. $50 D. $5,000 Answer: D LO: 17-07 Topic: The Expenditure Process Blooms: Apply 17-34 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium (Note: Question 73 is a Kaplan CPA Review Question) 73. Albee Township's fiscal year ends on June 30. Albee uses encumbrance accounting. On April 5, 20X5, an approved $1,000 purchase order was issued for supplies. Albee received these supplies on May 2, 20X5, and the $1,000 invoice was approved for payment. What journal entry should Albee make on April 5, 20X5, to record the approved purchase order? A. Debit: ENCUMBRANCES CONTROL $1,000 Credit: BUDGETARY FUND BALANCE $1,000 B. Memorandum entry only. C. Debit: Supplies $1,000 Credit: Vouchers payable $1,000 D. Debit: ENCUMBRANCES CONTROL $1,000 Credit: APPROPRIATIONS CONTROL $1,000 Answer: A LO: 17-07 Topic: The Expenditure Process Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 17-35 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting (Note: Question 74 is a Kaplan CPA Review Question) 74. The following related entries were recorded in sequence in the general fund of a municipality: 1. ENCUMBRANCES CONTROL $12,000 BUDGETARY FUND BALANCE $12,000 2. BUDGETARY FUND BALANCE $12,000 ENCUMBRANCES CONTROL $12,000 3. Expenditures control $12,350 Vouchers payable $12,350 The sequence of entries indicates that A. Encumbrances were anticipated but later failed to materialize and were reversed. A liability of $12,350 was incurred. B. An adverse event was foreseen and a reserve of $12,000 was created; later the reserve was cancelled and a liability for the item was acknowledged. C. An order was placed for goods or services estimated to cost $12,000; the actual cost was $12,350 for which a liability was acknowledged upon receipt. D. The first entry was erroneous and was reversed; a liability of $12,350 was acknowledged. Answer: C LO: 17-07 Topic: The Expenditure Process Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard 75. The general fund of the City of Columbia transferred money to establish an internal service fund for the city's data processing needs. The general fund of Columbia should account for this transaction as a(n): A. expenditure. B. interfund transfer. C. interfund reimbursement. D. loan. Answer: B LO: 17-08 Topic: Interfund Transfers Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 17-36 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 76. The general fund of Richmond was billed $22,000 on August 15, 20X8, for using the services of one of its internal service funds (ISF). What accounts should be debited and credited, respectively, in the general fund on August 15, 20X8, to record this transaction? A. Expenditures and Transfer Out to ISF B. Expenditures and Due to ISF C. Encumbrances and Due to ISF D. Encumbrances and Transfer Out to ISF Answer: B LO: 17-08 Topic: Interfund Services Provided and Used Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 77. The general fund of Battle Creek budgeted a transfer to its capital projects fund for $110,000 to be used in operations during the year ended June 20, 20X9. On September 15, 20X8, the general fund transferred $110,000 to the capital projects fund. What account should be debited in the general fund on September 15 to record this transfer? A. Appropriations B. Expenditures C. Budgetary Fund BalanceAssigned For Encumbrances D. Other Financing UsesTransfer Out to Capital Projects Fund Answer: D LO: 17-08 Topic: Interfund Transfers Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 78. The general fund of Sun City was billed $7,000 for using the services of one of its internal service funds. The general fund should account for this transaction as a(n) A. interfund transfer. B. interfund loan. C. interfund service. D. interfund reimbursement for services rendered. 17-37 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Answer: C LO: 17-08 Topic: Interfund Services Provided and Used Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 79. When an internal service fund (ISF) enters into a capital lease the transaction is recorded in the: I. fixed assets of the ISF. II. long-term debt of the ISF. A. I only B. II only C. Both I and II D. Neither I nor II Answer: C LO: 17-08 Topic: Interfund Loans Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 80. GASB 34 established four types of interfund activities. Interfund activities are recognized as revenue in a governmental fund for an: Answer: A LO: 17-08 Topic: Interfund Reimbursements Topic: Interfund Transfers Topic: Interfund Loans 17-38 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 81. Which of the following observations concerning interfund transfers is true? A. They are expected to be repaid. B. They are classified as fund revenues or expenditures. C. The receiving fund recognizes these transfers as revenue. D. These transfers are classified under \"Other Financing Sources or Uses.\" Answer: D LO: 17-08 Topic: Interfund Transfers Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 17-39 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Essay Questions 82. Accounting processes differ between a for-profit entity and a governmental entity. Discuss three differences between a governmental entity and a for-profit entity. Answer: The major differences between a governmental entity and a for-profit entity include: Governmental accounting must recognize that governmental units collect resources and make expenditures to fulfill societal needs. Except for some proprietary activities such as utilities, governmental entities do not have a general profit motive. Governmental operations have legal authorization for their existence, conduct revenue raising through the power of taxation, and have mandated expenditures they must make to provide their services. Governmental entities use comprehensive budgetary accounting, which services as a significant control mechanism and provides the basis for comparing actual operations against budgeted amounts. The primary emphasis in governmental fund accounting is to measure and report on management's stewardship of the financial resources committed to the objectives of the governmental unit. Governmental entities typically are required to establish separate funds to carry out their various missions. Many fund entities do not record fixed assets or long-term debt in their funds. LO: 17-01 Topic: Differences between Governmental and Private Accounting Blooms: Understand AACSB: Communication AICPA: FN Decision Making Difficulty: 2 Medium 17-40 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 83. Briefly discuss the various types of governmental funds and proprietary funds. Answer: Five types of governmental funds are used to provide basic governmental services to the public. These are: (1) general fund, (2) special revenue funds, (3) capital projects funds, (4) debt service funds, and (5) permanent funds. The number of governmental funds maintained by the governmental entity is based on its legal and operating requirements. The five governmental funds use the current financial resources measurement focus. The two types of proprietary funds typically used by governmental entities are (6) enterprise funds and (7) internal service funds. Some activities of a governmental unit are similar to those of commercial enterprises. The objective of the governmental unit is to recover its costs in such operations through a system of user charges. Accounting and reporting for a proprietary fund are similar to accounting for a commercial operation. LO: 17-03 Topic: Definitions and Types of Funds Blooms: Remember AACSB: Communication AICPA: FN Decision Making Difficulty: 2 Medium 17-41 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 84. The adjusted trial balance for White River for the fiscal year ended June 30, 20X9, is presented below. Cash Property Taxes ReceivableDelinquent Allowance for Uncollectible TaxesDelinquent Inventory of Supplies Vouchers Payable Due to Internal Service Fund Fund BalanceAssigned for Inventories Fund BalanceAssigned for Encumbrances Fund BalanceUnassigned Expenditures Transfer Out to Internal Service Fund Property Taxes Revenues Fine and License Revenues Estimated Revenues Control Estimated Transfer Out to Internal Service Fund Appropriations Control Budgetary Fund BalanceUnassigned Totals $ Debits 51,000 20,000 Credits $ 15,000 2,000 10,000 2,000 2,000 12,000 6,000 718,000 40,000 685,000 99,000 800,000 $ 1,631,000 40,000 750,000 10,000 $ 1,631,000 Required: a. Prepare a statement of revenues, expenditures, and changed in fund balance for White River for the year ended June 30, 20X9. Assume there were no supplies or outstanding encumbrances at the beginning of the year. b. Prepare a balance sheet for White River at June 30, 20X9. 17-42 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Problem 84 (continued): Answer: a) White River Statement of Revenues, Expenditures, and Changes in Fund Balance For the Year Ended June 30, 20X9 Revenues: Property Taxes Fines and Licenses Total Revenues $ 685,000 99,000 784,000 Expenditures General Government Excess of Revenues Over Expenditures 718,000 66,000 Other Financing Uses: Transfer Out to Internal Service Fund Net Change in Fund Balance Fund Balance, July 1, 20X8 Fund Balance June 30, 20X9 40,000 26,000 20,000 $ 46,000 b) White River Balance Sheet June 30, 20X9 Assets: Cash Property Taxes ReceivableDelinquent Allowance for Uncollectible TaxesDelinquent Inventory of Supplies Total Assets $ 51,000 $ 20,000 (15,000) Liabilities and Fund Balance: Liabilities: Vouchers Payable Due to Internal Service Fund Total Liabilities 5,000 2,000 $58,000 $ 10,000 2,000 12,000 Fund Balance: Nonspendable Supplies Inventory Spendable Assigned to: General Government Services Unassigned Total Liabilities and Fund Balance $ 2,000 12,000 32,000 17-43 46,000 $ 58,000 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Problem 84 (continued): LO: 17-04 Topic: Balance Sheet for Governmental Funds Topic: Statement of Revenues, Expenditures, and Changes in Fund Balance for Governmental Funds Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard 17-44 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 85. Discuss major differences between a governmental entity's uses of the modified accrual method and a for-profit corporation's use of the accrual method. Answer: The modified accrual method of accounting is used to measure revenues that are available to finance current expenditures and to measure the expenditures made during the period. The accrual method is used to measure the revenues and expenses during a period with the purpose of measuring profitability. LO: 17-05 Topic: Basis of Accounting Blooms: Remember AACSB: Communication AICPA: BB Critical Thinking Difficulty: 2 Medium 17-45 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting 86. The town of Stow was incorporated and began governmental operations on July 1, 20X8. Stow's transactions and events for the fiscal year ended June 30, 20X9, are listed below. Stow uses the consumption method of accounting for purchases of supplies. Encumbrances do not lapse at year end. Required: Prepare the journal entry (ies) required in the general fund for each of the following transactions or events. a. The town budget was approved, providing for revenues of $800,000, a $40,000 transfer to establish an internal service fund (ISF), and expenditures of $750,000. b. Property taxes were levied in the amount of $700,000, with 4 percent of the total estimated to be uncollectible. c. Purchase orders were issued in the amount of $90,000 for equipment, and $635,000 for other goods and services. d. Collections for fines and licenses totaled $99,000 for the year. e. Property taxes collected amounted to $680,000; the balance was reclassified as delinquent, and the allowance for uncollectible taxes was reduced to $15,000. f. The equipment ordered was received, and a voucher was issued for the final invoice cost of $91,000. g. All but $12,000 of the other goods and services ordered was received. Vouchers were issued for the invoice cost of $622,000. h. All but $10,000 of the vouchers issued during the year was paid. i. A transfer in the amount of $40,000 was made to establish an internal service fund for the town. The general fund received services of $7,000 from the internal service fund during the year, with $2,000 remaining unpaid at year end. j. Expenditures recorded for the year included the purchase of supplies. The estimated balance of supplies on hand at year end was $2,000. k. A reserve was established at year end for the outstanding encumbrances, all of which will be honored in the next fiscal year. l. Closing entries were made. 17-46 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Problem 86 (continued): Answer: a) b) c) d) e) ESTIMATED REVENUES CONTROL ESTIMATED TRANSFER OUT TO ISF APPROPRIATIONS CONTROL BUDGETARY FUND BALANCEUNASSIGNED 800,000 Property Taxes Receivable Allowance for Uncollectible Taxes-Current Property Taxes Revenue 700,000 ENCUMBRANCES BUDGETARY FUND BALANCEASSIGNED FOR ENCUMBRANCES 725,000 28,000 672,000 Cash Fine and License Revenues 99,000 Cash Property Taxes Receivable-Current 680,000 680,000 BUDGETARY FUND BALANCEASSIGNED FOR ENCUMBRANCES ENCUMBRANCES Expenditures Vouchers Payable g) h) 725,000 99,000 Property Taxes ReceivableDelinquent Allowance for Uncollectible Taxes-Current Property Taxes Receivable-Current Allowance for Uncollectible TaxesDelinquent Property Taxes Revenues f) 40,000 750,000 10,000 20,000 28,000 20,000 15,000 13,000 90,000 90,000 91,000 91,000 BUDGETARY FUND BALANCEASSIGNED FOR ENCUMBRANCES ENCUMBRANCES 623,000 623,000 Expenditures Vouchers Payable 622,000 Vouchers Payable Cash 703,000 622,000 703,000 17-47 Chapter 17 - Governmental Entities: Introduction and General Fund Accounting Problem 86 (continued): i) j) k) Transfer Out to ISF Cash 40,000 40,000 Expenditures Due to ISF 7,000 Due to ISF Cash 5,000 Inventory of Supplies Expenditures 2,000 Fund BalanceUnassigned Fund BalanceNonspendable 2,000 7,000 5,000 2,000 2,000 BUDGETARY FUND BALANCEASSIGNED FOR ENCUMBRANCES ENCUMBRANCES Fund BalanceUnassigned Fund BalanceAssigned for Encumbrances l) 12,000 12,000 12,000 12,000 ESTIMATED TRANSFER OUT TO ISF APPROPRIATIONS CONTROL BUDGETARY FUND BALANCEUNASSIGNED ESTIMATED REVENUES CONTROL 40,000 750,000 10,000 Property Tax Revenues Fine and License Revenues Expenditures Transfer Out to ISF Fund BalanceUnassigned 685,000 99,000 800,000 718,000 40,000 26,000 LO: 17-07 Topic: The Expenditure Process Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard 17-48