Please provide step-by-step instructions on how to solve these problems. Thanks

A new district was created and named Olympia City and State Recreation District. The district established the following funds each is a separate fiscal and accounting entity:

General fund to account for general operating resources (unassigned)

Capital project fund to account for the proceeds of bonds issued to finance the construction of recreational facilities

Debt service fund to account for resources to pay principal and interest on the bonds

Internal service fund to account for the operations of an equipment repaid department that will provide services to various departments that are within the general fund

The following is a summary of the districts first year transactions (dollars are in millions)

A new district was created and named City and State Recreation District. The district established the following funds each is a separate fiscal and accounting entity:

o General fund to account for general operating resources (unassigned)

o Capital project fund to account for the proceeds of bonds issued to finance the construction of recreational facilities

o Debt service fund to account for resources to pay principal and interest on the bonds

o Internal service fund to account for the operations of an equipment repaid department that will provide services to various departments that are within the general fund

The following is a summary of the districts first year transactions (dollars are in millions)

1. It levies taxes of $300, of which it collects $250. It expects to collect the remaining $50 shortly after yearend. 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 longterm bonds of $500. The bonds must be used to finance the acquisition of recreational facilities. Therefore, the funds are recorded in a restricted fund the capital projects fund. The capital projects fund is a governmental fund, so it is not accounted for on a full accrual basis; it is accounted for on a modified accrual basis. It does not recognize long-term debt as a long-term liability in the balance sheet. Therefore, the inflow of resources is accounted for as bond proceeds this is an account that increases fund balance. The account is classified as other financing sources in a statement of revenues, expenditures, and changes in fund balances to separate it from operating revenues.

4. The district acquires $400 of recreational facilities using the resources available in the capital projects fund. The capital projects fund records the acquition of the equipment as an expenditure. Again, the capital projects fund is a governmental fund, so it is not accounted for on a full accrual basis; it is accounted for on a modified accrual basis. It does not recognize long-term assets as long-term assets in the balance sheet. Therefore, the cash paid for the acquisition of facilities is accounted for as expenditure this is an account that decreases fund balance. The account is classified as expenditure in a statement of revenues, expenditures, and changes in fund balances.

5. The bond indenture (agreement) requires that the district periodically commit funds to repay the principal of the debt. The district transfers $40 from the general 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 internal service fund, acquires $10 of equipment, giving a longterm 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 longterm assets and longterm 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.

Requirements for chapter 2 homework:

a. Prepare journal entries to record the transactions in individual funds. Governmental funds are accounted for on a modified accrual basis; proprietary funds are accounted for 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 position (balance sheet) and a government-wide statement of activities (statement of revenues and expenses). These statements should consolidate all funds, including the internal service fund on a full accrual basis. Assume that the district charged depreciation of $40 on recreational faculties in addition to the amount charged in the internal service fund.