Prepare the journal entries necessary for 2018 based on the information below.Prepare the town's financial statements for the year ended December 31, 2018.

TOWN OF PARKVILLE, ILLINOIS

Practice Set for

ACC 3750 - Governmental and Not-for-Profit Accounting

The new Comptroller of a small Illinois town named Parkville. The town has around 10,000 citizens in around 4,500 households. There are several small businesses, including a grocery store, bookstore, gas station, and hardware store. The town's largest employer is a factory that makes parts for printing presses.

The town provides the following services for its citizens:

• General government - The town is run by a part-time, elected mayor and a Town Council, comprised of five elected representatives. The town also has a part-time secretary/clerk that keeps the town's records and does many of the administrative functions.
• Public safety - The town has a full-time Police Chief, another full-time police officer, and two part-time police officers. The town also operates a fire department using volunteers. Several of the volunteers have become paramedics and help with medical emergencies. The volunteers are paid a stipend for each activity (a meeting, a fire, or a medical emergency) they attend.
• Recreation - The town has a park with a baseball diamond and basketball court. The park facilities have an original cost of $2,500,000 and accumulated depreciation of $1,187,500 at 12/31/17. Church youth leaders run a summer recreation program using the park that is popular with working parents. Youth and adult basketball and baseball/softball leagues also use the park facilities. Both the church youth leaders and the sports leagues pay a facility rental. In 2017, the town council approved building an indoor sports facility that will have basketball courts, an indoor pool, a tennis court, and meeting rooms.
• Streets, sidewalks, and storm drains - The town has around twenty-five miles of streets (original cost of $750,000), ten miles of sidewalks (original cost of $800,000), and fifteen miles of storm drains (original cost of $2,000,000). There is a full-time employee who maintains the streets and storm drains. The town follows the modified approach for infrastructure.

• Utilities - The town has around fifteen miles of water and sewer mains, as well as two water well sites and a treatment plant and a sewage treatment plant. There is a full-time employee who oversees the water and sewage facilities, along with a part-time assistant. Improvements to the water plant were made five years ago, and financed through 20-year revenue bonds. The Environmental Protection Agency has hinted that the water treatment plant may also need some improvements in the near future. The town also contracts with a company that collects garbage. In turn, the town bills citizens for the garbage collection costs.
• Library - The town operates a library with unpaid volunteers. Patrons can use a few computers to access electronic resources and can check out books or DVD's from the library's collection. The library accounts for its holdings as a collection, which has an original cost of $425,000. Realizing the library has a relatively small budget and the importance of literacy, a group of citizens formed a not-for-profit organization that raises money for the library (Friends of Our Library). The NFP organization incorporated and gained 501(c)(3) status from the Internal Revenue Service. The NFP organization is governed by a board whose members are nominated and elected by the NFP organization's board.

Due to having vehicles and machinery, the town also employs a part-time mechanic. The mechanic works on the town's vehicles and machinery and charges back her materials and time to the departments needing the work.

The town believes it is important to hire quality employees, which they believe requires a retirement plan. Employees pay 8% of their gross salary, and the town contributes another 12%. The pension plan is accounted for in a trust managed by the town. The town does collect a special property tax used to make the town's contribution to the pension trust. The utilities fund makes its own contribution to the pension trust.

The town helped form an economic development organization to help current businesses expand and draw in new businesses. The organization is legally separate from the town. It is governed by a board whose members are appointed by the town's mayor and approved by the town's council. About 80% of the organization's budget is provided by the town, with the other 20% in gifts from area businesses and citizens.

The town operates on a fiscal year ending December 31. The town's December 31, 2017 financial information is attached.

During the fiscal year 2018, the town had the following transactions:

1. On 1/1/18, the town council approved the 2018 budget.

GENERAL FUND

Estimated Revenues

Property taxes

$910,000

Sales taxes

21,000

Fines

10,000

Other

4,000

Estimated Expenditures

General government

$25,000

Police

250,000

Streets

165,000

Recreation

2,000

Library

1,000

Economic development

RETIREMENT

Estimated Revenues

Property taxes

$20,000

Estimated Expenditures

General government

1,800

Police

13,500

Streets

4,800

The town does not adopt a budget for the proprietary or fiduciary funds.

1. During 2017, the town council decided to build an indoor recreation facility. The winning contractor, Clapp Construction, bid $2,100,000. The council issued $2,200,000 of 20-year general obligation bonds, also on 1/1/18. The bonds will be repaid evenly over the twenty years with interest of 3.5%. Principal is due on 6/30, and interest is due on 6/30 and 12/31. The council issued a contract to Clapp Construction for $2,150,000 for the building to be move-in ready by 8/1/18.

1. On 1/1/18, the town levied its property taxes in the amount of $1,500,000. The property taxes are for general corporate use ($950,000), pension ($50,000), and general obligation bond debt service ($500,000). Based on past experience, the town expects to receive $1,450,000. Any allowance for uncollectible taxes is recorded in the General Fund.

1. On 1/1/18, the town also issued purchase orders as follows:
2. General - GG1 for $2,500 for supplies and GG2 for $500 for accounting software
3. Public safety - PS1 for $40,000 for a new police vehicle, PS2 for $3,500 for gas, and PS3 for $4,000 for new fire pumps
4. Recreation - RE1 for $3,000 for mowing
5. Streets, sidewalks, and storm drains - ST1 for $40,000 for cold mix/road patch, ST2 for $7,000 for a new snow plow blade, and ST3 for $4,000 for gas/fuel
6. Utilities - UT1 for $5,000 for treatment chemicals, UT2 for $8,000 for electricity, UT3 for $40,000 for garage hauling, UT4 for $5,000 for a new pump, and UT5 for $6,000 for maintenance/repairs
7. Library - LI1 for $1,000 for books

1. On 6/1/18, the city received a partial invoice/progress billing from Harmon Construction for $500,000, with a $50,000 retainage, which was paid on 6/15/18. On 7/1/18, the city received a partial invoice from Harmon Construction for $1,400,000, with $140,000 retainage, which was paid on 7/15/18. On 8/1/18, the city received good news. The indoor recreation facility was complete, and Harmon Construction had come in under the bid. A final invoice was received from Harmon Construction for $200,000 plus the $190,000 retainage. The town's architect agreed that the building was complete, so the town paid the remaining amount to Harmon Construction on 8/15/18. As the facility was now complete, the council voted to use the remaining balance (the $2,200,000 bond proceeds less the payments to Harmon) to make debt payments on the bonds.

1. On 8/1/18, with the indoor recreation facility complete, the town's secretary was able to sell $90,000 of passes to the new facility. The passes expire on 12/31/18.

1. On 4/1,18, the town received its property tax distribution (levied in #3) from the county for $1,425,000. The town paid $25,000 to the economic development agency for the agency's operations.

1. During the year, the town received and paid invoices for the following:

Department

Type of expenditure/expense

Order #

Amount Paid

General government

Supplies

GG1

$2,400

Software

GG2

$500

Telephone

$3,000

Maintenance/cleaning

$3,000

Heat/electricity

$2,500

Public safety

Vehicle

PS1

$40,000

Supplies

$4,500

Gas

PS2

$4,000

Fire pumps

PS3

$5,000

Uniforms/safety items

$10,000

Water (paid to utilities)

$5,000

Heat/electricity

$7,000

Telephone/radio

$8,000

Recreation

Mowing

RE1

$3,500

Tree trimming

$1,500

Nets and other supplies

$500

Heat/electricity

$20,000

Pool chemicals

$5,000

Streets

Cold mix/road patch

ST1

$42,000

Snow plow blade

ST2

$7,000

Gas

ST3

$4,000

Tools/shop supplies

$5,000

Heat/electricity

$7,500

Telephone

$5,000

Utilities

Chemicals

UT1

$7,000

Electricity

UT2

$8,000

Garbage hauling

UT3

$45,000

Pump

UT4

$5,000

Maintenance/repairs

UT5

$7,000

Library

Books

LI1

$3,500

Mechanic

Shop supplies

$5,000

1. During the year, the town received $500,000 in water/sewer/garbage billings. Customers still owed the town $25,000 at 12/31/18.

1. The Environmental Protection Agency notified the town that some improvements needed made to the water treatment plant (part of the utilities fund). On 4/30/18, the town council issued $100,000 in revenue bonds to finance the improvements. The revenue bonds will pay interest at 4.5% on 4/30 and 10/31 (so you will have an accrual), and principal equally over five years on 10/31. Figure your accruals using full months.

1. On 5/1/18, the town council entered into a contract with Martin Construction for the water plant improvements in the amount of $100,000. By 9/1/18, the improvements were finished and approved by the architect/engineer, and Martin Construction invoiced the town for $100,000. The town paid the invoice on 9/15/18.

1. On 7/1/18, the town paid for its insurance, for 7/1/18 to 6/30/19, in the amount of $10,000. The insurance runs differently than the town's fiscal year (so there will be an accrual). Of the invoice, the general government pays $4,000, and the utilities pays $6,000.

1. The town's mechanic billed the public safety department $21,000, the streets department $4,000, and the utilities department $5,000 for 2018. Those departments paid the mechanic's billing.

1. On 5/31/18, one of the town's history teachers retired. A group of his students donated $100,000 to the town. The letter with the donations stated that the town should preserve and invest the $100,000 gift, with the earnings being used to buy history books for the library. The town invested the entire gift. By 12/31/18, the investment had earned $1,500, none of which had been spent.

1. The town received the following in cash during 2018:

Fines (from police department - the town considers this to be program revenue)

$10,000

Fuel taxes (to be used for street repairs)

$20,000

Operating grants (to the library)

$2,500

Rents (for the park areas)

$2,500

Sales tax (for general corporate uses)

$35,000

1. The town paid out the following in payroll for the 2018:

Department

Gross

Employer Taxes

Pension (employee 8% share)

Pension (employer 12% share)

General government

$15,000

$1,373

$1,200

$1,800

Public safety

$112,500

$10,295

$9,000

$13,500

Streets

$40,000

$3,660

$3,200

$4,800

Utilities

$65,000

$5,948

$5,200

$7,800

Mechanic

$20,000

$1,830

$1,600

$2,400

All pensions for governmental purposes are paid from the property taxes earmarked for pensions.

1. On 2/1/18, the town, economic development agency, county, and school decided to pool their investments with the town managing the pool. The town contributed $100,000 from its general fund, the economic development agency contributed $25,000, the county contributed $65,000, and the school contributed $750,000. The full amount was invested in US government securities. On 6/30/18, the town received $18,000 of interest earnings on the securities. On 7/1/18, the county withdrew $700,000 of its investments. On 12/31/18, the town received $4,000 of interest earnings on the securities.

1. At 12/31/18, the town recorded $175,000 of depreciation expense on the utilities plant, $75,000 of depreciation expense on the utilities equipment, and $500 of depreciation expense on the auto mechanic's tools.

Miscellaneous

The following information was received from the Friends of the Library:

Cash @ 1/1/18

$4,000

Donations

$6,000

Library books (donated to library)

($4,000)

Fundraising expenses

($250)

Cash @ 12/31/18

$5,750

The following information was received from the Economic Development Agency. The beginning net assets (unrestricted) at 1/1/18 was $11,108.

Cash

$5,000

Investments held by town

xxxxxx

Office equipment (net of accumulated depreciation)

$6,000

Contributions from town

$25,000

Contributions from others

$5,000

Salaries

$23,000

Supplies

$1,000

Telephone

$1,000

information about the town:

Description

Original Cost

Book value @ 12/31/17

2018 Depreciation Expense

Book value @ 12/31/18

Truck and Backhoe (streets)

$10,000

$7,500

$1,500

$6,000

Police/Fire vehicles

$350,000

$300,000

$30,000

$270,000

Streets infrastructure

$4,000,000

$4,000,000

$0

$4,000,000

Library books

$250,000

$250,000

$0

$250,000

Public safety building

$2,700,000

$2,000,000

$135,000

$1,865,000

City Hall

$300,000

$150,000

$7,500

$142,500

Library building

$150,000

$142,500

$7,500

$135,000