Question 2:

The following transactions and events affected the council funds of PP Local Government during 2019.

PP Local Government Trial Balance Council Fund

As at 1 January 2019

Items

Debit (RM)

Credit (RM)

Cash

100,000

Assessment Taxes Receivable

400,000

Uncollectible Assessment Taxes Receivable

40,000

Interest and Penalties Receivable on Assessment Tax

25,000

Uncollectible Interest and Penalties Receivable on Assessment Taxes

10,000

Voucher Payable

135,000

Deferred Revenues (Permit and Licenses)

20,000

Due to Federal Government

30,000

Account Payable (2015)

45,000

Fund Balances

245,000

Total

525,000

525,000

The following information summaries the transaction of PP Local Government during 2019:

I .Recordingthe budget

At the beginning of the fiscal year, the budget approved for 2019 are as follows:

a.Estimated RevenueRM6,200,000

b.Estimated ExpenditureRM5,200,000

c.Estimated Transfer to Debt Service FundRM650,000

d.Estimated Equity Transfer FundRM150,000

e.

2. The PP Local Government liabilities that are Voucher Payable and Dueto FederalGovernmentamountedtoRMI 65,000,whiletheCashamounted to RM I00,000 (as shown in the above Trial Balance). Although some collections of Taxes Receivable are expected early in the year, payrolls and other liabilities are incurred and must be paidbefore substantial amount of cash can be collected accordingly. Therefore, it is desirable for PP Local Government to arrange a short term loan amountingto RM200,000.

3. Cheques were drawn to pay the Vouchers Payable and the amount Due to Federal Government as at the end of 2019.

4.Account Payable of 2018

In the Trial Balances as at 1 January 2019, the items of AccountPayable (2018) indicates that purchase orders or contracts issued in 2018 were charge to 2018 allocationand will be paid in 2019.

5.Commitment Entry

Purchase order for materials and supplies are issued with a total of RM800,000.

6. At the end of 2018, PP LocalGovernmentDeferredRevenues (Permit and Licenses) amounted to RM20,000 is reflected in the beginning Trial Balance as revenue.

7.RecordingAssessmentTaxes Levy

Budget revenue from assessment taxes was RM3,200,000. In order to generate tax collection, 2% of these taxes are estimated to be uncollectable due to the tax collection policy and local economic condition. In order to generate revenues of RM3,200,000, the gross levy must be RM3,265,306.

8. Collection of AssessmentTaxes Receivableand Interest and Penalties Receivable

PP Local Government received late payment of Assessment Taxes by tax payers amounting to RM330,000 and the Interest and Penaltiesonthis Assessment Taxes of RMI 0,000 had beenrecordedas receivableat the endof 2018.

9.Collectionof Current Taxes

Collectionsduring 2019 of AssessmentTaxesfor 2019are RM 2,700,000.

10. Revenue recognizedon Cash Basis

Revenue for Permit and Licenses is recognized on cash basis. Col lectionsduring the year of 2019 amountedto RM2,800,000.

11. Repaymentof Notes Payable

PP Local Government will have to pay the local bank for the money borrowed(as statedin no. 2 information) withinterest of RM5,000.

12. Recognitionof Expendituresfor Commitment Items

As stated in information no. 5 earlier, the invoices for materials and supplies amounted to RM800,000 were received. After the materials and supplieshavebeen inspected, they were approvedfor paymentand voucher was then issued.

13. Payrollsand Payroll Taxes

The gross payment of payroll for employees amounted to RM3,345,000. This includes the deduction of insurance for RM78,000 and Employee Provident Fund (EPP) of RM430,000. The gross pay is chargeable to the appropriation of the individual departmentof the employees.

14. Inter Fund Transfer

The Water Utility Fund of PP Local Government provides water utilities with fire hydrants and water service for the fire protection at a flat annual charge. As such, a Water Utility Fund is expected to support the cost of its operationby charging the users under Water Utility Fund. The amount charged bythe Water Utility Fund to the Council Fund was RM50,000.

15. Write-offof UncollectibleTaxes Receivables

The age of receivables periodically were reviewed to determine the adequacy of allowance account and to authorize the write-off of items judged to be uncollectable. The accountant of PP Local Government has received the approval to write-off Uncollectable Assessment Taxes amounting to' RM30,000 and the related

Interestand Penaltiesof RM3,000.

16. DeferredRevenuesof Permit and Licenses

A review on the Permit and Licenses Revenue Ledger indicated that approximately RM40,000 would probably will be received more than sixty days beyond the end of the fiscal year.

REQUIRED:

(a)Prepare the journal entries for PP Local Government according to the transactions given above.

(b)Prepare the Statement of Financial Performance (Consolidated Council Fund) for the year ended 31 December 2019 for PP Local Government.

(c)Prepare the Statement of Financial Position for the year ended 31 December 2019 for PP Local Government.