1. Assume that the City of Ft. Smith maintains its books and records in a manner that facilitates the preparation of the fund financial statements. For each of the following events indicate in which fund(s) of the City of Ft. Smith the event would be recorded and justify your fund selection. a. The City collected property taxes levied for the general operations of the City. b. The City collected property taxes levied to pay principal and interest on bonds issued several years in the past to construct a new fire station. c. The City collected property taxes levied on a specific area of the City for the purposes of providing more frequent snow removal than is enjoyed by the rest of the City. d. The City sold bonds to finance the construction of a new City Hall. e. The City sold bonds to finance major renovations at the city-owned electric utility. f. The City purchased a street sweeping machine. 2. Assume that the City of Amber maintains its books and records in a manner that facilitates the preparation of the fund financial statements. Amber City maintains a general fund a capital projects fund and a special revenue fund. During the current fiscal year the City engaged in the following transactions. Record all transactions. Be sure to clearly indicate the fund in which the entry is made. a. The City sold bonds face value $26 million at par to finance the construction of a new City Hall. b. The City purchased two new police cars at a total cost of $50 000. c. The City collected $8 000 in taxes dedicated for the eradication of noxious weeds. d. The City spent $6 000 on pesticides for noxious weeds. e. The City acquired a new tractor for $75 000. The City paid $20 000 in cash and signed a note that is due in three years. 3. Assume that Blackfoot County maintains its books and records in a manner that facilitates the preparation of the fund financial statements. Blackfoot County engaged in the following transactions during the current month. Prepare journal entries in the general fund to record these events. a. Paid salaries to County employees $100 000. b. Borrowed $35 000 on a three-year note from a local bank to use to buy a County car. c. Purchased the County car for $35 000. d. Made a $7 000 payment on outstanding accounts payable. e. Collected $3 500 000 of the current property tax levy. f. Received a $50 000 grant from the State to support general government activities. 4. Kayla Township issued the following bonds during the year: • Ten-year bonds to acquire equipment for a data processing service reported in an internal service fund $1 000 000 • Bonds to construct a new police station $4 500 000 • Bonds to increase the capacity of the water treatment plant reported in an enterprise fund $2 400 000 a. The amount of debt reported in the Township’s general fund is: 1. $0 2. $4 500 000 3. $5 500 000 4. $7 900 000 b. The Township should report depreciation expense related to the new capital assets in these funds: 1. The general fund 2. The enterprise fund 3. The enterprise and internal service funds 4. The capital projects fund c. The bonds issued to construct the new police stations should be reported as: 1. Debt proceeds in the general fund 2. Long-term debt in the debt service fund 3. Debt proceeds in the capital projects fund 4. None of the above d. In accordance with bond covenants the Township sets aside $500 000 to help assure that it is able to meet its first payment of principal and interest on the police station debt due one year from the date the bonds were issued. The amount of liability that the Township should report in its debt service fund is: 1. $0 2. $500 000 3. $4 500 000 4. $4 000 000 5. A newly established Chessie Foundation engaged in the following transactions: 1. A donor made a $1 000 000 pledge giving the organization a legally enforceable 90-day note for the full amount. 2. The same donor paid $500 000 of the amount pledged. 3. The Foundation purchased a building for $750 000 paying $100 000 in cash and giving a ten-year mortgage for the balance. The building has a 25-year useful life. The organization charges a half-year’s depreciation for all assets in the year they are acquired. 4. The organization hired five employees. At year-end these employees had earned $10 000 in salaries and wages for which they had not been paid. The Foundation accounts for its activities in a single fund. a. Prepare journal entries to record the transactions making the following alternative assumptions as to the organization’s measurement focus: • Cash only • Cash plus other current financial resources (cash plus short-term receivables less short-term payables) • All economic resources b. Based on your entries prepare appropriate operating statements and balance sheets for the organization. 6. Katerah City maintains the following funds: 1. General 2. Special revenue 3. Capital projects 4. Debt service 5. Enterprise 6. Investment trust 7. Permanent 8. Agency For each of the following transactions indicate which fund would most likely be used to report the transaction: a. The City collects $1 million of taxes for an independent fire district located within the City. b. The City spends $1.2 million on street maintenance using the proceeds of a city gas tax dedicated for road and highway maintenance and improvements. c. The City receives a bequest of $1.5 million. The donor’s Will requires that the principal amount be invested in perpetuity and that the earnings on the investment be used to maintain a city park to be renamed for the donor. d. The City collects water and sewer fees of $4.2 million. e. The City pays $4 million to a contractor for work on the new bridge. f. The City receives $1.3 million to invest on behalf of the County. g. The City pays its police officers wages of $325 000. h. The City pays $2.2 million in Bond Interest on its general obligation debt. 7. The Geneva Housing Authority a governmental entity accounts for its activities on a modified accrual basis of accounting. In the current period it reports the following transactions: • The Authority issues $1.5 million in long-term bonds. • The Authority purchases 4 acres of land for $300 000 in cash. • It sells one of these acres of land for $75 000 in cash. • It made a $195 000 payment on the debt consisting of $45 000 of interest and $150 000 in principal. • It lost a lawsuit filed by one of its renters and was ordered to pay $1 million in damages over 5 years. It made its first cash payment of $200 000. 1. Prepare journal entries to record each of these transactions in the general fund. 2. Based on your entries prepare a balance sheet and statement of revenues expenditures and changes in fund balance for the general fund. 3. Comment on how these statements capture the Authority’s economic resources and obligations. 4. Comment on the extent to which the statement of revenues expenditures and changes in fund balances captures the Authority’s costs of services. 5. When the Authority prepares GAAP financial statements based on GASB Statement No. 34 what assets and liabilities would be added in the Authority’s government-wide Statement of Net Assets? What gains and losses would be added in its government-wide Statement of Activities? 8. The newly established Environmental Council (a not-for-profit organization) uses two funds for internal reporting purposes. The general fund is used to record day-to-day operating transactions. A building fund is used to accumulate resources for a new building to house the Council’s operations. Both funds are reported using the accrual basis of accounting. In its first year the Council engaged in the following transactions: 1. It received cash contributions of $500 000 $100 000 of which donors stipulate must be used for the new building. 2. It incurred operating payroll costs of $200 000 of which $180 000 is paid in cash. 3. It earned $1 000 in interest (paid in cash) on investments restricted to the acquisition of the new building. 4. It transferred $25 000 from its general fund to the building fund. 5. It paid $15 000 in fees (accounted for as expenses) for architectural drawings for the proposed building. a. Prepare journal entries to record the transactions. Be sure to indicate the fund in which the entry would be made. b. Prepare a statement of revenues expenses and other changes in fund balances and a balance sheet. Use a two-column format one column for each of the Council’s two funds.
