The following information is available about items that differ between the governmental funds and the government wide statements. Assume that there are no internal service funds. The schedule of capital assets prepared for the year ended December 31, 2015, includes the following items:
Government Beginning Ending
Activities Balance Additions Retirements Balance
Total Capital Assets
(at gross) $700,000 $50,000 $(25,000) $725,000
Less: Accumulated
Depreciation (170,000) (30,000) 17,500 (182,500)
Net Capital Assets $530,000 $20,000 $ (7,500) $542,500
The bond was issued at the beginning of the year, and the following amortization schedule is available.
Date Interest Paid Cash Paid Premium Bond
Amortization Balance
1/1/2015 $104,213
12/31/2015 6,253 7,000 747 $103,466
The net change in fund balancesâtotal governmental funds was $1,100,000.
Required:
Prepare the reconciliation of the statement of revenues, expenditures, and changes in fund balances to the statement of activities on a government-wide basis for the year ended December 31, 2015.
The following information is available about items that differ between the governmental funds and the government wide statements. Assume that there are no internal service funds. The schedule of capital assets prepared for the year ended December 31, 2015, includes the following items:
Government Beginning Ending
Activities Balance Additions Retirements Balance
Total Capital Assets
(at gross) $700,000 $50,000 $(25,000) $725,000
Less: Accumulated
Depreciation (170,000) (30,000) 17,500 (182,500)
Net Capital Assets $530,000 $20,000 $ (7,500) $542,500
The bond was issued at the beginning of the year, and the following amortization schedule is available.
Date Interest Paid Cash Paid Premium Bond
Amortization Balance
1/1/2015 $104,213
12/31/2015 6,253 7,000 747 $103,466
The net change in fund balancesâtotal governmental funds was $1,100,000.
Required:
Prepare the reconciliation of the statement of revenues, expenditures, and changes in fund balances to the statement of activities on a government-wide basis for the year ended December 31, 2015.
Related questions
| 2. Prepare worksheet entries and postto the worksheet for the following items. Identify each adjustmentby the letter used in the problem: a. Record the January 1, 2015balances of general fixed assets and related accumulateddepreciation accounts. The City of Monroe had the followingbalances (excluding Internal Service Funds):
b. Eliminate thecapital expenditures shown in the governmental funds Statement ofRevenues, Expenditures, and Changes in Fund Balances. c. Depreciation expense(governmental activities) for the year totaled $ 5,750,000. d. Eliminate theother financing sources from the sale of bonds by recording aliability for bonds payable and the related premium. e. As of January1, 2015, the City of Monroe had $12,000,000 in general obligationbonds outstanding. f. Eliminate the expenditures for bondprincipal. g. Accrueinterest in the amount of $328,000. (Two bond issues wereoutstanding; interest payments for both were last made on July 1,2015. The computation is as follows: ($11,200,000 Ã .03 Ã 6/12) +($4,000,000 Ã. 08 Ã 6/12) = $328,000). h. Adjust for theinterest accrued in the prior year government-wide statements, butrecorded as an expenditure in the 2015 fund basis statements,($12,000,000 Ã .03 Ã 6/12) = $180,000. i. Amortize bondpremium in the amount of $ 10,000. j. Makeadjustments for additional revenue accrual. The only adjustment isfor property taxes to eliminate the current year deferral ofproperty taxes. k. Adjust for the$21,000 of property taxes that was deferred in 2014 and recognizedas revenue in the 2015 fund-basis statements. l. Assume theCity adopted a policy in 2015 of allowing employees to accumulatecompensated absences. Make an adjustment accruing the expense of $39,500 Charge compensated absences expense. m. Bring in thebalances of the internal service fund balance sheet accounts.Again, use a single account for all capital assets and a secondaccount for all accumulated depreciation balances (use a separatecolumn of the worksheet to enter Internal Service Fundentries). n. No revenuesfrom internal service funds were with external parties. Assume$3,200 of the $11,200 âDue from Other Fundsâ in the internalservice accounts represents a receivable from the General Fund andthe remaining $8,000 is due from the enterprise fund. Eliminate the$3,200 interfund receivables. o. Reducegovernmental fund expenses by the net operating profit of internalservice funds. As the amount is small, reduce general governmentexpenses for the entire amount. p. Eliminatetransfers that are between departments reported within governmentalactivities. | Gov'tal Fund Balances | Adjustments &Eliminations | Govern-mental Funds Adjusted | Internal Service Funds | Balances for Gov't-wide Stmts | ||||||||||||
| Debits | Credits | Debits | Credits | ||||||||||||||
| DEBITS: | |||||||||||||||||
| Cash | 830,320 | 830,320 | 830,320 | ||||||||||||||
| Cash with Fiscal Agent | 928,000 | 928,000 | 928,000 | ||||||||||||||
| Investments | 259,000 | 259,000 | 259,000 | ||||||||||||||
| Taxes Receivable, net | 274,000 | 274,000 | 274,000 | ||||||||||||||
| Interest Receivable, net | 16,850 | 16,850 | 16,850 | ||||||||||||||
| Inventories | - | - | |||||||||||||||
| Due from State Govt. | 580,000 | 580,000 | 580,000 | ||||||||||||||
| Due from Other Funds | - | - | |||||||||||||||
| Capital Assets | - | - | |||||||||||||||
| bothrows | |||||||||||||||||
| - | - | ||||||||||||||||
| Expenditures (expenses) Current | - | ||||||||||||||||
| General Govt. | 1,646,900 | 1,646,900 | 1,646,900 | ||||||||||||||
| Public Safety | 3,026,900 | 3,026,900 | 3,026,900 | ||||||||||||||
| Highway and Streets | 2,471,900 | 2,471,900 | 2,471,900 | ||||||||||||||
| Sanitation | 591,400 | 591,400 | 591,400 | ||||||||||||||
| Health | 724,100 | 724,100 | 724,100 | ||||||||||||||
| Welfare | 374,300 | 374,300 | 374,300 | ||||||||||||||
| Culture and Recreation | 917,300 | 917,300 | 917,300 | ||||||||||||||
| Compensated Absences Exp | - | - | |||||||||||||||
| Other Expenditures (expenses) | - | - | |||||||||||||||
| - Debt Service Principal | 800,000 | 800,000 | 800,000 | ||||||||||||||
| - Interest(expenditure/expense) | 514,000 | 514,000 | 514,000 | ||||||||||||||
| bothrows | |||||||||||||||||
| - Capital Outlay | 5,798,100 | 5,798,100 | 5,798,100 | ||||||||||||||
| - Depreciation | - | - | |||||||||||||||
| Other Fin. Uses - Transfers Out | 1,876,700 | 1,876,700 | 1,876,700 | ||||||||||||||
| - | |||||||||||||||||
| Total Debits | 21,629,770 | 21,629,770 | |||||||||||||||
| CREDITS: | |||||||||||||||||
| Accounts Payable | 493,400 | 493,400 | 493,400 | ||||||||||||||
| Due to Other Funds | 40,200 | 40,200 | 40,200 | ||||||||||||||
| Accrued Interest Payable | - | - | |||||||||||||||
| Bonds Payalbe | |||||||||||||||||
| bothrows | - | - | |||||||||||||||
| Premium on Bonds | - | - | |||||||||||||||
| Compensated Absence Payable | - | - | |||||||||||||||
| Advance from Water Utility Fund | - | - | |||||||||||||||
| Deferred Inflows: Property Taxes | 27,500 | 27,500 | 27,500 | ||||||||||||||
| Accumulated Depreciation | |||||||||||||||||
| bothrows | - | - | |||||||||||||||
| Revenues | - | ||||||||||||||||
| Property Taxes | 6,657,500 | 6,657,500 | 6,657,500 | ||||||||||||||
| Sales Taxes | 2,942,000 | 2,942,000 | 2,942,000 | ||||||||||||||
| Interest | 21,220 | 21,220 | 21,220 | ||||||||||||||
| Licenses & Permits | 800,000 | 800,000 | 800,000 | ||||||||||||||
| Miscellaneous | 350,000 | 350,000 | 350,000 | ||||||||||||||
| State Grant for Highway StreetExpenses | 1,072,000 | 1,072,000 | 1,072,000 | ||||||||||||||
| Capital Grant- Gen Gov't | 332,000 | 332,000 | 332,000 | ||||||||||||||
| Capital Grant- Public Safety | 1,320,000 | 1,320,000 | 1,320,000 | ||||||||||||||
| - | - | ||||||||||||||||
| - | - | ||||||||||||||||
| Other Financing Sources | - | - | |||||||||||||||
| Proceeds of Bonds | 4,000,000 | 4,000,000 | 4,000,000 | ||||||||||||||
| Premium on Bonds | 200,000 | 200,000 | 200,000 | ||||||||||||||
| Transfers In | 1,876,700 | 1,876,700 | 1,876,700 | ||||||||||||||
| Net Position at beginning of year | - | ||||||||||||||||
| threerows | |||||||||||||||||
| 1,497,250 | 1,497,250 | 1,497,250 | |||||||||||||||
| Total Credits | 21,629,770 | 21,629,770 | |||||||||||||||
Problem 12-13A Prepare and Interpret a Statement of Cash Flows; Free Cash Flow [LO12-1, LO12-2, LO12-3]
| Mary Walker, president of Rusco Company, considers $38,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $33,000 in cash was available at the end of 2015. Since the company reported a large net income for the year, and also issued both bonds and common stock, the sharp decline in cash is puzzling to Ms. Walker. |
| Rusco Company Comparative Balance Sheet July 31, 2015 and 2014 | ||||
| 2015 | 2014 | |||
| Assets | ||||
| Current assets: | ||||
| Cash | $ | 33,000 | $ | 54,600 |
| Accounts Receivable | 221,600 | 233,400 | ||
| Inventory | 266,200 | 206,800 | ||
| Prepaid expenses | 19,600 | 36,600 | ||
| Total current assets | 540,400 | 531,400 | ||
| Long-term investments | 144,000 | 210,000 | ||
| Plant and equipment | 896,000 | 768,000 | ||
| Less accumulated depreciation | 219,000 | 195,400 | ||
| Net plant and equipment | 677,000 | 572,600 | ||
| Total assets | $ | 1,361,400 | $ | 1,314,000 |
| Liabilities and Stockholders' Equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 191,200 | $ | 249,800 |
| Accrued liabilities | 9,800 | 18,600 | ||
| Income taxes payable | 56,400 | 48,000 | ||
| Total current liabilities | 257,400 | 316,400 | ||
| Bonds Payable | 254,000 | 0 | ||
| Total liabilities | 511,400 | 316,400 | ||
| Stockholdersâ equity: | ||||
| Common stock | 717,000 | 690,000 | ||
| Retained earnings | 133,000 | 307,600 | ||
| Total stockholders' equity | 850,000 | 997,600 | ||
| Total liabilities and stockholders' equity | $ | 1,361,400 | $ | 1,314,000 |
| Rusco Company Income Statement For the Year Ended July 31, 2015 | |||
| Sales | $ | 1,160,000 | |
| Cost of goods sold | 725,000 | ||
| Gross margin | 435,000 | ||
| Selling and administrative expenses | 310,300 | ||
| Net operating income | 124,700 | ||
| Nonoperating items: | |||
| Gain on sale of investments | $29,000 | ||
| Loss on sale of equipment | (9,600) | 19,400 | |
| Income before taxes | 144,100 | ||
| Income taxes | 43,140 | ||
| Net income | $ | 100,960 | |
| The following additional information is available for the year 2015. |
| a. | The company declared and paid a cash dividend. |
| b. | Equipment was sold during the year for $58,400. The equipment had originally cost $126,000 and had accumulated depreciation of $58,000. |
| c. | Long-term investments that had cost $66,000 were sold during the year for $95,000. |
| d. | The company did not retire any bonds payable or repurchase any of its common stock. |
| Required: | |
| 1. | Using the indirect method, compute the net cash provided by operating activities for 2015. (Negative amount should be indicated by a minus sign.) |
| 2. | Using the data from (1) above, and other data from the problem as needed, prepare a statement of cash flows for 2015. (List any deduction in cash and cash outflows as negative amounts.) |
| Rusco Company |
| Statement of Cash Flows - Indirect Method |
| For the year ended July 31,2015 |
|
| 3. | Compute free cash flow for 2015. (Negative amount should be indicated by a minus sign.) |
| Free cash flow |
