I need assistance with preparing journal entries for the belowitems.
This is the first year of operations for the city â 20X4. Thefollowing transactions are summarized for the city this year:
The city levied $9,000,000 of general property taxes, $8,800,000of which has been collected. It expects to collect the balanceshortly after the end of the year. These taxes are unassigned; theycan be used for any legitimate city purpose. You believe thesetaxes should be recorded in the general fund, but you decide todouble check by reviewing the GASBâs following website: Touringthe Financial Statements, Part III: The Governmental Fundsnoting the explanation for general funds.http://www.gasb.org/cs/ContentServer?pagename=GASB/GASBContent_C/UsersArticlePage&cid=1176156735732
The City received a state grant of $200,000 to purchasecomputers. This grant is restricted by the state for a specificpurpose. You need to determine in which fund you should record(categorize) the state grant for the purchase of the computers. Youremember reading in GASB Statement No. 54 that governmental fundbalance information is reported in five different classifications(nonspendable, restricted, committed, assigned and unassigned).Further, you decide to read the Fact Sheet about Fund BalanceReporting and Governmental Fund Type Definitions.
The City issued $12,000,000 in long-term bonds to construct acity building. The proceeds must be used for the intended purpose.You are unsure of the fund in which you record the proceeds of thelong-term bonds, designated to construct a city building; however,you remember the major types of expenditures: operating, capital,debt service, and intergovernmental charges. Capital expendituresrelate to the acquisition of capital assets (such as the citybuilding). You recall that such expenditures may be recorded in theGeneral Fund, Special Revenue Funds, or Capital Projects Funds,depending on the source of funding. You review the National Centerfor Education Statistics Government-wide Reporting requirements fortypes of expenditures and accounting treatments.
The City constructed the school building for $11,000,000. Youdecide to account for the construction of the school building as anexpenditure, causing the City Controllerâs asking for yourjustification in doing so. In gathering information from which toprepare a response, you note two things: 1) fund accounting followsthe modified accrual basis of accounting and 2) fund accountingfinancial statements are the Fund Balance Sheet and the Statementof Fund Revenues, Expenditures, and Other Changes in Fund Balances.To prepare the memo to explain your decision to the CityController, you browse the GASB Website in search of anauthoritative explanation about the use of expenditure or expensesfor fund accounting.
Knowing that GASB Statement No. 54 provides governmental fundrequirements for constructing buildings, you search GASB for anexplanation as to why capital assets and long-term liabilities arenot included on Fund Balance Sheets. Further, you are interested inlearning more about the nature of the Statement of Fund Revenues,Expenditures and Other Changes in Fund Balances.
The City incurred $6,000,000 in general operating expenditures,$5.5. million of which has been paid. You review GASB No 54 and theGASB website to help you explain why the City uses the termexpenditures instead of expenses for fund accounting.
Using its state grant, the City purchased computers for$100,000. As with the construction of the building, the City wouldrecognize the acquisition as an expenditure. You must justify tothe City Controller why the correct recording of the computers areexpenditures, even though the City would record them as assets in asupplementary ledger or list. When the government-wide statementsare prepared, the computers would be recognized asassets.
The City transferred $1,100,000 from the general fund to thedebt service fund to make the first payments of both principal andinterest that are due the following year. Viewed as broken downinto its components, this transaction is straightforward, involvingsimple entries to each of the two funds. You research which fundsto use for this transfer using the GASB websites above and otherwebsites that you find during your research.
