Continuous problem city of monroe

Continuous Problem – City of Monroe

Continuous Problem – City of Monroe

to Accompany

Essentials of Accounting for Governmental

and Not-for-Profit Organizations:

Thirteenth Edition

Chapters 2 through 8 describe accounting and financial reporting by state and local governments. A continuous problem is presented to provide an overview of the reporting process, including preparation of fund basis and government-wide statements. The problem assumes the government is using fund accounting for its internal record-keeping and then at year-end makes necessary adjustments to prepare the government-wide statements. The problem that follows is presented in the same order as the textbook (beginning with Chapters 3, and 4).

Each chapter requires the preparation of journal entries to record the events and transactions of governmental, proprietary, or fiduciary funds. For the General Fund, use control accounts for the budgetary accounts, revenues, expenditures and encumbrances. For all other funds, use separate accounts for each type of revenue and expenditure/expense. At appropriate stages, preparation of the fund and government-wide statements are required. The following funds are included in this series of problems:

Governmental Funds

· General

· Special revenue—Street and Highway Fund

· Capital projects—City Hall Annex Construction Fund

· Debt service—City Jail Annex Debt Service Fund

· Debt service—City Hall Debt Service Fund

Proprietary Funds

· Internal service—Stores and Services Fund

· Enterprise—Water and Sewer Fund

Fiduciary Funds

· Private-purpose—Student Scholarship Fund

· Pension trust—Fire and Police Retirement Fund

Chapters 3 & 4

The Balance Sheets of the General Fund and the Street and Highway Fund of the City of Monroe as of December 31, 2016, follow. These (beginning) balances have been entered in the proper general ledger accounts, as of 1/1/2017.

CITY OF MONROE

General Fund Balance Sheet

As of December 31, 2016

Assets

Cash

$497,000

Taxes receivable

$210,000

Less: Estimated uncollectible taxes

(37,000)

net

173,000

Interest and penalties receivable on taxes

5,200

Less: Estimated uncollectible interest and penalties

(950)

net

4,250

Due from state government

210,000

Total assets

$884,250

Liabilities, Deferred Inflows, and Fund Equity

Liabilities:

Accounts payable

$ 99,000

Due to other funds

27,000

Total liabilities

126,000

Deferred inflows – Property taxes

21,000

Fund equity:

Fund balance—assigned

(for outstanding encumbrances)

$17,000

Fund balance—unassigned

720,250

Total fund balance

737,250

Total liabilities, deferred inflows and fund equity

$884,250

CITY OF MONROE

Street and Highway Fund Balance Sheet

As of December 31, 2016

Assets

Cash

$23,000

Investments

59,000

Due from state government

107,000

Total assets

$189,000

Liabilities and Fund Equity

Liabilities:

Accounts payable

$9,000

Fund equity:

Fund balance—assigned for streets and

highways

180,000

Total liabilities and fund equity

$189,000

3–C. This portion of the continuous problem continues the General Fund and special revenue fund examples by requiring the recording and posting of the budgetary entries. To reduce clerical effort required for the solution use control accounts for the budgetary accounts, revenues, expenditures and encumbrances. Subsidiary accounts are not required. Budget information for the City includes:

a) As of January 1, 2017, the City Council approved and the mayor signed a budget calling for $11,150,000 in property tax and other revenue, $9,350,000 in appropriations for expenditures, and $1,700,000 to be transferred to two debt service funds for the payment of principal and interest. Record the budget for the General Fund and post to the ledger.

b) Also as of January 1, 2017, the City Council approved and the mayor signed a budget for the Street and Highway Fund that provided for estimated revenues from the state government in the amount of $1,068,000 and appropriations of $1,047,000. Record the budget and post to the ledger.

4–C. Part 1. General Fund Transactions

Required:

a. Record journal entries for the following transactions for FY 2017. Make any computations to the nearest dollar. Journal entry explanations are not required. Use control accounts for revenues, expenditures and budgetary accounts. It is not necessary to reflect subsidiary ledger entries.

(1) Encumbrances of $ 17,000 for purchase orders outstanding at the end of 2016 were re-established.

(2) The January 1, 2017, balance in Deferred Inflows – Property Taxes relates to the amount of the 2016 levy that was expected to be collected more than 60 days after December 31. This amount should be recognized as 2017 revenues.

(3) A general tax levy in the amount of $6,800,000 was made. It is estimated that 2¼ percent (.0225) of the tax will be uncollectible.

(4) Tax anticipation notes in the amount of $500,000 were issued.

(5) Goods and supplies related to all encumbrances outstanding as of December 31, 2016 were received, along with invoices amounting to $16,600; the invoices were approved for payment. The City maintains immaterial amounts in supply inventories and it is the practice of the City to charge supplies to expenditure when received.

(6) All accounts payable and the amount due other funds were paid.

(7) The General Fund collected the following ($ 10,811,500) in cash:

· prior year taxes, $158,000;

· interest and penalties receivable on prior year taxes, $3,500;

· current taxes, $6,400,000;

· $210,000 previously recorded as due from the state government;

· licenses and permits, $800,000;

· sales taxes, $2,890,000; and

· miscellaneous revenues, $350,000.

(8) Purchase orders and contracts were issued in the amount of $3,465,000.

(9) Payrolls for the General Fund totaled $5,070,000. Of that amount, $498,000 were withheld for employees’ federal income taxes and $357,000 were withheld for employees’ FICA and Medicare tax liability; the balance was paid in cash. The encumbrance system is not used for payrolls.

(10) The liability for the city’s share of FICA and Medicare taxes, $357,000, was recorded as was the liability for state unemployment taxes in the amount of $28,000.

(11) Invoices for most of the supplies and services ordered in transaction 8 were received in the amount of $3,375,300 and approved for payment. The related encumbrance amounted to $3,407,000.

(12) Tax anticipation notes were paid at maturity, along with interest in the amount of $18,000.

(13) Notification was received that an unrestricted state grant in the amount of $332,000 would be received during the first month of the next year.

(14) The General Fund recorded a liability to the Water and Sewer Fund for services in the amount of $37,000 and to the Stores and Services Fund for supplies in the amount of $313,200; $310,000 of the amount due the Stores and Services Fund was paid.

(15) The General Fund recorded an amount due of $52,000 from the state government, representing sales taxes to be collected from retail sales taking place during the last week of the year.

(16) The General Fund paid accounts payable in the amount of $3,175,000 and paid the amounts due the federal and state governments. The General Fund also transferred to the debt service funds cash in the amount of $1,662,000 for the recurring payment of principal and interest.

(17) All required legal steps were accomplished to increase appropriations by the net amount of $109,000. Estimated revenues were increased by $73,000.

(18) The City Council authorized a write-off of $51,000 in delinquent property taxes and corresponding interest and penalties amounting to $1,600.

(19) Interest and penalties receivable on taxes were accrued in the amount of $17,200; $1,100 of this amount is expected to be uncollectible.

(20) It is estimated that $10,500 of the outstanding taxes receivable will be collected more than 60 days beyond the fiscal year-end.

b. Post the entries to the general ledger.

c. Prepare and post the closing entries for the General Fund. Outstanding encumbrances at year end are classified as Assigned Fund Balance and all remaining net resources are classified as Unassigned Fund Balance.

d. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the year ended December 31, 2017. Confirm that the revenue and expenditure control accounts agree with the following detail and use this information in the Statement:

Revenues

Expenditures

Property Taxes . . . . . .

$6,657,500

General Government . . .

$1,646,900

Sales Taxes

2,942,000

Public Safety . . . . . . . . .

3,026,900

Interest and Penalties on Taxes . . . . . . . . . . .

16,100

Highways and Streets . .

1,441,400

Licenses and Permits .

800,000

Sanitation . . . . . . . . . . . .

591,400

Intergovernmental Revenue . . . . . . . . . . .

332,000

Health . . . . . . . . . . . . . .

724,100

Miscellaneous Revenue

350,000

Welfare . . . . . . . . . . . . .

374,300

Total . . . . . . . . . . . .

$11,097,600

Culture and Recreation .

917,300

Capital Outlay . . . . . . . .

492,800

Total . . . . . . . . . . . . .

$9,215,100

e. Prepare in good form a Balance Sheet for the General Fund as of the end of fiscal year, December 31, 2017.

4–C. Part 2. Special Revenue Fund Transactions

Required:

a. Record journal entries for the following transactions for FY 2017 and post to the general ledger. As there are relatively few revenues and expenditures, the use of control accounts is not necessary. (Make entries directly to individual revenue and expenditure accounts).

(1) The state government notified the City that $1,065,000 will be available for street and highway maintenance during 2017 (i.e. the City has met eligibility requirements). The funds are not considered reimbursement-type as defined by GASB standards.

(2) Cash in the total amount of $997,000 was received from the state government.

(3) Contracts, all eligible for payment from the Street and Highway Fund, were signed in the amount of $1,062,000.

(4) Contractual services (see transaction 3) were received; the related contracts amounted to $1,042,000. Invoices amounting to $1,040,500 for these items were approved for payment. The goods and services all were for street and highway maintenance.

(5) Investment revenue of $5,120 was earned and received.

(6) Accounts payable were paid in the amount of $923,000.

(7) All required legal steps were accomplished to increase appropriations in the amount of $4,500.

b. Prepare and post the necessary closing entries for the Street and Highway Fund.

c. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balances for the Street and Highway Fund for the fiscal year ended December 31, 2017.

d. Prepare a Balance Sheet for the Street and Highway Fund as of December 31, 2017. Assume any unexpended net resources are classified as Restricted Fund Balance.

Chapter 5

5–C. Part 1. Capital Projects Fund Transactions

The voters of the City of Monroe approved the issuance of tax-supported bonds in the face amount of $4,000,000 for the construction and equipping of a new City Jail. Architects were to be retained, and construction was to be completed by outside contractors. In addition to the bond proceeds, a $1,340,000 grant was expected from the state government.

Required:

a. Open a general journal for the City Jail Annex Construction Fund. Record the following transactions and post to the general ledger. Control accounts are not necessary.

(1) On January 1, 2017, the total face amount of bonds bearing an interest rate of 8 percent was sold at a $200,000 premium. Principal amounts of $200,000 each will come due annually over a 20-year period commencing January 1, 2018. Interest payment dates are July 1 and January 1. The first interest payment will be July 1, 2017. The premium was transferred to the City Jail Debt Service Fund for the future payment of principal on the bonds.

(2) The receivable from the state government was recorded.

(3) Legal and engineering fees early in the project were paid in the amount of $121,000. This amount had not been encumbered.

(4) Architects were engaged at a fee of $250,000.

(5) Preliminary plans were approved, and the architects were paid $50,000 (20 percent of the fee).

(6) The complete plans and specifications were received from the architects and approved. A liability in the amount of $150,000 to the architects was approved and paid.

(7) Bids were received and opened in public session. After considerable discussion in City Council, the low bid from Hardhat Construction Company in the amount of $4,500,000 was accepted, and a contract was signed.

(8) The contractor required partial payment of $1,350,000. Payment was approved and vouchered with the exception of a 5 percent retainage.

(9) Cash in the full amount of the grant was received from the state government.

(10) Furniture and equipment for the annex were ordered at a total cost of $459,500.

(11) Payment was made to the contractor for the amount payable (see 8 above).

(12) The contractor completed construction and requested payment of the balance due on the contract. After inspection of the work, the amount, including the past retainage, was approved for payment and then paid.

(13)The furniture and equipment were received at a total actual installed cost of $459,300. Invoices were approved for payment.

(14) The remainder of the architects’ fees was approved for payment.

(15) The City Jail Construction Fund paid all outstanding accounts payables ($ 509,300) on December 31, 2017.

(16) The remaining cash was transferred to the City Jail Debt Service Fund.

b. Post the entries to the City Jail Construction Fund general ledger.

c. Prepare and post an entry closing all nominal accounts to Fund Balance.

5–C. Part 2. Existing Debt Service Fund Transactions

The City Hall Debt Service Fund of the City of Monroe has been open for five years; it was created to service an $16,000,000, 3 percent tax-supported bond issue. As of December 31, 2016, this serial bond issue had a balance of $12,000,000. Semiannual interest payments are made on January 1 and July 1, and a principal payment of $400,000 is due on January 1 and July 1 of each year.

As this is a regular serial bond debt service fund, the only accounts with balances as of January 1, 2017, were Cash with Fiscal Agent and Fund Balance—Assigned for Debt Service, each with balances of $580,000. (Revenues were raised and collected in cash in 2016 in order to be able to pay bond principal and interest due on January 1, 2017.) The government chose not to accrue interest payable.

Required:

a. Open a general journal for the City Hall Debt Service Fund and prepare journal entries for the following transactions. Control accounts are not necessary

(1) The fiscal agent reported that $180,000 in checks had been mailed to bondholders for interest due on January 1, and $400,000 in checks were mailed for bonds maturing that day.

(2) Cash in the amount of $574,000 was received from the General Fund on June 30 and was transferred to the fiscal agent.

(3) The fiscal agent reported that checks dated July 1 had been mailed to bondholders for interest of $ 174,000 due that day and $400,000 in checks were mailed for bonds maturing that day.

(4) Cash in the amount of $568,000 was received from the General Fund on December 31 and transferred to the fiscal agent to be used for the interest and principal due on January 1 (next fiscal year). The government elected to not accrue the interest or principal at year-end.

b. Post the entries to the City Hall Debt Service Fund ledger (t-accounts).

c. Prepare and post an entry closing all nominal accounts to Fund Balance.

5–C. Part 3. New Debt Service Fund Transactions

On the advice of the city attorney, a City Jail Debt Service Fund is opened to account for debt service transactions related to the bond issue sold on January 1, 2017 (see Part 1).

Required:

a. Open a general journal for the City Jail Debt Service Fund. Record the following transactions, as necessary. Control accounts are not necessary

(1) The premium described in transaction 1 of Part 1 was received as a transfer from the capital projects fund.

(2) Cash in the amount of $160,000 was received from the General Fund on June 30 and was transferred to the fiscal agent.

(3) The fiscal agent reported that checks dated July 1 had been mailed to bondholders for interest due that day.

(4) The transfer described in part c of Part 1 was received.

(5) Cash in the amount of $360,000 was received from the General Fund on December 31 and transferred to the fiscal agent to be used for interest and principal payments due on January 1 (next fiscal year). The government elected to not accrue the interest at year-end.

(6) $ 200,000 of the remaining cash on hand was invested.

b. Post the entries to the City Jail Debt Service Fund ledger (t-accounts).

c. Prepare and post an entry closing all nominal accounts to Fund Balance. Assume any remaining net resources are classified as Fund Balance – Assigned for Debt Service.

5–C. Part 4. Governmental Funds Financial Statements

Required:

a. Prepare a Balance Sheet for the governmental funds for the City of Monroe as of December 31, 2017. Include the General Fund, the Street and Highway Fund (P4–C), the City Hall Debt Service Fund, and the City Jail Debt Service Fund. Use the balances computed in 4-C for the General Fund and special revenue fund portions of this statement.

b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balances for the governmental funds for the City of Monroe for the Year Ended December 31, 2017. Include the same funds as listed in requirement a plus the City Jail Construction Fund.

Chapter 6 – Proprietary Funds

6–C. Part 1. Internal Service Fund Transactions

The Stores and Service Fund of the City of Monroe had the following account balances as of January 1, 2017:

Debits

Credits

Cash

$28,000

Due from other funds

27,000

Inventory of supplies

27,500

Land

18,000

Buildings

84,000

Accumulated depreciation—buildings

$30,000

Equipment

46,000

Accumulated depreciation—equipment

25,000

Accounts payable

19,000

Advance from water utility fund

30,000

Net position

126,500

Totals

$230,500

$230,500

Required:

a. Open a general journal for the City of Monroe Stores and Service Fund and record the following transactions.

(1) A budget was prepared for FY 2017. It was estimated that the price charged other departments for supplies should be 1.25% of cost to achieve the desired breakeven for the year.

(2) The amount due from other funds as of January 1, 2017, was collected in full.

(3) During the year, supplies were ordered and received in the amount of $307,000. This amount was posted to accounts payable.

(4) $15,000 of the advance from the Water Utility Fund, originally provided for construction, was repaid. No interest is charged.

(5) During the year, supplies costing $250,560 were issued to the General Fund, and supplies costing $46,400 were issued to the Water Utility Fund. These funds were charged based on the previously determined markup ($ 313,200 to General Fund and 58,000 to the Water Utility Fund).

(6) Operating expenses, exclusive of depreciation, were recorded in accounts payable as follows: Purchasing, $15,000; Warehousing, $16,900; Delivery, $17,500; and Administrative, $9,000.

(7) Cash was received from the General Fund in the amount of $310,000 and from the Water Utility Fund in the amount of $50,000.

(8) Accounts payable were paid in the amount of $365,000.

(9) Depreciation in the amount of $10,000 was recorded for buildings and $4,600 for equipment.

b. Post the entries to the Stores and Service Fund ledger (t-accounts).

c. Prepare and post an entry closing all nominal accounts to Net position. Compute the balance in the net position accounts, assuming there are no Restricted Net position.

6–C. Part 2. Enterprise Fund Transactions

The City of Monroe maintains a Water and Sewer Fund to provide utility services to its citizens. As of January 1, 2017, the City of Monroe Water and Sewer Fund had the following account balances:

Debits

Credits

Cash

$ 98,000

Customer Accounts Receivable

84,000

Estimated Uncollectible Accounts Receivable

$4,000

Materials and Supplies

28,000

Advance to Stores and Services Fund

30,000

Restricted Assets

117,000

Water Treatment Plant in Service

4,200,000

Construction Work in Progress

203,000

Accumulated Depreciation - Utility Plant

1,200,000

Accounts Payable

97,000

Revenue Bonds Payable

2,500,000

Net position

959,000

Totals

$4,760,000

$4,760,000

Required:

a. Open a general journal for the City of Monroe Water and Sewer Utility Fund and record the following transactions.

(1) During the year, sales of water to non-government customers amounted to $1,018,000 and sales of water to the General Fund amounted to $37,000.

(2) Collections from non-government customers amounted to $976,000.

(3) The Stores and Services Fund repaid $15,000 of the long-term advance to the Water and Sewer Fund.

(4) Materials and supplies in the amount of $261,000 were received. A liability in that amount was recorded.

(5) Materials and supplies were issued and were charged to the following accounts: cost of sales and services, $169,500; selling, $15,000; administration, $18,000; construction work in progress, $50,000.

(6) Payroll costs for the year totaled $416,200 plus $34,200 for the employer’s share of payroll taxes. Of that amount, $351,900 was paid in cash, and the remainder was withheld for taxes. The $450,400 (416,200 + 34,200) was distributed as follows: cost of sales and services, $265,800; sales, $43,900; administration, $91,400; construction work in progress, $49,300.

(7) Bond interest (6½%) in the amount of $162,500 was paid.

(8) Interest in the amount of $17,000 (included in 7 above) was reclassified to Construction Work in Progress.

(9) Construction projects at the water treatment plant (reflected in the beginning balance of construction in process) were completed in the amount of $203,000, and the assets were placed in service. Payments for these amounts were made in the previous year (no effect on 2017 Statement of Cash Flows).

(10) Collection efforts were discontinued on bills totaling $2,890. The unpaid receivables were written off.

(11) An analysis of customer receivable balances indicated the Estimated Uncollectible Accounts needed to be increased by $5,500.

(12) Payment of accounts payable amounted to $302,000. Payments of payroll taxes totaled $95,200.

(13) Supplies transferred from the Stores and Services Fund amounted to $58,000. Cash in the amount of $50,000 was paid to the Stores and Services Fund for supplies.

(14) Depreciation expense for the year was computed to be $282,000.

(15) In accord with the revenue bond indenture, $25,000 cash was transferred from operating cash to restricted assets.

b. Post the entries to the Water and Sewer Fund ledger (t-accounts).

c. Prepare and post an entry closing all nominal accounts to Net position. Compute the balance in the net position accounts, assuming the only restricted assets are those identified with the bond indenture and the outstanding bonds are associated with the purchase of capital assets.

6–C. Part 3. Proprietary Fund Financial Statements

Required:

Prepare, in good form, for the proprietary funds accounted for in Parts 1 and 2, the following:

(1) A Statement of Revenues, Expenses, and Changes in Fund Net position for the Year Ended December 31, 2017.

(2) A Statement of Net position, as of December 31, 2017.

(3) A Statement of Cash Flows for the Year Ended December 31, 2017. Include restricted assets as a part of cash and cash equivalents for this statement. (Assume any materials and labor attributable to construction in process were paid by year end).

Chapter 7 – Fiduciary Funds

7–C. Part 1. Private Purpose Trust Fund Transactions

The City of Monroe Scholarship Foundation private-purpose trust fund had the following account balances on January 1, 2017:

Debits

Credits

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 50,500

Accrued Interest Receivable . . . . . . . . . . . . . . . . . .

7,500

Investments in Corporate Bonds . . . . . . . . . .

750,000

Net position Held in Trust ……………… . . . . . . . . .

$ 808,000

Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 808,000

$ 808,000

Required:

a. Open a general journal for the City of Monroe Community Foundation Trust Fund and record the following transactions for the year ending December 31, 2017:

(1) On May 1, the first semiannual interest payment was received on the corporate bonds. The bonds pay 6 percent annual interest, semiannually on May 1 and November 1.

(2) During the first half of the year, additional contributions from individuals and foundations amounted to $205,500, in cash. From these funds, $ 200,000 were invested in RST Corporation stock on June 15.

(3) On November 1, the second semiannual interest payment was received from the investment in bonds.

(4) On November 15, a dividend was declared by RST Corporation in the amount of $2,000 and was received in cash.

(5) On December 1, RST Corporation stock was sold for $204,000 cash. Those funds were immediately invested in UVW Corporation stock.

(6) On December 15, cash scholarships in the amount of $48,000 were made to various college students.

(7) On December 31, an accrual was made for year-end interest on the corporate bonds.

(8) Also, on December 31, it was determined that the market value of the corporate bonds, exclusive of accrued interest, was $ 752,100 and that the market value of UVW Company stock was $ 199,000.

b. Post the entries to the Community Foundation Trust ledger (t-accounts).

c. Prepare and post an entry closing all nominal accounts to Net position.

7–C. Part 2. Pension Trust Fund Transactions

The City of Monroe Police Department pension plan, a single-employer, defined-benefit plan, reported the following account balances as of January 1, 2017:

Debits

Credits

Cash

$137,000

Accrued Interest Receivable

75,000

Investments: Bonds

5,300,000

Investments: Common Stock

2,790,000

Accounts Payable

$27,000

Net position Held in Trust for Employee Benefits

8,275,000

Totals

$ 8,302,000

$8,302,000

Required:

a. Open a general journal for the City of Monroe Police Department Pension Trust Fund and record the following transactions for the year ending December 31, 2017:

(1) Member contributions were received in the amount of $400,000. The City General Fund contributed the same amount.

(2) Interest was received in the amount of $212,000, including the accrued interest receivable at the beginning of the year. The interest accrual at year end amounted to $86,000.

(3) During the year, common stock dividends amounted to $125,000.

(4) Investments were made during the year in common stock in the amount of $650,000.

(5) Annuity benefits in the amount of $325,400, disability benefits of $ 82,020 and refunds to nonvested terminated employees of $39,800 were recorded as liabilities.

(6) Accounts payable, in the amount of $460,700, were paid in cash.

(7) During the year, common stock valued at $505,000 was sold for $506,800. A portion of these funds, $500,000 were invested in common stock of a different company.

(8) At year-end, the market value of investments in bonds increased by $7,750; the market value of investments in stocks decreased by $3,250.

b. Post the entries to the Police Department Pension Trust ledger (t-accounts).

c. Prepare and post an entry closing all nominal accounts to Net position.

7–C. Part 3. Fiduciary Fund Financial Statements

Required: Using the balances from Parts 1 and 2 prepare the following:

1. Statement of Changes in Fiduciary Net position.

2. Statement of Fiduciary Net position

Chapter 8 – Government-wide Statements

8–C. Assemble the following from previous continuous problems: (1) the governmental funds Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balances from Section 5–C; (3) the proprietary funds Statement of Net position and Statement of Revenues, Expenses, and Changes in Fund Net position from Section 6–C.

Required:

1. Start a worksheet for adjustments, using the trial balance format illustrated in the text (i.e. list accounts with debit balances first, then accounts with credit balances). Enter the balances from the governmental funds financial statements prepared for Section 5-C. When doing this, follow the following guidelines:

· Net position: Use a single account for net position (which will include the beginning balance of all fund balance accounts).

· Intergovernmental Revenues: When setting up the worksheet, set up separate lines for the intergovernmental revenues as follows:

State Grant for Highway and Street Maintenance

$ 1,065,000

Operational Grant—General Government

332,000

Capital Grant—Public Safety

1,340,000

total

$2,737,000

· Capital Assets: It is not necessary to set up separate lines for different classes of capital (fixed) assets or accumulated depreciation (simply use one row for Capital Assets and another for Accumulated Depreciation).

· Confirm that the total debits and credits equal.

2. Prepare worksheet entries and post to the worksheet for the following items. Identify each adjustment by the letter used in the problem:

a. Record the January 1, 2017 balances of general fixed assets and related accumulated depreciation accounts. The City of Monroe had the following balances (excluding Internal Service Funds):

Cost

Accumulated Depreciation

Totals

$ 64,200,000

28,700,000

b. Eliminate the capital expenditures shown in the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances.

c. Depreciation expense (governmental activities) for the year totaled $ 4,900,000.

d. Eliminate the other financing sources from the sale of bonds by recording a liability for bonds payable and the related premium.

e. As of January 1, 2017, the City of Monroe had $12,000,000 in general obligation bonds outstanding.

f. Eliminate the expenditures for bond principal.

g. Accrue interest in the amount of $328,000. (Two bond issues were outstanding; interest payments for both were last made on July 1, 2017. The computation is as follows: ($11,200,000 × .03 × 6/12) + ($4,000,000 ×. 08 × 6/12) = $328,000).

h. Adjust for the interest accrued in the prior year government-wide statements, but recorded as an expenditure in the 2017 fund basis statements, ($12,000,000 × .03 × 6/12) = $180,000.

i. Amortize bond premium in the amount of $ 10,000.

j. Make adjustments for additional revenue accrual. The only adjustment is for property taxes to eliminate the current year deferral of property taxes.

k. Adjust for the $21,000 of property taxes that was deferred in 2016 and recognized as revenue in the 2017 fund-basis statements.

l. Assume the City adopted a policy in 2017 of allowing employees to accumulate compensated absences. Make an adjustment accruing the expense of $ 42,000 Charge compensated absences expense.