Governmental And Not For Profit Entities

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Q3. The city council of E. Staatsboro approved the following budget for the General Fund for fiscal year 2013:

Estimated Revenues

Property taxes.. $335,000

License fees… 40,000

Fines and penalties .15,000

Total revenues .$390,000

Appropriations

Salaries. $350,000

Supplies and utilities. 30,000

Debt service. 3,000

Total appropriations.. 383,000

Budgeted Increase in Fund Balance $ 7,000

The post-closing trial balance for the fund, as of December 31, 2012, was as follows:

Debits

Credits

Cash

$ 15,000

$ 8,000

Vouchers payable

7,000

Fund balance (unassigned)

$15,000

$15,000

The following transactions and events occurred during FY 2013:

1. Levied property taxes of $335,000 and mailed tax bills to property owners.

2. Borrowed $300,000 on tax anticipation notes at an interest rate of 1 percent per annum.

3. Ordered supplies expected to cost $18,000.

4. Received the supplies along with an invoice for $19,000; paid the invoice immediately.

5. Received cash ($383,000) from the following sources: property taxes ($330,000), licenses and fees ($38,000), fines and penalties ($15,000).

6. Paid cash for the following purposes: unpaid vouchers at the start of year ($8,000), salaries ($340,000), utility bills ($11,000).

7. Repaid the tax anticipation notes 6 months after the date of borrowing, with interest.

8. Processed a budgetary interchange, increasing the appropriation for supplies and utilities by $2,000 and reducing the appropriation for salaries by a like amount.

9. Will pay salaries for the last few days in December, amounting to $2,000, at the end of the first pay period in January 2014; also, received in early January 2014 a utilities invoice for $1,000 applicable to December 2013.

Use the preceding information to do the following.

a. Prepare journal entries to record the budget and the listed transactions and events.

b. Prepare a pre-closing trial balance.

c. Prepare a balance sheet; a statement of revenues, expenditures, and changes in fund balance.

d. Prepare closing journal entries.

 

Sample Solution

Q3. E. Staatsboro City General Fund Accounting for FY 2013

a. Journal Entries

1. Budget (July 1, 2013, opening entry):

Debit: Appropriations – Salaries $350,000 Debit: Appropriations – Supplies & Utilities $30,000 Debit: Appropriations – Debt Service $3,000 Credit: Estimated Revenues $390,000

2. Property Tax Levy (July 1, 2013):

Debit: Receivables – Property Taxes $335,000 Credit: Estimated Revenues $335,000

3. Tax Anticipation Loan (July 1, 2013):

Debit: Cash $300,000 Credit: Payable – Tax Anticipation Notes $300,000

4. Supplies Order (July 15, 2013):

Debit: Encumbrances – Supplies & Utilities $18,000 Credit: Appropriations – Supplies & Utilities $18,000

5. Supplies Payment (August 1, 2013):

Debit: Expenditures – Supplies & Utilities $19,000 Debit: Encumbrances – Supplies & Utilities $18,000 Credit: Vouchers Payable $19,000

6. Revenue Collection (Throughout FY 2013):

Debit: Cash $383,000 Credit: Receivables – Property Taxes $330,000 Credit: Revenues – License Fees $38,000 Credit: Revenues – Fines & Penalties $15,000

7. Vouchers Paid (Throughout FY 2013):

Debit: Expenditures – Various $359,000 Credit: Vouchers Payable $359,000 ** (Breakdown:** ** Previous vouchers: $8,000 ** Salaries: $340,000 ** Utilities: $11,000)

8. Budgetary Interchange (September 1, 2013):

Debit: Appropriations – Salaries $2,000 Credit: Appropriations – Supplies & Utilities $2,000

9. Accruals (December 31, 2013):

Debit: Expenditures – Salaries $2,000 Debit: Expenditures – Utilities $1,000 Credit: Accrued Payroll Liabilities $2,000 Credit: Accrued Utilities Payable $1,000

10. Tax Anticipation Note Repayment (January 1, 2014):

Debit: Expenditures – Interest on Debt $1,500 (6 months at 1%) Debit: Payable – Tax Anticipation Notes $300,000 Credit: Cash $301,500

b. Pre-Closing Trial Balance

Debits Credits Cash $22,500 Receivables – Property Taxes $5,000 Vouchers Payable $24,000 Accrued Payroll Liabilities $2,000 Accrued Utilities Payable $1,000 Fund Balance (unassigned) $60,000

Total $114,500 Total $114,500

c. Financial Statements

Balance Sheet:

Assets Cash $22,500 Receivables – Property Taxes $5,000

Total Assets $27,500

Liabilities and Fund Balance Vouchers Payable $24,000 Accrued Payroll Liabilities $2,000 Accrued Utilities Payable $1,000 Fund Balance (unassigned) $60,000

Total Liabilities and Fund Balance $87,000

Statement of Revenues, Expenditures, and Changes in Fund Balance:

Revenues: Property Taxes $330,000 License Fees $38,000

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