Question

The Balance Sheet of the Street and Highway Fund of the City of Monroe as of December 31, 2019, follow.

CITY OF MONROE
Street and Highway Fund Balance Sheet
As of December 31, 2019
Assets
Cash	$	19,000
Investments		63,000
Due from state government		107,000
Total assets	$	189,000
Liabilities and Fund Equity
Liabilities:
Accounts payable	$	10,000
Fund equity:
Fund balance—assigned for streets and highways		179,000
Total liabilities and fund equity	$	189,000

3-C. This portion of the continuous problem continues the special revenue fund example 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:

(1) Also as of January 1, 2020, 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 $1,057,000. Record the budget and post to the ledger.

4–C. Part 2. Special Revenue Fund Transactions

Required:
a. Record journal entries for the following transactions for FY 2020 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. (2) The state government notified the City that $1,067,500 will be available for street and highway maintenance during 2020 (i.e. the City has met eligibility requirements). The funds are not considered reimbursement-type as defined by GASB standards.
2. (3) Cash in the total amount of $997,000 was received from the state government.
3. (4) Contracts, all eligible for payment from the Street and Highway Fund, were signed in the amount of $1,062,000.
4. (5) 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. (6) Investment revenue of $1,900 was earned and received.
6. (7) Accounts payable were paid in the amount of $987,000.
7. (8) 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, 2020.
d. Prepare a Balance Sheet for the Street and Highway Fund as of December 31, 2020. Assume any unexpended net resources are classified as Restricted Fund Balance.

Answer 1

		Dr	Cr
		$	$
3-C	Estimated Revenue	1068000
1	To Appropriation		1057000
	To Budegtry fund balance		11000
4-C
2	No Journal entry required
	The state government has just notified
3	Cash a/c	9,97,000
	To Funds for street and highway maintenance a/c		9,97,000
4	No Journal entry required
	Only contract is signed
5	Funds for street and highway maintenance a/c	10,42,000
	To Revenue		10,42,000
6	Cash a/c	1900
	To Income on Investment		1900
7	Accounts Payable a/c	9,87,000
	To Cash a/c		9,87,000
7	Legal Exp a/c	4,500
	To Cash a/c		4,500

Statemetn of Revenue
revenue from Street and highwasy maintenance	10,42,000
revene from Investment	1900
Total	10,43,900
Statemetn of Expenditure
Accounts Payable	9,23,000
Legal Exp	4,500
Total	9,27,500
Changes in fund
Amount received for Maintenance	9,97,000
revene from Investment	1900
Accounts payable	-9,87,000
Legal Exp	-4,500
Closing Balance	7400