Question

Chapter 6 – Proprietary Funds

I need Part 3

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 125% 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) in transaction #1.

(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) Optional - 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). This is worth 5 extra credit points!

Answer 1

Balance Sheet
Liability		Assets
Accumulated Depreciation	69600	Cash	35000
Accounts Payable	19400	Due from General Fund	3200
Advance from water utility fund	15000	Due from Water Utility Fund	8000
net position	127740	Invetories of Supplies	37540
		Land	18000
		Buildings	84000
		Equipment	46000
Grand total	231740	Grand Total	231740

LEDGER ACCOOUNTS
T FORM
Cash Account
Particulars	Amount	Particulars	Amount
To Balance B/d	28000	By Water Utility fund	15000
To Due from other funds	27000	By Accounts Payable	365000
To general Fund	310000
To Water Utility Fund	50000	By balance c/d	35000
Grand Total	415000	Grand Total	415000
To Balance B/d	35000
Due from other funds
Particulars	Amount	Particulars	Amount
To Balance B/d	27000	By Cash Account	27000
Grand Total	27000	Grand Total	27000
Inventory and Supplies
Particulars	Amount	Particulars	Amount
To Balance B/d	27500	By Services Provided	296960
to cash	307000	By balance C/d	37540
Grand Total	334500	Grand Total	334500
to Balance B/d	37540
Land
Particulars	Amount	Particulars	Amount
To Balance B/d	18000	By balance C/d	18000
Grand Total	18000	Grand Total	18000
to Balance B/d	18000
Buildings
Particulars	Amount	Particulars	Amount
To Balance B/d	84000	By balance C/d	84000
Grand Total	84000	Grand Total	84000
to balance b/d	84000
Depreciation Fund
Particulars	Amount	Particulars	Amount
To Balance C/d	69600	By Balance B/d	55000
		By depreciation	14600
Grand Total	69600	Grand Total	69600
		By Balance B/d	69600
Depreciation
Particulars	Amount	Particulars	Amount
To buildings	10000	By Operating Account	14600
to Equipments	4600
Grand Total	14600	Grand Total	14600
Equipment
Particulars	Amount	Particulars	Amount
To Balance B/d	46000	By Balance C/d	46000
Grand Total	46000	Grand Total	46000
To balance B/d	46000
Accounts Payable
Particulars	Amount	Particulars	Amount
To cash	365000	By Balance B/d	19000
to Balance c/d	19400	By Supplies	307000
		By operating expense	58400
Grand Total	384400	Grand total	384400
		by Balance B/d	19400
Advance from water utility fund
Particulars	Amount	Particulars	Amount
to cash	15000	By Balance B/d	30000
to Balance c/d	15000
Grand Total	30000	Grand total	30000
		by balance B/d	15000
Properitors Fund
Particulars	Amount	Particulars	Amount
to balance c/d	127740	By Balance B/d	126500
		By operating account	1240
Grand Total	127740	Grand Total	127740
		by balance b/d	127740
Services Provided Account
Particulars	Amount	Particulars	Amount
to operating account	371200	By general Fund	313200
		By Water utility fund	58000
Grand Total	371200	Grand Total	371200
General Fund
Particulars	Amount	Particulars	Amount
to Services Provided	313200	By Cash	310000
		by balance c/d	3200
Grand Total	313200	Grand Total	313200
to balance b/d	3200
Water Utility Fund
Particulars	Amount	Particulars	Amount
To services Provided	58000	By cash	50000
		by Balance C/d	8000
Grand Total	58000	Grand Total	58000
to balance b/d	8000
Operating Expenses Account
Particulars	Amount	Particulars	Amount
Operating Expenses payable Account	15000	By opearing account	58400
Operating Expenses payable Account	16900
Operating Expenses payable Account	17500
Operating Expenses payable Account	9000
Grand Total	58400	Grand Total	58400
Operating Account
Particulars	Amount	Particulars	Amount
to Supplies and Inventories	296960	BY Service provided account	371200
to Depreciation	14600
to operating expenses	58400
to properitors fund	1240
Grand Total	371200	Grand Total	371200

JOURNAL ENTRY
	DB	CR
Particulars	Amount	Amount
Cash Account	27000
To Due from other funds		27000
Purchases	307000
To accounts payable		307000
Advance from Water Utility fund	15000
To cash		15000
General Fund Account	313200
to services provided		313200
Water utility fund account	58000
to services provided		58000
Operating expenses (Purchase)	15000
Operating expenses (Warehouse)	16900
Operating expenses (Delivery)	17500
Operating expenses (Admin)	9000
Account payable		58400
Operating Account	296960
to Supplies and inventories		296960
Cash Account	360000
to General fund account		310000
Utility fund account		50000
Accounts payable	365000
to cash		365000
Depreciation	14600
to buildings		10000
to Equipments		4600
Operating Account	14600
to depreciation		14600
Services Provided Account	371200
to operating account		371200
Operating Account	1240
Properitors fund		1240