Question

he newly formed Buffalo School District engaged in the following transactions and other events during the year:levied and collected property taxes of $110 million. 2. It issued $30 million in long-term bonds to construct a building. It placed the cash received in a special fund set aside to account for the bond proceeds. 3. During the year it constructed the building at a cost of $25 million. It expects to spend the $5 million balance in the following year. The building has an estimated useful life of 25 years. 4. It incurred $70 million in general operating costs, of which it paid $63 million. It expects to pay the balance early the following year. 5. It transferred$12million from its general fund to a fund established to account for resources set aside to service the debt. Of this, $10 million was for repayment of the debt; $2 million was for interest. 6. From the special fund established to service the debt, it paid $2 million in interest and $6 million in principal. 7. It collected $4 million in hotel taxes restricted to promoting tourism.Since the resources were restricted they were accounted for in a special restricted fund. During the year, the district spent $3 million on promoting tourism. 8. The district established a supplies store to provide supplies to the district’s various departments by transferring $4 million from the general fund. It accounted for the store in an internal service (proprietary) fund. During the year the store purchased (and paid for) $2 million in supplies. Of these it ‘‘sold’’ $1 million, at cost (for cash),to departments accounted for in the general fund. During the year these departments used all of the supplies that they had purchased. a. Prepare journal entries to record the transactions and other events in appropriate funds. APrepare journal entries to record the transactions and other events in appropriate funds. Assume that governmental funds are accounted for on a modified accrual basis and focus only on current financial resources (and thus do not give balance sheet recognition either to capital assets or long-term debts). Proprietary funds are accounted for on a full accrual basis. b. Prepare a combined balance sheet—one that has a separate column for each of the governmental funds you established. c. Prepare a combined statement of revenues, expenditures, and changes in fund balances for all governmental funds. Prepare a separate statement of revenues, expenses, and changes in fund net position for any proprietary funds you established. d. Prepare a government-wide statement of net position and a government-wide statement of activities in which all funds are consolidated and are accounted for on a full accrual basis. Be sure to include both long-term assets and liabilities on the statement of net position and to depreciate the long-term assets. Also, be sure to adjust for any interfund activity.

Answer 1

a. Prepare journal entries to record the transactions and other events in appropriate funds.Assume that governmental funds are accounted for on a modified accrual basis and focus only on current financial resources (and thus do not give balance sheet recognition either to capital assets or long-term debts). Proprietary funds are accounted for on a full accrual basis.

Journal entries are as follows:

1.levied and collected property taxes of $110 million:

General fund Cash           $110     to Property tax revenue $110                                                                                   ( To record property taxes    )

2. It issued $30 million in long-term bonds to construct a building. It placed the cash received in a special fund set aside to account for the bond proceeds.

Capital Projects fund Cash           $30,000,000     to Proceeds from borrowings $$30,000,000                                                                                  ( To record the issuance of bond which is a special fund used for the bond proceeds recorded in the capital projects fun   )

3.During the year it constructed the building at a cost of $25 million. It expects to spend the $5 million balance in the following year. The building has an estimated useful life of 25 years.

Capital projects fund Construction of building (expenditure) $25,000,000 Cash $25,000,000 (To record the costs of constructing the school building)

4.It incurred $70 million in general operating costs, of which it paid $63 million. It expects to pay the balance early the following year.

General fund General operating expenditures $70 m Cash $63 Accounts payable $7 (To record general operating expenditures)

5. It transferred$12million from its general fund to a fund established to account for resources set aside to service the debt. Of this, $10 million was for repayment of the debt; $2 million was for interest.

a)General fund                                                                              Transfer out to debt service fund $12 m                                Cash $11                                                                                                    (To record transfer to the debt service fund)                           b) Debt service fund                                                                                                             Cash $12m                                                                                     Transfer in from general fund $12m                                             (To record transfer from the general fund)

6. From the special fund established to service the debt, it paid $2 million in interest and $6 million in principal.

b) Debt service fund                                                                                                                                                                                                                                                                                                                                                                                                                Interest expenditure $2m                                                                                                                                                                                                                                                                                                                                                                                                          Principal payment $6m                                                                                                                                                                                                                                                                                                                                                                                                       (To record transfer from the special fund)

7. It collected $4 million in hotel taxes restricted to promoting tourism.Since the resources were restricted they were accounted for in a special restricted fund. During the year, the district spent $3 million on promoting tourism.

Special revenue fund

Cash $4

Hotel taxes $4

(To record hotel taxes)

Tourism expenditures $3

Cash $3

(To record tourism expenses)

8. The district established a supplies store to provide supplies to the district’s various departments by transferring $4 million from the general fund. It accounted for the store in an internal service (proprietary) fund. During the year the store purchased (and paid for) $2 million in supplies. Of these it ‘‘sold’’ $1 million, at cost (for cash),to departments accounted for in the general fund. During the year these departments used all of the supplies that they had purchased.

Internal service fund a)Cash $4          Transfer-in from general fund $4 b)Supplies inventory    $ 2          Cash   $ 2 c)Cash $1         Sales revenue $1 d)Cost of supplies sold $1       Supplies inventory $1 2. General Fund a) Transfe-out to internal service fund $ 4        Cash $4 b) Supplies expenditure $ 1          Cash $1

b. Prepare a combined balance sheet—one that has a separate column for each of the governmental funds you established.

TABLE 2-1 School District’s Funds Balance Sheet (in millions)

Assets

Cash

Property Taxes Recievable

Total