In: Accounting
For the following situations, make adjusting entries necessary to prepare government-wide financial statements. Where appropriate, take account of the amounts reported in the fund-level financial statements.
A) To prepare its government-wide financial statements for the year ended December 31, 2015, the city reported a $900,000 long-term liability for estimated judgments and claims. At December 31, 2016, the city estimated that the long-term liability would be $935,000. (Hint: Carry forward the starting liability and adjust for the increase.)
B) A city instituted a new sales tax starting January 1, 2015. It collected $600,000 of sales taxes during 2015. When the city prepared its fund-level statements, it accrued an additional $200,000 for sales taxes remitted by larger businesses in January, 2016, for taxes collected in the fourth quarter of 2015. However, smaller businesses are not required to remit fourth quarter collections until April, 2017. No accrual was made for those taxes, which were estimated to be $28,000.
C) See facts in situation b. For the calendar year 2016, the city reported sales taxes of $800,000 in its fund-level financial statements. This amount includes all taxes collected in 2016 (applicable to 2016 and 2015), as well as the accrual for larger merchant remittances in January, 2017. The accrual does not include estimated remittances of $35,000 from smaller merchants in April, 2017.
The necessary adjustment entries to prepare government-wide financial statements are as follows-:
Judgments and claims expenses35,000
Judgments and claims liabilities935,0000
(The adjustment could be in two entries, in which one carries forward for December 31, 2012, liability of 900,000)
Revenues - sales taxes28,000