Question

Prepare journal entries for a local government to record the following transactions, first for fund financial statements and then for government-wide financial statements.

a. The government sells $1,064,000 in bonds at face value to finance construction of a warehouse.

b. A $1.22 million contract is signed for construction of the warehouse. The commitment is required if allowed.

c. A $222,000 transfer of unrestricted funds was made for the eventual payment of the debt in (a).

d. Equipment for the fire department is received with a cost of $18,905. When it was ordered, an anticipated cost of $18,200 had been recorded.

e. Supplies to be used in the schools are bought for $4,550 cash. The consumption method is used.

f. A state grant of $93,500 is awarded to supplement police salaries. The money will be paid to reimburse the government after the supplement payments have been made to the police officers.

g. Property tax assessments are mailed to citizens of the government. The total assessment is $602,000, although officials anticipate that 5 percent will never be collected. There is an enforceable legal claim for this money and the government can use it immediately.

Also, mention the type of fund activity it is in front of the journal.

Answer 1

Answer:

We have to prepare a journal entries for  a local government to record the following transactions, first for fund financial statements and then for government-wide financial statements.

a. The government sells $1,064,000 in bonds at face value to finance construction of a warehouse.

Here we are using Capital projects fund

Fund financial statements :

Particulars	Debit($)	Credit($)
Cash	1,064,000
Other financing sources-Bond proceeds		1,064,000

Government wide financial statements

Particulars	Debit($)	Credit($)
Cash	1,064,000
Bonds payable		1,064,000

Here, the assets are not reported only given the money financial the project.

b) b. A $1.22 million contract is signed for construction of the warehouse. The commitment is required if allowed.

Here we are using Capital projects fund

Fund financial statements :

Particulars	Debit($)	Credit($)
Encumbrance	1,220,000
Fund balance-Reserved for encumbrance		1,220,000

Government wide financial statements

Here no government activity is required under government wide financial statements.

c. A $222,000 transfer of unrestricted funds was made for the eventual payment of the debt

Fund financial statements :

Particulars	Debit($)	Credit($)
Other financing uses-Transfer out	222,000
Cash		222,000
Cash	220,000
Other financing uses-Transfer out		220,000

Government wide financial statements

In goverment activities, No entry is required to be recorded

d. Equipment for the fire department is received with a cost of $18,905. When it was ordered, an anticipated cost of $18,200 had been recorded.

Fund financial statements :

Particulars	Debit($)	Credit($)
Fund balance-reserved for encumbrances	18,200
Encumbrances		18,200
Expenditure control	18,905
Vouchers payable		18,905

Government wide financial statements

Particulars	Debit($)	Credit($)
Machinery and equipment	18,905
Vouchers payable		18,905

e) Supplies to be used in the schools are bought for $4,550 cash. The consumption method is used.

Fund financial statements :

Particulars	Debit($)	Credit($)
Supply inventory	4,550
Cash		4,550

Government wide financial statements

Particulars	Debit($)	Credit($)
Supply inventory	4,550
Cash		4,550

g) Property tax assessments are mailed to citizens of the government. The total assessment is $602,000, although officials anticipate that 5 percent will never be collected. There is an enforceable legal claim for this money and the government can use it immediately.

Uncollected tax = 602,000 *5% = $30,100

The amount of revenue = 602,000-30,100 = $571,900

Fund financial statements :

Particulars	Debit($)	Credit($)
Taxes receivable	602,000
Revenues		571,900
Uncollected property tax		30,100

Government wide financial statements

Particulars	Debit($)	Credit($)
Taxes receivable	602,000
Revenues		571,900
Uncollected property tax		30,100