Homework answers / question archive / Chapter 04   Accounting for Governmental Operating Activities—Illustrative Transactions and Financial Statements    True / False Questions  1

Chapter 04   Accounting for Governmental Operating Activities—Illustrative Transactions and Financial Statements    True / False Questions  1

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Chapter 04

 

Accounting for Governmental Operating Activities—Illustrative Transactions and Financial Statements

  

True / False Questions

 1.  The government-wide statement of net position is prepared using the same measurement focus and basis of accounting as the General Fund balance sheet. 

 

 True    False

 

 

2.  The Governmental Activities column of the government-wide statement of net position reports both current and noncurrent assets and liabilities. 

 

 True    False

 

 

3.  Vehicles used by the Culture and Recreation Department should be reported in the governmental fund financial statements. 

 

 True    False

 

 

4.  Recording the annual budget is optional in the General Fund. 

 

 True    False

 

 

5.  The account Budgetary Fund Balance can have either a debit or credit balance. 

 

 True    False

 

 

6.  The Governmental Activities column of the statement of net position includes financial information for all funds of a government. 

 

 True    False

 

 

 7.  Encumbrances Outstanding is shown on the balance sheet as a restriction on fund balance. 

 

True    False

 8.  Governments that are temporarily short of cash but that have levied taxes expected to be collectible during the fiscal year are generally able to borrow on short-term notes known as "tax anticipation notes payable."

 

True    False

 

 

 9.  If the actual liability for goods received in the current year differs from the estimated liability recorded when the goods were ordered in the prior year, the Encumbrances account should be credited in the amount of the estimated liability.

 

 True    False

 

 

10.  Under the modified accrual basis of accounting applicable to governmental fund types, property tax revenue is accrued and recorded at net realizable value. 

 

 True    False

 

 

11.  Current financial resources include cash and items such as marketable securities and receivables expected to be converted into cash in the current period or soon enough thereafter to pay current period obligations.

 

True    False

 

 

12.  Under GASB standards, Revenues must be credited for the total amount of the property tax levy. 

 

 True    False

 

 

13.  A contribution was received by the city for the purchase of playground equipment. The contribution would not be recognized as revenue by the permanent fund until the playground equipment has been purchased. 

 

 True    False

 

 

14.  Property tax revenue is an example of a nonexchange revenue—one in which the government receives value without directly giving equal value in exchange.

 

 True    False

 

15.  Under current GASB standards the revenue from property taxes should be recorded in the amounts collected during the current period. 

 

True    False

 

 

16.  Estimated uncollectible tax amounts are recorded in the General Fund general journal as a reduction in revenues and in the governmental activities journal as a bad debt expense. 

 

 True    False

 

 

17.  A tourist tax that is restricted for use on maintenance projects in the historic downtown district should be recorded as general revenues in the governmental activities journal. 

 

 True    False

 

 

18.  Property taxes due 75 days after the end of the 2017 fiscal year would be recognized in 2017 as revenues in the General Fund general journal.   

 

 True    False

 

 

19.  Whenever a significant revenue source is restricted for a specific operating purpose, a special revenue fund should be established. 

 

 True    False

 

 

20.  A payment made by the General Fund to a debt service fund would not be recorded in the governmental activities journal. 

 

 True    False

 

 

21.  Fines and forfeits are reported as charges for services on the government-wide statement of activities. 

 

 True    False

 

 

22.  A payment made by a city-owned utility to the General Fund of the city in lieu of taxes is an example of an "internal exchange transaction." 

 

 True    False

23.  Amounts due to or from other funds should be eliminated in both the government-wide and fund financial statements. 

 

 True    False

 

 

24.  At the end of the fiscal year, the purchases method of recording inventory adjusts the Expenditures account to reflect the amount of inventory actually used during the period. 

 

True    False

 

 

25.  Permanent funds use the modified accrual basis of accounting.

 

 True    False

 

 

26.  An interfund transfer occurs when one fund of government pays another fund of the same government for services provided. 

 

 True    False

 

 

27.  Grant funds received before time requirements are met, but after all other eligibility requirements have been met, should be reported as an asset and a deferred inflow of resources by the recipient.

 

True    False

 

 

28.  Year-end interfund receivable or payable balances will appear in the line item internal balances within their respective columns on the government-wide statement of net position.

 

True    False

 

 

29.  Some governments choose to sell the collection rights to unpaid property taxes in tax lien public auctions and therefore will not have property tax balances reported within the financial statements. 

 

True    False

 

 

30.  Encumbrance accounts need not be closed at year-end if the government is required or intends to honor the encumbrances outstanding at year-end.

 

True    False

 

Multiple Choice Questions

31.  Which of the following financial statement(s) reports both current and noncurrent assets and liabilities?

	Government-wide Statement of Net Position	General Fund Balance Sheet
A)	No	Yes
B)	No	No
C)	Yes	No
D)	Yes	Yes

 

A. Choice A

B. Choice B

C. Choice C

D. Choice D

 

 

32.       Which of the following should not be reported on the balance sheet of the General Fund? 

 

A.        Equipment.

B.        Vouchers payable.

C.        Tax anticipation notes payable.

D.        Due from federal government.

 

 

33.       When equipment is ordered by a department of the government, the purchase order should be recorded in the General Fund as a debit to: 

 

A.        Appropriations.

B.        Equipment.

C.        Encumbrances.

D.        Expenditures.

 

 

34.  The receipt of equipment that had previously been ordered should be recorded in the General Fund as a debit to: 

 

A.        Appropriations.

B.        Equipment.

C.        Encumbrances.

D.        Expenditures.

35.       The City of Pringle purchased a vehicle for the police department. If the operations of the police department are financed by general revenues, an asset would be recorded in which journal(s)?

	General Fund	Governmental Activities
A)	Yes	No
B)	No	No
C)	No	Yes
D)	Yes	Yes

 

A.        Choice A.

B.        Choice B.

C.        Choice C.

D.        Choice D.

 

 

36.       The Town of Loveland levied property taxes in the amount of $1,600,000. The town estimates that 1 percent will be uncollectible. The journal entry to record the tax levy will include 

 

A.        A debit to Cash for $1,584,000.

B.        A credit to Revenues for $1,584,000.

C.        A debit to Allowance for Uncollectible Current Taxes for $16,000.

D.        A debit to Estimated Revenues for $1,600,000.

 

 

37.  Dover City has calculated that General Fund property tax revenues of $5,640,000 are required for the current fiscal year. Over the past several years, the city has collected 94 percent of all property taxes levied. The city levied property taxes in the amount that will generate the required $5,640,000. Which of the following general journal entries would correctly record the property tax levy?

 

A.  Taxes Receivable – Current……………………   5,640,000

Estimated Uncollectible Current Taxes…………………   338,400

Revenues………………………………………………   5,301,600

B.  Taxes Receivable – Current ……………………   6,000,000

Estimated Uncollectible Current Taxes…………………   360,000

Revenues………………………………………………   5,640,000        

C.  Taxes Receivable – Current……………………    5,640,000

Deferred Inflow of Taxes.………………………………    338,400

Revenues………………………………………………   5,301,600

D.  Taxes Receivable – Current……………………    6,000,000

Deferred Inflow of Taxes……………………………….    360,000

Revenues………………………………………………   5,640,000

 

38.       An interfund transfer in should be reported in a governmental fund operating statement as a(an) 

A.        Revenue.

B.        Due from other funds.

C.        Other financing source.

D.        Other financing use.

 

 

39.       The General Fund has transferred cash to the appropriate fund for eventual retirement of term bonds maturing in 10 years. Which funds would record this transaction?

 

	General Fund	Capital Projects Fund	Debt Service Fund
A)	Yes	No	Yes
B)	No	No	Yes
C)	Yes	No	No
D)	Yes	Yes	Yes

 

A.        Choice A.

B.        Choice B.

C.        Choice C.

D.        Choice D.

 

40. A properly prepared schedule of revenues, expenditures, and changes in fund balances—budget and actual will include which of the following columns?

A. Actual revenue and expenditure amounts on the GAAP basis.

B. Actual revenue and expenditure amounts on the budget basis.

C. Encumbrances outstanding at year-end.

D. Unexpended appropriations.

 

41.       Using the information below, what amount should be accounted for in a special revenue fund or funds?

Warehouse equipment used to store supplies for delivery to all city departments and agencies on a cost-reimbursement basis	$300,000
Equipment used for supplying electric power to residents	$1,750,000
Receivables for completed sidewalks to be paid for in installments by affected property owners.  Construction was financed by special assessment bonds for which the town has no liability	$1,500,000
Cash received from federal government, dedicated to highway maintenance, that must be accounted for in a separate fund	$1,800,000

 

A.        $1,800,000.

B.        $2,100,000.

C.        $3,300,000.

D.        $5,350,000.

 

 

42.       Which of the following would properly be reported in the operating statement of a governmental fund? 

 

A.        Interest on a tax anticipation note issued and repaid during the period.

B.        Amortization expense.

C.        Depreciation expense.

D.        A grant that is intended to finance activities of the following period.

 

 

43.       The Revenues account of a government is debited when: 

 

A.        The budget is recorded at the beginning of the year.

B.        Property taxes are recorded.

C.        The account is closed to fund balance—unassigned at the end of the year.

D.        Property taxes are collected.

 

 

44.       The Estimated Revenues account of a government is debited when:

 

A.        The budget is recorded at the beginning of the year.

B.        Property taxes are recorded.

C.        The account is closed to fund balance—unassigned at the end of the year.

D.        Property taxes are collected.

 

 

45.       Which of the following would be considered an internal exchange transaction?  

 

A.        The General Fund transfers $200,000 to establish a Central Supplies Fund; this amount will not be repaid.

B.        The General Fund transfers $125,000 to the Debt Service Fund for payment of currently due bond interest payments.

C.        The General Fund transfers $9,000 to the Central Supplies Fund for supplies it received from Central Supplies.

D.        The Capital Projects Fund completes a library building project and transfers the remaining cash to the Debt Service Fund.

 

 

 

46.       The General Fund used electricity provided by the city-owned electric utility (an enterprise fund of the city). The General Fund general journal entry to record the transaction will include: 

 

A.        A debit to Expenses.

B.        A debit to Expenditures.

C.        A debit to Interfund Transfers Out.

D.        A debit to Due to Other Funds.

 

 

47.       The General Fund used electricity provided by the city-owned electric utility (an enterprise fund of the city). The governmental activities journal entry to record the transaction will include:  

 

A.        A debit to Expenses.

B.        A debit to Expenditures.

C.        A debit to Internal Balances.

D.        No entry would be recorded since the transaction is between two funds of the same government.

 

 

48.       On May 1, the City of Dustin was notified of approval of a $300,000 federal operating grant, payable on a reimbursement basis as the city expends resources for the intended purpose of the grant. As of May 1, no expenditures had been made for grant purposes. The journal entry to record approval of this grant will include:   

 

A.        A credit to Revenues in the amount of $300,000.

B.        A credit to Deferred Inflow of Resources— Grant Proceeds in the amount of $300,000.

C.        A debit to Grants Receivable in the amount of $300,000.

D.        No journal entry will be made until expenditures for the authorized purpose occur.

 

 

49.       Vacation City was awarded a $500,000 federal operating grant for use in Year 2.  On December 1 of year 1, half of the grant money was received by the City. The journal entry to record receipt of the grant funds will include:  

 

A.        A credit to Revenues in the amount of $250,000.

B.        A credit to Deferred Inflow of Resources— Grant Proceeds in the amount of $250,000.

C.        A debit to Grant Expenditures in the amount of $250,000.

D.        No journal entry will be made until expenditures are made in Year 2.

 

 

 

50.       Which of the following best describes the proper treatment for uncollectible amounts of taxes?  

 

A.        Report as bad debt expense.

B.        Report as deferred inflow of resources.

C.        Report as bad debt expenditures.

D.        Report receivables net of uncollectible amounts.

 

 

51.       Property taxes due and collectible 90 days after the 2017 fiscal year end would be recorded as revenues in 2017 in which journal?

 

	General Fund	Governmental Activities
A)	Yes	No
B)	No	No
C)	No	Yes
D)	Yes	Yes

A.        Choice A.

B.        Choice B.

C.        Choice C.

D.        Choice D.

 

 

52.       Cartier Village's capital expenditures during the year ended December 31 included:

 

Equipment for village tax collector's office    $40,000

Vehicles for village electric utility                    60,000

 What amounts should have been recorded in the General Fund and enterprise fund for the increase in equipment during the year ended December 31, assuming the electric utility is considered an enterprise fund? 

A.        General Fund: $0; Enterprise Fund: $0

B.        General Fund: $0; Enterprise Fund: $60,000

C.        General Fund: $40,000; Enterprise Fund: $60,000

D.        General Fund: $100,000; Enterprise Fund: $0

 

 

 

53.       The City of Island Grove uses encumbrance accounting and its fiscal year ends on June 30. On May 6, a purchase order was approved and issued for supplies in the amount of $6,000. Island Grove received these supplies on June 2, and the $6,000 invoice was approved for payment. What General Fund journal entry should Island Grove make on May 6, to record the approved purchase order?

		Debits	Credits
A)	Encumbrances	6,000
	Appropriations		6,000
B)	Supplies	6,000
	Vouchers Payable		6,000
C)	Encumbrances	6,000
	Encumbrances Outstanding		6,000
D)	Expenditures	6,000
	Encumbrances		6,000

 

 

A.        Choice A

B.        Choice B

C.        Choice C

D.        Choice D

54.

The City of Island Grove uses encumbrance accounting and its fiscal year ends on June 30. On May 6, a purchase order was approved and issued for supplies in the amount of $6,000. Island Grove received these supplies on June 2, and the $6,000 invoice was approved for payment. What General Fund journal entry or entries should Island Grove make on June 2, upon receipt of the supplies and approval of the invoice?         Debits Credits A) Encumbrances Outstanding 6,000       Encumbrances   6,000   Expenditures 6,000       Vouchers Payable   6,000 B) Encumbrances 6,000       Appropriations   6,000   Fund Balance—Unassigned 6,000       Vouchers Payable   6,000 C) Supplies 6,000       Vouchers Payable   6,000 D) Appropriations 6,000       Encumbrances   6,000   Supplies 6,000       Vouchers Payable   6,000     A.  Choice A. B.  Choice B. C.  Choice C. D.  Choice D.

 

55.       Which of the following will require a credit to Fund Balance—Unassigned of a governmental fund when operating statement accounts are closed at the end of the year, assuming there are no other financing sources or uses?  

 

A.        Revenues are less than expenditures.

B.        Revenues are more than expenditures.

C.        Revenues are more than expenditures and encumbrances.

D.        Revenues are less than expenditures and encumbrances.

 

 

 

56.       On July 1, the first day of its fiscal year, the Town of Eldon levied a $1,000,000 property tax which is payable in full on December 1 of the same year. On September 15, the town decided to borrow $200,000 in 90-day tax anticipation notes to cover operating expenditures until the tax revenues are collected. The journal entry on September 15 to record the issuance of tax anticipation notes will include: 

 

A.        A credit to Other Financing Sources—Proceeds of Tax Anticipation Notes.

B.        A credit to Tax Anticipation Revenue.

C.        A credit to Tax Anticipation Notes Payable.

D.        A credit to Deferred Outflow of Resources—Tax Anticipation Notes.

 

 

57.       The voters of the city passed an ordinance to increase their sales tax by ¼ percent. The proceeds of the sales tax are to be used for culture and recreation. In the governmental activities journal, how would the ¼ percent sales tax revenue be recorded? 

 

A.        Program Revenue—Culture and Recreation—Sales Tax.

B.        Program Revenue—Culture and Recreation—Operating Grants and Contributions.

C.        General Revenue—Sales Tax.

D.        General Revenue—Culture and Recreation—Sales Tax.

 

 

58.       During January 2017 General Fund supplies ordered in the previous fiscal year and encumbered at an estimated amount of $2,000 were received at an actual cost of $2,200. The entry to record this transaction will require a debit to: 

 

A.        Expenditures—2017 in the amount of $2,200.

B.        Expenditures—2016 in the amount of $200.

C.        Expenditures—2017 in the amount of $200.

D.        Expenditures—2016 in the amount of $2,200.

 

           

59.       When a fire truck purchased from General Fund revenues is received, what account, if any, should have been debited in the General Fund?  

 

A.        No journal entry should be made in the General Fund.

B.        Expenditures.

C.        Encumbrances.

D.        Equipment.

 

 

60.       Which of the following accounts would not be closed at the end of each fiscal year?  

 

A.        Fund balance.

B.        Estimated revenues.

C.        Interfund transfers out.

D.        Expenditures.

 

 

61.       In fiscal year 2017 the "Expenditures—2016" account represents:  

 

A.        Excess expenditures in 2016 that will be offset against appropriations for 2017.

B.        Goods or services received in 2016 which the government has no record of ordering.

C.        Amount of expenditures for goods ordered in 2016 that were received in 2017 and chargeable to appropriations of 2016.

D.        The amounts of purchase orders issued in 2016 that were intended to be paid in full from appropriations for 2017.

 

 

62.       If state law requires that local governments prepare General Fund and special revenue fund budgets on a basis that differs from the basis of accounting required by GAAP, then the budgetary comparison schedule or statements should:  

 

A.        Not be included as part of the basic financial statements.

B.        Be included with the actual figures presented on the budget basis and then reconciled to the GAAP basis.

C.        Be included with budget figures and actual figures adjusted to the GAAP basis.

D.        Be included as part of management's discussion and analysis (MD&A).

 

 

63.       Which of the following transactions is classified as an exchange transaction?  

 

A.        Property taxes.

B.        Fees charged by a municipal airport.

C.        Bequest left to the city by a wealthy citizen.

D.        State grant to conduct an after school program for children.

 

 

64.       Equipment acquired several years ago by a capital projects fund and reported in the governmental activities statement of net position at a net book value of $2,000 was sold for $1,000 cash. Cash is collected in the General Fund. Journal entries are necessary in the general journals of the: 

 

A.        General Fund, capital projects fund, and governmental activities.

B.        General Fund and governmental activities.

C.        General Fund, capital projects fund, and enterprise fund.

D.        Capital projects fund and governmental activities.

 

 

 

 

65.       Which of the following assets would appropriately be reported on the governmental funds balance sheet?  

 

A.        Capital assets.

B.        Inventories.

C.        Unamortized debt issuance costs.

D.        Goodwill.

 

 

66.       Which of the following would be reported on the operating statement of a governmental fund?  

 

A.        The liability for the annual obligation to the employee retirement plan.

B.        Depreciation expense.

C.        Resources received for services to be provided in future periods.

D.        Revenue related to prior periods.

 

 

67.       If a governmental fund issues debt to finance a capital acquisition, how should the proceeds of the debt be recorded?  

 

A.        Long-term liability.

B.        Revenue.

C.        Other financing source.

D.        Not reported by the governmental fund; only reported at the government-wide level.

 

 

68.       Under the modified accrual basis of accounting, revenues should be recognized when:  

 

A.        Realizable.

B.        Earned.

C.        Available.

D.        Spent.

 

 

69.       At the end of the 2017 fiscal year the General Fund had $500 in encumbrances that remained opened into fiscal year 2018. In 2018 the encumbered goods were received at an invoiced cost of $520. How much would be recorded as the 2018 expenditure? 

 

A.        $0.

B.        $20.

C.        $500.

D.        $520.

 

 

 

 

70.       The governmental funds operating statement presents all of the following except:  

 

A.        Expenditures.

B.        Other financing sources.

C.        Revenues.

D.        Encumbrances.

 

 

71.       The General Fund is used to account for:  

 

A.        Revenues and expenditures legally restricted to a specific purpose.

B.        The accumulation of resources to pay for principal and interest on the current portion of long-term debt.

C.        Construction of major capital assets.

D.        General administration of the government.

 

 

72.       Under the consumption method for recording supplies that are maintained on a perpetual inventory system, the adjusting entry made at year end would affect which of the following accounts?  

 

A.        Fund Balance—Nonspendable—Inventory of Supplies.

B.        Fund Balance—Restricted—Inventory of Supplies.

C.        Expenditures.

D.        Inventory of Supplies.

 

 

73.       Supplies recorded in the General Fund under the purchases method will initially include a:    

 

A.        Debit to Inventory of Supplies.

B.        Credit to Fund Balance—Restricted—Inventory of Supplies.

C.        Debit to Expenditures.

D.        Debit to Fund Balance—Restricted—Inventory of Supplies.

 

 

74.       Revenues that are legally restricted for expenditure on specified operating purposes should be accounted for in special revenue funds, including

 

A.        Endowment where the investment earnings are to be used for public purposes.

B.        Pension trust fund revenues.

C.        Accumulation of resources for payment of general long-term debt principal and interest.

D.        Gasoline taxes to finance road repairs.

 

 

 

 

75.       The city’s electric utility fund sent $700,000 to the General Fund to help cover the city’s operating costs. This transaction would be recorded in the governmental activities journal as: 

 

A.        Interfund transfer in.

B.        Internal balance.

C.        Revenue.

D.        It would not be recorded since the transaction involves two funds of the same government.

 

 

76.       Which of the following transactions is classified as an exchange transaction? 

 

A.        Fees charged for use of an athletic field at a city park.

B.        State grant to conduct a smoking cessation program for middle school-aged youth.

C.        Bequest left to the city by a former mayor.

D.        Personal property taxes.

 

 

77.       Which of the following types of nonexchange transactions recognize revenue when all the eligibility requirements are met?  

 

A.        Voluntary nonexchange transactions.

B.        Imposed nonexchange transactions.

C.        Derived tax revenues.

D.        Property tax revenues.

 

 

78.       Which of the following is not a program revenues classification used in the governmental activities journal and reported in the government-wide statement of activities?  

 

A.        User fees.

B.        Operating grants and contributions.

C.        Charges for services.

D.        Capital grants and contributions.

 

 

79.  The county received a $10,000,000 endowment, the terms of which indicate that earnings on the endowment are to be used by health and welfare to provide medical services to low-income children. Where would the $10,000,000 be recorded? 

 

A.        Special revenue fund.

B.        Permanent fund.

C.        Private-purpose trust fund.

D.        Public-purpose trust fund.

 

 

80.  The earnings on the assets of a permanent fund are to be used to support the city’s library (special revenue fund). How would the earnings be recorded?  

A.        Revenues by the permanent fund.

B.        Revenues by the library.

C.        Revenues by both the permanent fund and the library.

D.        Other financing source by the permanent fund.

 

Short Answer Questions

 

81.

The following are key terms in Chapter 4 that relate to exchange and nonexchange transactions:  A. Derived tax revenues  B. Exchange transactions  C. Nonexchange transactions  D. Imposed nonexchange transactions  E. Voluntary nonexchange transactions      For each of the following definitions, indicate the key term from the list above that best matches by placing the appropriate letter in the blank space next to the definition.   _____ 1.  Transactions in which the donor derives no direct tangible benefits from the recipient agency _____ 2.  A classification of nonexchange transaction, such as income or sales taxes _____ 3.  A category of nonexchange transaction that includes certain grants and entitlements and most donations _____ 4.  A category of nonexchange transactions, such as property taxes and most fines and forfeitures.

82.  In what ways does the government-wide statement of net position differ from the balance sheet for governmental funds?

 

 

83.  How does the use of encumbrance procedures improve budgetary control over expenditures?

 

 

84.  Why might actual revenues and expenditures reported on the schedule of revenues, expenditures, and changes in fund balances—budget and actual differ from those reported on the GAAP-basis statement of revenues, expenditures, and changes in fund balances?

 

 

85.       Identify the four types of nonexchange transactions and discuss the rules for recognition of revenues and expenses/expenditures for each type of transaction. 

 

 Problems

 

86.       All revenues of the City of Capri are accounted for on the modified accrual basis. Below is shown a list of Capri's General Fund transactions of a revenue nature. State which ones should be recognized by the General Fund as a revenue in the year of occurrence. If any item is not a current revenue, state the proper treatment for that item.

 1) Receipt of money from issue of tax anticipation notes.

 2) Collection of taxes that had been written off in prior year. 

 3) Collection of current-year property taxes.

 4) Collection of prior years' delinquent property taxes.

 5) Receipt of money in prepayment of a property owner's next-year taxes.

 6) Collection of accounts receivable for charges for services.

 

 

 

87.

The following is a pre-closing trial balance for Sun City's General Fund as of June 30, 2017:    Debits Credits Cash $116,500   Taxes Receivable—Current 29,000   Allowance for Uncollectible Current Taxes   $3,000 Accounts Payable   7,800 Due to Other Funds   5,500 Tax Anticipation Notes Payable   50,000 Fund Balance—Unassigned   70,200 Budgetary Fund Balance   1,000 Estimated Revenues 100,000   Revenues   102,000 Appropriations   99,000 Expenditures 93,000   Totals $338,500 $338,500 What is the fund balance as of June 30, 2017, after all closing entries have been made? Show your work.

 

 

88.       Beach City received a gift of corporate stock valued at $1,200,000 on the date of the gift. The donor specified that the principal amount of the gift be maintained in perpetuity, but that earnings can be used to acquire works of art to improve the appearance of public buildings. All changes in fair value are to increase or decrease the principal amount of the gift. Assuming that Beach City uses a permanent fund to account for the endowment and a special revenue fund to account for the earmarked earnings from the endowment, explain the accounting process for (1) receipt of the original gift, (2) receipt of quarterly dividends, (3) notification that fair value of the original stock increased by $3,000 during the year, and (4) the effect on fund balances of closing temporary accounts at year-end. (Note: Ignore the effects of the transactions at the government-wide level). 

 

 

89. During fiscal year 2017, the Town of Tonawanda issued purchase orders to various vendors in the amounts shown for the following functions of the town:

 

General Government               $  82,500

Public Safety                             148,700

Public Works                             130,400

Culture and Recreation               97,300

Health and Welfare                     94,800

Miscellaneous                             14,200

Total                                        $567,900

 

All goods ordered during the year were received at the following actual costs:

 

General Government               $  83,720

Public Safety                            147,940

Public Works                            131,140

Culture and Recreation               98,780

Health and Welfare                     93,970

Miscellaneous                             14,300

Total                                        $569,850

 

a. Prepare a summary journal entry in the General Fund general journal to record the issuance of purchase orders during fiscal year 2017.  (Subsidiary detail may be omitted.)

 

b. Prepare summary journal entries in the General Fund general journal to record the receipt of and payment for goods during fiscal year 2017. (Subsidiary detail may be omitted.)

 

 

 

 

 

90.  The following transactions occurred for the City of Fontaine’s General Fund.

 

1. The budget prepared for the fiscal year included Total estimated revenues of $2,774,000 and appropriations of $2,693,000.

 

2. Encumbrances issued against the appropriations during the year were $931,000.

 

3. The current year’s tax levy of $2,005,000 was recorded; uncollectibles were estimated as $65,000.

 

4. Collections of delinquent taxes from prior years’ levies totaled $132,000; collections of the current year’s levy totaled $1,459,000.

 

5. Invoices were received and approved for payment for items ordered in documents recorded as encumbrances in Transaction (2) of this problem.  The estimated liability was $851,200.  Actual costs were $850,500.

 

6. Revenue other than taxes collected during the year consisted of licenses and permits, $373,000; intergovernmental revenue, $400,000; and $66,000 of miscellaneous revenues.

 

7. Payments on Vouchers Payable totaled $1,505,000.

 

Prepare journal entries in the General Fund general journal to record the transactions. (Subsidiary detail may be omitted.)