Professional Documents
Culture Documents
The title of each problem is followed by the estimated time in minutes required for completion and by a
difficulty rating. The time estimates are applicable for students using the partially filled-in working papers.
Appropriations 1,520,000
Budgetary Fund Balance ($1,600,000 – $1,520,000) 80,000
Estimated Revenues 1,600,000
To close budgetary ledger accounts.
Revenues 1,616,000
Expenditures 1,500,000
Unreserved and Undesignated Fund Balance 116,000
To close Revenues and Expenditures ledger accounts.
Appropriations 890,000
Budgetary Fund Balance 90,000
Estimated Revenues 980,000
To close budgetary ledger accounts.
Revenues 976,700
Expenditures 896,200
Unreserved and Undesignated Fund Balance 80,500
To close Revenues and Expenditures ledger accounts.
Revenues 840,200
Expenditures 764,800
Unreserved and Undesignated Fund Balance 75,400
To close Revenues and Expenditures ledger accounts.
CASES
Case 17–1 Deficiencies of the financial statements of Corbin City General Fund include the following:
(1) The "income statement" and statement of changes in fund balance should be combined in a
statement of revenues, expenditures, and changes in fund balance on a budget, actual, and
variance basis.
(2) "Expenses" should be titled "expenditures."
(3) "Net income" should be titled "excess of revenues over expenditures."
(4) Depreciation should not be included in the financial statements of a general fund.
(5) Plant assets should not be included in the financial statements of a general fund.
(6) The $20,000 "reserve" for delinquent property taxes should be offset against the $80,000
property taxes receivable, with the $60,000 net amount displayed in the assets section of
the balance sheet.
(7) The amount of $110,000 should be segregated in the liabilities and fund balance (with
reserves deleted) section of the balance sheet as "fund balance reserved for inventory of
supplies." The amount of $160,000 ($4,890,000 fund balance – $4,620,000 plant assets –
$110,000 reserved for inventory of supplies = $160,000) should be displayed in the
liabilities and fund balance section of the balance sheet as unreserved and undesignated
fund balance.
Case 17–2 Student Ella apparently supports the adage "Don't count the chickens before they hatch." That
philosophy supports the modified accrual basis of accounting for general funds of
governmental entities, under which revenues are not recognized unless they are measurable
The McGraw-Hill Companies, Inc., 2006
Solutions Manual, Chapter 17 215
and available. Those requirements preclude the accrual of self-assessed taxes such as income
taxes and sales taxes, for which the governmental entity does not bill the taxpayers unless the
taxes are delinquent or underpaid when reported. Given that estimated revenues in general fund
budgets do include amounts expected to be collected for income taxes and sales taxes, the
modified accrual basis of accounting causes inconsistent budget variances, as recognized by
student Janice. Further, given that the accrual basis of accounting is used for proprietary funds
of governmental entities, consistent application of accounting principles supports the use of
accrual accounting for general funds and other governmental funds of governmental entities.
Case 17–3 Fund accounting by governmental entities is justified because of the need for careful
monitoring of revenues and expenditures or expenses of various departments and activities of
governmental entities. Unlike publicly owned business enterprises, governmental entities do not
have oversight provided by audit committees of boards of directors, or regulatory agencies
such as the Securities and Exchange Commission. Some governmental entities do not have
audits by independent certified public accountants because no federal laws mandate such
audits, which are required for publicly owned companies. Further, not all governmental entities
have internal audit staffs. Given such lack of oversight, prudence dictates that functions in
governmental entities be separated more than would be necessary for business enterprises;
funds help provide such separation.
Taxes Receivable 1 8 7 0 0 0 0
Allowance for Uncollectible Taxes 1 0 0 0 0
Revenues 1 8 6 0 0 0 0
To accrue property taxes billed and to provide for
estimated uncollectible portion.
Cash 1 8 2 0 0 0 0
Taxes Receivable 1 8 2 0 0 0 0
To record collections of property taxes for the year.
Encumbrances 1 0 7 0 0 0 0
Fund Balance reserved for Encumbrances 1 0 7 0 0 0 0
To record purchase orders for nonrecurring
expenditures issued during the year.
Expenditures 1 8 4 0 0 0 0
Vouchers Payable 1 8 4 0 0 0 0
To record expenditures for the year.
Vouchers Payable 1 8 5 2 0 0 0
Cash 1 8 5 2 0 0 0
To record payment of vouchers during the year.
Appropriations 1 9 4 0 0 0 0
Budgetary Fund Balance 6 0 0 0 0
Estimated Revenues 2 0 0 0 0 0 0
To close budgetary ledger accounts.
Revenues 1 8 6 0 0 0 0
Expenditures 1 8 4 0 0 0 0
Unreserved and Undesignated Fund Balance 2 0 0 0 0
To close Revenues and Expenditures ledger accounts.
(2) Encumbrances 2 5 0 0
Fund Balance Reserved for Encumbrances 2 5 0 0
To record outstanding purchase orders for operating
expenditures.
(3) Revenues 1 9 0 0 0 0
Donated Land 1 9 0 0 0 0
To remove donated land erroneously recorded as an
asset in General Fund.
(3) Cash 3 9 0 0 0 0 0
Taxes ReceivableCurrent 3 9 0 0 0 0 0
To record collections of property taxes for the year.
Taxes Receivable—Delinquent 6 3 0 0 0 0
Allowance for Uncollectible Current Taxes 1 5 0 0 0 0
Taxes Receivable—Current 6 3 0 0 0 0
Allowance for Uncollectible Delinquent Taxes 1 5 0 0 0 0
To transfer delinquent taxes and related estimated
uncollectible amounts from the current classification.
(4) Cash 4 8 5 0 0 0
Fines Receivable 2 0 0 0 0 0
Revenues 2 7 0 0 0 0
Other Financing Sources 1 5 0 0 0
To record collections of other revenues and proceeds
of disposal of equipment for the year.
(5) Encumbrances 2 1 5 0 0 0 0
Fund Balance Reserved for Encumbrances 2 1 5 0 0 0 0
To record purchase orders for nonrecurring
expenditures issued during the year.
(6) Expenditures 4 5 6 5 0 0 0
Vouchers Payable 4 5 6 5 0 0 0
To record expenditures for the year.
Appropriations 9 8 5 0 0 0
Estimated Other Financing Uses 1 5 0 0 0
Budgetary Fund Balance 7 0 0 0
Estimated Revenues 1 0 0 7 0 0 0
To close budgetary ledger accounts.
Revenues 1 0 0 8 2 0 0
Expenditures 9 9 0 2 0 0
Other Financing Uses 1 0 0 0 0
Unreserved and Undesignated Fund Balance 8 0 0 0
To close Revenues, Expenditures, and Other
Financing Uses ledger accounts.
Taxes Receivable 2 8 7 0 0 0 0
Allowance for Uncollectible Taxes 7 0 0 0 0
Revenues from Taxes 2 8 0 0 0 0 0
To accrue property taxes billed and to provide for
estimated uncollectible portion.
Cash 2 9 4 0 0 0 0
Taxes Receivable 2 8 1 0 0 0 0
Other Revenues 1 3 0 0 0 0
To record collections of property taxes and other
revenues for the year.
Vouchers Payable 2 6 4 0 0 0 0
Cash 2 6 4 0 0 0 0
To record payment of vouchers during the year.
Appropriations 2 8 1 0 0 0 0
Estimated Other Financing Uses 1 7 0 0 0 0
Budgetary Fund Balance 2 0 0 0 0
Estimated Revenues 3 0 0 0 0 0 0
To close budgetary ledger accounts.
Property tax levy required for year ending June 30, 2006 $3 3 6 1 0 0 0
Taxes Receivable 8 0 9 0 0 0
Allowance for Uncollectible Taxes 9 0 0 0
Revenues 8 0 0 0 0 0
To accrue property taxes billed and to provide for
estimated uncollectible portion.
Cash 9 5 5 0 0 0
Allowance for Uncollectible Taxes 6 0 0 0
Taxes Receivable 7 8 1 0 0 0
Revenues ($955,000 – $775,000) 1 8 0 0 0 0
To record collections of property taxes and other
revenues for the year, and to write off uncollectible
taxes.
Vouchers Payable 8 8 0 0 0 0
Cash 8 8 0 0 0 0
To record payment of vouchers during the year.
Expenditures 1 1 0 0 0 0
Payable to Internal Service Fund 1 0 0 0 0
Payable to Enterprise Fund 1 0 0 0 0 0
To record amounts payable to other funds.
Encumbrances 4 7 0 0 0
Fund Balance Reserved for Encumbrances 4 7 0 0 0
To record encumbrances for purchase orders
outstanding on June 30, 2006.
Appropriations 9 6 5 0 0 0
Budgetary Fund Balance 3 5 0 0 0
Estimated Revenues 1 0 0 0 0 0 0
To close budgetary ledger accounts.
(3) Encumbrances 5 1 8 0 0 0
Fund Balance Reserved for Encumbrances 5 1 8 0 0 0
To record purchase orders for nonrecurring
expenditures issued during the year.
(4) Cash 6 6 4 0 0 0
Taxes Receivable—Delinquent 3 8 0 0 0
Taxes Receivable—Current 2 2 6 0 0 0
Expenditures 4 0 0 0
Revenues 1 9 6 0 0 0
Other Financing Sources 2 0 0 0 0 0
To record collection of property taxes, other revenue,
other financing sources, and refund from a vendor for
the year.
Appropriations 5 6 0 0 0 0
Estimated Other Financing Uses 2 0 0 0 0
Budgetary Fund Balance 2 0 0 0 0
Estimated Revenues 4 0 0 0 0 0
Estimated Other Financing Sources 2 0 0 0 0 0
To close budgetary ledger accounts.