Question

Question 1

Winter County enacted a law establishing a Highway Special Revenue Fund, effective January 1, 2020. The fund expenditures were to be financed by a special gasoline tax. Prepare journal entries to record the following transactions for the calendar year 2020. Then prepare a preclosing trial balance as of December 31,2020.
a. Winter County adopted the following budget for the fund:

Estimated revenues—gasoline taxes	855,000
Appropriations—maintenance salaries	745,000
Appropriations—maintenance supplies	90,000
Budgeted increase in fund balance	20,000

b. The county collected gasoline taxes of $825,000.

c. The county paid maintenance salaries of $730,000.

d. The county placed purchase orders for maintenance supplies totaling $65,000.

e. The maintenance supplies ordered in d., above, were received and accepted. Because the purchase orders allowed for additional quantities to be shipped, the invoices totaled $68,000.

f. Because of the shortfall in gasoline tax collections, the county reduced estimated revenues by $30,000. It also ordered a halt to all purchases of maintenance supplies and reduced the appropriation for maintenance supplies by $20,000.

g. Unpaid salaries for the last few days in December (to be paid in January 2021) totaled $14,000.

Question 2

Use the preclosing trial balance prepared for Question 1 above, regarding Winter County, to close the accounts for the year ended December 31, 2020.

Question 3

The following data comes from the 2020 financial statements of the Village of Matthews. Although presented in summarized format, the balance sheet debits and credits are equal and the operating statement information is complete.

General Fund - Balance Sheet Elements
Cash	$1,200,000
Short-term Investments	405,000
Property taxes receivable - delinquent	282,000
Due from other funds	58,000
Accounts payable and other accrued liabilities	920,000
Assigned fund balance	90,000
Unassigned fund balance	935,000
General Fund - Operating Statement Elements
Revenues, including property taxes of $6,125,000	$8,350,000
Expenditures (total)	7,510,000
Transfer out to Debt Service Fund	400,000
Excess of revenues and other sources over expenditures and other uses	440,000
Debt Service Fund - Balance Sheet Elements
Cash and cash equivalents	230,000
Restricted fund balance	230,000
Debt Service Fund - Operating Statement Elements
Debt service expenditures:
Principal	100,000
Interest	200,000
Operating transfer from General Fund	400,000
Excess of revenues and other sources over expenditures and other uses	100,000

Calculate the following ratios for the Village of Matthews:

1. Number of days’ cash on hand - General Fund
2. Quick ratio - General Fund
3. Property tax receivable delinquency rate
4. Budgetary cushion for the General Fund (Assume all assigned fund balance is available.)
5. Debt service burden
6. Excess of revenues and other sources over expenditures and other uses, as a percentage of revenues - Combined, General Fund and Debt Service Fund (Hint: The transfers out and in cancel each other. Therefore, use the revenues for the denominator.)
7. Assess the liquidity of the Village of Matthews, based on the standard that the General Fund’s number of days’ cash on hand should be no less than 45 (and that 60 is more desirable) and that the quick ratio should be at least 1.

Question 4

Following is a trial balance (in thousands) showing the accounts of Beta Hospital at December 31, 2019. Using the information from the trial balance, answer the following questions. Show the calculations used.

1. What is number of days’ cash on hand?
2. What is the number of days of revenue in net patient accounts receivable?
3. How much is the excess of revenues over expenses?
4. What is the operating margin?
5. What is the long-term debt-to-equity ratio at year-end?
6. What is the interest coverage (times interest earned)?

	Debits	Credits
Cash	$5,000
Patient accounts receivable	8,000
Allowance for bad debts		$1,000
Food and medicines inventory	2,000
Buildings	40,000
Accumulated depreciation, buildings		8,000
Equipment	20,000
Accumulated depreciation, equipment		10,000
Land	5,000
Accounts payable		6,000
Accrued interest payable		200
Current portion of bonds payable		1,500
Long-term bonds payable		34,000
Net position, January 1, 2019		17,300
Patient service revenues (net)		36,000
Patient care expense	20,000
Dietary expense	2,000
General and administrative expense	6,000
Bad debts expense	1,000
Depreciation, buildings and equipment	4,000
Interest expense	1,000
Totals	$114,000	$114,000

Answer 1

Question 1

Step 1

Journal entries

Budgeted figures are only for control purposes, no journal entries will be made for budgeted figures. Journal entries for collection of taxes, maintenance salary and supplies will be as under:

Cash Revenue- Gasoline taxes (On collection of taxes	Dr Cr	$ 825,000	$ 825,000
Maintenance Salary payable Cash Unpaid salary ( Salary paid and unpaid salary paid in January 2021)	Dr Cr Cr	$ 744,000	$ 730,000 $ 14,000
Maintenance supplies received and accepted Cash ( Against the purchase order of $ 65,000)	Dr Cr	$ 68,000	$ 68,000

Trial balance will be as under

Particulars	Dr	Cr
Cash	$ 27,000
Gasoline taxes		$ 825,000
Maintenance Salary	$ 744,000
Maintenance supplies	$ 68,000
Unpaid salary		$ 14,000
Total	$ 839,000	$ 839,000

  

Question 2

Financial statement on closing of accounts will be as under:

Profit and loss Statement

Expenditure	Amount in $	Income	Amount in $
Maintenance Salaries	744,000	Gasoline Taxes	825,000
Maintenance supplies	68,000
Surplus of revenue	13,000
Total	825,000	Total	825,000

Balance Sheet will be as under

Liabilities	Amount in $	Assets	Amount in $
unpaid Salary	14,000	Cash	27,000
Surplus of Revenue	13,000
Total	27,000	Total	27,000

Question 3

1. Number of days cash in hand

Cash and cash equivalent

Cash    $ 1,200,000

Short term investments    $ 405,000

Total $ 1,605,000

Expenses $ 7,510,000

Expenses average per day $ 7,510,000/365 $ 20,575

Number of days cash-in-hand 1605,000/20,575= 78 days

2. Quick Ratio

Quick assets   

Cash + Short term investments $ 1,605,000

Current Liabilities $ 920,000

Quick Ratio will be 1,605,000/920,000 = 1.74

3. Property Tax delinquency Rate

Property Tax Receivable    $ 282,000

Rate    282,000/ 365 = $ 772.6 per day

4.Budgetary Cushion

Cash $ 1,200,000

Short term investment    $    405,000

Property tax receivables $ 282,000

Due from other funds    $ 58,000

Assigned fund balance $    90,000

Unassigned fund balance $ 935,000

Total    $ 2,970,000

5. Debt service burden

Principal    $ 100,000

Interest    $ 200,000

Total    $ 300,000