Question

1. The City of Milltown maintains its books so as to prepare fund accounting statements and records worksheet adjustments in order to prepare government-wide statements. You are to prepare, in journal form, worksheet adjustments for each of the following situations.

   1. General fixed assets as of the beginning of the year, which had not been recorded, were as follows:

      1. Land        $ 7,820,000

      2. Buildings     32,355,000

      3. Improvements Other Than Buildings        14,690,000

      4. Equipment     11,554,000   

      5. Accumulated Depreciation, Capital Assets     24,300,000

   2. During the year, expenditures for capital outlays amounted to $7,200,000. Of that amount, $4,800,000 was for buildings; the remainder was for improvements other than buildings.

   3. The capital outlay expenditures outlined in (b) were completed at the end of the year (and will begin to be depreciated next year). For purposes of financial statement presentation, all capital assets are depreciated using the straight-line method, with no estimated salvage value.

      1. Estimated lives are as follows: buildings, 40 years; improvements other than buildings, 20 years; and equipment, 10 years.

   4. In the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances, the City reported proceeds from the sale of land in the amount of $600,000. The land originally cost $505,000.

   5. At the beginning of the year, general obligation bonds were outstanding in the amount of $4,000,000. Unamortized bond premium amounted to $36,000.

   6. During the year, debt service expenditures for the year amounted to: interest, $580,000; principal, $400,000. For purposes of government-wide statements, $3,600 of the bond premium should be amortized. No adjustment is necessary for interest accrual.

   7. At year-end, additional general obligation bonds were issued in the amount of $1,700,000, at par.

Answer 1

City of Milltown Worksheet Entries
No.	General journal	Debit	Credit
1.	Land	7820000
	Buildings	32355000
	Improvements other than buildings	14690000
	Equipment	11554000
	Accumulated depreciation, capital assets		24300000
	Net position		42119000
2	Buildings	4800000
	Improvements other than buildings	2400000
	Expenditures – Capital outlay		7200000
3	Depreciation expense	2698775
	Accumulated depreciation – buildings (32355000/40)		808875
	Accumulated depreciation – improvements other than buildings (14690000/20)		734500
	Accumulated depreciation – equipment (11554000/10)		1155400
4	Special item – proceeds from sale of land	600000
	Land		505000
	Special item – Gain on sale of land		95000
5	Net position	4036000
	Bonds payable		4000000
	Premium on bonds payable		36000
6	Premium on bonds payable	3600
	Interest expense		3600
7	Other financing sources – proceeds of bonds	1700000
	Bonds payable		1700000