Question

Please note I have the answer. I am interested in knowing why this problem or at least the question (c) is treated as an intra-activity transfer?

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 $900,000 in bonds at face value to finance construction of a warehouse. b. A $1.1 million contract is signed for construction of the warehouse. The commitment is required if allowed. c. A $130,000 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 $12,000. When it was ordered, an anticipated cost of $11,800 had been recorded. e. Supplies to be used in the schools are bought for $2,000 cash. The consumption method is used. f. A state grant of $90,000 is awarded to supplement police salaries. The money will be paid to reimburse the government after the supplements have been paid to the police officers. g. Property tax assessments are mailed to citizens of the government. The total assessment is $600,000, although officials anticipate that 4 percent will never be collected. There is an enforceable legal claim for this money and the government can use it immediately.

Answer 1

Answer:- Fund financial statement is prepared for the governmental and proprietory funds and extra ordinary items separately at the end of statement of income and expenses and statement of financial position.

Government wide Financial statement gives the information relating to the financial performance of the government.

1.General journal. Debit. Credit

a).Capital projects fund

Cash $900000

OtherFinancing sources. $900000

Bond proceeds.

(To record Cash received from issue of bonds to construct a warehouse )

b).Capital projects fund

Encumbrances. $1100000

Fund Balance $1100000

Reserved for Encumbrances

(To record contract signed for construction of warehouse)

c).General Fund

Other Financing uses- transfer out. $ 130000

Cash. $130000

(To record transferred of unrestricted Fund was made eventual payment of debt)

Debit service Fund

Cash. $130000

Other Financing uses- transfer in. $130000

(To record transferred of previous Payment)

d).General Fund

Fund balance -

Reserves for encumbrances $ 11800

Encumbrances. $11800

(Fund balance is reserve for Encumbrances)

Expenditure control-

Machinery and equipment. $12000

Vouchers payable. $12000

(Payment made for fire equipments)

e).General Fund

Inventory of supplies. $2000

Cash. $2000

(Supplies of inventory is being made)

F). Special revenue fund.

Cash. $90000

Deferred revenue. $ 90000

(Special revenue Fund is being done)

G). General Fund

Taxes receivable. $600000

Revenue property tax. $576000

Allowances for uncollectible. $24000

( Total tax is receivable by government)

2). General journal

a).cash $900000

Bonds payable. $ 900000

b).No journal entry required

C). No journal entry required

d).Machinery and equipment. $12000

Vouchers or accounts payable. $ 12000

e).inventory of supplies. $2000

Cash. $2000

f).Cash. $ 90000

Deferred revenue. $90000

g).Tax receivable $ 600000

Revenue property tax. $576000

Allowances for uncollectible. $24000

Working Note:-

C). In this question the statement says that a payment of unrestricted Fund is made of debt and then they record the transferred the previous payment . i.e., the journal entry is being done as intra activity transfer . That's why the both the entry's is being made.

G). Tax receivable =600000

Allowances of uncollectible= 600000 @4% =24000

Revenue property tax= 600000- 24000

=576000