Question

Different types of funds justify different practices as to budgets and commitments.

Review the budget note to the Smith City's financial statements presented in the previous problem. Assume that the city engaged in the following transactions in 2020 and 2021:

In 2020, it signed a service contract with a private security company. The company agreed to provide security services to the city's for one year at a cost of $72,000 ($6,000 per month.) By year end the company provided, and paid for, services for three months.

In 2021, the company preformed, and the city paid for, the remaining nine months of the contract. However, because of the agreed-upon changes in the services provided by the company, the total charges for 2021 were reduced from $54,000 to $50,000.

  1. The city properly budgeted for the services and appropriated the funds consistent with policies set forth in the note. Prepare all the budgetary, encumbrance, and expenditure entries relating to the service contract that would be required in 2020 and 202 In 1020, when the city signed the contract, it appropriated the entire $72,000. Then, at the start of 2021, inasmuch as the city expended only $18,000 in 2020, it reappropriated $54,000.
  1. Assume first that the contract was accounted for in the smith’s general fund.
  2. Assume next that it was accounted for in a capital projects fund established for the construction of its Walnut Creek Amphitheatre. The city prepares annual financial statements for capital project funds, but it does not close out its accounts. Moreover, it prepares budgets for the entire project, not for particular periods. The project was started in 2020 and completed in 2021.

notes information
Note from Smith City Annual Report Budgetary control is exercised in all funds except for the trust and custodial funds. The
ordinances as necessary to recognize new resources or reallocations of budget. As of June 30, the effect of such amendments,
0 0
Add a comment Improve this question Transcribed image text
Answer #1

1.

a.      General Fund

2020

Fund balance                                                                                $72,000

Appropriations                                                                                                   $72,000

To record an appropriation for the full amount of the contract

Encumbrances                                                                              $72,000

Reserve for encumbrances                                                                                 $72,000

To establish a reserve for encumbrances

Expenditures                                                                                $18,000

Cash                                                                                                                   $18,000

To record expenditures for three months of services

Reserve for encumbrances                                                           $18,000

Encumbrances                                                                                                    $18,000

To reverse entry establishing encumbrances

Appropriations                                                                             $72,000

Fund balance                                                                                                     $72,000

To close the budgetary account

Fund Balance                                                                               $72,000

Expenditures                                                                                                      $18,000

Encumbrances                                                                                                    $54,000

To close encumbrances and expenditures

2021

Fund balance                                                                                $54,000

Appropriations                                                                                                   $54,000

To record the budget for nine months of services

Encumbrances                                                                              $54,000

Fund balance                                                                                                     $54,000

To restore encumbrances

Expenditures                                                                                $50,000

Cash                                                                                                                   $50,000

To record expenditures for nine months of services

Reserve for encumbrances                                                           $54,000

Encumbrances                                                                                                    $54,000

To reverse entry establishing encumbrances

Appropriations                                                                             $54,000

Fund balance                                                                                                     $54,000

To close the budgetary account

Fund balance                                                                                $50,000

Expenditures                                                                                                      $50,000

To close expenditures

b.   Capital Projects Fund

2020

Fund balance                                                                                $72,000

Appropriations                                                                                                   $72,000

To record the budget for 12 months of services (the full cost to be incurred over the period of the contract)

Encumbrances                                                                              $72,000

Reserve for encumbrances                                                                                 $72,000

To establish a reserve for encumbrances

Expenditures                                                                                $18,000

Cash                                                                                                                   $18,000

To record expenditures for three months of services

Reserve for encumbrances                                                           $18,000

Encumbrances                                                                                                    $18,000

To reverse entry establishing encumbrances

2021

Expenditures                                                                                $50,000

Cash                                                                                                                   $50,000

To record expenditures for nine months of services

Reserve for encumbrances                                                           $54,000

Encumbrances                                                                                                    $54,000

To reverse remaining balances in encumbrances and reserve for encumbrances

Appropriations                                                                             $72,000

Fund balance                                                                                                     $72,000

To close the budgetary account

Fund balance                                                                                $68,000

Expenditures                                                                                                      $68,000

To close expenditures

Add a comment
Know the answer?
Add Answer to:
Different types of funds justify different practices as to budgets and commitments. Review the budget note...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • The City of South River budget for the fiscal year ended June 30.2020. Included an appropriation...

    The City of South River budget for the fiscal year ended June 30.2020. Included an appropriation for the police department in the amount of $8.712.000. During the month of July 2020, the following transactions occurred in summary: Purchase orders were issued in the amount of $545.000 Of the $545,000 in purchase orders, $502,000 were filled with involces amounting to $492,000. Salaries, not encumbered, amounted to $308.000. A budget appropriations reduction in the amount of $64.000 was approved by the city...

  • The Edward City Council approved and adopted the budget for its general fund for the year just en...

    The Edward City Council approved and adopted the budget for its general fund for the year just ended. The budget contained the following amounts: Estimated revenues $4,900,000 Appropriations 4,780,000 Authorized interfund transfer to the sports and      recreation debt service fund 90,000 During the year, various transactions and events occurred that affected the general fund. Edward City levied property taxes of $4,000,000, of which it estimated that $25,000 would be uncollectible. During the discount period between the levy and the date...

  • The town council of Riverside estimated revenues for 2020 to be $878,412 from property taxes and...

    The town council of Riverside estimated revenues for 2020 to be $878,412 from property taxes and $211,588 from business licenses. The appropriations budget from the council was as follows: General government $ 411,000 Parks and recreation 142,000 Sanitation 122,000 Streets and sidewalks 192,000 In April, heavy spring rains caused some flooding near the river. As a result, a picnic area at River’s Edge Park was ruined and several damaged shops had to shut down. The council adopted an upward revision...

  • Gov. Acct

    The Balance Sheet of the General Fund of the City of Monroe as of December 31, 2019 , follow.3.C. This portion of the continuous problem continues the General Fund example by requiring the recording and posting of the budgetary entries. To reduce clerical effort required for the solution use control accounts for the budgetary accounts, revenues. expenditures and encumbrances. Subsidiary accounts are not required. Budget information for the City includes:(1) As of January 1, 2020 , the City Council approved...

  • Greenville has provided the following information from its General Fund Revenues and Appropriations/Expenditure/Encumbrances subsidiary ledgers for...

    Greenville has provided the following information from its General Fund Revenues and Appropriations/Expenditure/Encumbrances subsidiary ledgers for the fiscal year ended. Assume the beginning fund balances are $156 (in thousands) and that the budget was not amended during the year. City of Greenville General Fund Subsidiary Ledger Account Balances (in thousands) For the Fiscal Year Debits Credits Estimated Revenue Taxes 6,048 Fines & Forfeits 303 Intergovernmental Revenue 504 Charges for Services 370 Revenues Taxes 6,056 Fines & Forfeits 308 Intergovernmental Revenue...

  • The following transactions occurred during the 2020 fiscal year for the City of Evergreen. For budgetary...

    The following transactions occurred during the 2020 fiscal year for the City of Evergreen. For budgetary purposes, the city reports encumbrances in the Expenditures section of its budgetary comparison schedule for the General Fund but excludes expenditures chargeable to a prior year’s appropriation. The budget prepared for the fiscal year 2020 was as follows: Estimated Revenues: Taxes $ 1,943,000 Licenses and permits 372,000 Intergovernmental revenue 397,000 Miscellaneous revenues 62,000 Total estimated revenues 2,774,000 Appropriations: General government 471,000 Public safety 886,000...

  • [The following information applies to the questions displayed below.] The following transactions occurred during the 2020...

    [The following information applies to the questions displayed below.] The following transactions occurred during the 2020 fiscal year for the City of Evergreen. For budgetary purposes, the city reports encumbrances in the Expenditures section of its budgetary comparison schedule for the General Fund but excludes expenditures chargeable to a prior year’s appropriation. The budget prepared for the fiscal year 2020 was as follows: Estimated Revenues: Taxes $ 1,943,000 Licenses and permits 372,000 Intergovernmental revenue 397,000 Miscellaneous revenues 62,000 Total estimated...

  • Greenville has provided the following information from its General Fund Revenues and Appropriations/Expenditure/Encumbrances subsidiary ledgers for...

    Greenville has provided the following information from its General Fund Revenues and Appropriations/Expenditure/Encumbrances subsidiary ledgers for the fiscal year ended. Assume the beginning fund balances are $167 (in thousands) and that the budget was not amended during the year. Required Prepare a General Fund statement of revenues, expenditures, and changes in fund balance. Prepare a General Fund schedule of revenues, expenditures, and changes in fund balance—budget and actual (assume the budget is prepared on a GAAP basis). 514 308 367...

  • Required information [The following information applies to the questions displayed below.] The following transactions occurred during...

    Required information [The following information applies to the questions displayed below.] The following transactions occurred during the 2020 fiscal year for the City of Evergreen. For budgetary purposes, the city reports encumbrances in the Expenditures section of its budgetary comparison schedule for the General Fund but excludes expenditures chargeable to a prior year's appropriation. 1. The budget prepared for the fiscal year 2020 was as follows: Estimated Revenues: $1,943,000 372,000 397,000 62,000 Тахes Licenses and permits Intergovernmental revenue Miscellaneous revenues...

  • 4) A properly prepared schedule of revenues, expenditures, and changes in fund halar budget and actual...

    4) A properly prepared schedule of revenues, expenditures, and changes in fund halar 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. 5) 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...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT