Question

"4–27. Operating Transactions and Financial Statements. (LO4-1 through LO4-3) The City of Castleton’s General Fund had the following post-closing trial balance at June 30, 2019, the end of its fiscal year:

Debits                                                   Credits

Cash                                                                                            $276,120

Taxes Receivable—Delinquent                                                   183,000

Allowance for Uncollectible Delinquent Taxes                                                                                     $21,960

Interest and Penalties Receivable                                                  6,280

Allowance for Uncollectible Interest and Penalties                                                                                1,160

Inventory of Supplies                                                                           6,100

Vouchers Payable                                                                                                                                    48,500

Due to Federal Government                                                                                                                   29,490

Deferred Inflows of Resources—Unavailable Revenues 166,160

Fund Balance—Nonspendable—Inventory of Supplies                                                                         6,100

Fund Balance—Unassigned                                                                                                                       198,130

$471,500 $471,500

During the year ended June 30, 2020, the following transactions, in summary form, with subsidiary ledger detail omitted, occurred:

1.The budget for FY 2020 provided for General Fund estimated revenues totaling $3,140,000 and appropriations totaling $3,100,000.

2.The city council authorized temporary borrowing of $500,000 in the form of a 120-day tax anticipation note. The loan was obtained from a local bank at a discount of 6 percent per annum (debit Expenditures for the discount in the General Fund journal and Expenses—General Government in the governmental activities journal).

3.The property tax levy for FY 2020 was recorded. Net assessed valuation of taxable property for the year was $43,000,000, and the tax rate was $5 per $100. It was estimated that 3 percent of the levy would be uncollectible.

4.Purchase orders and contracts were issued to vendors and others in the amount of $2,060,000.

5.$1,961,000 of current taxes, $103,270 of delinquent taxes, and $3,570 of interest and penalties were collected. The delinquent taxes and associated interest and penalties were collected more than 60 days after the prior year-end.

6.Additional interest and penalties on delinquent taxes were accrued in the amount of $3,430, of which 30 percent was estimated to be uncollectible.

7.Because of a change in state law, the city was notified that it will receive $80,000 less in intergovernmental revenues than was budgeted.

8.Delinquent taxes of $12,792 were deemed uncollectible and written off. The associated interest and penalties of $952 also were written off.

9.Total payroll during the year was $819,490. Of that amount, $62,690 was withheld for employees’ FICA tax liability, $103,710 for employees’ federal income tax liability, and $34,400 for state taxes; the balance was paid to employees in cash.

10.The employer’s FICA tax liability was recorded for $62,690.

11.Revenues from sources other than taxes were collected in the amount of $947,000."

"12. Amounts due the federal government as of June 30, 2020 and amounts due for FICA taxes and state and federal withholding taxes during the year were vouchered.

13.Purchase orders and contracts encumbered in the amount of $1,988,040 were filled at a net cost of $1,987,570, which was vouchered.

14.Vouchers payable totaling $2,201,660 were paid after deducting a credit for purchases discount of $8,030 (credit Expenditures).

15.The tax anticipation note of $500,000 was repaid.

16.All unpaid current year’s property taxes became delinquent. The balances of the current taxes’ receivables and related uncollectible were transferred to delinquent accounts. The City uses the 60-day rule for all revenues and does not expect to collect any delinquent property taxes or interest and penalties in the first 60 days of the next fiscal year.

17.A physical inventory of materials and supplies at June 30, 2020, showed a total of $9,100. Inventory is recorded using the purchases method in the General Fund; the consumption method is used at the government-wide level. (Note: A periodic inventory system is used both in the General Fund and at the government-wide level. When inventory was purchased during the year, Expenditures were debited in the General Fund journal and Inventory of Supplies was debited in the governmental activities journal.)

Required

a. Record in general journal form the effect of the above transactions on the General Fund and governmental activities for the year ended June 30, 2020. Do not record subsidiary ledger debits and credits.

b. Record in general journal form entries to close the budgetary and operating statement accounts in the General Fund only. Do not close the governmental activities accounts.

c. Prepare a General Fund balance sheet as of June 30, 2020.

d. Prepare a statement of revenues, expenditures, and changes in fund balance for the year ended June 30, 2020. Do not prepare the government-wide financial statements."

Answer 1

Answer:-

a.   

CITY OF CASTLETON

JOURNAL ENTRIES FY 2020

  Debits Credits

General Fund:

1.   

ESTIMATED REVENUES 3,140,000

APPROPRIATIONS 3,100,000

BUDGETARY FUND BALANCE 40,000

General Fund:

2.

CASH 490,000

EXPENDITURES-2020 10,000

TAX ANTICIPATION NOTES PAYABLE 500,000

(COMPUTATION OF DISCOUNT: $500,000 × .06 × 1/3 YEAR = $10,000.)

Governmental Activities:

CASH 490,000

EXPENSES—GENERAL GOVERNMENT 10,000

TAX ANTICIPATION NOTES PAYABLE 500,000

General Fund:

3.

TAXES RECEIVABLE-CURRENT 2,150,000

ALLOWANCE FOR UN-COLLECTIBLE

CURRENT TAXES 64,500

REVENUES 2,085,500

(COMPUTATIONS: $43,000,000 ASSESSED VALUATION × $5 TAX RATE PER $100 = $2,150,000 GROSS LEVY; $2,150,000 GROSS LEVY × .03 = $64,500 ESTIMATED UN-COLLECTIBLE.)

  Debits   Credits

Governmental Activities:

TAXES RECEIVABLE¾CURRENT 2,150,000

ALLOWANCE FOR UN-COLLECTIBLE

CURRENT TAXES 64,500

REVENUES 2,085,500

General Fund:

4.

ENCUMBRANCES-2020 2,060,000

ENCUMBRANCES OUTSTANDING¾2020 2,060,000

General Fund and Governmental Activities:

5.

CASH 2,067,840

TAXES RECEIVABLE-CURRENT 1,961,000

TAXES RECEIVABLE-DELINQUENT 103,270

INTEREST AND PENALTIES RECEIVABLE 3,570

General Fund:

DEFERRED INFLOWS OF RESOURCES¾

UNAVAILABLE REVENUES 106,840

REVENUES 106,840

General Fund:

6.   

INTEREST AND PENALTIES RECEIVABLE 3,430

ALLOWANCE FOR UN-COLLECTIBLE INTEREST

AND PENALTIES 1,029

REVENUES 2,401

Governmental Activities:

INTEREST AND PENALTIES RECEIVABLE 3,430

ALLOWANCE FOR UN-COLLECTIBLE INTEREST

AND PENALTIES 1,029

GENERAL REVENUES—INTEREST AND

PENALTIES ON DELINQUENT TAXES 2,401

  

  Debits Credits

General Fund:

7.      

BUDGETARY FUND BALANCE 80,000

ESTIMATED REVENUES 80,000

(THIS ENTRY ADJUSTS THE ORIGINAL BUDGETARY INCREASE OF $40,000 IN BUDGETARY FUND BALANCE TO A NET DECREASE OF $40,000.)

   General Fund and Governmental Activities:

8.

ALLOWANCE FOR UN-COLLECTIBLE

DELINQUENT TAXES 12,792

ALLOWANCE FOR UN-COLLECTIBLE INTEREST

AND PENALTIES 952

TAXES RECEIVABLE¾DELINQUENT 12,792

INTEREST AND PENALTIES RECEIVABLE 952

General Fund:

9.   

EXPENDITURES-2020 819,490

DUE TO FEDERAL GOVERNMENT 166,400

DUE TO STATE GOVERNMENT 34,400

CASH 618,690

   Governmental Activities:

EXPENSES -(function details omitted) 819,490

DUE TO FEDERAL GOVERNMENT 166,400

DUE TO STATE GOVERNMENT 34,400

CASH 618,690

General Fund:

10.   

EXPENDITURES-2020 62,690

DUE TO FEDERAL GOVERNMENT 62,690

Governmental Activities:

EXPENSES¾(function details omitted) 62,690

DUE TO FEDERAL GOVERNMENT 62,690

General Fund:

11.   

CASH 947,000

REVENUES 947,000

Governmental Activities:

CASH 947,000

REVENUES-(itemize as program

or general and by source) 947,000

General Fund and Governmental Activities:

12.   

DUE TO FEDERAL GOVERNMENT 258,580

DUE TO STATE GOVERNMENT 34,400

VOUCHERS PAYABLE 292,980

General Fund:

13.

ENCUMBRANCES OUTSTANDING¾2020 1,988,040

ENCUMBRANCES-2020 1,988,040

EXPENDITURES¾2020 1,987,570

VOUCHERS PAYABLE 1,987,570

   

Governmental Activities:

EXPENSES¾(function details omitted) 1,987,570

VOUCHERS PAYABLE 1,987,570

General Fund:

14.

VOUCHERS PAYABLE 2,201,660

CASH 2,193,630

EXPENDITURES¾2020 8,030

Governmental Activities:

VOUCHERS PAYABLE 2,201,660

CASH 2,193,630

EXPENSES-(function detail omitted) 8,030

  

General Fund and Governmental Activities:

15.   

TAX ANTICIPATION NOTES PAYABLE 500,000

CASH 500,000

General Fund and Governmental Activities:

16.

TAXES RECEIVABLE—DELINQUENT 189,000

TAXES RECEIVABLE—CURRENT 189,000

ALLOWANCE FOR UN-COLLECTIBLE CURRENT   

TAXES 64,500

ALLOWANCE FOR UN-COLLECTIBLE

DELINQUENT TAXES 64,500

General Fund:

REVENUES 126,901

DEFERRED INFLOWS OF RESOURCES¾

UNAVAILABLE REVENUES 126,901

(THIS ADJUSTS FOR THE NET PROPERTY TAXES [$189,000-64,500] AS WELL AS THE NET INTEREST AND PENALTIES FROM ENTRY 6 [$2,401] THAT ARE NOT “AVAILABLE”.)

General Fund:

17.

INVENTORY OF SUPPLIES 3,000

FUND BALANCE—NON-SPENDABLE—

INVENTORY OF SUPPLIES 3,000

Governmental Activities:

No entry required – expenses are recorded periodically.

b.

CLOSING ENTRIES, JUNE 30, 2020

General Fund:

APPROPRIATIONS 3,100,000

ESTIMATED REVENUES 3,060,000

BUDGETARY FUND BALANCE 40,000

REVENUES 3,014,840

EXPENDITURES—2020 2,871,720

FUND BALANCE—UNASSIGNED 143,120

Governmental Activities:

(Not closed here since the governmental activities general ledger includes operating statement transactions related to all governmental funds, not just those of the General Fund. See Chapter 9 for an example of closing the governmental activities temporary accounts.)

c.

CITY OF CASTLETON

GENERAL FUND BALANCE SHEET

AS OF JUNE 30, 2020

  ASSETS

CASH $ 468,640

TAXES RECEIVABLE¾DELINQUENT $255,938

LESS: ALLOWANCE FOR UN-COLLECTIBLE

TAXES¾DELINQUENT    73,668 182,270

INTEREST AND PENALTIES RECEIVABLE 5,188

LESS: ALLOWANCE FOR UN-COLLECTIBLE

INTEREST AND PENALTIES 1,237 3,951

INVENTORY OF SUPPLIES    9,100

TOTAL ASSETS   $ 663,961

LIABILITIES AND FUND BALANCES

LIABILITIES:

VOUCHERS PAYABLE $127,390

DEFERRED INFLOWS OF RESOURCES—

UNAVAILABLE REVENUES 186,221

TOTAL LIABILITIES AND DEFERRED INFLOWS

OF RESOURCES 313,611

FUND BALANCES:

NON-SPENDABLE—INVENTORY

OF SUPPLIES $ 9,100

UNASSIGNED   341,250

TOTAL FUND BALANCES   350,350

TOTAL LIABILITIES AND FUND BALANCES $ 663,961

d.

CITY OF CASTLETON

GENERAL FUND

STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUND BALANCE

FOR THE YEAR ENDED JUNE 30, 2020

REVENUES

TAXES $2,064,270

INTEREST AND PENALTIES ON TAXES 3,570

OTHER SOURCES    947,000

TOTAL REVENUES 3,014,840

EXPENDITURES

SALARIES AND WAGES 882,180

INTEREST ON NOTE PAYABLE 10,000

OTHER 1,979,540

TOTAL EXPENDITURES 2,871,720

EXCESS OF REVENUES OVER EXPENDITURES 143,120

INCREASE IN INVENTORY OF SUPPLIES 3,000

FUND BALANCES, JULY 1, 2019 204,230

FUND BALANCES, JUNE 30, 2020   $ 350,350

Computations:

Taxes = [(3) 2,085,500 + (5) 103,270 − (16) 124,500]

Interest and Penalties on Taxes = [(5) 3,570]

Other Sources = [(11) 947,000]

Salaries and Wages = [(9) 819,490 + (10) 62,690]

Interest on Notes Payable = [(2) 10,000]

Other = [(13) 1,987,570 − (14) 8,030]

The Governmental Activities general ledger is not shown here.

CITY OF CASTLETON General Fund General Ledger (Not Required) 3,570 7/1/2019 Bal. (2) (5) (11) 6/30/2020 Bal. Cash 276,120 490,000 2,067,840 947.000 468,640 (9) 618,690 (14) 2,193,630 (15) 500,000 952 Interest and Penalties Rec. 7/1/2019 Bal. 6,280 (5) (6) 3.430 (8) 6/30/2020 Bal 5,188 Taxes Receivable Current (3) 2,150,000 (5) 1,961,000 4-27(16) 189,000 6/30/2020 Bal. Allow. for Uncoll. Interest & Penalties 7/1/2019 Bal. 1,160 (8) 952 (6) 1.029 6/30/2020 Bal. 1,237 -0. 4-27(16) Allow. for Uncoll. Current Taxes 64,500 4-27(3) 64,500 6/30/2020 Bal. -0- Inventory of Supplies 7/1/2019 Bal. 6,100 (17) 3,000 6/30/2020 Bal. 9,100 Taxes Receivable_Delinquent 7/1/2019 Bal. 183,000 (5) 103,270 (16) 189,000 (8) 12,792 6/30/2020 Bal. 255,938 (8) Allow. for Uncoll. Delinquent Taxes 1/1/2019 Bal. 21,960 12,792 4-27(16) 64,500 6/30/2020 Bal. 73,668 Vouchers Payable (14) 2,201,660 7/1/2019 Bal 48,500 4-27(12) 292,980 4-27(13) 1.987,570 6/30/2020 Bal. 127,390

Due to Federal Government Revenues (12) 258,580 (16) 126,901 b. 3,014,840 7/1/2019 Bal. 29,490 (9) 166,400 (10) 62,690 6/30/2020 Bal. -0- (3) 2,085,500 (5) 106,840 (6) 2,401 (11) 947.000 (12) Due to State Government 34,400 (9) 34,400 6/30/2020 Bal. -0- Expenditures-2020 (2) 10,000 (14) 8,030 (9) 819,490 b 2.871.720 (10) 62,690 (13) 1,987,570 (15) Tax Anticipation Notes Payable 500,000 (2) 500,000 6/30/2020 Bal. -0- Deferred Inflows of Resources, Unavailable Revenues 7/1/2019 Bal. 166,160 (5) 106,840 (16) 126,901 6/30/2020 Bal. 186,221 Fund Balance-Unassigned 7/1/2019 Bal. 198,130 b 143.120 6/30/2020 Bal. 341,250 Fund Balance-Nonspendable- Inventory of Supplies 7/1/2019 Bal. 6,100 (17) 3000 6/30/2020 Bal. 9,100 (1) Estimated Revenues 3,140,000 (7) 80,000 b 3,060,000 Encumbrances-2020 (4) 2,060,000 (13) 1.988,040 6/30/2020 Bal. 71,960 Appropriations 3,100,000 (1) 3,100,000 b Encumbrances Outstanding-2020 (13) 1.988,040 (4) 2,060,000 6/30/2020 Bal. 71,960 Budgetary Fund Balance 80,000 (1) b 40,000 40,000