Question

4. (Journal entries - budgetary and financial) Prepare journal entries to record the following transactions for Cosmotown for 2013. The Town records encumbrances only for its Supplies appropriation. a. Cosmotown adopted the following budget for the year: Revenues: Property taxes $275,000 Licenses and fees 35,000 Appropriations: Salaries 255,000 Supplies 40,000 Interest 1,500 b. Property tax bills amounting to $275,000 were sent to the property owners. c. Because property taxes were not due to be received for several months and the town needed cash to finance its activities, Cosmotown borrowed $100,000 from a local bank using tax anticipation notes. d. Cosmotown paid salaries in the amount of $75,000. e. The town sent out two purchase orders for supplies: purchase order A for $6,000 and purchase order B for $5,000. f. The town received $130,000 from property owners in payment of their property taxes. g. Cosmotown repaid the bank on its borrowing in transaction c. The amount paid was $101,000, which included interest of $1,000. h. The town collected $15,000 for fishing licenses. i. The town received the supplies ordered on purchase order A in transaction e. All the supplies arrived in good condition and the invoice for $6,100 was approved for payment. j. The town Treasurer paid the invoice in transaction i. for $6,100.

Answer 1

Part	Particulars		Dr	Cr
a	Estimated revenue - Property taxes		275,000
	Estimated revenue - License and fees		35,000
		Appropriations - Salaries		255,000
		Appropriations - Supplies		40,000
		Appropriations - Interest		1,500
		Budgetary fund balance		13,500
b	Property taxes receivable		275,000
		Revenue - Property taxes		275,000
c	Cash		100,000
		Tax anticipation notes payable		100,000
d	Expenditure - Salaries		75,000
		Cash		75,000
e	Encumbrances		11,000
		Budgetary fund balance reserved for encumrances		11,000
f	Cash		130,000
		Property tax receivable		130,000
g	Tax anticipation notes payable		100,000
	Expenditure - Interest		1,000
		Cash		101,000
h	Cash		15,000
		Revenue - Licenses and fees		15,000
i	Budgetary fund balance reserved for encumrances		6,000
		Encumbrances		6,000
	Expenditure - Supplies		6,100
		Vouchers payable		6,100
j	Vouchers payable		6,100
		Cash		6,100