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10. Cash received from a capital grant, $5,000.
11. Cash paid for construction costs that qualify under the capital grant, $1,500.
12. The City acquired land for future plant expansion, $750, by issuing a 10-year bond in the
same amount.
13. Cash received from operating grants, $500.
14. Cash paid for salaries covered by operating grant, $85.
15. The City had an unrealized gain on investments of $12.
16. The Enterprise Fund incurred $10,000 in operating expenses, including $1,000 in
depreciation, $3,000 for employees, and $6,000 paid to suppliers. All but $500 of the
salary expenses were paid by year end.
17. Cash paid for equipment purchased with the proceeds of an operating grant, $34.
18. Cash received from the General Fund to cover part of the cost of plant expansion, $1,000.
19. Cash proceeds from the sale of fund capital assets, $23.
20. Cash received from another fund as a 6-month loan for the sole purpose of financing
purchase of equipment, $90.
The balance of cash and cash equivalents at October 1, 20X1, was $313. The balance of cash
and cash equivalents at year end (9/30/20X2) is $26,250.
Requirement: Prepare the City of Jimtown Enterprise Fund Statement of Cash Flows for the
year ended September 30, 20X2. You may exclude the reconciliation of operating
income to cash flows from operating activities.
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Answer:
City of Jimtown
Enterprise Fund
Statement of Cash
For the Year Ended September 30, 20X2
Cash Flows from Operating Activities
Cash received from customers $12,500
Cash received from other funds 2,500
Cash paid to employees (85 + 3,000 – 500) (2,585)
Cash paid to suppliers (6,000) $6,415
Cash Flows from Noncapital Financing Activities
Cash paid for interfund transfers (300)
Cash received from operating grants 500 200
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Problem 5 – Statement of Revenues, Expenses, and Changes in Fund Net Position
Using the information provided below for the Water Utility Enterprise Fund of the City of Rice,
prepare a statement of revenues, expenses, and changes in fund net position for 20X3.
Charges for service.................................................................................................... $3,300
Interest received......................................................................................................... 105
Increase in fair value of investments......................................................................... 12
Gain on sale of capital assets..................................................................................... 8
Operating transfers from the General Fund............................................................... 450
Capital Grant.............................................................................................................. 1,200
Salaries expense......................................................................................................... 1,000
Contractual services used........................................................................................... 300
Supplies used............................................................................................................. 400
Depreciation............................................................................................................... 1,100
Interest expense.......................................................................................................... 250
Unrestricted Net Position, January 1, 20X3............................................................... 1,000
Restricted Net Position, January 1, 20X3.................................................................. 200
Net Investment in Capital Assets, January 1, 20X3................................................... 1,800
Answer:
City of Rice
Water Utility Enterprise Fund
Statement of Revenues, Expenses, and Changes in Fund Net Position
For the Year Ended December 31, 20X3
Operating Revenues – Charges for Services $3,300
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Governmental and Nonprofit Accounting: Theory and Practice, 10e (Freeman)
Problems – Chapter 11
Problem 1 – Statement of Cash Flows
The five sections for reporting items in an Internal Service Fund Statement of Cash Flows
prepared using the direct method (excluding the reconciliation of operating income to cash flows
from operations) are:
A. Operating Activities
B. Noncapital Financing Activities
C. Capital and Related Financing Activities
D. Investing Activities
E. Noncash Investing, Capital, and Financing Activities
Using these five sections, indicate in which section each of the following Internal Service Fund
transactions should be reported. If a transaction should not be reported on the Statement of Cash
Flows, indicate it using the letter “X”.
1. Purchase of an Internal Service Fund capital asset for cash.
2. Providing services to other funds on a cash basis.
3. Issuing refunding bonds to refinance bonds issued 10 years ago to provide financing for
capital asset acquisitions.
4. Sale of Internal Service Fund capital assets for cash.
5. Transfer from a Special Revenue Fund for the specific purpose of financing an Internal
Service Fund capital asset purchase.
6. Payment of office workers' salaries.
7. Amortization of the Deferred Interest Expense Adjustment created when the capital asset
debt was refunded.
8. Transfer to a Capital Projects Fund to provide financing for a general government capital
asset construction project.
9. Purchases of investments with cash received from issuing bonds to finance construction
of Internal Service Fund capital assets.
10. Transfer to the General Fund for the purpose of financing specific operating costs of a
department accounted for in that fund.
11. Issuing bonds to provide operating cash for the Internal Service Fund.
12. Signing a capital lease for equipment to be used by activities accounted for in the Internal
Service Fund.
13. Interest received during the year earned on investments.
14. Transfer the proceeds from the sale of an Internal Service Fund capital asset to the
General Fund.
15. Depreciation on Internal Service Fund capital assets.
16. Proceeds of bonds issued to finance construction of Internal Service Fund capital assets.
17. Interest paid on bonds issued to finance construction of an Internal Service Fund capital
asset.
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18. Principal retirement payments on bonds issued to finance construction of Internal Service
Fund capital assets
19. Unrealized gain on investments held at year end.
20. Receipt of a capital grant for an ongoing Internal Service Fund capital asset construction
project.
Answers:
Problem 2 – Internal Service Fund Journal Entries
Listed below are selected transactions for the Maury County Internal Service Fund.
Transactions:
1. Purchased a building on January 2, 20X2, by paying $100,000 down and borrowing
$350,000 on a 6%, 10-year mortgage. Assume semi-annual mortgage payments are due
each June 30 and December 31, beginning this year. The building will be depreciated
over 20 years with no salvage value using the straight-line method.
2. Purchased supplies on account, $58,000. The fund uses the perpetual inventory method
when accounting for supplies.
3. Paid employee salaries, $120,000. Accrued salaries at year end were $13,000. Accrued
salaries at the beginning of the year were $9,000.
4. Billed General Fund departments $400,000 for services provided to those departments.
Billings to the Enterprise Fund totaled $30,000. 90% of these billings were collected by
year end. The remaining 10% is not expected to be collected from the other funds until
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the second quarter of the next fiscal year.
5. The first semi-annual mortgage payment of $23,500 was made.
6. Paid $50,000 on account.
7. Supplies on hand at year end have a cost of $4,000. The beginning of the year inventory
was $6,000.
8. The second semi-annual mortgage payment of $23,500 was made.
9. Record depreciation on the building for the year.
Requirements:
7. Prepare the journal entries required in the Internal Service Fund. If no entry is required,
state “No entry required” and explain why.
8. Indicate the effects of each transaction on the accounting equation of the Internal Service
Fund accounts. If an element of the equation is not affected or if the net effect is zero,
put “NE” in the appropriate box. Do not leave any boxes blank.
Answers:
Requirement #1
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# Accounts Debit Credit
1 Building 450,000
Cash 100,000
Requirement #2
Trans
#
Current
Assets
Noncurrent
Assets
Current
Liabilities
Noncurrent
Liabilities
Net
Position
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4b NE NE NE NE NE
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Problem 3 – Financial Statement Preparation
The accounts listed below are taken from an Internal Service Fund adjusted trial balance (all
amounts are in thousands):
Accounts DR CR
Accounts Payable $44
Accumulated Depreciation – Buildings 200
Accumulated Depreciation – Vehicles and Equipment 210
Billings to Departments 981
Buildings $319
Capital Contribution 60
Cash 243
Construction in Progress 20
Depreciation Expense 50
Due from Other Funds 60
Due to Other Funds 24
Net Position, July 1, 20X2 729
Interest Expense 11
Interest Revenue 15
Investments 160
Land 120
Maintenance Expense 35
Mortgage Payable 50
Personnel Services Expense 630
Restricted Cash – Construction 90
Supplies Expense 251
Supplies Inventory 73
Transfer from General Fund 75
Vehicles and Equipment 326
$2,388 $2,388
Requirements: Prepare Statement of Fund Net Position and Statement of Revenues, Expenses,
and Changes in Fund Net Position for the year ended June 30, 20X3, for the City
of Bell Buckle.
Answers: See Excel file Ch11P-3S.xlsx.
Governmental and Nonprofit Accounting: Theory and Practice, 10e (Freeman)
Problems – Chapter 12
Problem 1 – Agency Fund Entries
Shelby County collects property taxes levied by the county for its General Fund. It also collects
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the taxes levied by two towns within the county—Ford's Way and Foote’s Corner. The county
charges the towns a collection fee equal to 1% of taxes collected for those entities. Two percent
of the property taxes have been uncollectible historically. All amounts are in thousands of
dollars.
Transactions:
1. Taxes levied for 20X6 were $12,000 for the county, $5,000 for Ford's Way, and $3,000
for Foote’s Corner.
2. During the year tax collections for the county totaled $9,000; $4,000 was collected for
Ford’s Way and $2,200 was collected for Foote’s Corner.
3. One percent of the gross taxes receivable were written off as uncollectible during the
year.
4. All cash collected, less the collection fee, was remitted to the appropriate fund or entity.
5. The collection fee was remitted to the appropriate fund or entity.
Requirement: Prepare the entries required in the Shelby County General Fund and in the
Shelby County Tax Agency Fund to record the transactions. . If no entry is
required, state “No entry required” and explain why.
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