1) On December 31, 2014, the following account balances, among others, were
included in the preclosing trial balance of the General Fund of the City of Springfield.
Estimated Revenue$2,960,000
Expenditures1,950,000
Encumbrances530,000
Expenditures2013300,000
Reserve for Encumbrances (1)830,000
Appropriations2,850,000
Revenue3,220,000
Reserve for Supplies Inventory (2)600,000
Supplies Inventory600,000
Unreserved Fund Balance300,000
(1)The balance in this account was $270,000 on January 1, 2014. Purchase orders
outstanding on December 2014 total $530,000.
(2)Supplies on hand on December 31, 2014, amount to $380,000.
Required:
1>What was the balance in the Unreserved Fund Balance account on December 31,
2013? What was the total Fund Balance on December 31, 2013?
2>Prepare the necessary adjusting and closing entries for the year ended December 31,
2014. Springfield uses the purchase method to account for supplies.
2) How is the income reported by the subsidiary reflected on the books of the investor
under each of the methods of accounting for investments?
3)
4) The following transactions take place:
1>On January 1, the city issued 9% general obligation bonds with a face value of
$4,000,000 payable in 10 years to finance the construction of city offices. Total
proceeds were $4,500,000.
2>On December 20, construction was completed and occupancy taken of the city
offices. The full cost of $3,900,000 was paid to the contractor, and appropriate closing
entries were made with regard to the project.
3>The General Fund repaid the Special Revenue Fund a loan of $15,000 plus $900 in
interest on the loan.
Required:
Prepare entries in general journal form to record these transactions in the proper
fund(s). Designate the fund in which each entry is recorded.
5) A vice president of marketing for your company has been charged with embezzling
nearly $100,000 from the company. The vice president allegedly submitted fraudulent
vendor invoices in order to receive payments. As the vice president of marketing for the
company, the vice president is authorized to approve the payment of invoices submitted
by third-party vendors who did work for the company. After the activities were
uncovered, the company responded by stating: All employees are accountable to our
ethics guidelines and procedures. We do not tolerate violations of our ethics policy and
will consistently enforce these policies and procedures.
1>How would you evaluate the internal controls of the company?
2>Do you think there are companies that develop comprehensive ethics and compliance
pro-grams programs for mid- and lower-level employees and ignore upper-level
executives and managers?
3>Is it an ethical issue if companies are not forth-coming concerning fraudulent
activities of top executives in an effort to minimize negative publicity?
6) Why do most NNOs use fund accounting?
7) From a consolidated point of view, when shouldprofit be recognized on
intercompany sales ofdepreciable assets? Nondepreciable assets?
The NOR Partnership is being liquidated. A balance sheet prepared prior to liquidation
is presented below:8) AssetsLiabilities & Equities
Cash$240,000Liabilities$ 160,000
Other Assets300,000Rice, Loan60,000
Nutt, Capital180,000
Ohm, Capital60,000
Rice, Capital 80,000
Total Assets$540,000Total Equities$540,000
Nutt, Ohm, and Rice share profits and losses in a 40:40:20 ratio. All partners are
personally insolvent.
Required:
APrepare the journal entries necessary to record the distribution of the available cash.
BPrepare the journal entries necessary to record the completion of the liquidation
process, assuming the other assets are sold for $120,000.
9) On January 1, 2013, Preston Corporation acquired an 80% interest in Spiegel
Company for $2,400,000. At that time Spiegel Company had common stock of
$1,800,000 and retained earnings of $800,000. The book values of Spiegel Company’s
assets and liabilities were equal to their fair values except for land and bonds payable.
The land’s fair value was $120,000 and its book value was $100,000. The outstanding
bonds were issued on January 1, 2005, at 9% and mature on January 1, 2015. The bond
principal is $600,000 and the current yield rate on similar bonds is 8%.
Required:
Prepare the workpaper entries necessary on December 31, 2013, to allocate, amortize,
and depreciate the difference between implied and book value.
Present Value
Present value of 1of Annuity of 1
9%, 5 periods.649933.88965
8%, 5 periods.680583.99271
