Part b — FUND FINANCIAL STATEMENTS
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
For the Year Ended December 31, 2015
General Fund
Revenues
—Property Taxes $370,000
—Student Fees 3 ,000
Total Revenues $373,000
Expenditures
Change in Fund Balance $ 99,000
Fund Balance—Beginning of Year – 0 –
Fund Balance—End of Year $ 99 ,000
BALANCE SHEET
December 31, 2015
General Fund
Assets
—Cash $ 53,000
—Property Tax Receivable 80 ,000
Total Assets $133 ,000
Total Liabilities, Deferred Inflows of
Resources, and Fund Balance $133 ,000
45. (25 Minutes) (Assessing the impact of various government transactions.)
a. This statement is false. Internal service funds are included in
b. This statement is false because not enough information is available to
say that this fund “must be” reported as a major fund. The asset balance
($32,000) for this governmental fund is larger than 10 percent of the total assets
c. This statement is false. If (a) the user charge is the sole security for
the debts of the bus system or (b) the activity’s costs are required to be
recovered through the fee or (c) the fee is set to recover the activity’s costs, then
d. This statement is true. To record a budget so that the projected
e. This statement is false. To record a budget so that the projected
increase or decrease in fund balance will be obvious (a credit is an anticipated
f. This statement is true. In the purchases method, the total prepaid
expenses or supplies acquired is recorded as an expenditure. In the
g. This statement is true. Income taxes and sales taxes are both derived
tax revenues because the tax is assessed based on a specific event (the earning
of income or the making of a sale).
h. This statement is true. Accrual accounting is used for government-
i. This statement is false. The encumbrance (commitment) is removed
j. This statement is false. “Fund balance – committed” is used when
financial resources have been designated by the highest level of government
k. This statement is false. This is an intra-activity transaction between
46. (25 Minutes) (The handling of various government transactions.)
a. This statement is false. This transfer is an internal exchange
b. This statement is false. No increase in net position is recognized in
d. This statement is false. The $5,000 cannot be used at this time.
However, revenue recognition will occur after the passage of time. The
e. This statement is false. The $5,000,000 can never be spent so a fund
47. (25 Minutes) (Prepare a statement of revenues, expenditures, and other
changes in fund balance)
In this problem, the journal entries are prepared based on the rules for
creating fund financial statements for the General Fund.
a.
Cash 700,000
Property Taxes Receivable 100,000
b.
Expenditures—Police Cars 200,000
Cash 200,000
If previously recorded, an encumbrance would also have to be removed.
c.
Other Financing Uses—Transfers Out 90,000
d.
required in this period. Payment will not be until next June 30.
e.
Encumbrances – Computer 40,000
Encumbrances Outstanding 40,000
f.
h.
Expenditures—Supplies 10,000
Cash 10,000
i.
Supplies 2,000
Fund Balance—Nonspendable 2,000
FUND FINANCIAL STATEMENTS
CITY OF LOST ANGELS
STATEMENT OF REVENUES, EXPENDITURES AND OTHER CHANGES IN FUND
BALANCE
For the Year Ended December 31, 2015
General Fund
Revenues
—Property Taxes $750 ,000
Total Revenues $750 ,000
Expenditures
—Police cars $200,000
—Salaries 40,000
—Computer 41,000
Other Financing Sources (Uses)
—Transfer to Debt Service Fund $(90,000)
—Issued Long-Term Bond 200 ,000
Net Other Financing Sources $110 ,000
48. (25 Minutes) (Prepare a statement of net position for governmental
activities)
Here the journal entries are prepared based on the need to create
government-wide financial statements for the General Fund (a governmental
activity).
a.
Cash 700,000
Property Taxes Receivable 100,000
Property Tax Revenue 800,000
b.
d.
Cash 200,000
Bonds Payable 200,000
Interest Expense 10,000
Interest Payable 10,000
Interest is accrued here based on $200,000 x 10 percent x 1/2 year.
g.
Computer 41,000
Vouchers Payable 41,000
Depreciation Expense 4,100
Accumulated Depreciation 4,100
This problem indicates that the General Fund held $180,000 in cash at the start of
the year. The following account balances have been determined based on the
above journal entries.
GOVERNMENT-WIDE FINANCIAL STATEMENTS
CITY OF LOST ANGELS
STATEMENT OF NET POSITION
December 31, 2015 Governmental
Activities
Assets
—Cash $840,000
—Property Tax Receivable 100,000
Total Assets $1 ,168,900
Liabilities
—Vouchers Payable $41,000
—Salary Payable 10,000
—Interest Payable 10,000
The total net position figure of $907,900 can be found by taking the opening
balance of $180,000 and then adding the revenues for the period and
subtracting the expenses.
49. (10 Minutes) (The budgetary process)
A. True—The initial approval of spending was $380,000 and that amount
should be recorded immediately. The budgetary entry debits Estimated
Revenues and credits Appropriations.
E. False—Budgetary information only relates to fund financial statements
to show the inflows and outflows of current financial resources and has
no impact on the government-wide financial statements.
50. (10 Minutes) (The recording of grants)
A. False—This grant appears to be voluntary exchange transaction.
Revenue should be recognized when all eligibility requirements have
been met. Here, the eligibility requirements, if any, could have been met
during 2015. It is certainly possible that the eligibility requirements have
not been met but that is not necessarily the case.
D. True—Cash is recognized because it had been received but no revenue
is reported because all eligibility requirements have not yet been met.
Thus, unavailable revenue should be established for the amount
received.
51. (20 Minutes) (Impact of various government transactions)
a. Fund financial statements – the fund balance goes up by $6 million
because of the inflow of current financial resources.
Government-wide financial statements – the net position balance does
b. Fund financial statements – the fund balance goes down by $149,000
because of the outflow of current financial resources.
b. Fund financial statements – the fund balance is not affected because
the resources will not be collected quickly enough to be available in the
current period. An asset (receivable) is recognized along with a liability
(unearned revenue) so that the size of the fund balance is not affected.
d. Fund financial statements – the fund balance should go up by $500,000.
Sales took place in the current year but only half of the financial
resources will all be received within the 75 day period being used to
define available resources. The remainder will be unavailable revenue.
f. Fund financial statements – the fund balance for the General Fund goes
down by $18,000 because the transfer has been approved and will
remove current financial resources from this fund.
Government-wide financial statements – no impact occurs on the net
position balance of the governmental activities because this is an intra-
activity transfer from one Governmental Fund to another. There is no
net effect.