Ch. 16—Problems 16–1
16–1
CHAPTER 16
UNDERSTANDING THE ISSUES
1. Capital projects funds are used to account
for the inflows and outflows of financial re-
mental funds. Fixed assets acquired with
2. Closing of a capital projects fund at the end
of a period is desirable to adjust and bal-
ance the fund accounts for the annual
3. Capital special assessments are levied in
installments to provide more time over
be collected in future periods.
4. The due date and amounts of principal and
5. Revenues would be credited if resources
were received from a source outside of the
6. Both funds account for public-purpose
trusts. If the resources and any earnings on
7. Two major types of interfund transfers are
funds for such items as debt servicing, financ-
ing of specific programs, or funding of major
construction projects. Equity transfers are
tures/expenses. Equity transfers between
8. Both an agency fund and a trust fund are
fiduciary funds. An agency fund is adopted
9. Both are proprietary funds. An enterprise
fund is used to account for activities of a
16–2
Governmental funds record expenditures
using modified accrual accounting.
11. The accounting emphasis for governmental
funds emphasizes the funds available,
12. Private-purpose trust funds are used to
account for assets held by the government
on behalf of an individual, a group, or an
organization. Permanent funds record
assets held, income from which will benefit
16–3 Ch. 16—Exercises
EXERCISES
EXERCISE 16-1
(1) b The cash flow statement for governmental proprietary funds and nonexpendable trust
(3) b Accounting procedures of internal service funds resemble commercial accounting.
(4) d Payments for services provided by an internal service fund within the same govern-
(5) c As an interest adjustment factor, the premium should be transferred to the debt service
fund that pays the interest.
(7) d The police car is not a current financial resource and is not reported on the balance
sheet.
(8) d The reclassification entry is a follows:
(10) d The revenue is recorded by the general fund, but the debt service fund makes the
payment of principal and interest.
EXERCISE 16-2
(1) d The debt service fund follows general fund procedures except for the usual practice of
not using budgetary entries.
(2) a Permanent funds are used to account for public-purpose trusts, for which earnings are
(3) b Permanent funds are classified as governmental and follow accounting rules similar to
Exercise 16-2, Concluded
(4) d Capital projects funds are used to account for major construction activity financed by
general tax revenues or special assessments.
(5) a An investment trust fund is used to account for assets, liabilities, net position, and
(6) a Debt service funds are used to account for the payment of interest and principal on
(8) b With no commitment by the governmental unit, the liability is solely that of the as-
(9) b Expenses are not reported in governmental funds. In addition, governmental funds
(10) c The amount to be provided is reduced with the receipt of available funds in the debt
service fund.
EXERCISE 16-3
(1) a Interest is recorded only in the period that interest is due.
(3) c All long-term debt that is the responsibility of the city (except debt of proprietary funds)
is recorded here.
16–5 Ch. 16—Exercises
EXERCISE 16-4
Fund or
Account Group Entries Debit Credit
(a) Capital Estimated Other Financing Sources ……………………. 36,000,000
Projects Appropriations ……………………………………………… 14,000,000
Fund To record contribution from the general fund.
(c) Capital Cash ………………………………………………………………. 29,650,000
Projects Expenditures ……………………………………………………. 50,000
Fund Other Financing Uses ……………………………………….. 300,000
Other Financing Sources ………………………………. 30,000,000
Expenditures ……………………………………………………. 7,000,000
Cash …………………………………………………………… 7,000,000
To record expenditures for partial completion.
General Construction in Progress …………………………………… 7,000,000
Fixed Assets Investment in General Fixed Assets—
EXERCISE 16-5
Cash ……………………………………………………………………………………. 20,000
Other Financing Sources ………………………………………………….. 20,000
To record cash receipt from the general fund.
Cash ……………………………………………………………………………………. 380,000
EXERCISE 16-6
Fund or
Account Group Date Entries Debit Credit
Debt Jan. 1 Special Assessments Receivable (current) ……. 95,000
Exercise 16-6, Concluded
Fund or
Account Group Date Entries Debit Credit
Debt Dec. 31 Cash ………………………………………………………… 64,125
EXERCISE 16-7
(a) No entry is made in the debt service fund.
(b) Expenditures …………………………………………………………………………….. 800,000
Matured Bonds Payable ……………………………………………………….. 500,000
EXERCISE 16-8
(a) Restricted Assets—Cash for Construction ………………………………. 300,000
Interfund Transfer from General Fund ……………………………….. 300,000
To record restricted amount received from the
general fund.
EXERCISE 16-9
Permanent Fund
Cash …………………………………………………………………………………………. 200,000
16–9 Ch. 16—Exercises
Exercise 16-9, Concluded
Unrealized Loss …………………………………………………………………………. 600
Investment in Bonds ………………………………………………………………. 600
To record fair value adjustment.
Other Financing Uses …………………………………………………………………. 12,000
Cash ……………………………………………………………………………………. 12,000
City of Alexander
Water Quality Improvement Permanent Funds
Balance Sheet
December 31, 2018
Assets Total
Cash ……………………………………………………………………………………………………. $ 3,000
Fund Balance
Restricted for endowments …………………………………………………………………….. $202,400
EXERCISE 16-10
(1) b (6) g
(3) d (8) d
(5) b (10) h
Ch. 16—Exercises 16–10
EXERCISE 16-11
(1) g (6) j
(3) l (8) a
(5) e (10) b
EXERCISE 16-12
(a) GF, GFAAG
(b) DSF, CPF, GLTDAG
16–11 Ch. 16—Problems
PROBLEMS
PROBLEM 16-1
(2) c The grant is for the construction of a fixed asset.
(3) b The capital projects fund records other financing sources and uses. The debt service
fund records other financing sources. The general long-term debt account group
(5) d All self-sustaining activities are recorded in proprietary funds; in this case, both are en-
terprise funds.
(7) d The general fund records only its transfer; the debt proceeds are recorded as other
financing sources in the capital projects fund.
PROBLEM 16-2
(2) c Expenditures for a debt service fund equal the amount of matured principal
(3) a Because transfers received from other funds are not revenue but are other financing
sources, only the interest of $600,000 qualifies as revenue.
(5) a Under modified accrual, issue costs and debt insurance are recorded as expenditures.
Problem 16-2, Concluded
(7) d “City streets and sidewalks” are infrastructure fixed assets. A governmental unit must
(8) a Special revenue funds are established to account for restricted resources used for
PROBLEM 16-3
(1) Palmer Township
Administration Center Capital Projects Fund
Journal Entries
For Period July 1, 2018, to June 30, 2019
2018
16–13 Ch. 16—Problems
Problem 16-3, Continued
2019
Apr. 30 Encumbrances ……………………………………………………… 7,000,000
Fund Balance—Assigned …………………………………… 7,000,000
To record encumbrance for contract.
(2) Palmer Township
Administration Center Capital Projects Fund
Closing Entries
June 30, 2019
Problem 16-3, Concluded
(3) Palmer Township
Administration Center Capital Projects Fund
Balance Sheet
June 30, 2019
Assets
Cash ……………………………………………………………………………………………………… $6,800,000
Due from state government ………………………………………………………………………. 2,000,000
Total assets ………………………………………………………………………………………. $8,800,000
Liabilities and Fund Balance
Liabilities:
Contracts payable ……………………………………………………………. $1,152,000
(4) 2018
July 1 General Transfer-Out—Other Financing Uses …….. 250,000
Fund Cash ……………………………………………… 250,000
To record transfer to the capital
projects fund.
Dec. 1 Debt Cash …………………………………………………. 60,000
Service Other Financing Sources ………………….. 60,000
Fund To record receipt of premiums.
2019
June 10 General Cash …………………………………………………. 250,000
Fund Transfer-In—Other Financing Sources .. 250,000
To record transfer from the capital
projects fund.
16–15 Ch. 16—Problems
PROBLEM 16-4
(1) Appropriations …………………………………………………………………….. 640,000
Estimated Other Financing Uses ……………………………………………. 25,000
Budgetary Fund Balance—Unassigned ………………………………….. 305,000
(2) City of Clark
Capital Projects Fund
Statement of Revenues, Expenditures, and Changes in Fund Balance
For Year Ended December 31, 2019
Revenues ………………………………………………………………………………….. $ 16,600
Expenditures ……………………………………………………………………………… 686,600
Excess of expenditures over revenues ………………………………………….. $(670,000)
Problem 16-4, Concluded
(3) City of Clark
Capital Projects Fund
Balance Sheet
December 31, 2019
Assets
Current:
Cash ………………………………………………………………………………. $ 75,000
Liabilities and Fund Balances
PROBLEM 16-5
(1) d
(3) b
16–17 Ch. 16—Problems
PROBLEM 16-6
Fund or
Date Account Group Entry
Jan. 2 Capital Budgetary Fund Balance—Unassigned …… 223,400
Projects Appropriations ………………………………….. 223,400
Fund To record budget.
Feb. 1 Debt Cash …………………………………………………… 237,600
Service Interest Receivable on Delinquent Special
Fund Assessments ……………………………………. 2,400
Revenues ……………………………………. 20,000
Special Assessments Receivable—
Current ……………………………………. 220,000
To record collections and to bill
interest.
Special Assessments Receivable—
Delinquent ……………………………………….. 30,000
28 Debt Expenditures ……………………………………….. 140,000
Service Cash ……………………………………………….. 140,000
Fund To record matured principal
and interest.
General Capital Project Special Assessment Debt
Problem 16-6, Concluded
Fund or
Date Account Group Entry
Mar. 14 Debt Cash ………………………………………………………… 32,650
Service Special Assessments Receivable—
Fund Delinquent ………………………………………… 30,000
May 1 Capital Expenditures …………………………………………….. 220,000
Projects Contracts Payable ………………………………….. 209,000
Fund Contracts Payable—Retained Percentage … 11,000
To book additional expenditures on
completed contract.
10 Capital Contracts Payable ……………………………………… 150,000
Projects Cash …………………………………………………….. 150,000