7–34
7-25. a. CITY OF BAY LAKE
WATER UTILITY FUND
GENERAL JOURNAL
Debits Credits
1. SALES OF WATER 500,000
ACCRUED UTILITY REVENUE 500,000
2. ACCOUNTS RECEIVABLE 2,788,691
3. CASH 260,000
INTEREST INCOME 178,000
INTEREST RECEIVABLE 82,000
4. MANAGEMENT & ADMINISTRATION EXPENSE 360,408
5. CASH—RESTRICTED 2,427
CUSTOMER DEPOSITS 2,427
6. CASH 2,943,401
Chapter 07 – Accounting for the Business–type Activities of State and Local Governments
7–35
Ch. 7, Solutions, Exercise 7-25 (Cont’d)
Debits Credits
7. ACCOUNTS PAYABLE 1,462,596
INTEREST PAYABLE 131,772
INTEREST EXPENSE 264,145
CURRENT PORTION OF LONG-TERM DEBT 400,000
MACHINERY & EQUIPMENT 583,425
8. CASH 475,000
CONTRIBUTION—CAPITAL GRANT 475,000
9. ACCUMULATED PROVISION FOR UNCOLLECTIBLE
10. INTERFUND TRANSFER OUT 800,000
CASH 800,000
11. DEPRECIATION EXPENSE 600,132
UNCOLLECTIBLE ACCOUNTS 14,913
INTEREST EXPENSE 61,406
ACCUMULATED DEPRECIATION—BUILDINGS 240,053
Chapter 07 – Accounting for the Business–type Activities of State and Local Governments
7–36
Ch. 7, Solutions, Exercise 7-25 (Cont’d)
Debits Credits
ACCRUED UTILITY REVENUE 700,000
12. REVENUE BOND PAYABLE 400,000
CURRENT PORTION OF LONG-TERM DEBT 400,000
13. SALES OF WATER 3,182,557
INTEREST INCOME 193,849
CONTRIBUTION—CAPITAL GRANT 475,000
MANAGEMENT & ADMINISTRATION EXPENSE 360,408
MAINTENANCE & DISTRIBUTION EXPENSE 689,103
TREATMENT PLANT EXPENSE 695,237
NET POSITION—UNRESTRICTED 383,293
NET POSITION—NET INVESTMENT IN CAPITAL
ASSETS* 383,293
*Net investment in capital assets was increased by the purchase of $583,425 of
machinery and equipment and a $400,000 decrease in the revenue bonds. The
account was decreased by $600,132 in depreciation.
Chapter 07 – Accounting for the Business–type Activities of State and Local Governments
7–37
Ch. 7, Solutions, Exercise 7-25 (Cont’d)
b. CITY OF BAY LAKE
WATER UTILITY FUND
STATEMENT OF REVENUE, EXPENSES, AND
CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2023
OPERATING INCOME:
OPERATING EXPENSES:
MANAGEMENT & ADMINISTRATION $ 360,408
MAINTENANCE & DISTRIBUTION 689,103
TREATMENT PLANT 695,237
NONOPERATING REVENUE/EXPENSES:
INTEREST INCOME 193,849
INTEREST EXPENSE ( 325,551)
TOTAL NONOPERATING INCOME (EXPENSE) (131,702)
INCOME BEFORE TRANSFERS & CONTRIBUTIONS 691,062
INTERFUND TRANSFERS OUT (800,000)
Chapter 07 – Accounting for the Business–type Activities of State and Local Governments
7–38
Ch. 7, Solutions, Exercise 7-25 (Cont’d)
c. CITY OF BAY LAKE
WATER UTLITY FUND
STATEMENT OF NET POSITION
JUNE 30, 2023
ASSETS:
CURRENT ASSETS:
CASH AND INVESTMENTS $ 1,811,482
INTEREST RECEIVABLE 15,849
TOTAL CURRENT ASSETS $ 2,887,754
RESTRICTED ASSETS:
CASH 10,708
CAPITAL ASSETS:
LAND $1,780,945
LIABILITIES:
CURRENT LIABILITIES:
ACCOUNTS PAYABLE 814,199
INTEREST PAYABLE 61,406
CURRENT PORTION OF LONG-TERM DEBT 400,000
TOTAL CURRENT LIABILITIES 1,275,605
LIABILITIES PAYABLE FROM RESTRICTED ASSETS:
CUSTOMER DEPOSITS 10,708
Chapter 07 – Accounting for the Business–type Activities of State and Local Governments
7–39
Ch. 7, Solutions, Exercise 7-25 (Cont’d)
d. CITY OF BAY LAKE
WATER UTILITY FUND
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
CASH RECEIVED FROM CUSTOMERS $2,943,401
CASH PAID TO EMPLOYEES AND SUPPLIERS ( 1,462,596)
NET CASH PROVIDED BY OPERATIONS 1,480,805
CASH FLOWS FROM CAPITAL & RELATED FINANCING
ACTIVITIES:
PROCEEDS FROM CAPITAL GRANT 475,000
PUCHASE OF MACHINERY & EQUIPMENT (583,425)
PRINCIPAL PAID ON CAPITAL DEBT (400,000)
INTEREST PAID ON CAPITAL DEBT (395,917)
NET CASH USED BY CAPITAL &
RELATED FINANCING ACTIVITIES (904,342)
END BEGINNING
OF YEAR OF YEAR
CASH AND CASH EQUIVALENTS IN CURRENT
AND ACCRUED ASSETS $1,811,482 $1,775,019
RESTRICTED CASH AND CASH EQUIVALENTS 10,708 9,193
TOTAL CASH AND CASH EQUIVALENTS $1,822,190 $1,784,212
Chapter 07 – Accounting for the Business–type Activities of State and Local Governments
Ch. 7, Solutions, Exercise 7-25, d. (Cont’d)
RECONCILIATION OF OPERATING INCOME TO NET CASH
PROVIDED BY OPERATIONS
OPERATING INCOME $ 822,764
ADJUSTMENTS:
DEPRECIATION EXPENSE 600,132
General Problem Information: City of Bay Lake Water Utility Fund
Learning Objective: 7-5
Topic: Enterprise Funds
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Hard
Chapter 07 – Accounting for the Business–type Activities of State and Local Governments
7–41
7-26.
VILLAGE OF SHELBURNE
GOLF COURSE ENTERPRISE FUND
PARTIAL STATEMENT OF NET POSITION
AS OF YEAR END
NET POSITION:
NET POSITION—NET INVESTMENT IN CAPITAL ASSETS $ 594,300
Calculations
Net investment in capital assets:
Beginning balance $585,400
+ Leased equipment 200,000
– Lease obligation (200,000-40,000) 160,000
– Sale of equipment 6,100
Ending balance $594,300
Restricted:
Beginning and ending balance $ 5,000
Unrestricted:
Beginning balance $254,790
Chapter 07 – Accounting for the Business–type Activities of State and Local Governments
7–42
Ch. 7, Solutions, Exercise 7-26 (Cont’d)
General Problem Information: Net Position Classifications
Learning Objective: 7-5
Topic: Net Position of an Enterprise Fund
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Medium
Chapter 07 – Accounting for the Business–type Activities of State and Local Governments
7–43
7-27.
CUMBERLAND COUNTY
ENTERPRISE FUND
STATEMENT OF CASH FLOWS
FOR THE CURRENT YEAR ENDED
CASH FLOWS FROM OPERATING ACTIVITIES:
CASH RECEIVED FROM CUSTOMERS $112,793
CASH PROVIDED FROM CUSTOMER DEPOSITS 1,400
CASH FLOWS FROM NONCAPITAL FINANCING
ACTIVITIES:
TRANSFER FROM GENERAL FUND 5,000
NET CASH PROVIDED BY NONCAPITAL
FINANCING ACTIVITIES 5,000
CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES:
PROCEEDS FROM ISSUANCE OF DEBT 15,000
PURCHASE OF NEW EQUIPMENT (8,000)
DEBT PAYMENT (17,500)
NET CASH PROVIDED BY INVESTING ACTIVITIES 1,525
NET INCREASE IN CASH AND CASH EQUIVALENTS 54,987
CASH AND CASH EQUIVALENTS, BEGINNING 98,576
CASH AND CASH EQUIVALENTS, ENDING $153,563
Chapter 07 – Accounting for the Business–type Activities of State and Local Governments
Ch. 7, Solutions, Exercise 7-27 (Cont’d)
RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE BALANCE
SHEET
END BEGINNING
* – Beginning balance + deposits received – deposits returned and those written off and released
from restriction.
General Problem Information: Enterprise fund statement of cash flows
Learning Objective: 7-5
Topic: Enterprise Funds
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Medium
7–45
7-28. a. BROWN COUNTY
SOLID WASTE FUND
GENERAL JOURNAL
Debits Credits
1. INTEREST ON LONG-TERM DEBT 6,702,000
2. INSURANCE EXPENSE 1,069,000
DUE TO OTHER FUNDS 1,069,000
3. INVESTMENTS 3,952,000
4. PROVISION FOR UNCOLLECTIBLE ACCOUNTS 45,000
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS 45,000
5. PROVISION FOR LANDFILL CLOSURE
AND POSTCLOSURE 1,800,000
b. Yes, the county is complying with GASB standards for recognition of closure and
post-closure care costs. The county is recognizing an expense and liability each
period based on a units-of-production approach. The county estimates the dollar
value of closure and post-closure costs, and then recognizes the expense and liability
Chapter 07 – Accounting for the Business–type Activities of State and Local Governments
7–46
Ch. 7, Solutions, Exercise 7-27 (Cont’d)
c. The funds set aside to meet closure and post-closure obligations would be shown as
Amounts Held by Trustee in the Restricted Assets section of the statement of net
position and as net position restricted for closure and post-closure care costs. In the
case of Brown County, if regulations require that 90% of the estimated liability be