Monroe 2015 Continuous Problem Statement Analysis

Continuous Problem â?? City of MonroeContinuous Problem â?? City of MonroeTOACCOMPANYESSENTIALS OF A

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Continuous Problem â€" City of MonroeContinuous Problem â€" City of MonroeTOACCOMPANYESSENTIALS OF ACCOUNTING FOR GOVERNMENTALAND NOT-FOR-PROFIT ORGANIZATIONS:TWELFTH EDITIONChapters 2 through 8 describe accounting and financial reporting by state and localgovernments. A continuous problem is presented to provide an overview of the reportingprocess, including preparation of fund basis and government-wide statements. The problemassumes the government is using fund accounting for its internal record-keeping and then atyear-end makes necessary adjustments to prepare the government-wide statements. Theproblem that follows is presented in the same order as the textbook (beginning with Chapters3, and 4).Each chapter requires the preparation of journal entries to record the events and transactionsof governmental, proprietary, or fiduciary funds. For the General Fund, use control accountsfor the budgetary accounts, revenues, expenditures and encumbrances. For all other funds,use separate accounts for each type of revenue and expenditure/expense. At appropriatestages, preparation of the fund and government-wide statements are required. The followingfunds are included in this series of problems:Governmental FundsGeneralSpecial revenueâ€"Street and Highway FundCapital projectsâ€"City Hall Annex Construction FundDebt serviceâ€"City Jail Annex Debt Service FundDebt serviceâ€"City Hall Debt Service FundProprietary FundsInternal serviceâ€"Stores and Services FundEnterpriseâ€"Water and Sewer FundFiduciary FundsPrivate-purposeâ€"Student Scholarship FundPension trustâ€"Fire and Police Retirement FundChapters 3 & 4The Balance Sheets of the General Fund and the Street and Highway Fund of the City ofMonroe as of December 31, 2014, follow. These (beginning) balances have been entered inthe proper general ledger accounts, as of 1/1/2015.1Continuous Problem â€" City of MonroeCITY OF MONROEGeneral Fund Balance SheetAs of December 31, 2014AssetsCash$502,000Taxes receivable$210,000Less: Estimated uncollectible taxes(42,000)net168,000Interest and penalties receivable on taxes5,200Less: Estimated uncollectible interest and penalties(950)net4,250Due from state government210,000Total assets$884,250Liabilities, Deferred Inflows, and Fund EquityLiabilities:Accounts payable$ 99,000Due to other funds27,000Total liabilities126,000Deferred inflows â€" Property taxesFund equity:Fund balanceâ€"assigned(for outstanding encumbrances)Fund balanceâ€"unassignedTotal fund balanceTotal liabilities, deferred inflows and fund equity21,000$17,000720,250737,250$884,250CITY OF MONROEStreet and Highway Fund Balance SheetAs of December 31, 2014AssetsCashInvestmentsDue from state governmentTotal assetsLiabilities and Fund EquityLiabilities:Accounts payableFund equity:Fund balanceâ€"assigned for streets andhighwaysTotal liabilities and fund equity2$21,00059,000109,000$189,000$9,000180,000$189,000Continuous Problem â€" City of Monroe3â€"C. This portion of the continuous problem continues the General Fund and special revenuefund examples by requiring the recording and posting of the budgetary entries. Toreduce clerical effort required for the solution use control accounts for the budgetaryaccounts, revenues, expenditures and encumbrances. Subsidiary accounts are notrequired. Budget information for the City includes:a) As of January 1, 2015, the City Council approved and the mayor signed a budgetcalling for $11,250,000 in property tax and other revenue, $9,300,000 inappropriations for expenditures, and $1,700,000 to be transferred to two debt servicefunds for the payment of principal and interest. Record the budget for the GeneralFund and post to the ledger.b) Also as of January 1, 2015, the City Council approved and the mayor signed a budgetfor the Street and Highway Fund that provided for estimated revenues from the stategovernment in the amount of $1,068,000 and appropriations of $1,047,000. Recordthe budget and post to the ledger.4â€"C. Part 1. General Fund TransactionsRequired:a. Record journal entries for the following transactions for FY 2015. Make any computationsto the nearest dollar. Journal entry explanations are not required. Use control accounts forrevenues, expenditures and budgetary accounts. It is not necessary to reflect subsidiaryledger entries.(1) Encumbrances of $ 17,000 for purchase orders outstanding at the end of 2014were re-established.(2) The January 1, 2015, balance in Deferred Inflows â€" Property Taxes relates to theamount of the 2014 levy that was expected to be collected more than 60 daysafter December 31. This amount should be recognized as 2015 revenues.(3) A general tax levy in the amount of $6,800,000 was made. It is estimated that 2percent of the tax will be uncollectible.(4) Tax anticipation notes in the amount of $500,000 were issued.(5) Goods and supplies related to all encumbrances outstanding as of December 31,2014 were received, along with invoices amounting to $16,600; the invoiceswere approved for payment. The City maintains immaterial amounts in supplyinventories and it is the practice of the City to charge supplies to expenditurewhen received.(6) All accounts payable and the amount due other funds were paid.(7) The General Fund collected the following ($ 10,811,500) in cash:o prior year taxes, $158,000;o interest and penalties receivable on prior year taxes, $3,500;o current taxes, $6,400,000;o $210,000 previously recorded as due from the state government;o licenses and permits, $800,000;o sales taxes, $2,890,000; and3Continuous Problem â€" City of Monroeo miscellaneous revenues, $350,000.(8) Purchase orders and contracts were issued in the amount of $3,465,000.(9) Payrolls for the General Fund totaled $5,070,000. Of that amount, $498,000were withheld for employees†federal income taxes and $357,000 werewithheld for employees†FICA and Medicare tax liability; the balance was paidin cash. The encumbrance system is not used for payrolls.(10) The liability for the cityâ€s share of FICA and Medicare taxes, $357,000, wasrecorded as was the liability for state unemployment taxes in the amount of$28,000.(11) Invoices for most of the supplies and services ordered in transaction 8 werereceived in the amount of $3,375,300 and approved for payment. The relatedencumbrance amounted to $3,407,000.(12) Tax anticipation notes were paid at maturity, along with interest in the amountof $18,000.(13) Notification was received that an unrestricted state grant in the amount of$332,000 would be received during the first month of the next year.(14) The General Fund recorded a liability to the Water and Sewer Fund for servicesin the amount of $37,000 and to the Stores and Services Fund for supplies inthe amount of $313,200; $310,000 of the amount due the Stores and ServicesFund was paid.(15) The General Fund recorded an amount due of $52,000 from the stategovernment, representing sales taxes to be collected from retail sales takingplace during the last week of the year.(16) The General Fund paid accounts payable in the amount of $3,015,000 and paidthe amounts due the federal and state governments. The General Fund alsotransferred to the debt service funds cash in the amount of $1,662,000 for therecurring payment of principal and interest.(17) All required legal steps were accomplished to increase appropriations by thenet amount of $212,000. Estimated revenues were increased by $73,000.(18) The City Council authorized a write-off of $51,000 in delinquent property taxesand corresponding interest and penalties amounting to $1,600.(19) Interest and penalties receivable on taxes were accrued in the amount of$17,200; $1,100 of this amount is expected to be uncollectible.(20) It is estimated that $27,500 of the outstanding taxes receivable will be collectedmore than 60 days beyond the fiscal year-end.b. Post the entries to the general ledger.c. Prepare and post the closing entries for the General Fund. Outstanding encumbrances atyear end are classified as Assigned Fund Balance and all remaining net resources areclassified as Unassigned Fund Balance.d. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the yearended December 31, 2015. Confirm that the revenue and expenditure control accountsagree with the following detail and use this information in the Statement:4Continuous Problem â€" City of MonroeRevenuesProperty Taxes . . . . . . $6,657,500Sales Taxes2,942,000Interest and Penaltieson Taxes . . . . . . . . . . .16,100Licenses and Permits .800,000IntergovernmentalRevenue . . . . . . . . . . .332,000Miscellaneous Revenue350,000Total . . . . . . . . . . . .$11,097,600ExpendituresGeneral Government . . . $1,646,900Public Safety . . . . . . . . . 3,026,900Highways and Streets . . 1,441,400Sanitation . . . . . . . . . . . .591,400Health . . . . . . . . . . . . . .724,100Welfare . . . . . . . . . . . . .374,300Culture and Recreation .917,300Capital Outlay . . . . . . . .492,800Total . . . . . . . . . . . . .$9,215,100e. Prepare in good form a Balance Sheet for the General Fund as of the end of fiscal year,December 31, 2015.4â€"C. Part 2. Special Revenue Fund TransactionsRequired:a. Record journal entries for the following transactions for FY 2015 and post to the generalledger. As there are relatively few revenues and expenditures, the use of control accountsis not necessary. (Make entries directly to individual revenue and expenditure accounts).(1) The state government notified the City that $1,072,000 will be available forstreet and highway maintenance during 2015 (i.e. the City has met eligibilityrequirements). The funds are not considered reimbursement-type as defined byGASB standards.(2) Cash in the total amount of $985,000 was received from the state government.(3) Contracts, all eligible for payment from the Street and Highway Fund, weresigned in the amount of $1,062,000.(4) Contractual services (see transaction 3) were received; the related contractsamounted to $1,043,000. Invoices amounting to $1,030,500 for these itemswere approved for payment. The goods and services all were for street andhighway maintenance.(5) Investment revenue of $5,120 was earned and received.(6) Accounts payable were paid in the amount of $923,000.(7) All required legal steps were accomplished to increase appropriations in theamount of $4,500.b. Prepare and post the necessary closing entries for the Street and Highway Fund.c. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balances for theStreet and Highway Fund for the fiscal year ended December 31, 2015.5Continuous Problem â€" City of Monroed. Prepare a Balance Sheet for the Street and Highway Fund as of December 31, 2015.Assume any unexpended net resources are classified as Restricted Fund Balance.Chapter 55â€"C. Part 1. Capital Projects Fund TransactionsThe voters of the City of Monroe approved the issuance of tax-supported bonds in the faceamount of $4,000,000 for the construction and equipping of a new City Jail. Architects wereto be retained, and construction was to be completed by outside contractors. In addition to thebond proceeds, a $1,320,000 grant was expected from the state government.Required:a. Open a general journal for the City Jail Annex Construction Fund. Record the followingtransactions and post to the general ledger. Control accounts are not necessary.(1) On January 1, 2015, the total face amount of bonds bearing an interest rate of 8percent was sold at a $200,000 premium. Principal amounts of $200,000 eachwill come due annually over a 20-year period commencing January 1, 2016.Interest payment dates are July 1 and January 1. The first interest payment willbe July 1, 2015. The premium was transferred to the City Jail Debt ServiceFund for the future payment of principal on the bonds.(2) The receivable from the state government was recorded.(3) Legal and engineering fees early in the project were paid in the amount of$116,000. This amount had not been encumbered.(4) Architects were engaged at a fee of $250,000.(5) Preliminary plans were approved, and the architects were paid 20 percent of thefee.(6) The complete plans and specifications were received from the architects andapproved. A liability in the amount of $150,000 to the architects was approvedand paid.(7) Bids were received and opened in public session. After considerable discussionin City Council, the low bid from Hardhat Construction Company in theamount of $4,500,000 was accepted, and a contract was signed.(8) The contractor required partial payment of $1,350,000. Payment was approvedand vouchered with the exception of a 5 percent retainage.(9) Cash in the full amount of the grant was received from the state government.(10) Furniture and equipment for the annex were ordered at a total cost of $439,500.(11) Payment was made to the contractor for the amount payable (see 8 above).(12) The contractor completed construction and requested payment of the balancedue on the contract. After inspection of the work, the amount, including the pastretainage, was approved for payment and then paid.(13)The furniture and equipment were received at a total actual installed cost of$439,300. Invoices were approved for payment.(14) The remainder of the architects†fees was approved for payment.(15) The City Jail Construction Fund paid all outstanding accounts payables ($489,300) on December 31, 2015.6Continuous Problem â€" City of Monroe(16) The remaining cash was transferred to the City Jail Debt Service Fund.b. Post the entries to the City Jail Construction Fund general ledger.c. Prepare and post an entry closing all nominal accounts to Fund Balance.5â€"C. Part 2. Existing Debt Service Fund TransactionsThe City Hall Debt Service Fund of the City of Monroe has been open for five years; it wascreated to service an $16,000,000, 3 percent tax-supported bond issue. As of December 31,2014, this serial bond issue had a balance of $12,000,000. Semiannual interest payments aremade on January 1 and July 1, and a principal payment of $400,000 is due on January 1 andJuly 1 of each year.As this is a regular serial bond debt service fund, the only accounts with balances as ofJanuary 1, 2015, were Cash with Fiscal Agent and Fund Balanceâ€"Assigned for DebtService, each with balances of $580,000. (Revenues were raised and collected in cash in2014 in order to be able to pay bond principal and interest due on January 1, 2015.) Thegovernment chose not to accrue interest payable.Required:a. Open a general journal for the City Hall Debt Service Fund and prepare journal entries forthe following transactions. Control accounts are not necessary(1) The fiscal agent reported that $180,000 in checks had been mailed tobondholders for interest due on January 1, and $400,000 in checks were mailedfor bonds maturing that day.(2) Cash in the amount of $574,000 was received from the General Fund on June 30and was transferred to the fiscal agent.(3) The fiscal agent reported that checks dated July 1 had been mailed tobondholders for interest of $ 174,000 due that day and $400,000 in checks weremailed for bonds maturing that day.(4) Cash in the amount of $568,000 was received from the General Fund onDecember 31 and transferred to the fiscal agent to be used for the interest andprincipal due on January 1 (next fiscal year). The government elected to notaccrue the interest or principal at year-end.b. Post the entries to the City Hall Debt Service Fund ledger (t-accounts).c. Prepare and post an entry closing all nominal accounts to Fund Balance.7Continuous Problem â€" City of Monroe5â€"C. Part 3. New Debt Service Fund TransactionsOn the advice of the city attorney, a City Jail Debt Service Fund is opened to account fordebt service transactions related to the bond issue sold on January 1, 2015 (see Part 1).Required:a. Open a general journal for the City Jail Debt Service Fund. Record the followingtransactions, as necessary. Control accounts are not necessary(1) The premium described in transaction 1 of Part 1 was received as a transfer fromthe capital projects fund.(2) Cash in the amount of $160,000 was received from the General Fund on June 30and was transferred to the fiscal agent.(3) The fiscal agent reported that checks dated July 1 had been mailed tobondholders for interest due that day.(4) The transfer described in part c of Part 1 was received.(5) Cash in the amount of $360,000 was received from the General Fund onDecember 31 and transferred to the fiscal agent to be used for interest andprincipal payments due on January 1 (next fiscal year). The government electedto not accrue the interest at year-end.(6) $ 200,000 of the remaining cash on hand was invested.b. Post the entries to the City Jail Debt Service Fund ledger (t-accounts).c. Prepare and post an entry closing all nominal accounts to Fund Balance. Assume anyremaining net resources are classified as Fund Balance â€" Assigned for Debt Service.5â€"C. Part 4. Governmental Funds Financial StatementsRequired:a. Prepare a Balance Sheet for the governmental funds for the City of Monroe as ofDecember 31, 2015. Include the General Fund, the Street and Highway Fund (P4â€"C), theCity Hall Debt Service Fund, and the City Jail Debt Service Fund. Use the balancescomputed in 4-C for the General Fund and special revenue fund portions of this statement.b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balances for thegovernmental funds for the City of Monroe for the Year Ended December 31, 2015.Include the same funds as listed in requirement a plus the City Jail Construction Fund.8Continuous Problem â€" City of MonroeChapter 6 â€" Proprietary Funds6â€"C. Part 1. Internal Service Fund TransactionsThe Stores and Service Fund of the City of Monroe had the following account balances as ofJanuary 1, 2015:CashDue from other fundsInventory of suppliesLandBuildingsAccumulated depreciationâ€"buildingsEquipmentAccumulated depreciationâ€"equipmentAccounts payableAdvance from water utility fundNet assetsTotalsDebits$31,00027,00027,50018,00084,000Credits$33,00046,000$233,50025,00019,00030,000126,500$233,500Required:a. Open a general journal for the City of Monroe Stores and Service Fund and record thefollowing transactions.(1) A budget was prepared for FY 2015. It was estimated that the price chargedother departments for supplies should be 1.25% of cost to achieve the desiredbreakeven for the year.(2) The amount due from other funds as of January 1, 2015, was collected in full.(3) During the year, supplies were ordered and received in the amount of $303,500.This amount was posted to accounts payable.(4) $15,000 of the advance from the Water Utility Fund, originally provided forconstruction, was repaid. No interest is charged.(5) During the year, supplies costing $250,560 were issued to the General Fund, andsupplies costing $46,400 were issued to the Water Utility Fund. These fundswere charged based on the previously determined markup ($ 313,200 toGeneral Fund and 58,000 to the Water Utility Fund).(6) Operating expenses, exclusive of depreciation, were recorded in accountspayable as follows: Purchasing, $15,000; Warehousing, $16,000; Delivery,$17,500; and Administrative, $9,200.(7) Cash was received from the General Fund in the amount of $310,000 and fromthe Water Utility Fund in the amount of $50,000.(8) Accounts payable were paid in the amount of $355,700.(9) Depreciation in the amount of $11,000 was recorded for buildings and $4,600for equipment.9Continuous Problem â€" City of Monroeb. Post the entries to the Stores and Service Fund ledger (t-accounts).c. Prepare and post an entry closing all nominal accounts to Net Assets. Compute thebalance in the net asset accounts, assuming there are no Restricted Net Assets.6â€"C. Part 2. Enterprise Fund TransactionsThe City of Monroe maintains a Water and Sewer Fund to provide utility services to itscitizens. As of January 1, 2015, the City of Monroe Water and Sewer Fund had the followingaccount balances:CashCustomer Accounts ReceivableEstimated Uncollectible Accounts ReceivableMaterials and SuppliesAdvance to Stores and Services FundRestricted AssetsWater Treatment Plant in ServiceConstruction Work in ProgressAccumulated Depreciation – Utility PlantAccounts PayableRevenue Bonds PayableNet AssetsTotalsDebits$105,00077,000Credits$4,00028,00030,000117,0004,200,000203,000$4,760,0001,200,00097,0002,500,000959,000$4,760,000Required:a. Open a general journal for the City of Monroe Water and Sewer Utility Fund and recordthe following transactions.(1) During the year, sales of water to non-government customers amounted to$1,002,000 and sales of water to the General Fund amounted to $37,000.(2) Collections from non-government customers amounted to $962,000.(3) The Stores and Services Fund repaid $15,000 of the long-term advance to theWater and Sewer Fund.(4) Materials and supplies in the amount of $257,000 were received. A liability inthat amount was recorded.(5) Materials and supplies were issued and were charged to the following accounts:cost of sales and services, $164,900; selling, $15,000; administration, $18,000;construction work in progress, $50,000.(6) Payroll costs for the year totaled $416,200 plus $34,200 for the employerâ€s shareof payroll taxes. Of that amount, $351,900 was paid in cash, and the remainderwas withheld for taxes. The $450,400 (416,200 + 34,200) was distributed asfollows: cost of sales and services, $265,800; sales, $43,900; administration,$91,400; construction work in progress, $49,300.10Continuous Problem â€" City of Monroe(7) Bond interest (6½%) in the amount of $162,500 was paid.(8) Interest in the amount of $17,000 (included in 7 above) was reclassified toConstruction Work in Progress.(9) Construction projects at the water treatment plant (reflected in the beginningbalance of construction in process) were completed in the amount of $203,000,and the assets were placed in service. Payments for these amounts were made inthe previous year (no effect on 2015 Statement of Cash Flows).(10) Collection efforts were discontinued on bills totaling $3,020. The unpaidreceivables were written off.(11) An analysis of customer receivable balances indicated the EstimatedUncollectible Accounts needed to be increased by $5,500.(12) Payment of accounts payable amounted to $297,900. Payments of payroll taxestotaled $95,200.(13) Supplies transferred from the Stores and Services Fund amounted to $58,000.Cash in the amount of $50,000 was paid to the Stores and Services Fund forsupplies.(14) Depreciation expense for the year was computed to be $275,000.(15) In accord with the revenue bond indenture, $25,000 cash was transferred fromoperating cash to restricted assets.b. Post the entries to the Water and Sewer Fund ledger (t-accounts).c. Prepare and post an entry closing all nominal accounts to Net Assets. Compute thebalance in the net asset accounts, assuming the only restricted assets are those identifiedwith the bond indenture and the outstanding bonds are associated with the purchase ofcapital assets.6â€"C. Part 3. Proprietary Fund Financial StatementsRequired:Prepare, in good form, for the proprietary funds accounted for in Parts 1 and 2, the following:(1) A Statement of Revenues, Expenses, and Changes in Fund Net Assets for the Year EndedDecember 31, 2015.(2) A Statement of Net Assets, as of December 31, 2015.(3) A Statement of Cash Flows for the Year Ended December 31, 2015. Include restrictedassets as a part of cash and cash equivalents for this statement. (Assume any materials andlabor attributable to construction in process were paid by year end).11Continuous Problem â€" City of MonroeChapter 7 â€" Fiduciary Funds7â€"C. Part 1. Private Purpose Trust Fund TransactionsThe City of Monroe Scholarship Foundation private-purpose trust fund had the followingaccount balances on January 1, 2015:DebitsCreditsCash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 49,500Accrued Interest Receivable . . . . . . . . . . . . . . . . . .7,500Investments in Corporate Bonds . . . . . . . . . .750,000Net Assets Held in Trust ……………… . . . . . . . . .$ 807,000Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 807,000 $ 807,000Required:a. Open a general journal for the City of Monroe Community Foundation Trust Fund andrecord the following transactions for the year ending December 31, 2015:(1) On May 1, the first semiannual interest payment was received on the corporatebonds. The bonds pay 6 percent annual interest, semiannually on May 1 and…

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