AFM 361 Chapter Notes -Capital Cost Allowance, Capital Account, Cumulate Rock
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. Identification of Fiduciary Funds. Following is a list of fund names and descriptions from comprehensive annual financial reports (CAFRs). Indicate which of the following are fiduciary funds. If not a fiduciary fund, identify which type of fund should be used to account for the activities and explain why that fund is most appropriate.
Tri-Centennial Fund. Accounts for money raised or contributed by several local area governments and other organizations. The purpose is to ensure availability of resources to celebrate the United States Tri-Centennial in 2076.
Perpetual Care Fund. Accounts for endowed gifts and investment earnings dedicated to perpetual care of the city's cemeteries.
Poudre River Public Library District Fund. Accounts for cash and investments held by the city on behalf of Poudre River Public Library District.
School Impact Fee Fund. The city collects school impact fees as part of the cost of building permits issued. Money must be remitted periodically to the local school district, a legally separate government that is not a component unit of the city.
Cultural Services and Facilities Fund. Accounts for revenues received from the Lincoln Center performing arts facility, the city museum, and General Fund subsidies used to promote cultural activities for city residents.
Payroll Fund. The city has established a fund in which all payroll deductions are reported.
Telephone Commissions Fund. The city collects commissions on pay telephones used by jail inmates. The funds are used to provide inmates such benefits as library resources and fitness equipment.
Block Grant Fund. The state receives federal funds for the homeless which it passes through to local not-for-profit organizations. The only responsibility the state has is to contribute an additional amount of funds (match) to the federal grant.
Health Benefits Fund. The county has agreed to pay a portion of the health insurance premiums for employees when they retire. Contributions for the benefit are paid into this fund.
Unclaimed Property Fund. The state has established a fund to account for abandoned and unclaimed property. The property is held in the fund for 10 years. If a legal claimant to the property is not found within the 10-year time period, the property reverts to the state.
2. Investment Trust Fund. The Albertville City Council decided to pool the investments of its General Fund with Albertville Schools and Richwood Township in an investment pool to be managed by the city. Each of the pool participants had reported its investments at fair value as of the end of 2013. At the date of the creation of the pool, February 15, 2016, the fair value of the investments of each pool participant was as follows:
| Investments | ||
| 12/31/16 | 2/15/17 | |
| City of Albertville General Fund | $ 890,000 | $900,000 |
| Albertville Schools | $4,200,000 | $4,230,000 |
| Richwood Township | $3,890,000 | $3,870,000 |
| Total | $8,980,000 | $9,000,000 |
Using this information:
Prepare the journal entries that should be made by the City of Albertville, Albertville Schools, and Richwood Township on February 15 to record their participation in the investment pool. (Entries for the investment pool trust fund will be made later.)
Prepare the journal entries to be made in the accounts of the investment pool trust fund to record the following transactions of the first year of operations:
Record the investments transferred to the pool; assume that the investments of the city's General Fund were in U.S. Treasury notes and the investments of both the schools and the township were in certificates of deposit (CDs).
On June 15, the Richwood Township decided to withdraw $3,010,000 for a capital projects payment. At the date of the withdrawal, the fair value of the Treasury notes has increased by $30,000. Assume that the trust fund is able to redeem the CDs necessary to complete the withdrawal without a penalty but does not receive interest on the funds.
On September 15, interest on Treasury notes in the amount of $50,000 was collected.
Interest on CDs accrued at year-end amounted to $28,000.
At the end of the year, undistributed earnings were allocated to the investment pool participants. Assume that there were no additional changes in the fair value of investments after the Richwood Township withdrawal. Round the amount of the distribution to each fund or participant to the nearest dollar.
Record the June 15 increase in each of the participant's funds.
Record the change in each participant's Equity in Pooled Investment account due to the September 15 treasury interest and December 31 CD interest accrual.
Explain how the investment trust fund would report the General Fund's interest in the investment pool and the Albertville School's interest in the investment pool.
3. Comprehensive Set of Transactions. The City of Lynnwood was recently incorporated and had the following transactions for the fiscal year ended December 31, 2017.
The city council adopted a General Fund budget for the fiscal year. Revenues were estimated at $3,000,000 and appropriations were $2,990,000.
Property taxes in the amount of $2,000,000 were levied. It is estimated that $8,000 of the taxes levied will be uncollectible.
A General Fund transfer of $30,000 in cash and $300,000 in equipment (with accumulated depreciation of $65,000) was made to establish a central duplicating internal service fund.
A citizen of Lynnwood donated marketable securities with a fair value of $900,000. The donated resources are to be maintained in perpetuity with the city using the revenue generated by the donation to finance an after school program for children, which is sponsored by the parks and recreation function. Revenue earned and received as of December 31, 2017, was $45,000.
The city's utility fund billed the city's General Fund $125,000 for water and sewage services. As of December 31, the General Fund had paid $124,000 of the amount billed.
The central duplicating fund purchased $4,500 in supplies.
Cash collections recorded by the general government function during the year were as follows:
| Property taxes | $1,925,000 |
| Licenses and permits | 35,000 |
| User charges | 28,000 |
During the year the internal service fund billed the city's general government function $15,700 for duplicating services and it billed the city's utility fund $8,100 for services.
The city council decided to build a city hall at an estimated cost of $5,000,000. To finance the construction, 6 percent bonds were sold at the face value of $5,000,000. A contract for $4,500,000 has been signed for the project; how- ever no expenditures have been incurred as of December 31, 2017.
The general government function issued a purchase order for $32,000 for computer equipment. When the equipment was received, a voucher for $31,900 was approved for payment and payment was made.
Using this information, prepare all journal entries to properly record each transaction for the fiscal year ended December 31, 2017. Use the following funds and government-wide activities, as necessary:
| General Fund | GF |
| Capital projects fund | CPF |
| Internal service fund | ISF |
| Permanent fund | PF |
| After School Fund (a special revenue fund) | SRF |
| Enterprise fund | EF |
| Governmental activities | GA |
Each journal entry should be numbered to correspond with each transaction. Do not prepare closing entries.
Your answer sheet should be organized as follows:
| Transaction Number | Fund or Activity | Account Title | Amounts | |
| Debits | Credits | |||
4. Net Position Classifications. Section A provides a list of transactions or events that occurred during the year, followed by Section B, a list of the possible effects each transaction or event has on adjusting net position accounts at year-end, assuming that all temporary accounts have already been closed to the account Net Position – Unrestricted.
Section A
Depreciation was recorded for the year.
A fully depreciated computer was sold for $50.
Bonds issued to construct the new library were retired.
Construction expenditures were incurred for the new fire substation.
Grant funds that can only be used for a summer kids’ camp remain unexpended at year-end.
An operating lease was entered into during the year.
A $3 million endowment was received during the year.
Several new fire trucks were purchased and 70 percent financed with long-term notes.
The capital projects fund transferred its residual fund balance to the debt service fund during the year.
A grant received in the prior year for afterschool recreational activities was expanded.
Section B
Restricted Net Position is increased and Unrestriced Net Position is decreased.
Restricted Net Position is decreased and Unrestriced Net Position is increased.
Net Investment in Capital Assets is increased and Unrestriced Net Position is decreased.
Net Investment in Capital Assets is decreased and Unrestricted Net Position is increased.
None of the above.
Required
Indentify how the new position categories would need to be adjusted for each of the transactions. For the statement in Section A, select the appropriate answer from Section B.
5. Change in Net Position of Governmental Activities. You have been provided with the following information concerning operating activity for Annette County. For the year ended June 30, 2017, the net change in total governmental fund balances was $(289,200), and the change in net position of governmental activities was $194,300. During the year, Annette issued $2,000,000 in general obligation bonds at a premium of 101. The bonds are to be used for a construction project. The county acquired $2,750,000 in capital assets and sold capital assets with a book value of $563,000 for $570,900. At the beginning of the period accrued liabilities were $470,000 and at the end of the period they totaled $494,000. Depreciation on capital assets totaled $595,000. Revenue accrued for the period but not available for use totaled $364,000.
PREPARE THE JOURNAL ENRTRIES FOR THE FOLLOWING (0NLY FROM TRANSACTON 28 TO 45
| During July 2017, the following transactions, prepared by Maddie's Cleaning Service, were completed: | ||
| Transaction | Date | Description |
| 1 | July 1 | Began her business by contributing a computer valued at $500 and rug cleaner at $6,200 and depositing $2X,XXX (XXXX- represents the last 4 digits of your Bronc's identification number) in a checking account in the name of the corporation in exchange for 6,000 shares, $1 par value shares of capital stock. |
| 2 | 1 | Received $10,000 proceeds from an unsecured, 11%, 5 year, interest only bank loan, due July 1, 2017. The proceeds will be used to pay daily operations of the company. Interest will be paid monthly on the fifth of each month; next payment day is June 5th August 5. |
| 1 | Purchased 30 shares of Facebook stock for market rate as of July 1, 2017. MCS paid $12.00 brokerage fee. Use the Short-term Investment (Available For Sale) account. | |
| 3 | 2 | Paid $1,500 for 3 floor waxer/buffer machines. |
| 4 | 2 | Purchased a used truck for $18,000 in exchange for a 3 year zero-interest bearing $25,000 note to Jim's Auto Sales. |
| 5 | 3 | Purchased cleaning supplies for $6,500. These supplies will not be resold—use the Cleaning Supplies Inventory account, 2%/15, net 30. The company uses the period inventory method. |
| 6 | 3 | Paid cash for an exclusive 3 yr right to sell cleaning products from Brite N’ Clean Supply company, $8,900. |
| 7 | 3 | Purchased 350 cans of cleaning product, XB4, on account, for resale purposes only, from Brite N’ Clean. Each can costs $8.00. Total shipping costs were $15.00, also included in the amount owed—use the Merchandise Inventory Account. |
| 8 | 4 | Signed a two year lease agreement for storge and office location. Paid 3 months of rent in advance, $3,000, plus security deposit of $1,000, total $4,000 |
| 9 | 5 | Paid $4,800 on a one-year insurance policy, effective July 1. |
| 10 | 7 | Hired 5 workers at $15.50 per hour. |
| 11 | 8 | Jim Bob Grocery Store paid Maddie's $5,900 in advance for cleaning services to be performed monthly. |
| 12 | 12 | Billed customers $22,300 for cleaning services. |
| 13 | 15 | Paid gas and oil for the month on the truck, $600. |
| 14 | 18 | Paid amount owed on cleaning supplies purchased on July 3rd. |
| 15 | 18 | Billed customers $16,500 for cleaning services. |
| 16 | 18 | Purchased 40 cans of cleaning product, XB4, $400, for resale purposes only on account. The costs include total shipping costs of $30.00. |
| 17 | 18 | Paid $5,000 to employees, with withholding of $960 for federal income taxes, $150 for state income taxes, $310 for social security, $725 for Medicare tax, and $100 for city income tax. Use Employee Tax Withheld account for all withholding. |
| 18 | 18 | Accrue employer tax (related to July 18th payroll) of $1,352. These taxes include employer portion of FICA and Medicare tax and state and federal unemployment tax. Use Employer Tax Payable account. |
| 19 | 21 | Collected $25,400 from customers billed on July 12. |
| 20 | 22 | Sold 200 cans of cleaning product, XB4, to T. Jones Cleaning on account for $30.00 each. Maddie's’s Cleaning Services, Inc. uses a perpetual inventory method for its merchandise inventory sales and determines costs using LIFO in-first out (LIFO) costing method. Shipping costs were 5%. Costs were charged to T. Jones Cleaning. |
| 21 | 24 | Using Ms. Colbert’s credit card, purchased a used cleaning cart used to carry cleaning supplies to each office, $400. |
| 22 | 25 | Purchased a computer to support office activities, $2,000. |
| 23 | 30 | Bank returned a check for $125 from Tang Juice Company for services paid on July 21st. The bank charges Maddie's’s Cleaning Services $5.00 service fee for the NSF check. |
| 24 | 30 | Paid withholding tax for July 18th payroll, including employer tax. |
| 25 | 30 | Sold one of the floor polisher purchased on July 1 for $850. Record all depreciation related to equipment. |
| 26 | 31 | Declared and paid a $.25 per share cash dividend. |
| After talking with the client, Ms. Ratcher prepared the following information related to July transactions (use July 31 for the date of transactions): | ||
| 28 | 1 | Earned but unbilled fees at July 31 were $4,245. |
| 29 | 2 | All equipment is depreciated over 5 years, using the straight line method. Depreciate all equipment as if purchased on July 1. |
| 30 | 3 | An inventory count shows $1,700 of cleaning supplies (not for resale) on hand at July 31. |
| 31 | 4 | Record the amortization of the franchise. |
| 32 | 5 | Accrued but unpaid employee salaries were $5,000 with withholding of $880 for federal income taxes. Calculate the payroll using 6.2% FICA tax, 3% for state income taxes, 1.45% Medicare tax, and 2% for city income tax. Record the payroll, using Employee Tax Withheld account for all withholding taxes. |
| 33 | 6 | Accrued employer payroll tax of $800.00 |
| 34 | 7 | Record the rent expiration for the month. |
| 35 | 8 | Record the interest incurred on the note for the month. |
| 36 | 9 | Record amortization of the zero-interest bearing note. |
| 37 | 10 | MCS charged Jim Bob's Grocery $2,800 for services rendered during the month. (See earlier transaction). |
| 39 | 11 | Calculate the change in value of Facebook stock based on market prices as of July 31, 2017. |
| 40 | 12 | One-twelfth of the insurance expired. |
| 41 | 13 | Accrue income taxes for the period. The company expects to pay income taxes at a 18% rate. Note: you must calculate income before you can determine the amount for this adjusting entry. |
| 42 | 14 | Based on an aging of the accounts receivables, Ms. Colbert estimates that 5.5% of outstanding accounts receivables will be uncollectible. |
| 43 | Based on the bank reconciliation performed by John, the other new staff member at Daniel and Jacob, LLC, the following adjusting entries should be made: | |
| 44 | --- A check from Elton Inc. was returned for non sufficient funds (NSF) for $1,000. The check was included in the deposit made on July 21st . | |
| 45 | --- The deposit made on July 21st for cash receipts was recorded $24,400, but bank correctly counted the deposit to be $25,400. | |
