ACCT 2331 Chapter 9: Chapter 9 ACCT 2331
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| 2. Prepare worksheet entries and postto the worksheet for the following items. Identify each adjustmentby the letter used in the problem: a. Record the January 1, 2015balances of general fixed assets and related accumulateddepreciation accounts. The City of Monroe had the followingbalances (excluding Internal Service Funds):
b. Eliminate thecapital expenditures shown in the governmental funds Statement ofRevenues, Expenditures, and Changes in Fund Balances. c. Depreciation expense(governmental activities) for the year totaled $ 5,750,000. d. Eliminate theother financing sources from the sale of bonds by recording aliability for bonds payable and the related premium. e. As of January1, 2015, the City of Monroe had $12,000,000 in general obligationbonds outstanding. f. Eliminate the expenditures for bondprincipal. g. Accrueinterest in the amount of $328,000. (Two bond issues wereoutstanding; interest payments for both were last made on July 1,2015. The computation is as follows: ($11,200,000 Ã .03 Ã 6/12) +($4,000,000 Ã. 08 Ã 6/12) = $328,000). h. Adjust for theinterest accrued in the prior year government-wide statements, butrecorded as an expenditure in the 2015 fund basis statements,($12,000,000 Ã .03 Ã 6/12) = $180,000. i. Amortize bondpremium in the amount of $ 10,000. j. Makeadjustments for additional revenue accrual. The only adjustment isfor property taxes to eliminate the current year deferral ofproperty taxes. k. Adjust for the$21,000 of property taxes that was deferred in 2014 and recognizedas revenue in the 2015 fund-basis statements. l. Assume theCity adopted a policy in 2015 of allowing employees to accumulatecompensated absences. Make an adjustment accruing the expense of $39,500 Charge compensated absences expense. m. Bring in thebalances of the internal service fund balance sheet accounts.Again, use a single account for all capital assets and a secondaccount for all accumulated depreciation balances (use a separatecolumn of the worksheet to enter Internal Service Fundentries). n. No revenuesfrom internal service funds were with external parties. Assume$3,200 of the $11,200 âDue from Other Fundsâ in the internalservice accounts represents a receivable from the General Fund andthe remaining $8,000 is due from the enterprise fund. Eliminate the$3,200 interfund receivables. o. Reducegovernmental fund expenses by the net operating profit of internalservice funds. As the amount is small, reduce general governmentexpenses for the entire amount. p. Eliminatetransfers that are between departments reported within governmentalactivities. | Gov'tal Fund Balances | Adjustments &Eliminations | Govern-mental Funds Adjusted | Internal Service Funds | Balances for Gov't-wide Stmts | ||||||||||||
| Debits | Credits | Debits | Credits | ||||||||||||||
| DEBITS: | |||||||||||||||||
| Cash | 830,320 | 830,320 | 830,320 | ||||||||||||||
| Cash with Fiscal Agent | 928,000 | 928,000 | 928,000 | ||||||||||||||
| Investments | 259,000 | 259,000 | 259,000 | ||||||||||||||
| Taxes Receivable, net | 274,000 | 274,000 | 274,000 | ||||||||||||||
| Interest Receivable, net | 16,850 | 16,850 | 16,850 | ||||||||||||||
| Inventories | - | - | |||||||||||||||
| Due from State Govt. | 580,000 | 580,000 | 580,000 | ||||||||||||||
| Due from Other Funds | - | - | |||||||||||||||
| Capital Assets | - | - | |||||||||||||||
| bothrows | |||||||||||||||||
| - | - | ||||||||||||||||
| Expenditures (expenses) Current | - | ||||||||||||||||
| General Govt. | 1,646,900 | 1,646,900 | 1,646,900 | ||||||||||||||
| Public Safety | 3,026,900 | 3,026,900 | 3,026,900 | ||||||||||||||
| Highway and Streets | 2,471,900 | 2,471,900 | 2,471,900 | ||||||||||||||
| Sanitation | 591,400 | 591,400 | 591,400 | ||||||||||||||
| Health | 724,100 | 724,100 | 724,100 | ||||||||||||||
| Welfare | 374,300 | 374,300 | 374,300 | ||||||||||||||
| Culture and Recreation | 917,300 | 917,300 | 917,300 | ||||||||||||||
| Compensated Absences Exp | - | - | |||||||||||||||
| Other Expenditures (expenses) | - | - | |||||||||||||||
| - Debt Service Principal | 800,000 | 800,000 | 800,000 | ||||||||||||||
| - Interest(expenditure/expense) | 514,000 | 514,000 | 514,000 | ||||||||||||||
| bothrows | |||||||||||||||||
| - Capital Outlay | 5,798,100 | 5,798,100 | 5,798,100 | ||||||||||||||
| - Depreciation | - | - | |||||||||||||||
| Other Fin. Uses - Transfers Out | 1,876,700 | 1,876,700 | 1,876,700 | ||||||||||||||
| - | |||||||||||||||||
| Total Debits | 21,629,770 | 21,629,770 | |||||||||||||||
| CREDITS: | |||||||||||||||||
| Accounts Payable | 493,400 | 493,400 | 493,400 | ||||||||||||||
| Due to Other Funds | 40,200 | 40,200 | 40,200 | ||||||||||||||
| Accrued Interest Payable | - | - | |||||||||||||||
| Bonds Payalbe | |||||||||||||||||
| bothrows | - | - | |||||||||||||||
| Premium on Bonds | - | - | |||||||||||||||
| Compensated Absence Payable | - | - | |||||||||||||||
| Advance from Water Utility Fund | - | - | |||||||||||||||
| Deferred Inflows: Property Taxes | 27,500 | 27,500 | 27,500 | ||||||||||||||
| Accumulated Depreciation | |||||||||||||||||
| bothrows | - | - | |||||||||||||||
| Revenues | - | ||||||||||||||||
| Property Taxes | 6,657,500 | 6,657,500 | 6,657,500 | ||||||||||||||
| Sales Taxes | 2,942,000 | 2,942,000 | 2,942,000 | ||||||||||||||
| Interest | 21,220 | 21,220 | 21,220 | ||||||||||||||
| Licenses & Permits | 800,000 | 800,000 | 800,000 | ||||||||||||||
| Miscellaneous | 350,000 | 350,000 | 350,000 | ||||||||||||||
| State Grant for Highway StreetExpenses | 1,072,000 | 1,072,000 | 1,072,000 | ||||||||||||||
| Capital Grant- Gen Gov't | 332,000 | 332,000 | 332,000 | ||||||||||||||
| Capital Grant- Public Safety | 1,320,000 | 1,320,000 | 1,320,000 | ||||||||||||||
| - | - | ||||||||||||||||
| - | - | ||||||||||||||||
| Other Financing Sources | - | - | |||||||||||||||
| Proceeds of Bonds | 4,000,000 | 4,000,000 | 4,000,000 | ||||||||||||||
| Premium on Bonds | 200,000 | 200,000 | 200,000 | ||||||||||||||
| Transfers In | 1,876,700 | 1,876,700 | 1,876,700 | ||||||||||||||
| Net Position at beginning of year | - | ||||||||||||||||
| threerows | |||||||||||||||||
| 1,497,250 | 1,497,250 | 1,497,250 | |||||||||||||||
| Total Credits | 21,629,770 | 21,629,770 | |||||||||||||||
1. Make all adjustments on the "Adjusting Journal Entries". Remember to include a description under each journal entry.
| 12 | . On 1/1/14, ABC Corporation purchased, as a held-to-maturity investment, $200,000 of the 8%, 5-year bonds of Intuit Corporation for $177,824, | ||||||||
| which provides an 11% return. Prepare ABC's 12/31/14 journal entry to reflect the receipt of annual interest and discount amortization. | |||||||||
| Assume the bond investment pays interest annually on 12/31 each year and that effective interest amortization is used. | |||||||||
| Note: Notice that a discount account is not used for this investment. Therefore, for purposes of this adjusting entry, amortize the discount directly to the | |||||||||
| investment account. | |||||||||
| 13. | ABC Corporation prepares an aging schedule on 12/31/14 that estimates total uncollectible accounts at $25,000. Assuming that the allowance method is used, | ||||||||
| prepare the entry to record bad debt expense. | |||||||||
| 14 | On 1/1/14, ABC Corporation signed a 5-year noncancelable lease for a delivery vehicle. The terms of the lease called for ABC to Corporation to make | ||||||||
| annual payments of $10,503 at the beginning of each year, starting January 1, 2014. The delivery vehicle has an estimated useful life of 6 years and a $7,000 | |||||||||
| unguaranteed residual value. The delivery vehicle reverts back to the lessor at the end of the lease term. ABC Corporation uses the straight-line method | |||||||||
| of depreciation for the delivery vehicle. ABC Corporation's incremental borrowing rate is 10%, and the Lessor's implicit rate is unknown. No entries have yet | |||||||||
| been made concerning this lease arrangement. After determining the type of lease arrangement (capital or operating), prepare the necessary multiple-part journal | |||||||||
| entry for 2014 for ABC Corporation. (Hints: You will need to compute the present value of the minimum lease payments and 4 separate sub-entries for | |||||||||
| this lease transaction. Also, for Statement of Cash Flow purposes, the principal portion of lease payments are correctly categorized as a financing activity.) | |||||||||
| 15 | ABC Corporation provides a defined benefit pension plan for its employees. A combination adjusting entry should be made to correctly account for this type of pension | ||||||||
| plan given the following items of information for the 2014 plan year, including the recording of pension expense and the employer's contribution to the pension plan in 2014. | |||||||||
| Note: Use the summary entry method as demonstrated and discussed in the chapter lectures on pension accounting to prepare the adjusting entry. | |||||||||
| Pension asset/liability (January 1) | $0 | ||||||||
| Actual return on plan assets | $40,000 | ||||||||
| Expected return on plan assets | $20,000 | ||||||||
| Contributions (funding) in 2014 | $37,000 | ||||||||
| Fair value of plan assets (December 31) | $75,000 | ||||||||
| Settlement rate | 10% | ||||||||
| Projected benefit obligation (January 1) | $0 | ||||||||
| Service cost | $60,000 | ||||||||
| Benefits paid in 2014 | $0 | ||||||||
| *For purposes of financial statement presentation, consider Pension Expense as an operating item and any resulting Pension Asset/Liability as long-term in nature. | |||||||||
| 16 | On December 31, 2014, ABC Corporation issued 1,000 shares of restricted stock to its Chief Financial Officer. ABC stock had a fair value (closing market price) of | ||||||||
| $10 per share on December 31, 2014. Additional information is as follows: | |||||||||
| a. The service period related to the restricted stock is 2 years. | |||||||||
| b. Vesting occurs if the CFO stays with the company for a two-year period. | |||||||||
| c. The par value of the common stock is $3 per share. | |||||||||
| Make the appropriate accounting entry as of the grant date, 12/31/14. Note: use the alternative method as described in your textbook for deferred compensation. | |||||||||
| Do this step after preparing the Income Statement except for the Income taxes line: (You need to calculate Income Before Income Taxes in order to calcualte total Income Tax Expense) | |||||||||
| 17 | Corporate taxes are due in four estimated quarterly payments on April 15, June 15, September 15, and December 15. | ||||||||
| However, for the purposes of this ABC illustration, we will assume that estimates are not paid, and that the tax is paid in full | |||||||||
| on the return's March 15, 2015 due date. | |||||||||
| ABC's income tax rate is 40%. The entire year's income tax expense was estimated at the beginning of 2014 to be $69,600, | |||||||||
| so January through November income tax expense recognized amounts to $63,800 (11/12 months). | |||||||||
| Since we are assuming estimates are not made during the year, the balance in Income taxes payable represents | |||||||||
| tax accrued for January through November. Assume no deferred tax assets or deferred tax liabilities. | |||||||||
| Based on the income before income taxes figure from the income statement, record December's income tax expense | |||||||||
| so that the entire year's total tax expense is correct. | |||||||||