Continuous Problem
– City of Monroe

to Accompany

Essentials of Accounting for
Governmental

and Not-for-Profit
Organizations: 

Twelfth Edition

Chapters
2 through 8 describe accounting and financial reporting by state and local
governments. A continuous problem is presented to provide an overview of the
reporting process, including preparation of fund basis and government-wide
statements.  The problem assumes the
government is using fund accounting for its internal record-keeping and then at
year-end makes necessary adjustments to prepare the government-wide statements.
The problem that follows is presented in the same order as the textbook
(beginning with Chapters 3, and 4).

Each
chapter requires the preparation of journal entries to record the events and
transactions of governmental, proprietary, or fiduciary funds.  For the General Fund, use control accounts
for the budgetary accounts, revenues, expenditures and encumbrances.  For all other funds, use separate accounts
for each type of revenue and expenditure/expense.  At appropriate stages, preparation of the
fund and government-wide statements are required. The following funds are included
in this series of problems:

Governmental
Funds

Ø 
General

Ø 
Special revenue—Street and Highway Fund

Ø 
Capital projects—City Hall Annex Construction
Fund

Ø 
Debt service—City Jail Annex Debt Service Fund

Ø 
Debt service—City Hall Debt Service Fund

Proprietary
Funds

Ø 
Internal service—Stores and Services Fund

Ø 
Enterprise—Water
and Sewer Fund

Fiduciary
Funds

Ø 
Private-purpose—Student Scholarship Fund

Ø  Pension
trust—Fire and Police Retirement Fund

Chapters 3 & 4

The
Balance Sheets of the General Fund and the Street and Highway Fund of the City
of Monroe as of December 31, 2014, follow. These (beginning) balances have been
entered in the proper general ledger accounts, as of 1/1/2015.

CITY OF MONROE
General Fund Balance Sheet
As of December 31, 2014
Assets
Cash	$502,000
Taxes receivable	$210,000
Less: Estimated uncollectible taxes	(42,000)
net	168,000
Interest and penalties receivable on taxes	5,200
Less: Estimated uncollectible interest and penalties	(950)
net	4,250
Due from state government	210,000
Total assets	$884,250
Liabilities, Deferred Inflows, and Fund Equity
Liabilities:
Accounts payable	$ 99,000
Due to other funds	27,000
Total liabilities	126,000
Deferred inflows – Property taxes	21,000
Fund equity:
Fund balance—assigned   (for outstanding encumbrances)	$17,000
Fund balance—unassigned	720,250
Total fund balance	737,250
Total liabilities, deferred inflows and fund equity	$884,250

CITY OF MONROE
Street and Highway Fund Balance Sheet
As of December 31, 2014
Assets
Cash	$21,000
Investments	59,000
Due from state government	109,000
Total assets	$189,000
Liabilities and Fund Equity
Liabilities:
Accounts payable	$9,000
Fund equity:
Fund balance—assigned for streets and   highways	180,000
Total liabilities and fund equity	$189,000

3–C. This
portion of the continuous problem continues the General Fund and special revenue
fund examples by requiring the recording and posting of the budgetary entries. To
reduce clerical effort required for the solution use control accounts for the
budgetary accounts, revenues, expenditures and encumbrances.  Subsidiary accounts are not required. Budget
information for the City includes:

a) 
As of January 1, 2015, the City Council approved and
the mayor signed a budget calling for $11,250,000 in property tax and other
revenue, $9,300,000 in appropriations for expenditures, and $1,700,000 to be
transferred to two debt service funds for the payment of principal and
interest. Record the budget for the General Fund and post to the ledger.

b) 
Also as of January 1, 2015, the City Council approved
and the mayor signed a budget for the Street and Highway Fund that provided for
estimated revenues from the state government in the amount of $1,068,000 and appropriations
of $1,047,000. Record the budget and post to the ledger.

4–C. Part
1. General Fund Transactions

Required:

a. Record journal entries for the following
transactions for FY 2015. Make any computations to the nearest dollar. Journal
entry explanations are not required.  Use
control accounts for revenues, expenditures and budgetary accounts.  It is not necessary to reflect subsidiary
ledger entries.

(1)  Encumbrances
of $ 17,000 for purchase orders outstanding at the end of 2014 were re-established.

(2) The January 1, 2015, balance in Deferred Inflows
– Property Taxes relates to the amount of the 2014 levy that was expected to be
collected more than 60 days after 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 2 percent 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 invoices were approved for payment.  The City maintains immaterial amounts in supply
inventories and it is the practice of the City to charge supplies to
expenditure when 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:

oprior
year taxes, $158,000;

ointerest
and penalties receivable on prior year taxes, $3,500;

ocurrent
taxes, $6,400,000;

o$210,000
previously recorded as due from the state government;

olicenses
and permits, $800,000;

osales
taxes, $2,890,000; and

omiscellaneous
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, $498,000 were withheld for employees’ federal income taxes and $357,000
were withheld for employees’ FICA and Medicare tax liability; the balance was
paid in cash. The encumbrance system is not used for payrolls.

(10) The liability for the city’s share of FICA and
Medicare taxes, $357,000, was recorded 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 were received in the amount of $3,375,300 and approved
for payment. The related encumbrance amounted to $3,407,000.

(12) Tax anticipation notes were paid at maturity,
along with interest in the amount of $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 services in the amount of $37,000 and to the Stores
and Services Fund for supplies in the amount of $313,200; $310,000 of the amount
due the Stores and Services Fund was paid.

(15) The General Fund recorded an amount due of $52,000
from the state government, representing sales taxes to be collected from retail
sales taking place during the last week of the year.

(16) The General Fund paid accounts payable in the
amount of $3,015,000 and paid the amounts due the federal and state
governments. The General Fund also transferred to the debt service funds cash
in the amount of $1,662,000 for the recurring payment of principal and
interest.

(17) All required legal steps were accomplished to
increase appropriations by the net 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 taxes and 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 collected more 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 at year end are classified as Assigned Fund Balance and all
remaining net resources are classified as Unassigned Fund Balance.

d. Prepare a Statement of Revenues,
Expenditures, and Changes in Fund Balance for the year ended December 31, 2015.
Confirm that the revenue and expenditure control accounts agree with the
following detail and use this information in the Statement:

Revenues	Expenditures
Property Taxes . . . . . .	$6,657,500	General Government . . .	$1,646,900
Sales Taxes	2,942,000	Public Safety . . . . . . . . .	3,026,900
Interest and Penalties on Taxes . . . . . . . . . . .	16,100	Highways and Streets . .	1,441,400
Licenses and Permits .	800,000	Sanitation . . . . . . . . . . . .	591,400
Intergovernmental Revenue . . . . . . . . . . .	332,000	Health . . . . . . . . . . . . . .	724,100
Miscellaneous Revenue	350,000	Welfare . . . . . . . . . . . . .	374,300
Total . . . . . . . . . . . .	$11,097,600	Culture and Recreation .	917,300
Capital Outlay . . . . . . . .	492,800
Total . . . . . . . . . . . . .	$9,215,100

e. Prepare
in good form a Balance Sheet for the General Fund as of the end of fiscal year,
December 31, 2015.

4–C. Part
2. Special Revenue Fund Transactions

Required:

a. Record journal entries for the following
transactions for FY 2015 and post to the general ledger. As there are
relatively few revenues and expenditures, the use of control accounts is 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 for street and highway maintenance during 2015
(i.e. the City has met eligibility requirements). The funds are not considered reimbursement-type as
defined by GASB 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, were signed in the amount of $1,062,000.

(4) Contractual services (see transaction 3) were
received; the related contracts amounted to $1,043,000. Invoices amounting to $1,030,500
for these items were approved for payment. The goods and services all were for
street and highway 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 the amount 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 the Street and Highway Fund for
the fiscal year ended December 31, 2015.

d. 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 5

5–C. Part 1. Capital Projects Fund
Transactions

The
voters of the City of Monroe approved the issuance of tax-supported bonds in
the face amount of $4,000,000 for the construction and equipping of a new City
Jail. Architects were to be retained, and construction was to be completed by
outside contractors. In addition to the bond 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 following transactions 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 8 percent was sold at a $200,000 premium.  Principal amounts of $200,000 each will 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 will be July 1, 2015.
The premium was transferred to the City Jail Debt Service Fund 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 the fee.

(6) The complete plans and specifications were
received from the architects and approved. A liability in the amount of $150,000to the architects was approved and
paid.

(7) Bids were received and opened in public session.
After considerable discussion in City Council, the low bid from Hardhat
Construction Company in the amount of $4,500,000 was accepted, and a contract was
signed.

(8) The contractor required partial payment of $1,350,000.
Payment was approved and 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 balance due on the contract. After inspection of the
work, the amount, including the past retainage, 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. 

(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.

5–C. Part 2. Existing Debt Service Fund
Transactions

The
City Hall Debt Service Fund of the City of Monroe has been open for five years;
it was created 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 are made on January 1 and July 1, and a principal
payment of $400,000 is due on January 1 and July 1 of each year.

As
this is a regular serial bond debt service fund, the only accounts with balances
as of January 1, 2015, were Cash with Fiscal Agent and Fund Balance—Assigned for
Debt Service, each with balances of $580,000. (Revenues were raised and
collected in cash in 2014 in order to be able to pay bond principal and
interest due on January 1, 2015.) The government chose not to accrue interest
payable.

Required:

a. Open a general journal for the City Hall
Debt Service Fund and prepare journal entries for the following transactions. Control
accounts are not necessary

(1) The fiscal agent reported that $180,000 in checks
had been mailed to bondholders for interest due on January 1, and $400,000 in
checks were mailed for bonds maturing that day.

(2) Cash in the amount of $574,000 was received from
the General Fund on June 30 and was transferred to the fiscal agent.

(3) The fiscal agent reported that checks dated July
1 had been mailed to bondholders for interest of $ 174,000 due that day and
$400,000 in checks were mailed for bonds maturing that day.

(4) Cash in the amount of $568,000 was received from
the General Fund on December 31 and transferred to the fiscal agent to be used
for the interest and principal due on January 1 (next fiscal year). The
government elected to not accrue 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.

5–C. Part 3. New Debt Service Fund
Transactions

On
the advice of the city attorney, a City Jail Debt Service Fund is opened to
account for debt 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 following transactions, as necessary. Control
accounts are not necessary

(1) The premium described in transaction 1 of Part 1
was received as a transfer from the capital projects fund.

(2) Cash in the amount of $160,000 was received from
the General Fund on June 30 and was transferred to the fiscal agent.

(3) The fiscal agent reported that checks dated July
1 had been mailed to bondholders 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 on December 31 and transferred to the fiscal agent to be used
for interest and principal payments due on January 1 (next fiscal year). The
government elected to 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 any remaining net
resources are classified as Fund Balance – Assigned for Debt Service.

5–C. Part 4.
Governmental Funds Financial Statements

Required:

a. Prepare a Balance Sheet for the
governmental funds for the City of Monroe
as of December 31, 2015. Include the General Fund, the Street and Highway Fund
(P4–C), the City Hall Debt Service Fund, and the City Jail Debt Service Fund.
Use the balances computed 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 the governmental 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.

Chapter 6 – Proprietary Funds

6–C. Part 1. Internal Service Fund Transactions

The
Stores and Service Fund of the City of Monroe
had the following account balances as of January 1, 2015:

Debits	Credits
Cash	$31,000
Due from other funds	27,000
Inventory of supplies	27,500
Land	18,000
Buildings	84,000
Accumulated depreciation—buildings	$33,000
Equipment	46,000
Accumulated depreciation—equipment	25,000
Accounts payable	19,000
Advance from water utility fund	30,000
Net assets	126,500
Totals	$233,500	$233,500

Required:

a. Open a general journal for the City of Monroe Stores and Service
Fund and record the following transactions.

(1) A budget was prepared for FY 2015. It was
estimated that the price charged other departments for supplies should be 1.25%
of cost to achieve the desired breakeven 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 for construction, was repaid. No interest is charged.

(5) During the year, supplies costing $250,560 were
issued to the General Fund, and supplies costing $46,400 were issued to the
Water Utility Fund.  These funds were
charged based on the previously determined markup ($ 313,200 to General Fund
and 58,000 to the Water Utility Fund).

(6) Operating expenses, exclusive of depreciation,
were recorded in accounts payable 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 from the 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 $4,600 for equipment.

b. 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
the balance in the net asset accounts, assuming there are no Restricted Net Assets. 

6–C. Part 2. Enterprise Fund Transactions

The City of Monroe maintains a Water and Sewer Fund to
provide utility services to its citizens. As of January 1, 2015, the City of Monroe Water and Sewer
Fund had the following account balances:

Debits	Credits
Cash	$105,000
Customer Accounts Receivable	77,000
Estimated Uncollectible Accounts Receivable	$4,000
Materials and Supplies	28,000
Advance to Stores and Services Fund	30,000
Restricted Assets	117,000
Water Treatment Plant in Service	4,200,000
Construction Work in Progress	203,000
Accumulated Depreciation – Utility Plant	1,200,000
Accounts Payable	97,000
Revenue Bonds Payable	2,500,000
Net Assets	959,000
Totals	$4,760,000	$4,760,000

Required:

a. Open a general journal for the City of Monroe Water and Sewer
Utility Fund and record the 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 the Water and Sewer Fund.

(4) Materials and supplies in the amount of $257,000
were received. A liability in that 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 employer’s share of payroll taxes. Of that amount, $351,900 was
paid in cash, and the remainder was withheld for taxes. The $450,400 (416,200 +
34,200) was distributed as follows: cost of sales and services, $265,800;
sales, $43,900; administration, $91,400; construction work in progress, $49,300.

(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 to Construction Work in Progress.

(9) Construction projects at the water treatment
plant (reflected in the beginning balance 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 in the previous year (no effect on 2015 Statement of
Cash Flows).

(10) Collection efforts were discontinued on bills
totaling $3,020. The unpaid receivables were written off.

(11) An analysis of customer receivable balances
indicated the Estimated Uncollectible Accounts needed to be increased by $5,500.

(12) Payment of accounts payable amounted to $297,900.
Payments of payroll taxes totaled $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 for supplies.

(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 from operating 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
the balance in the net asset accounts, assuming the only restricted assets are
those identified with the bond indenture and the outstanding bonds are
associated with the purchase of capital assets.

6–C. Part 3. Proprietary Fund Financial
Statements

Required:

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 Ended December 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 restricted assets as a part of cash and cash equivalents
for this statement. (Assume any materials and labor attributable to
construction in process were paid by year end).

Chapter 7 – Fiduciary Funds

7–C. Part 1. Private Purpose Trust Fund
Transactions

The
City of Monroe Scholarship Foundation private-purpose trust fund had the
following account balances on January 1, 2015:

Debits	Credits
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$ 49,500
Accrued Interest Receivable . . . . . . . . . . . . . . . . . .	7,500
Investments in Corporate Bonds . . . . . . . . . .	750,000
Net Assets Held in Trust ……………… . . . . . . . . .	$ 807,000
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$ 807,000	$ 807,000

Required:

a. Open a general journal for the City of Monroe Community Foundation Trust Fund
and record the following transactions for the year ending December 31, 2015:

(1) On May 1, the first semiannual interest payment
was received on the corporate bonds. The bonds pay 6 percent annual interest,
semiannually on May 1 and November 1.

(2) During the first half of the year, additional
contributions from individuals and foundations amounted to $206,026, in cash. From
these funds, $ 200,000 were invested in RST Corporation stock on June 15.

(3) On November 1, the second semiannual interest
payment was received from the investment in bonds.

(4) On November 15, a dividend was declared by RST
Corporation in the amount of $4,000 and was received in cash.

(5) On December 1, RST Corporation stock was sold for
$203,500 cash. Those funds were immediately invested in UVW Corporation stock.

(6) On December 15, cash scholarships in the amount
of $50,000 were made to various college students.

(7) On December 31, an accrual was made for year-end
interest on the corporate bonds.

(8) Also, on December 31, it was determined that the
market value of the corporate bonds,  exclusive
of accrued interest, was $ 752,100 and that the market value of UVW Company
stock was $ 199,000.

b. Post the entries to the Community
Foundation Trust ledger (t-accounts).

c.
Prepare and post an entry closing all nominal accounts to Net Assets. 

7–C. Part 2. Pension Trust Fund
Transactions

The
City of Monroe Police Department pension plan, a single-employer,
defined-benefit plan, reported the following account balances as of January 1, 2015:

Debits	Credits
Cash	$140,000
Accrued Interest Receivable	72,000
Investments: Bonds	5,300,000
Investments: Common Stock	2,790,000
Accounts Payable	$27,000
Net Assets Held in Trust for Employee Benefits	8,275,000
Totals	$ 8,302,000	$8,302,000

Required:

a. Open a general journal for the City of Monroe Police Department Pension Trust Fund
and record the following transactions for the year ending December 31, 2015:

(1) Member contributions were received in the amount
of $400,000. The City General Fund contributed the same amount.

(2) Interest was received in the amount of $386,900,
including the accrued interest receivable at the beginning of the year. The
interest accrual at year end amounted to $86,000.

(3) During the year, common stock dividends amounted
to $125,000.

(4) Investments were made during the year in common
stock in the amount of $575,000.

(5) Annuity benefits in the amount of $377,400,
disability benefits of $ 82,020 and refunds to nonvested terminated employees
of $39,800 were recorded as liabilities.

(6) Accounts payable, in the amount of $507,500, were
paid in cash.

(7) During the year, common stock valued at $505,000
was sold for $506,800. A portion of these funds, $502,000 were invested in
common stock of a different company.

(8) At year-end, the market value of investments in
bonds increased by $12,750; the market value of investments in stocks decreased
by $5,770.

b. Post the entries to the Police Department
Pension Trust ledger (t-accounts).

c.
Prepare and post an entry closing all nominal accounts to Net Assets. 

7–C. Part 3. Fiduciary Fund Financial
Statements

Required:  Using the balances from Parts 1 and 2
prepare the following:

1. Statement of Changes in
   Fiduciary Net Assets.

1. Statement of Fiduciary Net
   Assets

Chapter 8 – Government-wide Statements

8–C. Assemble the following from previous continuous problems:
(1) the governmental funds Balance Sheet and Statement of Revenues,
Expenditures, and Changes in Fund Balances from Section 5–C; (3) the
proprietary funds Statement of Net Assets and  Statement of Revenues, Expenses, and Changes
in Fund Net Assets from Section 6–C.

Required:Part of this is
already completed if you use the problem templates posted in Bb

1. Start a worksheet for
   adjustments, using the trial balance format illustrated in the text (i.e.
   list accounts with debit balances first, then accounts with credit
   balances).  Enter the balances from
   the governmental funds financial statements prepared for Section 5-C.  When doing this, follow the following
   guidelines:

§ 
Net
Assets:  Use a single account for net
assets (which will include the beginning balance of all fund balance accounts).

§ 
Intergovernmental
Revenues:  When setting up the
worksheet, set up separate lines for the intergovernmental revenues as follows:

State Grant for Highway and Street Maintenance	$ 1,072,000
Operational Grant—General Government	332,000
Capital Grant—Public Safety	1,320,000
total	$2,724,000

§ 
Capital
Assets:  It is not necessary to set
up separate lines for different classes of capital (fixed) assets or
accumulated depreciation (simply use one row for Capital Assets and another for
Accumulated Depreciation).

§ 
Confirm that the total debits and credits equal.

2. Prepare worksheet entries and post to the worksheet
for the following items. Identify each adjustment by the letter used in the
problem:

a.  Record the January 1, 2015 balances of general
fixed assets and related accumulated depreciation accounts. The City of Monroe had the following
balances (excluding Internal Service Funds):

Cost	Accumulated Depreciation
Totals	$ 65,900,000	29,800,000

b.  Eliminate the capital expenditures shown
in the governmental funds Statement of Revenues, Expenditures, and Changes in
Fund Balances.

c.   Depreciation expense (governmental activities)
for the year totaled $ 5,750,000.

d.  Eliminate
the other financing sources from the sale of bonds by recording a liability for
bonds payable and the related premium.

e.  As
of January 1, 2015, the City of Monroe had $12,000,000 in general obligation
bonds outstanding.

f.  Eliminate
the expenditures for bond principal.

g.  Accrue
interest in the amount of $328,000. (Two bond issues were outstanding; interest
payments for both were last made on July 1, 2015. The computation is as
follows: ($11,200,000 × .03 × 6/12) +
($4,000,000 ×. 08 × 6/12) = $328,000).

h.  Adjust
for the interest accrued in the prior year government-wide statements, but recorded
as an expenditure in the 2015 fund basis statements, ($12,000,000 × .03 × 6/12) = $180,000.

i.  Amortize
bond premium in the amount of $ 10,000.

j.  Make
adjustments for additional revenue accrual. The only adjustment is for property
taxes to eliminate the current year deferral of property taxes.

k.  Adjust
for the $21,000 of property taxes that was deferred in 2014 and recognized as
revenue in the 2015 fund-basis statements.

l.  Assume
the City adopted a policy in 2015 of allowing employees to accumulate
compensated absences.  Make an adjustment
accruing the expense of $ 39,500 Charge compensated
absences expense.

m.  Bring in the balances of the internal
service fund balance sheet accounts. Again, use a single account for all capital
assets and a second account for all accumulated depreciation balances (use a
separate column of the worksheet to enter Internal Service Fund entries).   

n.  No
revenues from internal service funds were with external parties. Assume $3,200
of the $11,200 “Due from Other Funds” in the internal service accounts
represents a receivable from the General Fund and the remaining $8,000 is due
from the enterprise fund. Eliminate the $3,200 interfund receivables.

o.  Reduce
governmental fund expenses by the net operating profit of internal service
funds. As the amount is small, reduce general government expenses for the entire
amount.

p.  Eliminate
transfers that are between departments reported within governmental activities.

3. Prepare, in good form, a Statement of Activities
for the City of Monroe
for the Year Ended December 31, 2015. For purposes of this statement, assume:

§ 
$ 332,000 in the General Fund is a state grant specifically
to support general government programs.

§ 
$ 1,072,000 in the Street and Highway Fund is an
operating grant specifically for highway and street maintenance expenses.

§ 
$ 1,320,000 in the City Jail Construction Fund
is a capital grant that applies to public safety.

  Use the
balances computed from the worksheet completed in part 2 for the governmental
activities portion of the statement.  Use
the solution to P6–C (Enterprise
fund) to prepare the business activities portion (net any short-term interfund
payables/receivables).

4. Prepare, in good form, a Statement of Net Assets
for the City of Monroe
as of December 31, 2015. Group all capital assets, net of depreciation. Include
a breakdown in the Net Assets section for (a) capital assets, net of
related debt, (b) restricted, and (c) unrestricted. For purposes
of classifying net assets for the governmental activities, assume:

§ 
For the governmental activities net assets invested in capital assets, net
of related debt, the related debt includes the bonds payable, the premium on
bonds payable, and the advance from the water utility fund.

§ 
The special revenue fund resources are
restricted by the granting agency for street and highway maintenance.  These ($ 247,000) are the only restricted
resources in the governmental activities. 

5. Prepare the reconciliation necessary to convert
from the fund balance reported in the governmental funds Balance Sheet to the
net assets in the government-wide Statement of Net Assets.  EXTRA CREDIT 10 POINTS  for both reconciliation

6. Prepare the reconciliation necessary to convert
from the change in fund balances in the governmental funds Statement of
Revenues, Expenditures, and Changes in Fund Balances to the change in net
assets in the government-wide Statement of Activities.

Chapter 13 – Financial Statement Analysis

Assemble
the financial statements prepared for the City of Monroe. These financial statements will be in
the solutions to Exercises 5–C, 6–C, 7–C, and 8–C. Assume a population of 25,000
and fair value of property in the amount of $360 million. Compute the following
ratios, following the guidance used for the Village of Elizabeth
in this chapter:

(1) Financial Position –
Governmental Activities

(2) Financial Position –
General Fund.

(3) Quick Ration – Governmental
Activities

(4) Leverage – Primary
Government

(5) Debt Coverage – Enterprise
Funds

(6) Debt Service to Total
Expenditures

(7) Debt per Capital – Primary
Government

(8) Debt to Assessed Value of
Property – Primary Government