Answered: ass necessary Journal entries in the…

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter16: Tax Research

Section: Chapter Questions

Problem 49RC

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The Muscat City for the year 2019 maintain two funds: a General Fund accounts for its unrestricted resources and general operations, and a Proprietary funds for internal services and State Enterprises. The Muscat City has provided the following financial information for the year 2019 for you to prepare r journal entries in the relevant funds separately. As the crude oil price in the international market has come down from the budgeted 58 $ per barrel to 23$ per barrel, City has decided to borrow 2 million OMR from the world bank – IMF to address the increasing deficit in the budget. The City levied $ 1 million of general property taxes of which it actually collected $ 0.4 million. The City decided to set up its own printing and publishing department by investing OMR 0.8 million but the services will be available only for government units, but not free of cost. City government also transferred 0.80 million as an investment for automation and diversification of the services of Muscat Airport Authority. As the City’s sewage system is outdated and needs to be improved, City requested the national government for financial assistance in the form of grant. The national government approved a grant of OMR 2.5 million for the purpose. To improve City’s operational efficiency and services to the society, it has been decided to construct a purpose built building to accommodate its main office. As it involves huge amount of OMR 2.4 million, City has decided to borrow the fund from the public and financial institutions by issuing bonds in the local and international market. The City issued OMR 4.5 million in long-term Bonds for operational expenditure to cover up the deficit due to the unexpected fall in the prices of crude oil. The proceeds must be used for the day to day expenditure of the government. Using the bond issue proceeds, the City signed an agreement with one of the leading construction company to construct the main office. The cost of the construction amounts to OMR 2.20. The City also transferred $ 0.07 million to Debt Service Fund as the first payment towards the principal and interest of its bonds issued for operational expenditure. The City signed a contract for OMR 2 million to improve the sewage system of the city. The printing and publishing department billed the City for the services and goods delivered OMR 0.15. Payment of salary and other allowances by the City government to the government employees OMR 1.25 million Transferred OMR 0.4 million to a fund which will remain intact except the revenue and interest accrued on it. Reported the completion of a portion of the sewage work , duly approved by the City. and payment has been made OMR 1.75 million Disputes occurred between the City and the Company regarding the completion of the remaining sewage work, and it has been mutually agreed to cancel the rest of the work in the contract. Pass necessary Journal entries in the books of Muscat City under the relevant funds separately both governmental funds and proprietary funds

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