Chapter 10, Problem 38P

a.

To determine

Prepare the journal entries to recognize the following in government-wide financial statements for the required reconciliations:

1. 1. Recognize Capital Assets of $199,360 as of the beginning of the year.
2. 2. Record Depreciation Expense of $9,968 for the year and reverse Expenditures of $11,962 for Capital Outlays during the year.
3. 3. Recognize $7,000 of Bonds Payable as of the beginning of the year.
4. 4. Reverse Other Financing Sources of $2,000 and Expenditures – Debt Payments of $700 relating to increases and decreases in the bond liability during the year.
5. 5. Reverse Deferred Revenue of $27,300 as of the beginning of the year.
6. 6. Reverse $1,365 of deferred revenue recognized during the year.
7. 7. Recognize Compensated Absences of $3,988 as of the beginning of the year and an increase in that liability of $199 during the year.
8. 8. Recognize $20 of Accrued Interest Payable as of the beginning of the year and an increase in that liability of $33 during the year.
9. 9. Recognize a liability of $5,482 relating to the City’s landfill as of the beginning of the year. The estimate for this liability did not change during the year.

Explanation of Solution

Government-wide statements put together financial activities in one location and provide information on accrual-based economic resources. Government-wide statements shall coordinate information whether it applies to government activities or business-type operations. The Government-wide reports consist of a statement of net position and a statement of activities. The statement of net position portrays the local government as a single economic entity rather than a collection of different funds.

Statement of activities is the statement which lists the government revenues and expenses and, in some instances, the difference to show the balance between them. It is practically a running effectively regarding the government's financial condition.

The Statement of Activities presents the reporting government operations in two parts:

• The net expense or revenue of each governmental function
• General revenues

Date	Accounting Explanation	Amount ($)	Amount ($)
1.	Capital assets, net	$\$199,360$
	Net position		$\$199,360$
	(Capital assets, net at beginning of year)
2.	Depreciation expense	$\$9,968$
	Capital assets, net	$\$1,994$
	Expenditures—capital outlay		$\$11,962$
	(Change in capital assets, net)
3.	Net position	$\$7,000$
	Bonds payable		$\$7,000$
	(Bonds and notes payable at beginning of year)
4.	Other financing sources—proceeds from bonds	$\$2,000$
	Bonds payable		$\$1,300$
	Expenditures—debt principal payments		$\$700$
	(Change in bonds payable)
5.	Deferred revenues	$\$27,300$
	Net position		$\$27,300$
	(Deferred revenues at beginning of year)
6.	Deferred revenues	$\$1,365$
	Revenues		$\$1,365$
	(Change in deferred revenues)
7.	Net position	$\$3,988$
	Compensated absence expense	$\$199$
	Compensated Absences		$\$4,187$
	(To record beginning of year compensated absences and change for the year)
8.	Net position	$\$20$
	Interest expense	$\$33$
	Accrued interest		$\$53$
	(To record beginning of year accrued interest and change for the year)
9.	Net position	$\$5,482$
	Landfill closure and post-closure care costs		$\$5,482$
	(Beginning of year landfill closure and post-closure care costs)

b.

To determine

Prepare the government-wide statement of net position and identify the revenues, expenses, and net position change that should be reported in the year's statement of activities of the City, B H.

Explanation of Solution

Government-wide statements put together financial activities in one location and provide information on accrual-based economic resources. Government-wide statements shall coordinate information whether it applies to government activities or business-type operations. The Government-wide reports consist of a statement of net position and a statement of activities. The statement of net position portrays the local government as a single economic entity rather than a collection of different funds.

The difference between assets of an entity plus deferred resource outflows and their liabilities plus deferred resource inflows which represents the net position is known as statements of net position of government-wide financial statements.

RECONCILIATION WORKSHEET
	Governmental Funds		DR				CR						Governmental Activities
Balance Sheet/Statement of Net Position:
Current Assets:
Cash	$30,240												$30,240
Receivables:
Real Estate & Personal Property	2,520												2,520
Intergovernmental	26,060												26,060
Noncurrent:
Receivables
Capital assets, net of accumulated depreciation		1	199,360											201,354
		2	1,994
Total Assets	$58,820												$260,174
LIABILITIES
Payables	$2,982												$2,982
Accrued interest					8		53						53
Bond and notes payable					3		7,000						8,300
					4		1,300
Compensated advances					7		4,187						4,187
Landfill closure and post-closure care costs					9		5,482						5,482
Deferred revenues	28,665	5	27,300										0
		6	1,365
Total Liabilities	31,647												21,004
FUND BALANCE	27,173													27,173
Adjustments:		3	7,000		1				199,360						192,360
		7	3,988		5				27,300						23,312
		8	20												(20)
		9	5,482												(5,482)
Net income adjustments					below				1,827						1,827
NET POSITION															239,170
Check:  Liabilities + Net Position = Total Assets															$260,174

Statement of Revenues, Expenditures, and Changes in Fund Balances:
	Governmental Activities		DR		CR		Governmental Activities
Total revenues—fund statements	$111,384						$111,384
Adjustments:
Deferred revenues				6	1,365		1,365
Total revenues—statement of activities							112,749
Total expenditures—fund statements	107,912						107,912
Adjustments:
Debt principal payments				4	700		(700)
Depreciation expense/capital outlay		2	9,968	2	11,962		(1,994)
Compensated absences		7	199				199
Interest expense		8	33				33
Total expenses—statement of activities							105,450
Miscellaneous adjustments:
OFS—proceeds from bonds	2,000	4	2,000				0
Net change in fund balances/ change in net position	$5,472		12,200		14,027		$7,299