Chapter 17, Problem 21EP

Congress authorized the Flood Control Commission to start operations on October 1, 2020.

Required

1. a.      Record the following transactions in general journal form as they should appear in the accounts of the Flood Control Commission. Record all expenses in the Operating/Program Expenses account.
   1. (1) The Flood Control Commission received official notice that the one-year appropriation passed by Congress and signed by the president amounted to $7,000,000 for operating expenses.
   2. (2) The Office of Management and Budget notified the Commission of the following schedule of apportionments: first quarter, $2,000,000; second quarter, $2,000,000; third quarter, $1,500,000; and fourth quarter, $1,500,000.
   3. (3) The Flood Control Commissioner allotted $1,000,000 for the first month’s operations.
   4. (4) Obligations were recorded for salaries and fringe benefits, $400,000; furniture and equipment, $270,000; materials and supplies, $250,000; and rent and utilities, $50,000. The Commission does not record commitments prior to recording obligations.
   5. (5) Payroll for the first two weeks in the amount of $170,000 was paid.
   6. (6) Invoices approved for payment totaled $395,000; of the total, $180,000 was for furniture and equipment, $175,000 for materials and supplies, and $40,000 for rent.
   7. (7) A liability was recorded for the payroll for the second two weeks, $160,000, and for the employer’s share of FICA taxes for the four weeks, $23,000. (Note: Credit to Accrued Funded Payroll and Benefits.)
   8. (8) Accounts payable totaling $189,000 were paid, and this included liabilities for materials and supplies, $149,000, and rent, $40,000. Accrued Funded Payroll and Benefits in the amount of $183,000 were paid.
   9. (9) Accruals recorded at month-end were salaries, $30,000, and utilities, $10,000. Materials and supplies costing $60,000 were used during the month. Depreciation of $2,500 was recorded on furniture and equipment for the month. (Note: In practice, this would likely be done in worksheet form for monthly reporting purposes.)
   10. (10) Necessary closing entries were prepared as of October 31, 2020. (Note: Again, for monthly statements, this would be a worksheet entry only.)
2. b.      Prepare the Balance Sheet of the Flood Control Commission as of October 31, 2020, assuming that all of the Commission’s assets are entity assets, Fund Balance with Treasury is intragovernmental, and all other assets are governmental.
3. c.       Prepare the Statement of Changes in Net Position of the Flood Control Commission for the month ended October 31, 2020.
4. d.      Prepare the Statement of Budgetary Resources of the Flood Control Commission for the month ended October 31, 2020.

To determine

Journalize the given transactions in the accounts of FC Commission.

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Journalize the given transactions in the budgetary and proprietary accounts of FC Commission.

1.

Entry for appropriation realized for operating expenses:

		Debits ($)	Credits ($)
Budgetary:
Other Appropriations Realized-2020		7,000,000
	Unappropriated Authority-2020		7,000,000
Proprietary:
Fund Balance with Treasury-2020		7,000,000
	Unexpended Appropriations		7,000,000

Table (1)

2.

Entry for schedule of apportionments:

		Debits ($)	Credits ($)
Budgetary:
Unappropriated Authority-2020		7,000,000
	Apportionments-2020		7,000,000

Table (2)

3.

Entry for allotments for first month’s operations:

		Debits ($)	Credits ($)
Budgetary:
Apportionments-2020		1,000,000
	Allotments-2020		1,000,000

Table (3)

4.

Entry for commitments:

		Debits ($)	Credits ($)
Budgetary:
Allotments-2020		970,000
	Undelivered Orders-2020		970,000

Table (4)

5.

Entry for payment of payroll:

		Debits ($)	Credits ($)
Budgetary:
Undelivered Orders-2020		170,000
	Expended Authority-2020		170,000
Proprietary:
Operating/Program Expenses		170,000
	Disbursements in Transit-2020		170,000
Disbursements in Transit-2020		170,000
	Fund Balance with Treasury-2020		170,000
Unexpended Appropriations-2020		170,000
	Appropriations Used		170,000

Table (5)

6.

Entry for payment approved invoices:

		Debits ($)	Credits ($)
Budgetary:
Undelivered Orders-2020		395,000
	Expended Authority-2020		395,000
Proprietary:
Furniture and Equipment		180,000
Operating Materials and Supplies		175,000
Operating/Program Expenses		40,000
	Accounts Payable		395,000
Unexpended Appropriations-2020		395,000
	Appropriations Used		395,000

Table (6)

7.

Entry for payroll liability:

		Debits ($)	Credits ($)
Budgetary:
Undelivered Orders-2020		183,000
	Expended Authority-2020		183,000
Proprietary:
Operating/Program Expenses		183,000
	Accrued Funded Payroll and Benefits		183,000
Unexpended Appropriations-2020		183,000
	Appropriations Used		183,000

Table (7)

8.

Entry for payment of accounts payables:

		Debits ($)	Credits ($)
Proprietary:
Accounts Payable		189,000
Accrued Funded Payroll and Benefits		183,000
	Disbursements in Transit-2020		372,000
Disbursements in Transit-2020		372,000
	Fund Balance with Treasury-2020		372,000

Table (8)

9.

Entry to record accruals:

		Debits ($)	Credits ($)
Budgetary:
Undelivered Orders-2020		40,000
	Expended Authority-2020		40,000
Proprietary:
Operating/Program Expenses		40,000
Accrued Funded Payroll and Benefits			30,000
	Accounts Payable		10,000
Operating/Program Expenses		60,000
	Operating Materials and Supplies		60,000
Depreciation and Amortization		2,500
	Accumulated Depreciation-Furniture and Equipment		2,500
Unexpended Appropriations-2020		40,000
	Appropriations Used		40,000

Table (9)

10.

Record closing entries:

		Debits ($)	Credits ($)
Budgetary:
Expended Authority-2020		788,000
	Other Appropriations Realized-2020		788,000
Proprietary:
Cumulative Results of Operations		495,500
	Operating/Program Expenses		493,000
	Depreciation and Amortization		2,500
Appropriations Used		788,000
	Cumulative Results of Operations		788,000

Table (10)

To determine

Prepare balance sheet for FC Commission as of October 31, 2020.

Explanation of Solution

Balance sheet: This is the financial statement that reports the financial position of the federal agency or the governmental entity, and includes the sections assets, liabilities, and net position. Net position is the net amount of the fund balances of the equity funds that are reported on the balance sheet.

Prepare balance sheet for FC Commission as of October 31, 2020.

FC Commission
Balance Sheet
As of October 31, 2020
Particulars	Amount ($)
Assets
Intragovernmental:
Fund Balance with Treasury-2020	$6,458,000
Governmental:
Operating Materials and Supplies	115,000
Furniture and Equipment (Net of accumulated depreciation of $2,500)	177,500
Total assets	$6,750,500
Liabilities
Governmental liabilities:
Accounts payable	$216,000
Accrued funded payroll and benefits	30,000
Total liabilities covered by budgetary resources	$246,000
Net Position
Unexpended appropriations	6,212,000
Cumulative results of operations	292,500
Total net position	6,504,500
Total liabilities and net position	$6,750,500

Table (11)

To determine

Prepare statement of changes in net position for FC Commission for the month ended October 31, 2020.

Explanation of Solution

Statement of changes in net position: The Statement of Net Position of a federal agency reports the total of unexpended appropriations and cumulative results of operations, as net position. Net position is the net amount of the fund balances of the equity funds that are reported on the balance sheet.

Prepare statement of changes in net position for FC Commission for the month ended October 31, 2020.

FC Commission
Statement of Changes in Net Position
For the Month Ended October 31, 2020
	Cumulative Results of Operations	Unexpended Appropriations
Beginning balances	$0	$0
Budgetary funding sources:
Appropriation received		7,000,000
Appropriations used	788,000	(788,000)
Other financing sources	0	0
Total financing sources	788,000	6,212,000
Net cost of operations	(495,500)	0
Ending balances	$292,500	$6,212,000

Table (12)

To determine

Prepare statement of budgetary resources for FC Commission for the month ended October 31, 2020.

Explanation of Solution

Statement of budgetary resources: The statement that reports the available budgetary resources and status of those budgetary resources at the end of the year is referred to as statement of budgetary resources.

Prepare statement of budgetary resources for FC Commission for the year ended October 31, 2020.

FC Commission
Statement of Budgetary Resources
For the Month Ended October 31, 2020
Particulars	Amount ($)
Budgetary Resources:
Budget authority	$7,000,000
Total Budgetary Resources	$7,000,000
Status of Budgetary Resources:
New obligations and upward adjustments	$970,000
Unobligated balances available	6,030,000
Total Status of Budgetary Resources	$7,000,000
Change in Obligated Balance:
Unpaid obligations:
Unpaid obligations, beginning of period	$0
New obligations and upward adjustments	970,000
Outlays	(542,000)
Obligated balance, end of period	$428,000

Table (13)

Notes:

• The sum of undelivered orders–2019 ($182,000) and expended budgetary authority–2020 ($788,000) is the value of new obligations and upward adjustments, $970,000.
• The total budgetary resources of $7,000,000 minus the new obligations of $970,000 is the value of unobligated balances, $6,030,000.
• The sum of undelivered orders ($182,000) and total liabilities ($246,000) is the value of outlays, $428,000.