Chapter 17, Problem 35P

The following information pertains to the City of Williamson for 2017, its first year of legal existence. For convenience, assume that all transactions are for the general fund. which has three separate functions: general government, public safety, and health and sanitation.

Receipts:
Property taxes	$320,000
Franchise taxes	42,000
Charges for general government services	5,000
Charges for public safety services	3,000
Charges for health and sanitation services	42,000
Issued long-term note payable	200,000
Receivables at end of year:
Property taxes (90% estimated to be collectible)	90,000
Payments:
Salary:
General government	66,000
Public safety	39,000
Health and sanitation	22,000
Rent:
General government	11,000
Public safety	18,000
Health and sanitation	3,000
Maintenance:
General government	21,000
Public safety	5,000
Health and sanitation	9,000
Insurance:
General government	8,000
Public safety ($2,000 still prepaid at end of year)	11,000
Health and sanitation	12,000
Interest on debt	16,000
Principal payment on debt	4,000
Storage shed	120,000
Equipment	80,000
Supplies (20% still held) (public safety)	15,000
Investments	90,000
Ordered but not received:
Equipment	12,000
Due in one month at end of year:
Salaries:
General government	4,000
Public safety	7,000
Health and sanitation	8,000

Compensated absences (such as vacations and sick days) legally owed to general government workers at year-end total $13,000. These amounts will not be taken by the employees until so late in 2018 that the payment is not viewed as requiring 2017 current financial resources.

The city received a piece of art this year as a donation. It is valued at $14,000. It will be used for general government purposes. There are no eligibility requirements. The city chose not to capitalize this property.

The general government uses the storage shed that was acquired this year. It is being depreciated over 10 years using the straight-line method with no salvage value. The city uses the equipment for health and sanitation and depreciates it using the straight-line method over rise years with no salvage value.

The investments are valued at $103,000 at the end of the year.

For the equipment that has been ordered but not yet received, the City Council (the highest decision-making body in the government) has voted to honor the commitment when the equipment is received.

1. a. Prepare a statement of activities and a statement of net position for governmental activities for December 31, 2017, and the year then ended.
2. b. Prepare a statement of revenues, expenditures, and other changes in fund balances and a balance sheet tor the general fund as of December 31, 2017, and the year then ended. Assume that the city applies the consumption method.

To determine

Prepare a statement of activities and a statement of net position for the year 2017.

Explanation of Solution

Statement of activity for W:

Statement of activities
Program revenue				Net revenue and change in net assets
Program	Expenses	Charges for services	Grants and contribution (operating)	Grants and contribution (capital)	Governmental activities	Business activities	Total
Primary government:
Governmental activities
General governmental	$149,000	$5,000		$14,000	($130,000)		($130,000)
Public safety	$90,000	$3,000			($87,000)		($87,000)
Health and sanitation	$70,000	$42,000			($28,000)		($28,000)
Interest on debt	$16,000				($16,000)		($16,000)
Total governmental activities	$325,000	$50,000		$14,000	($261,000)		($261,000)

Table: (1)

Working note:

Computation of closing amount of net assets:

General revenue:
Property taxes	$ 401,000
Franchise taxes	$   42,000
Investment	$   13,000
Total	$ 456,000
Change in net assets	$ 195,000
Net assets – beginning
Net assets – closing	$ 195,000

Table: (2)

Statement of net assets for W:

Statement of net assets
Particulars	Governmental activities	Business activities	Total
Assets
Cash & equivalents	$              62,000		$      62,000
Prepaid expenses	$                2,000		$         2,000
Investment	$           103,000		$    103,000
Receivables	$              81,000		$      81,000
Inventories	$                3,000		$         3,000
Capital assets	$           172,000		$    172,000
Total assets	$           423,000		$    423,000
			$                -
Liabilities			$                -
Salaries payable	$              19,000		$      19,000
Compensating absence		$       13,000	$      13,000
Noncurrent liabilities	$           196,000		$    196,000
Total liabilities	$           215,000	$       13,000	$    228,000
			$                -
Net assets			$                -
			$                -
Invested in net assets	$           (24,000)		$    (24,000)
Unrestricted	$           219,000		$    219,000
Total net assets	$           195,000		$    195,000

Table: (3)

To determine

Prepare a statement of revenues, expenditures and other changes in fund balance and a balance sheet for the year 2017.

Explanation of Solution

Statement of revenues, expenditures and other changes in fund balance for W:

Statement of revenue, expenditure and change in fund balance
Particulars	General funds	Total government funds
Property taxes	$                 401,000	$                   401,000
Franchise taxes	$                   42,000	$                     42,000
Charges for Services	$                   50,000	$                     50,000
Investments	$                   13,000	$                     13,000
Total	$                 506,000	$                   506,000
Expenditures:
General Governmental	$                 110,000	$                   110,000
Public Safety	$                   90,000	$                     90,000
Health and Sanitation	$                   54,000	$                     54,000
Debt Service:
Principal payment on debt	$                     4,000	$                       4,000
Interest on debt	$                   16,000	$                     16,000
Capital Outlay	$                 200,000	$                   200,000
Total expenditures	$474,000	$474,000
Excess of
revenues over expenses	32,000	32,000
Other Financing Sources:
Proceeds from long-term note	200,000	200,000
other
uses and sources	200,000	200,000
Net Changes in fund balance
Fund Balances (beginning)	-	-
Fund Balances (ending)	$232,000	$232,000

Table: (4)

Balance sheet for W:

Balance sheet
Particulars	General funds ($)	Total government funds ($)
Assets:
Cash & equivalents	62,000	62,000
Prepaid expense	2,000	2,000
Investment	103,000	103,000
Receivables	81,000	81,000
Inventory	3,000	3,000
Total assets	251,000	251,000
Liabilities:
Salaries payable	19,000	19,000
Fund balance -
For encumbrances	12,000	12,000
For inventory	3,000	3,000
For prepaid expenses	2,000	2,000
For unreserved	215,000	215,000
Total fund balance	232,000	232,000
Total liabilities	251,000	251,000

Table: (5)