Entries for Funds [AICPA Adapted]
Olivia Village was recently incorporated and began financial operations on July 1, 20X2, the beginning of its fiscal year. The following transactions occurred during this first fiscal year, July 1, 20X2, to June 30, 20X3:
- The village council adopted a budget for general operations for the fiscal year ending June 30, 20X3. Revenue was estimated at $400,000. Legal authorizations for budgeted expenditures totaled $394,000.
- Property taxes of $390,000 were levied; 2 percent of this amount was estimated to be uncollectible. These taxes are available to finance current expenditures as of the date of levy.
- During the year, a village resident donated marketable securities valued at $50,000 to the village under the terms of a trust agreement that stipulated that the principal amount be kept intact. The use of revenue generated by the securities is restricted to financing college scholarships for needy students. Revenue earned and received on these marketable securities amounted to $5,500 through June 30, 20X3.
- A general fund transfer of $5,000 was made to establish an internal service fund to provide for a permanent investment in inventory.
- The village decided to install lighting in the village park financed through an authorized special assessment project at a cost of $75,000. The city is obligated if the property owners default on their special assessments. The village issued special assessment bonds in the amount of $72,000 and levied the first year’s special assessment of $24,000 against the village’s property owners. The remaining $3,000 for the project will be contributed from the village’s general fund.
- The special assessments for the lighting project are due over a three-year period, and the first year’s assessments of $24,000 were collected. The $3,000 transfer from the village’s general fund was received by the lighting capital projects fund.
- A contract for $75,000 was let for the lighting installation. The capital projects fund was encumbered for the contract. On June 30, 20X3, the contract was completed, and the contractor was paid.
- During the year, the internal service fund purchased various supplies at a cost of $1,900.
The allowance for estimated uncollectible taxes is adjusted to $4,000.
Required
Prepare journal entries to record property each of these transactions in the appropriate fund or funds of Olivia Village for the fiscal year ended June 30, 20X3.
Use the following funds; general fund, capital projects fund, debt service fund, internal service fund, and private-purpose trust fund. Each
Introduction:
Government funds: It is the financial resources of government established by the government for money collected for a government project. These funds are created to provide an extra level of transparency and accountability to taxpayers that their tax dollars are used for the appropriate purpose. Governmental funds use the modified accrual basis of accounting, and proprietary and fiduciary funds use accrual basis.
The entries to record each of these transactions in appropriate fund.
Explanation of Solution
Fund | Entry | Debit $ | Credit $ |
1. General Fund | Estimated revenues control | 400,000 | |
Appropriations control | 394,000 | ||
Budgetary fund balance - unreserved | 6,000 | ||
(Budget, and budgeted expenditure for the year adopted) | |||
2. General fund | Taxes receivable − current | 390,000 | |
Revenue − taxes | 382,200 | ||
Allowances for uncollectible - current | |||
(Tax revenue receivable recognized) | |||
3. Private − Purpose trust fund | Investments | 50,000 | |
Contributions | 50,000 | ||
(Received contributions in the form of investments) | |||
Cash | 5,500 | ||
Additions − interest | 5,500 | ||
(Received interest on securities) | |||
4. General fund | Other financing uses − transfer out of internal service fund | 5,000 | |
Cash | 5,000 | ||
(Paid cash to establish internal service fund) | |||
5. Capital projects | Cash | 72,000 | |
Other financing sources − bond issue | 72,000 | ||
(Received cash for lighting installation using bond issue) | |||
Due from general fund | 3,000 | ||
Other financing sources − transfer in from general fund | 3,000 | ||
(Remaining funds contributed from general fund) | |||
Debt service fund | Special assessments receivable | 24,000 | |
Revenue − special assessments | 24,000 | ||
(First year special assessments levied) | |||
6. General fund | Other financing uses − transfer out to capital projects funds | 3,000 | |
Due to capital projects fund | 3,000 | ||
(Due to capital project fund recognized) | |||
General fund | Due to capital projects fund | 3,000 | |
Cash | 3,000 | ||
(Paid cash for capital project funds) | |||
7. Capital projects funds | Cash | 3,000 | |
Due from general fund | 3,000 | ||
(Transferred from general fund to capital project funds) | |||
Debt service fund | Cash | 24,000 | |
Special assessments receivable | 24,000 | ||
(First year assessment for collected) | |||
Capital projects fund | Encumbrances | 75,000 | |
Budgetary fund balance − reserved for encumbrances | 75,000 | ||
(Encumbrances for lighting installation created) | |||
Budgetary fund balance − reserved for encumbrances | 75,000 | ||
Encumbrances | 75,000 | ||
(entry reversed when the goods received) | |||
Expenditures | 75,000 | ||
Contracts payable | 75,000 | ||
(expenditure recognized on receipt of goods) | |||
Contracts payable | 75,000 | ||
Cash | 75,000 | ||
(Cash paid for goods expenditure on lighting installation) | |||
8. Internal service fund | Inventory of supplies | 1,900 | |
Cash | 1,900 | ||
(Cash paid on goods received) | |||
9. General fund | Cash | 393,000 | |
Taxes Receivable − Current | 386,000 | ||
Revenue − Licenses and fees | 7,000 | ||
(Received cash on taxes receivable) | |||
Allowances for Uncollectible − current | 3,800 | ||
Revenue − Taxes | 3,800 | ||
10. Capital project fund | Cash | 500,000 | |
Other financing sources − bond issue | 500,000 | ||
(Issued bonds to build village hall) | |||
11. General fund | Budgetary fund balance − reserved for encumbrances | 15,000 | |
Encumbrances | 15,000 | ||
(Encumbrance for purchase of truck reversed on receipt) | |||
Expenditures | 15,000 | ||
Cash | 15,000 | ||
(Cash paid on receipt of truck) |
Correction of uncollectible - current:
Estimate | $7,800 |
Actual | ($4,000) |
Correction | $3,800 |
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