Chapter 18, Problem 18.8E

Enterprise Fund Entries and Statements
Augusta has a municipal water and gas utility district (MUD). The trail balance on January 1, 20X1, follows:

Additional Information for 20X1

1. Charges to customers for water and gas were $420,000; collections were $432,000.
2. A loan of $30,000 for two years was received from the general fund.
3. The water and gas lines extended to a new development at a cost of $75,000. The contractor was paid.
4. Supplies were acquired from central stores (internal service fund) for $12,400. Operating expenses were $328,000, and interest expense was $30,000. Payment was made for the interest and the payable to central stores, and $325,000 of the vouchers were paid.
5. Adjusting entries were as follows: estimated uncollectible accounts receivable, $6,300; depreciation expense, $32,000; and supplies expense, $15,200.

Required

1. Prepare entries for the MUD enterprise fund for 20X1 and closing entries.
2. Prepare a statement of net position for the fund for December 31, 20X1.
3. Prepare a statement of revenues, expenses, and changes in fund net position for 20X1. Assume that the $500,000 of the 6 percent bonds is related to the net capital assets of land and of plant and equipment.
4. Prepare a statement of cash flows for 20X1.

To determine

Introduction: An enterprise fund is one of two proprietary funds. It is the amounts charged to the general public, to recover all or most of the cost of goods and services provided by the government to the general public. An enterprise fund is one of two proprietary funds.

The entries for the enterprise fund for 20X1 and closing entries.

Explanation of Solution

Particulars	Debit $	Credit $
1. Accounts receivable	420,000
Revenue		420,000
(Recognition of receivable from customers)
2. Cash	432,000
Accounts receivable		432,000
(Received cash on account of accounts receivable)
Cash	30,000
Due to general fund		30,000
(Received loan from general fund)
3. Plant and equipment	75,000
Contracts payable		75,000
(Extension of water and gas lines recognized)
Contract payable	75,000
Cash		75,000
(Record payment of extended lines)
4. Inventory of supplies	12,400
Operating expenses	328,000
Interest expense	30,000
Due to central stores fund		12,400
Vouchers payable		328,000
Interest payable		30,000
(Expenses incurred are recognized)
Due to central stores fund	12,400
Vouchers payable	325,000
Interest payable	30,000
Cash		367,400
(Paid cash for dues to central fund vouchers and interest)
5. Revenue	6,300
Allowance for uncollectible		6,300
(Reduction of revenue for uncollectible accounts)
Depreciation expense	32,000
Accumulated depreciation		32,000
(Adjustment for depreciation for the period)
Supplies expense	15,200
Inventory of supplies		15,200
(Adjustment for supplies on hand)
Closing entries:
Revenue	413,700
Operating expenses		328,000
Interest expense		30,000
Depreciation expense		32,000
Supplies expense		15,200
Profit and loss summary		8,500
(Closing of nominal accounts)
Profit and loss summary	8,500
Net assets − unrestricted		8,500
(Profit and loss summary account closed and amount transferred to net assets unrestricted)
Net Assets − unrestricted	43,000
Net assets − invested in capital		43,000
(Recognition of increase in net asset invested)

Calculation of increase in net assets invested:

Ending balance of net capital assets	$563,000
Less: Related debt	(500,000)
Beginning balance in net assets − invested in capital assets	(20,000)
Increase in net assets invested	$43,000

To determine

Introduction: An enterprise fund is one of two proprietary funds. It is the amounts charged to the general public, to recover all or most of the cost of goods and services provided by the government to the general public. An enterprise fund is one of two proprietary funds.

The statement of net position for the fund for December 31, 20X1.

Answer to Problem 18.8E

Total assets as per statement of net assets $686,500

Explanation of Solution

A MUD Enterprise Fund

Statement of Net Assets

December 31, 20X1

	$	$
Assets:
Cash		111,600
Accounts receivable	13,000
Less: Allowance for uncollectible	(6,300)	6,700
Inventory of supplies		5,200
Land		120,000
Plant and equipment	555,000
Less: Accumulated depreciation	(112,000)	443,000
Total Assets		686,500
Liabilities:
Vouchers payable	18,000
Due to general fund	30,000
Bonds payable	500,000
Total Liabilities		548,000
Net Assets:
Invested in capital assets, net of related debt	63,000
Unrestricted	75,500
Total Net Assets		138,500
		686,500

To determine

Introduction: An enterprise fund is one of two proprietary funds. It is the amounts charged to the general public, to recover all or most of the cost of goods and services provided by the government to the general public. An enterprise fund is one of two proprietary funds.

The statement of revenues, expenses and changes in fund net position for 20X1. Assuming $500,000 of the 6 percent bonds is related to the net capital assets of land and of plant and equipment.

Answer to Problem 18.8E

Change in net assets $8,500

Explanation of Solution

A MUD Enterprise fund

Statement of Revenues, Expenses and

Changes in Fund Net Assets

For the year ended December 31, 20X1

	$	$
Revenues:
Revenue from services		413,700
Expenses:
Operating expense	328,000
Depreciation	32,000
Supplies	15,200
Total expenses		375,200
Operating income		38,500
Non-operating expenses
Interest on capital − related debt		30,000
Change in net assets		8,500
Net assets, January 1		130,000
Net assets, December 31		138,500

To determine

Introduction: An enterprise fund is one of two proprietary funds. It is the amounts charged to the general public, to recover all or most of the cost of goods and services provided by the government to the general public. An enterprise fund is one of two proprietary funds.

The statement of cash flows 20X1.

Answer to Problem 18.8E

Net increase in cash $19,600

Explanation of Solution

A MUD Enterprise Fund

Statement of Cash Flows

December 31, 20X1

	$	$
Cash flows from operating activities:
Cash received from customers	432,000
Cash payments for goods and services	(325,000)
Cash paid to internal service fund for supplies	(12,400)
Net cash provided by operating activities		94,600
Cash flows from non-capital financing activities:
Cash received from general fund for non-capital loan	30,000
Net cash provided by non-capital financing activities		30,000
Cash flow from capital and related financing activities
Interest on capital related debts	(30,000)
Extension of service lines	(75,000)
Net cash used for capital and related financing activities		(105,000)
Cash flow from investing activities		0
Net increase in cash		19,600
Cash at the beginning of the year		92,000
Cash at the end of the year		111,600