6-2
1.
2.
3.
4.
5.
6.
7.
8.
b
d
c
a
d
a
c
d
Exercise Exercise 6-4
1.
ExpendituresCapital Outlay ..............................................
Cash ...............................................................................
Other Financing SourcesIncrease in
Capital Lease Liabilities ...........................................
To record inception of capital lease, including initial
down payment.
3,800,000
380,000
3,420,000
Entries also are required in the General Capital Assets and General Long-Term Liabilities
accounts to record the leased asset ($3,800,000) and the long-term lease liability
($3,420,000).
2. ExpendituresInterest ($3,420,000 x .1 x .5) ............................
ExpendituresPrincipal Retirement ....................................
Cash ...............................................................................
To record semiannual lease payment.
171,000
69,000
240,000
Transactions 2 and 3 also require entries in the General Capital Assets and General LongTerm Liabilities accounts to record the reduction of the long-term lease liability to the
remaining principal balance ($3,351,000 after Transaction 2). These entries are discussed
and demonstrated in Chapter 9 of the text.
3.
ExpendituresInterest ($3,351,000 x .10 x .5) ....................
ExpendituresPrincipal Retirement ....................................
Cash ...............................................................................
To record semiannual lease payment.
167,550
72,450
240,000
Exercise 6-5
Changes in
Fund
Liability
Cash
Contribution
1.
$5,000,000
Pension
Expenditures
$5,000,000
3.
4.
2.
$4,200,000
$9,000,000
$4,500,000
+$ 150,000
-$ 200,000
$4,350,000
$8,800,000
$4,500,000
Exercise 6-6 (a)
City of Bettinger's Bend
General Fund
General Journal
(Entry Explanations Omitted)
#
Accounts
Dr.
Cr.
Purchases method:
1.
2a.
2b.
3a.
3b.
Encumbrances .......................................................................
Reserve Encumbrances.............................................
740,000
Reserve for for Encumbrances ...................................................
Encumbrances.................................................................
740,000
Expenditures .........................................................................
Vouchers Payable ...........................................................
741,000
Inventory of Materials and Supplies .....................................
Other Financing SourceInventory Increase ...............
4,000
Unreserved Fund Balance .....................................................
Fund Balance Reserved for Inventory ...........................
4,000
740,000
740,000
741,000
4,000
4,000
Note: The solution to requirement a assumes that the beginning balances of Inventory and
Fund Balance Reserved for Inventory were left unchanged during the year.
Formal explanations of the entries were omitted for simplicity.
Exercise 6-6 (b)
Consumption methodPerpetual system:
1.
2a.
Encumbrances .......................................................................
Reserve for Encumbrances ............................................
740,000
Reserve for Encumbrances ...................................................
Encumbrances ................................................................
740,000
740,000
740,000
2b.
3.
Inventory of Materials and Supplies .....................................
Vouchers Payable ...........................................................
741,000
Expenditures .........................................................................
Inventory of Materials and Supplies ..............................
737,000
741,000
737,000
Exercise 6-6 (c)
The ending inventory balance to be reported in the General Fund balance sheet would be
$90,000, regardless of the accounting method used. An equal amount, $90,000, will be included
in the amount of nonspendable fund balance.