Chapter 3

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Continuous Problem – City of Everlasting Sunshine Continuous Problem – City of Everlasting Sunshine TO A CCOMPANY E SSENTIALS OF A CCOUNTING FOR G OVERNMENTAL AND N OT - FOR -P ROFIT O RGANIZATIONS : T ENTH E DITION Chapters 2 through 8 describe accounting and financial reporting by state and local governments. A continuous problem is presented to provide an overview of the reporting process, including preparation of fund basis and government-wide statements. The problem assumes the government is using fund accounting for its internal record-keeping and then at year-end makes necessary adjustments to prepare the government-wide statements. The problem that follows is presented in the same order as the textbook (beginning with Chapters 3, and 4). Each chapter requires the preparation of journal entries to record the events and transactions of governmental, proprietary, or fiduciary funds. For the General Fund, use control accounts for the budgetary accounts, revenues, expenditures and encumbrances. For all other funds, use separate accounts for each type of revenue and expenditure/expense. At appropriate stages, preparation of the fund and government-wide statements are required. The following funds are included in this series of problems: Governmental Funds ¾ General ¾ Special revenue—Street and Highway Fund ¾ Capital projects—City Hall Annex Construction Fund ¾ Debt service—City Hall Annex Debt Service Fund ¾ Debt service—City Hall Debt Service Fund Proprietary Funds ¾ Internal service—Stores and Services Fund ¾ Enterprise—Water and Sewer Fund Fiduciary Funds ¾ Private-purpose—Student Scholarship Fund ¾ Pension trust—Fire and Police Retirement Fund 1
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Continuous Problem – City of Everlasting Sunshine Chapter 3 – Modified Accrual Accounting: Including the Role of Fund Balances and Budgetary Authority & Chapter 4 – Accounting for the General and Special Revenue Funds The Balance Sheets of the General Fund and the Street and Highway Fund of the City of Everlasting Sunshine as of December 31, 2011, follow. These (beginning) balances have been entered in the proper general ledger accounts, as of 1/1/2012. CITY OF EVERLASTING SUNSHINE General Fund Balance Sheet As of December 31, 2011 Assets Cash $80,000 Taxes receivable—delinquent $215,855 Less: Estimated uncollectible delinquent taxes (37,333) 178,522 Interest and penalties receivable on taxes 21,586 Less: Estimated uncollectible interest and penalties (4,318) 17,268 Due from state government 330,000 Total assets $605,790 Liabilities and Fund Equity Liabilities: Accounts payable $154,750 Due to other funds 35,250 Deferred revenues—property taxes 20,000 Total liabilities 210,000 Fund equity: Fund balance—assigned (for outstanding encumbrances) $31,000 Fund balance—unassigned 364,790 Total fund equity 395,790 Total liabilities and fund equity $605,790 CITY OF EVERLASTING SUNSHINE Street and Highway Fund Balance Sheet As of December 31, 2011 Assets Cash $6,500 Investments 55,000 Due from state government 200,000 2
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