8–C. Assemble the following from previous continuous problems: (1) the governmental funds Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balances from Section 5–C; (3) the proprietary funds Statement of Net Assets and Statement of Revenues, Expenses, and Changes in Fund Net Assets from Section 6–C.
Required:
- Start a worksheet for adjustments, using the trial balance format illustrated in the text (i.e. list accounts with debit balances first, then accounts with credit balances). Enter the balances from the governmental funds financial statements prepared for Section 5-C. Enter debits balances as positives and credit as negatives. When doing this, follow the following guidelines:
Net Assets:Use a single account for net assets (which will include thebeginning balance of all fund balance accounts).
Intergovernmental Revenues:When setting up the worksheet, set up separate lines for the intergovernmental revenues as follows:
| State Grant for Highway and Street Maintenance | $ 975,000 |
| Capital Grant—General Government | 250,000 |
| Capital Grant—Public Safety | 250,000 |
| Grant for Law Enforcement Programs | 288,000 |
Capital Assets:It is not necessary to set up separate lines for differentclasses of fixed assets or accumulated depreciation (simply use one row for Capital Assets and another for Accumulated Depreciation).
Confirm that the total debits and credits equal $19,237,240.
2. Prepare worksheet entries and post to the worksheet for the following items. Identify each adjustment by the letter used in the problem:
a. Record the January 1, 2012 balances of general fixed assets and related accumulated depreciation accounts. The City of Everlasting Sunshine had the following balances (excluding Internal Service Funds):
| Accumulated | |||
| Cost | Depreciation | ||
| Land | 5,125,000 | – | |
| Buildings | 30,200,000 | 12,100,000 | |
| Improvements Other than Buildings | 20,000,000 | 8,200,000 | |
| Equipment | 8,375,000 | 4,800,000 | |
| Totals | 63,700,000 | 25,100,000 |
15
Continuous Problem – City of Everlasting Sunshine
b. Eliminate the capital expenditures shown in the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances.
c. Depreciation expense (governmental activities) for the year totaled $ 2,592,500.
d. Eliminate the other financing sources from the sale of bonds by recording a liability for bonds payable and the related premium.
e. As of January 1, 2012, the City of Everlasting Sunshine had $6,000,000 in general obligation bonds outstanding.
f. Eliminate the expenditures for bond principal.
g. Accrue interest in the amount of $328,000. (Two bond issues were outstanding; interest payments for both were last made on July 1, 2012. The computation is as follows: ($5,600,000 × .06 ×6/12) + ($4,000,000 ×. 08 ×6/12) = $328,000).
h. Adjust for the interest accrued in the prior year government-wide statements, but recorded as an expenditure in the 2012 fund basis statements, ($6,000,000 × .06
× 6/12) = $180,000.
i. Amortize bond premium in the amount of $2,500.
j. Make adjustments for additional revenue accrual. The only adjustment is for property taxes to eliminate the current year deferral of property taxes.
k. Adjust for the $20,000 of property taxes that was deferred in 2011 and recognized as revenue in the 2012 fund-basis statements.
l. Assume the City adopted a policy in 2012 of allowing employees to accumulate compensated absences. Make an adjustment accruing the expense of $ 316,000 Charge compensated absences expense.