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On the facing page are four accounts from a governmental fund balance sheet. Discuss how and why these accounts will be adjusted when preparing the.

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Presentation on theme: "On the facing page are four accounts from a governmental fund balance sheet. Discuss how and why these accounts will be adjusted when preparing the."— Presentation transcript:

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3 On the facing page are four accounts from a governmental fund balance sheet. Discuss how and why these accounts will be adjusted when preparing the balance sheet conversion worksheet for governmental activities. If no adjustments are required, state why. Due from International Airport Enterprise Fund....$50,000 Due to Water Enterprise Fund ,000 Due to GF ,000 Due from SRF ,000 receivable payable receivable Gov Activities Bus Type Activities due from airport enterprise fund $50,000 due to governmental fund; $50,000 INTERNAL BALANCE In Gov Activities column internal balance...$50,000 due from airport enterprise fund...$50,000

4 On the facing page are four accounts from a governmental fund balance sheet. Discuss how and why these accounts will be adjusted when preparing the balance sheet conversion worksheet for governmental activities. If no adjustments are required, state why. Due from International Airport Enterprise Fund....$50,000 Due to Water Enterprise Fund ,000 Due to GF ,000 Due from SRF ,000 payable receivable Gov Activities Bus Type Activities due to water enterprise fund $20,000 due from gov fund $20,000 INTERNAL BALANCE In Gov Activities column due to enterprise fund $20,000 Internal balance......$20,000

5 On the facing page are four accounts from a governmental fund balance sheet. Discuss how and why these accounts will be adjusted when preparing the balance sheet conversion worksheet for governmental activities. If no adjustments are required, state why. Due from International Airport Enterprise Fund....$50,000 Due to Water Enterprise Fund ,000 Due to GF ,000 Due from SRF ,000 payable receivable Gov Activities Bus Type Activities due to GF $10,000 (in SRF) due from the SRF $10,000 (in GF) ELIMINATION In Gov Activities column due to GF....$10,000 due from SRF.....$10,000

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7 The following information is for the governmental funds (total) of Bell County for 20x6. Assume the deferred tax revenues meet the earnings criteria. Deferred Tax Revenues (January 1) $800,000 Deferred Tax Revenues (December 31) $1,300,000 Tax Revenues (20x6) $8,000,000 a.Prepare the worksheet conversion entries required for this information using the one-worksheet approach in Appendix 14-1.

8 The following information is for the governmental funds (total) of Bell County for 20x6. Assume the deferred tax revenues meet the earnings criteria. Deferred Tax Revenues (January 1) $800,000 Deferred Tax Revenues (December 31) $1,300,000 Tax Revenues (20x6) $8,000,000 a.Prepare the worksheet entry to derive the tax revenues to be reported for governmental activities in the government-wide financial statements. Deferred Tax Revenue $800,000 Net Assets $800,000 Reestablishes revenues from previous periods that should be counted as revenue in Government-Wide.

9 The following information is for the governmental funds (total) of Bell County for 20x6. Assume the deferred tax revenues meet the earnings criteria. Deferred Tax Revenues (January 1) $800,000 Deferred Tax Revenues (December 31) $1,300,000 Tax Revenues (20x6) $8,000,000 a.Prepare the worksheet entry to derive the tax revenues to be reported for governmental activities in the government-wide financial statements. Deferred Tax Revenue $500,000 Revenue $500,000 Takes this year’s deferred tax revenue and says its actually earned revenue for GOVT-WIDE statements. $1,300,000 - $800,000 = $500,000 increase this year

10 The following information is for the governmental funds (total) of Bell County for 20x6. Assume the deferred tax revenues meet the earnings criteria. Deferred Tax Revenues (January 1) $800,000 Deferred Tax Revenues (December 31) $1,300,000 Tax Revenues (20x6) $8,000,000 b.Compute the governmental activities tax revenues to be reported in Bell County’s government-wide Statement of Activities for 20x6. Tax revenues 20x $8,000,000 + incremental adjustment for x , TOTAL$8,500,000

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12 Mosser Township’s expenditures for claims and judgments for all its governmental funds totaled $5,300,000 for 20X8. Mosser’s long-term liability for general government claims and judgments was $12,000,000 at January 1, 2008 and $11,500,000 at December 31, Explain the worksheet adjustment to convert Mosser’s governmental funds claims and judgments expenditures to government-wide, governmental activities data. What are the total GOVT-WIDE claims and judgments expenses for GOVTL activities? Entries that Mosser DID To record $5.3M of expenditures C&A expenditures….$5.3M Cash…………….$5.3M To record decrease of $500,000 (12m-11.5m) of long-term liability for C&A IN GLTL: Long-term liability….$500,000 Net Assets………$500,000 assume that $500K actual payment is part of $5.3M above. Entry Mosser would have done in full accrual C&A expense….$4.8M C&A liab……...5M Cash…………..$5.3M WORKSHEET ADJUSTMENT C&A LIAB…..$.5M C&A EXPENSES…..$.5M

13 Expenditures incurred in 20X8$5,300,000 Reduction in long-term liabilities(500,000) Government-wide expenses$4,800,000 What are the total GOVT-WIDE claims and judgments expenses for GOVTL activities?

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15 Conversion of Enterprise Funds Data to Business-Type Activities Information. Presented below is the PRECLOSING TRIAL BALANCE information for the total of Locklear County’s FOUR ENTERPRISE FUNDS. Dr.Cr. Cash……………………………$ 1,800,000 A/R……………………………… 8,100,000 Allowance for Uncollectible Accts$ 100,000 Due from Other Enterprise Funds 600,000 Inventory……………………………. 3,000,000 Land…………………………………. 2,000,000 Buildings…………………………… 10,000,000 Acc Dep-Buildings……………….. 4,500,000 Equipment…………………………. 27,000,000 Acc Dep-Equipment……………… 18,000,000 Vouchers Payable………………… 3,600,000 Due to GF………………………….. 550,000 Due to Other Enterprise Funds… 600,000 Deferred Grant Revenues………. 2,000,000 Bonds Payable…………………….. 6,000,000 Discount on B/P……………………. 200,000

16 Dr.Cr. Cash……………………………$ 1,800,000 A/R……………………………… 8,100,000 Allowance for Uncollectible Accts$ 100,000 Due from Other Enterprise Funds 600,000 Inventory……………………………. 3,000,000 Land…………………………………. 2,000,000 Buildings…………………………… 10,000,000 Acc Dep-Buildings……………….. 4,500,000 Equipment…………………………. 27,000,000 Acc Dep-Equipment……………… 18,000,000 Vouchers Payable………………… 3,600,000 Due to GF………………………….. 550,000 Due to Other Enterprise Funds… 600,000 Deferred Grant Revenues………. 2,000,000 Bonds Payable…………………….. 6,000,000 Discount on B/P……………………. 200,000 Net Assets………………………….. 14,070,000 Charges for Services: Water & Sewer……………………. 8,000,000 Golf Course……………………….. 1,000,000 Transit……………………………… 1,500,000 Convention Center………………. 4,000,000

17 Dr.Cr. Transfers from GF………$ 3,700,000 Investment Income……… 100,000 Gain on sale of equipment… 50,000 Contributions (of cap assets) from Govt’l unit………………… 830,000 Water & Sewer expenses$7,200,000 Golf Course Expenses 1,100,000 Transit Authority Expenses 2,600,000 Convention Center Expenses 5,000, Totals$68,600,000$68,600,000========== Additional Information: 1.The Contribution from Locklear County resulted from GCA being reassigned for use in Enterprise Fund departments. 2.Expenses of the Golf Course, Transit Authority, and Convention Center Enterprise Funds included charges for water and sewer services of $25,000, $2,000, and $8,000 respectively.

18 Part A. Discuss the adjustments that are necessary to convert this information to the data to be used for the business-type activities in preparing the government-wide financial statements.

19 1.The Contribution from Locklear County resulted from general capital assets being reassigned for use of Enterprise Fund departments. Contributions from Govt’l Unit….. $830,000 Transfers from Governmental Activities………..$830,000 cancels the contribution which is listed in trial balance as a credit. reclassifies it as a “transfer” in the operating statement.

20 The due from other enterprise funds and due to other enterprise funds accounts should be ELIMINATED. Due to Other Enteprise Funds…$600K Due from Other Enterprise Funds..$600K

21 The due to GF should be reclassified as an INTERNAL BALANCE. Due to the GF $550,000 Internal Balance $550,000

22 Part B. Prepare the business-type activities column for the government-wide statement of net assets and the business-type activities columns and rows of the Statement of Activities.

23 Locklear County Statement of Net Assets September 30, 20X7 Business-type Activities Assets Current Assets: Cash $1,800,000 A/R (net) ,000,000 Inventory ,000, Total CA$12,800,000 Noncurrent assets Land $2,000,000 Buildings ,000,000 Equipment ,000,000 -Acc Dep (22,500,000) Total NCA ,500,000 Total Assets$29,300,000

24 Liabilities Current liabilities: Vouchers/p $3,600,000 Internal balance ,000 Deferred Grant Revenues ,000,000 Total current liabilities ,150,000 I had this as a negative asset in my lecture. OK either way.

25 Liabilities Current liabilities: Vouchers/p $3,600,000 Internal balance ,000 Deferred Grant Revenues ,000,000 Total current liabilities ,150,000 Noncurrent liabilities Bonds payable $6,000,000 Less Discount (200,000) Total NCL ,800,000 Total Liabilities ,950,000 Net Assets Invested in capital assets net of related debt $10,700,000 Unrestricted $6,650,000 (plug) Total net assets $17,350,000 Total NCA $16,500,000 (net of acc/dep) - Bonds/p (net of disc) $5,800,

26 Locklear County Statement of Activities For the Year Ended September 30, 20X7 ExpensesCharges forBus Type ServicesActivities Program RevNet (Expense) Rev Water & Sewer$7,200,000 (given) $8,000,000$ 800,000 (given) Jacobs Ridge Golf Course1,100,000 (given) $1,000,000(100,000) (given) Transit Authority$2,600,000 (given) $1,500,000(1,100,000) (given) Hardin-Emanuel Convention Center$5,000,000 (given) $4,000,000(1,000,000) (given) Totals$15,900,000$14,500,000(1,400,000)

27 Locklear County Statement of Activities For the Year Ended September 30, 20X7 ExpensesCharges forBus Type ServicesActivities Program RevNet (Expense) Rev Water & Sewer$7,200,000 (given) $8,000,000$ 800,000 (given) Jacobs Ridge Golf Course1,100,000 (given) $1,000,000(100,000) (given) Transit Authority$2,600,000 (given) $1,500,000(1,100,000) (given) Hardin-Emanuel Convention Center$5,000,000 (given) $4,000,000(1,000,000) (given) Totals$15,900,000$14,500,000(1,400,000) General Revenues: Investment income $100,000 Gain on sale of equipment ,000 Transfers from Govtl activities ,530,000 3,700, ,000 Total Gen rev & transfers ,680,000 Change in NA ,280,000 Net Assets 10/1/X ,070,000 Net assets 9/30/X ,350,000

28 The December 31, 20X7 total fund balance (postclosing) was $6,764,000. Prepare a balance sheet conversion worksheet to derive government-wide, governmental activities data for Soucy Township.

29 ENTER THE PRECLOSING TRIAL BALANCE INFORMATION FOR Soucy Township GOVERNMENTAL FUNDS INTO THE WORKSHEET.

30 BALANCES AT $16,098,000 ==========

31 ENTER IN THE GCA AND GLTL INFORMATION DIRECTLY BELOW THE PRE-CLOSING TRIAL BALANCE INFORMATION.

32 BALANCES AT $27,898,000 ========== Soucy Township

33 Reclassify capital outlay expenditures as capital assets Equipment………. $750,000 Capital outlay-Equipment purchase….$750,000 ADJUSTMENT #1

34 Eliminate GCA sale proceeds and record a gain on the capital asset sale We don’t have this in this problem.

35 Piece of info. 6: Depreciation expense on the buildings and on the equipment is associated with functions as follows: General Government 10%, Public Safety 50%, Highways & Streets 25%, Health and Sanitation 10%, and Other 5%. Assume a zero salvage value. Record Depreciation

36 Buildings:$3,500,000/20 (given) = $175,000 depreciation expense for year. Equipment:$8,750,000/10 (given) = $875,000 [adds in $750,000 from prev. adj.] Piece of info. 5: Depreciation expense on the buildings and on the equipment is associated with functions as follows: General Government 10%, Public Safety 50%, Highways & Streets 25%, Health and Sanitation 10%, and Other 5%. Assume a zero salvage value. Buildings depreciation Gen Gov expenditure.. $17,500 (10%) Public Saf expenditure.. 87,500 (50%) Highways & Streets…. 43,750 (25%) Health & San expend… 17,500 (10%) Other expenditure…. 8,750 (5%) Accumulated Depreciation…… $175,000 Equipment depreciation Gen Gov expenditure.. $87,500 (10%) Public Saf expenditure.. 437,500 (50%) Highways & Streets…. 218,750 (25%) Health & San expend… 87,500 (10%) Other expenditure…. 43,750 (5%) Accumulated Depreciation…… $875,000 health & sanitation & other expenditures are recorded together on worksheet printout. adjustment #2

37 Reclassify bond proceeds and bond issue costs doesn’t apply to this problem

38 Eliminate GLTL retirement expenditures and reduce liability PCTB shows Principal Retirement of $100,000 Bonds payable………… $100,000 Principal retirement………..$100,000 properly records the payment of principal as a reduction of a liability adjustment #3

39 Record bond premium amortization not in this problem

40 Record bond issue cost amortization not in this problem

41 Record accrued interest and adjust beginning net assets and interest expense. Piece of info. 4: Accrued interest payable at 1/1/07 was $50,000; at December 31, it was $47,500. Net Assets……..$50,000 Accrued interest payable….$50,000 50K – 47,500 = 2,500 payment on account. Accrued int pay…$2,500 Interest expenditure 2.5K (fund accounting would have called this an expenditure). adjustment #4 Net credit to accrued interest payable......$47,500

42 Adjust claim/adjustments expenses for decreases in long-term liability for C&J. not in this problem

43 Adjust compensated absences expenses for increase in long-term liability for compensated absences not in this problem

44 Eliminate deferred tax revenues. Piece of info. #1: Deferred Revenues (other than for grants) at the beginning of the year were $2,200,000- all associated with taxes. Deferred Revenues……….$2,200,000 Net Assets……………………$2,200,000 By the EOY the deferred revenue is DOWN to $2,000,000. Def Rev 2M EOY 2.2M.2M DEBIT bal we don’t want any.2M second adjust. 0 Revenue……………$200,000 Deferred Revenue………$200,000 That must mean that some of the current tax revenue being counted as revenue is actually just a receipt of last year’s revenue which is already recognized as NA adjustment #5

45 Eliminate interfund payables and receivables between governmental funds. Due to GF…….. $75,000 Due from SRF……… $75,000 adjustment #6

46 Eliminate transfers between governmental funds. Transfers from GF……… $111,000 Transfers to CPF……….. $35,000 Transfers to DSF……….. $76,000 adjustment #7

47 Fund balance $8,124,000 Net assets......$8,124,000 Reclassify beginning fund balance as net assets. adjustment #10


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