CHAPTER 19

GOVERNMENTAL ENTITIES: PROPRIETARY FUNDS,

FIDUCIARY FUNDS, AND COMPREHENSIVE ANNUAL
FINANCIAL REPORT

The title of each problem is followed by the estimated time in minutes required for completion and by a
difficulty rating. The time estimates are applicable for students using the partially filled-in working papers.

Pr. 19–1 Kaspar City (30 minutes, medium)

Journal entries for general fund, enterprise fund, internal service fund, and general capital
assets account group of a governmental entity.
Pr. 19–2 Town of Tolliver (30 minutes, medium)
Preparation of a statement of revenues, expenses, and changes in net assets and a statement of
net assets for the enterprise fund of a governmental entity.
Pr. 19–3 Diggs County (30 minutes, medium)
Working paper summarizing journal entries for an agency fund of a governmental entity and
for general funds of other governmental entities serviced by the agency fund.
Pr. 19–4 Town of Northville (40 minutes, medium)
Given selected transactions and events of a governmental entity's funds and account groups,
prepare working paper summarizing journal entries (explanations omitted) for the transactions
and events. Affected fund or account group must be identified.
Pr. 19–5 City of Cavendish (40 minutes, medium)
Journal entries for operations of the internal service fund of a governmental entity.
Pr. 19–6 Town of Novis (60 minutes, strong)
Adjusting and closing entries for general fund, and adjusting entries for enterprise fund,
general long-term debt account group, and general capital assets account group, when all
governmental entity transactions are inappropriately accounted for in a general fund. Post-
closing trial balance for general fund.
Pr. 19–7 Village of Rosner (50 minutes, strong)
Statement of cash flows (indirect method) for a governmental entity's enterprise fund.

ANSWERS TO REVIEW QUESTIONS

1. General obligation bonds payable of a governmental entity are recorded in the governmental
entity's enterprise fund if that fund is obligated to pay the bonds at maturity. This situation arises
when the general obligation bond proceeds are used to finance plant additions of the enterprise
fund.
2. Differences between the accounting for a governmental entity's enterprise fund and the accounting
for a business enterprise include the following (only three required):
(1) Enterprise funds are not subject to federal and state income taxes.
(2) There is no capital stock in an enterprise fund's statement of net assets.
(3) An enterprise fund has restricted assets.
(4) Current liabilities payable from restricted assets are segregated from other current liabilities of
an enterprise fund.
(5) A restricted portion of net assets generally is included in the accounting records of an
enterprise fund. (Appropriations of retained earnings are rare for business enterprises.)

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 (6) A transfers section is included in the statement of revenues, expenses, and changes in net
assets of an enterprise fund.
3. An enterprise fund has restricted assets in its statement of net assets because of the need to assure
that customer advances and proceeds of revenue bonds are used for the purposes intended for the
advances or bonds proceeds.
4. The four categories of cash flows in the statement of cash flows for a governmental entity's
enterprise fund are (a) from operating activities, (b) from noncapital financing activities, (c) from
capital and related financing activities, and (d) from investing activities.
5. The excess of total assets over total liabilities of a governmental entity's internal service fund is
displayed as net assets on the statement of net assets because the internal service fund does not
have owners' equity.
6. The statement of net assets of a governmental entity's internal service fund does not have a
restricted assets section or a liabilities payable from restricted assets section, as does the statement
of net assets of an enterprise fund. Further, a restricted portion of net assets for revenue bond
retirement, which typically is displayed in the balance sheet of a governmental entity's enterprise
fund, is not relevant for an internal service fund.
7. Because an agency fund does not have operations, a statement of revenues, expenses, and changes
in fiduciary net assets is not appropriate for it. Instead, a statement of changes in assets and
liabilities is issued for an agency fund.
8. The principal of a nonexpendable private-purpose trust must be maintained intact by the custodian
governmental entity, but the revenues produced by the trust principal may be expended to carry out
the purposes of the trust. Therefore, separate trust principal and trust revenues funds are required
to distinguish between trust activities applicable to principal and to revenues.
9. Contributions in the statement of changes in pension plan net assets of a governmental entity's
pension trust fund represents the amounts received by the trust fund from both the governmental
entity and its employees under a contributory pension plan of the governmental entity or from the
governmental entity only under a noncontributory pension plan.
10. In addition to fund financial statements, government-wide financial statements are included in the
comprehensive annual financial report of a governmental entity.
11. No, required supplementary information is a separate section of the comprehensive annual
financial report of a governmental entity.

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SOLUTIONS TO EXERCISES
Ex. 19–1 1. a 8. c
2. d 9. c
3. a 10. a
4. b 11. d
5. d 12. a
6. a 13. d
7. b
Ex. 19–2 Journal entry for Orchard City General Fund, May 31, 2006:
Expenditures 16,400
Payable to Enterprise Fund 16,400
To record billing for services received from Enterprise Fund.
Journal entry for Orchard City Enterprise Fund, May 31, 2006:
Receivable from General Fund 16,400
Charges for Services 16,400
To record billing for services to General Fund.
Ex. 19–3 Computation of required balance of Town of Goland Enterprise Fund Net Assets Restricted for
Revenue Bonds Retirement ledger account, June 30, 2006:
Total restricted assets ($42,300 + $168,100) $210,400
Less: Total liabilities payable from restricted assets ($24,400 + $62,600) 87,000
Restriction of net assets $123,400
Ex. 19–4 Journal entry for Wilbert Township General Fund, June 18, 2006:
Cash 120,000
Revenues 120,000
To record payment in lieu of property taxes received from Enterprise
Fund.
Journal entry for Wilbert Township Enterprise Fund, June 18, 2006:
Payment in Lieu of Property Taxes 120,000
Cash 120,000
To record payment in lieu of property taxes to General Fund.
Ex. 19–5 Cash flows from operating activities exhibit for Town of Liddell Enterprise Fund, year ended
June 30, 2006:
Operating income $125,400
Adjustments to reconcile operating income to net cash provided by operating
activities:
Depreciation expense 81,700
Increase in accounts receivable (36,800)
Decrease in receivable from General Fund 21,700
Decrease in inventory of supplies 42,600
Increase in short-term prepayments (11,600)
Decrease in vouchers payable (12,200)
Increase in accrued liabilities 8,100
Net cash provided by operating activities $218,900

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Solutions Manual, Chapter 19 257
Ex. 19–6 TOWN OF DILBEY INTERNAL SERVICE FUND
Statements of Revenues, Expenses, and Changes in Net Assets
For Year Ended June 30, 2006

Operating revenues:
Charges for services $ 324,800
Operating expenses 320,000
Increase in net assets $ 4,800
Net assets, beginning of year 1,273,600
Net assets, end of year $1,278,400

TOWN OF DILBEY INTERNAL SERVICE FUND

Statement of Net Assets
June 30, 2006
Assets
Current assets:
Cash $ 17,200
Receivable from General Fund 12,000
Inventory of supplies 128,600
Total current assets $ 157,800
Plant assets $1,804,800
Less: Accumulated depreciation 655,600
Net plant assets 1,149,200
Total assets $1,307,000
Liabilities & Net Assets
Current liabilities:
Vouchers payable $ 28,600
Net assets $1,278,400
Total liabilities & net assets
Ex. 19–7 Journal entries for Roark City Endowment Principal Nonexpendable Private-Purpose Trust

Fund:
2005
July 1 Investments 620,000
Additions—Contributions 620,000
Dec. 14 Cash 42,000
Additions—Investment Earnings 42,000
14 Transfers Out 42,000
Payable to Revenues Private-Purpose Trust
Fund 42,000
Journal entry for Roark City Endowment Revenues Expendable Private-Purpose Trust Fund:
2005
Dec. 14 Receivable from Endowment Principal Private-
Purpose Trust Fund 42,000
Transfers In 42,000

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Ex. 19–8 CITY OF CARVELL PENSION TRUST FUND
Statement of Changes in Fiduciary Net Assets
For Year Ended June 30, 2006

Additions:
Employee contributions $211,600
Employer contributions 318,500
Investment revenues (net) 163,900
Total additions $694,000
Deductions:
Annuity benefits $284,300
Disability benefits 52,800
Refunds of contributions 61,600
Administrative expenses 294,600
Total deductions 693,300
Net increase $ 700
Net assets held in trust for benefits, beginning of year 841,000
Net assets held in trust for benefits, end of year $841,700
Ex. 19–9 Journal entries for Local Town Enterprise Fund:
2005
Nov. 3 Cash 1,000,000
General Obligation Bonds Payable 1,000,000
30 Accounts Receivable 80,000
Charges for Services 80,000
Journal entries for Local Town General Fund:
2005
Nov. 5 Expenditures 25,000
Vouchers Payable 25,000
5 Fund Balance Reserved for Encumbrances 24,700
Encumbrances 24,700
Journal entry for Local Town General Capital Assets Account Group:
2005
Nov. 5 Machinery and Equipment 25,000
Investment in General Capital Assets from
General Fund Revenues 25,000
Journal entry for Local Town Internal Service Fund:
2005
Nov. 7 Inventory of Supplies 50,000
Cash 50,000

CASES
Case 19–1 In view of the contribution of the Ashburn City Special Revenue Fund, it is inappropriate for
the Ashburn City Electric Utility Enterprise Fund to absorb the entire $80,000 interest on the
8% general obligation serial bonds. It is preferable to account for the required Special Revenue
Fund payment of 80% of the $80,000 interest, or $64,000, as a reduction of the Interest
Expense ledger account balance of the Electric Utility Enterprise Fund, rather than as a credit
to the equity-type Contribution from Special Revenue Fund ledger account. Accounting for the
$64,000 as a reduction of interest expense would result in an increase in net assets of $24,000
for the Electric Utility Enterprise Fund instead of a decrease in net assets of $40,000 ($64,000

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Solutions Manual, Chapter 19 259
 – $40,000 = $24,000). This treatment reflects the nature of the $64,000it is a subsidy for
current operating expenses of the Electric Utility Enterprise Fund, rather than a contribution
for plant asset additions.
Case 19–2 The Stuarts' gift is nonexpendable; thus two separate private-purpose trust fundsone for
principal and one for revenuesmust be established by officials of Colby City. The trust
indenture should govern the proper allocation of transactions and events associated with the
Greystone tours to the principal trust fund or the revenue trust fund.
Because the trust indenture requires recognition of depreciation on Greystone, the journal entry
should be made in the Colby City Endowment Principal Nonexpendable Trust Fund with a
debit to Net Assets Reserved for Endowment and a credit to Accumulated Depreciation. It
would be inappropriate to charge depreciation to the Colby City Endowment Revenues
Expendable Trust Fund because the trust indenture provides that only operating expenditures
associated with the tours and maintenance and repair costs are chargeable to that fund.

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30 Minutes, Medium
Kaspar City Pr. 19–1
Kaspar City General Fund
Journal Entries

20 05
July 1 Taxes Receivable—Current 1 6 0 0 0 0 0
Allowance for Uncollectible Current Taxes
($1,600,000 x 0.05) 8 0 0 0 0
Revenues 1 5 2 0 0 0 0
To accrue property taxes billed and to provide for
estimated uncollectible portion.

Sept 1 Expenditures 1 0 0 0 0
Vouchers Payable 1 0 0 0 0
To record expenditure for computer.

1 Fund Balance Reserved for Encumbrances 1 0 2 0 0

Encumbrances 1 0 2 0 0
To reverse encumbrance applicable to vouchered
expenditure.

Oct 1 Inventory of Supplies 1 2 0 0

Payable to Internal Service Fund 1 2 0 0
To record invoice for supplies received from Internal
Service Fund.

Kaspar City Enterprise Fund

Journal Entry

20 05
Aug 1 Cash [($1,000,000 x 0.306557) + ($35,000 x 23.11472)] 1 1 1 5 5 7 4
General Obligation Bonds Payable 1 0 0 0 0 0 0
Premium on General Obligation Bonds Payable 1 1 5 5 7 4
To record issuance of 20–year, 7% general obligation
bonds to finance construction of power-generating facility.

Kaspar City General Capital Assets Account Group

Journal Entry

20 05
Sept 1 Machinery and Equipment 1 0 0 0 0
Investment in General Capital Assets from
General Fund Revenues 1 0 0 0 0
To record acquisition of computer by General Fund.

Kaspar City Internal Service Fund

Journal Entry

20 05
Oct 1 Receivable from General Fund 1 2 0 0
Charges for Services 1 2 0 0
To record billing for supplies sent to General Fund.

30 Minutes, Medium

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Solutions Manual, Chapter 19 261
Town of Tolliver Pr. 19–2
Town of Tolliver Enterprise Fund
Statement of Revenues, Expenses, and Changes in Net Assets
For Year Ended June 30, 2006
Operating revenues:
Charges for services $ 6 4 3 0 0 0
Operating expenses:
Personal services $ 2 8 1 0 0 0
Contractual services 1 4 3 0 0 0
Material and supplies 4 6 0 0 0
Heat, light, and power 3 8 0 0 0
Depreciation 5 7 0 0 0
Total operating expenses 5 6 5 0 0 0
Operating income $ 7 8 0 0 0
Nonoperating revenues (expenses):
Operating grants $ 5 0 0 0 0
Investment revenue and net gains 1 2 0 0 0
Interest expense and fiscal agent fees ( 8 3 0 0 0 )
Total nonoperating revenues (expenses) ( 2 1 0 0 0 )
Increase in net assets $ 5 7 0 0 0
Net assets, beginning of year 7 5 9 0 0 0
Net assets, end of year $ 8 1 6 0 0 0

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Town of Tolliver (concluded) Pr. 19–2
Town of Tolliver Enterprise Fund
Statement of Net Assets
June 30, 2006
Assets
Current assets:
Cash $ 2
2 0 0 0
Short-term investments, at fair value 6
4 0 0 0
Accounts receivable (net) 5
2 0 0 0
Receivable from other funds 4
4 0 0 0
Inventory of supplies, at average cost 4
7 0 0 0
Short-term prepayments 8 0 0 0
Total current assets $ 2 3 7 0 0 0
Restricted assets:
Cash $ 3 8 0 0 0
Short-term investments, at fair value 9 7 0 0 0
Total restricted assets 1 3 5 0 0 0
Plant assets:
Land $ 1 6 0 0 0 0
Buildings 8 3 0 0 0 0
Machinery and equipment 2 4 7 0 0 0
Subtotal $1 2 3 7 0 0 0
Less: Accumulated depreciation 2 4 8 0 0 0
Net plant assets 9 8 9 0 0 0
Total assets $1 3 6 1 0 0 0
Liabilities
Current liabilities:
Vouchers payable and contracts payable $ 6 5 0 0 0
Accrued liabilities 1 8 0 0 0
Total current liabilities $ 8 3 0 0 0
Liabilities payable from restricted assets:
Interest payable $ 2 4 0 0 0
Current portion of revenue bonds 4 0 0 0 0
Customers’ deposits 3 8 0 0 0
Total liabilities payable from restricted assets 1 0 2 0 0 0
Long-term debt:
Revenue bonds, less current portion 3 6 0 0 0 0
Total liabilities $ 5 4 5 0 0 0

Net Assets
Net assets:
Invested in Capital, net of related debt $ 5 8 9 0 0 0
Restricted for revenue bonds retirement 7 3 0 0 0
Unrestricted 1 5 4 0 0 0
Total net assets $ 8 1 6 0 0 0

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Solutions Manual, Chapter 19 263
30 Minutes, Medium
Diggs County Pr. 19–3
Diggs County, Evans City, and Hickman Township
Journal Entries
For Three Months Ended October 1, 2005
Hickman
Diggs County Diggs County Evans City Township
Tax Agency Fund General Fund General Fund General Fund
Account titles dr (cr) dr (cr) dr (cr) dr (cr)
Taxes Receivable—Current 3 6 0 0 0 0 0 1 8 0 0 0 0 0 6 0 0 0 0 0
Allowance for Uncollectible
Current Taxes ( 1 0 0 0 0 0 ) ( 6 0 0 0 0 ) ( 4 0 0 0 0 )
Revenues (3 5 0 0 0 0 0 ) (1 7 4 0 0 0 0 ) ( 5 6 0 0 0 0 )
To accrue property taxes billed
and to provide for estimated
uncollectible portion.

Cash 1 4 4 0 0 0 0
Expenditures 8 6 4 0 (1) 2 8 8 0 (2)
Receivable from Diggs County
Tax Agency Fund 8 7 5 5 2 0 4 2 3 3 6 0 1 4 1 1 2 0
Payable to Diggs County
General Fund ( 8 7 5 5 2 0 )(3)
Payable to Evans City General
Fund ( 4 2 3 3 6 0 )(4)
Payable to Hickman Township
General Fund ( 1 4 1 1 2 0 )(5)
Taxes Receivable—Current ( 8 6 4 0 0 0 )(6) ( 4 3 2 0 0 0 )(7) ( 1 4 4 0 0 0 )(8)
Revenues ( 1 1 5 2 0 )(9)
To record Tax Agency Fund’s
receipt of first-quarter property
taxes, net of administrative fee.

Payable to Diggs County General

Fund 8 7 5 5 2 0
Payable to Evans City General
Fund 4 2 3 3 6 0
Payable to Hickman Township
General Fund 1 4 1 1 2 0
Cash 8 7 5 5 2 0 4 2 3 3 6 0 1 4 1 1 2 0
Receivable from Diggs
County Tax Agency Fund ( 8 7 5 5 2 0 ) ( 4 2 3 3 6 0 ) ( 1 4 1 1 2 0 )
Cash (1 4 4 0 0 0 0 )
To record Tax Agency Fund’s
cash remittances.

Computation:
(1) ($432,000 x 0.02) = $8,640
(2) ($144,000 x 0.02) = $2,880
(3) ($1,440,000 x 0.60) + ($432,000 x 0.02) + ($144,000 x 0.02) = $875,520
(4) ($1,440,000 x 0.30) x 0.98 = $423,360
(5) ($1,440,000 x 0.10) x 0.98 = $141,120
(6) ($1,440,000 x 0.60) = $864,000
(7) ($1,440,000 x 0.30) = $432,000
(8) ($1,440,000 x 0.10) = $144,000
(9) ($432,000 x 0.02) + ($144,000 x 0.02) = $11,520

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40 Minutes, Medium
Town of Northville Pr. 19–4
Town of Northville
Journal Entries
For Year Ended June 30, 2006
Fund or
Transaction account
no. group Account titles Debit Credit
(1) GF Estimated Revenues 4 0 0 0 0 0
Appropriations 3 9 4 0 0 0
Budgetary Fund Balance 6 0 0 0

(2) GF Taxes Receivable—Current 3 9 0 0 0 0

Allowance for Uncollectible Current
Taxes 7 8 0 0
Revenues 3 8 2 2 0 0

(3) EPF Investments 5 0 0 0 0

Additions—Contributions 5 0 0 0 0

EPF Cash 5 5 0 0
Additions—Investment earnings 5 5 0 0

EPF Other Financing Uses—Transfers Out 5 5 0 0

Payable to Endowment Revenues
Private-Purpose Trust Fund 5 5 0 0

EPF Payable to Endowment Revenues

Private-Purpose Trust Fund 5 5 0 0
Cash 5 5 0 0

ERF Receivable from Endowment Principal

Private-Purpose Trust Fund 5 5 0 0
Other Financing Sources—Transfers In 5 5 0 0

ERF Cash 5 5 0 0
Receivable from Endowment Principal
Private-Purpose Trust Fund 5 5 0 0

(4) GF Other Financing Uses—Transfers Out 5 5 0 0 0

Cash 5 5 0 0 0

ISF Cash 5 5 0 0 0
Other Financing Sources—Transfers In 5 5 0 0 0

(5) SRF Special Assessment Receivable—Current 7 2 0 0 0

Receivable from General Fund 3 0 0 0
Revenues 7 2 0 0 0
Other Financing Sources—Transfers In 3 0 0 0

SRF Cash 7 5 0 0 0
Special Assessment Receivable—
Current 7 2 0 0 0
Receivable from General Fund 3 0 0 0
(Continued on page 522.)

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Solutions Manual, Chapter 19 265
Town of Northville (concluded) Pr. 19–4
Town of Northville
Journal Entries (concluded)
For Year Ended June 30, 2006
Fund or
Transaction account
no. group Account titles Debit Credit
GF Other Financing Uses—Transfers Out 3 0 0 0
Payable to Special Revenue Fund 3 0 0 0

GF Payable to Special Revenue Fund 3 0 0 0

Cash 3 0 0 0

(6) TPL Encumbrances 7 5 0 0 0

Fund Balance Reserved for
Encumbrances 7 5 0 0 0

TPL Expenditures 7 5 0 0 0
Vouchers Payable 7 5 0 0 0

TPL Fund Balance Reserved for Encumbrances 7 5 0 0 0

Encumbrances 7 5 0 0 0

TPL Vouchers Payable ($75,000 x 0.95) 7 1 2 5 0

Cash 7 1 2 5 0

GFA Improvements Other than Buildings 7 5 0 0 0

Investment in General Capital Assets
from Capital Projects Funds 7 5 0 0 0

(7) ISF Inventory of Supplies 4 1 9 0 0

Cash 4 1 9 0 0

(8) GF Cash 3 9 3 0 0 0
Taxes Receivable—Current 3 8 6 0 0 0
Revenues 7 0 0 0

(9) TH Cash 5 0 0 0 0 0
Other Financing Sources 5 0 0 0 0 0

GLTD Amount to Be Provided 5 0 0 0 0 0

Term Bonds Payable 5 0 0 0 0 0

(10) GF Expenditures 1 6 0 0 0
Vouchers Payable 1 6 0 0 0

GF Fund Balance Reserved for Encumbrances 1 5 0 0 0

Encumbrances 1 5 0 0 0

GF Vouchers Payable 1 6 0 0 0
Cash 1 6 0 0 0

GCA Machinery and Equipment 1 6 0 0 0

Investment in General Capital Assets
from General Fund Revenues 1 6 0 0 0

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40 Minutes, Medium
City of Cavendish Pr. 19–5
City of Cavendish Internal Service Fund
Journal Entries
For Year Ended June 30, 2006
(1) Inventory of Material and Supplies 7 4 0 0 0
Vouchers Payable 7 4 0 0 0

(2) Operating Expenses ($80,000 + $74,000 – $58,000) 9 6 0 0 0

Inventory of Material and Supplies 9 6 0 0 0

(3) Operating Expenses 2 3 0 0 0 0

Cash 2 3 0 0 0 0

(4) Operating Expenses 3 0 0 0 0

Payable to Enterprise Fund 3 0 0 0 0

Payable to Enterprise Fund 3 0 0 0 0

Cash 3 0 0 0 0

(5) Operating Expenses 1 3 0 0 0

Accumulated Depreciation of Building 5 0 0 0
Accumulated Depreciation of Machinery and
Equipment 8 0 0 0

(6) Receivable from General Fund 2 6 2 0 0 0

Receivable from Enterprise Fund 8 4 0 0 0
Receivable from Special Revenue Fund 3 2 0 0 0
Charges for Services 3 7 8 0 0 0

(7) Cash 3 7 6 0 0 0
Receivable from General fund
($20,000 + $262,000 – $6,000) 2 7 6 0 0 0
Receivable from Enterprise Fund 8 4 0 0 0
Receivable from Special Revenue Fund
($32,000 – $16,000) 1 6 0 0 0

(8) Vouchers Payable ($38,000 + $74,000 – $14,000) 9 8 0 0 0

Cash 9 8 0 0 0

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Solutions Manual, Chapter 19 267
60 Minutes, Strong
Town of Novis Pr. 19–6
a. Town of Novis General Fund
Adjusting and Closing Entries
June 30, 2006
Receivable from Water Utility Enterprise Fund 1 2 0 0
Accounts Receivable 1 2 0 0
To correct classification of amount receivable from
Water Utility Enterprise Fund.

Revenues 8 0 0 0
Allowance for Uncollectible Current Taxes 8 0 0 0
To establish allowance for uncollectible current taxes.
$8,000 allowance divided by $270,000 total tax levy
equals 2.96%, which approximates 3% average loss
on uncollectible taxes in recent years.

Expenditures 4 8 0 0 0
Bonds Payable 4 8 0 0 0
To correct classification of $30,000 principal and
$18,000 interest paid on 12% general obligation serial
bonds issued July 1, 2001.

Inventory of Supplies ($12,300 – $8,400) 3 9 0 0

Expenditures 3 9 0 0
To establish supplies inventory at end of year.

Unreserved and Undesignated Fund Balance 3 9 0 0

uF
Fund Balance Reserved for Inventory of
Supplies 3 9 0 0
To provide reserve for inventory at end of year.

Unreserved and Undesignated Fund Balance 2 6 0 0

Expenditures 2 6 0 0
To charge expenditure applicable to prior fiscal year to
Unreserved and Undesignated Fund Balance account
because Fund Balance Reserved for Encumbrances
account was not established.

Encumbrances 4 1 0 0
Fund Balance Reserved for Encumbrances 4 1 0 0
To record encumbrances for purchase orders
outstanding on June 30, 2006.

Receivable from State Government 8 2 0 0

Revenues 8 2 0 0
To accrue revenues for share of state gasoline taxes
for Fiscal Year 2006.

(Continued on page 525.)

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268 Modern Advanced Accounting, 10/e
Town of Novis (continued) Pr. 19–6
Town of Novis General Fund
Adjusting and Closing Entries (concluded)
June 30, 2006
Expenditures 1 7 0 0 0
Other Financing Sources 9 0 0
Town Property 1 6 1 0 0
To correct journal entries for disposal of old equipment
for $900 and acquisition of new equipment for
$17,000.

Taxes Receivable—Delinquent 8 0 0 0
Allowance for Uncollectible Current Taxes 8 0 0 0
Taxes Receivable—Current 8 0 0 0
Allowance for Uncollectible Delinquent Taxes 8 0 0 0
To transfer delinquent taxes and related estimated
uncollectible amounts from the current classification.

Unreserved and Undesignated Fund Balance 4 1 0 0

Encumbrances 4 1 0 0
To close Encumbrances ledger account.

Appropriations 3 5 0 0 0 0
Estimated Revenues 2 9 0 0 0 0
Unreserved and Undesignated Fund Balance 6 0 0 0 0
To close budgetary ledger accounts.

Revenues (320,000 – $8,000 + $8,200) 3 2 0 2 0 0

Other Financing Sources 9 0 0
Unreserved and Undesignated Fund Balance 6 9 4 0 0
Expenditures ($332,000 + $48,000 – $3,900 –
$2,600 + $17,000) 3 9 0 5 0 0
To close Revenues, Expenditures, and Other
Financing Sources ledger accounts.

b. Town of Novis General Fund

Post-Closing Trial Balance
June 30, 2006
Cash $ 1 2 9 0 0
Receivable from state government 8 2 0 0
Receivable from Water Utility Enterprise Fund 1 2 0 0
Taxes receivable—delinquent 8 0 0 0
Allowance for uncollectible delinquent taxes $ 8 0 0 0
Inventory of supplies 3 9 0 0
Vouchers payable 1 5 0 0 0
Fund balance reserved for inventory of supplies 3 9 0 0
Fund balance reserved for encumbrances 4 1 0 0
Unreserved and undesignated fund balance 3 2 0 0
Totals $ 3 4 2 0 0 $ 3 4 2 0 0

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Solutions Manual, Chapter 19 269
Town of Novis (concluded) Pr. 19–6
c. Town of Novis General Long-Term Debt Account Group
Adjusting Entry
June 30, 2006
Serial Bonds Payable 3 0 0 0 0
Amount to Be Provided 3 0 0 0 0
To record payment of matured 12% general obligation
serial bonds by General Fund.

Town of Novis General Capital Assets Account Group

Adjusting Entry
June 30, 2006
Investment in General Capital Assets from General
Fund Revenues 7 5 0 0
Equipment 7 5 0 0
To remove cost of equipment disposed of by General
Fund.

Equipment 1 7 0 0 0
Investment in General Capital Assets from
General Fund Revenues 1 7 0 0 0
To record cost of equipment acquired by General
Fund.

Town of Novis Water Utility Enterprise Fund

Adjusting Entry
June 30, 2006
Cash 1 2 0 0
Payable to General Fund 1 2 0 0
To record liability to General Fund for proceeds from
disposal of obsolete equipment.

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50 Minutes, Strong
Village of Rosner Pr. 19–7
Village of Rosner Enterprise Fund
Statement of Cash Flows (indirect method)
For Year Ended June 30, 2006
Net cash provided by operating activities (Exhibit 1) $ 1 4 6 0 0 0

Cash flows from noncapital financing activities:

Operating grant $ 2 0 0 0 0
Transfer (out) to General Fund ( 5 5 0 0 0 )
Net cash used in noncapital financial
activities ( 3 5 0 0 0 )

Cash flow from capital and related financing activities:

Acquisition of machinery and equipment $ ( 8 5 0 0 0 )
Disposal of machinery and equipment 2 2 0 0 0
Payment of interest on revenue bonds ( 4 0 0 0 0 )
Customers’ deposits received 7 0 0 0
Customers’ deposits refunded ( 2 0 0 0 )
Net cash used in capital and related financing
activities ( 9 8 0 0 0 )

Cash flows from investing activities:

Revenue and net gains from short-term
investments 8 0 0 0
Increase in cash and cash equivalents $ 2 1 0 0 0
Cash and cash equivalents, beginning of year 1 3 8 0 0 0
Cash and cash equivalents, end of year $ 1 5 9 0 0 0

Exhibit 1 Cash flows from operating activities:

Operating income $ 1 1 6 0 0 0
Adjustments to reconcile operating income to net
cash provided by operating activities:
Depreciation expense 3 6 0 0 0
Increase in accounts receivable (net) ( 6 0 0 0 )
Increase in receivable from General Fund ( 4 0 0 0 )
Decrease in inventory of supplies 2 0 0 0
Decrease in short-term prepayments 1 0 0 0
Decrease in vouchers payable ( 6 0 0 0 )
Increase in accrued liabilities 7 0 0 0
Net cash provided by operating activities $ 1 4 6 0 0 0

The McGraw-Hill Companies, Inc., 2006

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