CITY OF MONROE General Fund Balance Sheet As of December 31, 2020 Assets Cash 503000 Taxes receivable 210,000 Less: Estimated uncollectible taxes (37,000 ) Net 173,000 Interest and penalties receivabl

The Balance Sheet of the General Fund of the City of Monroe as of December 31, 2019, follow.
 

 
3-C. This portion of the continuous problem continues the General Fund example by requiring the recording and posting of the budgetary entries. To reduce clerical effort required for the solution use control accounts for the budgetary accounts, revenues, expenditures and encumbrances. Subsidiary accounts are not required. Budget information for the City includes:
(1) As of January 1, 2020, the City Council approved and the mayor signed a budget calling for $11,150,000 in property tax and other revenue, $9,380,000 in appropriations for expenditures, and $1,700,000 to be transferred to two debt service funds for the payment of principal and interest. Record the budget for the General Fund and post to the ledger.
4–C. Part 1. General Fund Transactions
 
Required:
a. Record journal entries for the following transactions for FY 2020. Journal entry explanations are not required. Use control accounts for revenues, expenditures and budgetary accounts. It is not necessary to reflect subsidiary ledger entries.

1. (2) Encumbrances of $19,000 for purchase orders outstanding at the end of 2019 were re-established.

2. (3) The January 1, 2020, balance in Deferred Inflows – Property Taxes relates to the amount of the 2019 levy that was expected to be collected more than 60 days after December 31. This amount should be recognized as 2020 revenues.

3. (4) A general tax levy in the amount of $7,000,000 was made. It is estimated that 2¼ percent (0.0225) of the tax will be uncollectible.

4. (5) Tax anticipation notes in the amount of $500,000 were issued.

5. (6) Goods and supplies related to all encumbrances outstanding as of December 31, 2019 were received, along with invoices amounting to $18,700. The invoices were approved for payment. The City maintains immaterial amounts in supply inventories and it is the practice of the City to charge supplies to expenditure when received.

6. (7) All accounts payable and the amount due other funds were paid.

7. (8) The General Fund collected the following in cash:

   • prior year taxes, $158,000;

   • interest and penalties receivable on prior year taxes, $3,500;

   • current taxes, $6,400,000;

   • $204,000 previously recorded as due from the state government;

   • licenses and permits, $800,000;

   • sales taxes, $2,890,000; and

   • Miscellaneous revenues, $350,000.

8. (9) Purchase orders and contracts were issued in the amount of $3,465,000.

9. (10) Payrolls for the General Fund totaled $5,110,000. Of that amount, $498,000 were withheld for employees’ federal income taxes and $390,915 were withheld for employees’ FICA and Medicare tax liability; the balance was paid in cash. The encumbrance system is not used for payrolls.

10. (11) The liability for the city’s share of FICA and Medicare taxes, $390,915, was recorded as was the liability for state unemployment taxes in the amount of $28,000.

11. (12) Invoices for most of the supplies and services ordered in transaction 8 were received in the amount of $3,375,300 and approved for payment. The related encumbrance amounted to $3,407,000.

12. (13) Tax anticipation notes were paid at maturity, along with interest in the amount of $18,000.

13. (14) Notification was received that an unrestricted state grant in the amount of $332,000 would be received during the first month of the next year.

14. (15) The General Fund recorded a liability to the Water and Sewer Fund for services in the amount of $37,000 and to the Stores and Services Fund for supplies in the amount of $313,200; $310,000 of the amount due the Stores and Services Fund was paid.

15. (16) The General Fund recorded an amount due of $48,000 from the state government, representing sales taxes to be collected from retail sales taking place during the last week of the year.

16. (17) The General Fund paid accounts payable in the amount of $3,175,000 and paid the amounts due to the federal and state governments. The General Fund also transferred to the debt service funds cash in the amount of $1,662,000 for the recurring payment of principal and interest.

17. (18) All required legal steps were accomplished to increase appropriations by the net amount of $109,000. Estimated revenues were increased by $73,000.

18. (19) The City Council authorized a write-off of $51,000 in delinquent property taxes and corresponding interest and penalties amounting to $1,600.

19. (20) Interest and penalties receivable on taxes were accrued in the amount of $17,200; $1,100 of this amount is expected to be uncollectible.

20. (21) It is estimated that $17,500 of the outstanding taxes receivable will be collected more than 60 days beyond the fiscal year-end.

 
b. Post the entries to the general ledger.
c. Prepare and post the closing entries for the General Fund. Outstanding encumbrances at year end are classified as Assigned Fund Balance and all remaining net resources are classified as Unassigned Fund Balance.
d. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the year ended December 31, 2020. Confirm that the revenue and expenditure control accounts agree with the following detail (amounts are assumed) and use this information in the Statement:

Revenues Expenditures

Property Taxes$6,846,000 

General

Government$1,682,915 

Sales Taxes 2,938,000

 Public Safety 3,066,900 

Interest and Penalties on Taxes 16,100 

Highways and Streets 1,441,400 

Licenses and permits 800000 

Sanitation 591,400 

Intergovernmental Revenue 332,000 

Health 724,100 

Miscellaneous Revenue 350,000 

Welfare 374,300     

Culture and Recreation 917,300    

 Capital Outlay 492,800

 Total$11,282,100  Total$9,291,115 

The Balance Sheet of the Street and Highway Fund of the City of Monroe as of December 31, 2019, follow.
 

 
3-C. This portion of the continuous problem continues the special revenue fund example by requiring the recording and posting of the budgetary entries. To reduce clerical effort required for the solution use control accounts for the budgetary accounts, revenues, expenditures and encumbrances. Subsidiary accounts are not required. Budget information for the City includes:
 
(1) Also as of January 1, 2020, the City Council approved and the mayor signed a budget for the Street and Highway Fund that provided for estimated revenues from the state government in the amount of $1,068,000 and appropriations of $1,057,000. Record the budget and post to the ledger.
4–C. Part 2. Special Revenue Fund Transactions
 
Required:
a. Record journal entries for the following transactions for FY 2020 and post to the general ledger. As there are relatively few revenues and expenditures, the use of control accounts is not necessary. (Make entries directly to individual revenue and expenditure accounts).

1. (2) The state government notified the City that $1,067,500 will be available for street and highway maintenance during 2020 (i.e. the City has met eligibility requirements). The funds are not considered reimbursement-type as defined by GASB standards.

2. (3) Cash in the total amount of $997,000 was received from the state government.

3. (4) Contracts, all eligible for payment from the Street and Highway Fund, were signed in the amount of $1,062,000.

4. (5) Contractual services (see transaction 3) were received; the related contracts amounted to $1,042,000. Invoices amounting to $1,040,500 for these items were approved for payment. The goods and services all were for street and highway maintenance.

5. (6) Investment revenue of $1,900 was earned and received.

6. (7) Accounts payable were paid in the amount of $987,000.

7. (8) All required legal steps were accomplished to increase appropriations in the amount of $4,500.

b. Prepare and post the necessary closing entries for the Street and Highway Fund.
c. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balances for the Street and Highway Fund for the fiscal year ended December 31, 2020.
d. Prepare a Balance Sheet for the Street and Highway Fund as of December 31, 2020. Assume any unexpended net resources are classified as Restricted Fund Balance.

5–C. Part 1. Capital Projects Fund Transactions
The voters of the City of Monroe approved the issuance of tax-supported bonds in the face amount of $4,000,000 for the construction and equipping of a new City Jail. Architects were to be retained, and construction was to be completed by outside contractors. In addition to the bond proceeds, a $1,335,000 grant was expected from the state government.
 
Required:
a. Record the following transactions in the general journal and post to the general ledger. Control accounts are not necessary.

1. (1) On January 1, 2020, the total face amount of bonds bearing an interest rate of 8 percent was sold at a $200,000 premium. Principal amounts of $200,000 each will come due annually over a 20-year period commencing January 1, 2021. Interest payment dates are July 1 and January 1. The first interest payment will be July 1, 2020. The premium was transferred to the City Jail Debt Service Fund for the future payment of principal on the bonds.

2. (2) The receivable from the state government was recorded.

3. (3) Legal and engineering fees early in the project were paid in the amount of $119,000. This amount had not been encumbered.

4. (4) Architects were engaged at a fee of $250,000.

5. (5) Preliminary plans were approved, and the architects were paid $50,000 (50 percent of the fee).

6. (6) The complete plans and specifications were received from the architects and approved. A liability in the amount of $150,000 to the architects was approved and paid.

7. (7) Bids were received and opened in public session. After considerable discussion in City Council, the low bid from Hardhat Construction Company in the amount of $4,500,000 was accepted, and a contract was signed.

8. (8) The contractor required partial payment of $1,350,000. Payment was approved and vouchered with the exception of a 5 percent retainage.

9. (9) Cash in the full amount of the grant was received from the state government.

10. (10) Furniture and equipment for the annex were ordered at a total cost of $459,500.

11. (11) Payment was made to the contractor for the amount payable (see 8 above).

12. (12) The contractor completed construction and requested payment of the balance due on the contract. After inspection of the work, the amount, including the past retainage, was approved for payment and then paid.

13. (13) The furniture and equipment were received at a total actual installed cost of $459,300. Invoices were approved for payment.

14. (14) The remainder of the architects’ fees was approved for payment.

15. (15) The City Jail Construction Fund paid all outstanding accounts payables ($ 509,300) on December 31, 2020.

16. (16) The remaining cash was transferred to the City Jail Debt Service Fund.

b. Post the entries to the City Jail Construction Fund general ledger.
c. Prepare and post an entry closing all nominal accounts to Fund Balance.
 
5–C. Part 2. Existing Debt Service Fund Transactions
The City Hall Debt Service Fund of the City of Monroe has been open for five years; it was created to service a $16,000,000, 3 percent tax-supported bond issue. As of December 31, 2019, this serial bond issue had a balance of $12,000,000. Semiannual interest payments are made on January 1 and July 1, and a principal payment of $400,000 is due on January 1 and July 1 of each year.
 
As this is a regular serial bond debt service fund, the only accounts with balances as of January 1, 2020, were Cash with Fiscal Agent and Fund Balance—Restricted for Debt Service, each with balances of $412,000. (Revenues were raised and collected in cash in 2019 in order to be able to pay bond principal and interest due on January 1, 2020.) The government chose not to accrue interest payable.
 
Required:
a. Prepare journal entries for the following transactions in the general journal of the City Hall Debt Fund. Control accounts are not necessary.

1. (1) The fiscal agent reported that $180,000 in checks had been mailed to bondholders for interest due on January 1, and $400,000 in checks were mailed for bonds maturing that day.

2. (2) Cash in the amount of $574,000 was received from the General Fund on June 30 and was transferred to the fiscal agent.

3. (3) The fiscal agent reported that checks dated July 1 had been mailed to bondholders for interest of $ 174,000 due that day and $400,000 in checks were mailed for bonds maturing that day.

4. (4) Cash in the amount of $568,000 was received from the General Fund on December 31 and transferred to the fiscal agent to be used for the interest and principal due on January 1 (next fiscal year). The government elected to not accrue the interest or principal at year-end.

b. Post the entries to the City Hall Debt Service Fund ledger (t-accounts).
c. Prepare and post an entry closing all nominal accounts to Fund Balance. Assume any remaining net resources are classified as Fund Balance – Restricted for Debt Service.
 
5–C. Part 3. New Debt Service Fund Transactions
On the advice of the city attorney, a City Jail Debt Service Fund is opened to account for debt service transactions related to the bond issue sold on January 1, 2020 (see Part 1).
 
Required:
a. Record the following transactions in the general journal for the City Jail Debt Service Fund, as necessary. Control accounts are not necessary.

1. (1) The premium described in transaction 1 of Part 1 was received as a transfer from the capital projects fund.

2. (2) Cash in the amount of $160,000 was received from the General Fund on June 30 and was transferred to the fiscal agent.

3. (3) The fiscal agent reported that checks dated July 1 had been mailed to bondholders for interest due that day.

4. (4) The transfer of the unexpended funds from the capital project fund (described in part c of Part 1) was received.

5. (5) Cash in the amount of $360,000 was received from the General Fund on December 31 and transferred to the fiscal agent to be used for interest and principal payments due on January 1 (next fiscal year). The government elected to not accrue the interest at year-end.

6. (6) $200,000 of the remaining cash on hand was invested.

b. Post the entries to the City Jail Debt Service Fund ledger (t-accounts).
c. Prepare and post an entry closing all nominal accounts to Fund Balance. Assume any remaining net resources are classified as Fund Balance – Restricted for Debt Service.
 
5–C. Part 4. Governmental Funds Financial Statements
 
Required:
a. Prepare a Balance Sheet for the governmental funds for the City of Monroe as of December 31, 2020. Respective values for the General Fund, the Street and Highway Fund are given. Include the City Hall Debt Service Fund, and the City Jail Debt Service Fund.
b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balances for the governmental funds for the City of Monroe for the Year Ended December 31, 2020. Include the same funds as listed in requirement a plus the City Jail Construction Fund.
  

6–C. Part 1. Internal Service Fund Transactions
 
The Stores and Service Fund of the City of Monroe had the following account balances as of January 1, 2020:
 

  
Required:
a. Record the following transactions in the general journal of the City of Monroe Stores and Service Fund.

1. (1) A budget was prepared for FY 2020. It was estimated that the price charged other departments for supplies should be 1.25% of cost to achieve the desired breakeven for the year.

2. (2) The amount due from other funds as of January 1, 2020, was collected in full.

3. (3) During the year, supplies were ordered and received in the amount of $312,000. This amount was posted to accounts payable.

4. (4) $15,000 of the advance from the Water Utility Fund, originally provided for construction, was repaid. No interest is charged.

5. (5) During the year, supplies costing $250,560 were issued to the General Fund, and supplies costing $46,400 were issued to the Water Utility Fund. These funds were charged based on the previously determined markup ($ 313,200 to General Fund and 58,000 to the Water Utility Fund).

6. (6) Operating expenses, exclusive of depreciation, were recorded in accounts payable as follows: Purchasing, $16,200; Warehousing, $16,900; Delivery, $17,500; and Administrative, $8,000.

7. (7) Cash was received from the General Fund in the amount of $310,000 and from the Water Utility Fund in the amount of $50,000.

8. (8) Accounts payable were paid in the amount of $367,500.

9. (9) Depreciation in the amount of $8,400 was recorded for buildings and $6,200 for equipment.

 
b. Post the entries to the Stores and Service Fund ledger (t-accounts).
c. Prepare and post an entry closing all nominal accounts to Net position. Compute the balance in the Net Position accounts, assuming there are no Restricted Net Position.
 
6–C. Part 2. Enterprise Fund Transactions
 
The City of Monroe maintains a Water and Sewer Fund to provide utility services to its citizens. As of January 1, 2020, the City of Monroe Water and Sewer Fund had the following account balances:
 
 

 
Required:
a. Record the following transactions in the general journal of the City of Monroe Water and Sewer Utility Fund.

1. (1) During the year, sales of water to non-government customers amounted to $1,025,000 and sales of water to the General Fund amounted to $37,000.

2. (2) Collections from non-government customers amounted to $983,000.

3. (3) The Stores and Services Fund repaid $15,000 of the long-term advance to the Water and Sewer Fund.

4. (4) Materials and supplies in the amount of $261,000 were received. A liability in that amount was recorded.

5. (5) Materials and supplies were issued and were charged to the following accounts: cost of sales and services, $180,000; selling, $15,000; administration, $18,000; construction work in progress, $50,000.

6. (6) Payroll costs for the year totaled $416,200 plus $34,200 for the employer’s share of payroll taxes. Of that amount, $351,900 was paid in cash, and the remainder was withheld for taxes. The $450,400 (416,200 + 34,200) was distributed as follows: cost of sales and services, $265,800; sales, $43,900; administration, $91,400; construction work in progress, $49,300.

7. (7) Bond interest (6½%) in the amount of $162,500 was paid.

8. (8) In accord with the revenue bond indenture, $25,000 cash was transferred from operating cash to restricted assets.

9. (9) Construction projects at the water treatment plant (reflected in the beginning balance of construction in process) were completed in the amount of $214,000, and the assets were placed in service. Payments for these amounts were made in the previous year (no effect on 2020 Statement of Cash Flows).

10. (10) Collection efforts were discontinued on bills totaling $3,500. The unpaid receivables were written off.

11. (11) An analysis of customer receivable balances indicated the Estimated Uncollectible Accounts needed to be increased by $6,500.

12. (12) Payment of accounts payable amounted to $332,000. Payments of payroll taxes totaled $95,200.

13. (13) Supplies transferred from the Stores and Services Fund amounted to $58,000. Cash in the amount of $50,000 was paid to the Stores and Services Fund for supplies.

14. (14) Depreciation expense for the year was computed to be $267,000.

b. Post the entries to the Water and Sewer Fund ledger (t-accounts).
c. Prepare and post an entry closing all nominal accounts to Net Position. Compute the balance in the Net Position accounts, assuming the only restricted assets are those identified with the bond indenture and the outstanding bonds are associated with the purchase of capital assets.
 
6–C. Part 3. Proprietary Fund Financial Statements
 
Required:
Prepare statements for the proprietary funds accounted for in Parts 1 and 2 as follows:

1. (1) A Statement of Revenues, Expenses, and Changes in Fund Net Position for the Year Ended December 31, 2020.

2. (2) A Statement of Net Position, as of December 31, 2020.

3. (3) A Statement of Cash Flows for the Year Ended December 31, 2020. Include restricted assets as a part of cash and cash equivalents for this statement. (Assume any materials and labor attributable to construction in process were paid by year end).