E17-3 Multiple-Choice Questions on Budgets, Expenditures, and Revenue [AICPA

Adapted]

1. c

2. d

3. c

4. a

5. b

6. c

7. d

8. b

9. c

10. d

E17-4 Multiple-Choice Questions on the General Fund

1. b

2. d

3. c The balances in the ENCUMBRANCES CONTROL and the FUND BALANCE-

ASSIGNED FOR ENCUMBRANCES accounts are the same. Therefore, an
excess of one account over the other indicates a recording error.

4. c The following entry is made when a purchase order is approved:

ENCUMBRANCES CONTROL
BUDGETARY FUND BALANCE ASSIGNED FOR ENCUMBRANCES

5. b The 60-day rule for property tax revenues states that property taxes collected
within 60 days after the end of a fiscal year (within first 60 days of 2007) may be
classified as revenues of the prior fiscal year (2006). The entry to record the tax
levy would be:

Property Taxes Receivable 700,000

Allowance for Uncollectible Taxes 10,000
Revenue Property Taxes 600,000
Deferred Revenue (reported as a liability
on the general fund balance sheet) 90,000
[Note: The estimated uncollectibles are on the property taxes reported as
deferred revenue.]

6. a Upon receipt of the order, Oak would record the following entries:
 BUDGETARY FUND BALANCE ASSIGNED
FOR ENCUMBRANCES 5,000
ENCUMBRANCES CONTROL 5,000

Expenditures Control 4,950

Vouchers Payable 4,950

7. a Johnson would record the following entry:

ESTIMATED REVENUES CONTROL 9,000,000

ESTIMATED OTHER FINANCING SOURCE
TRANSFER IN (Internal Service) 1,000,000
ESTIMATED OTHER FINANCING SOURCE
TRANSFER IN (Debt Service) 500,000
APPROPRIATIONS CONTROL XXXXXX
BUDGETARY FUND BALANCE UNASSIGNED XXX

8. c

9. a

10. b
 E17-5 Encumbrances at Year-End

a. Outstanding encumbrances lapse at year-end.

(1) Order equipmentNovember 3, 20X2:

ENCUMBRANCE 21,000
BUDGETARY FUND BALANCE--ASSIGNED
FOR ENCUMBRANCES 21,000
Order equipment and record encumbrance.

(2) Year-end entriesDecember 31, 20X3:

BUDGETARY FUND BALANCE ASSIGNED FOR

ENCUMBRANCES 21,000
ENCUMBRANCES 21,000
Close remaining budgeted encumbrances.

Fund Balance Unassigned 21,000

Fund Balance Assigned for Encumbrances 21,000
Reserve actual fund balance for outstanding encumbrances at year-end.

(3) City Council accepts outstanding encumbrancesJanuary 1, 20X3:

Fund Balance Assigned for Encumbrances 21,000

Fund Balance Unassigned 21,000
Reverse prior-year encumbrance reserve.

ENCUMBRANCES 21,000
BUDGETARY FUND BALANCE ASSIGNED
FOR ENCUMBRANCES 21.000
Establish budgetary control over encumbrances renewed from prior year.

(4) Equipment receivedJanuary 18, 20X3:

BUDGETARY FUND BALANCE ASSIGNED FOR

ENCUMBRANCES 21,000
ENCUMBRANCES 21,000
Remove budgetary reserve for goods received.

Expenditures 21,800
Vouchers Payable 21,800
Record expenditure for goods received at actual cost of $21,800.

(5) Year-end entryDecember 31, 20X3:

Fund BalanceUnassigned 21,800

Expenditures 21,800
Close 20X3 expenditures account.
 E17-5 (continued)

b. Outstanding encumbrances are nonlapsing.

(1) Order equipmentNovember 3, 20X2:

ENCUMBRANCE 21,000
BUDGETARY FUND BALANCE--ASSIGNED
FOR ENCUMBRANCES 21,000
Order equipment and record encumbrance.

(2) Year-end entriesDecember 31, 20X2:

BUDGETARY FUND BALANCE ASSIGNED

FOR ENCUMBRANCES 21,000
ENCUMBRANCES 21,000
Close remaining budgetary encumbrances.

Fund Balance Unassigned 21,000

Fund Balance Assigned for Encumbrances 21,000
Reserve fund balance for outstanding encumbrances.

(3) Date the encumbrances from prior yearJanuary1, 20X3::

Fund Balance Assigned for Encumbrances 21,000

Fund Balance Assigned for
Encumbrances 20X2 21,000
Reclassify reserve from 2002, prior year.

(4) Equipment receivedJanuary 18, 20X3:

Expenditures 20X2 21,000

Expenditures (20X3) 800
Vouchers Payable 21,800
Record actual expenditure for goods received.

(5) Closing entriesDecember 31, 20X3:

Fund Balance Assigned for

Encumbrances 20X2 21,000
Expenditures 20X2 21,000
Close expenditures account for prior year encumbrances.

Fund Balance Unassigned 800

Expenditures (20X3) 800
Close expenditures for current year.
 E17-5 (continued)

(Note: In entry (4), the $800 excess of actual cost over the encumbered amount must be
approved as part of 20X3's expenditures. Entry (4) records the City Councils approval
with a debit to Expenditures (20X3) which increases 20X3s total expenditures. The
expenditures for 20X3 are closed in entry (5). If the actual cost was less than the
encumbered amount, then the difference should be closed to Fund Balance-Unassigned,
although some governmental units have a policy of closing any difference between actual
and encumbered amounts for prior year encumbrances to the current year's
expenditures.)

c. (1) Outstanding encumbrances are nonlapsing; City Council cancels order

January 1, 20X3:

Fund BalanceAssigned for Encumbrances 21,000

Fund BalanceUnassigned 21,000
City Council cancels 20X2 order for equipment.

E17-6 Accounting for Inventories of Office Supplies

a. Consumption method of accounting for inventories:

(1) Purchase of supplies:

August 8, 20X2
Expenditures 3,600
Vouchers Payable 3,600
Acquire inventory of supplies.

(2) Entries at end of 20X2 fiscal year:

September 30, 20X2

Inventory of Supplies 2,800
Expenditures 2,800
Recognize ending inventory of supplies.

Fund Balance Unassigned 2,800

Fund Balance Assigned for Inventories 2,800
Establish fund reserve for ending inventory.

Fund Balance Unassigned 800

Expenditures 800
Close expenditures account.
 E17-6 (continued)

(3) Entry at end of 20X3 fiscal year:

September 30, 20X3

Expenditures 2,800
Inventory of Supplies 2,800
Record expenditures for inventories consumed.

Fund Balance Assigned for Inventories 2,800

Fund Balance Unassigned 2,800
Remove fund balance reserve for inventories consumed.

Fund Balance Unassigned 2,800

Expenditures 2,800
Close expenditures account.

b. Purchase method of accounting for inventories:

(1) Purchase of supplies:

August 8, 20X2
Expenditures 3,600
Vouchers Payable 3,600
Acquire inventory of supplies.

(2) Entries at end of 20X2 fiscal year:

September 30, 20X2

Inventory of Supplies 2,800
Fund Balance Assigned for Inventories 2,800
Recognize ending inventory of supplies.

Fund Balance Unassigned 3,600

Expenditures 3,600
Close expenditures account.

(3) Entries at end of 20X3 fiscal year:

September 30, 20X3

Fund Balance Assigned for Inventories 2,800
Inventory of Supplies 2,800
Remove fund balance reserve for inventories consumed.
 P17-14 General Fund Entries [AICPA Adapted]

1. ESTIMATED REVENUES CONTROL 3,000,000

APPROPRIATIONS CONTROL 2,980,000
BUDGETARY FUND BALANCE UNASSIGNED 20,000
Record the budget.

Taxes Receivable 2,870,000

Allowance for Uncollectible Taxes 70,000
Revenue from Taxes 2,800,000
Record tax levy.

Cash 2,810,000
Taxes Receivable 2,810,000
Record tax collection.

Allowance for Uncollectible Taxes 40,000

Taxes Receivable 40,000
Record write-off of uncollectible taxes:
July 1, 20X1, taxes receivable balance $ 150,000
20X2 tax levy 2,870,000
Less: Taxes collected (2,810,000)
Taxes receivable final balance (170,000)
Taxes written off as uncollectible $ 40,000

Cash 130,000
Miscellaneous Revenue 130,000
Collect miscellaneous revenue.

2. Fund Balance Assigned for Encumbrances 60,000

Fund Balance Unassigned 60,000
Reverse prior reserve which has been renewed.

ENCUMBRANCES 60,000
BUDGETARY FUND BALANCE ASSIGNED
FOR ENCUMBRANCES 60,000
Renew encumbrances from prior period.

ENCUMBRANCES 2,700,000
BUDGETARY FUND BALANCE ASSIGNED
FOR ENCUMBRANCES 2,700,000
Record encumbrances.
 P17-14 (continued)

3. Expenditures 142,000
Due to Other Funds 142,000
Record liability to other funds for services received.

4. BUDGETARY FUND BALANCE ASSIGNED

FOR ENCUMBRANCES 2,700,000
ENCUMBRANCES 2,700,000
Reverse encumbrances for items received.

Expenditures 2,700,000
Vouchers Payable 2,700,000
Record expenditures.

BUDGETARY FUND BALANCE ASSIGNED

FOR ENCUMBRANCES 60,000
ENCUMBRANCES 60,000
Reverse reserve for encumbrances.

Expenditures (Prior Period) 58,000

Vouchers Payable 58,000
Actual expenditure for goods received.

Due to Other Funds 210,000

Vouchers Payable 210,000
Record approval for payment to other funds.

Vouchers Payable 2,640,000

Cash 2,640,000
Record voucher payments.

5. ENCUMBRANCES 91,000
BUDGETARY FUND BALANCE ASSIGNED
FOR ENCUMBRANCES 91,000
Record May 10 encumbrance.
 P17-15 General Fund Entries and Statements

a. Entries for 20X2 budget and transactions:

1. ESTIMATED REVENUES CONTROL 1,877,000

APPROPRIATIONS CONTROL 1,840,000
ESTIMATED OTHER FINANCIAL
USES TRANSFER OUT 37,000
Record budget.

ENCUMBRANCES 21,000
BUDGETARY FUND BALANCE ASSIGNED
FOR ENCUMBRANCES 21,000
Renew encumbrances from prior period.

Fund Balance Assigned for Encumbrances 21,000

Fund Balance Unassigned 21,000
Reverse reserve for renewed encumbrances.

Property Tax Receivable Current 1,600,000

Allowance for Uncollectibles Current 16,000
Property Tax Revenue 1,584,000
Record property tax levy.

2. Cash 1,590,000
Property Taxes Receivable Current 1,507,000
Property Taxes Receivable Delinquent 83,000
Collect property taxes.

Allowance for Uncollectibles Delinquent 9,000

Property Taxes Receivable Delinquent 7,000
Property Tax Revenue 2,000
Write off remaining delinquent property taxes.

Property Taxes Receivable Delinquent 93,000

Allowance for Uncollectibles Current 16,000
Property Taxes Receivable Current 93,000
Allowance for Uncollectibles Delinquent 16,000
Reclassify remainder of uncollected 20X2 property taxes.

Cash 333,000
Sales Tax Revenue 284,000
Miscellaneous Revenue 39,000
Due to Motor Pool Fund 10,000
Other cash receipts.
 P17-15 (continued)

3. ENCUMBRANCES 1,800,000
BUDGETARY FUND BALANCE ASSIGNED
FOR ENCUMBRANCES 1,800,000
Record purchase orders.

BUDGETARY FUND BALANCE ASSIGNED

FOR ENCUMBRANCES 1,773,000
ENCUMBRANCES 1,773,000
Reverse reserve for items received.

Expenditures 1,788,000
Vouchers Payable 1,788,000
Actual expenditures for items received.

Vouchers Payable 1,793,000

Cash 1,793,000
Vouchers paid.

4. Due from Central Stores Fund 13,000

Other Financing Uses Transfer Out 37,000
Cash 50,000
Other cash payments and transfer.

b. Pine Ridge
General Fund
Preclosing Trial Balance
December 31, 20X2

Debit Credit

Cash $ 191,000
Property Tax Receivable Delinquent 93,000
Allowance for Uncollectibles Delinquent $ 16,000
Due from Central Stores Fund 13,000
Vouchers Payable 26,000
Due to Motor Pool Fund 10,000
Fund Balance Unassigned 161,000
Property Tax Revenue 1,586,000
Sales Tax Revenue 284,000
Miscellaneous Revenue 39,000
Expenditures 1,788,000
Other Financing Uses Transfer Out 37,000
ESTIMATED REVENUES CONTROL 1,877,000
APPROPRIATIONS CONTROL 1,840,000
ESTIMATED OTHER FINANCING USES TRANSFER OUT 37,000
ENCUMBRANCES 48,000
BUDGETARY FUND BALANCE ASSIGNED
FOR ENCUMBRANCES 48,000
$4,047,000 $4,047,000
 P17-15 (continued)

c. Closing entries:

APPROPRIATIONS CONTROL 1,840,000

ESTIMATED OTHER FINANCING
USES TRANSFER OUT 37,000
ESTIMATED REVENUES CONTROL 1,877,000
Close budgetary accounts.

BUDGETARY FUND BALANCE ASSIGNED

FOR ENCUMBRANCES 48,000
ENCUMBRANCES 48,000
Close remaining encumbrances.

Fund Balance Unassigned 48,000

Fund Balance Assigned for
Encumbrances 48,000
Reserve fund balance for outstanding purchase orders.

Property Tax Revenue 1,586,000

Sales Tax Revenue 284,000
Miscellaneous Revenue 39,000
Expenditures 1,788,000
Other Financing Uses Transfer Out 37,000
Fund Balance Unassigned 84,000
Close operating statement accounts.

d. Pine Ridge
General Fund
Balance Sheet
December 31, 20X2

Assets
Cash $191,000
Property Tax Receivables Delinquent $ 93,000
Less: Allowance for Uncollectibles Delinquent (16,000) 77,000
Due from Central Stores Fund 13,000
Total Assets $281,000

Liabilities and Fund Balance

Vouchers Payable $ 26,000
Due to Motor Pool Fund 10,000
Fund Balance:
Spendable:
Assigned to:
General Government Services $ 48,000
Unassigned 197,000 245,000
Total Liabilities and Fund Balance $281,000
 P17-15 (continued)

e. Pine Ridge
General Fund
Statement of Revenues, Expenditures, and Changes
in Fund Balance
For Fiscal Year Ended December 31, 20X2

Revenue:
Property Taxes $1,586,000
Sales Taxes 284,000
Miscellaneous 39,000
Total Revenue $1,909,000
Expenditures:
Current $1,746,000
Capital Outlay Furniture 42,000
Total Expenditures $1,788,000
Excess of Revenue over Expenditures $ 121,000
Other Financing Sources (Uses):
Transfer Out (37,000)
Change in Fund Balance $ 84,000
Fund Balance, January 1, 20X2 161,000
Fund Balance, December 31, 20X2 $ 245,000

[Note that the $42,000 expenditure for the office furniture capital outlay is reported
separately. The theoretical support for this is that the expenditure will also benefit future
periods. Some governmental entities report capital outlays made in the general fund with
current expenditures because current financial resources were expended. Some
governments integrate capital outlay expenditures into the appropriate functional
categories (e.g., fire protection, government administration, or streets and highways)
rather than separately report the expenditures for capital outlays. The choice of reporting
alternative for the general fund is up to the governmental entity because the total
expenditures will be the same regardless of how or where the capital outlay is reported.]
P17-17 Identification of Governmental Accounting Terms

1. Government-wide financial statements

2. The Governmental Accounting Standards Board (GASB)

3. A fund

4. Interfund services provided or used

5. Internal service and enterprise funds

6. Infrastructure assets

7. Agency and trust funds

8. Modified accrual basis

9. Flow of total economic resources

10. The property tax levy

11. The general, special revenue, capital projects, debt service funds and permanent
funds

12. The allowance for uncollectible property taxes

13. Budgetary fund balance unassigned

14. Encumbrances

15. The consumption method

16. Other financing uses transfer out

17. Expenditures

18. Fund balance unassigned

19. Expenditures

20. Appropriations

21. Nonlapsing method