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(solution) 3-3 A county engages in basic transactions. Kilbourne County


3-3 A county engages in basic transactions. Kilbourne County engaged in the following transactions in summary form during its fiscal year. All amounts are in millions. 1. Its commissioners approved a budget for the current fiscal year. It included total revenues of $860 and total appropriations of $850. 2. It ordered office supplies for $20. 3. It incurred the following costs, paying in cash: Salaries $610 Repairs $ 40 Rent $ 25 Utilities $ 41 Other operating costs $119 4. It ordered equipment costing $9. 5. It received the equipment and was billed for $10, rather than $9 as anticipated. 6. It received the previously ordered supplies and was billed for the amount originally estimated. The county reports the receipt of supplies as expenditures; it does not maintain an inventory account for supplies. 7. It earned and collected revenues of $865. a. Prepare journal entries as appropriate. b. Prepare closing entries as appropriate. c. What would have been the difference in the year-end financial statements, if any, had the county not made the budgetary entries? 3-5 Both budgeted and actual revenues and expenditures are closed to the fund balance. The budgeted and actual revenues and expenditures of Seaside Township for a recent year (in millions) were as presented in the schedule that follows. 1.) Prepare journal entries to record the budget 2.) Prepare journal entries to record the actual revenues and expenditures. Assume all transactions resulted in increases or decreases in cash. 3.) Prepare journal entries to close the accounts 4.) Determine the net change in fund balance. Does it equal the net change in actual revenues and expenditures? Budget Actual Revenues Property taxes $7.5 $7.6 Sales taxes $2.1 $2.4 Other revenues $1.6 $1.5 Total revenues $11.2 $11.5 Expenditures Wages & salaries $6.2 $6.1 Supplies $3.1 $3.0 Other expenditures $1.3 $1.2 Total expenditures $10.6 $10.3 Increase in fund balance $0.6 $1.2 P 3-1 Is accrual-based budgeting preferable to cash-based budgeting? The Disability Research Institute receives its funding mainly from government grants and private contributions. In turn, it supports research and related projects carried out by universities and other not-for-profits. Most of its government grants are reimbursed (expenditure-driven) awards.That is, the government will reimburse the institute for the funds that it disburses to others. The institute estimates that the following will occur in the forthcoming year: -It will be awarded $5 million in government grants, all of which will be paid out to sub-recipients during the year. Of this amount, only $4.5 million will be reimbursed by the government during -It will receive $600,000 in pledges from private donors. It expects to collect $450,000 during the year and the balance in the following year. It also expects to collect $80,000 in pledges made the prior year -It will purchase new furniture and office equipment at a cost of $80,000. It currently owns its building, which it has purchased for $800,000 and additional furniture and equipment, which it acquired for $250,000. The building has a useful life of twenty-five years; the furniture and equipment have a useful life of five years -Employees will earn wages and salaries of $340,000, of which they will be paid $320,000 during the forthcoming year and the balance in the next year -It will incur other operating costs of $90,000, of which it will pay $70,000 in the forthcoming year and $20,000 in the nest year. It will also pay another $10,000 in costs incurred in the previous year. 1.) Prepare two budgets, one on a cash basis and the other on a full accrual basis. For convenience show both on the same schedule, with the cash budget in one column and the accrual in the other column. 2.)Comment on which budget better shows whether the institute is covering the economic cost of the services that it provides. 3.)Which is likely to be more useful to a.) Institute managers? b.) Members of the institute's board of trustees? c.) Bankers from whom the institute seeks a loan? P. 3-11 Journal entries can be derived from a city's ledger. Shown on the top of the next page is an excerpt from a city's subsidiary ledger for the first two months of its fiscal year. Missing is the column that explains or references each of the entries. 1.) Prepare the journal entries that were most likely made in the account, adding to each a brief note of explanation. Each line of the account records a single transaction (e.g., the receipt of an invoice); however, the entries on January 1 were made before the city engaged in any actual transactions (i.e., with outside parties). 2.) The appropriation for consulting fees was intended to last for the entire year. Apparently, the city is spending or committing funds at a faster pace than planned. Can you propose an additional control mechanism to help ensure that the funds are spent evenly throughout the year?

 


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