E17-2. Listed are typical financial activities of a local governmental unit. 1.
ID: 2424577 • Letter: E
Question
E17-2. Listed are typical financial activities of a local governmental unit.
1. The legislative unit approved the budget for the general operating fund. Estimated revenues are $4,000,000, and appropriations for expenditures are $3,800,000.
2. Statements of property tax assessments totaling $3,000,000 were mailed to property owners. It is estimated that 4% of the assessed taxes will be uncollectible.
3. Notification was received from the state that this unit’s share of sales tax revenues from the fourth quarter of the previous year will be $500,000.
4. The manager signed a contract to purchase equipment costing $250,000.
5. The equipment ordered above was received and paid for.
6. Employees were paid their biweekly wages of $36,000.
7. Property taxes in the amount of $2,050,000 were collected.
Required:
Prepare the necessary journal entries to record the transactions listed above in the records of the General Fund.
Explanation / Answer
Date
Account Titles and Explanation
Debit
Credit
xx/xx/xxxx
Estimated Revenues A/c Dr.
$4,000,000
To Appropriations A/c
$3,800,000
To Budgetary Fund balance A/c
$ 200,000
(Fund approved and appropriated in the budget)
xx/xx/xxxx
Property Taxes Receivable A/c Dr.
$3,000,000
To Allowance for uncollectible taxes A/c
$ 120,000
To Revenues – Property Taxes A/c
$2,880,000
(Property taxes assessed and estimate of uncollectible taxes)
xx/xx/xxxx
Sales Tax Receivable A/c Dr.
$ 500,000
To Revenues – Sales Taxes A/c
$ 500,000
(Sales Tax revenue notification)
xx/xx/xxxx
Encumbrances A/c Dr.
$ 250,000
To Fund Balance Reserved for encumbrances A/c
$ 250,000
(Signed a contract to purchase equipment)
xx/xx/xxxx
Fund Balance Reserved for encumbrances A/c Dr.
$ 250,000
To Encumbrances A/c
$ 250,000
Expenditures A/c Dr.
$ 250,000
To Vouchers Payable A/c
$ 250,000
Vouchers Payable A/c Dr.
$ 250,000
To Cash A/c
$ 250,000
(Equipment received and paid the invoice)
xx/xx/xxxx
Expenditures A/c Dr.
$ 36,000
To Cash A/c
$ 36,000
(Biweekly wages paid)
xx/xx/xxxx
Cash A/c Dr.
$2,050,000
To Property Taxes Receivable A/c
$2,050,000
(Property taxes collected)
Uncollectible assessed taxes are 4% of $3,000,000 = $120,000
As the entries are posted to General Fund, entries are posted for Budget appropriations and equipment ordered also. In Government-wide accounting, entries will not be posted for these.
Date
Account Titles and Explanation
Debit
Credit
xx/xx/xxxx
Estimated Revenues A/c Dr.
$4,000,000
To Appropriations A/c
$3,800,000
To Budgetary Fund balance A/c
$ 200,000
(Fund approved and appropriated in the budget)
xx/xx/xxxx
Property Taxes Receivable A/c Dr.
$3,000,000
To Allowance for uncollectible taxes A/c
$ 120,000
To Revenues – Property Taxes A/c
$2,880,000
(Property taxes assessed and estimate of uncollectible taxes)
xx/xx/xxxx
Sales Tax Receivable A/c Dr.
$ 500,000
To Revenues – Sales Taxes A/c
$ 500,000
(Sales Tax revenue notification)
xx/xx/xxxx
Encumbrances A/c Dr.
$ 250,000
To Fund Balance Reserved for encumbrances A/c
$ 250,000
(Signed a contract to purchase equipment)
xx/xx/xxxx
Fund Balance Reserved for encumbrances A/c Dr.
$ 250,000
To Encumbrances A/c
$ 250,000
Expenditures A/c Dr.
$ 250,000
To Vouchers Payable A/c
$ 250,000
Vouchers Payable A/c Dr.
$ 250,000
To Cash A/c
$ 250,000
(Equipment received and paid the invoice)
xx/xx/xxxx
Expenditures A/c Dr.
$ 36,000
To Cash A/c
$ 36,000
(Biweekly wages paid)
xx/xx/xxxx
Cash A/c Dr.
$2,050,000
To Property Taxes Receivable A/c
$2,050,000
(Property taxes collected)
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