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What are the journal entries for the City of Wetteville and Gotham City?

1. The City of Wetteville has a fiscal year ending June 30. Examine the following transactions for Wetteville:

(A) On 6/1/10, Wetteville enters into a 5-year lease on a copying machine. The lease meets the criteria of a capital lease and carries an implied interest rate of 10%. The copier has a present value of $2,300. Wetteville has to put a $300 down payment on the lease at the beginning of the lease with monthly payments thereafter of $42.49.

(B) On 6/5/10, Wetteville opens a new landfill. The engineers estimate that at the end of 10 years the landfill will be full. Estimated costs to close the landfill are currently at $3,500,000.

(C) On 6/15/08, the end of the two-week pay period, Wetteville has $20,000 in accrued vacation pay related to the payroll for the period. The city estimates that $5,000 of this pay will be taken by the end of this summer and the rest will be used next summer.

(D) On 6/18/08, Wetteville receives a donation of a vintage railroad steam engine. The engine will be put on display at the local town park. A fee will be charged to actually climb up into the engine. The engine has been valued at $500,000.

(E) On 6/30/08, Wetteville makes its first payment on the leased copier. The $42.49 payment includes $16.68 interest.

(F) On 6/30/08, Wetteville estimates that the landfill is 2% filled.

Required:
Prepare the journal entries for the above transactions, on the dates mentioned for each lettered item, for the purposes of preparing the government-wide financial statements

Problem 2
The following are the transactions incurred by Gotham City. Prepare the journal entries required, first for fund-based accounting, including which fund it is made in as Part A. Second prepare the journal entries that would be made for city-wide accounting in Part B.

1 The city council passes this year's budget with revenues of 900,000, approved spending of 600,000, and operating transfers out of 250,000.
2 A contract is signed to build a city office complex for city government for 5,000,000. The budget for the complex was previously recorded.
3 Bonds are sold for 4,000,000 (same as their maturity value) for the new complex.
4 The complex is completed at its contract price. An invoice is received and paid.
5 Previously unrestricted cash of $700,000 is set aside to begin paying the bonds discussed in item 3.
6 A portion of the bonds comes due and $500,000 is paid. Of this total 100,000 is for interest on the bonds.
7 Legally-enforceable property taxes are assessed billing taxpayers $1,000,000. The taxes are to be received in the current year are 90% of the total. Another 5% will be collected in the following year and 5% of the total is estimated uncollectible.
8 Cash of $300,000 is received from the city's sole toll bridge. The money can only be used for highway and bridge maintenance.
9 The city received a portfolio of investment securities valued at $250,000 as a donation from a deceased citizen. Income from these investments must be used to support city libraries.

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A. Fund based accounting:

1) The city council passes this year's budget with revenues of 900,000, approved spending of 600,000, and operating transfers out of 250,000.

General Fund:

Revenue (control) $900,000
Expenditure $600,000
Other financing uses $250,000
Fund Balance $50,000
To close the annual budget
2) A contract is signed to build a city office complex for city government for 5,000,000. The budget for the complex was previously recorded.

Encumbrances (Control) $5,000,000
Fund balance-reserved for encumbrances $5,000,000

3) Bonds are sold for 4,000,000 (same as their maturity value) for the new complex.

Cash $4,000,000
Other financing sources $4,000,000

4) The complex is completed at its contract price. An invoice is received and paid.

Fund balance-reserved for encumbrances $5,000,000
Encumbrance (control) $5,000,000
Expenditures (control) $5,000,000
Contracts payable $5,000,000
Invoice after completion of contract

Contracts ...

Solution Summary

This solution provides the journal entries for the two problems in two attached Word documents.

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