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Government Accounting

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Chapter 11

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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Solution Summary

This solution provides you with journal entries for Gotham City Fund-Based and City-Wide Accounting. References are provided.

Solution Preview

Hello Student,

Before you begin to prepare journal entries, you need to take note of what is fund-based accounting. Fund accounting is a system of accounting used primarily by non-profit and government organizations. It is a system which emphasizes accountability rather than profitability. In a fund accounting system, a fund is a self-balancing set of accounts, segregated for specific purposes in accordance with laws and regulations or special restrictions and limitations. For more information on fund accounting and the various kinds of funds, kindly visit the following link - http://www.controller.ucsb.edu/ResourcesandPresentations/pdf/deskmanual/fund_accounting.pdf; after which you may attempt to determine the journal entries give below:

Debit Credit
$ $

Entry 1 (General Fund)

Revenue Control 900,000
Expenditure 600,000
Other Financing Uses (Approved spending) 250,000
Fund Balance (Closing) 50,000

Entry 2

Encumbrances Control 5,000,000
Fund Balance Reserved for Encumbrances 5,000,000

Note encumbrances are used to reflect commitments and prevent overspending and the fund balance is reserved for encumbrances.

Entry 3

Cash 4,000,000
Other Financing Sources 4,000,000

When Gotham City sells bonds, this brings in cash for the City from other financing sources (outside of taxes and other fees collected by the city).

Entry 4

Fund Balance - Reserved for Encumbrances 5,000,000
Encumbrance ...

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