6–C. Part 2. Enterprise Fund Transactions The City of Monroe maintains a Water a
ID: 2447461 • Letter: 6
Question
6–C. Part 2. Enterprise Fund Transactions
The City of Monroe maintains a Water and Sewer Fund to provide utility services to its citizens. As of January 1, 2015, the City of Monroe Water and Sewer Fund had the following account balances:
Debits
Credits
Cash
$105,000
Customer Accounts Receivable
77,000
Estimated Uncollectible Accounts Receivable
$4,000
Materials and Supplies
28,000
Advance to Stores and Services Fund
30,000
Restricted Assets
117,000
Water Treatment Plant in Service
4,200,000
Construction Work in Progress
203,000
Accumulated Depreciation - Utility Plant
1,200,000
Accounts Payable
97,000
Revenue Bonds Payable
2,500,000
Net Assets
959,000
Totals
$4,760,000
$4,760,000
Required:
a. Open a general journal for the City of Monroe Water and Sewer Utility Fund and record the following transactions.
(1) During the year, sales of water to non-government customers amounted to $1,002,000 and sales of water to the General Fund amounted to $37,000.
(2) Collections from non-government customers amounted to $962,000.
(3) The Stores and Services Fund repaid $15,000 of the long-term advance to the Water and Sewer Fund.
(4) Materials and supplies in the amount of $257,000 were received. A liability in that amount was recorded.
(5) Materials and supplies were issued and were charged to the following accounts: cost of sales and services, $164,900; selling, $15,000; administration, $18,000; construction work in progress, $50,000.
(6) Payroll costs for the year totaled $416,200 plus $34,200 for the employer’s share of payroll taxes. Of that amount, $351,900 was paid in cash, and the remainder was withheld for taxes. The $450,400 (416,200 + 34,200) was distributed as follows: cost of sales and services, $265,800; sales, $43,900; administration, $91,400; construction work in progress, $49,300.
(7) Bond interest (6½%) in the amount of $162,500 was paid.
(8) Interest in the amount of $17,000 (included in 7 above) was reclassified to Construction Work in Progress.
(9) Construction projects at the water treatment plant (reflected in the beginning balance of construction in process) were completed in the amount of $203,000, and the assets were placed in service. Payments for these amounts were made in the previous year (no effect on 2015 Statement of Cash Flows).
(10) Collection efforts were discontinued on bills totaling $3,020. The unpaid receivables were written off.
(11) An analysis of customer receivable balances indicated the Estimated Uncollectible Accounts needed to be increased by $5,500.
(12) Payment of accounts payable amounted to $297,900. Payments of payroll taxes totaled $95,200.
(13) Supplies transferred from the Stores and Services Fund amounted to $58,000. Cash in the amount of $50,000 was paid to the Stores and Services Fund for supplies.
(14) Depreciation expense for the year was computed to be $275,000.
(15) In accord with the revenue bond indenture, $25,000 cash was transferred from operating cash to restricted assets.
b. Post the entries to the Water and Sewer Fund ledger (t-accounts).
c. Prepare and post an entry closing all nominal accounts to Net Assets. Compute the balance in the net asset accounts, assuming the only restricted assets are those identified with the bond indenture and the outstanding bonds are associated with the purchase of capital assets.
6–C. Part 3. Proprietary Fund Financial Statements
Required:
Prepare, in good form, for the proprietary funds accounted for in Parts 1 and 2, the following:
(1) A Statement of Revenues, Expenses, and Changes in Fund Net Assets for the Year Ended December 31, 2015.
(2) A Statement of Net Assets, as of December 31, 2015.
(3) A Statement of Cash Flows for the Year Ended December 31, 2015. Include restricted assets as a part of cash and cash equivalents for this statement. (Assume any materials and labor attributable to construction in process were paid by year end).
Debits
Credits
Cash
$105,000
Customer Accounts Receivable
77,000
Estimated Uncollectible Accounts Receivable
$4,000
Materials and Supplies
28,000
Advance to Stores and Services Fund
30,000
Restricted Assets
117,000
Water Treatment Plant in Service
4,200,000
Construction Work in Progress
203,000
Accumulated Depreciation - Utility Plant
1,200,000
Accounts Payable
97,000
Revenue Bonds Payable
2,500,000
Net Assets
959,000
Totals
$4,760,000
$4,760,000
Explanation / Answer
1) Non Government customers ac dr 1002000 General Fund ac dr 37000 To Sales of Water ac cr 1039000 2) Cash ac dr 962000 To Non Government Customers ac cr 962000 3) Cash ac dr 15000 To Store and Service Fund ac cr 15000 4) Material and supplies ac dr 257000 To Material and Suppliers ac cr 257000 5) Cost of Sales and Services ac dr 164900 Selling ac dr 15000 Administration ac dr 18000 Construction work in progress ac dr 50000 To Material and Suppliers ac cr 247900 6) Payroll cost ac dr 416200 Payroll tax ac dr 34200 To Pay roll cost and tax payable ac cr 450400 7) Cost of Sales and Services ac dr 265800 Selling ac dr 43900 Administration ac dr 91400 Construction work in progress ac dr 49300 To Payroll Cost ac cr 416200 To Payroll tax ac cr 34200 8) Bond Int. ac dr 162500 To Cash ac cr 162500 7) Construction work in progress ac dr 17000 To Bond Int. ac cr 17000 9) Water Treatement plant ac dr 203000 To Construction Work in Progress ac cr 203000 10) Bad debts ac dr 3020 To unpaid receivables ac cr 3020 11) Estimated Uncollectible Accounts Receivable ac dr 5500 To Customer Accounts Receivable ac cr 5500 12) Accounts payable ac dr 297000 Payroll Tax ac dr 95200 To Cash ac cr 392200 13) Supplies ac dr 58000 To Store and Service Fund ac cr 58000 14) Store and Service Fund ac dr 50000 To Cash ac cr 50000 15) Depreciation ac dr 275000 To Accumulated Depreciation - Utility Plant ac cr 275000 16) Restricted assets. ac dr 25000 To Cash ac cr 25000 Statement of Reveule and Expenditure Income Expenditure 1) Sale of Water 1039000 2) Material and supplies 257000 3) Payroll an tax 450400 4) Int. 162500 5) Bad debts 3020 6) Supplies 58000 7) Depreciation 275000 1039000 1205920 Fund Net Asstets opening Balance 959000 Add: Sale of Water 1039000 Less: Material and Supplies 257000 Payroll and tax payable 450400 1998000 707400 Cash Statment opening Balance 105000 Add Non Government Customers 962000 Store and Service Fund 15000 Less: Bond Int. 162500 Accounts payable 297000 Payroll Tax 95200 Store and Service Fund 50000 Restricted assets. 25000 977000 629700
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