Chapter 16 - Advanced Acccoutning (12th Edition) Prepare journal entries for the

Question

Chapter 16 - Advanced Acccoutning (12th Edition)

Prepare journal entries for the City of Toledo’s governmental funds to record the following transactions, first for the fund financial statements and then for government-wide financial statements. Indicate which fund is used for each fund-based transaction.

The town council adopts an annual budget for the general fund estimating general revenues of $1.7 million, approved expenditures of $1.5 million, and approved transfers out of $120,000.

The town levies property taxes of $1.3 million. It expects to collect all but 3 percent of these taxes during the year.

The town orders two new police cars at an approximate cost of $110,000.

A transfer of $50,000 is made from the general fund to the debt service fund.

The two police cars are received with an invoice price of $112,000. The voucher has been approved but not yet paid.

Depreciation on the new police cars is computed as $30,000 for the period.

Explanation / Answer

The budgeted revenue, expenses and approved transfers do not form part of journal entries, These are the limits upto which the transactions can be made.

1) Property tax Receivable A/c Dr $1.3 m

Estimated Uncollectibes 39000 (3% of 1.3 million)

Revenue A/c 1261000 (balancing Figure)

2) Police Cars A/c Dr $112000

Accounts payable 112000

3) Debt Service Fund Dr $50000

General Fund 50000

4) Depreciation - Police Vans $30000

Accumulated Depreciation $ 30000

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