Question

The City of Dire Dewa started calendar year 2013 with General Fund cash of Br. 50,000 and fund balance (unassigned) of Br. 50,000. The Dire Dewa council approved the following General Fund budget for 2013:Estimated RevenuesProperty taxes …………………………………..Br.850,000Licenses and fees ………………………………….70,000Investment income …………………………………5,000 ……….. Br.925,000AppropriationsSalaries ………………………………… Br.800,000Utilities ……………………………………50,000Equipment …………………………………85,000……………….. 935,000Budgeted Decrease in Fund Balance …………………………… Br.10,000The following transactions and events occurred in 2013:i. Recorded the approved budget for the year.ii. Levied property taxes of Br.850,000. (The council assumed all property taxes would be collected in time to pay the year’s expenditures.)iii. Collected property taxes in the amount of Br.840,000 and licenses and fees of Br.70,000.iv. Invested Br.50,000 of available cash in a CD. Later in the year, redeemed the CD in full with interest of Br.2,000.v. Ordered police sedans for Br.80,000.vi. Received police sedans (with some extra bells and whistles) and an invoice for Br.82,000. (The Police chief liked the bells and whistles and approved the invoice for Br.82,000.) The invoice was subsequently paid. (Note: Record this purchase as capital outlay expenditure.)vii. Paid salaries of Br.770,000 and utility bills of Br.45,000.viii. During the last few days in December, Dire Dewar employees earned Br.25,000, which will be paid at the end of the pay period in early January 2014. Also, Dire Dewar received a utility bill for Br.4,000 for December 2013, which will be paid in January 2014.Use the preceding information to do the following:a. Prepare journal entries to record the foregoing transactions and events. b. Prepare a statement of revenues, expenditures, and changes in fund balance. c.Prepare balance sheet.

Answer 1

Explanation:

a. Journal Entries:

i. Budget Approval:

Debit: Appropriations - Salaries - Br. 800,000

Debit: Appropriations - Utilities - Br. 50,000

Debit: Appropriations - Equipment - Br. 85,000

Credit: Estimated Revenues - Property Taxes - Br. 850,000

Credit: Estimated Revenues - Licenses and Fees - Br. 70,000

Credit: Estimated Revenues - Investment Income - Br. 5,000

ii. Property Tax Levy:

Debit: Property Taxes Receivable - Br. 850,000

Credit: Property Taxes Revenue - Br. 850,000

iii. Collection of Revenues:

Debit: Cash - Br. 910,000

Credit: Property Taxes Receivable - Br. 840,000

Credit: Licenses and Fees Revenue - Br. 70,000

iv. Investment in CD:

Debit: Cash - Br. 50,000

Credit: Investments - Br. 50,000

v. Purchase of Police Sedans:

Debit: Equipment - Br. 80,000

Credit: Cash - Br. 80,000

vi. Payment for Police Sedans:

Debit: Equipment - Br. 2,000

Credit: Cash - Br. 82,000

vii. Payment of Salaries and Utility Bills:

Debit: Salaries Expense - Br. 770,000

Debit: Utilities Expense - Br. 45,000

Credit: Cash - Br. 815,000

b. Statement of Revenues, Expenditures, and Changes in Fund Balance:

Revenues:

Property Taxes Revenue - Br. 850,000

Licenses and Fees Revenue - Br. 70,000

Investment Income - Br. 2,000

Total Revenues - Br. 922,000

Expenditures:

Salaries Expense - Br. 800,000

Utilities Expense - Br. 50,000

Capital Outlay - Br. 82,000

Total Expenditures - Br. 932,000

Net Change in Fund Balance:

Revenues - Expenditures - Br. 10,000

Fund Balance:

Beginning Fund Balance - Br. 50,000

Net Change in Fund Balance - Br. 10,000

Ending Fund Balance - Br. 40,000

c. Balance Sheet:

Assets:

Cash - Br. 58,000

Investments - Br. 50,000

Property Taxes Receivable - Br. 10,000

Equipment - Br. 85,000

Total Assets - Br. 203,000

Liabilities:

None

Fund Balance:

Unassigned - Br. 40,000

Total Liabilities and Fund Balance - Br. 203,000