Question

Government-wide statements report on assets and liabilities that are denied recognition on funds statements. Entrepreneurs Consultants, a state agency, was estab- lished to provide consulting services to small businesses. It maintains only a single general fund and accounts for its activities on a modified accrual basis. During its first month of operations, the association engaged in, or was affected by, the following transactions and events:

1. It received an unassigned grant of $100,000.
2. It purchased five computers at $2,000 each.
3. It paid wages and salaries of $6,000.
4. Itborrowed$24,000fromabanktoenableittopurchase an automobile. It gave the bank a long-term note.
5. It purchased the automobile for $24,000.
6. It made its first payment on the note—interest of $200.
7. It destroyed one of its computers in an accident. The computer was not insured.
a. Prepare journal entries in the general fund to record each of the transactions or other events.
b. Prepare a balance sheet and a statement of revenues and expenditures for the general fund.
c. Prepareagovernment-widestatementofnetposition (balance sheet) and statement of activities. These should be on a full accrual basis. Assume that the capital assets have a useful life of five years and that no depreciation is to be charged on the computer that was destroyed.

Answer 1

1. Cash (Dr.) $100,000

Unassigned grant (Cr.) $100,000

2. Computers (Dr.) $10,000

Cash (Cr.) $10,000

3. Salaries and Wages (Dr.) $6,000

Cash (Cr.) $6,000

4. Cash (Dr.) $24,000

Long term bank loan - Notes payable (Cr.) $24,000

5. Automobile (Dr.) $24,000

Cash (Cr.) $24,000

6. Interest Expense (Dr.) $200

Cash (Cr.) $200

7. no entry

Step-by-step explanation:

Balance Sheet

Assets:

Cash $90,000

Computer $10,000

Automobile $24,000

Total Assets $124,000

Liabilities:

Notes Payable $24,000

Equity:

Grant Received $100,000

Total Equity and Liability $124,000