Question

Special Revenue Fund Transactions Required: a. Record journal entries for the following transactions for FY 2014 and post to the general ledger. As there are relatively few revenues and expenditures, the use of control accounts is not necessary. (Make entries directly to individual revenue and expenditure accounts).

(1) The state government notified the City that $1,085,000 will be available for street and highway maintenance during 2014 (i.e. the City has met eligibility requirements). The funds are not considered reimbursement-type as defined by GASB standards.

(2) Cash in the total amount of $990,000 was received from the state government.
(3) Contracts, all eligible for payment from the Street and Highway Fund, were signed in the amount of $1,044,000.
(4) Contractual services (see transaction 3) were received; the related contracts amounted to $1,037,500. Invoices amounting to $1,026,000 for these items were approved for payment. The goods and services all were for street and highway maintenance.
(5) Investment revenue of $6,000 was earned and received.
(6) Vouchers were paid in the amount of $956,000.
(7) All required legal steps were accomplished to increase appropriations in the amount of $12,500.
b. Prepare and post the necessary closing entries for the Street and Highway Fund.
c. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balances for the Street and Highway Fund for the fiscal year ended December 31, 2014.
d. Prepare a Balance Sheet for the Street and Highway Fund as of December 31, 2014. Assume any unexpended net resources are classified as Restricted Fund Balance.

Answer 1

The student's question involves preparing journal entries and financial statements for a Special Revenue Fund in government accounting. Journal entries for the provided transactions are created, and subsequently, a Statement of Revenues, Expenditures, and Changes in Fund Balances, and a Balance Sheet for the fiscal year ended December 31, 2014, are needed.

Step-by-step explanation:

To address the student's question, we should first prepare journal entries for the given transactions and then proceed to create the necessary financial statements for the Special Revenue Fund, specifically the Statement of Revenues, Expenditures, and Changes in Fund Balances, and the Balance Sheet.

Journal Entries for FY 2014

1. Dr. Due from State Government 1,085,000
   Cr. Revenues - State Grants 1,085,000
2. Dr. Cash 990,000
   Cr. Due from State Government 990,000
3. Dr. Expenditures - Street & Highway Maintenance 1,044,000
   Cr. Vouchers Payable 1,044,000
4. Dr. Vouchers Payable 1,026,000
   Cr. Cash 1,026,000
5. Dr. Cash 6,000
   Cr. Investment Revenue 6,000
6. Dr. Vouchers Payable 956,000
   Cr. Cash 956,000
7. Dr. Budgetary Control - Additional Appropriations 12,500
   Cr. Appropriations - Additional 12,500

Closing Entries for FY 2014

The closing entries would include closing the revenue and expenditure accounts to the Fund Balance account to reflect the changes during the year.

Financial Statements for Street and Highway Fund

The Statement of Revenues, Expenditures, and Changes in Fund Balances would list the revenues received, expenditures made, and the resulting changes in fund balance for the fiscal year. Similarly, the Balance Sheet would present the assets, liabilities, and fund balances as of December 31, 2014. In the case where resources are unexpended, they would be classified as Restricted Fund Balance.

Classifying Transactions

The transactions provided deal with the financial management of state and local governments, which involves receiving state grants, incurring expenditures related to street and highway maintenance, and managing investment revenue. These transactions are typical for a Special Revenue Fund, which is used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes.

Answer 2

The journal entries are made as indicated in the attached excel and working files screenshots.

Step-by-step explanation:

The data given is used in the sheet.