Question

A city engaged in the following transactions during a year: It acquired computer equipment at a cost of $40,000. It completed construction of a new jail, incurring $245,000 in new costs. In the previous year the city had incurred $2.5 million in construction costs. The project was accounted for in a capital projects fund. It sold for $16,000 land that it had acquired three years earlier for $28,000. It traded in a four‐year‐old sanitation department vehicle for a new model. The old vehicle had initially cost $27,000, its carrying value at the time of trade was $17,000, and its market value was $13,000. The city paid an additional $39,000 cash for the new model. The fair value of the new model was $52,000. Prepare journal entries to reflect the transactions in an appropriate governmental fund (e.g., a general fund or a capital projects fund). Prepare journal entries to reflect the transactions in the city's government‐wide statements.

Answer 1

1. Journal entries to reflect the transactions in an appropriate governmental fund

S/N Particulars Debit ($) Credit ($)

1. Expenditure - acquisition of 40,000

computers

Cash 40,000

2. Expenditure - Construction cost 245,000

Cash 245,000

3 Cash 16,000

Other financing sources - sale of land 16,000

4 Expenditure - acquisition of vehicle 39,000

Cash 39,000

Note: Cash being asset account, decreases hence debited. Expenditure being expense account increases hence debited.

2. Journal entries to reflect the transactions in the city's government-wide statements

S/N Particulars Debit ($) Credit ($)

1. Computers 40,000

Cash 40,000

2 Construction in process 245,000

Cash 245,000

3 Buildings 2,745,000

Construction in process 2,745,000

4 Cash 16,000

Loss on sale of land 12,000

Land 28,000

5 Vehicle – new 52,000

Accumulated depreciation - 10,000

old vehicle

Loss on trade-in 4,000

Cash 39,000

Vehicle - old 27,000

Note: All assets are asset accounts increases hence debited, If decrease then credited. All expenses are expense accounts increases hence debited, if decrease then credited.