7–3 Central Duplicating Internal Service Fund. As of September 30, 2010, the Central Duplicating Fund of the Town of Fredericksburg had the following post-closing trial balance:
Cash $ 15,000 Due from Other Funds 20,200 Service Supplies Inventory 35,300 Machinery and Equipment 300,000 Allowance for Depreciation $ 90,000 Due to Federal Government 1,500 Due to Other Funds 800 Accounts Payable 12,700 Net Assets—Invested in Capital Assets 210,000 Net Assets—Unrestricted 55,500 $370,500 $370,500
During the fiscal year ended September 30, 2011, the following transactions (summarized) occurred:
1. Employees were paid $290,000 wages in cash; additional wages of $43,500 were withheld for federal income and social security taxes. The employer’s share of social security taxes amounted to $23,375.
2. Cash remitted to the federal government during the year for withholding taxes and social security taxes amounted to $65,500.
3. Utility bills received from the Town of Fredericksburg’s Utility Fund during the year amounted to $23,500.
4. Office expenses paid in cash during the year amounted to $10,500.
5. Service supplies purchased on account during the year totaled $157,500.
6. Parts and supplies used during the year totaled $152,300 (at cost).
7. Charges to departments during the fiscal year were as follows:
General Fund $308,700 Street Fund 279,300
8. Unpaid balances at year-end were as follows:
General Fund $10,000 Street Fund 20,000
9. Payments to the Utility Fund totaled $21,800.
10. Accounts Payable at year-end amounted to $13,250.
11. Annual depreciation rate for machinery and equipment is 10 percent.
12. Revenue and expense accounts for the year were closed.
a. Prepare a statement of revenues, expenses, and changes in net assets for the year.
b. Comment on the evident success of the pricing policy of this fund, assuming that user charges are intended to cover all operating expenses, including depreciation, but are not expected to provide a net income in excess of 3 percent of billings to departments.
c. Prepare a statement of net assets for the Central Duplicating Fund as of September 30, 2011.
d. Prepare a statement of cash flows for the Central Duplicating Fund for the year ended September 30, 2011.
7–8 Enterprise Fund Journal Entries and Financial Statements. Following is the June 30, 2010, statement of net assets for the City of Bay Lake Water Utility Fund.
Current assets: Cash and investments Accounts receivable (net of $13,367 provision for uncollectible accounts) Accrued utility revenue Due from General Fund Accrued interest receivable $ 1,775,019 306,869 500,000 29,311 82,000 Total current assets Restricted assets: Cash Capital assets: Land Buildings (net of $3,420,000 in accumulated depreciation) Machinery and equipment (net of $5,129,928 in accumulated depreciation) $1,780,945 5,214,407 8,488,395 2,693,199 9,193 Total capital assets (net) 15,483,747 Total Assets 18,186,139 Current liabilities: Accounts payable Accrued interest payable Current portion of long-term debt 532,047 131,772 400,000 Total current liabilities payable from restricted assets: Customer deposits Long-term liabilities: Revenue bond payable 1,063,819 9,193 11,600,000 Total Liabilities 12,673,012 Invested in capital assets, net of related debt Unrestricted 3,483,747 2,029,380 $ 5,513,127
a. For fiscal year 2011, prepare general journal entries for the Water Utility Fund using the following information.
(1) The amount in the Accrued Utility Revenue account was reversed.
(2) Billings to customers for water usage during fiscal year 2011 totaled $2,982,557; $193,866 of the total was billed to the General Fund.
(3) Cash in the amount of $260,000 was received. The cash was for interest earned on investments and $82,000 in accrued interest.
(4) Expenses accrued for the period were: management and administration, $360,408; maintenance and distribution, $689,103; and treatment plant, $695,237.
(5) Cash receipts for customer deposits totaled $2,427.
(6) Cash collections on customer accounts totaled $2,943,401, of which $209,531 was from the General Fund.
(7) Cash payments for the period were as follows: Accounts Payable, $1,462,596; interest (which includes the accrued interest payable), $395,917; bond principal, $400,000; machinery and equipment, $583,425; and return of customer deposits, $912.
(8) A state grant amounting to $475,000 was received to help pay for new water treatment equipment.
(9) Accounts written off as uncollectible totaled $10,013.
(10) The utility fund transferred $800,000 in excess operating income to the General Fund.
(11) Adjusting entries for the period were recorded as follows: depreciation on buildings was $240,053 and on machinery and equipment it was $360,079; the allowance for uncollectible accounts was increased by $14,913; an accrual for unbilled customer receivables was made for $700,000; accrued interest income was $15,849; and accrued interest expense was $61,406.
(12) The Revenue Bond Payable account was adjusted by $400,000 to record the current portion of the bond.
(13) Closing entries and necessary adjustments were made to the net asset accounts.
b. Prepare a statement of revenues, expenses, and changes in fund net assets for the Water Utility Fund for the year ended June 30, 2011.
c. Prepare a statement of net assets for the Water Utility Fund as of June 30, 2011.
d. Prepare a statement of cash flows for the Water Utility Fund as of June 30, 2011.