Comprehensive Problem Solving: The Ultimate Guide Free Essay Example

Question 1: General Fund versus Internal Service Fund

Billing to other documents (revenues);

In Internal Service Funds the Billing to other departments (revenues) = $19,000,000

In general funds the Billing to other departments (revenues) = $19,000,000

Cost of Supplies (expense or expenditure)

In Internal Service Funds the Cost of Supplies (expenses or expenditure) = $4,000,000

In general funds the Cost of Supplies (expenses or expenditure) = $1,000,000

Expenses or Expenditures relating to acquisition or use of equipment

In Internal Service Funds the expenses = $24,000,000

In general funds the expenses = $0

Other operating costs

In Internal service funds = $13,000,000

In general funds = $13,000,000

Equipment (asset)

In Internal Service funds = $24,000,000 + $4,000,000 = $28,000,000

In general service funds = $0 + $1,000,000 = $1,000,000

Accumulated depreciation = depreciates fully after 8 years

In Internal service Fund = $3,000,000

In general fund = $ 0

Inventory

In Internal service fund = $24,000,000 + $4,000,000 = $28,000,000

In general fund = $0 + $ 3,000,000 = $3,000,000

Notes payable

In Internal Service Fund = $24,000,000

In general fund = $24,000,000

Non-spendable fund balance

In Internal Service Fund = $ 0

In general funds = $ 1,000,000

2. The total expenses in the Internal service fund = Expenses or Expenditures ₊ operating costs

The total expenses in the Internal service fund = $24,000,000 + $13,000,000 = $37,000,000

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3. Total amount of expenditure in the general fund as per the internal service fund = $24,000,000

Total amount of expenditure in the general fund as per the general fund = $13,000,000

4. The reported revenue and expenses = $19,000,000 + $37,000,000 = $56,000,000

Yes, it would matter if the district accounted for shop in a internal service fund but it would not matter if the district accounted for the shop in a general fund.

Question 2

a. Journal entry

Date	Account titles	Debit	credit
2011	cash cash	$20000	$0
2011	Marketable securities cash	$100,000	$0
2011	Building	$400,000
	cash		$0

Journal entry

Date

Account titles

Debit

credit

2011

Leased office

cash

$46,000

2011

cash

expenses

$15,000

Journal entry

Date

Account titles

Debit

credit

2011

Sold securities

cash

$26000

$20000

2011

Marketable securities

cash

$97,000

Journal entry

Date

Account titles

Debit

credit

2011

Dividends

cash

$5000

Total revenue = $214,000

Expenses = $15,000

Journal entry

Date

Account titles

Debit

credit

2011

cash

distribute fund’s revenue

$214,000

2011

cash

expenses

$15,000

Christopher City

Balance Sheet

2011

Assets

Liabilities

Current assets

Cash $20,000

Property

Building $400,000

Investment $26,000

Total assets = $446,000

Current liabilities

Total current liabilities $0

Stockholder’s equity

Common stock $97000

Total liabilities & stockholder’s equity =$97000

The fund would be reported as a separate entity from all the federal entities of Christopher City. The assets of the funds will not be recognized on the balance sheet of the city. The City is required to include the fund as a separate entity and to disclose the nature of the fiduciary fund, the schedule of the fiduciary net assets and the schedule of the fiduciary activities.
If a trust was established to benefit the programs and activities of the city the fund that would be used is the expendable fund. The main differences in the accounting principles is that in the non-expendable fund the principal amount is not used at all the income however can be used in whatever way however in expendable trust the principle and the income of the fund can be used for different purposes. The expendable trust would be recorded as a separate entity different from the federal entities in the city’s government wide statements.

Question 3: Illustrative Journal

Transaction 1 – It received a $10,000,000 endowment contribution, all in stocks and bonds

Description	Account Number	DR	CR
Endowment contribution	1111	$10,000,000
Cash repayable	1010		$10,000,000

Explanation: It received a $10,000,000 endowment contribution, all in stocks and bonds. None of the money is being repaid.

Transaction 2 – It received $3,000,000 in additional contributions, all restricted for its educational programs and $2,300,000 in unrestricted contributions

Description	Account Number	DR	CR
Additional contributions	1111	$3,000,000
Unrestricted contributions	1111	$2,300,000
Cash repayable	1010		$5,300,000

Explanation: It received a $5,300,000 contribution. None of the money is being repaid.

Transaction 3:

Description	Account Number	DR	CR
Equipment purchase	1111	$800,000
Cash repayable			$200,000

Explanation: assuming depreciation occurs at a rate of 75% for the entire 10 year period, the payable amount becomes $200,000.

Transaction 4: It spent $2,400,000 on educational programs.

Description	Account Number	DR	CR
Educational programs	1111	$2,400,000
Cash repayable	1010		$2,400,000

Explanation: the entire amount was paid out to cater for educational programs.

Transaction 5: It earned $300,000 in interest and dividends on its endowment investments

Description	Account Number	DR	CR
Interest earnings	1111	$300,000
Cash repayable	1010

Transaction 6: By year-end the value of its investments had appreciated by $600,000.

Description	Account Number	DR	CR
Appreciation	1111	$600,000
Cash repayable	1010

Explanation: no cash was repayable from the earnings.

Transaction 8: It incurred $1,300,000 in administrative expenses

Description	Account Number	DR	CR
Administrative expenses	1111	$1,300,000
Cash repayable	1010		$1,300,000

Explanation: It incurred $1,300,000 in administrative expenses. This was paid out of the accounts repayable account.

Transaction 9: Near year-end it received a pledge of $4,500,000, to be fulfilled in three installments of $1,500,000 beginning in one year.

Description	Account Number	DR	CR
Annual Pledge	1111	$1,500,000
Cash repayable	1010

Explanation: the pledge was paid to the cash account. The balance was to be applied with a 6% discount, which will be paid out in the second and third years.

Financial Statement

	Primary Government
	Governmental Activities	Total
ASSETS
Current assets:
Cash and cash equivalents	$ 13,800,000	$ 13,800,000
Taxes receivables (net)	-	-
Accrued interest receivable on taxes	300,000	300,000
Accounts receivable (net)	-	-
Due from other governments	-	-
Due from component units	600,000	600,000
Internal balances	-	-
Inventories	3,945	3,945
Prepaid items	-	-
Restricted cash and cash equivalents	6,530,000	6,530,000
Total current assets	21,233,945	21,233,945

Non-current assets:
Capital assets (Note 4):
Land, non-depreciable improvements, and construction in progress	-	-
Other capital assets, net of depreciation	200,000	200,000
Total capital assets	200,000	200,000
Total assets	21,433,945	21,433,945


LIABILITIES
Current liabilities:
Accounts payable	2,600,000	2,600,000
Accrued interest payable	-	-
Due to primary government	1,300,000	1,300,000
Due to other governments	-	-
Current portion of long-term liabilities	-	-
Payable from restricted assets	-	-
Total current liabilities	3,900,000	3,900,000

Long-term liabilities:
Net pension liability	-	-
Total pension liability	-	-
Due in more than one year	-	-
Total liabilities	3,900,000	3,900,000

Question 4: University Accounting

Transaction 1 – I January 2015, Kirkland University receives a pledge of $200,000, to be used exclusively to support research in a specialized area of communication disorders.

Description	Account Number	DR	CR
Pledge	0001	$200,000
Cash repayable	1010

Explanation: It received a $200,000 pledge. None of the money is being repaid as it remains to be received.

Transaction 2 – Kirkland receives the pledge contribution of $200,000 and spends $150,000 on qualifying research

Description	Account Number	DR	CR
Pledge contributions	1111	$200,000
Cash repayable	1010		$150,000

Explanation: It received a $200,000 contribution. $150,000 is being repaid, when spent on the relevant research area.

Table 1 : Public University Accounting

	University
	Public University Activities	Total
ASSETS
Current assets:
Cash and cash equivalents	$ 200,000	$ 200,000
Taxes receivables (net)	-	-
Accrued interest receivable on taxes	-	-
Accounts receivable (net)	-	-
Due from other governments	-	-
Due from component units	-	-
Internal balances	-	-
Inventories	-	-
Prepaid items	-	-
Restricted cash and cash equivalents	-	-
Total current assets	200,000	200,000

Non-current assets:
Capital assets (Note 4):
Land, non-depreciable improvements, and construction in progress	-	-
Other capital assets, net of depreciation	-	-
Total capital assets	-	-
Total assets	200,000	200,000


LIABILITIES
Current liabilities:
Accounts payable	150,000	150,000
Accrued interest payable	-	-
Due to primary government	-	-
Due to other governments	-	-
Current portion of long-term liabilities	50,000	50,000
Payable from restricted assets	-	-
Total current liabilities	200,000	200,000

Long-term liabilities:
Net pension liability	-	-
Total pension liability	-	-
Due in more than one year	-	-
Total liabilities	200,000	200,000

Table 2 : Not-for-Profit University Accounting

	University
	Not-for-profit University Activities	Total
ASSETS
Current assets:
Cash and cash equivalents	$ 200,000	$ 200,000
Taxes receivables (net)	-	-
Accrued interest receivable on taxes	-	-
Accounts receivable (net)	-	-
Due from other governments	-	-
Due from component units	-	-
Internal balances	50,000	50,000
Inventories	-	-
Prepaid items	-	-
Restricted cash and cash equivalents	-	-
Total current assets	250,000	250,000

Non-current assets:
Capital assets (Note 4):
Land, non-depreciable improvements, and construction in progress	-	-
Other capital assets, net of depreciation	-	-
Total capital assets	-	-
Total assets	250,000	250,000


LIABILITIES
Current liabilities:
Accounts payable	150,000	150,000
Accrued interest payable	-	-
Due to primary government	-	-
Due to other governments	-	-
Current portion of long-term liabilities	50,000	50,000
Payable from restricted assets	-	-
Total current liabilities	200,000	200,000

Long-term liabilities:
Net pension liability	-	-
Total pension liability	-	-
Due in more than one year	-	-
Total liabilities	200,000	200,000

Justification for different accounting methods:

Due to the fact that the non-profit university provides basic services to the people without the aim of making profits, the accounting methods are different. The aim of the accounting is obtain the net assets that the institution has. In this case, therefore, the remaining amount ($50,000) is the net assets left in the possession of the university were it a not-for-profit organization.

However, where it is a public institution, the objective changes during accounting and becomes the need to show the use of resources for the benefit of the institution as well as the provision of basic services. As a result, the financial statements show a slightly more balanced perspective.

Comprehensive Problem Solving: The Ultimate Guide

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