Question 1. The City of Wetteville has a fiscal year ending June 30. Examine the following transactions for Wetteville:
(A) On 6/1/10, Wetteville enters into a 5-year lease on a copying machine. The lease meets the criteria of a capital lease and carries an implied interest rate of 10%. The copier has a present value of $2,300. Wetteville has to put a $300 down payment on the lease at the beginning of the lease with monthly payments thereafter of $42.49.
(B) On 6/5/10, Wetteville opens a new landfill. The engineers estimate that at the end of 10 years the landfill will be full. Estimated costs to close the landfill are currently at $3,500,000.
(C) On 6/15/08, the end of the two-week pay period, Wetteville has $20,000 in accrued vacation pay related to the payroll for the period. The city estimates that $5,000 of this pay will be taken by the end of this summer and the rest will be used next summer.
(D) On 6/18/08, Wetteville receives a donation of a vintage railroad steam engine. The engine will be put on display at the local town park. A fee will be charged to actually climb up into the engine. The engine has been valued at $500,000.
(E) On 6/30/08, Wetteville makes its first payment on the leased copier. The $42.49 payment includes $16.68 interest.
(F) On 6/30/08, Wetteville estimates that the landfill is 2% filled.
Required:
Prepare the journal entries for the above transactions, on the dates mentioned for each lettered item, for the purposes of preparing the government-wide financial statements.
Question 2:
The following are the transactions incurred by Gotham City. Prepare the journal entries required, first for fund-based accounting, including which fund it is made in as Part A. Second prepare the journal entries that would be made for city-wide accounting in Part B.
1. The city council passes this year's budget with revenues of 900,000, approved spending of 600,000, and operating transfers out of 250,000.
2. A contract is signed to build a city office complex for city government for 5,000,000. The budget for the complex was previously recorded.
3. Bonds are sold for 4,000,000 (same as their maturity value) for the new complex.
4. The complex is completed at its contract price. An invoice is received and paid.
5. Previously unrestricted cash of $700,000 is set aside to begin paying the bonds discussed in item 3.
6. A portion of the bonds comes due and $500,000 is paid. Of this total 100,000 is for interest on the bonds.
7. Legally-enforceable property taxes are assessed billing taxpayers $1,000,000. The taxes are to be received in the current year are 90% of the total. Another 5% will be collected in the following year and 5% of the total is estimated uncollectible.
8. Cash of $300,000 is received from the city's sole toll bridge. The money can only be used for highway and bridge maintenance.
9. The city received a portfolio of investment securities valued at $250,000 as a donation from a deceased citizen. Income from these investments must be used to support city libraries.