GOVERNMENTAL FINANCIAL STATEMENT PROJECT
Background:
The date is December 31, 2091. You have just risen from a three-month cryogenic sleep during which you traveled from Earth to Europa, the only inhabited moon of Jupiter.
Europa has been colonized since the early 2060’s. To encourage development the United Earth Council gave land grants to colonists willing to leave Earth and settle this new world. The Council also built a series of water purification and power generating plants. These plants utilize the natural geothermal resources of Europa to generate electrical power.
Most of the inhabitants are engaged in the operation of the quarter-million-acre farms which span the temperate zones on either side of the equator. The labor is performed by robots through a centralized computer under the direction of the owner/farmer and family members. Harvests are transported by freighter to Earth. It is lonely, although profitable life with an average of 10 harvests per Earth year. All banking is performed on Earth through electronic funds transfers. A substantial business sector has developed, servicing the farming operations.
After several decades of hard work, the inhabitants of Europa are beginning to enjoy the rewards of their labors and are seeking some of the services which can only be provided by a local centralized government. They naturally sought to establish this government on Europa and petitioned the United Earth Council for admission to the Council as a member province.
Province status was granted by a vote of the Council and the citizens of Europa acted quickly to organize their new government, which officially began operations on January 1, 2091. One of the tasks facing the new government was to hire qualified people to carry on the day-to-day business of the government. You represent one of these people, having been highly trained in the subtleties of governmental accounting.
Ownership of public facilities which were constructed by the United Earth Council was transferred to the new province as of midnight on
12-31-2090. In return, the Province issued long-term bonds payable which provide for interest and principle payments to the United Earth Council over the next 20 years.
Having no qualified governmental accountants on Europa, the province administrator has simply made notes summarizing the transactions which have occurred since the beginning of operations. Your task is to establish a fund accounting system, prepare summary journal entries recording all transactions, and prepare the year end 12-31-2091 financial statements for the Province.
Requirements:
You must use formulas and references whenever possible – there should be no calculations done outside of Excel.
Part 1:
⦁ Prepare fund-basis financial statements, including a budget comparison statement for the General Fund.
⦁ Prepare ledgers (t-accounts) with journal entries for each fund and account group
⦁ T-accounts: For consistency, do not leave spaces in between entries. See the following example:
Part 2:
⦁ Prepare government-wide financial statements
⦁ Prepare worksheets and journal entries for the governmental activities portion of the government-wide financial statements
PROVINCE OF EUROPA
Transaction list
for the year ended December 31, 2091
Account Structure:
Because the Province has a limited number of revenue sources, revenue control accounts are not used. Rather, General Fund revenues are directly recorded into the following accounts (property taxes, sales taxes, fees licenses and permits, program fees, and intergovernmental grants) Similarly, expenditures are recorded directly into the following accounts: (general government operations, public safety, capital outlay, and debt service: principal and interest).
The Province established the Bureau of Electricity and Water to operate as an enterprise fund. The enterprise fund reports expenses by object category using the following account titles: (salaries, supplies, depreciation, and interest).
There are no fiduciary, special revenue, permanent, or internal service funds. The government uses account groups to record general fixed assets and general long-term debt.
Beginning Balances:
⦁ At 12-31-2090, the remaining cash and supplies on hand in the government offices were transferred to the new Province government. The opening trial balance for the Province for 1-1-2091 was as follows:
GENERAL FUND
Trial Balance Jan. 1, 2091
debits credits
Cash 26,000 Fund Balance:
Supplies 13,000 Assigned (Reserved
for encumbrances) 9,288
Unassigned 29,712
39,000 39,000
The supplies were office supplies for general government operations. (Only record the beginning balances in the t-accounts. Do not record current year journal entries.)
⦁ The reserve for encumbrances (in #1 above) relates to a purchase order placed in December of 2090 for engineering services (see #7 below). The Province honors outstanding encumbrances from previous years and the encumbrance should be re-established for 2091. For purposes of the Budgetary Comparison Statement, amounts are charged to the budget in the year they are initially encumbered, regardless of when the expenditure is incurred.
⦁ On December 31, 2090, the United Earth Council (U.E.C.) transferred the following capital assets. The Province Council assigned custody of these assets to the general Province government and the Bureau of Electricity and Water as follows:
General
Government Useful
Bureau Life Salvage
Value_
Land
Buildings, roads, and $ 2,000,000 $900,000
other structures 1,395,000 450,000 10 $ 0
Equipment 480,000 150,000 5 0
Geothermal Generators 0 650,000 5 0
Total $3,875,000 $2,150,000
========== ==========
In return for these assets, the Province government issued $1,875,000, 10 percent general obligation serial bonds. Principal payments of $93,750 and interest payments on the bonds are to be paid at the end of each year starting on December 31, 2091.
Similarly, the Bureau of Electricity and Water issued (at face value) $1,250,000, 10 percent long-term revenue bonds in exchange for the capital assets listed above. The bonds call for annual interest payments on January 1 and mature on January 1, 2101. Since these events occurred on the last day of 2090, they represent beginning balances for 2091.
Note: (The difference between the asset values and the debt issued is properly recorded as beginning Net Position in the financial statements prepared using the economic resource measurement focus).
Current Year Transactions:
⦁ The government of the Europa Province established the Bureau of Electricity and Water. The Bureau of Electricity and Water is in charge of providing the power and water for residents and the Province government. On January 1, 2091, the Province government agreed to contribute $350,000 for establishment of the Bureau of Electricity and Water and transferred cash on February 1, 2091.
⦁ On January 1, 2091, The Province Council approved budgets for 2091 as follows:
Budget Items Province Government
Capital Additions Bureau of Electricity and
Water
Revenue and other financing sources
Property Taxes Sales Taxes
Fees, Licenses and Permits Charges for Services (Bureau) Intergovernmental grants Transfer from General Fund
Proceeds from Bond Issues
$3,750,000 925,000
615,000
630,000
$ 700,000
2,500,000
$3,250,000 350,000
1,250,000
Expenditures/expenses and other financing uses:
General government operations Public Safety
Operating expenses (Bureau) Capital Outlays
Transfers to other funds
1,926,000
1,481,000
1,350,000
2,750,000
3,200,000
1,875,000
⦁ On January 10, 2091, a cash grant of $630,000 was received from the United Earth Council for operation of the Province. The grant provisions stipulate the funds are to be used to supplement general operations of the government.
⦁ On January 31, 2091, $3,800,000 in property taxes were levied. Of this, $19,000 (0.5% of property taxes) is estimated to be uncollectible. The remaining tax bills are expected to be collected within 60 days following the end of the fiscal year. As of December 28, 2091, $3,570,000 was collected. As of December 31, 2091, $11,000 of taxes are identified as uncollectible and written off.
⦁ On January 5, 2091, the engineering report ordered in December of the previous year (see #1 above) was received along with an invoice for of $9,124. The invoice was immediately paid. The engineering report was for general government operations.
⦁ As of April 19, 2091, the Province government placed orders amounting to $995,000 for supplies. All the supplies ordered were received as of September 22, 2091, with an invoice price of $980,000. On October 1, 2091, $960,000 was paid on the invoices. The supplies were distributed by major functions of government as follows:
General
Operation Public
Safety Total_
Order placed $ 595,000 $ 400,000 $ 995,000
Invoice prices 580,000 400,000 980,000
The government uses the consumption method of recording supplies – (i.e. expenditure is determined by the amount of supplies used – not purchased – during a period).
⦁ On March 15, 2091, the Bureau of Electricity and Water placed orders amounting to $800,000 for supplies. On April 7, 2091, the supplies were received with an invoice price of $775,000. On July 21, 2091, $625,000 of the invoices was paid.
⦁ On February 3, 2091, the Province Council approved the construction of a new school building at an estimated cost of $3,200,000. The issuance of $2,500,000 in general obligation long-term bonds was authorized to finance the cost of construction. In addition, the Province government agreed to provide
$700,000 for the construction project.
⦁ On March 31, 2091, the Province government transferred $700,000 to the school building capital project.
⦁ On April 1, 2091, $2,500,000 in 10 percent general obligation long-term bonds were issued for
$2,580,000. The premium of $80,000 was reserved for redemption of the bonds while the principal was set aside for construction of the school.
⦁ On June 1, 2091, the school building contract was awarded to the lowest bidder for $2,780,000, including planning and architect’s fees.
⦁ On November 30, 2091, the progress billings of $2,350,000 for the school building were received from the contractor. On December 19, 20291, $1,500,000 was paid on the November billing. The remaining balance is expected to be paid in January 2092. Liabilities resulting from capital additions are recorded in “Contracts Payable”, .
⦁ On May 28, 2091, the Board of the Bureau of Electricity and Water approved the construction of an office building at an estimated cost of $920,000.
⦁ On July 1, 2091, the office building contract was signed in the amount of $915,000, including planning and architect’s fees.
⦁ On October 30, 2091, construction on the office building was completed and $815,500 was paid on the contract. The remaining portion will be paid following final inspection on January 15, 2092. Liabilities resulting from capital additions are recorded in “Contracts Payable”,
⦁ On November 27, 2091, fire equipment was ordered for the public safety department at an estimated cost of $51,471. The units have not been delivered as of December 31, 2091.
⦁ As of December 31, 2091, the Province government received the following cash collections:
Sales taxes $ 918,000
Permits, fees & licenses 621,000
$ 1,539,000
⦁ As of December 31, 2091, salaries and wages of $3,188,000 were incurred and paid by the Province government and the Bureau of Electricity and Water. Salaries and wages are classified by governmental functions as follows:
Incurred_& Paid
General operation $ 847,000
Public safety 724,000
Bureau of Electricity Water 1,617,000
Total $ 3,188,000
⦁ As of November 30, 2091, the Bureau of Electricity and Water billed the Province government and the residents for electricity and water services in the amounts of $870,000 and $2,975,000, respectively. The Bureau estimated that 3% of the gross revenue from the residents will be uncollectible. As of December 28, 2091, $835,000 and $2,625,000 of the bills sent to the Province government and the residents, respectively, are collected. As of December 31, 2091, $10,500 of the bills sent to the residents are identified as uncollectible and written off.
The electricity and water services provided to the Province government were charged by government functions as follows:
General operation $ 545,000
Public safety 325,000
⦁ On December 20, 2091, $281,250 was removed from general government funds and set aside for payments on outstanding general obligation serial bonds.
⦁ On December 31, 2091, the Province government made principal payment of $93,750 and annual interest of $187,500 on the general obligation serial bonds.
⦁ As of December 31, 2091, physical inventories of supplies on hand report the following:
General operation $ 67,000
Public safety 17,000
Bureau of Electricity Water 27,000
⦁ On December 31, 2091, the Bureau of Electricity and Water accrued annual interest on the 10% bonds described in item #2.
⦁ The Province government and the Bureau of Electricity and Water recorded depreciation for 2091 using the straight-line method. The new office building is estimated to have zero salvage value and 10- year useful life and is depreciated on a monthly basis, beginning with the month it was placed in service.
⦁ Prepare closing entries for December 31, 2091, where appropriate. DO NOT post the closing entries to the t-accounts.
⦁ For purposes of classifying fund balances in the governmental funds, assume:
⦁ Supplies are the only nonspendable resource,
⦁ The outstanding encumbrances in the General Fund are classified as Assigned for capital asset acquisitions
⦁ The residual balances of the debt service funds are classified as assigned.
⦁ The residual balances of capital projects funds are classified as restricted.
Last Completed Projects
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