Journal entries, error correction. You have been engaged by the town of Rock Elm to examine its June 30, 20X8 balance sheet. You are the first CPA to be engaged by the town, and you find that acceptable methods of municipal accounting have not been employed. The town clerk stated that the books had not been closed and presented the following trial balance of the general fund as of June 30, 20X8:
|
Debit |
Credit |
|
|
Cash |
150,000 |
|
|
Taxes Receivable—Current Year |
59,200 |
|
|
Allowance for Uncollectible Current Taxes |
|
18,000 |
|
Taxes Receivable—Delinquent |
8,000 |
|
|
Allowance for Uncollectible Delinquent Taxes |
|
10,200 |
|
Estimated Revenues |
310,000 |
|
|
Appropriations |
|
348,000 |
|
Donated Land |
27,000 |
|
|
Expenditures—Building Addition Constructed |
50,000 |
|
|
Expenditures—Serial Bonds Paid |
16,000 |
|
|
Other Expenditures |
280,000 |
|
|
Revenues |
|
354,000 |
|
Accounts Payable |
|
126,000 |
|
Fund Balance—Unreserved, Undesignated |
|
82,000 |
|
Budgetary Fund Balance |
38,000 |
|
|
Total |
938,200 |
938,200 |
Additional information is as follows:
a. The estimated uncollectible taxes of $18,000 for Taxes Receivable—Current Year were determined to be reasonably estimated, but for the prior year they should not exceed 100% of Taxes Receivable Delinquent.
b. Included in the revenues account is a credit of $27,000 representing the value of land donated by the state for construction of a municipal park.
c. The Expenditures—Building Addition Constructed balance is the cost of an addition to the town hall building. This addition was constructed and completed in June, 20X8. The general fund recorded the payment as authorized.
d. The Expenditures—Serial Bonds Paid balance reflects the transfer to the debt service fund for serial bond retirement. A transfer of $7,000 for interest payments on this bond issue is included in Other Expenditures.
e. Operating supplies ordered in the prior fiscal year and chargeable to that year were received and consumed in June 20X7. The vendors’ invoices amounting to $8,800 for these supplies were incorrectly charged to Other Expenditures when paid in July 20X7.
f. Outstanding purchase orders at June 30, 20X8, for operating supplies totaled $2,100. These purchase orders were not recorded on the books.
g. The balance in Revenues includes credits for $20,000 from a note issued to a bank to obtain cash in anticipation of tax collections and for $1,000 from the sale of scrap iron from the town’s water plant. The note was still outstanding at June 30, 20X8. Operations of the water plant are accounted for in the Water Fund (a proprietary fund), which is to receive the proceeds from the scrap sale.
h. At year-end, current taxes are to be reclassified as delinquent.
1. Prepare the adjusting entries for the general fund for the fiscal year ended June 30, 20X8. Account titles should be respected if acceptable, even though different. Closing entries are not required.
2. Prepare formal adjusting journal entries for the general fixed assets account group and for the general long-term debt account group.