Three Advance Accounting Questions

(Q1)
Vaughn issued an 9%, 10-year $2,000,000 bond to build a monorail mass transit system. The city
received $1,764,431 cash from the bond issuance on January 1, 2025. The bond yield is 11%. Interest is
paid annually on December 31 of each year. Disclosure information about capital assets is reported
below.
Disclosure of Information about Capital Assets for the Year Ending December 31, 2025
Primary Government
Governmental Activities
Beginning Balance
Land
$500,000
$500,000
Building
760,000
760,000
Machinery and Equipment
950,000
Construction in Progress
Additions
Retirements
$(225,000)
$1,510,000
Ending Balance
725,000
1,510,000
Infrastructure
450,000
450,000
Totals at historical cost
$2,660,000
$1,510,000
Building
(191,000)
(58,750)
Machinery and Equipment
(235,000)
(75,650)
Infrastructure
(50,000)
(34,100)
Total accumulated depreciation
$(476,000)
$(168,500)
$139,000
$(505,500)
Governmental activities capital assets,
net
$2,184,000
$1,341,500
$(86,000)
$3,439,500
$(225,000)
$3,945,000
Less accumulated depreciation
Depreciation expense charged to governmental activities as follows:
Public Safety
$55,000
General Government
72,000
Highways and Streets
24,000
Sanitation
17,500
$168,500
(249,750)
139,000
(171,650)
(84,100)
Vaughn’s governmental funds financial statements are as follows:
Vaughn
Government Funds
Fund Balance Sheets at December 31, 2025
Capital Projects
fund
Debt service fund
Total
governmental
funds
Assets
General Fund
Monorail Fund
Term Bond Fund
Cash
$65,000
$301,000
$-
$366,000
11,000
3,000
14,000
1,255,000
98,000
1,451,000
Interest receivable
Invesments
98,000
Property tax receivable
190,000
Total Assets
$353,000
$1,567,000
Vouchers Payable
$72,000
$49,000
Total Liabilities
$72,000
$49,000
190,000
$101,000
$2,021,000
Liabilities and Fund Balance
$121,000
$-
$121,000
Fund Balances:
Restricted for:
Capital projects
1,518,000
Debt Service
1,518,000
101,000
101,000
Assigned for encumbrance
193,000
193,000
Unassigned
88,000
88,000
Total Fund Balance
281,000
1,518,000
101,000
1,900,000
Total Liabilities and Fund
Balances
$353,000
$1,567,000
$101,000
$2,021,000
Vaughn
Governmental Funds
Statement of Revenues, Expenditures, and Changes in Fund Balances for the Year Ended December 31, 2025
Capital
Projects
Fund
General
Fund
Debt
Service
Fund
Monorail Fund
Total
Governmental
Funds
Term Bond
Revenues
Property Taxes
$525,000
Licenses and Permits*
150,000
150,000
State Grant-highways and streets
250,000
250,000
Intergovernmental-state grant
$50,000
$1,000,000
$575,000
1,000,000
Charges for Services (general government)
130,000
130,000
Investment Earnings
75,000
75,000
Total Revenue
$1,130,000
$1,000,000
$50,000
$2,180,000
Expenditures
Public Safety
$500,000
$500,000
General Government
300,000
300,000
Highways and Streets
130,000
130,000
Sanitation
70,000
70,000
Debt Service Interest
$180,000
Capital Outlay
1,510,000
$180,000
1,510,000
Total Expenditures
$1,000,000
1,510,000
$180,000
$2,690,000
Excess (deficiency) of revenues over expenditures
$130,000
($510,000)
($130,000
($510,000)
Other Financing Sources (Uses)
Proceeds from long-term
capital debt
$1,764,431
Transfers in
Transfers out
$1,764,431
$180,000
$(180,000)
180,000
Total other
$(180,000)
$1,764,431
$180,000
$1,764,431
Special Items
Proceeds from sales of equipment
$115,000
$115,000
Net change in fund balance
65,000
1,254,431
50,000
1,369,431
Fund balance-beginning
189,000
263,569
78,000
530,569
Fund balance-ending
$254,000
$1,518,000
$128,000
$1,900,000
* Revenues from licenses and permits are assigned to highways and streets ($100,000) and to the general
government ($50,000).
Using the information above, prepare the statement of activities and the statement of net position on a
government-wide basis (using full accrual accounting). The beginning fund balance in the government-wide
Statement of Net Position is $2,714,569. (Round answers to 0 decimal places. e.g. 5,125.)
Vaughn
Statement of activities – government-wide for the year ended December 31, 2025
Net (expense) Revenue
and changes in net
position
Functions/Programs
Program Revenues
Primary Government
Expenses(a)
Charges for
Services
Grants and
Contributions
Governmental Activities
$
$
$
$
Primary Government
Governmental Activities
Options
Options
Options
Options
Options
Options
$
Options
$
$
$
Vaughn
Statement of net position- Government-wide basis at December 31, 2025
Statement of Net Position
Assets
Governmental
Funds
Adjustments
Total Government Activities
$
$
$
$
Options
Liabilities and fund balance
$
Options
$
$
$
$
Net Position
$
$
$
Options
Total
$
$
(Q2)
Windsor Library, a nonprofit organization, presented the following statement of financial position
and statement of activities for its fiscal year ended February 28, 2024.
Windsor Library
Statement of Financial Position
February 28, 2024
Assets
Unrestricted
Temporarily Restricted
Cash
$ 308,000
$72,000
Grants Receivable
72,000
Prepaid Expenses
67,000
Total
447,000
Investments (at market)
1,024,000
Land, Building, and Equipment
(less accumulated depreciation
of $64,193)
548,000
Total Assets
$2,019,000
Current Assets
$72,000
Liabilities and fund Balances
Current liabilities
Accounts payable and accrued
expenses
$138,000
Total
138,000
Long-term debt
186,000
Fund balances
1,695,000
72,000
Total liabilities and fund
balances
$2,019,000
$72,000
Windsor Library
Statement of activities for Year ended February 28, 2024
Support and Revenue
unrestricted
Temporarily restricted
Grants
$70,000
$-0-
gifts
317,000
72,000
total
387,000
72,000
Support
revenue
Service fees
22,000
Book rentals and fines
100,000
Investment Income
76,000
total
198,000
-0-
Total support and revenue
$585,000
$72,000
Expenses
Program Services
Circulation library
$220,000
Research Library
78,000
exhibits
21,000
Community services
11,000
total
330,000
-0-
Supporting services
General and administrative
192,000
Fundraising
104,000
total
296,000
-0-
Total expenses
626,000
-0-
Increase (decrease) in net
assets
(41,000)
72,000
Fund balances- beginning of
the year
1,736,000
-0-
Fund balances- end of year
$1,695,000
$72,000
The following transactions occurred during the fiscal year ended February 28, 2025.
1. Fees were billed as follows:
Service fees $27,120
Book rentals 39,490
Book fines
83,420
2. $40,670 of the Grant Receivable was received. Another grant in the amount of $18,430 was
promised.
3. Contributions in the amounts summarized below were received:
Unrestricted $216,610
Restricted
108,290
4. Investment income totaled $68,310 for the year.
5. Vouchers for the year were approved as follows:
Circulating library
$196,470
Research Library
67,080
Exhibits
15,790
Community services
12,820
General and
administrative
162,710
Fundraising
111,390
Total
$566,260
6. During the year, $520,000 worth of vouchers were paid.
Adjustment Data
7. Accounts Payable and Accrued Expenses at February 28, 2025, should be $192,610. The
difference should be allocated to the following expenses:
Research library $5,080
General and administrative
3,270
8. Additions to the research library in the amount of $73,990 that were approved in (5) above
were made in accordance with the terms of a contribution that had been received earlier and
that was restricted for that purpose.
9. The current market value of the investments is $1,038,630 (no investment transactions
occurred).
10. Depreciation amounted to $9,193 for the year. It should be allocated as follows:
Circulating library
$3,710
Research Library 2,658
General and administrative 2,825
11. Prepaid Expenses should be $61,844. The difference should be allocated to:
Exhibits $3,965
General and administrative 1,191
(a)
Prepare journal entries to record the transactions. (Credit account titles are automatically indented when
the amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account
titles and enter O for the amounts. List all debit entries before credit entries.)
No.
Account titles and
explanation
1.
2.
(to record grant
received)
Debit
Credit
(to record grant
promised)
3.
4.
5.
6.
7.
8.
(to release funds
from restricted into
unrestricted assets)
(to receive funds
into unrestricted
from restricted
assets)
9.
10.
11.
(b)
Prepare the statement of financial position and the statement of activities for the year ended February 28,
2025. (Enter negative amounts using either a negative sign preceding the number, e.g. -45 or parentheses,
e.g. (45).)
Windsor Library
Statement of financial position
Options
Assets
Unrestricted
Temporarily Restricted
Options
$
$
$
$
Options
Options
Options
Liabilities and fund balances
Options
Options
Options
$
$
Windsor Library
Statement of activities for year ended February 28, 2025
Without donor restriction
With donor restriction
$
$
Options
Options
Options
Options
Options
Options
Options
Options
Options
Options
Options
$
Options
$
Options
Options
Options
(Q3)
The partnership of Metlock, Bonita, and Windsor engaged you to adjust its accounting records and
convert them uniformly to the accrual basis in anticipation of admitting Kerns as a new partner. Some
accounts are on the accrual basis and some are on the cash basis. The partnership’s books were closed
at December 31, 2024, by the bookkeeper, who prepared the general ledger trial balance that appears as
follows:
Metlock, Bonita, and Windsor General Ledger Trial Balance
December 31, 2024
Debit
Cash
$15,600
Accounts Receivable
37,000
Inventory
27,900
Land
8,700
Credit
Buildings
52,900
Allowance for Depreciation of
Buildings
Equipment
$6,100
55,800
Allowance for Depreciation of
Equipment
Goodwill
6,300
4,700
Accounts Payable
58,000
Allowance for Future
Inventory Losses
8,600
Metlock, Capital
35,000
Bonita, Capital
58,600
Windsor, Capital
30,000
Totals
$202,600
$202,600
Your inquiries disclose the following:
1. The partnership was organized on January 1, 2023. No provision was made in the
partnership agreement for the allocation of partnership profits and losses. During 2023,
profits were allocated equally among the partners. The partnership agreement was
amended, effective January 1, 2024, to provide for the following profit and loss ratio:
Metlock, 40%; Bonita, 40%; and Windsor, 20%. The amended partnership agreement
also stated that the accounting records were to be maintained on the accrual basis and
that any adjustments necessary for 2023 should be allocated according to the 2023
profit allocation agreement.
2. The following amounts were not recorded as prepayments or accruals.
December 31
2024
2023
Prepaid insurance
$800
$900
Advances from
customers
1,00
0
1,600
Accrued interest
expense
–
500
The advances from customers were recorded as sales in the year the cash was received.
3. In 2024, the partnership recorded a provision of $8,600 for anticipated declines in
inventory prices. You convinced the partners that the provision was unnecessary and
should be removed from the books.
4. The partnership charged equipment purchased for $4,400 on January 1, 2024, to
expense. This equipment has an estimated life of 10 years and an estimated salvage
value of $400. The partnership depreciates its capitalized equipment using the declining
balance method at twice the straight-line depreciation rate.
5. The partners agreed to establish an allowance for doubtful accounts at 2% of current
accounts receivable and 5% of past-due accounts. At December 31, 2023, the
partnership had $54,600 of accounts receivable, of which only $3,700 was past due. At
December 31, 2024, 20% of accounts receivable was past due, of which $3,700
represented sales made in 2023 and was considered collectible. The partnership had
written off uncollectible accounts in the year the accounts became worthless as follows:
Accounts written off in
2024
2023
2024 accounts
$800
–
2023 accounts
1,000
$300
6. Goodwill was recorded on the books in 2024 and credited to the partners’ capital
accounts in the profit and loss ratio in recognition of an increase in the value of the
business resulting from improved sales volume. The partners agreed to write off the
goodwill before admitting the new partner.
Prepare a worksheet showing the adjustments and the adjusted trial balance for the partnership
on the accrual basis at December 31,
2024. All adjustments affecting income should be made directly to partners’ capital accounts.
Supporting computations should be in good form. (Do not prepare formal financial statements or
formal journal entries.) (Round answers to 0 decimal places, e.g. 5,125.)
Metlock, Bonita, and Windsor Partnership Adjusted trial balance December 31, 2024
Options
Options
Options
Options
Options
Options
Options
Options
Options
Options
Options
Unadjusted Balance
Adjustment
Adjusted
Balance
12/31/2024
Dr.
Cr.
Dr
Cr
Dr.
Cr.
$
$
$
$
$
$
Options
Options
Options
Options
Options
Options
$
$
$
$
$
$