Question

Olivia Village was recently incorporated and began financial operations on July 1, 20X2, the beginning of its fiscal year. The following transactions occurred during this first fiscal year, July 1, 20X2, to June 30, 20X3:
1. The village council adopted a budget for general operations for the fiscal year ending June 30, 20X3. Revenue was estimated at $400,000. Legal authorizations for budgeted expenditures totaled $394,000.
2. Property taxes of $390,000 were levied; 2 percent of this amount was estimated to be uncollectible. These taxes are available to finance current expenditures as of the date of levy.
3. During the year, a village resident donated marketable securities valued at $50,000 to the village under the terms of a trust agreement that stipulated that the principal amount be kept intact. The use of revenue generated by the securities is restricted to financing college scholarships for needy students. Revenue earned and received on these marketable securities amounted to $5,500 through June 30, 20X3.
4. A general fund transfer of $5,000 was made to establish an internal service fund to provide for a permanent investment in inventory.
5. The village decided to install lighting in the village park financed through an authorized special assessment project at a cost of $75,000. The city is obligated if the property owners default on their special assessments. The village issued special assessment bonds in the amount of $72,000 and levied the first year’s special assessment of $24,000 against the village’s property owners. The remaining $3,000 for the project will be contributed from the village’s general fund.
6. The special assessments for the lighting project are due over a three-year period, and the first year’s assessments of $24,000 were collected. The $3,000 transfer from the village’s general fund was received by the lighting capital projects fund.
7. A contract for $75,000 was let for the lighting installation. The capital projects fund was encumbered for the contract. On June 30, 20X3, the contract was completed, and the contractor was paid.
8. During the year, the internal service fund purchased various supplies at a cost of $1,900.
9. The general fund cash collections recorded during the year as follows:
Current property taxes $ 386,000
Licenses and permit fees 7,000
The allowance for estimated uncollectible taxes is adjusted to $4,000.
10. The village council decided to build a village hall at an estimated cost of $500,000 to replace space occupied in rented facilities. The village does not record project authorizations. The council decided to issue general obligation bonds bearing interest at 6 percent. On June 30, 20X3, the bonds were issued at face value of $500,000, payable in 20 years. No contracts have been signed for this project, no expenditures have been made, nor has an annual operating budget been prepared.
11. The voucher for purchasing a fire truck for $15,000 was approved and paid by the general fund. This expenditure previously had been encumbered for $15,000.
Required:
Prepare journal entries to record properly each of these transactions in the appropriate fund or funds of Olivia Village for the fiscal year ended June 30, 20X3. Do not prepare closing entries for any fund. (Select the appropriate fund for each situation when required. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Answer:

Olivia Village

Journal Entries:

July 1, 20X2 to June 30, 20X3:

1. No journal entry required.

2. Debit Property Taxes Receivable $390,000

   Credit Property Tax Revenue $390,000

To record the levying of property taxes

Debit Uncollectible taxes expense $7,800

Credit Uncollectible tax expense $7,800

To record the estimated uncollectible of 2%.

3. Debit Marketable Securities $50,000

   Credit Restricted Trust Fund Donations $50,000

To record the donation of marketable securities.

Debit Restricted Trust Fund $5,500

Credit Marketable Securities Revenue $5,500

To record the revenue earned on marketable securities.

4. Debit Internal Service Fund $5,000

Credit General Fund $5,000

To record the transfer of funds.

5. Debit Special Assessment Fund $72,000

Credit Special Assessment Bonds $72,000

To record the issue of bonds for special assessment project.

Debit Special Assessment Receivable $24,000

Credit Special Assessment Levy $24,000

To record the special assessment levied

6. Special Assessment Fund $27,000

Credit Special Assessment Receivable $24,000

Credit General Fund $3,000

To record the collection of the first year's special assessment and transfer from General Fund.

7. Debit Capital Projects Fund $75,000

Credit Contractor Payable $75,000

To record the letting of the contract for lighting.

June 30, 20X3:

Debit Contractor Payable $75,000

Credit Capital Projects Fund $75,000

To record the payment of the contractor for the project.

8. Debit Supplies $1,900

Credit Internal Service Fund $1,900

To record the purchase of various supplies.

9. Debit General Fund $393,000

Credit Property taxes Receivable $386,000

Credit Licenses and permit fees $7,000

To record cash collections for general fund

Debit Allowance for Uncollectible taxes $3,800

Credit Uncollectible Expenses $3,800

To adjust the allowance for uncollectible taxes to $4,000 balance.

10. Debit General Fund $500,000

Credit Bonds Payable $500,000

To record the issue of 6%, 20-year bonds payable.

11. Debit Fire Truck $15,000

Credit General Fund $15,000

To record the payment for the purchase of a fire truck.

Explanation:

Olivia Village can use the general journal to initially record transactions that occur during the year.  The journal shows the accounts to be debited and the accounts to be credited.