Reference no: EM132690089
Problem 1: The town of Malvern engages in the following transactions during its fiscal year ending September 30, 2021. All dollar amounts are in thousands. Prepare summary journal entries in its governmental funds. Base entries on generally accepted accounting principles now in effect.
(1) At the beginning of the fiscal year 2021, the town levied property taxes of $180,000. It estimated that $6,000 will be uncollectible.
(2) During fiscal year 2021, the town collected $150,000 prior to September 30, 2021.
(3) The town collected $4,000 each month in October and November 2021, prior to preparing its 2021 financial statements. It expected to receive $4,000 each month for the next four months.
(4) During the remainder of fiscal year 2022, the town collected $16,000 in tax relating to 2021, $140,000 related to 2022, and $10,000 applicable to 2023.
(5) On November 20, 2021, it received $42,000 from the state for sales taxes collected on its behalf. The payment was for sales made in September that merchants were required to remit to the state by October 15.
(6) In April, the town was awarded a state training grant of $500 for the period June 1, 2021, through May 31, 2022. In fiscal 2021, the town received the entire $500 but spent only $400.
(7) The town requires each vendor who sells at its farmers' market to obtain an annual permit. The funds generated by the sale of these permits are used to maintain the market. The permits, which cover the period from June 1 through May 31, are not refundable. During fiscal year 2021, the town issued $66 worth in permits. It expects to collect an additional $12 within 60 days of the close of the fiscal year.
(8) On May 1, 2021, a developer (in exchange for exemptions to zoning restrictions) donated several acres of land that the town intended to convert to a park. The land had cost the developer $100,000. At the time of the contribution, its fair market value was $280,000.
(9) Several years earlier the town received a donation of a parcel of land, upon which it expected to build. During fiscal 2021, it opted to sell the land for $185. When acquired by the town, the land had a market value of $119.
At the beginning of the fiscal year 2021, The town of Marlvern acquired six police cars at a total cost of $200,000. The vehicles are expected to have a useful life of four years. Prepare the journal entries that the town would make in its governmental funds in the fiscal year based on the following scenarios:
(10) It paid for the cars in cash at the time of acquisition.
(11) It issued $200,000 in installment notes to the car dealer, agreeing to repay them in four annual payments of $63,095 at the end of each fiscal year (effective interest rate is 10%), starting in the year of acquisition.