Question

Journal entries for year-end adjustments

The chief accountant for Eliana City needed to make adjusting entries before preparing the city’s financial statements for calendar year 2019. She wrote a brief paragraph to guide her assistant in making the adjusting entries for the General Fund and then gave her assistant data regarding the accounts that might be affected by the adjustments. Use the following information to make the year-end adjusting journal entries, if needed. Identify the expenditure accounts at the object-of-expenditure level.  

1. At December 31, the Property taxes receivable account showed a balance of $420,000, all of which was considered to be collectible. She estimated that $315,000 of that amount would be collected in the first 60 days of 2020.

2. The Health Department has a state grant that requires it to incur expenditures before the city can bill for the grant. The Department incurred $45,000 of expenditures under the grant during the last quarter of 2019 and sent a billing to the state, but the billing has not been recorded.  

3. During the last week in December, Eliana’s employees earned $80,000. They will be paid with the first paycheck in 2020.

4. The city received an invoice for $15,000 from its Electricity Proprietary Fund for December electricity services. The invoice, which has not yet been entered in the records, will be paid in early February.

5. City employees are allowed to accumulate up to 30 days’ vacation leave and to get cash for unused leave when they are terminated or retire. The total liability to city employees for earned, but unused, vacation leave increased from $1,210,000 to $1,290,000 during 2019. Two employees retired during the last week of December and will be paid $22,000 for unused leave with their final paychecks in January.

6. Numerous claims have been filed against the city for incidents attributed to several of its departments. Discussions with city attorneys who have been handling the cases indicate that the city could ultimately pay out $1,850,000 in judgments or settlements, an increase of $100,000 over last year’s estimate. As of December 31, settlements amounting to $35,000 were reached with two claimants. They will be paid in January.

7. The city operates a Pension Trust Fund to pay employee benefits. The plan has assets sufficient to pay for 75 percent of its pension liabilities. The city actuary recommended that the city contribute $950,000 to the Trust Fund in 2019. However, the city council appropriated only $300,000. That amount was paid to the Trust Fund in October, and the council made no further appropriation for the year.

8. The city Health Department has a state grant that must be used for a specific purpose, but there are no requirements as to when the grant resources may be used. At December 31, 2019, the unspent balance of the grant was $54,000.

NOTE: If no adjusting entry is required for a transaction, select No entry as your

Answer 1

1. No entry as all the receivable amount is considered collectible

2.Expeense a/c Dr 45000

To expense payable a/c 45000

(Expense incurred but not yet recorded)

3. Salary exp a/c Dr 80000

To salary payable 80000

(Being salary exp for the last week of Dec recorded)

4. Electricity exp a/c Dr 15000

To electricity expenses payable 15000

(Being electricity exp payable)

5.Earned leaves a/c Dr 22000

To employees a/c 22000

(Being earned leaves payable on retirement)

6. Reserves a/c Dr 100000

To provision for contingent liability 100000

(Being provision created for increase in liability)

Provision for contingent liability a/c Dr 35000

To liability payable 35000

(being liability arising on account of contingent liabilities)

7. No entry since no appropriation have been made

8.No entry as it states the unspent amount of grant.

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