ACC 405 Module 6 Project Solutions (2026) | Practice Problems PDF, Exams of Accounting

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ACC 405

Module 6 Project

Practice Problems and Solutions

Southern New Hampshire University

ACC-

Module Six Practice Problems and Solutions

Problem 1. The following events take place:

1. Hector Madras died and left 100 acres of undeveloped land to the city for a future park. He acquired the land at $100 an acre, but at the date of his death, the land was appraised at $8,000 an acre.
2. The city authorized the transfer of $100,000 of general revenues and the issuance of $1,000,000 in general obligation bonds to construct improvements on the donated land. The bonds were sold at par.
3. The improvements were completed at a cost of $1,100,000, and the operation of the park was turned over to the City Parks Department. Required: Prepare entries in general journal form to record these transactions in the proper fund(s). Designate the fund in which each transaction is recorded. If the transaction did not result in a journal entry to a government fund, record the journal entry needed to reflect the information in the government ‐ wide Statement of Net Position.

Answer

1. Government-Wide Statement of Net Position Land ($8,000 x 100) Revenue from Donations

1. General Fund Transfer to Capital Projects Fund Cash

Capital Projects Fund Cash Bond Issue Proceeds Cash Transfer From General Fund

Government-Wide Statement of Net Position Cash Bonds Payable

1. Capital Projects Fund Expenditures

Cash 1,100,

Bond Issue Proceeds 1,000, Transfers From General Fund 100, Expenditures 1,100,

Government-Wide Statement of Net Position Cash Bond payable

Problem 2. On January 1, 2020, Allentown issued $800,000 of 9% serial bonds at par. Semiannual interest is payable on January 1 and July 1 and principal of $80,000 matures each January 1 starting in 2021. The debt will be serviced through a special tax levy designed especially for this purpose. Therefore, transfers will be provided as needed from the Special Revenue Fund.

The following transactions occurred relating to the Debt Service Fund.

2020 June 29 A transfer of $36,000 was received from the Special Revenue Fund. July 1 The semiannual interest payment was made. Dec. 18 A Special Revenue Fund transfer of $20,000 was received.

2021 Jan. 1 A payment on bond principal and semiannual interest was made.

2031 Jan. 2 Accumulations in the Debt Service Fund amounted to $55,000 in investments and $40,000 in cash. The investments were liquidated at face value and the final interest and principal payment was made. Jan. 4 Having served its purpose, the Debt Service Fund's remaining assets were transferred to the Special Revenue Fund.

Required: Prepare the journal entries necessary to record the foregoing transactions.

Answer 2020

June 29 Cash Transfer from Special Revenue Fund

To record transfer received

July 1 Expenditures Cash To record interest payment (1/2 ฀9% ฀$800,000)

Dec. 18 Cash Transfer from Special Revenue Fund

To record transfer received

2021 Jan. 1 Expenditures Cash To record interest and principal payment ($80,000 + (1/2 ฀9% ฀$800,000))

Jan. 2 Cash Investments

To liquidate investments

Jan. 2 Expenditures Cash To make last bond principal and interest payment ($80,000 + (1/2 ฀9% ฀$80,000))

Jan. 4 Fund Balance- Unassigned Expenditures To close expenditures

Jan. 4 Transfer to Special Revenue Fund Cash ($40,000 + $55,000 - $83,600) To transfer remaining assets

Jan. 4 Fund Balance- Unassigned Transfer to Special Revenue Fund To close remaining accounts

Cash 1,

3. Cash

Bond Issue Proceeds ($900,000)(1.02)

Transfer to Debt Service Fund

Cash

4. Encumbrances

Fund Balance- Assigned(encumbrances)

5. Due to General Fund

Cash

Expenditures 120,

Deposit on Land Contract 80,

Cash 40,

6. Expenditures

Vouchers Payable

Fund Balance- Assigned(encumbrances)

Encumbrances

7. Vouchers Payable

Cash

8. Encumbrances ($880,000 - $780,000)

Fund Balance- Assigned(encumbrances)

Cash Bond Issue Proceeds^ 101,

• 1,100,
• Cash 1,
• 101,
• Transfer to Debt Service Fund 1,

Part D CITY OF MINDEN

Capital Projects Fund

Statement of Revenues, Expenditures and Changes in Fund Balance

For the Year Ended December 31, 2021

Revenue

Bond Issue Proceeds

Total

Expenditures

Transfer to Debt Service Fund

Total

Excess to Fund Balance Balance

• January 1

Less Residual Equity Transfer to Debt Service Fund

Balance – December 31

Pre – Closing Trial Balances of Related Funds

Debit Credit

Debt Service Fund

Cash $ 29,

Transfer from Capital Projects Fund (operating)

Transfer from Capital Projects Fund (residual equity) 10,

Total $ 29,000 $ 29,

Problem 5. The following schedule of capital assets was prepared for Capital City.

Governmental Activities

Beginning Balance

Addition s

Retirement s

Ending Balance (75, Total Capital Assets (gross) $500,000 100,000 0) $525,

Less: Accumulated (200,0 (30,00 25,00 (205, Depreciation 00) 0) 0 00) Net Capital Assets $300,000 70,000 (50,000) $320,

All capital acquisitions were made in a capital projects fund (and paid for with cash). An asset was sold by the general fund for $65,000 cash.

Required: Determine how the above information will be reflected on each of the following statements for the year 2020.

1. The governmental funds' statement of revenue, expenditures, and changes in fund balances. List the governmental fund and then list the dollar amount within the appropriate heading on the statement (such as Revenues, Expenditures, or Other Financing Sources (Uses)).
2. The government‐wide statement of net position.
3. The government‐wide statement of activities.

Answer

Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance For the year ended December 31, 2020 Capital Debt Total General Projects Service Governmental Fund Fund Fund Funds Revenues

Expenditures Expenditure (100,000) (100,000)

Other Financing Sources (Uses)

Special Items Revenue from Asset Sale 65,000 65,

Answer Statement of Activities

Patient Service Revenue $16,000, Allowances and Uncollectible Accounts (3,400,000) Net Patient Service Revenue 12,600, Other Operating Revenue (includes $160,000 from specific purpose funds) 346, Total Operating Revenue 12,946,

Operating Expenses (includes depreciation of $500,000) 13,370, Loss from Operations (424,000) Nonoperating Revenue: Unrestricted Gifts and Requests 410, Unrestricted Income from Endowment Funds 160, Income from Board-Designated Funds Total Nonoperating Revenue

Excess of Revenue over Expenses $228,

Problem 7. On January 1, 2020, a new Board of Directors was elected for Bradley Hospital. The new board switched to a different accountant. After reviewing the hospital's books, the accountant decided that the accounts should be adjusted. Effective January 1, 2020, the board decided that

1. Separate funds should be established for the General Fund, the Bradley Endowment Fund, and the Plant Replacement and Expansion Fund (the old balances will be reversed to eliminate them). 2. The accounts should be maintained in accordance with fund accounting principles. The balances in the general ledger at January 1, 2020, are presented here:

Cash

Investment in US treasury bills

Investment in common stock

Interest receivable

Accounts receivable Inventory

The following additional information is available:

1. Under the terms of the will of J. Ethington, founder of the hospital, “The principal of the bequest is to be fully invested in trust forevermore in mortgages secured by productive real estate in Central City and/or in U.S. Government securities … and the income therefrom is to be used to defray current expenses.”
2. The Endowment Fund consists of the following: Cash received in 1898 by bequest from Ethington $ 81, Net gains realized from 1956 through 1989 from the sale of real estate acquired in mortgage foreclosures

Income received from 1990 through 2019 from 90 ‐day U.S. treasury bill investments

Balance per general ledger on January 1, 2020 $119,

1900 appraisal of land at $10,000 and building at $5,000, received by donation at that time. The building was demolished in 1934.

1. The land account balance is composed of

Land

Building

Equipment Allowance for depreciation

Accounts payable

Bank loan

Endowment fund balance

Other fund balances

Total

Required Prepare the entries necessary to establish the correct balances as of January 1, 2020

Answer

Trial Balance Adjustments General Fund Endowment Fund

Plant Replacement Fund Account Description Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit $50,

Plant Replacement Fund Balance (5) 417,000 $417, General Fund Balance (5) 111,000 111, Totals $1,576,000 $1,576,000$1,089,500 $1,089,500 $769,000 $769,000 $105,000 $105,000 $417,000 $417,

Cash $50, Investment in U.S. Treasury Bills 105, Investment in Common Stock 417, Interest Receivable 4, Accounts Receivable 40, Inventory 25, Land 407, Building 245, Equipment Allowance for Depreciation Accounts Payable Bank Loan Endowment Fund Balance

Other Fund Balances

Adjusting Entries (not required)

(1) Endowment Fund Balance 14, Other Fund Balances 14, To eliminate from the Endowment Fund Balance the investment income earned on U.S. Treasury Bills

(2) Other Fund Balance Land To eliminate from the land account the $380,000 appraisal increase and the $5,000 cost of the old building which was demolished.

(3) Building Other Fund Balance To eliminate the appraisal decrease and restate the hospital building at its actual cost.

(4) Other Fund Balances Allowance for Depreciation To correct the allowance for depreciation through December 31, 2020 in

accordance with the following computation:

Building - $300,000 at 2% times 41 years $246, Elevator - $45,000 at 5% times 15 years 33, Equipment – ascertained to be accurate 158, Total accumulated depreciation, as computed 438, Less accumulated depreciation per books 376, Understatement of accumulated depreciation $62,

(5) Other Fund Balances Plant Replacement Fund

General Fund 111, To close out Other Fund Balances and to allocate its balance to the General Fund and the Plant Replacement Fund.

Problem 8. The following transactions of Beltville College transpired during 2020. The funds necessary are the Endowment Fund, the Annuity Fund, the Plant Fund—Unexpended, the Plant Fund—Investment in Plant, the Loan Fund, the Unrestricted Current Fund, and the Restricted Current Fund.

January 1

1. A gift of $10,000 was received from Carl Brown. The principal was to be held intact and the income to be used for any purpose designated by the governing board.
2. David Gross donated $20,000. The principal was to be held intact and the income to be used for scholarships for worthy students.

Answers

Event Fund Journal Entry

1 Endowment Fund – Brown Cash Revenue

2 Endowment Fund – Gross Cash Revenue

3 Endowment Fund – Norton Cash Revenue

4 Annuity Fund Cash Revenue-contribution Annuity Payable ($10,000 ฀8.1109)

5 Endowment Fund – Jackson Investments (1,000)($150) Revenue

6A Endowment Fund – Brown Investments (1/3)($30,000) Cash

6B Endowment Fund – Gross Investments (2/3)($30,000) Cash

7 Endowment Fund – Norton Investments Cash

8 Annuity Fund Investments Cash

Interest computations ($30,000)(.12) = $3,600, 1/3 of $3,600, or $1,200 to Brown, 2/3 of $3,600, or $2,400 to Gross ($30,000)(.10)=$3,000 to Norton

(continued)

Due to Unrestricted Current Fund

9A2 Unrestricted Current Fund Due from Endowment Fund – Brown Investment Income

9B1 Endowment Fund – Gross Cash 1, Due to Restricted Current Fund 1,

Event Fund Journal Entry 9A1 Endowment Fund – Brown Cash

9B2 Restricted Current Fund Due from Endowment Fund - Gross Investment Income

9C1 Endowment Fund - Norton Cash Due to Loan Fund

9C2 Loan Fund Due From Endowment Fund - Norton Investment Income

9D Annuity Fund Cash (8%)($200,000)/ Annuity payable

9E Endowment Fund - Jackson Cash Investment Income (BIM dividend)

9F1 Endowment Fund - Brown Due to Unrestricted Current Fund Cash

9F2 Unrestricted Current Fund Cash Due from Endowment Fund - Brown

9G1 Endowment Fund - Gross Due to Restricted Current Fund Cash

9G2 Restricted Current Fund Cash Due from Endowment Fund - Gross

9H1 Endowment Fund - Norton Due to Loan Fund Cash

9H2 Loan Fund Cash Due from Endowment Fund – Norton

10 Annuity Fund Annuity Payable Cash

11 Endowment Fund - Brown Cash Investments Fund Balance

Endowment Fund - Gross Cash Investments Fund Balance