ACC 405 Module 7 Project Solutions (2026) | Practice Problems PDF, Exams of Accounting

Download ACC 405 Module 7 Project Solutions (2026) | Practice Problems PDF and more Exams Accounting in PDF only on Docsity!

ACC 405

Module 7 Project

Practice Problems and Solutions

Southern New Hampshire University

Required:

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 $2,686,283.

Answer Circus City

Statement of Activites -Government-Wide For the Year Ended December 31, 2020

Interest expense Cash paid Discount Carrying Value Beginning balance $1,754, 12/31/20 175,422 160,000 15,422 $1,769, 12/31/21 176,964 160,000 16,964 $1,786, 12/31/22 178,660 160,000 18,660 $1,805, 12/31/23 180,526 160,000 20,526 $1,825, 12/31/24 182,579 160,000 22,579 $1,848, 12/31/25 184,837 160,000 24,837 $1,873, 12/31/26 187,321 160,000 27,321 $1,900, 12/31/27 190,053 160,000 30,053 $1,930, 12/31/28 193,058 160,000 33,058 $1,963, 12/31/29 196,363 160,000 36,363 $2,000,

Circus City Statement of Net Position - Government-Wide Basis At December 31, 2020 Statement of Net Position Total Governmental Government Funds Adjustments Activities

Assets Cash $ 364,000^ $ 364, Interest Receivable 16,000 16, Investments 1,450,500 1,450, Receivables 183,000 183,

Capital Assets (net) 3,431,000 3,431, Total Assets 2,013,500 $ 5,444,

Liabilities and Fund Balance Payables $ 123,000 $ 123,

Long-term Liabilities 1,769,639 1,769,

Total Liabilities $ 123,000 $1,892,

governmental activities report depreciation expense to allocate those expenditures over the life of the asset. This is the amount by which capital outlays exceeded depreciation in the current period. 1,331,

In the statement of activities, only the gain on the sale of equipment is reported, while in the governmental funds, the proceeds from the sale increase financial resources. Thus, the change in net position differs from the change in fund balance by the book value of the asset sold. (85,000)

Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net position. (1,754,217)

Interest expense recognized on the accrual basis exceeds the amounts paid by the amortization of the bond discount (15,422)

Change in Net Position of Governmental Activities $ 865,

Problem 2.

Preston Library, a nonprofit organization, presented the following statement of financial position and statement of activities for its fiscal year

ended February 28, 2019.

Preston Library

Statement of Financial Position

February 28, 2019

Assets

Unrestrict

e d

Temporaril

y

Restricted

Current Assets

Cash

Grants Receivable

Prepaid Expense

Total

Investments (at market)

Land, Building, and Equipment (less Acc Dep of

Total Assets

Liabilities and Fund Balances

Current Liabilities

Accounts Payable and Accrued Expenses

Total

Long-Term Debt

Fund Balances

Total Liabilities and Fund Balances

Preston Library

Statement of Activities

for Year Ended February 28, 2019

Support and Revenue

Unrestricte

d

Support and Revenue

Grants $ 70,000 $ -

Gifts 300,000 80,

Total

Revenue

Service Fees

Book Rentals and Fines 107,

Investment Income 71,000 -

Total 200,

Total Support and Revenue $ 570,000 $ 80,

Expenses

Program Services

Circulating Library $ 212,

Research Library 86,

Exhibits 20,

Community Services 10,

Total 328,000 0

Supporting Services

General and Administrative 175,

Fund Raising 111,

Total 286,000 0

Total Expenses 614,000 0

Increase (decrease) in Net Assets (44,000) 80,

Fund Balances - Beginning of Year 1,674,000 -

Fund Balances - End of Year $ 1,630,000 $ 80,

The following transactions occurred during the fiscal year ended February 28, 2020.

1. Fees were billed as follows: Service fees $30, Book rentals 43,

Book fines 78,

1. $40,000 of the Grant Receivable was received. Another grant in the amount of $20,000 was promised.
2. Contributions in the amounts summarized below were received: Unrestricted $215, Restricted 108,
3. Investment income totaled $75,000 for the year.
4. Vouchers for the year were approved as follows: Circulating library $189, Research library 74, Exhibits 15, Community services 12, General and administrative 166, Fund raising 103, Total $559,
5. During the year, $500,000 worth of vouchers were paid.

Adjustment Data

1. Accounts Payable and Accrued Expenses at February 28, 2020, should be $217,000. The difference should be allocated to the following expenses: Research library $5, General and administrative 3,
2. Additions to the research library in the amount of $68,000 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.
3. The current market value of the investments is $1,035,000 (no investment transactions occurred).
4. Depreciation amounted to $9,000 for the year. It should be allocated as follows: Circulating library $3, Research library 2, General and administrative 2,
5. Prepaid Expenses should be $60,000. The difference should be allocated to: Exhibits $3, General and administrative 1,

Required: A. Prepare journal entries to record the transactions B. Prepare the statement of financial position and the statement of activities for the year ended February 28, 2020.

Answer

Cash – Temporarily Restricted 68,

Cash – Unrestricted 68,

Net Assets Released from Restrictions 68,

9. Investments

Investment Income

10. Expenses - Circulating Library 3,

Expenses - Research Library 2,

Expenses - General & Administrative 2,

Accumulated Depreciation 9,

11. Expenses - Exhibits

Expenses - General & Administrative

Prepaid Expenses

Part B

PRESTON LIBRARY

Statement of Financial Position, February 28, 2020

Assets

Current Assets

Unrestricted Temporarily

Restricted

Cash $334,000 $120,

Grants Receivable 60,

Prepaid Expenses 60,

Total 454,

Investments (at market) 1,035,

Land, Buildings, and Equipment

Less accumulated depreciation of $59,000 521,

Total Assets $2,010,000 $120,

Liabilities and Fund Balances

Current Liabilities

Accounts Payable & Accrued Expenses $ 217,

Total 217,

Long-term Debt 200,

Fund Balances 1,593,000 120,

Total Liabilities and Fund Balances $2,010,000 $ 120,

Problem 3. The partnership of Cain, Gallo, and Hamm 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, 2019, by the bookkeeper, who prepared the general ledger trial balance that appears as follows:

Your inquiries disclose the following:

1. The partnership was organized on January 1, 2018. No provision was made in the partnership agreement for the allocation of partnership

profits and losses. During 2018, profits were allocated equally among the partners. The partnership agreement was amended, effective

Answer

Adjustments to Adjustments To

2018 Income 2019 Income

1. Prepaid insurance expensed in 2018 $800 $(800)a Prepaid insurance expensed in 2019 --- 700 Advances from customers in 2018 (1,500) 1,500b Advances from customers in 2019 --- (900) Accrued interest expense (450) 450 c
2. Add back provision for inventory decline 8,
3. Add back purchase price of equipment expensed

less depreciation expense of $880 3,520d

1. Deduct (add) adjustment to allowance account (1,200) 160 e
2. Deduct goodwill recognized (5,000) Total adjustment to capital accounts $(2,350) $7,

aThis assumes that the prepaid insurance expires in the next year.

bThis assumes that the advances are earned in the next year.

cThis assumes that the interest expense was deducted in 2019.

dDepreciation expense = $4,400 ´ 0.20 = $

2018 2019 e2% of current receivables (0.02 ´ $50,000) $1,000 (0.02 ´ $32,000) $

5% of past due receivables (0.05 ´ $4,000) 200 (0.05 ´ $8,000) 400 Allowance account balance at 12/31 $1,200 $1,

Allowance for Bad Debts Write-off-2019 1,800 1/1 1, Adjustment 1, 12/31 Bal. 1,

During 2019, $1,800 was written off and debited to expense Adjustment to income is $160 or ($1,800 - $1,640)

Analysis of Change in Capital Accounts

2018 Adjustment 2019 Adjustment Total

*Number is rounded: Cain, Gallo, and Hamm Partnership

• Cain 1/3 $(783) 0.40 $3,052 $2,
• Gallo 1/3 (783) 0.40 3,052 2,
• Hamm 1/3 (784) 0.20 1,526 - $(2,350)* $7,630 $5,
  • $ 2 , 350 = $ ( - December 31, Adjusted Trial Balance - Balance Adjustment Balance 12/31/ Unadjusted Adjusted
• Cash $15,000 $15, Dr. Cr. Dr Cr Dr. Cr.
• Accounts Receivable 40,000 40,
• Inventory 30,000 30,
• Land 9,000 9,
• Buildings 50,000 50,
• Allowance for Depreciation of Buildings 6,000 6,
• Equipment 56,000 4,400 60,
• Allowance for Depreciation of Equipment 6,000 880 6,
• Goodwill 5,000 5,
• Accounts Payable 56,000 56,
• Allowance for Future Inventory Losses 8,000 8,
• Cain, Capital 37,000 2,269 39,
• Gallo, Capital 60,000 2,269 62,
• Hamm, Capital 32,000 742 32,
• Prepaid Insurance
• Advances from Customers
• Allowance for Doubtful Accounts 1,040 1, - $205,000 $205,000 $13,100 $13,100 $205,100 $205,