30 Jun Question Description Introduction The date is December 31, 2091. You have just r
Question Description
Introduction
The date is December 31, 2091. You have just risen from a three-month cryogenic sleep during which you traveled from Earth to Europa, the only inhabited moon of Jupiter.
Europa has been colonized since the early 2060’s. To encourage development, the United Earth Council (roughly equivalent to a federal government for the planet Earth) gave land grants to colonists willing to leave Earth and settle this new world. The Council also built a series of water purification and power generating plants. These plants utilize the natural geothermal resources of Europa to generate electrical power.
Most of the inhabitants are engaged in the operation of the quarter million-acre farms, which span the temperate zones on either side of the equator. The labor is performed by robots through a centralized computer under the direction of the owner/farmer and family members. Harvests are transported by freighter to Earth. It is a lonely, although profitable life with an average of 10 harvests per Earth year. All banking is performed on Earth through electronic funds transfers. A substantial business sector has developed, servicing the farming operations.
After several decades of hard work, the inhabitants of Europa are beginning to enjoy the rewards of their labors and are seeking some of the services which can only be provided by a local centralized government. They naturally sought to establish this government on Europa and petitioned the United Earth Council for admission to the Council as a member province (roughly equivalent to the 20th century state governments).
Province status was granted by a vote of the Council, and the citizens of Europa acted quickly to organize their new government, which officially began operations on January 1, 2091. One of the tasks facing the new government was to hire qualified people to carry on the day to day business of the government. You represent one of these people, having been highly trained in the subtleties of governmental accounting. Ownership of public facilities, which were constructed by the United Earth Council (Buildings, roads and the electrical power utility), was transferred to the new province as of midnight on 12-31-2090. In return, the Province issued long-term bonds payable which provide for interest and principal payments to the United Earth Council over the next 20 years.
Having no qualified governmental accountants on Europa, the province administrator has simply made notes summarizing the transactions which have occurred since the beginning of operations. Your task is to establish a fund accounting system, prepare summary journal entries recording all transactions, and prepare the year end 12-31-2091 financial statements for the Province.
Instructions:
Your completed projects should include:
Fund-basis financial statements, including a Budget Comparison Statement for the General Fund.
Ledgers (t-accounts) with journal entries for each fund and account group
Check figures:
General fund cash: $143,249
General fund unassigned fund balance: 85,229
Governmental funds: Total fund balance 1,948,249
Enterprise fund cash: 69,500
Enterprise fund net position: 54,183
A set of Excel templates (Excel) is available for your use. Please turn in the printed copy of each worksheet.
PROVINCE OF EUROPA
Transaction list for the year ended December 31, 2091.
Account Structure:
Because the Province has a limited number of revenue sources, revenue control accounts are not used. Rather, General Fund revenues are directly recorded into the following accounts: property taxes, sales taxes, fees licenses and permits, program fees, and intergovernmental grants). Similarly, expenditures are recorded directly into the following accounts: general government operations, public safety, education, capital outlay, and debt service: principal and interest.
The Province established the Bureau of Electricity and Water to operate as an enterprise fund. The enterprise fund reports expenses by object category using the following account titles: salaries, supplies, depreciation, and interest.
There are no fiduciary, special revenue, permanent, or internal service funds. The government uses account groups to record general fixed assets and general long-term debt.
Beginning Balances:
1. At 12-31-2090, the remaining cash and supplies on hand in the government offices were transferred to the new Province government. The opening trial balance for the Province for 1-1-2091 was as follows:
GENERAL FUND
Trial balance
Jan. 1, 2091
debits credits
Cash 18,000 Fund Balance:
Supplies 13,000
31,000 Assigned (Reserved for encumbrances). 11,806
Unassigned 19,194
31,000
The supplies were office supplies for general government operations. The reserve for encumbrances relates to a purchase order placed in December of 2090 for engineering services (see item # 7, below). The Province honors outstanding encumbrances from previous years, and the encumbrance should be re-established for 2091. For purposes of the Budgetary Comparison Statement, amounts are charged to the budget in the year they are initially encumbered, regardless of when the expenditure is incurred.
2. On December 31, 2090, the United Earth Council (U.E.C.) transferred the fixed assets which have been constructed with U.E.C. funds. The Province Council assigned custody of these assets to the general Province government and the Bureau of Electricity and Water as follows:
Useful Salvage
Government Bureau Life Value
Buildings, roads, and other structures
$1,395,000 $450,000 10 $0
Equipment 480,000 150,000 5 0
Geothermal Generators 0 650,000 5 0
Total $1,875,000 $1,250,000
========== ==========
In return for these assets, the Province government issued $1,875,000, 10 percent general obligation serial bonds. Principal payments of $93,750 and interest payments on the bonds are to be paid at the end of each year, starting on December 31, 2091.
Similarly, the Bureau of Electricity and Water issued (at face value) $1,250,000, 10 percent long-term revenue bonds in exchange for the capital assets listed above. The bonds call for annual interest payments on January 1 and mature on January 1, 2101. Since these events occurred on the last day of 2090, they represent beginning balances for 2091.
Current Year Transactions:
3. The government of the Europa Province established the Bureau of Electricity and Water. The Bureau of Electricity and Water is in charge of providing the power and water for residents and the Province government. On January 1, 2091, the Province government agreed to contribute $300,000 for establishment of the Bureau of Electricity and Water, and transferred cash on February 1, 2091.
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