The nature of a transaction gives a clue as to the type of fund in which it should be recorded. Kendal County engaged in the following transactions. For each, prepare an appropriate journal entry and indicate the type of fund in which it would most likely be recorded:

1. It levied and collected $1 million in taxes dedicated to the repayment of outstanding general obligation bonds.

2. It billed sponsors of a charity bicycle ride $5,000 for providing police patrols during the ride.

3. It recognized $60,000 of cash dividends on investments dedicated to the support of a county arts center.

4. It recognized $70,000 of cash dividends on investments dedicated to scholarships for needy county residents.

5. It incurred $6 million in construction costs to complete a new county jail. The new jail was funded entirely with the proceeds of long-term bonds.

6. It transferred $400,000 of unrestricted funds to an appropriate fund to be invested and eventually used to repay the principal on the long-term jail bonds (entries in two funds required).

7. It recognized depreciation of $100,000 on equipment in a vehicle repair center that services all county departments that have motor vehicles.

8. It collected $30,000 in parking fees at the county-owned garage.

9. It issued $8 million in bonds to improve the city-owned electric utility.

10. It distributed $3 million in taxes collected on behalf of school districts located within the county.

1. Journal entry: Debit: Tax Receivable - General Obligation Bonds $1,000,000, Credit: Revenues - Taxes $1,000,000, Type of fund: Debt Service Fund

2. Journal entry: Debit: Accounts Receivable - Charity Bicycle Ride $5,000, Credit: Revenues - Charges for Services $5,000, Type of fund: Special Revenue Fund

3. Journal entry: Debit: Cash $60,000, Credit: Revenues - Investment Dividends $60,000, Type of fund: Permanent Fund

4. Journal entry: Debit: Cash $70,000, Credit: Revenues - Investment Dividends $70,000, Type of fund: Permanent Fund

5. Journal entry: Debit: Expenditures - Construction $6,000,000, Credit: Other Financing Sources - Proceeds of Bonds $6,000,000, Type of fund: Capital Projects Fund

6. Journal entries (in two funds): Fund A (Unrestricted Fund): Debit: Transfer Out $400,000, Credit: Cash $400,000, Type of fund: General Fund. Fund B (Bond Redemption Fund): Debit: Cash $400,000, Credit: Transfer In $400,000, Type of fund: Debt Service Fund

7. Journal entry: Debit: Depreciation Expense - Vehicle Repair Center $100,000, Credit: Accumulated Depreciation - Vehicle Repair Center $100,000, Type of fund: General Fund

8. Journal entry: Debit: Cash $30,000, Credit: Revenues - Parking Fees $30,000, Type of fund: General Fund

9. Journal entry: Debit: Cash $8,000,000, Credit: Other Financing Sources - Bonds $8,000,000, Type of fund: Enterprise Fund

10. Journal entry:, Debit: Taxes Receivable - School Districts $3,000,000, Credit: Revenues - Taxes $3,000,000, Type of fund: General Fund

1. The journal entry would be as follows:

Debit: Tax Receivable - General Obligation Bonds $1,000,000

Credit: Revenues - Taxes $1,000,000

In this scenario, the tax levy and collection will be used to pay off general obligation bonds, which are long-term debt obligations, so the entry would be recorded in the debt service fund.

2. The journal entry would be as follows:

Debit: Accounts Receivable - Charity Bicycle Ride $5,000

Credit: Revenues - Charges for Services $5,000

In this situation, the county is charging sponsors of a charity bicycle ride a fee for police protection during the event, so the funds should be put in a special revenue fund dedicated to police services.

3. The journal entry would be as follows:

Debit: Cash $60,000

Credit: Revenues - Investment Dividends $60,000

When a government invests resources that are legally restricted to a specific purpose, a trust fund should be created to account for the investment activity.

4. The journal entry would be as follows:

Debit: Cash $70,000

Credit: Revenues - Investment Dividends $70,000

Similar to the previous example, the resources in this case are restricted to providing scholarships to needy residents. A scholarship trust fund should be established to account for the investment activity.

5. The journal entry would be as follows:

Debit: Expenditures - Construction $6,000,000

Credit: Other Financing Sources - Proceeds of Bonds $6,000,000

When a government issues debt to fund a capital project, a capital projects fund should be established to account for the transaction.

6. The journal entries would be as follows:

Fund A (Unrestricted Fund):

Debit: Transfer Out $400,000

Credit: Cash $400,000

Fund B (Bond Redemption Fund):

Debit: Cash $400,000

Credit: Transfer In $400,000

Transferring unrestricted resources to an appropriate fund to be invested and eventually used to pay off long-term jail bonds necessitates two entries: one in the fund from which the transfer is made (the general fund in this case) and one in the fund to which the transfer is made (the debt service fund in this case).

7. The journal entry would be as follows:

Debit: Depreciation Expense - Vehicle Repair Center $100,000

Credit: Accumulated Depreciation - Vehicle Repair Center $100,000

When an internal service fund provides services to other governmental units, it should charge the actual cost of the services and recognize depreciation on any assets it owns.

8. The journal entry would be as follows:

Debit: Cash $30,000

Credit: Revenues - Parking Fees $30,000

An enterprise fund should be established to account for business-type activities that are financed and operated in a way that is similar to private-sector entities. When an enterprise fund charges fees for the services it provides, the resources obtained should be placed in that fund.

9. The journal entry would be as follows:

Debit: Cash $8,000,000

Credit: Other Financing Sources - Bonds $8,000,000

Governments that own and operate utilities should establish a utility fund to account for their operations. When debt is used to fund capital projects, as is the case in this situation, it should be recorded in the utility fund.

10. The journal entry would be as follows:

Debit: Taxes Receivable - School Districts $3,000,000

Credit: Revenues - Taxes $3,000,000

To account for the tax collections and disbursements, the general fund should establish due from/to other funds accounts.

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