IntroductionThe 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 groupCheck figures:General fund cash:$143,249General fund unassigned fund balance:85,229Governmental funds: Total fund balance1,948,249 Enterprise fund cash: 69,500Enterprise fund net position:54,183A set of Excel templates (Excel) is available for your use. Please turn in the printed copy of each worksheet. PROVINCE OF EUROPATransaction 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 FUNDTrial balanceJan. 1, 2091 debits creditsCash18,000Fund Balance: Supplies13,000 31,000Assigned (Reserved for encumbrances).11,806 Unassigned19,194 31,000The 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 GovernmentBureauLifeValueBuildings, roads, and other structures$1,395,000$450,00010$0Equipment480,000150,00050Geothermal Generators0650,00050Total$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, 2091.4. On January 1, 2091, The Province Council approved budgets for 2091 as follows: Budget ItemsProvince Government (General Fund)Capital AdditionsBureau of Electricity and WaterRevenue and other financing sourcesProperty TaxesSales TaxesFees, Licenses and PermitsCharges for Services (Bureau)Program Fees: EducationIntergovernmental grantsTransfer from General FundProceeds from Bond Issues$3,720,000750,000250,00070,000470,000$250,0002,500,000$3,250,000300,0001,250,000Expenditures/expenses and other financing uses:General government operationsPublic SafetyEducationOperating expenses (Bureau)Capital OutlaysTransfers to other funds1,500,0001,400,0001,250,000850,0002,750,0003,000,0001,875,0005. On January 10, 2091, a cash grant of $450,000 was received from the United Earth Council for operation of the Province. The grant provisions stipulate the funds are to be used for general operations of the government.6. On January 31, 2091, $3,700,000 in property taxes were levied. Of this, $111,000 (3% of property taxes) is estimated to be uncollectible. The remaining tax bills are expected to be collected within 60 days following the end of the fiscal year. During 2091, $3,030,000 was collected and $104,000 are identified as uncollectible and written off.7. On January 5, 2091, the engineering report ordered in December of the previous year (see item 1 above) was received along with an invoice for of $ 11,501. The invoice was immediately paid. The engineering report was for general government operations.8. During 2091, the Province government placed orders amounting to $940,000 for supplies. All the supplies ordered were received during the year with an invoice price of $935,000 (there are no outstanding encumbrances for supplies). $900,000 was paid during the year. The supplies were distributed by major functions of government as follows: GeneralPublic SafetyOperation EducationTotalOrder placed$390,000$400,000$150,000$940,000Invoice prices395,000400,000140,000 935,000 The government uses the consumption method of recording supplies – (i.e., expenditure is determined by the amount of supplies used – not purchased – during a period).9. During 2091, the Bureau of Electricity and Water placed orders amounting to $1,200,000 for supplies. The supplies were received with an invoice price of $1,100,000. Of this, $1,045,000 was paid before year end.10. The Province Council approved the construction of a new school building at an estimated cost of $2,750,000. The issuance of $2,500,000 in general obligation long-term bonds was authorized to finance the cost of construction. In addition, the Province government agreed to provide $250,000 for the construction project.11. On March 31, 2091, the Province government transferred $250,000 to the school building capital project.12. On April 1, 2091, $2,500,000 in 10 percent general obligation long-term bonds were issued for $2,580,000. The premium of $80,000 was reserved for redemption of the bonds, while the principal was set aside for construction of the school. The bonds call for annual interest payments on March 31, and mature on April 1, 2111.13. On June 1, 2091, the school building contract was awarded to the lowest bidder for $2,600,000, including planning and architect's fees.14. On November 30, 2091, the progress billings of $1,250,000 for the school building were received from the contractor, and $ 850,000 was paid on December 31, 2091. The remaining balance is expected to be paid in January 2092. Liabilities resulting from capital additions are recorded in “Contracts Payable,” (rather than Accounts Payable).15. The Board of the Bureau of Electricity and Water approved the construction of an office building at an estimated cost of $880,000.16. On July 1, 2091, the office building contract was signed in the amount of $865,000, including planning and architect's fees.17. On October 30, 2091, construction was completed and $632,500 was paid on the contract. The remaining portion ($ 232,500) will be paid following final inspection on January 15, 2092. Liabilities resulting from capital additions are recorded in “Contracts Payable” (rather than Accounts Payable).18. At the end of November, ground transportation units were ordered for the public safety department at an estimated cost of $167,020. The units have not been delivered as of December 31, 2091.19. During 2091, the Province government received the following cash collections:Sales taxes$838,000Permits, fees and licenses312,000Program Fees: Education80,000Total$1,230,00020. Salaries and wages of $4,150,000 were incurred and paid by the Province government and the Bureau of Electricity and Water during 2091. Salaries and wages are classified by governmental functions as follows: Incurred & Paid General operation$837,000 Public safety775,000Education725,000Bureau of Electricity Water 1,813,000Total$4,150,00021. During 2091, the Bureau of Electricity and Water billed the Province government and the residents for electricity and water services in the amounts of $920,000 and $2,120,000 respectively. The Bureau estimated that 2% of the gross revenue from the residents will be uncollectible. During 2091, $805,000 and $1,805,000 of the bills sent to the Province government and the residents, respectively, are collected. $18,500 of the bills sent to the residents are identified as uncollectible and written off.The electricity and water services provided to the Province government were charged by government functions as follows:General operation$350,000 Public safety320,000Education250,00022. $281,250 was removed from general government funds and set aside for payments on outstanding general obligation serial bonds.23. On December 31, 2091, the Province government made principal payment of $93,750 and annual interest of $187,500 on the general obligation serial bonds.24. As of December 31, 2091, physical inventories of supplies on hand report the following:General operation$116,000Public safety0Education0Bureau of Electricity Water 14,00025. On December 31, 2091, the Bureau of Electricity and Water accrued annual interest on the 10% bonds ($1,250,000 face value) described in item # 2.26. The Province government and the Bureau of Electricity and Water recorded depreciation for 2091 using the straight-line method. The new office building is estimated to have zero salvage value and 10-year useful life and is depreciated on a monthly basis, beginning with the month (November) it was placed in service.27. On December 31, 2091, the Bureau of Electricity and Water borrowed $650,000 on a 90-day note payable to cover a temporary cash shortfall.28. On December 31, 2091, $300,000 was borrowed on a 60-day note payable to cover a temporary cash shortfall in general government operations. 29. The bond premium is amortized using the straight-line basis over 20 years (9 months of amortization is recognized in 2091).30. For purposes of classifying fund balances in the governmental funds, assume:Supplies are the only nonspendable resource.The outstanding encumbrances in the capital project fund are classified as Committed by contractual obligation.The outstanding encumbrances in the General Fund are classified as Assigned for capital asset acquisitions.The residual balances of the debt service and capital projects funds are classified as assigned.31. Prepare closing entries, where appropriate. Entries Required for Government-Wide Financial Statements:A review of the governmental-type transactions for the year suggests the following worksheet journal entries are necessary for preparation of the government-wide statements:The fixed assets and debt acquired in Transaction 2 should be entered in the beginning balances column on the worksheet.Capital expenditures should be eliminated.Depreciation expense should be recorded.Bond proceeds should be eliminated.The premium on the 20-year bonds in Transaction 12 should be amortized using the straight line method (9 months).Nine months of interest should be accrued on the bonds in transaction 12.Interfund transfers should be eliminated, but not the portion paid to Business-type funds.Expenditures for bond principal should be eliminated.In your analysis, include the following:An introductionFund-basis financial statements, including a Budget Comparison Statement for the General Fund.Ledgers (t-accounts) with journal entries for each fund and account groupConclusion.