Completing Chapters 2 through 11 of the City of Smithville Full Version
Foreword
This
full version
of a cumulative problem written for the computer presents a series of transactions covering activities for the City of Smithville, assuming the city utilizes the dual-track accounting approach to the GASB
reporting model described in Reck, Lowensohn, and Neely,
Accounting for Governmental & Nonprofit Entities, 18th edition. The transactions presented relate to the city’s General Fund, capital projects, debt service, enterprise, and fiduciary funds, as well as to an additional accounting entity, governmental activities at the government-wide level. The transactions and instructions in this series are designated Chapter 2, Chapter 3, etc., corresponding to the chapters of Reck, Lowensohn, and Neely,
Accounting for Governmental & Nonprofit Entities,
18th edition.
You should begin the project with Chapter 2 of the instructions as you complete Chapter 2 of the textbook. Some problems require you to print trial balances or other documents. Other problems require the preparation of financial statements or other documents. The specified documents can either be turned in chapter by chapter or retained in a cumulative folder until the end of the project, depending on your instructor’s preference and instructions. Some instructors may prefer that you electronically submit your project data file and either Excel or .pdf files containing your trial balances, financial statements, and other documents, rather than submitting printed copies.
To minimize errors, you should read and follow all instructions carefully. Students find that this computerized cumulative problem significantly enhances their learning if they complete each City of Smithville chapter as the corresponding chapter of the textbook is covered. Conversely, students who procrastinate often find that the project takes more time than they expected and that it is harder to recall how to make the journal entries covered in the earlier chapters. Thus, delaying until your project is nearly due may increase the total time it takes you to do the project and leave you little time for anything else that week. So, our advice is to stay current with the project.
Chapter 2 Opening the Books
The City of Smithville just implemented a dual-track computerized accounting system, which provides files for general journal entries and posting to appropriate general ledger/subsidiary ledger accounts. Budgetary, operating statement, and balance sheet accounts are provided for the General Fund and the other governmental fund types. Operating statement accounts and balance sheet accounts are also provided for governmental activities at the government-wide level and the proprietary and fiduciary funds of the City of Smithville that you will use in Chapters 5-9 of the problem. As the city’s new accountant, it is your job to enter the city’s initial accounting information as of December 31, 2019, in preparation for placing the new accounting system in full operation effective January 1, 2020.
Required
First, be sure to read the
User Guide
to understand the general instructions on how to navigate and use this application.
Open the City of Smithville software by clicking on the
MHECitiesSmithvilleBingham
program. Access the instructions for the
Full
Version of the City of Smithville project by clicking on
[Instructions]
in the opening screen of the application and then
[Smithville]
which appears at the top of the window with the
Full
version selected by default.
If creating a new project, click
“Create New Project,”
when the
“Create New Project”
window appears choose
“Smithville
icon. In addition, in the
“Your name”
field, type your first and last name so that it will appear on all printable reports, and then click
[Create]
button. This will create the project and provide access to all of the funds and accounts that you will need to complete the Full Version City of Smithville cumulative problem.
To protect yourself from possible hard drive failure or corruption of your project data file, we recommended that you save your file to not only your hard drive but also another location (e.g., flash drive or the cloud), creating a backup file for your project at the end of each session.
To open an existing project, click on
“Open Project”
in the opening window or select the project from the “Recent projects” list.
a.
If it is not already displayed, select
[General Fund]
in the
“Current accounting entity”
window and the
[Accounts]
tab. Clicking on the
[Accounts]
tab allows you to see the chart of accounts that will be used for the
[General Fund]. A different chart of accounts is provided for each of the accounting entities. Next, select the
[Journal]
tab and click
the [Add new entry]
button and then click on
[Select account or search by account name or number]
in the Account column. You will see the same general ledger accounts that were listed when you clicked on the
[Accounts]
tab. (Note: For purposes of this exercise, date suffixes are omitted from the Expenditures and Encumbrances accounts as expenditures occur only from a single year’s appropriations.) You will not use all of the accounts listed for this project.
b.
The trial balance for the General Fund of the City of Smithville as of December 31, 2019, follows. Select the
[Journal]
tab and create a journal entry to enter the balance sheet accounts and amounts shown in the trial balance. To create an entry start by clicking on
[Add new entry]. Select or type the desired account name from the drop down list in the
[Account]
column. Be sure to enter
2019
from the dropdown in the
[Year]
column and enter the paragraph number from these instructions in the
[Add description]
field in the
[Description]
column of the
[Journal]. For this entry you should enter
2-b.
Select the appropriate accounts individually and insert the appropriate amounts.
(Note: You should enter all dollar amounts without dollar signs, commas, and decimal points. For all entries, it is vitally important that the correct year be selected.)
You enter each account and amount one line at a time by clicking
[Add]. The
[Add]
button will not be active if information for the entry is missing (e.g., the transaction description is missing.)
The year and transaction description need only be entered for the first line of the journal entry; it will remain selected for the rest of the accounts. When you have completed entering all account data and amounts, verify your entries, including date and paragraph numbers. When you are sure that your entries are correct, click
[Post entries]
to post the items to the general ledger of the General Fund.
CITY OF SMITHVILLE
General Fund Post-Closing Trial Balance
As of December 31, 2019
Account Title Debits Credits
Cash $ 376,290
Taxes Receivable—Delinquent 391,756
Allowance for Uncollectible Delinquent Taxes $ 11,752
Interest and Penalties Receivable on Taxes 40,126
Allowance for Uncollectible Interest and Penalties 3,611
Due from Other Funds 12,000
Due from State Government 165,000
Inventory of Supplies 66,000
Vouchers Payable 272,187
Due to Other Funds 6,400
Due to Federal Government 135,720
Due to State Government 32,600
Deferred Inflows of Resources 97,704
Fund Balance—Nonspendable—Inventory of Supplies 66,000
Fund Balance—Restricted—Public Safety 15,000
Fund Balance—Committed—Public Works 29,700
Fund Balance—Assigned—Culture and Recreation 56,800
Fund Balance—Unassigned 323,698
Totals $1,051,172 $1,051,172
Unpost capability.
As mentioned in the “User Guide” page, the City of Smithville software program permits students to “unpost” a particular batch of posted transactions. Unposted entries then can be edited and re-posted. In addition, any omitted entries can be inserted above or below a selected journal line in any unposted batch of entries.
Prior to unposting a batch, all batches must be posted.
Select
[Reports>Trial Balances>Post-Closing Trial Balance]
and print or save as a .pdf file the post-closing trial balance for year 2019. Retain the printed trial balance in your personal cumulative folder until the due date assigned by your instructor for the project, or submit a saved version of the trial balance electronically if directed to do so by your instructor.
c.
Select
[Governmental Activities, Government-wide Level]
in the
“Current accounting entity”
dropdown field and the
[Accounts]
tab. You will see most of the accounts included in the preceding trial balance, plus many other accounts that will be used in the various chapters of the City of Smithville project.
d.
Select the
[Journal]
tab and create a journal entry to enter the statement of net position (i.e., balance sheet) accounts and amounts shown in the following trial balance. It is necessary to enter these items in the accounts of the governmental activities category at the government-wide level as the general journal and general ledger for governmental activities comprise a separate “set of books” from those for the General Fund. Be sure to enter
2019
from the dropdown menu in the
[Year]
column and enter
2-d
in the
[Add description]
field in the
[Description]
column. Select each account individually and insert the appropriate debit or credit amount for each account. When you have completed entering the initial data, verify the accuracy and click
[Post entries]
to post the entry to the governmental activities, government-wide general ledger.
CITY OF SMITHVILLE
Governmental Activities Government-wide Level
Post-Closing Trial Balance
As of December 31, 2019
Account Title Debits Credits
Cash $ 376,290
Taxes Receivable—Delinquent 391,756
Allowance for Uncollectible Delinquent Taxes $ 11,752
Interest and Penalties Receivable on Taxes 40,126
Allowance for Uncollectible Interest and Penalties 3,611
Due from State Government 165,000
Internal Receivables from Business-type Activities 12,000
Inventory of Supplies 66,000
Land 4,180,000
Infrastructure 9,862,000
Accumulated Depreciation—Infrastructure 2,713,944
Buildings 6,296,000
Accumulated Depreciation—Buildings 1,731,000
Equipment 3,556,800
Accumulated Depreciation—Equipment 1,765,480
Vouchers Payable 272,187
Due to Federal Government 135,720
Due to State Government 32,600
Internal Payables to Business-type Activities 6,400
Net Position—Net Investment in Capital Assets 17,684,376
Net Position—Restricted for Public Safety 15,000
Net Position—Unrestricted 573,902
Totals $24,945,972 $24,945,972
e.
Select
[Reports>Trial Balances>Post-Closing Trial Balance]
and print the trial balance for 2019, or submit a saved .pdf version of the trial balance electronically if directed to do so by your instructor. Retain in your cumulative file until the due date for your project or the time specified by your instructor.
Before closing the
City of Smithville
it is recommended that you save a backup copy of your work to another location by clicking on
[File]
and
[Save As] for Windows and Mac. Click on
“Export my Project”
if you are using the Chromebook version.
Chapter 3 Recording the Annual Budget
The following budget for the General Fund of the City of Smithville was legally adopted for the fiscal year ending December 31, 2020.
Estimated Revenues:
Taxes:
Real Property $1,841,126
Sales 1,578,000
Interest and Penalties on Taxes 37,000
Licenses and Permits 500,000
Fines and Forfeits 210,000
Intergovernmental Revenue 789,000
Charges for Services 624,720
Miscellaneous Revenues 91,300
Total Estimated Revenues $5,671,146
Appropriations:
General Government $1,169,500
Public Safety 2,206,000
Public Works 834,000
Health and Welfare 700,000
Culture and Recreation 660,500
Total Appropriations $5,570,000
Estimated Other Financing Sources and Uses:
Interfund Transfers Out $ 17,500
Required
a.
After opening the file you created for Chapter 2 of this project, record the budget in the general journal, providing entries in the Detail Journal when directed. Begin by selecting
[General Fund]
in the
“Current accounting entity”
dropdown menu from the
[Journal]
tab. Click on the
[Add new entry]
to start your entry. In the
[Year]
field, be sure to select the year
2020. Enter
3-a
in the
[Add description]
field. Select Estimated Revenues in the drop down
[Account]
window. Click
[Add subsidiary]
to go to the Detail Journal where you will enter the detail for each estimated revenue source. In the Detail Journal, select
“Budget Authorization” from the drop-down menu for
[Description].
When you have finished entering the estimated revenue detail information, verify that the correct total amount is shown in the Detail Journal, then click on
[Add entry and return to Journal]
and the total estimated revenues will be entered in the general journal Estimated Revenues control account. Follow the same procedure to record the budget detail for Appropriations. To complete this entry debit or credit Budgetary Fund Balance as appropriate to balance the budgetary entry.
To finish recording the budget debit Budgetary Fund Balance and credit Estimated Other Financing Uses—Interfund Transfer Out for $17,500. Note that budgetary entries have no effect on governmental activities at the government-wide level and thus the budget information is only recorded in the General Fund.
When you are satisfied you have made the entries correctly, post them to the general ledger by clicking on
[Post entries]. Before posting, or after unposting as described previously, you can edit, delete or insert entries in the journal by placing the cursor in the line you want to adjust and then right-clicking. Note that the “Insert Entry” function will work if you are inserting an entry prior to a balance sheet account. However, it will not work when inserting an entry prior to any account that has an associated subsidiary ledger (e.g., estimated revenues, expenditures).
b.
Go to
[Reports], print the pre-closing subsidiary ledgers and pre-closing trial
balance for year 2020 and retain them in your cumulative file until directed by your instructor to submit them, or submit saved versions of these documents electronically if directed to do so by your instructor. As of this time, only the budget has been recorded.
This is your last opportunity to print or export these documents with budget information only.
After operating transactions have been journalized and posted in Chapter 4, subsidiary ledgers and trial balances will contain both budgetary and operating accounts and balances.
Before closing the
City of Smithville
it is recommended that you save a backup copy of your work to another location by clicking on
[File]
and
[Save As]
for Windows and Mac. Click on “Export my Project” if you are using the Chromebook version.
Chapter 4 Recording Operating Transactions Affecting the General Fund and Governmental Activities at the Government-wide Level
Presented below are a number of transactions for the City of Smithville that occurred during fiscal year 2020, the year for which the budget given in Chapter 3 was recorded. Read
all
instructions carefully.
a.
After opening the data file containing your data from Chapters 2 and 3 of this project, record the following transactions in the general journal for the General Fund and, if applicable, in the general journal for governmental activities at the government-wide level. For all entries, the date selected should be year
2020. For each of the paragraphs that requires entries in both the General Fund and governmental activities journals, you can either record them in both journals on a paragraph-by-paragraph basis or, alternatively, record all the General Fund journal entries first for all paragraphs, then complete the governmental activities journal entries for all paragraphs. Regardless of the method you choose, we recommend that you refer to the illustrative journal entries in Chapter 4 of the Reck, Lowensohn, and Neely textbook (18th
edition) for guidance in making all entries.
For each entry affecting budgetary accounts or operating statement accounts, you will be directed to the Detail Journal to allow you to record the appropriate amounts in the detail budgetary or actual accounts, as was the case in Chapter 3.
1.
[Para. 4-a-1]
On January 2, 2020, real property taxes were levied for the year in the amount of $1,878,700. It was estimated that 2 percent of the levy would be uncollectible.
Required: Record this transaction in both the General Fund and governmental activities journal. (Note: Type 4-a-1 as the paragraph number in the
[Add description]
field for this entry; 4-a-2 for the next transaction, etc. Careful referencing by paragraph number is very helpful should you need to determine where you may have omitted a required journal entry or made an error.) For the General Fund you will be directed to the Detail Journal. Select “Accrued Revenue” in the drop down
[Description]
menu in the Detail Journal related to the General Fund entry.
[Para. 4-a-2]
Encumbrances were recorded in the following amounts for purchase orders issued against the appropriations indicated:
General Government $ 193,220
Public Safety 442,900
Public Works 208,300
Health and Welfare 154,295
Culture and Recreation 143,580
Total $1,142,295
Required:
Record the encumbrances in the General Fund general journal and Detail Journal as appropriate. In the Detail Journal, select “Purchase Orders” from the drop down
[Description]
menu.
[Para. 4-a-3]
Cash was received during the year in the total amount of $5,710,511 for collections from the following receivables and cash revenues, as indicated:
Current Property Taxes $1,488,206
Delinquent Property Taxes 387,201
Interest and Penalties Receivable on Taxes 34,270
Due from Other Funds/Internal Receivables 12,000
Due from State Government 165,000
Revenues: (total: $3,623,834)
Sales Taxes 1,579,203
Licenses and Permits 477,960
Fines and Forfeits 211,106
Intergovernmental 639,000
Charges for Services 625,315
Miscellaneous 91,250
Total $5,710,511
Required:
Record the receipt of cash and the related credits to receivables and revenues accounts, as applicable, in both the General Fund and governmental activities journals. (Select “Received in cash” in the drop down
[Description]
menu in the Detail Journal related to the General Fund revenue entries.)
For purposes of the governmental activities entries at the government-wide level assume the following revenue classifications:
General Fund Governmental Activities
Sales Taxes General Revenues—Taxes—Sales
Licenses and Permits Program Revenues—General Government—
Charges for Services
Fines and Forfeits Program Revenues—General Government—
Charges for Services
Intergovernmental Program Revenues—Public Safety—Operating
Grants and Contributions, $295,000
Program Revenues—Health and Welfare—
Operating Grants and Contributions,
$344,000
Charges for Services Program Revenues—General Government—
Charges for Services, $250,126
Program Revenues—Public Safety—
Charges for Services, $93,798
Program Revenues—Culture and Recreation—
Charges for Services, $281,391
Miscellaneous General Revenues—Miscellaneous, $91,250
4.
[Para. 4-a-4]
Of the $387,201 in delinquent property taxes collected in transaction 4-a-3, $85,549 had been recorded in the Deferred Inflows of Resources account. Additionally, $7,540 of the interest and penalties collected in 4-a-3 had also been recorded as deferred inflows of resources.
Required:
In the General Fund recognize the property tax revenues and the interest and penalties revenues related to the deferred inflows of resources. To do this debit the Deferred Inflows of Resources account and credit related property tax revenues and interest and penalties revenues. Select “Previous Deferral” in the
[Description]
menu in the Detail Journal. Under accrual accounting the deferral was not recognized in the governmental activities journal; therefore, there is no need to record a journal entry in the governmental activities journal.
[Para. 4-a-5]
General Fund payrolls for the year totaled $4,401,482. Of that amount, $660,222 was withheld for employees' federal income taxes; $472,193 for federal payroll taxes; $190,798 for employees’ state income taxes; $220,152 for retirement funds administered by the state government; and the remaining $2,858,117 was paid to employees in cash. The City of Smithville does not record encumbrances for payrolls. The payrolls were chargeable against the following functions’ appropriations:
General Government $ 956,254
Public Safety 1,771,480
Public Works 624,960
Health and Welfare 545,370
Culture and Recreation 503.418
Total $4,401,482
Required:
Make summary journal entries for payroll in both the General Fund and governmental activities general journals for the year.
6.
[Para. 4-a-6]
Invoices for
some
of the goods recorded as encumbrances in transaction 4-a-2 were received and vouchered for later payment, as listed below. Related encumbrances were canceled in the amounts shown (select “Elimination” in the drop down
[Description]
menu in the Detail Journal):
Expenditures Encumbrances
General Government $ 191,709 $ 191,720
Public Safety 442,870 442,900
Public Works 208,320 208,300
Health and Welfare 153,822 153,800
Culture and Recreation 141,990 142,000
Total $1,138,711 $1,138,720
Required:
Record the receipt of these goods and the related vouchers payable in both the General Fund and governmental activities journals. At the government-wide level, you should assume the city uses the periodic inventory method. Thus, the invoiced amounts above should be recorded as expenses of the appropriate functions, except that $38,340 of the amount charged to the Public Works function was for a vehicle and $43,570 of the amount charged to the Culture and Recreation function was for recreation equipment (debit Equipment for these items at the government-wide level).
7. [Para. 4-a-7]
During FY 2020, the City of Smithville received notification that the state government would send $150,000 to it at the beginning of the next fiscal year. Based on the city’s definition of “available for use,” the city considers the funds available to use for Public Safety’s operating activities in the current reporting period. The budget for the current year included this amount as “Intergovernmental Revenue.”
Required:
Record this transaction as a receivable and revenue in the General Fund and governmental activities journals. (Select “Accrued Revenue” in the
[Description]
menu in the Detail Journal). At the government-wide level, assume that this item is an operating grant to the Public Safety function.
8.
[Para. 4-a-8]
Checks were written in the total amount of $2,734,295 during 2020. These checks were in payment of the following items:
Vouchers Payable $1,199,264
Due to Other Funds/Internal Payables 6,400
Due to Federal Government 1,126,941
Due to State Government 401,690
Total amount paid $2,734,295
Required:
Record the payment of these items in both the General Fund and governmental activities general journals.
9.
[Para. 4-a-9]
Current taxes receivable uncollected at year-end, and the related Allowance for Uncollectible Current Taxes account, were both reclassified as delinquent. Of the amount classified as delinquent it was determined $87,010 would not be collected within 60 days of the fiscal year end and would therefore be unavailable for use in the current period. As a result the amount was reclassified as deferred inflows of resources.
Required:
Record the reclassification of the current taxes receivable and related allowance for uncollectible account in the General Fund and governmental activities journals.
Reclassify $87,010 of property tax revenue to the Deferred Inflows of Resources account in the General Fund journal only. (Note: To accomplish the reclassification of revenue, debit the revenue account and credit deferred inflows of resources. Select “Deferral” in the
[Description]
menu in the Detail Journal.)
[Para. 4-a-10]
The city’s budget for 2020 was legally amended as follows:
Estimated Revenues:
Decreases Increases
Licenses and Permits $ 20,000
Appropriations:
Public Safety $ 10,000
Culture and Recreation $ 13,000
Required:
Record the budget amendments in the General Fund general journal only. Budgetary items do not affect the government-wide accounting records. (Note: Select “Budget Amendment” in the
[Description]
field in the Detail Journal.)
11.
[Para. 4-a-11]
Interest and penalties receivable on delinquent taxes was increased by $40,500; $3,248 of this was estimated as uncollectible and based on past history $8,910 was considered to be unavailable for use in the current fiscal year.
Required:
Record this transaction in the General Fund and governmental activities journals. The $8,910 classified as unavailable for use is recorded as deferred inflows of resources in the General Fund journal and as revenue in the governmental activities journal.
12.
[Para. 4-a-12]
Services received by the General Government function of the General Fund from the Solid Waste Disposal Fund amounted to $18,200 during the year. Of this amount, $15,400 was paid in cash and $2,800 remained unpaid at year-end.
Required:
Record the receipt of these services, amounts paid during the year, and remaining liability in the General Fund and governmental activities journals. At the government-wide level the liability should be credited to Internal Payables to Business-type Activities.
Do not record these items in the Solid Waste Disposal Fund
until instructed to do so in Chapter 7 of this case.
13.
[Para. 4-a-13]
Delinquent taxes receivable in the amount of $17,150 were written off as uncollectible. Interest and penalties already recorded as receivable on these taxes, amounting to $3,087, were also written off. Additional interest on these taxes that had legally accrued was not recorded since it was deemed uncollectible in its entirety.
Required:
Record this transaction in the General Fund and governmental activities journals.
14.
[4-a-14]
In December 2020, the General Fund transferred $17,500 to the Street Improvement Bond Debt Service Fund to assist with an interest payment due on January 1, 2021.
Required:
Record this transaction in the General Fund only. The transaction has no effect at the government-wide level since it occurs between two governmental activities.
Do not record this transaction in the Street Improvement Bond Debt Service Fund
until instructed to do so in Chapter 6 of this case.
15.
[4-a-15]
Adjusting Entry.
A physical count of consumable supplies at year-end showed an ending balance of $64,420, a decrease of $1,580 during the year. The city uses the purchases method of accounting for its inventory in the General Fund and the consumption method at the government-wide level. Since the city uses a periodic inventory system, both at the fund and governmental levels, it records all purchases of inventory as expenditures in the General Fund and as expenses at the government-wide level. The decrease in inventory requires no adjustment to the expenditure account (since the expenditure was recorded in a prior period); however, an adjustment to the expenses accounts should be made to the General Government function.
Required:
Prepare the adjusting journal entries in the General Fund journal to adjust the Inventory of Supplies and Fund Balance—Nonspendable—Inventory of Supplies accounts to the correct balances and the governmental activities journal to adjust the Expenses—General Government and Inventory of Supplies accounts.
Post all journal entries to the ledgers:
After reviewing all entries for accuracy, including year and paragraph numbers, post all entries to the general ledger accounts and to all subsidiary ledger accounts, by clicking on
[Post entries]. Also post all entries in the governmental activities journal.
Closing Entry.
Following the instructions in the next paragraph, prepare and post the necessary entries to close the General Fund Estimated Revenues, Appropriations, and Estimated Other Financing Uses accounts to Budgetary Fund Balance, and Revenues, Expenditures, and Other Financing Uses to Fund Balance—Unassigned. Because the City of Smithville honors all outstanding encumbrances at year-end, it is not necessary to close Encumbrances to Encumbrances Outstanding at year-end since encumbrances do not affect the General Fund balance sheet or statement of revenues, expenditures, and changes in fund balances. If, however, you would like to avoid having these accounts appear in the post-closing trial balance, you can opt to close Encumbrances to Encumbrances Outstanding. If the accounts are closed, they would need to be reestablished at the beginning of the next year.
To close the temporary accounts, you must click the box for
[Closing Entry]
that appears when you
[Add new entry].
[Closing Entry] checkbox will appear next to the
[Add credit]
field. Be sure the checkmark in the box for
[Closing Entry]
is showing as selected before closing each individual account. Also, you will be sent to the Detail Journal where you must close each individual budgetary or operating statement account. To determine the closing amounts for both General Ledger and subsidiary ledger accounts, you will need to print the pre-closing version of these ledgers for year 2020 from the
[Reports]
menu.
At year-end, an analysis by the city’s finance department determined the following constraints on resources in the General Fund. Prepare the appropriate journal entry in the General Fund to reclassify amounts between Fund Balance—Unassigned and the fund balance accounts corresponding to the constraints shown below. (Note: You should consider the beginning of year balances in fund balance accounts when calculating the amounts to be reclassified. Be sure the check mark in the box for
[Closing Entry]
is showing as selected before closing each individual account.)
Account Ending Balance
Fund Balance—Restricted—Public Safety $36,000
Fund Balance—Committed—Health and Welfare 43,000
Fund Balance—Committed—Public Works 12,700
Fund Balance—Assigned—Culture and Recreation 0
Note:
DO NOT PREPARE CLOSING ENTRIES FOR GOVERNMENTAL ACTIVITIES AT THIS TIME
since governmental activities will not be closed until Chapter 9, after the capital projects fund (Chapter 5) and debt service fund (Chapter 6) transactions affecting governmental activities at the government-wide level have been recorded.
b. Select
[Export]
from the drop down
[File]
menu to create an Excel worksheet of the General Fund post-closing trial balance as of December 31, 2020. Use Excel to prepare in good form a balance sheet for the General Fund as of December 31, 2020. Follow the format shown in Illustration 4-4 of Reck, Lowensohn, and Neely,
Accounting for Governmental & Nonprofit Entities, 18th edition
textbook (hereafter referred to as “the textbook”).
c. Select
[Export]
from the drop down
[File]
menu to create an Excel worksheet of the General Fund pre-closing subsidiary ledger account balances for the year 2020. Use Excel to prepare in good form a statement of revenues, expenditures, and changes in fund balance for the General Fund for the year ended December 31, 2020. (See Illustration 4-5 in the textbook for an example format.)
d. Use the Excel worksheet of the General Fund pre-closing subsidiary ledger account balances created in part
c
above to prepare in good form a schedule of revenues, expenditures, and changes in fund balance—budget and actual for the General Fund for the year ended December 31, 2020. (See Illustration 4-6 in the textbook for an example format.)
e. Prepare a reconciliation of total expenditures reported in your solution to part
c
of this problem with the total expenditures and encumbrances reported in your solution to part
d
of this problem. (In Chapter 4 below Illustration 4-5, see discussion and example which compares Illustrations 4-5 and 4-6.)
[Note: File the printouts of all your worksheets and your completed financial statements in your cumulative problem folder until directed by your instructor to submit them, unless your instructor specifies submission of files electronically,
in which case you will need to save a .pdf version of you trial balances.]
Before closing the
City of Smithville
it is recommended that you save a backup copy of your work to another location by clicking on
[File]
and
[Save As] for Windows and Mac. Click on “Export my Project” if you are using the Chromebook version.
Chapter 5 Recording Capital Asset Transactions
Street Improvement Capital Projects Fund and Governmental Activities at the Government-wide Level
During late 2019, the voters of the City of Smithville authorized tax-supported bond issues totaling $8,000,000 as partial financing for projects to construct the extension of two streets and the related curbs, culverts, and storm sewers in the city. The estimated total cost of the projects, which are expected to extend over the next three years, was $11,200,000. In addition to the bond financing, voters also approved a special 1 cent sales tax to assist in financing the projects. The sales tax begins January 1, 2020 and will continue for seven years. The sales tax is projected to generate $550,000 each year.
Required
a.
Prepare general journal entries as necessary to record the transactions described below in the Street Improvement Fund general journal and, if applicable, in the governmental activities general journal. Do not record entries at this time in other affected funds; those entries will be made in the later chapters of this cumulative problem that cover the affected funds. Use account titles listed under the drop down
[Account]
menu. Be sure the year
2020
is selected from the dropdown
[Year]
menu and the appropriate paragraph number shown in bold-face font below is in the
[Add description]
field.
1.
[Para. 5-a-1]
In early 2020, design plans and specifications for the first project, the Elm Street Project, were submitted by a construction engineering firm. The firm billed the Street Improvement Fund for $150,000.
Required:
Record this billing and the related Vouchers Payable liability in the Street Improvement Fund and governmental activities journals. (Note: this transaction was not encumbered.)
2.
[Para. 5-a-2]
On February 20, 2020, the city signed a $40,000, 90-day tax anticipation note bearing interest of 3.0 percent per annum.
Required:
Record this transaction in the Street Improvement Fund and governmental activities journals.
3.
[Para. 5-a-3]
A $235 purchase order for advertisements soliciting bids for the Elm Street Project was issued March 1, 2020. The bill for advertising in the amount of $230 was received March14, 2020 and a voucher for payment was issued.
Required:
Record the encumbrance, billing, and the Vouchers Payable liability in the Street Improvement Fund and governmental activities journals, as appropriate.
4.
[Para. 5-a-4]
On March 15, 2020, construction bids were opened and analyzed. A bid of $2,400,000 was accepted, and the contract was awarded for the Elm Street Project. The contract provided for a retained percentage of 5 percent from each progress payment, and from the final payment, until final inspection and acceptance by the city’s public works inspectors.
Required:
Record the signing of the contract in the Street Improvement Fund general journal. This transaction has no effect at the government-wide level.
5.
[Para. 5-a-5]
Sales tax revenue of $240,000 was received.
Required:
Record this transaction in both the Street Improvement Fund and governmental activities general journals.
[Para. 5-a-6]
Vouchers payable accumulated to date were paid on March 30, 2020.
Required:
Record this transaction in both the Street Improvement Fund and governmental activities general journals.
[Para. 5-a-7]
On April 1, 2020, 2.5% deferred serial bonds with a face value of $2,000,000 were sold for a total amount of $2,032,500, of which $12,500 was for accrued interest from the January 1, 2020 date of the bonds and $20,000 was a premium on the bonds sold. Cash in the amount of the accrued interest and premium was deposited directly in the Street Improvement Bond Debt Service Fund. Cash in the amount of $2,000,000 was deposited and recorded in the Street Improvement Fund.
Required:
Record these transactions in the Street Improvement Fund and governmental activities journals. (Hint: In addition to recording the liability for bonds payable in the governmental activities journal, you should record the premium on the bonds payable [credit Premium on Deferred Serial Bonds] and accrued interest on bonds sold [we recommend that you credit Expenses—Interest on Long-term Debt] in the governmental activities general journal for the $12,500 of accrued interest.) For now you should not make the entries in the Street Improvement Bond Debt Service Fund to record the accrued interest and premium. Those entries will be made in Chapter 6 of this cumulative problem.
[Para. 5-a-8]
The city repaid the $40,000 tax anticipation note plus interest of $300 ($40,000 X 0.03 X 90/360) (see transaction 2).
Required:
Record this transaction in both the Street Improvement Fund and governmental activities general journals. The $300 of interest should be debited to Interest Expenditures in the Street Improvement Fund journal and to Expenses—General Government in the governmental activities journal.
[Para. 5-a-9]
In July 2020, the contractor for the Elm Street Project reported that the project was one-half completed and requested a progress payment of $1,200,000. This amount was paid in late July, less the contractual retention of 5 percent.
Required:
Record this transaction in both the Street Improvement Fund and governmental activities general journals.
10.
[Para. 5-a-10]
Additional sales taxes were collected in the amount of $320,000 on December 1, 2020.
Required:
Record this transaction in both the Street Improvement Fund and governmental activities journals.
11.
[Para. 5-a-11]
On December 10, 2020 the Elm Street project was completed and the contractor for the project requested a final payment of $1,200,000. This amount was recorded as a liability. Payment was made, less the retained percentage, on December 15, 2020.
Required:
Record this transaction in both the Street Improvement Fund and governmental activities journals.
12.
[Para. 5-a-12]
The city submitted a $190,000 purchase order for design plans and specifications for the second street improvement project, the “Spruce Street Project.”
Required:
Record this encumbrance in the Street Improvement Fund.
13.
[Para. 5-a-13]
The city engineer approved the final construction on the Elm Street Project, and the city paid the retained percentage (Transactions 9 and 11) to the contractor.
Required:
Record this transaction in both the Street Improvement Fund and governmental activities journals. Total construction costs for the Elm Street Project should be capitalized in the Infrastructure account in governmental activities.
14. Verify the accuracy of all your preceding entries in the Street Improvement Fund and governmental activities general journals, then click
[Post entries]
of each entity to post the entries to the respective general ledgers. For the Street Improvement Fund only, prepare year-end closing entries for 2020 and post them to the fund’s general ledger, Fund Balance—Restricted. (Note: You must click on the box for
[Closing Entry]
to checkmark it;
“Closing Entry” checkbox will appear next to the
[Add credit]
field for the account being closed. Be sure the checkmark is present for each account being closed.) Click
[Post entries]
to post the closing entry. Under GASB standards encumbrances and encumbrances outstanding are not reported in any financial statements. Consequently, there is no need to close these accounts since the Spruce Street Project is still underway at year-end.
Closing entries will be made in the governmental activities general journal in Chapter 9 of this cumulative problem. Ignore those entries for now.
c.
Export the post-closing trial balance for year 2020 to an Excel worksheet and use Excel to prepare a balance sheet for the Street Improvement Fund as of December 31, 2020. (See Illustration 4-4 in the textbook for an example of an appropriate format of a governmental fund balance sheet.) In addition, print the post-closing trial balance from the
[Reports]
dropdown menu.
d.
Export the pre-closing trial balance for year 2020 to an Excel worksheet and use Excel to prepare a statement of revenues, expenditures, and changes in fund balance for the Street Improvement Fund for the year ended December 31, 2020. (See Illustration 5-3 in textbook for an example of the format of a capital projects fund statement of revenues, expenditures and changes in fund balance.) Print the pre-closing trial balance from the
[Reports]
dropdown menu.
[Note: Retain all required printouts and your financial statements in your cumulative folder until directed by your instructor to submit them, unless your instructor prefers to have files submitted electronically, in which case you will need to save a .pdf version of your trial balance.]
Before closing the
City of Smithville
it is recommended that you save a backup copy of your work to another location by clicking on
[File]
and
[Save As]
for Windows and Mac. Click on “Export my Project” if you are using the Chromebook version.
Chapter 6 Transactions Affecting General Long-term Liabilities and Debt Service
The City of Smithville created a Street Improvement Bond Debt Service Fund to be used to retire the bonds issued for the purposes described in Chapter 5 of this cumulative problem, and to pay the interest on the bonds. The $2,000,000 face value of bonds issued during 2020 are dated January 1, 2020, but were not issued until April 1, 2020. Because bondholders will receive six months of interest on July 1, 2020 in the total amount of $25,000, they were required to pay $12,500 on the date of issue to pay the city for unearned interest from January 1 to April 1. The bonds bear interest of 2.5 percent per annum. The first interest payment of $25,000 is due July 1, 2020. Subsequent semiannual interest payments will be made January 1 and July 1 of each following year until the maturity of the bonds. Bonds in the amount of $500,000 are to mature five years after the date of the bonds (January 1, 2025), and $100,000 is to mature January 1 of each year thereafter until all the bonds issued in 2020 have been retired. Thus, these bonds are deferred serial bonds as discussed in Chapter 6 of the textbook. Make entries as instructed in the following paragraphs.
Bond covenants related to this bond issue require the city to levy property taxes sufficient to make principal and interest payments until the bonds have been retired. The city council has approved a resolution to enable the property tax levy, beginning in fiscal year 2021. As the bond issue did not occur until April 2020, the city will not levy debt service property taxes until next year.
a.
Prepare general journal entries, as necessary to record the transactions described below in the Street Improvement Bond Debt Service Fund general journal and, if applicable, in the governmental activities general journal. Use account titles listed under the drop down
[Account]
menu. Be sure the year
2020
is selected from the drop-down
[Year]
menu and the appropriate paragraph number shown in bold-face font below is in the
[Add description]
box.
[Para. 6-a-1]
In early April 2020, an amendment to the annual budget for 2020 was approved by the city council for inflows and outflows in the Street Improvement Bond Debt Service Fund related to the bond issue. The debt service fund budget amendment provides for estimated other financing sources of $20,000 for the premium on bonds sold, estimated other financing sources of $17,500 for a transfer from the General Fund that will be used to help pay interest due on January 1, 2021, estimated revenues of $12,500 for accrued interest on bonds sold, and appropriations in the amount of the one interest payment of $25,000 to be made during 2020. (The payment that is due on July 1, 2020.)
Required:
Record the budget for the Street Improvement Bond Debt Service Fund for year 2020. Budgetary entries have no effect on the government-wide accounting records.
[Para. 6-a-2]
On April 1, 2020, the premium and accrued interest on bonds sold were received by the Street Improvement Bond Debt Service Fund. (See Transaction 5-a-7 in the Street Improvement Fund.)
Required:
Record this transaction in the debt service fund. No entry is required at this time in the governmental activities general journal since the bond issue, including the related premium and accrued interest, was recorded in the governmental activities general journal in transaction 5-a-7.
[Para. 6-a-3]
The July 1, 2020, interest payment was made in the amount of $25,000.
Required:
Record this transaction in both the debt service fund and the governmental activities general journals. Since Expense—Interest on Long-Term Debt was credited for $12,500 in 5-a-7 in the governmental activities general journal record the full July 1, 2020 interest payment as a debit to Interest Expense, less amortization of the premium. For the entry in the governmental activities journal, assume that the appropriate amount of amortization of the Premium on Deferred Serial Bonds Payable for the period the bonds have been outstanding (April 1 to July 1) is $439. (Note: Although premiums and discounts on bonds issued are not amortized in a debt service fund, they should be amortized at the government-wide level since the accrual basis of accounting is used at that level.)
[Para. 6-a-4]
Make the required journal entry in the governmental activities general journal to accrue six months of interest payable on the 2.5% deferred serial bonds from the July 1 interest payment until the end of the fiscal year, December 31, 2020. For this entry, assume that the appropriate amount of amortization of the Premium on Deferred Serial Bonds Payable is $875. (Recall that interest is not accrued for the period July 1 to December 31, 2020 in the debt service fund as no appropriation exists for this expenditure and the interest is not due this fiscal year.)
[Para. 6-a-5]
To permit payment of the $25,000 interest payment due on January 1, 2021, the Street Improvement Bond Debt Service Fund received $17,500 from the General Fund. That amount together with available cash balance in the debt service fund will be sufficient to cover the January 1, 2021, interest payment.
Required:
Record the interfund transfer in the debt service fund journal only. This transaction was previously recorded in the General Fund in Chapter 4 of this problem. The transaction has no effect at the government-wide level since it occurs between two governmental funds.
- Verify the accuracy of journal entries, including dates and paragraph numbers, and, if you have not already done so, post all entries to the general ledger of both the Street Improvement Bond Debt Service Fund and governmental activities by clicking on
[Post entries]. Make the entries needed to close the budgetary and operating statement accounts at the end of fiscal year 2020. Budgetary and operating statement accounts should be closed to Budgetary Fund Balance and Fund Balance—Restricted, as appropriate. Make this entry only in the Street Improvement Bond Debt Service Fund journal. Be sure that for each account being closed that the check mark for
[Closing Entry]
is selected. The “Closing Entry” appears next to the
[Add credit]
field. (Note: Closing entries for governmental activities at the government-wide level will be made in Chapter 9 of this cumulative problem.)
b.
Go to
[File>Export]
and export Excel files of the pre-closing and post-closing trial balances for the Street Improvement Bond Debt Service Fund as of December 31, 2020, and use them to prepare a balance sheet; statement of revenues, expenditures, and changes in fund balances; schedule of revenues, expenditures, and changes in fund balances—budget and actual for the Street Improvement Bond Debt Service Fund. The format for the statements will be similar to that of the combing statements in Illustrations 6-8, 6-9, and 6-10 of the textbook.
[Note: Retain all required printouts in your cumulative folder until directed by your instructor to submit them, unless your instructor specifies submission of files electronically, in which case you will need to save a .pdf version of your trial balance.]
Before closing the
City of Smithville
it is recommended that you save a backup copy of your work to another location by clicking on
[File]
and
[Save As]
for Windows and Mac. Click on “Export my Project” if you are using the Chromebook version.
c.
As given later in Chapter 8 of this project, the assessed valuation of property within the City of Smithville is $323,913,790. Assuming the legal general obligation debt limit is 8 percent of assessed valuation, prepare in good form a schedule showing the legal debt limit, debt outstanding subject to the limit, and the legal debt margin of the city as of December 31, 2020, rounding the debt limit to the nearest whole dollar (see Illustration 6-3 for an example). A note at the bottom of the schedule should disclose the bonds authorized but unissued, as described in the introductory paragraph of Chapter 5 of the City of Smithville cumulative problem. This will inform the reader that additional debt issuances are pending.
Fiscal year 2021 Transactions:
d.
On January 2, 2021, the City of Smithville approved the issuance of additional street improvement bonds in the total amount of $6,000,000. The new bonds will be serial bonds and will bear interest at the nominal annual rate of 2.75 percent. These bonds are dated January 1, 2021, and will be issued during the next few months when the city’s bond underwriters believe market conditions are most favorable.
The first interest payment on the new bonds will be due on July 1, 2021; interest will be payable January 1 and July 1 of each following year until maturity. Bonds in the amount of $200,000 will mature on January 1, 2022, and in the same amount at each interest payment date thereafter until all bonds of the 2021 issue have been retired. To give you some additional practice on accounting for a debt service fund record the following events and transactions that are presumed to occur in fiscal year 2021.
The transactions are to be recorded in the Street Improvement Bond Debt Service Fund only.
You should ignore entries that would be required in the General Fund and in the governmental activities general journal related to these transactions for fiscal year 2021.
Keep in mind that these transactions will not affect the 2020 financial statements that will be prepared in Chapter 9.
Be sure to select 2021 in the [Year] menu.
[Para. 6-d-1]
On January 2, 2021,
the Street Improvement Bond Debt Service Fund budget for 2021 is legally adopted. The budget should provide for estimated property tax revenue of $640,000, of which $120,000 will be invested to accumulate resources over the next four years for the $500,000 principal that will be due for payment on January 1, 2025 for the 2.5% deferred serial bonds. The budget should include estimated investment earnings of $3,000 during 2021. Property tax revenues are intended to help pay $50,000 interest due during 2021 on the 2.5% deferred serial bonds (due January 1 and July 1), as well as the $82,500 interest payment that will be due on the 2.75% serial bonds on July 1, 2018. The property tax levy will also provide resources to help pay interest of $107,500 due on January 1, 2022 ($25,000 interest on the 2.5% deferred serial bonds and $82,500 on the 2.75% serial bonds). No premium or accrued interest on bonds sold is included in the 2021 estimated other financing sources or estimated revenues. If the Street Improvement Debt Service Fund does receive such items, they will be invested and used for eventual bond redemption or interest payments, and the budget will be amended accordingly to reflect such items.
Required:
Record the budget for FY 2021 in the general journals for the Street Improvement Bond Debt Service Fund.
[As a reminder, you should make journal entries for FY 2021 only in the debt service fund, ignoring any entries for governmental activities at the government-wide level or any other funds.]
[Para. 6-d-2]
Property taxes were levied in the amount of $660,000, of which $20,000 was estimated to be uncollectible.
[Para. 6-d-3]
Bond interest due on January 1, 2021 in the amount of $25,000 was paid for the 2.5% deferred serial bonds.
[Para. 6-d-4]
On March 1, 2021, the Street Improvement Debt Service Fund received $90,000 of premium from the sale of the additional $6,000,000 street improvement bonds (see first paragraph of section
d.), plus $27,500 for two months of accrued interest ($117,500 in total). The $117,500 of premium and accrued interest was invested in temporary investments earning 3 percent per annum.
Required:
Prepare journal entries to record the receipt of $117,500 in cash and the subsequent investment. Also, prepare a journal entry to amend the FY 2021 budget to reflect the amounts of the premium and accrued interest on bonds sold, including an additional amount for estimated revenues for investment earnings in the amount of $2,687. (Note: You should credit Budgetary Fund Balance for the full $120,187, since the appropriation for the interest payment due on July 1, 2021, was recorded in Paragraph 6-d-1).
[Para. 6-d-5]
By June 30, 2021, property taxes had been collected in the amount of $325,000; $200,000 was invested in temporary investments that earn 3 percent per annum.
[Para. 6-d-6]
Bond interest of $25,000 due July 1, 2021 on the deferred serial bonds issued in 2020 and $82,500
on the 2.75% serial bonds issued in 2021 was paid on that date.
[Para. 6-d-7]
During the second half of 2021, property taxes were collected in the amount of $290,000.
At year-end, the uncollected amount of current property taxes receivable and related estimated uncollectible amount were reclassified as delinquent. Interest and penalties of $3,600 were also levied, of which $180 was estimated as uncollectible and $684 was classified as a deferred inflow of resources, the remainder was recognized as revenue.
Required:
Prepare the journal entries to record the receipt of current property taxes, to reclassify amounts as indicated; to accrue interest and penalties, and related revenues and deferred inflow of resources.
[Para. 6-d-8]
Of the amount classified as delinquent in 6-d-7, it was determined based on history that $7,440 would not be collected within 60 days of the fiscal year end.
Required:
Reclassify the revenues as deferred inflows of resources.
[Para. 6-d-9]
Investment earnings received in cash during the year amounted to $4,187.
- After verifying the accuracy of the preceding entries, post the amounts to the general ledger accounts by clicking
[Post entries]. Prepare closing entries for the Street Improvement Bond Debt Service Fund as of December 31, 2021. For each account closed, be sure to select the checkbox for
[Closing Entry].
The
[Closing Entry]
checkbox appears next to the
[Add credit]
field. Post the closing entries to the general ledger by clicking
[Post entries].
e.
Export the post-closing trial balance (click on
[File>Export]) for year 2021 to Excel to prepare a balance sheet for the Street Improvement Bond Debt Service Fund as of December 31, 2021.
f.
Export a pre-closing trial balance for year 2021 to Excel to prepare a statement of revenues, expenditures, and changes in fund balance for the Street Improvement Bond Debt Service Fund for the year ended December 31, 2021.
g.
Use the same trial balance exported in item
f
above to prepare a schedule of revenues, expenditures, and changes in fund balance—budget and actual for the Street Improvement Bond Debt Service Fund for the year ended December 31, 2021.
[Note: Retain a printout of all worksheets and your financial statements in your cumulative file until directed by your instructor to submit them, unless your instructor specifies that you should submit files electronically, in which case you will need to save a .pdf version of your trial balance.]
Before closing the
City of Smithville
it is recommended that you save a backup copy of your work to another location by clicking on
[File]
and
[Save As]
for Windows and Mac. Click on “Export my Project” if you are using the Chromebook version.
Chapter 7 Recording Transactions Affecting the Enterprise Fund and Business-type Activities
The City of Smithville accounts for its solid waste collection and disposal activities in an enterprise fund. The balance sheet for the Solid Waste Disposal Fund as of December 31, 2019 appears below.
CITY OF SMITHVILLE
Solid Waste Disposal Fund
Post-closing Trial Balance
As of December 31, 2019
Account Title Debits Credits
Cash $ 265,000
Customer Accounts Receivable 117,100
Allowance for Doubtful Accounts $ 6,140
Due from Other Funds 6,400
Inventories 54,060
Land 600,000
Buildings 1,650,000
Accumulated Depreciation—Buildings 791,250
Equipment 1,340,400
Accumulated Depreciation—Equipment 755,640
Vouchers Payable 45,180
Due to Other Funds 12,000
Accrued Payroll and Fringe Benefits 166,720
Net Position—Net Investment in Capital Assets 2,043,510
Net Position—Unrestricted 212,520
Totals $4,032,960 $4,032,960
Required
a.
Open a general journal as of December 31, 2019, for the Solid Waste Disposal Fund by entering each of the accounts and amounts shown in the above post-closing trial balance. Enter
2019
from the drop-down
[Year]
menu. Each of the account titles will be found in the drop down menu
[Account]
in the
[Journal]
view of the program. Be sure to enter
7-a
as your paragraph number in the
[Add description]
field and enter the appropriate paragraph number for all subsequent journal entries. Verify the accuracy of your journal entry and post it to the general ledger by clicking
[Post entries].
Unless your instructor specifies electronic submission, print a post-closing trial balance as of December 31, 2019, and retain it in your cumulative file until directed by your instructor to submit it.
Entries in this enterprise fund are not recorded at the government-wide level since enterprise funds and business-type activities at the government-wide level both use the same (accrual) basis of accounting and same (economic resources) measurement focus. Thus, the same information recorded in the accounts of the enterprise fund can also, with only slight modification, be reported as business-type activities at the government-wide level.
b.
Record the following events and transactions, which occurred during the year ended December 31, 2020. Be sure that
2020
appears in the
[Year]
menu.
[Para. 7-b-1]
Billings to customers for Charges for Services of the Solid Waste Disposal Fund totaled $2,584,662 for the year, including $18,200 billed to City of Smithville departments accounted for in the General Fund. For the amount billed to City of Smithville departments you should debit Due from Other Funds.
[Para. 7-b-2]
Equipment costing $395,300 was purchased on July 1, 2020. Cash in the amount of $195,300 was paid at the time of purchase; the vendor accepted revenue anticipation notes in the amount of $200,000 to finance the remainder of the equipment. Of this amount, $100,000 of the notes will be payable on July 1, 2021; the other $100,000 will be payable on July 1, 2022. All notes bear interest at the rate of 3.5 percent per year. Record only the purchase and the related payment of cash and issuance of notes at this time; interest will be recorded in a later transaction.
[Para. 7-b-3]
Vouchers for materials and supplies to be used in the operations of the fund were issued in the total amount of $896,320 (debit Inventories).
[Para. 7-b-4]
Collections from customers totaled $2,551,541 during 2020. This amount included $21,800 collected from the General Fund (see 7-a balance and 7-b-1 above).
[Para. 7-b-5]
Payrolls and fringe benefits paid in cash during the year totaled $1,463,379 including the amount accrued at December 31, 2019.
[Para. 7-b-6]
Accrued salaries and fringe benefits at year-end amounted to $175,264. Inventories of materials and supplies used in operations during the year amounted to $875,797, at cost.
[Para. 7-b-7]
Vouchers in the amount of $848,600 and the amount Due to Other Funds were paid during the year.
[Para. 7-b-8]
The city uses the following annual straight-line depreciation rates: Buildings, 2.5 percent; Equipment, 10 percent (equipment purchased during the year need not be depreciated because it was not held for more than 6 months of the year). Apply these rates to the original cost of buildings and equipment as of December 31, 2019, assuming no residual or salvage value.
[Para. 7-b-9]
Interest of $3,500 had accrued on the notes payable as of year-end (see transaction 7-b-2).
[Para. 7-b-10]
Management decided to increase the allowance for doubtful accounts by $960 at year-end.
- After verifying the accuracy of all entries for the preceding transactions, post amounts to the general ledger accounts by clicking
[Post entries].
c.
Prepare entries to close all operating statement accounts at the end of 2020 and to
reclassify the two net position accounts, as appropriate. Be sure that the check mark for
[Closing Entry]
is on for each account being closed and that “Closing Entries” appears next to the
[Add credit]
field. When completed, post the closing entries to the general ledger by clicking
[Post entries].
d.
Click on
[File>Export]
to export a post-closing trial balance for year 2020, and use Excel to prepare a statement of net position (see Illustration 7-6 in textbook) for the Solid Waste Disposal Fund as of December 31, 2020.
e.
Export a pre-closing trial balance for year 2020, and use Excel to prepare a statement of revenues, expenses, and changes in net position (see Illustration 7-7 in textbook) for the Solid Waste Disposal Fund for the year ended December 31, 2020. Interest expense should be considered a nonoperating item.
f.
Use the post-closing trial balance for year 2019 from Part
a
of this chapter and the trial balances from parts
d
and
e
above to prepare and save an Excel version statement of cash flows (see Illustration 7-8 in textbook) for the Solid Waste Disposal Fund for the year ended December 31, 2020.
[Note: Retain a printout of all worksheets and your financial statements in your cumulative file until directed by your instructor to submit them, unless your instructor specifies that you should submit computer files electronically, in which case you will need to save a .pdf version of you trial balances.]
Before closing the
City of Smithville
it is recommended that you save a backup copy of your work to another location by clicking on
[File]
and
[Save As]
for Windows and Mac. Click on “Export my Project” if you are using the Chromebook version.
Chapter 8 Recording Transactions Affecting a Fiduciary Fund—a Tax Custodial Fund
The City of Smithville administers a tax custodial fund that bills and collects property taxes levied by the governing bodies of the Smithville Consolidated School District (CSD), Smith County, and the Smith County Fire Protection District (FPD), in addition to those levied by the City of Smithville for its General Fund. (Note: Beginning in FY 2021, the tax custodial fund will also account for property tax billing and collection for the City of Smithville’s debt service fund. That fund will not levy property taxes for FY 2020.) As permitted by state law, the City of Smithville charges a collection fee of 1 percent of all taxes collected for the other governments.
CITY OF SMITHVILLE
Tax Custodial Fund
Post-closing Trial Balance
As of December 31, 2019
Account Title Debits Credits
Taxes Receivable for Other Funds and $1,977,075
Governments—Delinquent (including
related interest and penalties)
Due to Other Funds and Governments $1,977,075
Totals $1,977,075 $1,977,075
Required
a. Open a general journal as of December 31, 2019, for the Tax Custodial Fund by entering the two accounts and amounts shown in the above post-closing trial balance. Enter
2020
from the drop-down
[Year]
menu. Each of the account titles will be found in the drop down menu
[Account]
in the
[Journal]
view of the program. Be sure to enter
8-a
as your paragraph number in the
[Add description]
field. Verify the accuracy of your journal entry and post it to the general ledger by clicking
[Post entries].
Unless your instructor specifies electronic submission, print a post-closing trial balance as of December 31, 2019 and retain it in your cumulative file until directed by your instructor to submit it.
[Note: Entries in this fund are not recorded at the government-wide level. Fiduciary activity information is reported only in the fiduciary fund statements and not at the government-wide level.]
b. The following schedule shows the tax rates that have been established by the various taxing authorities for fiscal year 2020.
Tax Rates Applicable to Governments
Served by the Tax Custodial Fund
Fiscal Year 2020
(All amounts rounded to next higher dollar)
Tax Rate
(Per $100 Assessed Tax
Governments/Funds of Assessed Valuation) Valuation Levy
City of Smithville:
General Fund $0.58 $323,913,790 $1,878,700
Total city rate and levy $0.58 $1,878,700
Smithville CSD:
General Fund $2.40 $370,931,790 $8,902,363
Debt service fund 0.12 445,119
Total CSD rate and levy $2.52 $9,347,482
Smith County:
General Fund $0.30 $370,931,790 $1,112,796 County Road and Bridge Fund 0.32 1,186,982
Total county rate and levy $0.62 $2,299,778
Smith County FPD:
General Fund $0.95 $155,336,546 $1,475,698
Fire Station Construction Fund 0.30 466,010
Total county FPD rate and levy $1.25 $1,941,708
Grand Total tax rates and levies*
$4.97 $15,467,668
*
Note: Each property owner will receive a tax bill equal to the tax rates of all taxing authorities that have jurisdiction over his/her property times the assessed valuation of his/her property. Shown above are the
aggregate
taxes levied by each government, which are also the total amounts billed by the Tax Custodial Fund to all taxpayers in each jurisdiction.
Record the following transactions that occurred during 2020 in the general journal of the Tax Custodial Fund.
1.
[Para. 8-b-1]
On January 2, 2020, the city’s tax administrator mailed annual tax bills to all property owners in the total amount of $15,467,668 (see preceding table). The tax administrator maintains a detailed tax ledger to track amounts billed to and collected from each taxpayer and total amounts applicable to each fund and government. You need only record the grand total amount shown in the schedule above in the general journal, as illustrated in Chapter 8 of Reck, Lowensohn, and Neely.
2.
[Para. 8-b-2]
Delinquent taxes and related interest and penalties were collected during the year for the taxing authorities shown below:
Delinquent Interest and
Governments/Funds: Taxes Penalties Total
City of Smithville General Fund $ 387,201 $ 34,270 $ 421,471
Smithville CSD 722,650 57,810 780,460
Smith County 459,980 41,400 501,380
Smith County FPD 162,560 13,050 175,610
Total collected $1,732,391 $146,530 $1,878,921
Required:
Record the collections of delinquent taxes and interest and penalties by recognizing specific liabilities to each fund or government. The 1 percent collection fee should be deducted from the amounts due to other governments; the total amount deducted from other governments should be added to the amount due to the City of Smithville General Fund. (Note: Round all amounts to the nearest whole dollar. Rounding will result in $1 too much, to rectify make the adjustment to the correct total amount to City of Smithville General Fund amount.) Make these entries only in the Tax Custodial Fund general journal. The Tax Custodial Fund records the total amount of delinquent taxes and related interest and penalties in the Taxes Receivable for Other Funds and Governments—Delinquent account. (Note: All cash receipts and collection fees were recorded in earlier chapters in the journals for the General Fund and governmental activities at the government-wide level. The collection fees, though not separately identified, were included in Revenues—Charges for Services in the General Fund and in Program Revenues—General Government—Charges for Services in governmental activities.)
3.
[Para. 8-b-3]
All cash collected in paragraph 8-b-2 was transferred to the other funds and governments in the amounts calculated, adjusted for collection fees deducted or added (see Para. 8-b-2).
4.
[Para. 8-b-4]
Current taxes were collected during the year for the funds and governments shown below:
Current Taxes
Funds/Governments: Collected
City of Smithville General Fund $ 1,488,206
Smithville CSD 8,412,730
Smith County 2,069,800
Smith County FPD 1,747,540
Total collected $13,718,276
Required:
Record the collections of current taxes and recognize specific liabilities to each fund or government, after deducting the 1 percent collection fee from other governments and adding the total collection fee to the amount due the City of Smithville General Fund. Make these entries only in the Tax Custodial Fund general journal.
5.
[Para. 8-b-5]
All cash collected in paragraph 8-b-4 was transferred to the other funds and governments, adjusted for collection fees deducted or added. (Note: For simplicity, Chapter 4 of Smithville did not address this collection of fees by the custodial fund.)
6.
[Para. 8-b-6]
Make a year-end aggregate journal entry to reflect the additions and deductions made to net position for the reporting period.
Required:
Using debits, record deductions for the amount of the administrative fee, and all funds transferred to other governments and funds in paragraphs 8-b-2 and 8-b-4. Additions should be credited for all property tax collections made for other governments. Recall that amounts related to the City of Smithville General Fund are not included in the journal entry because the city does not hold a net position in the fiduciary fund since it is administering the fund.
7.
[Para. 8-b-7]
Make the year-end journal entry to reclassify all uncollected current taxes as delinquent. Add to the receivable amount interest and penalties of 6 percent on the reclassified amount (round amount to nearest whole dollar). The interest and penalties portion of the total amount should be debited to Taxes Receivable for Other Funds and Governments—Delinquent and credited to Due to Other Funds and Governments. You need only record the aggregate amounts reclassified in the general journal; the tax administrator will update the detailed tax ledger records for these reclassifications.
c.
Post the journal entries for all the preceding transactions. Prepare closing entries to close the additions and deductions accounts.
Export a post-closing trial balance for 2020 to prepare a statement of fiduciary net position for the Tax Custodial Fund (for an example of a custodial fund statement, see the last column of Illustration 8-6 of the textbook). You should deduct the city’s General Fund portion of delinquent taxes receivable and related interest and penalties receivable from the amounts recorded as Taxes Receivable for Other Funds and Governments—Delinquent. The same amount should be deducted from the liability account Due to Other Funds and Governments. The city’s General Fund portion of these account balances must be deducted as only the amounts applicable to other governments can be reported in a fiduciary fund statement. Taxes receivable and interest and penalties receivable that are applicable to the city itself were reported in the General Fund balance sheet that you prepared in Chapter 4 of this project.
d.
Use the exported pre-closing 2020 trial balance to prepare a statement of changes in fiduciary net position for the Tax Custodial Fund (for an example of a custodial fund statement, see the last column of Illustration 8-7 of the textbook).
[Note: Retain the post-closing trial balance as of December 31, 2020, the statement of fiduciary net position, and the statement of changes in fiduciary net position in your cumulative folder, unless your instructor requests electronic submission of your documents, in which case you will need to save a .pdf version of you trial balances.]
Before closing the
City of Smithville
it is recommended that you save a backup copy of your work to another location by clicking on
[File]
and
[Save As]
for Windows and Mac. Click on “Export my Project” if you are using the Chromebook version.
Chapter 9 Adjusting and Closing Entries for Governmental Activities, Government-wide Level; Preparation of Government-wide and Major Fund Financial Statements
a.
Prior to preparing financial statements at the end of FY 2020, it is necessary to record depreciation expense for the year for governmental activities at the government-wide level.
Based on general capital assets assigned to specific functions, depreciation expense related to equipment and infrastructure is allocated to functions as shown below:
Equipment Infrastructure
General Government $ 53,320
Public Safety 213,408
Public Works 138,715 $ 98,620
Health and Welfare 53,320
Culture and Recreation 74,357
Totals $533,120 $ 98,620
In addition, depreciation expense for buildings in the amount of $188,900 is allocated to functions according to the percentage of total floor space of buildings used by each function. The Public Works director has provided the following information for the current year:
Percentage of Building
Floor Space Used
General Government 20%
Public Safety 35
Public Works 22
Health and Welfare 10
Culture and Recreation 13
Total 100%
Required:
[Para. 9-a]
Record depreciation expense for the year 2020 in the governmental activities general journal at the government-wide level. Verify accuracy of the adjusting entries and post to the general ledger by clicking
[Post entries].
b.
Closing Entries.
Although closing entries were made in each fund in Chapters 4 through 6 of this cumulative problem, they have not yet been recorded at the government-wide level.
Required:
Record the journal entries required on December 31, 2020, to close all temporary accounts for governmental activities at the government-wide level. These entries should also recognize changes in the accounts Net Position—Net Investment in Capital Assets, Net Position—Restricted for Public Safety (see General Fund), Net Position—Restricted for Capital Projects (see Capital Projects Fund to calculate net position), and Net Position—Restricted for Debt Service (see Debt Service Fund to calculate net position).
(Note: Be sure to deduct accrued interest on long-term debt in calculating the December 31, 2020 balance of Net Position—Restricted for Debt Service. If accrued interest is greater than net position there is no restriction on net position.)
For each account to be closed or reclassified, be sure to click on the checkbox for
[Closing entry]
to select it. The [Closing Entry] checkbox appears next to the
[Add credit]
field. Post the closing entries to the general ledger by clicking on
[Post entries].
c.
Use the exportable trial balances used in Chapters 2 through 7 of this problem and export the pre-closing trial balance and post-closing trial balance for governmental activities to prepare required government-wide, governmental fund financial statements, and reconciliations that the City of Smithville must present for its basic financial statements to be in conformity with generally accepted accounting principles. (See Illustrations 9-3 through 9-8 and A2-1 through A2-9 of the Reck, Lowensohn, and Neely textbook for examples of these statements.) We recommend that you use Excel to prepare these financial statements. Since the Solid Waste Disposal Fund is the only fund in the proprietary funds category, you may reprint the statement of net assets; statement of revenues, expenses, and changes in net assets; and the statement of cash flows prepared for the Solid Waste Disposal Fund as the required statements for the proprietary fund basic financial statements, with appropriate changes to the titles of the statements. The information for the Solid Waste Disposal Fund can also be used to complete the Business-type Activities columns of the government-wide financial statements.
[Notes: The City of Smithville is a primary government and has no other organizations for which it is accountable as component units. Also, the FY 2021 financial information for the Street Improvement Debt Service Fund is not included in any of the basic financial statements you are preparing, as the statements you are preparing pertain only to FY 2020.]
Chapter 10 Analysis of Financial Condition
(Optional, unless assigned by your instructor)
Prepare a written evaluation of the City of Bingham’s financial position and condition as of December 31, 2020. Begin by calculating
some of
the following ratios found in Chapter 10 of the textbook:
From Illustration 10-3 From Illustration 10-4
Revenue Measures: Financial Position:
Intergovernmental revenues Unrestricted net position
Debt to assets
Operating Position Measures:
Current ratio
Revenues over expenditures
Operating surplus/deficit
Financial Performance:
Fund balances Interperiod equity
Liquidity
Financial Capability:
Debt Indicators:
Bonded debt per capita
Long-term debt Available legal debt limit
Current liabilities
Debt service
These ratios provide some benchmark information either in the illustrations or in exercise 10-16, part
f. For purposes of calculating per capita ratios, assume the population of the City of Smithville is 25,000.
Retain a print-out of your evaluation in your cumulative project folder, unless your instructor specifies submission by e-mail.
Chapter 11 Preparation of Audit Report
(Optional, unless assigned)
Prepare the audit report you believe would be appropriate for a certified public accountant to express on the financial statements of the City of Smithville, assuming that only generally accepted auditing standards (GAAS) promulgated by the AICPA apply to the City of Smithville. Explain the rationale for the nature of the audit report (unmodified or qualified) rendered.
If you have been maintaining a cumulative file, assemble all required printed reports and financial statements in the proper sequence and turn them in to your instructor.
--The End--