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ACC - CHAPTER 4 City of Smithville




Question;Chapter 4 Recording Operating Transactions Affecting the General Fund and Governmental Activities at the Government-wide LevelPresented below are a number of transactions for the City of Smithville that occurredduring the fiscal year for which the budget given in Chapter 3 was recorded, the calendaryear 2014. 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, ifapplicable, in the general journal for governmental activities at the government-widelevel. For all entries, the date selected should be year 2014. For each of theparagraphs that requires entries in both the General Fund and governmental activitiesjournals, you can either record them in both journals on a paragraph-by-paragraphbasis or, alternatively, record all the General Fund journal entries first for allparagraphs, then complete the governmental activities journal entries for allparagraphs next. If you choose the latter method, it might be useful to print theGeneral Fund general journal entries from the Reports menu to assist in making theentries in the governmental activities journal. Regardless of the method you choose,we recommend that you refer to the illustrative journal entries in Chapter 4 of theReck, Lowensohn, and Wilson textbook (16h edition) for guidance in making allentries.For each entry affecting budgetary accounts or operating statement accounts, theDetail Journal will automatically open, as was the case in Chapter 3, to record theappropriate amounts in the detail budgetary or actual accounts.Please remember that before closing the City of Smithville, you mustclick on [File], and [Save/Save As] to save your work. Your work isNOT automatically saved.1. [Para. 4-a-1] On January 2, 2014, real property taxes were levied for the year inthe amount of $1,697,000. It was estimated that 3 percent of the levy would beuncollectible.Required: Record this transaction in both the General Fund and governmentalactivities journal. (Note: Type 4-a-1 as the paragraph number in the [TransactionDescription] box for this entry, 4-a-2 for the next transaction, etc. Carefulreferencing by paragraph number is very helpful should you need to determinewhere you may have omitted a required journal entry or made an error.) (Select?Accrued Revenue? in the drop down [Transaction Description] menu in theDetail Journal related to the General Fund entry.)2. [Para. 4-a-2] Encumbrances were recorded in the following amounts for purchaseorders issued against the appropriations indicated:22General GovernmentPublic SafetyPublic WorksHealth and WelfareCulture and RecreationMiscellaneousTotal$ 98,453185,259247,675173,469108,92741,563$855,346Required: Record the encumbrances in the General Fund general journal andDetail Journal as appropriate. In the Detail Journal, select ?Purchase Orders?from the drop down [Transaction Description] menu. You can also type in analternative description, if desired.3. [Para. 4-a-3] Cash was received during the year in the total amount of $5,821,280for collections from the following receivables and cash revenues, as indicated:Current Property TaxesDelinquent Property TaxesInterest and Penalties Receivable on TaxesDue from State GovernmentRevenues: (total: $3,380,210)Sales TaxesLicenses and PermitsFines and ForfeitsIntergovernmentalCharges for ServicesMiscellaneousTotal$1,546,800360,00034,270500,0001,886,860583,800423,360168,000225,07093,120$5,821,280Required: Record the receipt of cash and the related credits to receivables andrevenues accounts, as applicable, in both the General Fund and governmentalactivities journals. (Select ?Received in Cash? in the drop down [TransactionDescription] menu in the Detail Journal related to the General Fund revenueentries.)For purposes of the governmental activities entries at the government-wide levelassume the following classifications:General FundSales TaxesLicenses and PermitsFines and ForfeitsGovernmental ActivitiesGeneral Revenues?Taxes?SalesProgram Revenues?General Government?Charges for ServicesProgram Revenues?General Government?Charges for Services23IntergovernmentalCharges for ServicesMiscellaneousProgram Revenues?Public Safety?OperatingGrants and ContributionsProgram Revenues?General Government?Charges for Services, $140,100Program Revenues?Culture and Recreation?Charges for Services, $84,970General Revenues?Miscellaneous4. [Para. 4-a-4] Additional interest and penalties were accrued on delinquentproperty taxes in the amount of $2,836, of which 10 percent was estimated to beuncollectible. (Note: Round the estimated uncollectible to the nearest wholedollar.)Required: Record this accrual in both the General Fund and governmentalactivities general journals.5. [Para. 4-a-5] General Fund payrolls for the year totaled $3,822,600. Of thatamount, $472,040 was withheld for employees' federal income taxes, $291,740for employees? share of FICA taxes, $171,610 for employees? state income taxes,and the remaining $2,887,210 was paid to employees in cash. The City ofSmithville does not record encumbrances for payrolls. The payrolls werechargeable against the following functions? appropriations:General GovernmentPublic SafetyPublic WorksHealth and WelfareCulture and RecreationTotal$ 476,3762,013,110612,881397,673322,560$3,822,600Required: Make summary journal entries for payroll in both the General Fundand governmental activities general journals for the year.6. [Para. 4-a-6] The city?s share of FICA taxes, $291,740, and the city'scontribution of $195,380 to retirement funds administered by the stategovernment were recorded as liabilities.Required: Record this transaction in both the General Fund and governmentalactivities general journals. Assume that the total $487,120 should be allocated inthe same proportions as in paragraph 4-a-5 above, that is:General Government: ($476,376/$3,822,600) x $487,120 = $60,705Public Safety: ($2,013,110/$3,822,600) x $487,120 = $256,534Public Works: ($612,881/$3,822,600) x $487,120 = $78,101Health and Welfare: ($397,673/$3,822,600) x $487,120 = $50,676Culture and Recreation: ($322,560/$3,822,600) x $487,120 = $41,10424(Note: The allocated amount for Public Works was rounded up one dollar tocompensate for rounding error.)7. [Para. 4-a-7] Invoices for some of the goods recorded as encumbrances intransaction 4-a-2 were received and vouchered for later payment, as listed below.Related encumbrances were canceled in the amounts shown (Select ?Elimination?in the drop down [Transaction Description] menu in the Detail Journal):General GovernmentPublic SafetyPublic WorksHealth and WelfareCulture and RecreationMiscellaneousExpenditures$ 93,838173,669190,596176,400109,28041,160$784,943Encumbrances$ 94,752173,356190,512173,124108,92741,563$782,234Required: Record the receipt of these goods and the related vouchers payable inboth the General Fund and governmental activities journals. At the governmentwide level, you should assume the city uses the periodic inventory method. Thus,the invoiced amounts above should be recorded as expenses of the appropriatefunctions, except that $27,800 of the amount charged to the Public Worksfunction was for a vehicle (debit Equipment for this item at the government-widelevel). Expenditures charged to the miscellaneous appropriation should berecorded in this case as General Government expenses at the government-widelevel.8. [Para. 4-a-8] During FY 2014, the City of Smithville received notification thatthe state government would remit $165,000 to it early in the next fiscal year,although this amount is intended to finance certain public safety operations of thecurrent year. This amount had been anticipated and was included in the budgetfor the current year as "Intergovernmental Revenue.?Required: Record this transaction as a receivable and revenue in the GeneralFund and governmental activities journals. (Note: Select ?Accrued Revenue? inthe [Transaction Description] box in the Detail Journal). At the governmentwide level, assume that this item is an operating grant to the Public Safetyfunction.9. [Para. 4-a-9] Checks were written in the total amount of $2,809,090 during 2014.These checks were in payment of the following items:Vouchers PayableTax Anticipation Notes PayableExpenditures (Interest on taxanticipation notes)$ 995,600375,000 (see Chapter 2)8,40025Due to Federal GovernmentDue to State GovernmentTotal amount paid1,068,400361,690$2,809,090(Note: Interest expenditures on tax anticipation notes were budgeted in theMiscellaneous category. Record them as a General Government expense at thegovernment-wide level.)Required: Record the payment of these items in both the General Fund andgovernmental activities general journals.10. [Para. 4-a-10] Current taxes receivable uncollected at year-end, and the relatedEstimated Uncollectible Current Taxes account, were both reclassified asdelinquent.Required: Record these reclassifications in the General Fund and governmentalactivities journals.11. [Para. 4-a-11] The city?s budget for 2014 was legally amended as follows:Estimated Revenues:Licenses and permitsIntergovernmentalCharges for ServicesMiscellaneousTotalAppropriations:General GovernmentPublic SafetyPublic WorksHealth and WelfareCulture and RecreationDecreases$ 5,000Increases$ 5,0005,000$10,00010,000$15,000$22,0003,50015,0005,500$8,000$8,000$46,000Note: These amendments decrease the balance of the Budgetary Fund Balanceaccount by $33,000.Required: Record the budget amendments in the General Fund general journalonly. Budgetary items do not affect the government-wide accounting records.(Note: Select ?Budget Amendment? in the [Transaction Description] box in theDetail Journal.)12. [Para. 4-a-12] Interest and penalties receivable on delinquent taxes was increasedby $11,000, $3,500 of this was estimated as uncollectible.26Required: Record this transaction in the General Fund and governmentalactivities journals.13. [Para. 4-a-13] Services received by the General Government function of theGeneral Fund from the Solid Waste Disposal Fund amounted to $16,500 duringthe year. Of this amount, $10,100 was paid in cash and $6,400 remained unpaid atyear-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 Payablesto Business-type Activities. Do not record these items in the Solid WasteDisposal Fund until instructed to do so in Chapter 7 of this case.14. [Para. 4-a-14] Delinquent taxes receivable in the amount of $17,150 were writtenoff as uncollectible. Interest and penalties already recorded as receivable on thesetaxes, amounting to $8,820, were also written off. Additional interest on thesetaxes that had legally accrued was not recorded since it was deemed uncollectiblein its entirety.Required: Record this transaction in the General Fund and governmentalactivities journals.15. [Para. 4-a-15] It was discovered that goods in the amount of $12,000 had beenrecorded in error as an expenditure against the General Government appropriationof the General Fund. These goods should have been charged to the Solid WasteDisposal Fund, an enterprise fund and a business-type activity at the governmentwide level. This item had also been charged as an expense of the GeneralGovernment function at the government-wide level. An interfund invoice wasprepared to reduce expenditures of the General Fund for the $12,000 andrecognize an interfund receivable. This item will be recognized later in Chapter 7of this case as an expense of the Solid Waste Disposal Fund.Required: Record this reimbursement transaction in the General Fund andgovernmental activities journals, debiting Due from Other Funds in the GeneralFund and Internal Receivables from Business-type Activities at the governmentwide level. Do not make any entries in the Solid Waste Disposal Fund at thistime. (Note: Select ?Goods Received? in the [Transaction Description] box inthe Detail Journal).16. [4-a-16] In December 2014, the General Fund made a short-term loan of $20,000to the Street Improvement Bond Debt Service Fund to assist with payment of aninterest payment due on January 1, 2015.27Required: Record this transaction in the General Fund only. The transaction hasno effect at the government-wide level since it occurs between two governmentalactivities.17. [4-a-17] Adjusting Entry. A physical count of consumable supplies at year-endshowed an ending balance of $66,000, an increase of $6,000 during the year. Thecity uses the purchases method of accounting for its inventory in the GeneralFund and the consumption method at the government-wide level. Since the cityuses a periodic inventory system, both at the fund and governmental levels, itrecords all purchases of inventory as expenditures in the General Fund and asexpenses at the government-wide level. These were included as part of theamounts recorded in paragraph 4-a-7. Adjustments to the expenses accountsshould be made to the Public Works function, where most supplies are used.Required: Prepare the adjusting journal entries in the General Fund journal toadjust the Inventory of Supplies and Fund Balance?Nonspendable?Inventory ofSupplies accounts to the correct balances and the governmental activities journalto adjust the Expenses?Public Works and Inventory of Supplies accounts.Post all journal entries to the general and subsidiary ledgers: After reviewingall entries for accuracy, including year and paragraph numbers, post all entries tothe general ledger accounts and to all subsidiary ledger accounts, by clicking on[Post Entries]. Also post all entries in the governmental activities journal.18. Closing Entry. Following the instructions in the next paragraph, prepare and postthe necessary entries to close the Estimated Revenues and Appropriationsaccounts to Budgetary Fund Balance, and Revenues and Expenditures to FundBalance?Unassigned. Because the City of Smithville honors all outstandingencumbrances at year-end, it is not necessary to close Encumbrances toEncumbrances Outstanding at year-end since encumbrances do not affect theGeneral Fund balance sheet or statement of revenues, expenditures, and changesin fund balances. If, however, you would like to avoid having these accountsappear in the post-closing trial balance, you can opt to close Encumbrances toEncumbrances Outstanding. If the accounts are closed, they would need to bereestablished at the beginning of the next year, although entries are not required inthis problem for the next year.To close the temporary accounts, you must click on the check mark for [ClosingEntry], ?Closing Entry? will appear in the [Transaction Description] box. Besure the check mark in the box for [Closing Entry] is showing before closingeach individual account. Also, you will be sent to the Detail Journal where youmust close each individual budgetary or operating statement account. Todetermine the closing amounts for both General Ledger and subsidiary ledgeraccounts, you should first print the pre-closing version of these ledgers for year2014 from the [Reports] menu.28At year-end, an analysis by the city?s finance department determined thefollowing constraints on resources in the General Fund. Prepare the appropriatejournal entry in the General Fund to reclassify amounts between Fund Balance?Unassigned and the fund balance accounts corresponding to the constraints shownbelow. (Note: You should consider the beginning of year balances in fundbalance accounts in calculating the amounts to be reclassified.)AccountFund Balance?Restricted?Public SafetyFund Balance?Committed?Public WorksFund Balance?Assigned?Culture and RecreationAmount$15,00029,70056,800Note: DO NOT PREPARE CLOSING ENTRIES FOR GOVERNMENTALACTIVITIES AT THIS TIME since governmental activities will not be closeduntil Chapter 9, after the capital projects fund (Chapter 5) and debt service fund(Chapter 6) transactions affecting governmental activities at the government-widelevel have been recorded.b. Select ?Export? from the drop down [File] menu to create an Excel worksheet of theGeneral Fund post-closing trial balance as of December 31, 2014. Use Excel toprepare in good form a balance sheet for the General Fund as of December 31, 2014.Follow the format shown in Illustration 4-3 of Reck, Lowensohn, and Wilson,Accounting for Governmental and Nonprofit Entities, 16th edition textbook (hereafterreferred to as ?the textbook?). Alternatively, you can click on [Reports] to print thepost-closing trial balance and use the printed copy to manually prepare a balancesheet.c. Select ?Export? from the drop down [File] menu to create an Excel worksheet of theGeneral Fund pre-closing subsidiary ledger account balances for the year 2014. UseExcel to prepare in good form a statement of revenues, expenditures, and changes infund balance for the General Fund for the year ended December 31, 2014. (SeeIllustration 4-4 in the textbook for an example format.)d. Use the Excel worksheet of the General Fund pre-closing subsidiary ledger accountbalances 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 Fundfor the year ended December 31, 2014. (See Illustration 4-5 in the textbook for anexample format.)e. Prepare a reconciliation of total expenditures reported in your solution to part c of thisproblem with the total expenditures and encumbrances reported in your solution to29part d of this problem. (In Chapter 4 below Illustration 4-5, see discussion andexample which compares Illustrations 4-4 and 4-5.)[Note: File the printouts of all your exported or printed documents and yourcompleted financial statements in your cumulative problem folder until directedby your instructor to submit them, unless your instructor specifies submission ofcomputer files via e-mail.]Before closing the City of Smithville, click on [File], and [Save/Save As]to save your work. Your work is NOT automatically saved.


Paper#39934 | Written in 18-Jul-2015

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