Question

Accounting for Governmental & Nonprofit Entities 18e (Reck)

City of Smithville 2019-2020 (Short 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 allinstructions carefully.

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.  If you choose the latter method, it might be useful to print the General Fund general journal entries to assist in making the entries in the governmental activities journal.  Regardless of the method you choose, we highly recommend that you refer to the illustrative journal entries in Chapter 4 of the Reck, Lowensohn, and Neely textbook (18^thedition) 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 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 may have made an error.) For the General Fund only you will be directed to the Detail Journal where you will select “Accrued Revenue” in the drop down[Description] menu when recording property tax revenue.

2.   [Para. 4-a-2] Encumbrances were recorded in the following amounts for purchase orders issued against the appropriations indicated:

                        General Government                           $135,673

                        Public Safety                                         386,652

                        Public Works                                        180,804

                        Culture and Recreation                         126,599

                             Total                                              $829,728

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 $4,028,058 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 State Government                                      165,000

                        Revenues: (total: $1,953,381)

                              Licenses and Permits                                            477,960

                              Fines and Forfeits                                                211,106

                              Intergovernmental                                                639,000

                              Charges for Services                                           625,315

                                   Total                                                          $4,028,058

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                      

        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

      Charges for Services       Program Revenues—General Government—

                                                          Charges for Services, $343,924

                                                  Program Revenues—Culture and Recreation—

                                                           Charges for Services, $281,391

[Para. 4-a-4]Of the $387,201 in delinquent property taxes collected in transaction 4-a-3 $76,994 had been recorded in the Deferred Inflows of Resources account. Additionally, $7,840 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 $3,179,547. Of that amount, $667,705 was withheld for employees' federal income taxes; $453,291 for federal payroll taxes; $238,466 for retirement funds administered by the state government; and the remaining $1,820,085 was paid to employees in cash. The City of Smithville does not record encumbrances for payrolls. The payrolls were chargeable against the following functions:

                  General Government                                 $   663,678   

                  Public Safety                                              1,539,302

                  Public Works                                                 542,765

                  Culture and Recreation                                  433,802

                        Total                                                    $3,179,547

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 someof the goods recorded as encumbrances in transaction 4-a-2 were received and vouchered for payment, as listed below. Related encumbrances were canceled in the amounts listed below (Select “Elimination” in the drop down [Description]menu in the Detail Journal):

                                                                                 Expenditures     Encumbrances

                  General Government                                 $130,606         $  130,572                  

      Public Safety                                              366,088              366,154

                  Public Works                                              141,981              141,972

                  Culture and Recreation                                126,000             125,965

                        Total                                                    $764,675            $764,663

Required:  Record the receipt of these goods and the related vouchers payable in both the General Fund and governmental activities journals.  In the Detail Journal select “Good received” for the expenditures description. 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 $32,340 of the amount charged to the Public Works function was for a vehicle (debit Equipment for this item 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 at the beginning of the next fiscal year.  Based on the city’s definition of “available for use,” the city considers the funds available for General Government’s use 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.  (Note: 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 Culture and Recreation function.

8.   [Para. 4-a-8]Checks were written in the total amount of $2,096,571 during 2020.  These checks were in payment of the following items:

Vouchers Payable                                  $   700,000

Due to Federal Government                     1,131,506  

Due to State Government                            265,065

      Total amount paid                             $2,096,571

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, this 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.)

10.[Para. 4-a-10]Interest and penalties receivable on delinquent taxes was increased by $40,500; $3,248 of this was estimated as uncollectible and $8,910 was considered unavailable for use in the current fiscal year.

Required:  Record this transaction in the General Fund and governmental activities journals as a revenue transaction. 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.

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 and Appropriations accounts to Budgetary Fund Balance, and Revenues and Expenditures 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” will appear in the [Add credit] field. Be sure the check mark in the box for [Closing Entry]is showing 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 fund balances in the General Fund.  Prepare the appropriate closing/reclassification 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 in calculating the amounts to be reclassified. Be sure the check mark in the box for [Closing Entry]is showing before closing each individual account.)

                       Account                                                     Ending Balance

Fund Balance—Restricted—General Government           $36,000

            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 TIMEsince 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 editiontextbook (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 cabove 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 cof this problem with the total expenditures and encumbrances reported in your solution to part dof 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.]

Before closing the City of Smithvilleit 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 Chromebook.

Answer 1