instructions smithville

Table of ContentsChapter 1

Introducing City of Smithville Welcome………………………………………………………. 4

System Requirements.................................................................4Licensing....................................................................................4

Running or Removing City of SmithvilleRunning the City of Smithville..................................................5Removing the City of Smithville...............................................5

General Operating InstructionsOpening the City of Smithville..................................................5Creating a new project...............................................................6Opening an existing project.......................................................6Saving the current project..........................................................6

City of Smithville Main WindowAdding and posting journal entries............................................8Editing/deleting/unposting journal entries.................................8Working with the ledgers screen................................................9Working with the detail journal screen....................................11

Printing Reports................................................................................12

Exporting Trial Balances................................................................12

Completing Chapters 2 through 10 and Chapter 12 of the City of Smithville Cumulative Problem .......................13

Chapter 2 Opening the Books.......................................................14

Chapter 3 Recording the Annual Budget.................................18

Chapter 4 Recording Operating Transactions Affectingthe General Fund and Governmental Activities at theGovernment-wide Level..................................................................20

Chapter 5 Recording Capital Asset Transactions.................27

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Chapter 6 Transactions Affecting General Long-termLiabilities and Debt Service...........................................................32

Chapter 7 Recording Transactions Affecting theEnterprise Fund and Business-type Activities........................37

Chapter 8 Recording Transactions Affecting aFiduciary Fund—An Investment Trust Fund.........................40

Chapter 9 Adjusting and Closing Entries forGovernmental Activities, Government-wide Level;Preparation of Government-wide and Major FundFinancial Statements........................................................................43

Chapter 10 Analysis of Financial Condition............................45

Chapter 12 Preparation of Audit Report..................................45

Appendix A..........................................................................................46

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CHAPTER 1

INTRODUCING CITY OF SMITHVILLE

WelcomeThank you for purchasing the City of Smithville Government Accounting Software. This software is designed to be used with the McGraw-Hill/Irwin textbook Accounting for Governmental and Nonprofit Entities, 15th edition, ISBN 0073100951.

System RequirementsTo use the City of Smithville accounting software application, you must have the following:

Operating System: Microsoft® Windows 2000 or later Mac OS X v10.4 or 10.5 Linux Red Hat® Enterprise Linux (RHEL) 5

Hardware: Windows ®: Intel® Pentium® II 450MHz or faster processor (or

equivalent) Macintosh: PowerPC® G3 500MHz or faster processor; Intel Core™ Duo 1.33GHz or faster processor

Recommended screen resolution of 1024 x 768 minimum 128MB of RAM minimum Spreadsheet program (in order to easily view the exported CSV files) Excel 2003 or later (in order to view the exported Excel files) Internet Explorer 7 or later, Mozilla Firefox 3.x or later, Safari 3.x or later Adobe Flash Player version 10 or above

LicensingThis manual was written for use with the City of Smithville software, Version 4.1. The manual and the software described in it are copyrighted, with all rights reserved. This manual and the City of Smithville software may not be copied, except as otherwise provided in your software license or as expressly permitted in writing by McGraw-Hill Higher Education, Inc.

Use of the City of Smithville governmental accounting software (the “Software”) and its documentation are governed by the terms set forth in your license. Such use is at your sole risk. The software and its documentation (including this manual) are provided “AS-IS” and without warranty of any kind.

RUNNING OR REMOVING THE CITY OF SMITHVILLE

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Running the City of SmithvilleThe City of Smithville can be run directly from a URL or by clicking on the Smithville_Bingham folder as indicated in the “Opening the City of Smithville” instructions below. As the City of Smithville is a web-based application, it need not be installed onto your local computer. However, the web-based software is downloaded, copied to your computer, and run locally.

As computers are often configured differently, you may need to change your Adobe Flash Player Security settings in order to run the City of Smithville. For more information and detailed instructions, please see Appendix A.

You may exit the program by clicking the "X" button at the top right corner of the browser. However, you MUST SAVE your work before closing the browser window.

Removing the City of Smithville You can remove the City of Smithville by deleting the “Smithville_Bingham” folder.

GENERAL OPERATING INSTRUCTIONS

Opening the City of SmithvilleYou can open the City of Smithville at any time by clicking on the Smithville_Bingham folder and then clicking on Start_Student.exe. The application requires the Web Browser pop-up blocker be turned off in order to run the application properly.

Creating a New ProjectBefore creating a new project, if you need the instructions for Smithville, click on “Open Instructions.” To create a new project, click on “Create New Project” in opening window. The Create New Project dialog will appear, as shown below.

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Enter your first and last name then click [Create]. You should save your project folder in the Projects folder located in the Smithville_Bingham folder created when the downloaded files were unzipped. For your own protection against hard-drive failure, you should create a dated backup file at the end of each session on a removable disk (CD/DVD/USB Flash Drive). This step creates the accounts and funds that you will need to complete the “City of Smithville” cumulative problem.

The main project window will pop-up once the project is created.

Opening an Existing ProjectClick on “Open Existing Project,” and then select the file you wish to open.

Saving the Current ProjectClick on [File] and [Save/Save As]. If a filename has already been specified, the current filename will be pre-populated in the Save dialog but may be changed if desired. Unlike previous versions of Smithville, this version does NOT automatically save your work. Be sure NOT to exit your browser until you have saved your project file.

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City Of Smithville Main WindowIf you have opened a project file, the main project window should appear:

To navigate between the Journal, Account, and Ledgers screens, simply click on the [TAB] for that particular screen.

To switch between different funds and governmental activities, government-wide, choose the desired entity from the drop-down menu.

You can verify which entity you are working on by the caption on the upper right corner of the window. It will show the title of your project, and the current fund you are in.

The main window has the same standard window controls as most other applications. To close down your project, simply click on the [X] box. It is very important that you always save your project file before you close your browser. Remember where you save your file so it will be easier to retrieve when you want to reopen the file.

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Adding and Posting Journal EntriesIf you are looking at the main window, you need to switch to the Journal view before you can add any journal entries.

Once you have switched to the Journal view, you will see the entry form on the lower portion of the window.

Before ANY entry can be added to the Journal, a description and debit or credit must be specified.

Once you have filled in the necessary fields, simply click on [Add Entry] to add the entry to the journal. If the entry being made is a closing entry, you must click on the check mark for [Closing Entry]. If one of the fields is missing a value or contains an illegal character, the [Add Entry] button will remain disabled.

If you are adding an entry that also affects a detail journal, you must first select an item from the drop-down [Transaction Description] or type your own description in the box before selecting the account and select the corresponding control account from the drop-down [Account (# - Account Description)] menu.

Once you have entered a batch of entries into the system, you can post them to the general ledger at any time by clicking the [Post Entries] button. In the case of the General Fund, posting transactions also posts entries from the detail journal to the Revenue ledger and Appropriations, Encumbrances, Expenditures ledgers as well. The [Post Entries] button only posts entries for the current fund/entity.

Editing/Deleting/Unposting Journal Entries

To edit entries that have already been entered, double click or right click on the entry, and select edit. You will know you are in edit mode when the entry form turns red and the blanks will fill in with the data from the journal. If you wish to delete an entry, right click on the item and select [Delete] or choose [Edit]-[Delete].

As in real-world systems, the software usually does not allow you to edit entries that have already been posted. So, it is highly recommended that you verify the accuracy of entries before clicking [Post Entries]. However, for your convenience we have added the capability to “unpost” individual batches of posted transactions. Simply highlight any entry within the batch you want to

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unpost and either right click and select [Unpost] or select [Unpost] from the Edit menu. Editing is then done in the same manner as for unposted journal entries. When editing is completed, click [Post Entries] and your corrections will be made to the appropriate accounts. If you need to add an entry to a previously posted journal entry, then unpost as described above and make the new entry at the bottom of the journal. You can then right click

Screen shot of “Right

Clicking” on a journal entry.

and use the [Move Up] option to move the entry one step at a time up the journal until it appears in the desired location. As in prior versions, a provision also allows you to clear all of the transactions from the current fund or entity. Under [File]-[Student Assistance] you will find the option [Wipe out Current Fund or Entity]. The wipe out function should be used as a last resort. Once you select this option, there is no going back. It will remove ALL of the transactions for the current fund or entity.

Working with the Ledgers ScreenSwitch to the Ledgers screen by clicking on the ledgers tab. The screen is shown on the following page.

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If your screen is not wide enough to display all of the columns, use the vertical and horizontal scrollbars to navigate the data.

Depending on the fund or entity with which you are working, there may be different ledgers for you to view. Choose the ledger you want to view from the drop-down list.

If you want to print out a ledger, you need to select the [Reports] menu, and choose the report.

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Switch entities at any time by changing the selection.

Working with the Detail Journal Screen

The General Fund of the City of Smithville uses a Detail Journal to hide details from the general journal/ledgers.

If you choose an account that has subsidiary detail associated with it, you will be taken directly to the Detail Journal. If you attempt to edit a journal entry that has associated subsidiary detail, you will automatically be prompted to also open the Detail Journal for editing, if desired.

The Detail Journal screen for the General Fund appears as follows:

The Detail Journal operates very similar to the entry screen on the General Journal. Fill in the blanks or, in the case of the [Transaction Description] box, select a description from the drop-down menu, and click [Add Entry]. The balance of the entries for this transaction is automatically updated. When you exit the Detail Journal the balance will be copied into a single line item in the General Journal. Please note that the year and reference numbers of these transactions are based on the originating entry (the line in the General Journal).

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Printing ReportsAll of the reports for the City of Smithville are available through the Reports menu. Simply go to the menu and click on the report you want. To print, click on “Save as Printable PDF File,” specify the file name and location where you want to save it, and print the saved report from the Adobe Reader software. (Note: You should manually add the .pdf extension to the end of your report file name.)

Exporting Trial BalancesSpreadsheet files for all trial balances for each entity and each year of transactions, as well as detail subsidiary account balances (General Fund only), can be exported to either CVS or Excel. To export an item, select it from the <File><Export> menu, specify a file name and folder location, and save it. (Note: If exporting to Excel, you should manually add the .xls file extension to your export file name.)

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Completing Chapters 2 through 10 and Chapter 12 of the City of Smithville

Foreword

This revised fourth 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 Statement No. 34 reporting model described in Wilson, Reck, and Kattelus, Accounting for Governmental and Nonprofit Entities, 15th 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 Wilson, Reck, and Kattelus, Accounting for Governmental and Nonprofit Entities, 15th 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. 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 attach your project data file and an Excel file containing your trial balances and financial statements to an e-mail for submission, or else e-mail the printable reports, 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 much 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.

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Chapter 2 Opening the Books

The City of Smithville has just implemented a new computerized accounting system, which provides files for general journal entries and posting to appropriate general ledger/subsidiary ledger accounts. Budgetary accounts are provided for the General Fund, and operating statement accounts and balance sheet accounts are provided for the General Fund, as well as for governmental activities at the government-wide level. Accounts are also provided as appropriate for all other funds used by the City of Smithville, which you will use in Chapters 5-9 of the problem. As the city’s new accountant (lucky you!), it is your job to enter the city’s initial accounting information as of December 31, 2010, and to prepare to place the new accounting system in full operation effective January 1, 2011.

Required

Open the City of Smithville software by double clicking on the Smithville_Bingham folder and then clicking on Start_Student.html. If creating a new project, click [Create New Project], when the [Create New Project] window appears choose City of Smithville from the [Choose a City] drop down menu. In addition, in the [Enter your name] box please type in your first and last name so that your name will appear on all printable reports and click [Create]. This will create the project and provide all of the funds and accounts that you will need to complete the “City of Smithville” cumulative problem.

It is also highly recommended that you save your file to a removable storage device (e.g., flash drive), creating a backup file for your project at the end of each session to protect yourself from possible hard drive failure or corruption of your project data file.

To open an exiting project, click on [Open Existing Project].

a. If it is not already displayed, select [General Fund] in the [Current Accounting Entity] window and the [Accounts] tab. Verify that the following accounts are listed. (Note: In addition to the accounts listed below you will see detail accounts that will be used in subsequent chapters for achieving budgetary control and recording revenues and expenditures detail.) Select the [Journal] tab and click the drop down menu for [Account (# - Description)]. You should see all of the following general ledger accounts listed (Note: For purposes of this exercise, date suffixes are omitted from the Expenditures and Encumbrances accounts as expenditures from two year’s appropriations do not occur.).

CashTaxes Receivable—CurrentEstimated Uncollectible Current TaxesTaxes Receivable—DelinquentEstimated Uncollectible Delinquent TaxesInterest and Penalties Receivable on TaxesEstimated Uncollectible Interest and Penalties

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Due from Other FundsDue from State GovernmentVouchers PayableTax Anticipation Notes PayableDue to Other FundsDue to Federal GovernmentDue to State GovernmentReserve for EncumbrancesFund BalanceBudgetary Fund BalanceEstimated RevenuesRevenuesAppropriationsExpendituresEncumbrances

b. The trial balance of the General Fund of the City of Smithville as of December 31, 2010, is shown on the following page. Select the [Journal] tab and create a journal entry to enter the balance sheet accounts and amounts shown in the trial balance (review software operating procedures in Chapter 1 of these instructions if necessary). Be sure to enter 2010 from the drop-down [Year] menu and enter the paragraph number from these instructions in the [Transaction Description] box of the [Journal]. For this entry you should enter 2-b. Select the appropriate accounts individually and insert the appropriate amounts. (Note: Enter all dollar amounts without dollar signs and without commas. All amounts in this project should be rounded to the nearest whole dollar. 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 Entry].

The year and transaction description need only be entered for the first line of the journal entry; it will remain in the boxes for the rest of the accounts. When you have completed entering all account data and amounts, verify all of 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.

Unpost capability. As discussed in Chapter 1 of these instructions, the City of Smithville software program permits students to “unpost” a particular batch of posted transactions. Unposted entries then can be edited in the same manner as pre-posted entries. Select [Reports, Trial Balances, Post-Closing Trial Balance], save the report file as a PDF file, and print the post-closing trial balance for year 2010, using the Adobe Reader. (Note: Add .pdf to the end of your report file name.) Retain the printed trial balance in your personal cumulative folder until the due date assigned by your

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instructor for the project, or submit the trial balance by e-mail if directed to do so by your instructor.

CITY OF SMITHVILLEGeneral Fund Post-Closing Trial Balance

As of December 31, 2010General Ledger

Account Title Debits CreditsCash $ 234,592Taxes Receivable—Delinquent 515,588Estimated Uncollectible Delinquent Taxes $ 38,669Interest and Penalties Receivable on Taxes 57,820Estimated Uncollectible Interest and Penalties 17,360Due from State Government 700,000Vouchers Payable 499,811Tax Anticipation Notes Payable 350,000Due to Federal Government 124,800Due to State Government 25,200Fund Balance 452,160 Totals $1,508,000 $1,508,000

c. Select [Governmental Activities, Government-wide Level] in the [Current Accounting Entity] drop-down box and the [Accounts] tab. You will see all 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 assets (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 2010 from the drop-down date menu and enter 2-d in the Transaction Description box. Select each account individually and insert the appropriate debit or credit amount for each account. When you have completed entering the initial data, verify its accuracy and click [Post Entries] to post the entry to the governmental activities, government-wide general ledger.

Select [Reports, Trial Balances, Post-Closing Trial Balance], save the report file as a .pdf file, and print the trial balance for 2010 using the Adobe Reader, or submit the trial balance by e-mail if directed to do so by your instructor. (Note: If saving to Excel, manually add .xls to the end of your export file name.) Retain in your

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cumulative file until the due date for your project or the time specified by your instructor.

Before closing the City of Smithville, click on [File], and [Save/Save As] to save your work. Your work is NOT automatically saved.

CITY OF SMITHVILLEGovernmental Activities Government-wide Level

Post-Closing Trial BalanceAs of December 31, 2010

General Ledger Account Title Debits CreditsCash $ 234,592Taxes Receivable—Delinquent 515,588Estimated Uncollectible Delinquent Taxes $ 38,669Interest and Penalties Receivable on Taxes 57,820Estimated Uncollectible Interest and Penalties 17,360Due from State Government 700,000Land 5,180,000Infrastructure 9,862,000Accumulated Depreciation—Infrastructure 2,595,600Buildings 6,296,000Accumulated Depreciation—Buildings 1,583,000Equipment 3,529,000Accumulated Depreciation—Equipment 1,342,000Vouchers Payable 499,811Tax Anticipation Notes Payable 350,000Due to Federal Government 124,800Due to State Government 25,200Net Assets—Invested in Capital Assets, Net of Related Debt 19,346,400Net Assets—Unrestricted 452,160 Totals $26,375,000 $26,375,000

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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, 2011.

Estimated Revenues: Taxes:

Real Property $1,372,000 Sales 1,496,000Interest and Penalties on Taxes 6,000Licenses and Permits 490,000Fines and Forfeits 350,000Intergovernmental Revenue 280,000Charges for Services 192,000Miscellaneous Revenues 78,000 Total Estimated Revenues $4,264,000

Appropriations:General Government $ 517,180Public Safety: Police 985,090 Fire 954,580 Building Safety 88,880Public Works 767,210Health and Welfare 519,240Parks and Recreation 412,740Miscellaneous 41,720

Total Appropriations $4,286,640

Required

a. 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] drop-down box and the [Journal] tab. In the [Year] box, be sure to select the year 2011. Enter 3-a in the [Transaction Description] box. Select “Estimated Revenues” in the drop down [Account (# - Description)] window. This will take you automatically 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 [Transaction Description].

When you have finished entering the estimated revenue detail information, verify that the correct balance is shown in the Detail Journal, then click on [Return to General 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. Complete the general journal entry by debiting or crediting Budgetary Fund Balance as appropriate to make the journal entry

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balance. 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 entry correctly, post it to the general ledger by clicking on [Post Entries]. Before posting, or after unposting as described previously, you can edit any of your journal entries by placing the cursor in the line you want to edit, then right-clicking and selecting “Edit.” If you make too many errors and want to start over from scratch, you can select “Student Assistance” from the [File] menu and completely wipe out all data from the current fund or entity (i.e., governmental activities, government-wide) on which you are working. Generally, such radical action should be unnecessary given the [Unpost] and [Move Up]/[Move Down] capabilities of the program, as described previously. After unposting, any entry can be edited or deleted and any omitted entry can be added at the bottom of the journal and moved to the correct location in the journal.

b. Go to [Reports], save the pre-closing subsidiary ledgers and pre-closing trial balance for year 2011 file as .pdf files, and print each file from the Adobe Reader. (As of this time, only the budget has been recorded) for retention in your cumulative file until directed by your instructor to submit them, or submit these documents by e-mail if directed to do so by your instructor. (Note: If exporting to Excel, be sure to manually add .xls to the end of your file name.) This is your last opportunity to print or export these documents with budgetary 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.


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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 the fiscal year for which the budget given in Chapter 3 was recorded, the calendar year 2011. Read all instructions carefully.

a. 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 2011. 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 last. 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 Wilson, Reck, and Kattelus textbook (15h edition) for guidance in making all entries.

For each entry affecting budgetary accounts or operating statement accounts, you will be sent to the Detail Journal, as was the case in Chapter 3, to record the appropriate amounts in the detail budgetary or actual accounts.

Please remember that before closing the City of Smithville, you must click on [File], and [Save/Save As] to save your work. Your work is NOT automatically saved.

1. [Para. 4-a-1] Encumbrances in the following amounts for purchase orders issued were recorded against the appropriations indicated:

General Government $ 82,040Public Safety—Police 74,228Public Safety—Fire 72,072Public Safety—Building Safety 8,078Public Works 206,388Health and Welfare 144,550Parks and Recreation 108,920Miscellaneous 34,636

Total $730,912

Required: Record the encumbrances in the General Fund general journal and Detail Journal as appropriate. (Note: Type 4-a-1 as the paragraph number in the [Transaction Description] box for this entry; 4-a-2 for the next transaction, etc.

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Careful referencing by paragraph number will be very helpful should you need to determine where you may have omitted a required journal entry or may have made an error.) In the Detail Journal, select “Purchase Orders” from the drop down [Transaction Description] menu. You can also type in an alternative description, if desired.

2. [Para. 4-a-2] On January 1, 2011, the real property tax levy for the year was made to yield the budgeted amount ($1,372,000), assuming 98 percent of the levy would be collectible.

Required: Calculate the required tax levy and record this transaction in both the General Fund and governmental activities journal. (Select “Accrued Revenue” in the drop down [Transaction Description] menu in the Detail Journal related to the General Fund entry.)

3. [Para. 4-a-3] Additional interest and penalties were accrued on delinquent property taxes in the amount of $2,363. The current balance of Estimated Uncollectible Interest and Penalties was deemed adequate, so the entire $2,363 should be credited to Revenues.

Required: Record this accrual in both the General Fund and governmental activities general journals.

4. [Para. 4-a-4] Cash was collected during the year in the total amount of $5,051,060. These collections were from the following receivables and cash revenues, as indicated:

Current Property Taxes $1,289,000Delinquent Property Taxes 300,000Interest and Penalties Receivable on Taxes 28,560Due from State Government 700,000Revenues: (total: $2,733,500)

Sales Taxes 1,489,050Licenses and Permits 486,500Fines and Forfeits 352,800Intergovernmental 140,000Charges for Services 187,550Miscellaneous 77,600 Total $5,051,060

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 Cash” in the drop down [Transaction Description] menu in the Detail Journal related to the General Fund revenue entries.)

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For purposes of the governmental activities entries at the government-wide level assume the following classifications:

General Fund Governmental Activities Sales Taxes General Revenues—Taxes—SalesLicenses and Permits Program Revenues—General Government—

Charges for ServicesFines and Forfeits Program Revenues—General Government—

Charges for ServicesIntergovernmental Program Revenues—Public Safety—Operating

Grants and ContributionsCharges for Services Program Revenues—Parks and Recreation—

Charges for ServicesMiscellaneous General Revenues—Miscellaneous

5. [Para. 4-a-5] Invoices for some of the goods recorded as encumbrances in transaction 4-a-1 were received and vouchered as listed below. Related encumbrances were canceled in the amounts listed below (Select “Elimination” in the drop down [Transaction Description] menu in the Detail Journal):

Expenditures EncumbrancesGeneral Government $ 78,198 $ 78,960

Public Safety—Police 74,536 73,388Public Safety—Fire 62,110 63,000Public Safety—Building Safety 8,078 8,078Public Works 158,830 158,760Health and Welfare 147,000 144,270Parks and Recreation 99,400 103,320Miscellaneous 34,300 34,636

$662,452 $664,412

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 $23,200 of the amount charged to the Public Works function was for a vehicle (debit Equipment for this item at the government-wide level). Expenditures charged to the miscellaneous appropriation should be recorded in this case as General Government expenses at the government-wide level.

6. [Para. 4-a-6] Gross General Fund payrolls for the year totaled $3,178,000. Of that amount, $476,700 was withheld for employees' federal income taxes; $243,180 for employees’ share of FICA taxes; $143,010 for employees’ state income taxes; and the balance was paid to employees in cash. The City of

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Smithville does not record encumbrances for payrolls. The payrolls were chargeable against the following functions’ appropriations:

General Government $ 389,480 Public Safety—Police 823,578Public Safety—Fire 789,502Public Safety—Building Safety 64,512Public Works 510,734Health and Welfare 331,394Parks and Recreation 268,800

Total $3,178,000

Required: Make summary journal entries for payroll in both the General Fund and governmental activities general journals for the year.

7. [Para. 4-a-7] The city’s share of FICA taxes, $243,180, and the city's contribution of $162,820 to retirement funds administered by the state government were recorded as liabilities.

Required: Record this transaction in both the General Fund and governmental activities general journals. Assume that the total $406,000 should be allocated in the same proportions as in paragraph 4-a-6 above; that is:

General Government: ($389,480)/$3,178,000 x $406,000 = $49,757 Public Safety—Police: ($823,578/$3,178,000) x $406,000 = $105,215 Public Safety—Fire: ($789,502/$3,178,000) x $406,000 = $100,861Public Safety—Building Safety: ($64,512/$3,178,000) x $406,000 = $8,242Public Works: ($510,734/$3,178,000) x $406,000 = $65,248Health and Welfare: ($331,394/$3,178,000) x $406,000 = $42,337Parks and Recreation: ($268,800/$3,178,000) x $406,000 = $34,340

8. [Para. 4-a-8] Checks were written in the total amount of $2,449,960 during 2011. These checks were in payment of the following items:

Vouchers Payable $ 838,000Tax Anticipation Notes Payable 350,000 (see Chapter 2)Interest on Tax Anticipation Notes

Payable (record as Miscellaneous Expenditure/Interest Expense) 7,000

Due to Federal Government 954,130 Due to State Government 300,830 Total amount paid $2,449,960

Note: Interest expenditures were budgeted in Miscellaneous Appropriations.

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Required: Record the payment of these items in both the General Fund and governmental activities general journals.

9. [Para. 4-a-9] During FY 2011, the City of Smithville received notification that the state government would remit $135,000 to it early in the next fiscal year, although this amount is intended to finance certain public safety operations of the current year. This amount had been anticipated and was included in the budget for the current year as "Intergovernmental Revenue,” and may be used in the current fiscal year.

Required: Record this transaction as a receivable and revenue in the General Fund and governmental activities journals. (Note: Select “Accrued Revenue” in the [Transaction Description] box in the Detail Journal). At the government-wide level, assume that this item is an operating grant to the Public Safety function. (The City of Smithville does not classify program revenues in the more detailed sub-function categories of police, fire, or building safety.).

10. [Para. 4-a-10] Current taxes receivable uncollected at year-end, and the related Estimated Uncollectible Current Taxes account, were both reclassified as delinquent.

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

11. [Para. 4-a-11] The appropriations budget for 2011 was legally amended as follows:

Decreases IncreasesGeneral Government $ 7,100Public Safety—Police 19,100Public Safety—Fire 7,000Public Safety—Building Safety $ 8,000Public Works 15,300Health and Welfare 1,800Parks and Recreation 4,500

$12,500 $50,300

Required: Record the budget amendments in the General Fund general journal only. Budgetary items do not affect the government-wide accounting records.

12. [Para. 4-a-12] Interest and penalties receivable on delinquent taxes was increased by $9,000; $3,500 of this was estimated as uncollectible.


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13. [Para. 4-a-13] Delinquent taxes receivable in the amount of $14,290 were written off as uncollectible. Interest and penalties already recorded as receivable on these taxes, amounting to $7,370, were also written off. Additional interest on these taxes that had legally accrued was not recorded since it was deemed uncollectible in its entirety.


14. [Para. 4-a-14] A post-audit disclosed that goods amounting to $10,000, which had been recorded as an expenditure in that amount against the General Government appropriation of the General Fund should have been charged to the Solid Waste Disposal Fund, an enterprise fund and a business-type activity at the government-wide level. This item had also been charged as an expense of the General Government function at the government-wide level. An interfund invoice was prepared to reduce expenditures of the General Fund for the $10,000 and recognize an interfund receivable. This item will be recognized later in Chapter 7 of this case as an expense of the Solid Waste Disposal Fund.

Required: Record this reimbursement transaction in the General Fund and governmental activities journals, debiting Due from Other Funds in the General Fund and Internal Receivables from Business-type Activities at the government-wide level. Do not make any entries in the Solid Waste Disposal Fund at this time.

15. [Para. 4-a-15] Services received by the General Government function of the General Fund from the Solid Waste Disposal Fund amounted to $13,700 during the year. Of this amount, $8,400 was paid in cash and $5,300 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.

Note: 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.

16. Closing Entry. Prepare and post at the end of year 2011, the necessary entries to close the Estimated Revenues and Appropriations accounts to Budgetary Fund Balance, and Revenues, Expenditures, and Encumbrances accounts to Fund Balance. You must click on the check mark for [Closing Entry], “Closing Entry” will appear in the [Transaction Description] box. Be sure the check mark in the

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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 first save and print the pre-closing version of these ledgers for year 2011 from the [Reports] menu. 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, 2011. (Manually add .xls to your export file name.) Use Excel to prepare in good form a balance sheet for the General Fund as of December 31, 2011. Follow the format shown in Illustration 4-5 of Wilson, Reck, and Kattelus, Accounting for Governmental and Nonprofit Entities, 15th edition textbook (hereafter referred to as “the textbook.”) Alternatively, you can click on [Reports] to save and print the post-closing trial balance and use the printed copy to manually prepare a balance sheet.

c. Select “Export” from the drop down [File] menu to create an Excel worksheet of the General Fund Pre-Closing Operating Statement Account Balances for the year 2011, with .xls manually added to the file name. 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, 2011. (See Illustration 4-6 in the textbook for an example format.)

d. Use the Excel worksheet of the General Fund pre-closing operating statement account balances created in part c above to prepare in good form a statement of revenues, expenditures, and changes in fund balance—budget and actual for the General Fund for the year ended December 31, 2011. (See Illustration 4-7 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 4-7, see discussion and example which compares Illustrations 4-6 and 4-7.)

[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 computer files via e-mail.]


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Chapter 5 Recording Capital Asset Transactions

Street Improvement Capital Projects Fund and Governmental Activities at the Government-wide Level

During late 2010, the voters of the City of Smithville authorized tax-supported bond issues totaling $9,000,000 as partial financing for a series of projects to construct streets, curbs, culverts, and storm sewers in various parts of the city. The estimated total cost of the series of projects was $9,800,000. In addition to the proceeds of the bonds, special assessments totaling $1,000,000 will be levied against property owners deemed to be particularly benefited by one of the projects, designated the “Springer Street Project.” All special assessments will be due December 1, 2011, without interest. Any special assessments unpaid on December 1 will be subject to a 7 percent penalty, plus interest at the rate of 1 percent per month until paid.

Required

a. Open a general journal for the Street Improvement Fund by recording the transactions listed under paragraph b below, as necessary. Use account titles listed under the drop-down [Account (# - Description)] menu. Select 2011 for each transaction in the [Year] box of the [Journal] view. Enter the paragraph reference, i.e. 5-b-[1, 2, 3, etc], in the [Transaction Description] box. The following account titles should appear in the [Accounts] view:

CashInvestmentsSpecial Assessments Receivable—CurrentInterest Receivable on InvestmentsVouchers PayableJudgments PayableContracts PayableContracts Payable—Retained PercentageFund Balance Reserve for Encumbrances—Alzmann Street Project Reserve for Encumbrances—Springer Street ProjectRevenuesOFS—Proceeds of BondsConstruction Expenditures—Springer Street ProjectInterest Expenditures—Springer Street ProjectConstruction Expenditures—Alzmann Street ProjectOFU—Interfund Transfers OutEncumbrances—Springer Street ProjectEncumbrances—Alzmann Street Project

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b. Record journal entries in the general journal of the Street Improvement Fund, as appropriate, for each of the following transactions. Remember to enter the correct year and paragraph numbers. 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. You should, however, make all required entries in the governmental activities general journal at the government-wide level.

1. [Para. 5-b-1] On January 2, 2011, plans and specifications for the first project, to

be known as “Springer Street Project,” were prepared by a consulting engineer's office. The engineer sent the Street Improvement Fund an invoice for $32,000.

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-b-2] On January 2, 2011, special assessments in the amount of $1,000,000 were recorded as receivable; revenue in that amount was recognized.

Required: Record this transaction in the Street Improvement Fund and governmental activities journals. In the governmental activities journal, record the transaction as Program Revenues—Public Works—Capital Grants and Contributions.

3. [Para. 5-b-3] A $290 purchase order for advertisements soliciting bids for the Springer Street Project was issued on January 2. The bill for advertising in the amount of $300 was received and a voucher for payment was issued on January 15, 2011.

Required: Record the encumbrance, billing and the Vouchers Payable liability in the Street Improvement Fund and governmental activities journals as appropriate.

4. [Para. 5-b-4] On February 15, 2011, construction bids were opened and analyzed. A bid of $1,800,000 was accepted, and the contract was let immediately for the Springer Street Project. The contract called for a 5 percent retention from each progress payment, and from the final payment, until final inspection and acceptance by the consulting engineers.

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-b-5] On April 1, 2011, deferred serial bonds in the amount of $1,500,000 were sold at $1,548,750, $18,750 of which was for interest (5%) accrued from the

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date of the bonds (January 1, 2011) to the date of the sale. Cash in the amount of the premium and accrued interest was deposited directly in the Street Improvement Bond Debt Service Fund. Cash in the amount of $1,500,000 was recorded in the Street Improvement Fund, of which $600,000 was invested immediately in certificates of deposit maturing on September 30 and earning 4% per annum.

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 5% Deferred Serial Bonds] and accrued interest on bonds sold [we recommend that you credit Expense—Interest on Long-term Debt] in the governmental activities general journal for the $18,750 of accrued interest.) Entries in the Street Improvement Bond Debt Service Fund to record the accrued interest and premium will be made in Chapter 6 of this cumulative problem, so ignore those entries for now.

6. [Para. 5-b-6] The total amount of Vouchers Payable was paid on April 15, 2011.

Required: Record this transaction in both the Street Improvement Fund and governmental activities general journals.

7. [Para. 5-b-7] The contractor for the Springer Street Project requested a progress payment of $900,000. This amount was paid on May 1, 2011, less the contractual 5 percent retention.

Required: Record this transaction in both the Street Improvement Fund and governmental activities general journals.

8. [Para. 5-b-8] Two property owners along Springer Street claimed the new sidewalk was not where they had given easements. A resurvey proved the sidewalk was laid erroneously, but the city did not feel the property owners were entitled to damages. The property owners brought suit and were awarded a total of $9,000, which was recorded as a judgment liability on July 29, 2011. The amount will be borne by the Street Improvement Fund; it will not be recoverable from the contractor.

Required: Record this transaction in both the Street Improvement Fund and governmental activities journals. You should debit Construction Expenditures in the Street Improvement Fund.

9. [Para. 5-b-9] Plans and specifications for the second street improvement project, to be known as the “Alzmann Street Project,” were prepared by the consulting engineer's office. The engineer’s invoice in the amount of $20,000 was vouchered for later payment.

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Required: Record this transaction in both the Street Improvement Fund and governmental activities journals. (Note: This transaction was not encumbered.)

10. [Para. 5-b-10] A $325 purchase order for advertisements soliciting bids for the Alzmann Street Project was issued on July 30. The bill for advertising in the amount of $315 was received and a voucher was issued for payment on August 15, 2011.

Required: Record these transactions in both the Street Improvement Fund and governmental activities journals as appropriate.

11. [Para. 5-b-11] Construction bids for the Alzmann Street Project were opened and analyzed. A bid in the amount of $1,500,000 was accepted, and the contract, bearing a 5 percent retention clause was signed in August 2011.

Required: Record this transaction in the Street Improvement Fund.

12. [Para. 5-b-12] On September 30, 2011, the 4% certificates of deposit matured; the face amount of $600,000 plus interest of $12,000 was collected. The interest is considered revenue of the Street Improvement Fund.

Required: Record this transaction in both the Street Improvement Fund and governmental activities journals.

13. [Para. 5-b-13] All outstanding vouchers were paid. In addition, the judgment payable (see Transaction 8) and interest thereon of $90 were paid on the same date. The interest is to be borne by the Street Improvement Fund and is not to be capitalized.

Required: Record these transactions in both the Street Improvement Fund and governmental activities journals.

14. [Para. 5-b-14] Special assessments in the amount of $1,000,000 were collected prior to December 1, 2011. $500,000 of this amount was invested in 3% U.S. Treasury notes at par on December 1, 2011; no interest was accrued on the notes at date of purchase.

Required: Record these transactions in both the Street Improvement Fund and governmental activities journals.

15. [Para. 5-b-15] On December 5, 2011 the project was completed and the contractor for the Springer Street Project requested a final payment of $850,000. This amount was recorded as a liability. Payment, less the retained percentage, was made on December 20, 2011.

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16. [Para. 5-b-16] Upon final inspection of the Springer Street Project, the city inspector determined that all work conformed to specifications. Retained percentages (Transactions 7 and 15) were paid to the contractor.

Required: Record this transaction in both the Street Improvement Fund and governmental activities journals. Total construction expenditures for the Springer Street Project should be capitalized in the Infrastructure account in governmental activities.

17. [Para. 5-b-17] $1,250 of interest was accrued on the investment in Treasury notes as of December 31, 2011. Fair market value of these notes was the same as cost at December 31, 2011.


18. Verify the accuracy of all your preceding entries in the Street Improvements 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 2011 and post them to the fund’s general ledger. (Note: You must click on the box for [Closing Entry] to check mark it; “Closing Entry” will appear in the [Transaction Description] box for the account being closed. Be sure the check mark is present for each account being closed.) Click [Post Entries] to post the closing entry. 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 2011 to an Excel worksheet, manually adding the .xls file extension, and use Excel to prepare a balance sheet for the Street Improvement Fund as of December 31, 2011. (See Illustration 4-5 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] drop-down menu.

d. Export the pre-closing trial balance for year 2011 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, 2011. (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.). Save and print the pre-closing trial balance from the [Reports] drop-down 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 computer files submitted via e-mail.]

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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 $1,500,000 face amount of bonds issued during 2011 are dated January 1, 2011, but were not issued until April 1, 2011. The bonds are each in the denomination of $5,000, bearing a nominal annual interest rate of 5 percent per annum. The first interest payment is due July 1, 2011. Subsequent semiannual interest payments will be made January 1 and July 1 of each following year until the maturity of the bond. Sixty bonds of $5,000 each are to mature 10 years after the date of the bonds (2021), and 60 bonds are to mature each year thereafter until all the bonds issued in 2011 have matured. Thus, these bonds are deferred serial bonds as discussed in Chapter 6 of the textbook. Make entries as instructed in the following paragraphs.

a. Prepare general journal entries, as necessary to record the transactions described in paragraph b 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 (# - Description)] menu. Be sure the year 2011 is selected from the drop-down [Year] menu and the appropriate paragraph number shown in bold-face font below is in the [Transaction Description] box.


b. Record the transactions below, as necessary.

1. [Para. 6-b-1] On April 1, 2011, an amendment to the annual budget for 2011 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 $30,000 for the premium on bonds sold and estimated revenues of $18,750 for accrued interest on bonds sold; and appropriations in the amount of the one interest payment of $37,500 to be made during 2011. (The payment that is due on July 1, 2011.)

Required: Record the amended budget for the Street Improvement Bond Debt Service Fund for year 2011. Budgetary entries have no effect on the government-wide accounting records.

2. [Para. 6-b-2] On April 1, 2011, the premium and accrued interest on bonds sold were received by the Street Improvement Bond Debt Service Fund. (See Transaction 5-b-5 in the Street Improvement Fund.)

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Required: Record this transaction in the Street Improvement Debt Service Fund. No entry is required at this time in the governmental activities general journal since the bond issue, together with related premium and accrued interest, was recorded in the governmental activities general journal in transaction 5-b-5.

3. [Para. 6-b-3] The July 1, 2011, interest payment was made. (Note: Since you credited Expense—Interest on Long-Term Debt for $18,750 in 5-b-5 in the governmental activities general journal you can record the full July 1, 2011, interest payment as a debit to Interest Expense, less amortization of the premium.)

Required: Record this transaction in both the Street Improvement Debt Service Fund and the governmental activities general journals. For the entry in the governmental activities journal, assume that the appropriate amount of amortization of the Premium on 5% Deferred Serial Bonds Payable for the three months the bonds have been outstanding (April 1 through July 1) is $508. (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.)

4. [Para. 6-b-4] Make the required journal entry in the governmental activities general journal to accrue six months of interest payable on the 5% Deferred Serial Bonds Payable from the July 1 interest payment until the end of the fiscal year, December 31, 2011. For this entry, assume that the appropriate amount of amortization of the Premium on 5% Deferred Serial Bonds Payable is $1,017. (Recall that interest is not accrued for the period July 1 to December 31, 2011, in the debt service fund as no appropriation exists for this expenditure and the interest is not due this fiscal year.)

5. 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 2011. Make this entry only in the Street Improvement Debt Service Fund journal. Be sure that for each account being closed that the check mark for [Closing Entry] is on and that “Closing Entry” appears in the [Transaction Description] box. (Note: Closing entries for governmental activities at the government-wide level will be made in Chapter 9 of this cumulative problem.)

c. Go to [Reports] and save and print the pre-closing and post-closing trial balances for the Street Improvement Bond Debt Service Fund as of December 31, 2011. Retain in your cumulative folder until directed by your instructor to submit them, unless your instructor specifies submission of computer files via e-mail.

d. Assuming that the assessed valuation of property within the City of Smithville is $150,000,000, and the legal general obligation debt limit is 10 percent of assessed

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valuation, compute the legal debt margin of the city as of December 31, 2011. (The bonds authorized but unissued, as described in the introductory paragraph of Chapter 5 of the City of Smithville cumulative problem, should be disclosed at the bottom of your schedule to inform the reader that additional debt issuances are pending.) Prepare a schedule in good form showing calculation of the legal debt limit, debt subject to the limit, and debt margin (see Illustration 6-3 for an example).

Fiscal year 2012 Transactions:

e. On January 2, 2012, the City of Smithville approved the issuance of additional street improvement bonds in the total amount of $2,500,000. The new bonds will be deferred serial bonds and will bear interest at the nominal annual rate of 6 percent. These bonds are dated January 1, 2012, and will be issued during the year 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, 2012; interest will be payable January 1 and July 1 of each following year until maturity. $250,000 of bonds will mature on January 1, 2022, and in the same amount each year thereafter until all bonds of the 2012 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 2012 in the Street Improvement 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 2012. However, a new fund, the Investment Pool Fund, has recently been created (see Chapter 8). The Investment Pool Fund will be used to account for the investments of the Street Improvement Debt Service Fund, effective FY 2012. You will be prompted in Chapter 8 to make any entries related to these investments. The Street Improvement Debt Service Fund reports all such investments as Equity in Pooled Investments.

1. [Para. 6-e-1] On January 1, 2012, the Street Improvement Debt Service Fund budget for 2012 was legally adopted. The budget provided for estimated other financing sources to be transferred from the General Fund in an amount equal to the $150,000 appropriations for interest for the year on all street improvement bonds expected to be outstanding during the year (including those issued in 2011), plus an amount of $220,000 to be invested in the City of Smithville’s new Investment Pool Fund for eventual bond redemption ($370,000 in total). The budget also provided for estimated earnings of $6,600 on the Street Improvement Debt Service Fund’s equity in pooled investments of the Investment Pool Fund. No premium or accrued interest on bonds sold is included in the 2012 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 and the budget will be amended accordingly to reflect such items.

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2. [Para. 6-e-2] Cash in the amount of $37,500 was transferred from the General Fund as budgeted for the bond interest due on January 1, 2012 for the 5% deferred serial bonds issued for the Street Improvement Fund during 2011.

3. [Para. 6-e-3] Bond interest due on January 1, 2012 in the amount of $37,500 for the first issue of street improvement bonds (see Chapter 5 of this cumulative problem) was paid on that date.

4. [Para. 6-e-4] On March 1, 2012, the Street Improvement Debt Service Fund received $25,000 of premium from the sale of the additional $2,500,000 street improvement bonds (see first sentence of paragraph e.), plus $25,000 for two months of accrued interest ($50,000 in total). The $50,000 of premium and accrued interest was transferred to the Investment Pool Fund until needed later for retirement of the bonds or for interest (debit Equity in Pooled Investments). Investments of the Investment Pool Fund are expected to earn an average of 5 percent per annum. Interest earnings will be added to the balance of the Equity in Pooled Investments account, generally at year-end upon notification from the Investment Pool Fund. In addition to recording the receipt of $50,000 in cash, record an amendment to the FY 2012 budget to reflect the amounts of the premium and accrued interest on bonds sold. Also, record an additional amount for estimated revenues for investment earnings in the amount of $2,250. (Note: You should credit Budgetary Fund Balance for the full $52,250, since the appropriation for the interest payment due on July 1, 2012, was recorded in Paragraph 6-e-1). Do not make any entries in the Investment Pool Fund until you begin Chapter 8 of the City of Smithville.

5. [Para. 6-e-5] On June 30, 2012, the General Fund transferred in cash the remaining $332,500 budgeted for the debt service fund; $220,000 was immediately transferred to the Investment Pool Fund, where it is expected to earn 5 percent per annum.

6. [Para. 6-e-6] Bond interest of $37,500 due July 1, 2012 on the 5% street improvement bonds issued in 2011 and $75,000 on the 6% street improvement bonds issued in 2012 was paid on that date.

7. [Para. 6-e-7] Notification was received from the investment manager of the Investment Pool Fund that the debt service fund’s portion of interest earned by the Investment Pool Fund for the year ended December 31, 2012 on all investments held by the Investment Pool Fund amounted to a $9,412 addition, the investment manager advised that the debt service fund’s equity in the increase of fair value of Investment Pool Fund investments amounted to $3,581 at year-end. (You should debit Equity in Pooled Investments and credit appropriate revenue accounts for these items in the Street Improvement Debt Service Fund. Corresponding entries in the Investment Pool Fund will be made in Chapter 8.)

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8. 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, 2012. Be sure that for each account being closed the [Closing Entry] check mark is on and that “Closing Entry” appears in the [Transaction Description] box. Post the closing entries to the general ledger by clicking [Post Entries].

f. Export the post-closing trial balance (click on [File]-[Export]) for year 2012 to Excel to prepare a balance sheet for the Street Improvement Bond Debt Service Fund as of December 31, 2012.

g. Export a pre-closing trial balance for year 2012 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, 2012.

h. Use the same trial balance exported in item e above to prepare a statement 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, 2012.

[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 via e-mail.]

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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, 2010, appears below.

CITY OF SMITHVILLESolid Waste Disposal FundPost-closing Trial BalanceAs of December 31, 2010

Account Title Debits CreditsCash $ 240,000Customer Accounts Receivable 121,200Allowance for Doubtful Accounts $ 10,900Inventories 4,200Land 500,000Buildings 1,375,000Accumulated Depreciation—Buildings 625,000Equipment 867,000Accumulated Depreciation—Equipment 543,000Vouchers Payable 41,900Accrued Payroll and Fringe Benefits 60,300Accrued Liability—Est. Closure/Post Closure Costs 170,000Invested in Capital Assets, Net of Related Debt 1,574,000Unrestricted 82,300 Totals $3,107,400 $3,107,400

Required

a. Open a general journal as of December 31, 2010, for the Solid Waste Disposal Fund by entering each of the accounts and amounts shown in the above post-closing trial balance. Enter 2010 from the drop-down [Year] menu. Each of the account titles will be found in the drop down menu [Account (# - Description)] in the [Journal] view of the program. Be sure to enter 7-a as your paragraph number in the [Transaction Description] box 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 e-mail submission, print a post-closing trial balance as of December 31, 2010 and retain it in your cumulative file until directed by your instructor to submit it.

Entries in this enterprise fund do not have to be 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)

37

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, 2011. Be sure that 2011 appears in the drop down [Year] menu.

1. [Para. 7-b-1] Billings to customers of the Solid Waste Disposal Fund totaled $1,890,800 for the year, including $13,700 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.

2. [Para. 7-b-2]Vouchers for materials and supplies to be used in the operations of the fund were issued in the total amount of $644,600. (Debit Inventories)

3. [Para. 7-b-3] Collections from customers totaled $1,825,800 during 2011, including $8,400 collected from the General Fund (see Transaction 7-b-1 above).

4. [Para. 7-b-4] Equipment costing $250,000 was purchased on July 1, 2011. Cash in the amount of $160,000 was paid at the time of purchase; the vendor accepted revenue anticipation notes in the amount of $90,000 to finance the remainder of the equipment. Of this amount, $45,000 of the notes will be payable on July 1, 2012; the other $45,000 will be payable on July 1, 2013. All notes bear interest at the rate of 4.2 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.)

5. [Para. 7-b-5] Payrolls and fringe benefits paid in cash during the year totaled $985,700, including the amount accrued at December 31, 2010.

6. [Para. 7-b-6] Accrued salaries and fringe benefits at year-end amounted to $55,600. Materials and supplies used in operations during the year amounted to $645,400, at cost.

7. [Para. 7-b-7] Vouchers in the amount of $648,800 were paid during the year.

8. [Para. 7-b-8] Interest accrued on revenue anticipation notes as of year-end (see transaction 7-b-4) was recorded.

9. [Para. 7-b-9] Provision for doubtful accounts was recorded in the amount of $2,550.

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10. [Para. 7-b-10] The city uses the following annual straight-line depreciation rates: Buildings, 2.5 percent; Equipment, 10 percent (equipment purchased during the year is not depreciated unless held for more than 6 months of the year). Apply these rates to the original cost of buildings and equipment as of December 31, 2010, assuming no residual or salvage value.

11. [Para. 7-b-11] The City of Smithville estimates that for the city’s landfill the total current cost for closure and postclosure compliance with the Environmental Protection Agency rules discussed in Chapter 7 will be $1,200,000. Based on the percentage of estimated capacity of the landfill used in the current period, the current period expense and related liability for future closure and post closure costs is $100,000.

12. [Para. 7-b-12] On December 31, 2011, prior to preparing closing entries, the Solid Waste Disposal Fund was charged for materials and supplies expense in the amount of $10,000 that had erroneously been charged to the General Fund (see transaction 14 of the General Fund in Chapter 4 of this cumulative problem). You should credit Due to Other Funds.

13. 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 2011 and to reclassify the two net asset accounts, as appropriate. Be sure that the check mark for [Closing Entry] is on for each account being closed and that “Closing Entries” appears in the [Transaction Description] box. 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 2011, and use Excel to prepare a statement of net assets for the Solid Waste Disposal Fund as of December 31, 2011.

e. Click on [File]-[Export] to export a pre-closing trial balance for year 2011, and use Excel to prepare a statement of revenues, expenses, and changes in net assets for the Solid Waste Disposal Fund for the year ended December 31, 2011. Provision for closure and postclosure costs should be considered an operating expense. Interest expense should be considered a nonoperating item.

f. Export the post-closing trial balance for year 2010 and use with the trial balances from parts d and e above and Excel to prepare a statement of cash flows for the Solid Waste Disposal Fund for the year ended December 31, 2011.

[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 via e-mail.]

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Chapter 8 Recording Transactions Affecting a Fiduciary Fund—An Investment Trust Fund

The city council of the City of Smithville decided in late 2011 to create an investment pool that would put the city’s investments under professional management. The pool will be accounted for as an investment trust fund. The name of the fund, when it is established in early 2012, will be the Investment Pool Fund. The initial participants in the Investment Pool Fund will be the city’s Street Improvement Debt Service Fund and the Smithville R4 Consolidated School District (CSD). The pool will be accounted for in accordance with GASB standards applicable to fiduciary funds; therefore, the city’s Street Improvement Debt Service Fund assets managed by the investment pool will not be reported in the Investment Pool Fund financial statements, which is as illustrated in Chapter 8 of the textbook. Unless there is a request for a withdrawal, investment earnings and changes in the fair value of investments are distributed to participants only at year-end. During the year, investment earnings are added to an Undistributed Earnings on Pooled Investments account and changes in fair value are added to or subtracted from an Undistributed Change in Fair Value of Investments Account.

a. Record the following transactions that occurred during 2012 in the Investment Pool Fund.


1. [Para. 8-a-1] On March 1, 2012, the Investment Pool Fund was formally established with the receipt of $50,000 in cash from the city’s own Street Improvement Debt Service Fund, plus receipt from the CSD of U.S. Treasury Notes having a market value of $605,000 on this date. The Treasury Notes mature on January 1, 2014, and were purchased by the Smithville CSD at a face value of $600,000 on January 1, 2012. The Treasury Notes receive semi-annual interest of 5 percent per annum, on July 1 and January 1 each year. The CSD’s equity is to also be credited for the two months of interest receivable of $5,000 on the U.S. Treasury Notes for January and February 2012.

2. [Para. 8-a-2] The Investment Pool Fund manager purchased a one-year CD on March 2 in the amount of $50,000. The CD pays semi-annual interest of 6 percent per annum, which will be added to the value of the CD on August 31 and February 28.

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3. [Para. 8-a-3] On June 30, the Investment Pool Fund received $220,000 representing an addition to the Street Improvement Debt Service fund’s sinking fund.

4. [Para. 8-a-4] On July 1, interest on the U.S. Treasury Notes in the amount of $15,000 was received in cash. On the same date, $235,000 was invested in 4.8 percent per annum U.S. Treasury Notes, at par. The Treasury Notes mature on July 1, 2014 and receive semi-annual interest on July 1 and January 1 each year.

5. [Para. 8-a-5] On August 31, interest was accrued on CDs in the amount of $1,250. This amount was debited to the Investments—CDs and Other account rather than the Interest Receivable on Investments account.

6. [Para. 8-a-6] On October 1, the Smithville CSD deposited an additional $100,000 in the Investment Pool Fund. This amount was immediately invested in 5.1 percent CDs for which interest is added to the face value semiannually on March 31 and September 30.

7. [Para. 8-a-7] On December 31, interest was accrued on all investments of the Investment Pool Fund in the amount of $22,915. Of this amount, $2,275 was recorded in the Investments—CDs and Other account; the remainder was recorded in the Interest Receivable on Investments account.

8. [Para. 8-a-8]. On December 31, the fair value of investments in U.S. Treasury Notes was $853,000. (Credit Undistributed Change in Fair Value of Investments for the increase in fair value)

9. [Para. 8-a-9]. On December 31, the Smithville CSD withdrew $100,000 to meet certain obligations coming due. To provide the cash needed for the withdrawal, the Investment Pool Fund manager sold 5 percent U.S. Treasury Notes on this date for $100,000, plus interest of $2,500, receiving in total $102,500 from the sale. (Note: Adjust Interest Receivable on Investments for the interest received.)

10. [Para. 8-a-10]. The proportionate equities of the city’s Street Improvement Debt Service Fund and the Smithville CSD were calculated and investment earnings and changes in fair value of investments were distributed accordingly. Round all calculations to the nearest whole dollar. (Note: You should complete 8-c and 8-d below prior to making these journal entries.)

b. Post the journal entries for all the preceding transactions then prepare and post closing entries to close the temporary accounts. Be sure and click on the check mark for [Closing Entries] and check that “Closing Entry” appears in the [Transaction Description] box for each account closed.

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c. Prepare a schedule in good form showing the proportionate equities of each of the Investment Pool Fund’s two participants before the Smithville CSD’s $100,000 withdrawal on December 31, 2012. Calculations should be carried to four decimal places.

d. Prepare a schedule in good form showing the proportionate equities of each of

the Investment Pool Fund’s two participants after the Smithville CSD’s $100,000 withdrawal on December 31, 2012. Calculations should be carried to four decimal places.

e. Export the post-closing trial balance and prepare a statement of net assets for the Investment Pool Fund as of December 31, 2012. (Follow the format of Illustration 8-6).

f. Export the pre-closing trial balance for this fund and prepare a statement of changes in net assets for the Investment Pool Fund for the year ended December 31, 2012. (Follow the format of Illustration 8-7.) Print and retain all the documents generated in Paragraphs c. through f. in your cumulative file until told to submit this assignment by your instructor, unless submission by e-mail is specified.

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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 2011, 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 $ 35,290Public Safety:Police 77,640Fire 98,810Building Safety 7,060Public Works 70,580 $98,620Health and Welfare 17,640Parks and Recreation 45,880 Totals $352,900 $98,620

In addition, depreciation expense for buildings in the amount of $157,000 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 BuildingFloor Space Used

General Government 20%Public Safety:

Police 14 Fire 16Building Safety 5

Public Works 22Health and Welfare 10Parks and Recreation 13 Total 100%

Required: [Para. 9-a] Record depreciation expense for the year 2011 in the governmental activities general journal at the government-wide level. Round all amounts to the nearest whole dollar. Verify accuracy of the adjusting the entries and post to the general ledger by clicking [Post Entries].

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b. Although closing entries were made in each fund in Chapters 4 through 7 of this cumulative problem, they have not yet been recorded at the government-wide level.

Required: Closing Entries. Record the journal entries required on December 31, 2011 to close all temporary accounts for governmental activities at the government-wide level. These entries should also recognize changes in the accounts Net Assets Invested in Capital Assets, Net of Related Debt; Net Assets—Restricted for Capital Projects; and Net Assets—Restricted for Debt Service. Assume that the remaining $11,250 of cash and the fund balance reported for the Street Improvement Bond Debt Service Fund at December 31, 2011, will eventually be used for repayment of debt principal. For each account to be closed or reclassified, be sure and click on the check mark for [Closing Entry] and that “Closing Entries” appears in the [Transaction Description] box. 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 the exportable pre-closing trial balance and post-closing trial balance for governmental activities, to prepare all government-wide and fund financial statements that must be presented by the City of Smithville in order for its basic financial statements to be in conformity with generally accepted accounting principles. (See Illustrations A1-1 through A1-11 of the Wilson, Reck, and Kattelus textbook for examples of these statements.) We recommend that you use Excel to prepare these financial statements; however, your instructor may want you to do these manually. 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. (Note: The City of Smithville is a primary government and has no other organizations for which it is accountable as component units.) Finally, note that the FY 2012 financial information for the Street Improvement Debt Service Fund and the Investment Pool Fund are not included in any of the basic financial statements you are preparing as the statements you are preparing pertain only to FY 2011.

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Chapter 10 Analysis of Financial Condition (Optional, unless assigned by your instructor)

Prepare a written evaluation of the City of Smithville’s financial position and condition as of December 31, 2011, using appropriate ratios such as the Crawford and Associates ratios illustrated in Chapter 10 of the textbook. For purposes of calculating per capita ratios, assume the population of the City of Smithville is 25,000.

Chapter 12 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. Explain the rationale for the nature of the audit report (qualified or unqualified) 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.

[See Appendix next page]

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Appendix A - Adobe Flash Player Security Settings

When first starting the Smithville program in a browser, an Adobe Flash Player Security warning pop-up might show up:

Click on "Settings..." button to be directed to the Adobe Flash Player™ Settings Manager and select "Always allow" radio button to allow the player working properly:

--The End--

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