ACG6506 Instructions City of Smithville Solution 18th Edition

Accompany18th Edition of Accounting for Governmental & Nonprofit Entitie

Journals, Ledgers & Trial Balances City of Smithville To Accompany18th Edition of Accounting for Governmental & Nonprofit Entitie

Instructions

City of Smithville

Full Version

Computerized Cumulative Problem

For use with McGraw-Hill Education

Accounting for Governmental & Nonprofit Entities

18th Edition

By Jacqueline L. Reck and Suzanne L. Lowensohn

Table of Contents

Completing Chapters 2 through 11 of the City of Smithville Full Version. 3

Chapter 2 Opening the Books. 4

Chapter 3 Recording the Annual Budget 8

Chapter 4 Recording Operating Transactions Affecting the General Fund and Governmental Activities at the Government-wide Level 10

Chapter 5 Recording Capital Asset Transactions. 18

Chapter 6 Transactions Affecting General Long-term Liabilities and Debt Service. 22

Chapter 7 Recording Transactions Affecting the Enterprise Fund and Business-type Activities  28

Chapter 8 Recording Transactions Affecting a Fiduciary Fund—a Tax Custodial Fund. 31

Chapter 9 Adjusting and Closing Entries for Governmental Activities, Government-wide Level; Preparation of Government-wide and Major Fund Financial Statements. 36

Completing Chapters 2 through 9 of the City of Smithville Full Version

Foreword

This full version of a cumulative problem written for the computer presents a series of transactions covering activities for the City of Smithville, assuming the city utilizes the dual-track accounting approach to the GASB reporting model described in Reck, Lowensohn, and Neely, Accounting for Governmental & Nonprofit Entities, 18th edition. The transactions presented relate to the city’s General Fund, capital projects, debt service, enterprise, and fiduciary funds, as well as to an additional accounting entity, governmental activities at the government-wide level. The transactions and instructions in this series are designated Chapter 2, Chapter 3, etc., corresponding to the chapters of Reck, Lowensohn, and Neely, Accounting for Governmental & Nonprofit Entities, 18th edition.

You should begin the project with Chapter 2 of the instructions as you complete Chapter 2 of the textbook.  Some problems require you to print trial balances or other documents.  Other problems require the preparation of financial statements or other documents.  The specified documents can either be turned in chapter by chapter or retained in a cumulative folder until the end of the project, depending on your instructor’s preference and instructions.  Some instructors may prefer that you electronically submit your project data file and either Excel or .pdf files containing your trial balances, financial statements, and other documents, rather than submitting printed copies.

To minimize errors, you should read and follow all instructions carefully.  Students find that this computerized cumulative problem significantly enhances their learning if they complete each City of Smithville chapter as the corresponding chapter of the textbook is covered.  Conversely, students who procrastinate often find that the project takes more time than they expected and that it is harder to recall how to make the journal entries covered in the earlier chapters.  Thus, delaying until your project is nearly due may increase the total time it takes you to do the project and leave you little time for anything else that week.  So, our advice is to stay current with the project.

Chapter 2 Opening the Books

The City of Smithville just implemented a dual-track computerized accounting system, which provides files for general journal entries and posting to appropriate general ledger/subsidiary ledger accounts. Budgetary, operating statement, and balance sheet accounts are provided for the General Fund and the other governmental fund types. Operating statement accounts and balance sheet accounts are also provided for governmental activities at the government-wide level and the proprietary and fiduciary funds of the City of Smithville that you will use in Chapters 5-9 of the problem. As the city’s new accountant, it is your job to enter the city’s initial accounting information as of December 31, 2019, in preparation for placing the new accounting system in full operation effective January 1, 2020.  

Required

First, be sure to read the User Guide to understand the general instructions on how to navigate and use this application.

Open the City of Smithville software by clicking on the MHECitiesSmithvilleBingham program.  Access the instructions for the Full Version of the City of Smithville project by clicking on [Instructions] in the opening screen of the application and then [Smithville] which appears at the top of the window with the Full version selected by default.

If creating a new project, click “Create New Project,” when the “Create New Project” window appears choose “Smithville icon.  In addition, in the “Your name” field, type your first and last name so that it will appear on all printable reports, and then click [Create] button.  This will create the project and provide access to all of the funds and accounts that you will need to complete the Full Version City of Smithville cumulative problem.

To protect yourself from possible hard drive failure or corruption of your project data file, we recommended that you save your file to not only your hard drive but also another location (e.g., flash drive or the cloud), creating a backup file for your project at the end of each session.

To open an existing project, click on “Open Project” in the opening window or select the project from the “Recent projects” list.

If it is not already displayed, select [General Fund] in the “Current accounting entity” window and the [Accounts] tab.  Clicking on the [Accounts] tab allows you to see the chart of accounts that will be used for the [General Fund]. A different chart of accounts is provided for each of the accounting entities. Next, select the [Journal] tab and click the [Add new entry] button and then click on [Select account or search by account name or number] in the Account column. You will see the same general ledger accounts that were listed when you clicked on the [Accounts] tab. (Note: For purposes of this exercise, date suffixes are omitted from the Expenditures and Encumbrances accounts as expenditures occur only from a single year’s appropriations.) You will not use all of the accounts listed for this project.

The trial balance for the General Fund of the City of Smithville as of December 31, 2019, follows. Select the [Journal] tab and create a journal entry to enter the balance sheet accounts and amounts shown in the trial balance. To create an entry start by clicking on [Add new entry]. Select or type the desired account name from the drop down list in the [Account] column. Be sure to enter 2019 from the dropdown in the [Year] column and enter the paragraph number from these instructions in the [Add description] field in the [Description] column of the [Journal].  For this entry you should enter 2-b. Select the appropriate accounts individually and insert the appropriate amounts. (Note: You should enter all dollar amounts without dollar signs, commas, and decimal points. For all entries, it is vitally important that the correct year be selected.)

You enter each account and amount one line at a time by clicking [Add]. The [Add] button will not be active if information for the entry is missing (e.g., the transaction description is missing.)

The year and transaction description need only be entered for the first line of the journal entry; it will remain selected for the rest of the accounts.  When you have completed entering all account data and amounts, verify your entries, including date and paragraph numbers. When you are sure that your entries are correct, click [Post entries] to post the items to the general ledger of the General Fund.

CITY OF SMITHVILLE

General Fund Post-Closing Trial Balance

As of December 31, 2019

      Account Title                                                                  Debits             Credits

Cash                                                                                   $  376,290

Taxes Receivable—Delinquent                                             391,756

Allowance for Uncollectible Delinquent Taxes                                        $    11,752

Interest and Penalties Receivable on Taxes                            40,126

Allowance for Uncollectible Interest and Penalties                                          3,611

Due from Other Funds                                                             12,000

Due from State Government                                                  165,000

Inventory of Supplies                                                              66,000

Vouchers Payable                                                                                          272,187

Due to Other Funds                                                                                           6,400

Due to Federal Government                                                                          135,720

Due to State Government                                                                                32,600

Deferred Inflows of Resources                                                                        97,704

Fund Balance—Nonspendable—Inventory of Supplies                                 66,000

Fund Balance—Restricted—Public Safety                                                     15,000

Fund Balance—Committed—Public Works                                                   29,700

Fund Balance—Assigned—Culture and Recreation                                       56,800

Fund Balance—Unassigned                                                                           323,698

    Totals                                                                            $1,051,172      $1,051,172

Unpost capability.  As mentioned in the “User Guide” page, the City of Smithville software program permits students to “unpost” a particular batch of posted transactions. Unposted entries then can be edited and re-posted. In addition, any omitted entries can be inserted above or below a selected journal line in any unposted batch of entries. Prior to unposting a batch, all batches must be posted.

Select [File>Export>Post-Closing Trial Balance to Excel-General Fund] and export the trial balance for 2019 in Excel to Project Workbook.

Select [Governmental Activities, Government-wide Level] in the “Current accounting entity” dropdown field and the [Accounts] tab.  You will see most of the accounts included in the preceding trial balance, plus many other accounts that will be used in the various chapters of the City of Smithville project.

Select the [Journal] tab and create a journal entry to enter the statement of net position (i.e., balance sheet) accounts and amounts shown in the following trial balance.  It is necessary to enter these items in the accounts of the governmental activities category at the government-wide level as the general journal and general ledger for governmental activities comprise a separate “set of books” from those for the General Fund.  Be sure to enter 2019 from the dropdown menu in the [Year] column and enter 2-d in the [Add description] field in the [Description] column.  Select each account individually and insert the appropriate debit or credit amount for each account.  When you have completed entering the initial data, verify the accuracy and click [Post entries] to post the entry to the governmental activities, government-wide general ledger.

CITY OF SMITHVILLE

Governmental Activities Government-wide Level

Post-Closing Trial Balance

As of December 31, 2019

      Account Title                                                               Debits             Credits

Cash                                                                             $    376,290

Taxes Receivable—Delinquent                                        391,756

Allowance for Uncollectible Delinquent Taxes                                    $     11,752

Interest and Penalties Receivable on Taxes                        40,126

Allowance for Uncollectible Interest and Penalties                                      3,611

Due from State Government                                             165,000

Internal Receivables from Business-type Activities           12,000

Inventory of Supplies                                                          66,000

Land                                                                               4,180,000

Infrastructure                                                                  9,862,000

Accumulated Depreciation—Infrastructure                                            2,713,944

Buildings                                                                        6,296,000

Accumulated Depreciation—Buildings                                                  1,731,000

Equipment                                                                      3,556,800

Accumulated Depreciation—Equipment                                                1,765,480

Vouchers Payable                                                                                       272,187

Due to Federal Government                                                                       135,720

Due to State Government                                                                             32,600

Internal Payables to Business-type Activities                                                6,400

Net Position—Net Investment in Capital Assets                                  17,684,376

Net Position—Restricted for Public Safety                                                  15,000

Net Position—Unrestricted                                                                        573,902 

   Totals                                                                       $24,945,972     $24,945,972

Select [File>Export>Post-Closing Trial Balance to Excel-Governmental Activities, Governmental-Wide level] and export the trial balance for 2019 in Excel to Project Workbook.

Before closing the City of Smithville it is recommended that you save a backup copy of your work to another location by clicking on [File] and [Save As] for Windows and Mac.  Click on “Export my Project” if you are using the Chromebook version.

Chapter 3 Recording the Annual Budget

The following budget for the General Fund of the City of Smithville was legally adopted for the fiscal year ending December 31, 2020.

Estimated Revenues:

     Taxes:

        Real Property                                                $1,841,126

 

        Sales                                                                1,578,000

      Interest and Penalties on Taxes                             37,000

      Licenses and Permits                                           500,000

      Fines and Forfeits                                                210,000

      Intergovernmental Revenue                                 789,000

      Charges for Services                                            624,720

      Miscellaneous Revenues                                       91,300

         Total Estimated Revenues                           $5,671,146

Appropriations:

      General Government                                      $1,169,500

      Public Safety                                                     2,206,000

      Public Works                                                       834,000

      Health and Welfare                                              700,000

      Culture and Recreation                                        660,500

      Total Appropriations                                      $5,570,000

Estimated Other Financing Sources and Uses:

      Interfund Transfers Out                                  $     17,500

Required

After opening the file you created for Chapter 2 of this project, record the budget in the general journal, providing entries in the Detail Journal when directed. Begin by selecting [General Fund] in the “Current accounting entity” dropdown menu from the [Journal] tab. Click on the [Add new entry] to start your entry. In the [Year] field, be sure to select the year 2020. Enter 3-a in the [Add description] field.  Select Estimated Revenues in the drop down [Account] window. Click [Add subsidiary] to go to the Detail Journal where you will enter the detail for each estimated revenue source.  In the Detail Journal, select “Budget Authorization” from the drop-down menu for [Description].

When you have finished entering the estimated revenue detail information, verify that the correct total amount is shown in the Detail Journal, then click on [Add entry and return to Journal] and the total estimated revenues will be entered in the general journal Estimated Revenues control account. Follow the same procedure to record the budget detail for Appropriations. To complete this entry debit or credit Budgetary Fund Balance as appropriate to balance the budgetary entry.

To finish recording the budget debit Budgetary Fund Balance and credit Estimated Other Financing Uses—Interfund Transfer Out for $17,500. Note that budgetary entries have no effect on governmental activities at the government-wide level and thus the budget information is only recorded in the General Fund.

When you are satisfied you have made the entries correctly, post them to the general ledger by clicking on [Post entries].  Before posting, or after unposting as described previously, you can edit, delete or insert entries in the journal by placing the cursor in the line you want to adjust and then right-clicking. Note that the “Insert Entry” function will work if you are inserting an entry prior to a balance sheet account. However, it will not work when inserting an entry prior to any account that has an associated subsidiary ledger (e.g., estimated revenues, expenditures). 

Select the [Ledger tab], export the pre-closing subsidiary ledgers and pre-closing trial balance for year 2020. Go to  [File>Export>] and export the pre-closing subsidiary ledgers and pre-closing trial balance for year 2020 in Excel to Project Workbook.

As of this time, only the budget has been recorded. This is your last opportunity to print or export these documents with budget information only. After operating transactions have been journalized and posted in Chapter 4, subsidiary ledgers and trial balances will contain both budgetary and operating accounts and balances.

Before closing the City of Smithville it is recommended that you save a backup copy of your work to another location by clicking on [File] and [Save As] for Windows and Mac.  Click on “Export my Project” if you are using the Chromebook version.

Chapter 4 Recording Operating Transactions Affecting the General Fund and Governmental Activities at the Government-wide Level

Presented below are a number of transactions for the City of Smithville that occurred during fiscal year 2020, the year for which the budget given in Chapter 3 was recorded.   Read all instructions carefully.

After opening the data file containing your data from Chapters 2 and 3 of this project, record the following transactions in the general journal for the General Fund and, if applicable, in the general journal for governmental activities at the government-wide level. For all entries, the date selected should be year 2020. For each of the paragraphs that requires entries in both the General Fund and governmental activities journals, you can either record them in both journals on a paragraph-by-paragraph basis or, alternatively, record all the General Fund journal entries first for all paragraphs, then complete the governmental activities journal entries for all paragraphs. Regardless of the method you choose, we recommend that you refer to the illustrative journal entries in Chapter 4 of the Reck, Lowensohn, and Neely textbook (18th edition) for guidance in making all entries.

 

Chapter 5 Recording Capital Asset Transactions

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

During late 2019, the voters of the City of Smithville authorized tax-supported bond issues totaling $8,000,000 as partial financing for projects to construct the extension of two streets and the related curbs, culverts, and storm sewers in the city. The estimated total cost of the projects, which are expected to extend over the next three years, was $11,200,000. In addition to the bond financing, voters also approved a special 1 cent sales tax to assist in financing the projects.  The sales tax begins January 1, 2020 and will continue for seven years.  The sales tax is projected to generate $550,000 each year.

Required

Prepare general journal entries as necessary to record the transactions described below in the Street Improvement Fund general journal and, if applicable, in the governmental activities general journal. Do not record entries at this time in other affected funds; those entries will be made in the later chapters of this cumulative problem that cover the affected funds. Use account titles listed under the drop down [Account] menu.  Be sure the year 2020 is selected from the dropdown [Year] menu and the appropriate paragraph number shown in bold-face font below is in the [Add description] field.

 [Para. 5-a-1] In early 2020, design plans and specifications for the first project, the Elm Street Project, were submitted by a construction engineering firm. The firm billed the Street Improvement Fund for $150,000.

Required:  Record this billing and the related Vouchers Payable liability in the Street Improvement Fund and governmental activities journals. (Note: this transaction was not encumbered.)

2.   [Para. 5-a-2] On February 20, 2020, the city signed a $40,000, 90-day tax anticipation note bearing interest of 3.0 percent per annum.

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

3.   [Para. 5-a-3] A $235 purchase order for advertisements soliciting bids for the Elm Street Project was issued March 1, 2020. The bill for advertising in the amount of $230 was received March14, 2020 and a voucher for payment was issued.

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

4.   [Para. 5-a-4] On March 15, 2020, construction bids were opened and analyzed. A bid of $2,400,000 was accepted, and the contract was awarded for the Elm Street Project. The contract provided for a retained percentage of 5 percent from each progress payment, and from the final payment, until final inspection and acceptance by the city’s public works inspectors.

Required:  Record the signing of the contract in the Street Improvement Fund general journal. This transaction has no effect at the government-wide level.