Recording Operating Transactions Affecting the General Fund and Governmental Activities at the Government-wide Level
City of Smithville that occurred during the fiscal year for which the budget given in Chapter 3 was recorded, the calendar year 2014. Read all instructions carefully.
a. After opening the data file containing your data from Chapters 2 and 3 of this project, record the following transactions in the general journal for the General Fund and, if applicable, in the general journal for governmental activities at the government-wide level. For all entries, the date selected should be year 2014. 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 next. If you choose the latter method, it might be useful to print the General Fund general journal entries from the Reports menu to assist in making the entries in the governmental activities journal. Regardless of the method you choose, we recommend that you refer to the illustrative journal entries in Chapter 4 of the Reck, Lowensohn, and Wilson textbook (16h edition) for guidance in making all entries.
For each entry affecting budgetary accounts or operating statement accounts, the Detail Journal will automatically open, 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] On January 2, 2014, real property taxes were levied for the year in the amount of $1,697,000. It was estimated that 3 percent of the levy would be uncollectible.
Required: Record this transaction in both the General Fund and governmental activities journal. (Note: Type 4-a-1 as the paragraph number in the [Transaction Description] box for this entry; 4-a-2 for the next transaction, etc. Careful referencing by paragraph number is very helpful should you need to determine where you may have omitted a required journal entry or made an error.) (Select “Accrued Revenue” in the drop down [Transaction Description] menu in the Detail Journal related to the General Fund entry.)
2. [Para. 4-a-2] Encumbrances were recorded in the following amounts for purchase orders issued against the appropriations indicated:
General Government $ 98,453
Public Safety 185,259
Public Works 247,675
Health and Welfare 173,469
Culture and Recreation 108,927
Miscellaneous 41,563
Total $855,346
Required: Record the encumbrances in the General Fund general journal and Detail Journal as appropriate. In the Detail Journal, select “Purchase Orders” from the drop down [Transaction Description] menu. You can also type in an alternative description, if desired.
3. [Para. 4-a-3] Cash was received during the year in the total amount of $5,821,280 for collections from the following receivables and cash revenues, as indicated:
Current Property Taxes $1,546,800
Delinquent Property Taxes 360,000
Interest and Penalties Receivable on Taxes 34,270
Due from State Government 500,000
Revenues: (total: $3,380,210)
Sales Taxes 1,886,860
Licenses and Permits 583,800
Fines and Forfeits 423,360
Intergovernmental 168,000
Charges for Services 225,070
Miscellaneous 93,120
Total $5,821,280
Required: Record the receipt of cash and the related credits to receivables and revenues accounts, as applicable, in both the General Fund and governmental activities journals. (Select “Received in Cash” in the drop down [Transaction Description] menu in the Detail Journal related to the General Fund revenue entries.)
For purposes of the governmental activities entries at the government-wide level assume the following classifications:
General Fund Governmental Activities
Sales Taxes General Revenues—Taxes—Sales
Licenses and Permits Program Revenues—General Government—
Charges for Services
Fines and Forfeits Program Revenues—General Government—
Charges for Services
Intergovernmental Program Revenues—Public Safety—Operating
Grants and Contributions
Charges for Services Program Revenues—General Government—
Charges for Services, $140,100
Program Revenues—Culture and Recreation—
Charges for Services, $84,970
Miscellaneous General Revenues—Miscellaneous
4. [Para. 4-a-4] Additional interest and penalties were accrued on delinquent property taxes in the amount of $2,836, of which 10 percent was estimated to be uncollectible. (Note: Round the estimated uncollectible to the nearest whole dollar.)
Required: Record this accrual in both the General Fund and governmental activities general journals.
5. [Para. 4-a-5] General Fund payrolls for the year totaled $3,822,600. Of that amount, $472,040 was withheld for employees’ federal income taxes; $291,740 for employees’ share of FICA taxes; $171,610 for employees’ state income taxes; and the remaining $2,887,210 was paid to employees in cash. The City of Smithville does not record encumbrances for payrolls. The payrolls were chargeable against the following functions’ appropriations:
General Government $ 476,376
Public Safety 2,013,110
Public Works 612,881
Health and Welfare 397,673
Culture and Recreation 322,560
Total $3,822,600
Required: Make summary journal entries for payroll in both the General Fund and governmental activities general journals for the year.
6. [Para. 4-a-6] The city’s share of FICA taxes, $291,740, and the city’s contribution of $195,380 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 $487,120 should be allocated in the same proportions as in paragraph 4-a-5 above; that is:
General Government: ($476,376/$3,822,600) x $487,120 = $60,705
Public Safety: ($2,013,110/$3,822,600) x $487,120 = $256,534
Public Works: ($612,881/$3,822,600) x $487,120 = $78,101
Health and Welfare: ($397,673/$3,822,600) x $487,120 = $50,676
Culture and Recreation: ($322,560/$3,822,600) x $487,120 = $41,104
(Note: The allocated amount for Public Works was rounded up one dollar to compensate for rounding error.)
7. [Para. 4-a-7] Invoices for some of the goods recorded as encumbrances in transaction 4-a-2 were received and vouchered for later payment, as listed below. Related encumbrances were canceled in the amounts shown (Select “Elimination” in the drop down [Transaction Description] menu in the Detail Journal):
Expenditures Encumbrances
General Government $ 93,838 $ 94,752
Public Works 190,596 190,512
Health and Welfare 176,400 173,124
Culture and Recreation 109,280 108,927
Miscellaneous 41,160 41,563
$784,943 $782,234
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 $27,800 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.
8. [Para. 4-a-8] During FY 2014, the City of Smithville received notification that the state government would remit $165,000 to it early in the next fiscal year, although this amount is intended to finance certain public safety operations of the current year. This amount had been anticipated and was included in the budget for the current year as “Intergovernmental Revenue.”
Required: Record this transaction as a receivable and revenue in the General Fund and governmental activities journals. (Note: Select “Accrued Revenue” in the [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.
9. [Para. 4-a-9] Checks were written in the total amount of $2,809,090 during 2014. These checks were in payment of the following items:
Vouchers Payable $ 995,600
Tax Anticipation Notes Payable 375,000 (see Chapter 2)
Expenditures (Interest on tax 8,400
anticipation notes)
Due to Federal Government 1,068,400
Due to State Government 361,690
Total amount paid $2,809,090
(Note: Interest expenditures on tax anticipation notes were budgeted in the Miscellaneous category. Record them as a General Government expense at the government-wide level.)
Required: Record the payment of these items in both the General Fund and governmental activities general journals.
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 these reclassifications in the General Fund and governmental activities journals.
11. [Para. 4-a-11] The city’s budget for 2014 was legally amended as follows:
Estimated Revenues:
Decreases Increases
Licenses and permits $ 5,000
Intergovernmental $ 5,000
Charges for Services 5,000
Miscellaneous 10,000
Total $10,000 $15,000
Appropriations:
General Government $22,000
Public Safety 3,500
Public Works 15,000
Health and Welfare 5,500
Culture and Recreation $8,000 $8,000 $46,000
Note: These amendments decrease the balance of the Budgetary Fund Balance account by $33,000.
Required: Record the budget amendments in the General Fund general journal only. Budgetary items do not affect the government-wide accounting records. (Note: Select “Budget Amendment” in the [Transaction Description] box in the Detail Journal.)
12. [Para. 4-a-12] Interest and penalties receivable on delinquent taxes was increased by $11,000; $3,500 of this was estimated as uncollectible.
Required: Record this transaction in the General Fund and governmental activities journals.
13. [Para. 4-a-13] Services received by the General Government function of the General Fund from the Solid Waste Disposal Fund amounted to $16,500 during the year. Of this amount, $10,100 was paid in cash and $6,400 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.
14. [Para. 4-a-14] Delinquent taxes receivable in the amount of $17,150 were written off as uncollectible. Interest and penalties already recorded as receivable on these taxes, amounting to $8,820, were also written off. Additional interest on these taxes that had legally accrued was not recorded since it was deemed uncollectible in its entirety.
Required: Record this transaction in the General Fund and governmental activities journals.
15. [Para. 4-a-15] It was discovered that goods in the amount of $12,000 had been recorded in error as an expenditure against the General Government appropriation of the General Fund. These goods 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 $12,000 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. (Note: Select “Goods Received” in the [Transaction Description] box in the Detail Journal).
16. [4-a-16] In December 2014, the General Fund made a short-term loan of $20,000 to the Street Improvement Bond Debt Service Fund to assist with payment of an interest payment due on January 1, 2015.
Required: Record this transaction in the General Fund only. The transaction has no effect at the government-wide level since it occurs between two governmental activities.
17. [4-a-17] Adjusting Entry. A physical count of consumable supplies at year-end showed an ending balance of $66,000, an increase of $6,000 during the year. The city uses the purchases method of accounting for its inventory in the General Fund and the consumption method at the government-wide level. Since the city uses a periodic inventory system, both at the fund and governmental levels, it records all purchases of inventory as expenditures in the General Fund and as expenses at the government-wide level. These were included as part of the amounts recorded in paragraph 4-a-7. Adjustments to the expenses accounts should be made to the Public Works function, where most supplies are used.
Required: Prepare the adjusting journal entries in the General Fund journal to adjust the Inventory of Supplies and Fund Balance—Nonspendable—Inventory of Supplies accounts to the correct balances and the governmental activities journal to adjust the Expenses—Public Works and Inventory of Supplies accounts.
Post all journal entries to the general and subsidiary ledgers: After reviewing all entries for accuracy, including year and paragraph numbers, post all entries to the general ledger accounts and to all subsidiary ledger accounts, by clicking on [Post Entries]. Also post all entries in the governmental activities journal.
18. Closing Entry. Following the instructions in the next paragraph, prepare and post the necessary entries to close the Estimated Revenues and Appropriations accounts to Budgetary Fund Balance, and Revenues and Expenditures to Fund Balance—Unassigned. Because the City of Smithville honors all outstanding encumbrances at year-end, it is not necessary to close Encumbrances to Encumbrances Outstanding at year-end since encumbrances do not affect the General Fund balance sheet or statement of revenues, expenditures, and changes in fund balances. If, however, you would like to avoid having these accounts appear in the post-closing trial balance, you can opt to close Encumbrances to Encumbrances Outstanding. If the accounts are closed, they would need to be reestablished at the beginning of the next year, although entries are not required in this problem for the next year.