ACC – CHAPTER 4 City Of Smithville 28032

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:

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General Government
Public Safety
Public Works
Health and Welfare
Culture and Recreation
Miscellaneous
Total

$ 98,453
185,259
247,675
173,469
108,927
41,563
$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
Delinquent Property Taxes
Interest and Penalties Receivable on Taxes
Due from State Government
Revenues: (total: $3,380,210)
Sales Taxes
Licenses and Permits
Fines and Forfeits
Intergovernmental
Charges for Services
Miscellaneous
Total

$1,546,800
360,000
34,270
500,000
1,886,860
583,800
423,360
168,000
225,070
93,120
$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
Sales Taxes
Licenses and Permits
Fines and Forfeits

Governmental Activities
General Revenues—Taxes—Sales
Program Revenues—General Government—
Charges for Services
Program Revenues—General Government—
Charges for Services

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Intergovernmental
Charges for Services

Miscellaneous

Program Revenues—Public Safety—Operating
Grants and Contributions
Program Revenues—General Government—
Charges for Services, $140,100
Program Revenues—Culture and Recreation—
Charges for Services, $84,970
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
Public Safety
Public Works
Health and Welfare
Culture and Recreation
Total

$ 476,376
2,013,110
612,881
397,673
322,560
$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

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(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):
General Government
Public Safety
Public Works
Health and Welfare
Culture and Recreation
Miscellaneous

Expenditures
$ 93,838
173,669
190,596
176,400
109,280
41,160
$784,943

Encumbrances
$ 94,752
173,356
190,512
173,124
108,927
41,563
$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 governmentwide 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 governmentwide 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
Tax Anticipation Notes Payable
Expenditures (Interest on tax
anticipation notes)

$ 995,600
375,000 (see Chapter 2)
8,400

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Due to Federal Government
Due to State Government
Total amount paid

1,068,400
361,690
$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:
Licenses and permits
Intergovernmental
Charges for Services
Miscellaneous
Total
Appropriations:
General Government
Public Safety
Public Works
Health and Welfare
Culture and Recreation

Decreases
$ 5,000

Increases
$ 5,000

5,000
$10,000

10,000
$15,000
$22,000
3,500
15,000
5,500

$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.

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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 governmentwide 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 governmentwide 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.

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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.
To close the temporary accounts, 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 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 should first print the pre-closing version of these ledgers for year
2014 from the [Reports] menu.

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At year-end, an analysis by the city’s finance department determined the
following constraints on resources in the General Fund. Prepare the appropriate
journal entry in the General Fund to reclassify amounts between Fund Balance—
Unassigned and the fund balance accounts corresponding to the constraints shown
below. (Note: You should consider the beginning of year balances in fund
balance accounts in calculating the amounts to be reclassified.)
Account
Fund Balance—Restricted—
Public Safety
Fund Balance—Committed—
Public Works
Fund Balance—Assigned—
Culture and Recreation

Amount
$15,000
29,700
56,800

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, 2014. Use Excel to
prepare in good form a balance sheet for the General Fund as of December 31, 2014.
Follow the format shown in Illustration 4-3 of Reck, Lowensohn, and Wilson,
Accounting for Governmental and Nonprofit Entities, 16th edition textbook (hereafter
referred to as “the textbook”). Alternatively, you can click on [Reports] to 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 subsidiary ledger account balances for the year 2014. 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, 2014. (See
Illustration 4-4 in the textbook for an example format.)
d. Use the Excel worksheet of the General Fund pre-closing subsidiary ledger account
balances created in part c above to prepare in good form a schedule of revenues,
expenditures, and changes in fund balance—budget and actual for the General Fund
for the year ended December 31, 2014. (See Illustration 4-5 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

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part d of this problem. (In Chapter 4 below Illustration 4-5, see discussion and
example which compares Illustrations 4-4 and 4-5.)
[Note: File the printouts of all your exported or printed documents 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.]