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 2017, the year for which the budget given in
Chapter 3 was recorded. 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
2017. For each of the paragraphs that requires
entries in both the General Fund and governmental activities journals, you can
either record them in both journals on a paragraph-by-paragraph basis or,
alternatively, record all the General Fund journal entries first for all
paragraphs, then complete the governmental activities journal entries for all
paragraphs. If you choose the latter
method, it might be useful to print the General Fund general journal entries to
assist in making the entries in the governmental activities journal. Regardless of the method you choose, we
highly recommend that you refer to the illustrative journal entries in Chapter
4 of the Reck and Lowensohn textbook (17
th edition) for guidance in
making all entries.

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

Before
closing the
City of Smithville, click
on [File], and [Save/Save As] to save your work.
If you close the file by clicking on the [X] box you will be asked if you want to save your changes before
closing.

1. [Para.
4-a-1]
On January 2, 2017, real property taxes were levied for the year in
the amount of $1,731,000. 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 may have 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 183,259

Public Works 217,675

Culture and Recreation 108,927


Total
$608,314

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 $3,399,599 for collections from the following
receivables and cash revenues, as indicated:

Current Property Taxes $1,561,535

Delinquent Property
Taxes 235,000

Interest and Penalties
Receivable on Taxes 34,270

Due from State
Government 165,000

Revenues: (total:
$1,403,794)

Licenses and
Permits 601,314

Fines and Forfeits 410,660

Intergovernmental 160,000

Charges for
Services

231,820

Total $3,399,599

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.)

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

General Fund Governmental
Activities

Licenses and Permits Program Revenues—General Government—

Charges
for Services

Fines and Forfeits Program Revenues—General
Government—

Charges
for Services

Intergovernmental Program Revenues—Public
Safety—Operating

Grants
and Contributions

Charges for Services Program Revenues—General Government—

Charges for Services, $143,850

Program
Revenues—Culture and Recreation—

Charges
for Services, $87,970

4. [Para. 4-a-4]General Fund payrolls for
the year totaled $2,638,220. Of that amount, $395,733 was withheld for
employees’ federal income taxes; $344,623 for federal payroll taxes; $98,933
for employees’ state income taxes; $194,545 for retirement funds administered
by the state government; and the remaining $1,604,386 was paid to employees in
cash. The City of Smithville does not record encumbrances for payrolls. The
payrolls were chargeable against the following functions:

General Government $ 518,022

Public Safety 1,242,447

Public Works 588,947

Culture and Recreation
288,804

Total $2,638,220

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

5. [Para.
4-a-5]
Invoices forsome of the
goods recorded as encumbrances in transaction 4-a-2 were received and vouchered
for payment, as listed below. Related encumbrances were canceled in the amounts
listed below (Select “Elimination” in the drop down
[Transaction Description] menu in the Detail Journal):

Expenditures Encumbrances

General Government $ 94,776 $ 94,752 Public
Safety 175,406 175,620

Public Works 194,408 194,512

Culture and
Recreation
108,187 108,150

$572,777 $573,034

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 $32,340 of the amount charged to the Public Works
function was for a vehicle (debit Equipment for this item at the
government-wide level).

6.
[Para. 4-a-6]
During FY 2017, the City of Smithville received
notification that the state government would send $115,000 at the beginning of
the next fiscal year. Based on the
city’s definition of “available for use,” the city considers the funds available
for Public Safety’s use in the current reporting period. The budget for the current year included this
amount as “Intergovernmental Revenue.”

Required: Record this transaction as a receivable and revenue in the General
Fund and governmental activities journals.
(Note: Select “Accrued Revenue” in the
[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.

7. [Para.
4-a-7]
Checks were written in the total amount of $1,721,571 during
2017. These checks were in payment of
the following items:

Vouchers Payable $ 700,000

Due to Federal
Government 731,506

Due to State
Government
290,065

Total amount paid $1,721,571

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

8. [Para. 4-a-8] Current taxes receivable uncollected at year-end, and
the related Allowance for Uncollectible Current Taxes account, were both
reclassified as delinquent.

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

9. [Para.
4-a-9]
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 as a revenue
transaction.

10.[Para.
4-a-10]
The city’s budget for 2017 was legally amended as follows:

Estimated Revenues:

Decreases Increases

Charges for
Services
$ 5,000

Total $ 5,000 $ 0

Appropriations:

Public Safety $
11,000

Public Works $ 1,600

Chapter 4 Recording Operating Transactions Affecting the General Fund.0/msohtmlclip1/01/clip_image002.png”>Culture and Recreation
37,500

$
11,000
$
39,100

Note: These
amendments decrease the balance of the Budgetary Fund Balance account by
$33,100.

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.)

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.

11. 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.

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 will need
to first save and print the pre-closing version of these ledgers for year 2017
from the
[Reports] menu.

At year-end, an analysis by the city’s
finance department determined the following constraints on fund balances in the
General Fund. Prepare the appropriate
closing/reclassification journal entry in the General Fund to reclassify
amounts between Fund Balance—Unassigned and the fund balance accounts
corresponding to the constraints shown below.
(Note: You should consider the beginning of year balances in fund
balance accounts in calculating the amounts to be reclassified. Be sure the
check mark in the box for
[Closing
Entry]
is showing before closing each individual account.)

Account Ending
Balance

Fund
Balance—Committed—General Government $30,000

Fund
Balance—Restricted—Public Safety 36,000

Fund Balance—Committed—Public Works 12,700

Fund Balance—Assigned—Culture and
Recreation 0

Note:DO
NOT PREPARE CLOSING ENTRIES FOR GOVERNMENTAL ACTIVITIES AT THIS 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, 2017. Use Excel to prepare
in good form a balance sheet for the General Fund as of December 31, 2017. Follow the format shown in Illustration 4-3
of Reck and Lowensohn,
Accounting for
Governmental & Nonprofit Entities, 17th edition
textbook (hereafter
referred to as “the textbook.”)

c. Select [Export]
from the drop down
[File] menu to
create an Excel worksheet of the General Fund pre-closing subsidiary ledger
account balances for the year 2017. 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,
2017. (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, 2017. (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 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 worksheets and your completed financial
statements in your cumulative problem folder until directed by your instructor
to submit them, unless your instructor specifies submission of files electronically.]

Before closing theCity of Smithville, click on [File], and [Save/Save As] to save
your work.
If you close the file by clicking on the [X] box you will be asked if you want to
save your changes before closing.