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 2014. 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 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 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, 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 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 185,259 Public Works 247,675 Culture and Recreation 108,927 Total $640,314 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 $3,469,420 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 125,000 Revenues: (total: $1,403,350) Licenses and Permits 576,920 Fines and Forfeits 423,360 Intergovernmental 168,000 Charges for Services 235,070 Total $3,469,420 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 classifications: General Fund Governmental Activities Licenses and Permits Program RevenuesGeneral Government Charges for Services Fines and Forfeits Program RevenuesGeneral Government Charges for Services Intergovernmental Program RevenuesPublic SafetyOperating Grants and Contributions Charges for Services Program RevenuesGeneral Government Charges for Services, $150,100 Program RevenuesCulture and Recreation Charges for Services, $84,970 4. [Para. 4-a-4] Gross General Fund payrolls for the year totaled $2,259,220. Of that amount, $472,040 was withheld for employees' federal income taxes; $166,070 for employees share of FICA taxes; $171,610 for employees state income taxes; and the balance 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 847,402 Public Works 612,881 Culture and Recreation 322,561 Total $2,259,220 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] The citys share of FICA taxes, $166,070, and the city's contribution of $105,380 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 $271,450 should be allocated in the same proportions as in paragraph 4-a-4 above, rounded to nearest whole dollar: General Government: ($476,376)/$2,259,220 x $271,450 = $57,238 Public Safety: ($847,402/$2,259,220) x $271,450 = $101,817 Public Works: ($612,881/$2,259,220) x $271,450 = $73,639 Culture and Recreation: ($322,561/$2,259,220) x $271,450 = $38,756 6. [Para. 4-a-6] Invoices for some 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 $ 93,838 $ 94,752 Public Safety 173,669 173,357 Public Works 241,996 242,512 Culture and Recreation 109,280 108,927 $618,783 $619,548 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). 7. [Para. 4-a-7] 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, 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. 8. [Para. 4-a-8] Checks were written in the total amount of $2,252,670 during 2014. These checks were in payment of the following items: Vouchers Payable $ 995,600 Due to Federal Government 952,780 Due to State Government 304,290 Total amount paid $2,252,670 Required: Record the payment of these items in both the General Fund and governmental activities general journals. 9. [Para. 4-a-9] 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. 10. [Para. 4-a-10] 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. 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. 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 BalanceUnassigned. 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, expenses, 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 2014 from the [Reports] menu. At year-end, an analysis by the citys 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 BalanceUnassigned 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 Amount Fund BalanceRestricted $15,000 Public Safety Fund BalanceCommitted 29,700 Public Works Fund BalanceAssigned 56,800 Culture and Recreation 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.) 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 balancebudget 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 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 computer files via e-mail.] Before closing the City of Smithville, click on [File], and [Save/Save As] to save your work. Your work is NOT automatically save