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. Regardless of the method you choose, we recommend that you refer to

the illustrative journal entries in Chapter 4 of the Reck and Lowensohn textbook (17th

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 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 $ 98,453

Public Safety 183,259

Public Works 217,675

Health and Welfare 174,469

Culture and Recreation 108,927

Miscellaneous 41,563

Total $824,346

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 $5,584,052

for collections from the following receivables and cash revenues, as indicated:

Current Property Taxes $1,561,535

Delinquent Property Taxes 335,000

Interest and Penalties Receivable on Taxes 34,270

Due from Other Funds/Internal Receivables 12,000

Due from State Government 165,000

Revenues: (total: $3,476,247)

Sales Taxes 1,981,203

Licenses and Permits 601,314

Fines and Forfeits 410,660

Intergovernmental 160,000

Charges for Services 231,820

Miscellaneous 91,250

Total $5,584,052

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 revenue classifications:

General Fund Governmental Activities

Sales Taxes General RevenuesTaxesSales

Licenses and Permits Program RevenuesGeneral Government

Charges for Services

Fines and Forfeits Program RevenuesGeneral Government

Charges for Services

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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in

whole or part.

21

Intergovernmental Program RevenuesPublic SafetyOperating

Grants and Contributions

Charges for Services Program RevenuesGeneral Government

Charges for Services, $143,850

Program RevenuesCulture and Recreation

Charges for Services, $87,970

Miscellaneous General RevenuesMiscellaneous

4. [Para. 4-a-4] Additional interest and penalties were accrued on delinquent

property taxes in the amount of $2,840, of which 10 percent was estimated to be

uncollectible.

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 $4,403,038. Of that

amount, $572,395 was withheld for employees' federal income taxes; $660,456

for federal payroll taxes; $190,798 for employees state income taxes; $220,152

for retirement funds administered by the state government; and the remaining

$2,759,237 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 $ 550,376

Public Safety 2,381,644

Public Works 690,481

Health and Welfare 431,673

Culture and Recreation 348,864

Total $4,403,038

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] 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 $ 94,776 $ 94,752

Public Safety 175,406 175,620

Public Works 194,408 194,512

Health and Welfare 172,872 173,002

Culture and Recreation 108,187 108,150

Miscellaneous 41,160 41,563

$786,809 $787,599

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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in

whole or part.

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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 $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). Expenditures charged to the miscellaneous appropriation should be

recorded in this case as General Government expenses at the government-wide

level.

7. [Para. 4-a-7] During FY 2017, the City of Smithville received notification that

the state government would send $115,000 to it at the beginning of the next fiscal

year. Based on the citys definition of available for use, the city considers the

funds available to use for Public Safetys operating activities 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 governmentwide

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 $2,622,090 during 2017.

These checks were in payment of the following items:

Vouchers Payable $ 995,600

Due to Other Funds/Internal Payables 6,400

Due to Federal Government 1,218,400

Due to State Government 401,690

Total amount paid $2,622,090

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

Allowance for Uncollectible Current Taxes account, were both reclassified as

delinquent.

Required: Record these reclassifications in the General Fund and governmental

activities journals.

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

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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in

whole or part.

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Estimated Revenues:

Decreases Increases

TaxesSales $ 20,000

Charges for Services $ 5,000

Total $ 5,000 $ 20,000

Appropriations:

Public Works $ 3,200

Health and Welfare 1,750

Culture and Recreation $ 2,000

Miscellaneous 5,000

$ 7,000 $ 4,950

Estimated Other Financing Uses:

Interfund Transfer Out $ 10,000

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.)

11. [Para. 4-a-11] Interest and penalties receivable on delinquent taxes was increased

by $11,000; $1,000 of this was estimated as uncollectible.

Required: Record this transaction in the General Fund and governmental

activities journals.

12. [Para. 4-a-12] Services received by the General Government function of the

General Fund from the Solid Waste Disposal Fund amounted to $18,200 during

the year. Of this amount, $15,400 was paid in cash and $2,800 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.

13. [Para. 4-a-13] 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.

2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or

distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in

whole or part.

24

Required: Record this transaction in the General Fund and governmental

activities journals.

14. [4-a-14] In December 2017, the General Fund transferred $10,000 to the Street

Improvement Bond Debt Service Fund to assist with an interest payment due on

January 1, 2018.

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. Do not record this transaction in the Street Improvement Bond

Debt Service Fund until instructed to do so in Chapter 6 of this case.

15. [4-a-15] Adjusting Entry. A physical count of consumable supplies at year-end

showed an ending balance of $67,420, an increase of $1,420 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-6. 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 BalanceNonspendableInventory of

Supplies accounts to the correct balances and the governmental activities journal

to adjust the ExpensesPublic 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.

16. Closing Entry. Following the instructions in the next paragraph, prepare and post

the necessary entries to close the Estimated Revenues, Appropriations, and

Estimated Other Financing Uses accounts to Budgetary Fund Balance, and

Revenues, Expenditures, and Other Financing Uses 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.

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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in

whole or part.

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To close the temporary accounts, you must click on the check mark for [Closing