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 2023, the year for which the budget given in Chapter 3 was recorded. Read all instructions carefully.

1. [Para. 4-a-1] On January 2, 2023, property taxes were levied for the year in the amount of $1,878,700. It was estimated that 1 percent of the levy would be uncollectible.

Required: Record this transaction in both the General Fund and governmental activities journal. Type 4-a-1 as the paragraph number in the [Add 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. For the General Fund you will be directed to the Detail Journal. Select Accrued Revenue in the drop down [Description] menu in the Detail Journal related to the General Fund entry.

1. [Para. 4-a-2] Encumbrances were recorded in the following amounts for purchase orders issued against the appropriations indicated:

General Government $ 193,220

Public Safety 442,900

Public Works 216,632

Health and Welfare 162,045

Culture and Recreation 143,580

Total $1,158,377

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 [Description] menu.

3. [4-a-3] The General Fund transferred $38,750 to the Street Improvement Bond Debt Service Fund to assist with interest payments due on July 1, 2023 and January 1, 2024.

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.

1. [Para. 4-a-4] Cash was received during the year in the total amount of $5,980,222 for collections from the following receivables and cash revenues, as indicated:

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 [Description] menu in the Detail Journal related to the General Fund revenue entries.

5. [Para. 4-a-5] Of the $387,201 in delinquent property taxes collected in transaction 4-a-3, $88,115 had been recorded in the Deferred Inflows of Resources account. Additionally, $7,766 of the interest and penalties collected in 4-a-3 had also been recorded as deferred inflows of resources.

Required: In the General Fund recognize the property tax revenues and the interest and penalties revenues related to the deferred inflows of resources. To do this debit the Deferred Inflows of Resources account and credit related property tax revenues and interest and penalties revenues. Select Previous Deferral in the [Description] menu in the Detail Journal. Under accrual accounting the deferral was not recognized in the governmental activities journal; therefore, there is no need to record a journal entry in the governmental activities journal.

1. [Para. 4-a-6] General Fund payrolls for the year totaled $4,460,212. Of that amount, $936,701 was withheld for employees' federal income taxes; $535,258 for federal payroll taxes; $133,815 for employees state income taxes; $267,629 for retirement funds administered by the state government; and the remaining $2,586,809 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:
2. :

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

1. [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 [Description] menu in the Detail Journal.
2. 

Required: Record the receipt of these goods and services and the related vouchers payable in both the General Fund and governmental activities journals. In the Detail Journal select Goods received for expenditure description. At the government-wide level, you should assume the city uses the consumption inventory method and initially records inventory as expenditure/expense. Thus, at the government-wide level the invoiced amounts above should be recorded as expenses of the appropriate functions, except that $45,095 of the amount charged to the Public Works function was for a vehicle and $39,680 of the amount charged to the Culture and Recreation function was for recreation equipment (debit Equipment for these items at the government-wide level).

8. [Para. 4-a-8] Checks were written in the total amount of $3,076,943 during 2023. These checks were in payment of the following items:

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

1. [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.

Of the amount classified as delinquent it was determined $70,450 would not be collected within 60 days of the fiscal year end and would therefore be unavailable for use in the current period. As a result, the related amount of revenues was reclassified as deferred inflows of resources.

Required: Record the reclassification of the balances in the current taxes receivable account and related allowance for uncollectible account in the General Fund and governmental activities journals.

Reclassify $70,450 of property tax revenue to the Deferred Inflows of Resources account in the General Fund journal only. To accomplish the reclassification of revenue, debit the revenue account and credit deferred inflows of resources. Select Deferral in the [Description] menu in the Detail Journal.

1. [Para. 4-a-10] The citys budget for 2023 was legally amended as follows:

Required: Record the budget amendments in the General Fund general journal only. Budgetary items do not affect the government-wide accounting records. Select Budget Amendment in the [Description] box in the Detail Journal.

11. [Para. 4-a-11] Interest and penalties receivable on delinquent taxes was increased by $8,454; $1,536 of this was estimated as uncollectible and based on past history $2,113 was considered to be unavailable for use in the current fiscal year.

Required: Record this transaction in the General Fund and governmental activities journals. The $2,113 considered unavailable for use is recorded as deferred inflows of resources in the General Fund journal and as revenue in the governmental activities journal.

12. [Para. 4-a-12] Services received by the General Government function of the General Fund from the Solid Waste Disposal Fund amounted to $28,500 during the year. Of this amount, $25,400 was paid in cash and $3,100 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 in 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. [4-a-13] Adjusting Entry. Because the city uses a periodic inventory system a physical count of consumable supplies was taken at year-end showing an ending balance of $60,420, an increase of $1,420 during the year. The city uses the consumption method of accounting for its inventory in the General Fund and at the government-wide level. Recall that inventory purchases were initially recorded as expenditures in the General Fund and as expenses at the government-wide level. Therefore, an increase in inventory requires adjustments to the expenditure and expense accounts of the General Government function.

Required: Prepare the adjusting journal entries in the General Fund journal to adjust General Government expenditures and Inventory of Supplies, and the Fund BalanceNonspendableInventory of Supplies and Fund BalanceUnassigned accounts to the correct balances. In the governmental activities journal adjust the ExpensesGeneral Government and Inventory of Supplies accounts.

Post all journal entries to the 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.

1. Closing Entry. Following the instructions in the next paragraph, prepare and post the necessary entries to close the General Fund Estimated Revenues, Appropriations, and Estimated Other Financing Uses accounts to Budgetary Fund Balance, and Revenues, Expenditures, and Other Financing Uses 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, 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 the box for [Closing Entry] that appears when you [Add new entry]. Closing Entry will appear in the [Add 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 view the pre-closing version of these ledgers for year 2023 from the [Reports] menu.

At year-end, an analysis by the citys 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 BalanceUnassigned and the fund balance accounts corresponding to the constraints shown below. You should consider the beginning of year balances in fund balance accounts when calculating the amounts to be reclassified. Be sure the check mark in the box for [Closing Entry] is showing before closing each individual account.

Estimated Revenues: \begin{tabular}{|c|c|c|} \hline & Decreases & Increases \\ \hline Property Taxes & & $17,500 \\ \hline Interest and Penalties & $22,000 & \\ \hline \end{tabular} Appropriations: \begin{tabular}{lll} General Government & & $8,500 \\ Public Safety & $9,000 \\ Culture and Recreation & $13,000 & \end{tabular} \begin{tabular}{|c|c|c|} \hline & Expenditures & Encumbrances \\ \hline General Government & $191,709 & $191,720 \\ \hline Public Safety & 442,870 & 442,900 \\ \hline Public Works & 206,308 & 206,241 \\ \hline Health and Welfare & 162,020 & 162,045 \\ \hline Culture and Recreation & 141,990 & 142,000 \\ \hline Total & $1,144,897 & $1,144,906 \\ \hline \end{tabular} \begin{tabular}{lr} Vouchers Payable & $1,197,963 \\ Due to Other Funds/Internal Payables & 7,400 \\ Due to Federal Government & 1,473,706 \\ Due to State Government & 397,874 \\ Total amount paid & $3,076,943 \end{tabular} For purposes of the governmental activities entries at the government-wide level accume the followina revenue slaccificatione: 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 2023. 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, Lowensohn, and Neely textbook (19 9th edition) for guidance in making all entries. For each entry affecting budgetary accounts or operating statement accounts, you will be directed to the Detail Journal to allow you to record the appropriate amounts in the detail budgetary or actual accounts, as was the case in Chapter 3 . \begin{tabular}{lr} General Government & $956,254 \\ Public Safety & 1,771,480 \\ Public Works & 656,690 \\ Health and Welfare & 572,370 \\ Culture and Recreation & 503.418 \\ \hline \end{tabular} \begin{tabular}{lr} Receivable Collections: & \\ Current Property Taxes & $1,596,895 \\ Delinquent Property Taxes & 387,201 \\ Interest and Penalties Receivable on Taxes & 34,270 \\ Due from Other Funds/Internal Receivables & 4,600 \\ Due from State Government & 165,000 \\ Cash Collections of Revenues: (total: $3,792,256) \\ Sales Taxes & 1,579,203 \\ Licenses and Permits & 497,960 \\ Fines and Forfeits & 173,590 \\ Intergovernmental & 789,000 \\ Charges for Services & 661,253 \\ Miscellaneous & 91,250 \\ Total & $5,980,222 \end{tabular} \begin{tabular}{lr} Account & Ending Balance \\ Fund Balance-Restricted-Public Safety & $54,000 \\ Fund Balance-Committed-Health and Welfare & 43,000 \\ Fund Balance-Assigned-Culture and Recreation & 0 \end{tabular} Estimated Revenues: \begin{tabular}{|c|c|c|} \hline & Decreases & Increases \\ \hline Property Taxes & & $17,500 \\ \hline Interest and Penalties & $22,000 & \\ \hline \end{tabular} Appropriations: \begin{tabular}{lll} General Government & & $8,500 \\ Public Safety & $9,000 \\ Culture and Recreation & $13,000 & \end{tabular} \begin{tabular}{|c|c|c|} \hline & Expenditures & Encumbrances \\ \hline General Government & $191,709 & $191,720 \\ \hline Public Safety & 442,870 & 442,900 \\ \hline Public Works & 206,308 & 206,241 \\ \hline Health and Welfare & 162,020 & 162,045 \\ \hline Culture and Recreation & 141,990 & 142,000 \\ \hline Total & $1,144,897 & $1,144,906 \\ \hline \end{tabular} \begin{tabular}{lr} Vouchers Payable & $1,197,963 \\ Due to Other Funds/Internal Payables & 7,400 \\ Due to Federal Government & 1,473,706 \\ Due to State Government & 397,874 \\ Total amount paid & $3,076,943 \end{tabular} For purposes of the governmental activities entries at the government-wide level accume the followina revenue slaccificatione: 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 2023. 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, Lowensohn, and Neely textbook (19 9th edition) for guidance in making all entries. For each entry affecting budgetary accounts or operating statement accounts, you will be directed to the Detail Journal to allow you to record the appropriate amounts in the detail budgetary or actual accounts, as was the case in Chapter 3 . \begin{tabular}{lr} General Government & $956,254 \\ Public Safety & 1,771,480 \\ Public Works & 656,690 \\ Health and Welfare & 572,370 \\ Culture and Recreation & 503.418 \\ \hline \end{tabular} \begin{tabular}{lr} Receivable Collections: & \\ Current Property Taxes & $1,596,895 \\ Delinquent Property Taxes & 387,201 \\ Interest and Penalties Receivable on Taxes & 34,270 \\ Due from Other Funds/Internal Receivables & 4,600 \\ Due from State Government & 165,000 \\ Cash Collections of Revenues: (total: $3,792,256) \\ Sales Taxes & 1,579,203 \\ Licenses and Permits & 497,960 \\ Fines and Forfeits & 173,590 \\ Intergovernmental & 789,000 \\ Charges for Services & 661,253 \\ Miscellaneous & 91,250 \\ Total & $5,980,222 \end{tabular} \begin{tabular}{lr} Account & Ending Balance \\ Fund Balance-Restricted-Public Safety & $54,000 \\ Fund Balance-Committed-Health and Welfare & 43,000 \\ Fund Balance-Assigned-Culture and Recreation & 0 \end{tabular}