Chapter 7 Recording Transactions Affecting the Enterprise Fund and Business type Activities The City of Smithville accounts for its solid waste collection and disposal activities in an enterprise fund The balance sheet for the Solid Waste Disposal Fund as of December 31, 2016, appears below CITY OF SMITHVILLE Solid Waste Disposal Fund Post closing Trial Balance As of December 31, 2016 Account Title Debits Credits Cash $ 315,000 Customer Accounts Receivable 117,100 Allowance for Doubtful Accounts $ 6,140 Due from Other Funds 6,400 Inventories 4,060 Land 600,000 Buildings 1,650,000 Accumulated DepreciationBuildings 791,250 Equipment 1,340,400 Accumulated DepreciationEquipment 755,640 Vouchers Payable 45,180 Due to Other Funds 12,000 Accrued Payroll and Fringe Benefits 66,720 Net PositionNet Investment in Capital Assets 2,043,510 Net PositionUnrestricted 312,520 Totals $4,032,960 $4,032,960 Required Open a general journal as of December 31, 2016, for the Solid Waste Disposal Fund by entering each of the accounts and amounts shown in the above post closing trial balance Enter 2016 from the drop down Year menu Each of the account titles will be found in the drop down menu Account ( Description) in the Journal view of the program Be sure to enter 7 a as your paragraph number in the Transaction Description box and enter the appropriate paragraph number for all subsequent journal entries Verify the accuracy of your journal entry and post it to the general ledger by clicking Post Entries Unless your instructor specifies electronic submission, print a post closing trial balance as of December 31, 2016, and retain it in your cumulative file until directed by your instructor to submit it Entries in this enterprise fund are not recorded at the government wide level since enterprise funds and business type activities at the government wide level both use the same (accrual) basis of accounting and same (economic resources) measurement focus Thus, the same information recorded in the accounts of the enterprise fund can also, with only slight modification, be reported as business type activities at the government wide level 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 Record the following events and transactions, which occurred during the year ended December 31, 2017 Be sure that 2017 appears in the Year menu Para 7 b 1 Billings to customers of the Solid Waste Disposal Fund totaled $2,247,532 for the year, including $18,200 billed to City of Smithville departments accounted for in the General Fund For the amount billed to City of Smithville departments you should debit Due from Other Funds Para 7 b 2 Equipment costing $335,000 was purchased on July 1, 2017 Cash in the amount of $135,000 was paid at the time of purchase the vendor accepted revenue anticipation notes in the amount of $200,000 to finance the remainder of the equipment Of this amount, $100,000 of the notes will be payable on July 1, 2018 the other $100,000 will be payable on July 1, 2019 All notes bear interest at the rate of 4 percent per year (Record only the purchase and the related payment of cash and issuance of notes at this time interest will be recorded in a later transaction ) Para 7 b 3 Vouchers for materials and supplies to be used in the operations of the fund were issued in the total amount of $773,500 (debit Inventories) Para 7 b 4 Collections from customers totaled $2,234,545 during 2017 This amount included $21,800 collected from the General Fund (see 7 a balance and 7 b 1 above) Para 7 b 5 Payrolls and fringe benefits paid in cash during the year totaled $1,221,724 including the amount accrued at December 31, 2016 Para 7 b 6 Accrued salaries and fringe benefits at year end amounted to $66,053 Inventories of materials and supplies used in operations during the year amounted to $773,480, at cost Para 7 b 7 Vouchers in the amount of $778,600 and the amount Due to Other Funds were paid during the year Para 7 b 8 The city uses the following annual straight line depreciation rates Buildings, 2 5 percent Equipment, 10 percent (equipment purchased during the year need not be depreciated because it was not held for more than 6 months of the year) Apply these rates to the original cost of buildings and equipment as of December 31, 2016, assuming no residual or salvage value Para 7 b 9 Interest of $4,000 had accrued on the notes payable as of year end (see transaction 7 b 2) Para 7 b 10 Management decided to increase the allowance for doubtful accounts by $960 at year end After verifying the accuracy of all entries for the preceding transactions, post amounts to the general ledger accounts by clicking Post Entries c Prepare entries to close all operating statement accounts at the end of 2017 and to reclassify the two net position accounts, as appropriate Be sure that the check mark for Closing Entry is on for each account being closed and that Closing Entries appears in the Transaction Description box When completed, post the closing entries to the general ledger by clicking Post Entries Click on File Export to export a post closing trial balance for year 2017, and use Excel to prepare a statement of net position for the Solid Waste Disposal Fund as of December 31, 2017 Click on File Export to export a pre closing trial balance for year 2017, and use Excel to prepare a statement of revenues, expenses, and changes in net position for the Solid Waste Disposal Fund for the year ended December 31, 2017 Interest expense should be considered a nonoperating item Use the post closing trial balance for year 2016 from Part a of this chapter and the trial balances from parts d and e above to prepare and save an Excel version statement of cash flows for the Solid Waste Disposal Fund for the year ended December 31, 2017 Note Retain a printout of all worksheets and your financial statements in your cumulative file until directed by your instructor to submit them, unless your instructor specifies that you should submit computer files electronically, in which case you will need to save a pdf version of you trial balances

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Chapter 7 Recording Transactions Affecting the Enterprise Fund and Business-type Activities The City of Smithville accounts for its solid waste collection and disposal activities in

Chapter 7 Recording Transactions Affecting the Enterprise Fund and Business-type Activities

The City of Smithville accounts for its solid waste collection and disposal activities in an enterprise fund. The balance sheet for the Solid Waste Disposal Fund as of December 31, 2016, appears below.

CITY OF SMITHVILLE

Solid Waste Disposal Fund

Post-closing Trial Balance

As of December 31, 2016

Account Title Debits Credits

Cash $ 315,000

Customer Accounts Receivable 117,100

Allowance for Doubtful Accounts $ 6,140

Due from Other Funds 6,400

Inventories 4,060

Land 600,000

Buildings 1,650,000

Accumulated DepreciationBuildings 791,250

Equipment 1,340,400

Accumulated DepreciationEquipment 755,640

Vouchers Payable 45,180

Due to Other Funds 12,000

Accrued Payroll and Fringe Benefits 66,720

Net PositionNet Investment in Capital Assets 2,043,510

Net PositionUnrestricted 312,520

Totals $4,032,960 $4,032,960

Required

Open a general journal as of December 31, 2016, for the Solid Waste Disposal Fund by entering each of the accounts and amounts shown in the above post-closing trial balance. Enter 2016 from the drop-down [Year] menu. Each of the account titles will be found in the drop down menu [Account (# - Description)] in the [Journal] view of the program. Be sure to enter 7-a as your paragraph number in the [Transaction Description] box and enter the appropriate paragraph number for all subsequent journal entries. Verify the accuracy of your journal entry and post it to the general ledger by clicking [Post Entries]. Unless your instructor specifies electronic submission, print a post-closing trial balance as of December 31, 2016, and retain it in your cumulative file until directed by your instructor to submit it.

Entries in this enterprise fund are not recorded at the government-wide level since enterprise funds and business-type activities at the government-wide level both use the same (accrual) basis of accounting and same (economic resources) measurement focus. Thus, the same information recorded in the accounts of the enterprise fund can also, with only slight modification, be reported as business-type activities at the government-wide level.

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.

Record the following events and transactions, which occurred during the year ended December 31, 2017. Be sure that 2017 appears in the [Year] menu.

[Para. 7-b-1] Billings to customers of the Solid Waste Disposal Fund totaled $2,247,532 for the year, including $18,200 billed to City of Smithville departments accounted for in the General Fund. For the amount billed to City of Smithville departments you should debit Due from Other Funds.

[Para. 7-b-2] Equipment costing $335,000 was purchased on July 1, 2017. Cash in the amount of $135,000 was paid at the time of purchase; the vendor accepted revenue anticipation notes in the amount of $200,000 to finance the remainder of the equipment. Of this amount, $100,000 of the notes will be payable on July 1, 2018; the other $100,000 will be payable on July 1, 2019. All notes bear interest at the rate of 4 percent per year. (Record only the purchase and the related payment of cash and issuance of notes at this time; interest will be recorded in a later transaction.)

[Para. 7-b-3] Vouchers for materials and supplies to be used in the operations of the fund were issued in the total amount of $773,500 (debit Inventories).

[Para. 7-b-4] Collections from customers totaled $2,234,545 during 2017. This amount included $21,800 collected from the General Fund (see 7-a balance and 7-b-1 above).

[Para. 7-b-5] Payrolls and fringe benefits paid in cash during the year totaled $1,221,724 including the amount accrued at December 31, 2016.

[Para. 7-b-6] Accrued salaries and fringe benefits at year-end amounted to $66,053. Inventories of materials and supplies used in operations during the year amounted to $773,480, at cost.

[Para. 7-b-7] Vouchers in the amount of $778,600 and the amount Due to Other Funds were paid during the year.

[Para. 7-b-8] The city uses the following annual straight-line depreciation rates: Buildings, 2.5 percent; Equipment, 10 percent (equipment purchased during the year need not be depreciated because it was not held for more than 6 months of the year). Apply these rates to the original cost of buildings and equipment as of December 31, 2016, assuming no residual or salvage value.

[Para. 7-b-9] Interest of $4,000 had accrued on the notes payable as of year-end (see transaction 7-b-2).

[Para. 7-b-10] Management decided to increase the allowance for doubtful accounts by $960 at year-end.

After verifying the accuracy of all entries for the preceding transactions, post amounts to the general ledger accounts by clicking [Post Entries].

c. Prepare entries to close all operating statement accounts at the end of 2017 and to reclassify the two net position accounts, as appropriate. Be sure that the check mark for [Closing Entry] is on for each account being closed and that Closing Entries appears in the [Transaction Description] box. When completed, post the closing entries to the general ledger by clicking [Post Entries].

Click on [File]-[Export] to export a post-closing trial balance for year 2017, and use Excel to prepare a statement of net position for the Solid Waste Disposal Fund as of December 31, 2017.

Click on [File]-[Export] to export a pre-closing trial balance for year 2017, and use Excel to prepare a statement of revenues, expenses, and changes in net position for the Solid Waste Disposal Fund for the year ended December 31, 2017. Interest expense should be considered a nonoperating item.

Use the post-closing trial balance for year 2016 from Part a of this chapter and the trial balances from parts d and e above to prepare and save an Excel version statement of cash flows for the Solid Waste Disposal Fund for the year ended December 31, 2017.

[Note: Retain a printout of all worksheets and your financial statements in your cumulative file until directed by your instructor to submit them, unless your instructor specifies that you should submit computer files electronically, in which case you will need to save a .pdf version of you trial balances.]