Chapter 9 Adjusting and Closing Entries for Governmental Activities, Government-wide Level; Preparation of Government-wide and Major Fund Financial Statements

1. Prior to preparing financial statements at the end of FY 2020, it is necessary to record depreciation expense for the year for governmental activities at the government-wide level.

Based on general capital assets assigned to specific functions, depreciation expense related to equipment and infrastructure is allocated to functions as shown below:

Equipment Infrastructure

General Government $ 53,320

Public Safety 213,408

Public Works 138,715 $ 98,620

Health and Welfare 53,320

Culture and Recreation 74,357

Totals $533,120 $ 98,620

In addition, depreciation expense for buildings in the amount of $188,900 is allocated to functions according to the percentage of total floor space of buildings used by each function. The Public Works director has provided the following information for the current year:

Percentage of Building

Floor Space Used

General Government 20%

Public Safety 35

Public Works 22

Health and Welfare 10

Culture and Recreation 13

Total 100%

Required: [Para. 9-a] Record depreciation expense for the year 2020 in the governmental activities general journal at the government-wide level. Verify accuracy of the adjusting entries and post to the general ledger by clicking [Post entries].

b. Closing Entries. Although closing entries were made in each fund in Chapters 4 through 6 of this cumulative problem, they have not yet been recorded at the government-wide level.

Required: Record the journal entries required on December 31, 2020, to close all temporary accounts for governmental activities at the government-wide level. These entries should also recognize changes in the accounts Net PositionNet Investment in Capital Assets, Net PositionRestricted for Public Safety (see General Fund), Net PositionRestricted for Capital Projects (see Capital Projects Fund to calculate net position), and Net PositionRestricted for Debt Service (see Debt Service Fund to calculate net position). (Note: Be sure to deduct accrued interest on long-term debt in calculating the December 31, 2020 balance of Net PositionRestricted for Debt Service. If accrued interest is greater than net position there is no restriction on net position.) For each account to be closed or reclassified, be sure to click on the checkbox for [Closing entry] to select it. The [Closing Entry] checkbox appears next to the [Add credit] field. Post the closing entries to the general ledger by clicking on [Post entries].

3. Use the exportable trial balances used in Chapters 2 through 7 of this problem and export the pre-closing trial balance and post-closing trial balance for governmental activities to prepare required government-wide, governmental fund financial statements, and reconciliations that the City of Smithville must present for its basic financial statements to be in conformity with generally accepted accounting principles. (See Illustrations 9-3 through 9-8 and A2-1 through A2-9 of the Reck, Lowensohn, and Neely textbook for examples of these statements.) We recommend that you use Excel to prepare these financial statements. Since the Solid Waste Disposal Fund is the only fund in the proprietary funds category, you may reprint the statement of net assets; statement of revenues, expenses, and changes in net assets; and the statement of cash flows prepared for the Solid Waste Disposal Fund as the required statements for the proprietary fund basic financial statements, with appropriate changes to the titles of the statements. The information for the Solid Waste Disposal Fund can also be used to complete the Business-type Activities columns of the government-wide financial statements.

[Notes: The City of Smithville is a primary government and has no other organizations for which it is accountable as component units. Also, the FY 2021 financial information for the Street Improvement Debt Service Fund is not included in any of the basic financial statements you are preparing, as the statements you are preparing pertain only to FY 2020.]