16
e. Select [Reports, Trial Balances, Post-Closing Trial Balance] and print the trial
balance for 2016 or save the report as a PDF. If printed, retain the printed trial balance
in your personal cumulative folder until the due date assigned by your instructor for
the project. The PDF file can be submitted as directed by your instructor. Also, we
recommend that you save a dated backup file on a removable device, as discussed
previously.
Before closing the City of Bingham, 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.
17
Chapter 3 Recording the Annual Budget
The following budget for the General Fund of the City of Bingham was legally adopted for
the fiscal year ending December 31, 2017.
Estimated Revenues:
Real Property Taxes $6,600,000
Sales Taxes 750,000
Interest and Penalties on Taxes 47,000
Licenses and Permits 480,000
Fines and Forfeits 510,000
Intergovernmental Revenue 525,000
Charges for Services 360,000
Miscellaneous Revenues 225,000
Total Estimated Revenues $9,497,000
Appropriations:
General Government $1,710,000
Public Safety 3,485,000
Public Works 1,735,000
Health and Welfare 965,000
Culture and Recreation 970,000
Miscellaneous 195,000
Total Appropriations $9,060,000
Estimated Other Financing Uses:
Interfund Transfers Out $ 50,000
Required
a. After opening the data file you created for Chapter 2 of this project, record the budget
in the general journal, providing entries in the Detail Journal when directed. Begin by
selecting [General Fund] in the [Current Accounting Entity] drop-down box and
the [Journal] tab. In the [Year] box, be sure to select the year 2017. Enter 3-a in the
[Transaction Description] box. Select “Estimated Revenues” in the drop down
[Account (# – Description)] window. This will take you automatically to the Detail
Journal where you will enter the detail for each estimated revenue source. In the
Detail Journal, select “Budget Authorization” from the drop-down menu for
[Transaction Description].
When you have finished entering the estimated revenue detail information, verify that
the correct balance is shown in the Detail Journal, then click on [Return to General
Journal] and the total estimated revenues will be entered in the general journal
Estimated Revenues control account. Follow the same procedure to record the budget
detail for Appropriations. To complete the budgetary entry credit Estimated Other
18
Financing Uses—Interfund Transfer Out and debit or credit Budgetary Fund Balance
as appropriate to balance the budgetary entry. Note that budgetary entries have no
effect on governmental activities at the government-wide level and thus the budget
information is only recorded in the General Fund.
When you are satisfied you have made the entries correctly, post them to the General
Ledger by clicking on [Post Entries]. Before posting, or after unposting as described
previously, you can edit your journal entries by placing the cursor in the line you want
to edit, then right-clicking and selecting “Edit.” After unposting, any entry can be
edited or deleted, and any omitted entry can be inserted above a highlighted entry.
Note that the “Insert Entry” function will work if you are inserting an entry prior to a
balance sheet account. However, it will not work when inserting an entry prior to any
account that has an associated subsidiary ledger (e.g., estimated revenues,
expenditures).
b. Go to [Reports], print the pre-closing subsidiary ledgers and pre-closing trial balance
for year 2017 from the “Reports” window for retention in your cumulative file until
directed by your instructor to submit them, or submit saved versions of these
documents electronically if directed to do so by your instructor. As of this time, only
the budget has been recorded. This is your last opportunity to print or export these
documents with budget information only. After operating transactions have been
journalized and posted in Chapter 4, subsidiary ledgers and trial balances will contain
both budgetary and operating accounts and balances.
Before closing the City of Bingham, 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.
19
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 Bingham that occurred during
the 2017 fiscal year; 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. 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 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.
1. [Para. 4-a-1] Property taxes were levied in the amount of $6,875,000. It is
estimated that 4 percent of the tax will 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] Tax anticipation notes were issued in the amount of $500,000.
Required: Record the issuance of this note in both the General Fund and
governmental activities general journals.
3. [Para. 4-a-3] Purchase orders, contracts, and other commitment documents were
issued in the following amounts for the following functions:
20
General Government $ 395,000
Public Safety 1,095,000
Public Works 945,750
Health and Welfare 665,725
Culture and Recreation 625,125
Miscellaneous 138,000
Total $3,864,600
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.
4. [Para. 4-a-4] Grant funds of $30,000 recorded as Deferred Inflow of
Resources-Operating Grants and Contributions at the end of FY 2016 were
recognized as revenue when timing requirements were met.
Required: Record the revenue in both the General Fund and governmental
activities general journals by debiting Deferred Inflow of Resources-Operating
Grants and Contributions and crediting Revenue. (This amount was included as
Miscellaneous Revenue in the General Fund and Program Revenues-Culture and
Recreation-Operating Grants at the government-wide level.)
5. [Para. 4-a-5] The General Fund paid $385,000 on the vouchers payable that were
outstanding at the end of FY 2016.
Required: Record the payment of this amount in both the General Fund and
governmental activities general journals.
6. [Para. 4-a-6] The General Fund collected the following amounts in cash:
Current year Real Property Taxes $6,364,000
Delinquent Taxes 468,000
Interest and Penalties Receivable on Taxes 23,860
Sales Taxes 748,000
Licenses and Permits 478,000
Fines and Forfeits 525,000
Intergovernmental Revenues 510,000
Charges for Services 361,000
Miscellaneous Revenues 226,500
Total $9,704,360
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
21
entries.) For governmental activities at the government-wide level, all Licenses
and Permits and Charges for Services were attributable to the General Government
function as Program Revenue. Fines and forfeits were collected by General
Government departments in the amount of $200,000 and by Public Safety
departments in the amount of $325,000. Intergovernmental Revenues should be
credited to “Program Revenues—General Government—Operating Grants and
Contributions.”
7. [Para. 4-a-7] The General Fund paid the $14,300 reported as Due to Other Funds at
the end of FY 2016. This amount was reported as Internal Payables to Business
-type Activities at the government-wide level. (Note: Do not record this transaction
in the Water Utility Fund until instructed to do so in Chapter 7 of this case.)
Required: Record the payment of this amount in both the General Fund and
governmental activities general journals.
8. [Para. 4-a-8] Delinquent taxes receivable in the amount of $26,000 were written
off as uncollectible. Interest and penalties accrued on these taxes in the amount of
$1,300 were also written off.
Required: Record the writeoffs in both the General Fund and governmental
activities general journals.
9. [Para. 4-a-9] General Fund payrolls for the year totaled $5,083,038. Of that
amount, $772,395 was withheld for employees’ federal income taxes; $860,456 for
federal payroll taxes; $290,798 for employees’ state income taxes; $320,152 for
retirement funds administered by the state government; and the remaining
$2,839,237 was paid to employees in cash. The City of Bingham does not record
encumbrances for payrolls. The payrolls were chargeable against the following
functions’ appropriations:
General Government $ 1,300,376
Public Safety 2,331,644
Public Works 790,481
Health and Welfare 311,673
Culture and Recreation 348,864
Total $5,083,038
Required: Make summary journal entries for payroll in both the General Fund and
governmental activities general journals for the year. Expenditures charged to the
miscellaneous appropriation should be recorded in this case as General
Government expenses at the government-wide level.
10. [Para. 4-a-10] Invoices for some of goods and services ordered in transaction 4-a-3
were received and vouchered for later payment. (Select “Elimination” in the drop
down [Transaction Description] menu in the Detail Journal):
22
Actual Estimated
General Government $ 395,940 $ 394,060
Public Safety 1,136,650 1,138,600
Public Works 922,300 927,620
Health and Welfare 661,200 663,600
Culture and Recreation 593,750 597,000
Miscellaneous 88,000 88,000
Totals $3,797,840 $3,808,880
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 for $72,500 of playground equipment ordered by
Culture and Recreation. The equipment meets the city’s threshold for capitalization
(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.
11. [Para. 4-a-11] The General Fund paid vouchers during the year in the amount of
$3,200,000 as well as its liabilities for employees’ federal and state income taxes
withheld and payroll taxes.
Required: Record the payment of these items in both the General Fund and
governmental activities general journals.
12. [Para. 4-a-12] The General Fund transferred $50,000 to the debt service fund so
the debt service fund could make a bond interest payment.
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 debt service fund until instructed to
do so in Chapter 6 of this case.)
13. [Para. 4-a-13] Tax anticipation notes issued by the General Fund were paid at
maturity at the face amount plus interest of $10,000.
Required: Record the payment of these items in both the General Fund and
governmental activities general journals. For the General Fund charge
Miscellaneous for the interest expenditure. At the government-wide level, debit
Expenses—Interest on Tax Anticipation Notes.
23
14. [Para. 4-a-14] The General Fund recorded liabilities of $50,000 to other funds for
services received from the Water Utility Fund during the year. Of this amount,
$39,000 should be charged to Public Safety and $11,000 to General Government.
Required: Record the receipt of these services and the associated 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 Water Utility Fund until instructed to do so in
Chapter 7 of this case.
15. [Para. 4-a-15] The balances in the current taxes receivable and related estimated
uncollectibles accounts were reclassified as delinquent. Interest and penalties of
$56,580 were recorded on the delinquent taxes, of which $10,500 was estimated to
be uncollectible.
Required: Record this transaction and reclassification in the General Fund and
governmental activities journals.
16. [Para. 4 a-16] In view of unexpected revenue and expenditure developments the
city council revised the budgets for the current year as shown below:
Budget Adjustments
Estimated Revenues:
Intergovernmental Revenue $ 15,000 decrease
Fines and Forfeits 15,000 increase
Miscellaneous Revenue 31,500 increase
Appropriations:
Public Safety $ 20,000 decrease
Health and Welfare 10,000 increase
Miscellaneous 50,000 decrease
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.)
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.
17. [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.
24
Because the City of Bingham 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. However, if 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, although
entries are not required in this problem for 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, with the exception of Estimated Other Financing
Uses—Interfund Transfers Out and Other Financing Uses—Interfund Transfers
Out, 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 should first print the
pre-closing version of these ledgers for year 2017 from the [Reports] menu.
At year-end, an analysis by the city’s 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 Balance—Unassigned 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.)
Account Amount
Fund Balance—Assigned—Culture and Recreation $57,650
Fund Balance—Assigned— Health and Welfare 25,000
Fund Balance—Committed—Public Safety 12,300
Fund Balance—Committed—Public Works 33,790
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 or other
worksheet of the General Fund post-closing trial balance as of December 31, 2017.
Use Excel or other spreadsheet software to prepare in good form a balance sheet for
the General Fund as of December 31, 2017. Follow the format shown in
Illustration 4-3 of Reck and Lowensohn, Accounting for Governmental and
Nonprofit Entities, 17th edition textbook (hereafter referred to as “the textbook.”)
Alternatively, you can click on [Reports] to print the post-closing trial balance and
use the printed copy to manually prepare a balance sheet.
25
c. Refer to the General Fund Revenues and Appropriations/Encumbrances/Expenditures
Subsidiary Ledgers found under “Reports” and “Ledgers.” Use Excel or other
spreadsheet software to prepare in good form a statement of revenues, expenditures,
and changes in fund balances for the General Fund for the year ended December 31,
2017. (See Illustration 4-4 in the textbook for an example format.)
d. Refer to the General Fund Revenues and Appropriations/Encumbrances/Expenditures
Subsidiary Ledgers found in part c above to prepare in good form a statement of
revenues, expenditures, and changes in fund balances—budget and actual for the
General Fund for the year ended December 31, 2017. (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. (See example in Chapter 4 of the textbook following Illustration 4–5,
which compares Illustrations 4-4 and 4-5.)
[Note: File the printouts of all your exported or printed documents and your
completed financial statements in your cumulative problem folder until
directed by your instructor to submit them, unless your instructor specifies
submission files electronically.]
Before closing the City of Bingham, 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.
26
Chapter 5 Recording Capital Asset and Capital Project Transactions
City Hall Annex Construction Fund and Governmental Activities at the
Government-wide Level
During fiscal year 2016, the voters of the City of Bingham approved the issuance of 3
percent tax-supported serial bonds in the face amount of $7,500,000 to construct and equip
an annex to the City Hall. The bonds are to mature in blocks of $375,000 every six months
over a 10-year period commencing January 1, 2018.
Required
a. Prepare general journal entries as necessary to record the following transactions in the
general journals of the City Hall Annex Construction Fund and, if applicable, in the
governmental activities general journal at the government-wide level. Do not record
entries at this time in any other affected funds; those entries will be made in later
chapters of this cumulative problem that cover those funds. Use account titles listed
under the drop-down [Account (#-Account Description)] menu. Be sure the year
2017 is selected from the drop-down [Year] menu and the appropriate paragraph
number shown in bold-face font below is in the [Transaction Description] box.
Before closing the City of Bingham, 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. 5-a-1] On the first day of the 2017 fiscal year (January 1, 2017), the bond
issue was sold at 101. Cash in the face amount of the bonds, $7,500,000, was
deposited in the City Hall Annex Construction Fund; the premium was deposited in
the debt service fund, as required by state law.
Required: Record these transactions in the City Hall Annex Construction Fund
and governmental activities journals. (Hint: In addition to recording the liability for
bonds payable in the governmental activities journal, you should record the
premium on the bonds payable [credit Unamortized Premium on Serial Bonds] in
the governmental activities general journal.) Wait until instructed in Chapter 6 to
make the corresponding entry in the debt service fund.
2. [Para. 5-a-2] The city invested $5,000,000 of the bond proceeds in 90-day notes.
Required: Record this transaction in both the City Hall Annex Construction Fund
and governmental activities general journals.
3. [Para. 5-a-3] The City Hall Annex Construction Fund purchased land for the
annex for $500,000. This amount was vouchered.
Required: Record this transaction in both the City Hall Annex Construction Fund
27
and governmental activities general journals. In the governmental activities general
journal at the government-wide level, this purchase should be debited to Land.
(Note: This transaction was not encumbered.)
4. [Para. 5-a-4] A contract for architectural services was signed at an estimated
amount of $325,000 for the design of the City Hall Annex.
Required: Record the encumbrance in the City Hall Annex Construction. This
transaction has no effect at the government-wide level.
5. [Para. 5-a-5] Legal and other capitalizable costs of the bond issue were vouchered
in the amount of $150,000.
Required: Record this transaction in both the City Hall Annex Construction Fund
and governmental activities general journals. (Note: This transaction was not
encumbered.)
6. [Para. 5-a-6] Preliminary plans were received (related to the contract signed in
paragraph 5-a-4) for which architectural fees of $95,000 were vouchered.
Required: Eliminate the encumbrance and record a Vouchers Payable liability in
the City Hall Annex Construction Fund and governmental activities journals, as
appropriate.
7. [Para. 5-a-7] Construction bids were opened and analyzed. A contract was signed
with the firm that submitted the winning bid of $6,000,000. A provision of the
contract permits the city to withhold 5 percent of payment pending final acceptance
of the completed project.
Required: Record the signing of the contract in the City Hall Annex Construction
Fund general journal. This transaction has no effect at the government-wide level.
8. [Para. 5-a-8] Vouchers payable were recorded in the amount of $220,000 for the
final architectural plans and specifications for the construction project (see para.
5-a-4).
Required: Eliminate the remaining encumbrance for the architectural services and
record a Vouchers Payable liability in the City Hall Annex Construction Fund and
governmental activities journals, as appropriate.
9. [Para. 5-a-9] The 90-day notes matured, paying $37,500 in interest (see para.
5-a-2).
Required: Record this transaction in both the City Hall Annex Construction Fund
and governmental activities general journals. The interest should be recorded as
general revenue in the governmental activities journal.
28
10. [Para. 5-a-10] The contractor submitted a billing for $3,000,000. This amount was
recorded as a contract payable.
Required: Record this transaction in both the City Hall Annex Construction Fund
and governmental activities general journals.
11. [Para. 5-a-11] The contractor’s billing (see para. 5-a-10) was paid, less a 5 percent
retained percentage.
Required: Record this transaction in both the City Hall Annex Construction Fund
and governmental activities general journals.
12. [Para. 5-a-12] All pending vouchers were approved and paid.
Required: Record this transaction in both the City Hall Annex Construction Fund
and governmental activities general journals.
13. [Para. 5-a-13] Furniture and equipment for the annex were ordered at an estimated
total cost of $465,000.
Required: Record this transaction in the City Hall Annex Construction Fund. It
has no effect on the governmental activities general journal.
14. [Para. 5-a-14] The contractor completed construction, submitted the final bill, and
requested payment of the balance due. A liability was recorded in the amount of
$3,100,000.
Required: Record this transaction in both the City Hall Annex Construction Fund
and governmental activities general journals. The encumbrance account should be
reduced by the remaining $3,000,000 construction contract balance.
15. [Para. 5-a-15] After final inspection, a final payment was made to the contractor,
including the amount retained in para. 5-a-11.
Required: Record this transaction in both the City Hall Annex Construction Fund
and governmental activities general journals.
16. [Para. 5-a-16] Furniture and equipment were received (see para. 5-a-13) at a total
cost of $465,500. Invoices were vouchered for payment.
Required: Record this transaction in both the City Hall Annex Construction Fund
and governmental activities general journals. This amount exceeds the city’s
capitalization threshold, so Equipment should be debited.
17. [Para. 5-a-17] The City Hall Annex Construction Fund paid all outstanding
liabilities on December 31, 2017.
29
Required: Record this transaction in both the City Hall Annex Construction Fund
and governmental activities general journals. Total construction costs for the City
Hall Annex Construction Project should be capitalized in the Infrastructure account
in governmental activities.
18. [Para. 5-a-18] Remaining cash in the City Hall Annex Construction Fund was
transferred to the debt service fund.
Required: Record this transaction in the City Hall Annex Construction Fund. Do
not record the transfer in the debt service fund until you are instructed to do so in
Chapter 6. This transaction involves two governmental funds, thus it has no effect
on the governmental activities general journal.
19. Verify the accuracy of all your preceding entries in the general journals of the City
Hall Annex Construction Fund and governmental activities at the government-wide
level, then click [Post Entries] of each entity to post the entries to the respective
general ledgers. For the City Hall Annex Construction Fund only, prepare year-end
closing entries for 2017 and post them to the fund’s general ledger. (Note: You
must click on the box for [Closing Entry] to check mark it; “Closing Entry” will
appear in the [Transaction Description] box for the account being closed. Be sure
the check mark is present for each account being closed.) Click [Post Entries] to
post the closing entry. Closing entries will be made in the governmental activities
general journal in Chapter 9 of this cumulative problem. Ignore those entries for
now.
b. Export the pre-closing trial balance for year 2017 to an Excel worksheet to prepare a
statement of revenues, expenditures, and changes in fund balances for the City Hall
Annex Construction Fund for the year ended December 31, 2017. (See Illustration 5-3
in the textbook for an example of the format of a capital projects fund statement of
revenues, expenditures and changes in fund balance.). Print the pre-closing trial
balance from the [Reports] menu. (Note: A balance sheet is not required since the
capital project fund was closed prior to end of FY 2017.)
[Note: Retain all required printouts and your financial statements in your
cumulative folder until directed by your instructor to submit them, unless your
instructor prefers to have files submitted electronically, in which case you will
need to save a .pdf version of your trial balance.]