whole or part.
39
the year). Apply these rates to the original cost of buildings and equipment as of
December 31, 2016, assuming no residual or salvage value.
9. [Para. 7-b-9] Interest of $4,000 had accrued on the notes payable as of year-end
(see transaction 7-b-2).
10. [Para. 7-b-10] Management decided to increase the allowance for doubtful
accounts by $960 at year-end.
11. 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].
d. 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.
e. 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.
f. 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.]
whole or part.
40
Chapter 8 Recording Transactions Affecting a Fiduciary Fund—a Tax
Agency Fund
The City of Smithville administers a tax agency fund that bills and collects property taxes
levied by the governing bodies of the Smithville Consolidated School District (CSD),
Smith County, and the Smith County Fire Protection District (FPD), in addition to those
levied by the City of Smithville for its General Fund. (Note: Beginning in FY 2018, the
tax agency fund will also account for property tax billing and collection for the City of
Smithville’s debt service fund. That fund will not levy property taxes for FY 2017.) As
permitted by state law, the City of Smithville charges a collection fee of one percent of
all taxes collected for the other governments.
CITY OF SMITHVILLE
Tax Agency Fund
Post-closing Trial Balance
As of December 31, 2016
Account Title Debits Credits
Taxes Receivable for Other Funds and $1,977,075
Governments—Delinquent (including
related interest and penalties)
Due to Other Funds and Governments $1,977,075
Totals $1,977,075 $1,977,075
Required
a. Open a general journal as of December 31, 2016, for the Tax Agency Fund by
entering the two 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 8-a as your paragraph number in the [Transaction
Description] box. 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.
[Note: Entries in this fund are not recorded at the government-wide level.
Fiduciary activity information is reported only in the fiduciary fund statements
and not at the government-wide level.]
b. The following schedule shows the tax rates that have been established by the various
taxing authorities for fiscal year 2017.
41
Tax Rates Applicable to Governments
Served by the Tax Agency Fund
Fiscal Year 2017
(All amounts rounded to next higher dollar)
Tax Rate
(Per $100 Assessed Tax
Governments/Funds of Assessed Valuation) Valuation Levy
City of Smithville:
General Fund $0.55 $314,727,270 $1,731,000
Total city rate and levy $0.55 $1,731,000
Smithville CSD:
General Fund $2.40 $370,931,790 $8,902,363
Debt service fund 0.12 445,119
Total CSD rate and levy $2.52 $9,347,482
Smith County:
General Fund $0.30 $370,931,790 $1,112,796
County Road and Bridge Fund 0.32 1,186,982
Total county rate and levy $0.62 $2,299,778
Smith County FPD:
General Fund $0.95 $155,336,546 $1,475,698
Fire Station Construction Fund 0.30 466,010
Total county FPD rate and levy $1.25 $1,941,708
Grand Total tax rates and levies* $4.94 $15,319,968
* Note: Each property owner will receive a tax bill equal to the tax rates of all taxing
authorities that have jurisdiction over his/her property times the assessed valuation of
his/her property. Shown above are the aggregate taxes levied by each government,
which are also the total amounts billed by the Tax Agency Fund to all taxpayers in
each jurisdiction.
Record the following transactions that occurred during 2017 in the general journal of
the Tax Agency Fund.
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. 8-b-1] On January 2, 2017, the city’s tax administrator mailed annual tax
bills to all property owners in the total amount of $15,319,968 (see preceding
table). The tax administrator maintains a detailed tax ledger to track amounts
billed to and collected from each taxpayer and total amounts applicable to each
fund and government. You need only record the grand total amount shown in
the schedule above in the general journal, as illustrated in Chapter 8 of Reck and
Lowensohn.
42
2. [Para. 8-b-2] Delinquent taxes and related interest and penalties were collected
during the year for the taxing authorities shown below:
Delinquent Interest and
Governments/Funds: Taxes Penalties Total
City of Smithville General Fund $ 335,000 $ 34,270 $ 369,270
Smithville CSD 722,650 57,810 780,460
Smith County 459,980 41,400 501,380
Smith County FPD 162,560 13,050 175,610
Total collected $1,680,190 $146,530 $1,826,720
Required: Record the collections of delinquent taxes and interest and penalties
by recognizing specific liabilities to each fund or government. The 1 percent
collection fee should be deducted from the amounts due to other governments;
the total amount deducted from other governments should be added to the
amount due to the City of Smithville General Fund. (Note: Round all amounts to
the nearest whole dollar.) Make these entries only in the Tax Agency Fund
general journal. The Tax Agency Fund records the total amount of delinquent
taxes and related interest and penalties in the Taxes Receivable for Other Funds
and Governments—Delinquent account. (Note: All cash receipts and collection
fees were recorded in earlier chapters in the journals for the General Fund and
governmental activities at the government-wide level. The collection fees,
though not separately identified, were included in Revenues—Charges for
Services in the General Fund and in Program Revenues—General Government—
Charges for Services in governmental activities.)
3. [Para. 8-b-3] All cash collected in paragraph 8-b-2 was transferred to the other
funds and governments in the amounts calculated, adjusted for collection fees
deducted or added (see Para. 8-b-2).
4. [Para. 8-b-4] Current taxes were collected during the year for the funds and
governments shown below:
Current Taxes
Funds/Governments: Collected
City of Smithville General Fund $ 1,561,535
Smithville CSD 8,412,730
Smith County 2,069,800
Smith County FPD 1,747,540
Total collected $13,791,605
Required: Record the collections of current taxes and recognize specific
liabilities to each fund or government, after deducting the 1 percent collection
fee from other governments and adding the total collection fee to the amount due
the City of Smithville General Fund. Make these entries only in the Tax Agency
Fund general journal.
whole or part.
43
5. [Para. 8-b-5] All cash collected in paragraph 8-b-4 was transferred to the other
funds and governments, adjusted for collection fees deducted or added. (Note:
For simplicity, Chapter 4 of Smithville did not address this collection of fees by
the agency fund.)
6. [Para. 8-b-6] Make the year-end journal entry to reclassify all uncollected
current taxes as delinquent. Add to the receivable amount interest and penalties
of 4 percent on the reclassified amount (round amount to nearest whole dollar).
The interest and penalties portion of the total amount should be debited to Taxes
Receivable for Other Funds and Governments—Delinquent and credited to Due
to Other Funds and Governments. You need only record the aggregate amounts
reclassified in the general journal; the tax administrator will update the detailed
tax ledger records for these reclassifications.
c. Post the journal entries for all the preceding transactions, and then export a post-
closing trial balance for 2017 to Excel. Use the trial balance to prepare a statement of
fiduciary net position for the Tax Agency Fund (for an example of an agency fund,
see the last column of Illustration A2-10 in Appendix A of Chapter 2 of the text).
You should deduct $176,373 of delinquent taxes receivable and related interest and
penalties receivable from the amounts recorded as Taxes Receivable for Other Funds
and Governments—Delinquent. The same amount should be deducted from the
liability account Due to Other Funds and Governments. The city’s General Fund
portion of these account balances must be deducted as only the amounts applicable to
other governments can be reported in a fiduciary fund statement. Taxes receivable
and interest and penalties receivable that are applicable to the city itself were reported
in the General Fund balance sheet that you prepared in Chapter 4 of this project.
[Note: Retain the post-closing trial balance as of December 31, 2017, and the
statement of fiduciary net position in your cumulative folder, unless your
instructor requests electronic submission of your documents, in which case you
will need to save a .pdf version of you trial balances.]
whole or part.
44
Chapter 9 Adjusting and Closing Entries for Governmental Activities,
Government-wide Level; Preparation of Government-wide
and Major Fund Financial Statements
a. Prior to preparing financial statements at the end of FY 2017, 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 $ 44,460
Public Safety 177,840
Public Works 115,596 $ 98,620
Health and Welfare 44,460
Culture and Recreation 62,244
Totals $444,600 $ 98,620
In addition, depreciation expense for buildings in the amount of $209,000 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 2017 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, 2017, to close all
temporary accounts for governmental activities at the government-wide level. These
entries should also recognize changes in the accounts Net Position—Net Investment
in Capital Assets, Net Position—Restricted for Public Safety (see General Fund), Net
whole or part.
45
Position—Restricted for Capital Projects (see Capital Projects Fund to calculate net
position), and Net Position—Restricted 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, 2017 balance of Net Position—Restricted
for Debt Service.) For each account to be closed or reclassified, be sure and click on
the check mark for [Closing Entry] and that “Closing Entries” appears in the
[Transaction Description] box. Post the closing entries to the general ledger by
clicking on [Post Entries].
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.
c. 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 all government-wide and fund financial statements 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 and Lowensohn textbook for examples of these
statements.) We recommend that you use Excel to prepare these financial statements;
however, your instructor may want you to do these manually. 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 2018
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 2017.]
46
Chapter 10 Analysis of Financial Condition (Optional, unless assigned by
your instructor)
Prepare a written evaluation of the City of Bingham’s financial position and condition
as of December 31, 2017. Begin by calculating some of the following ratios found in
Chapter 10 of the textbook:
From Illustration 10-3 From Illustration 10-4
Revenue Measures: Financial Position:
Intergovernmental revenues Unrestricted net position
Debt to assets
Operating Position Measures: Current ratio
Revenues over expenditures
Operating surplus/deficit Financial Performance:
Fund balances Interperiod equity
Liquidity
Financial Capability:
Debt Indicators: Bonded debt per capita
Long-term debt Available legal debt limit
Current liabilities
Debt service
These ratios provide some benchmark information either in the illustrations or in
exercise 10-15, part f. For purposes of calculating per capita ratios, assume the
population of the City of Smithville is 25,000.
Retain a print-out of your evaluation in your cumulative project folder, unless your
instructor specifies submission by e-mail.
Chapter 11 Preparation of Audit Report (Optional, unless assigned)
Prepare the audit report you believe would be appropriate for a certified public
accountant to express on the financial statements of the City of Smithville, assuming
that only generally accepted auditing standards (GAAS) promulgated by the AICPA
apply to the City of Smithville. Explain the rationale for the nature of the audit report
(qualified or unqualified) rendered.
If you have been maintaining a cumulative file, assemble all required printed reports
and financial statements in the proper sequence and turn them in to your instructor.
—The End—