4. [Para. 5a-4] A contract for architectural services was signed at an estimated
amount of $350,000 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. 5a-5] Legal and other capitalizable costs of the bond issue were vouchered
in the amount of $165,000.
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. 5a-6] Preliminary plans were received (related to the contract signed in
paragraph 5a-4) for which architectural fees of $103,000 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. 5a-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. 5a-8] Vouchers payable were recorded in the amount of $240,000 for the
final architectural plans and specifications for the construction project (see para.
5a-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. 5a-9] The 90-day notes matured, paying $37,500 in interest (see para. 5a-
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.
10. [Para. 5a-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. 5a-11] The contractor’s billing (see para. 5a-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. 5a-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. 5a-13] Furniture and equipment for the annex were ordered at an estimated
total cost of $475,000.
Required: Record this transaction in the City Hall Annex Construction Fund. It
has no effect on the governmental activities general journal.
14. [Para. 5a-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. 5a-15] After final inspection, a final payment was made to the contractor,
including the amount retained in para. 5a-11.
Required: Record this transaction in both the City Hall Annex Construction
Fund and governmental activities general journals.
16. [Para. 5a-16] Furniture and equipment were received (see para. 5a-13) at a total
cost of $475,500. 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. 5a-17] The City Hall Annex Construction Fund paid all outstanding
liabilities on December 31, 2020.
21
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 Buildings
account in governmental activities.
18. [Para. 5a-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 2020 and post them to the fund’s
general ledger. (Note: You must click on the box for [Closing Entry] to
checkmark it; “Closing Entry” checkbox will appear next to the [Add credit]
field for the account being closed. Be sure the checkmark 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.
c. Export the pre-closing trial balance for year 2020 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, 2020. (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.). Save and 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 2020.)
[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.]
Before closing the City of Bingham it is recommended that you save a backup copy of
your work to another location by clicking on [File] and [Save As] for Windows and Mac.
Click on “Export my Project” if you are using the Chromebook version.
22
Chapter 6 Transactions Affecting General Long-Term Liabilities and
Debt Service
The City of Bingham utilizes a single debt service fund to account for the service of all
issues of tax-supported and special assessment long-term debt. As of December 31, 2019,
one issue of tax-supported serial bonds was outstanding.
The post-closing trial balance of the debt service fund as of December 31, 2019, is shown
below. The issue of tax-supported serial bonds issued on October 1, 2019 and
outstanding on December 31, 2019, amounted to $10,000,000. Bonds of this issue in the
amount of $500,000 mature on September 30 of each year, beginning in 2020. This bond
issue bears interest at the annual rate of 2 percent, payable on March 31 and September
30 each year. The cash balance of the debt service fund on December 31, 2019, is
restricted for the repayment of tax-supported bond principal and interest payments, such
as the principal maturing on September 30, 2020, and bond interest due in 2020.
a. Record the following accounts and balances in the debt service fund general journal,
selecting 2019 from the [Year] menu and using para. 6a for the [Add description].
When completed select [Post entries] to post the entries in the general ledgers. (Note:
These opening balances were previously recorded in the governmental activities
general journal in Chapter 2 of this project.)
CITY OF BINGHAM
Debt Service Fund
Trial Balance
As of December 31, 2019
Debits Credits
Cash $ 950,000
Taxes Receivable—Delinquent 85,000
Allowance for Uncollectible Delinquent
Taxes $ 54,000
Interest and Penalties Receivable on Taxes 9,600
Allowance for Uncollectible Interest and
Penalties 960
Deferred Inflows of Resources 39,640
Fund Balance—Restricted 950,000
Totals $1,044,600 $1,044,600
Additional Information:
On January 1, 2020, the City of Bingham sold a 12-year issue of tax-supported serial
bonds to finance the construction and equipping of an annex to City Hall. As
described in Chapter 5 of this cumulative problem, the total amount of bonds issued
on that date was $7,500,000, sold at 101. The issue bears interest at the annual rate of
23
3 percent, payable on January 1 and July 1 of each year; bonds in the amount of
$312,500 will mature on January 1, 2021, and every six months thereafter until
maturity. The premium on these bonds will be amortized using the straight-line
method over 24 periods. Cash for the payment of interest in 2020 will be provided by
the General Fund (see Chapter 4).
Required:
b. Prepare general journal entries, as necessary to record the following transactions in
the debt service fund general journal and, if applicable, in the governmental activities
general journal. Use account titles listed under the drop down [Account] menu. Be
sure the year 2020 is selected from the drop-down [Year] menu and the appropriate
paragraph number shown in bold-face font below is in the [Add description] box.
1. [Para. 6b-1] From the data given about the bond issue already outstanding on
January 1, 2020, and the City Hall Annex Construction Fund bond issue sold on
that date, city officials adopted a legal budget for the fiscal year ended December
31, 2020.
Required: Record the budget for the Bingham Debt Service Fund for year 2020.
Budgetary entries have no effect on the government-wide accounting records.
The budget provides for estimated revenues of $700,000 from property taxes,
$2,000 of interest and penalties on taxes, and $9,000 of earnings on investments.
It also provides for estimated other financing sources for premiums on bonds of
$75,000 and interfund transfers in from the General Fund of $50,000.
Appropriations of $812,500 were provided for the payment of bond principal of
$500,000 maturing on September 30 and $312,500 for bond interest payments due
on March 31, July 1, and September 30, 2020 ([.02 X 6/12 X $10,000,000] + [.03
X 6/12 X $7,500,000] + [.02 X 6/12 X $10,000,000]). (In the Debt Service Fund,
the City opts not to budget for the subsequent year January 1 interest payment.)
2. [Para. 6b-2] Property taxes were levied by the debt service fund in the amount of
$705,000. Of this amount, $5,000 was expected to be uncollectible.
Required: Record these transactions in both the debt service fund and
governmental activities journals.
3. [Para. 6b-3] Cash in the amount of the $75,000 premium on the bonds sold on
January 1, 2020 was received and recorded in the debt service fund.
Required: Record this transaction in the debt service fund. No entry is required
at this time in the governmental activities general journal since the bond issue,
including the related premium and accrued interest, was recorded in the
governmental activities general journal in transaction 5a-1.
24
4. [Para. 6b-4] Temporary investments were purchased in the amount of $500,000.
Required: Record this transaction in both the debt service fund and
governmental activities journals.
5. [Para. 6b-5] Checks were written and mailed to bondholders for interest payable
on March 31, 2020.
Required: Record this transaction in both the debt service fund and
governmental activities journals. In the governmental activities general journal,
debit Accrued Interest Payable for the portion of these amounts expensed on
December 31, 2019, the end of the preceding fiscal year.
6. [Para. 6b-6] Current taxes receivable were collected in the amount of $675,000.
Also, delinquent taxes receivable were collected in the amount of $10,000, along
with Interest and Penalties Receivable on Taxes of $600.
Required: Record these transactions in both the debt service fund and
governmental activities journals. (Remember to recognize revenue in the debt
service fund for the delinquent taxes and interest and penalties collected by
reducing the deferred inflows of resources.)
7. [Para. 6b-7] Interest on temporary investments was received in cash in the
amount of $7,500.
Required: Record this transaction in both the debt service fund and
governmental activities journals.
8. [Para. 6b-8] Temporary investments amounting to $300,000 were sold at par.
Required: Record this transaction in both the debt service fund and
governmental activities journals.
9. [Para. 6b-9] On July 1, the debt service fund received $50,000 from the General
Fund for interest payment on the 3% serial bonds. Checks were written and
mailed to bondholders for the interest payment due July 1, 2020.
Required: Record the transfer in the debt service fund and the interest payment
in both the debt service fund and governmental activities journals. At the
government-wide level, $3,125 was debited for amortization of the premium on
the 3% serial bonds.
10. [Para. 6b-10] Cash to close the City Hall Annex Construction Fund was received
in the amount of $4,000. (See Chapter 5, para. 5a-18). The city council
authorized a budget amendment for this unexpected transfer.
25
Required: Record the budget amendment and transfer in the debt service fund.
This transaction involves two governmental funds, thus it has no effect on the
governmental activities general journal.
11. [Para. 6b-11] On September 30, the debt service fund made the principal and
interest payments associated with the 2% serial bond.
Required: Record this transaction in both the debt service fund and
governmental activities journals.
12. [Para. 6b-12] The uncollected balance of current taxes receivable and the related
estimated uncollectible account were reclassified as delinquent. Property tax
revenues and deferred inflows of resources were adjusted for unavailable
revenues. Interest and penalties of $1,200 were accrued, of which $120 was
estimated to be uncollectible.
Required: Record this transaction in both the debt service fund and
governmental activities journals. In the debt service fund net receivables and
interest and penalties should be also be recorded as deferred inflows of resources,
rather than revenues.
13. [Para. 6b-13] At December 31, 2020, accrued interest expense on the two
outstanding bond issues was recorded in the governmental activities general
journal. Amortization of the premium on the 3% bonds sold was also recorded in
the amount of $3,125.
Required: Record the accrual in the governmental activities journal.
14. Verify the accuracy of all your preceding journal entries in the debt service fund
and governmental activities general journals, then click [Post entries] of each
entity to post the entries to the respective general ledgers. For the debt service
fund only, make the entries needed to close the budgetary and operating statement
accounts at the end of fiscal year 2020 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” checkbox appears next to the [Add credit] field for the account being
closed. Be sure the checkmark 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 post-closing trial balance for year 2020 to an Excel worksheet and use
Excel to prepare a balance sheet for the debt service fund as of December 31, 2020.
(See Illustration 4-4 in the textbook for an example of an appropriate format of a
governmental fund balance sheet.). In addition, print the post-closing trial balance
from the [Reports] drop-down menu.
26
c. Export the pre-closing trial balance for year 2020 to an Excel worksheet and use
Excel to prepare a statement of revenues, expenditures, and changes in fund balance
for the Debt Service Fund for the year ended December 31, 2020. (See Illustration 4–
5 in textbook for an example of the format of a statement of revenues, expenditures
and changes in fund balance.) Print the pre-closing trial balance from the [Reports]
drop-down menu.
d. Prepare in good form a statement of revenues, expenditures, and changes in fund
balances—budget and actual for the Debt Service Fund for the year ended December
31, 2020. (See Illustration 4-6 in the textbook for an example format.)
f. Assuming that the assessed valuation of property within the City of Bingham is
$452,700,000, and the legal general obligation debt limit is 7.5 percent of assessed
valuation, compute the legal debt margin of the city as of December 31, 2020.
Prepare a schedule in good form showing calculation of the legal debt limit, debt
subject to the limit, and debt margin. (Note: There is no requirement stating what
amount of the restricted fund balance must be dedicated to principal versus interest
payment, so in this instance treat the entire amount of restricted fund balance as
restricted for principal when performing your calculations.) (See Illustration 6-3 for
an example).
[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.]
Before closing the City of Bingham it is recommended that you save a backup copy of
your work to another location by clicking on [File] and [Save As] for Windows and Mac.
Click on “Export my Project” if you are using the Chromebook version.
27
Chapter 7 Recording Transactions Affecting the Enterprise Fund and
Business-Type Activities
The city water utility is owned and operated by the City of Bingham. The water utility
was originally constructed and operated by a private corporation, but it was sold to the
city 30 years before the year for which transactions are given. The post-closing trial
balance of the Water Utility Fund, as of December 31, 2019, follows:
CITY OF BINGHAM
Water Utility Fund
Trial Balance
As of December 31, 2019
Debits Credits
Cash $ 526,692
Restricted Cash—Customer Deposits 67,840
Customer Accounts Receivable 181,524
Accumulated Provision for
Uncollectible Accounts $ 5,266
Inventory of Supplies 101,799
Due from Other Funds 22,400
Utility Plant in Service 21,042,463
Accumulated Depreciation—
Utility Plant 4,765,842
Construction Work in Progress 1,402,777
Vouchers Payable 83,541
Customer Deposits 67,840
Accrued Interest Payable 477,510
Revenue Bonds Payable 15,917,000
Bond Discount on Revenue Bonds
Payable 71,720
Net Position—Net Investment in Capital
Assets 1,834,118
Net Position—Unrestricted 266,098
Totals $23,417,215 $23,417,215
Additional information:
The following information is provided about accounts shown on the December 31,
2019, trial balance:
Accrued Interest Payable represents six months’ accrual of interest on 6% revenue
bonds payable. Interest is payable semiannually on January 1 and July 1 of each year.
The Bond Discount is credited every six months for the amortization applicable to the
interest payment period. Amortization is computed by the straight-line method. The
balance of $71,720 is to be amortized over the remaining 20 years of the bond
maturity.
28
Required
a. Open a general journal as of December 31, 2019 for the Water Utility Fund by
entering each of the accounts and amounts shown in the above post-closing trial
balance. Enter 2019 from the dropdown [Year] menu. Each of the account titles will
be found in the drop down [Account] menu in the [Journal] view of the program.
Be sure to enter 7a as your paragraph number in the [Add description] field 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, 2019, and retain it in your cumulative file until
directed by your instructor to submit it.
Entries in this enterprise fund do not have to be 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.
b. Record the following events and transactions, which occurred during the year ended
December 31, 2020. Be sure that 2020 appears in the [Year] menu.
1. [Para. 7b-1] Bond interest accrued and due on January 1, 2020 was paid to holders
of the revenue bonds.
2. [Para. 7b-2] Billings to external customers for water service for the year totaled
$3,124,500. Billings to the City of Bingham General Fund for water service totaled
$50,000.
3. [Para. 7b-3] Collections from customers totaled $3,044,100; $22,400 was also
received from the city’s General Fund.
4. [Para. 7b-4] A $650,000 contract was signed for a construction project expected
to cost $995,000. Water utility employees will complete $360,000 of the project.
5. [Para. 7b-5] Materials and supplies were ordered and received during the period in
the amount of $610,500. The invoices agreed with the purchase orders and
receiving reports and were recorded as vouchers payable. A perpetual inventory
system is used for all materials and supplies.
6. [Para. 7b-6] Payrolls were paid totaling $645,750 for operations; $169,400 for
maintenance; and $170,500 for construction.
7. [Para. 7b-7] Materials and supplies issued during the period amounted to $275,000
29
for operations; $130,000 for maintenance; and $166,000 for construction.
8. [Para. 7b-8] Bond interest due on July 1, 2020 was paid. As part of the journal
entry, 1/40th of the Unamortized Bond Discount on Revenue Bonds Payable should
be amortized.
9. [Para. 7b-9] Interest of $35,000 that was recorded as an expense in 7b–8 was
determined to have been incurred during construction and should be charged to
Construction Work in Progress.
10. [Para. 7b-10] A progress billing for $390,000 was received from the construction
contractor and paid.
11. [Para. 7b-11] Some assets under construction at the start of the year and some
started during the year were completed and placed in service. The costs incurred
on this construction totaled $1,120,750.
12. [Para. 7b-12] Collection efforts were discontinued on bills amounting to $6,150;
the customers owing the bills had paid deposits and interest to the water utility in
the amount of $1,750. (Note: Remember to adjust cash accounts for amounts no
longer restricted.)
13. [Para. 7b-13] Customer deposits and interest thereon amounting to $2,500 were
applied to the final bills of customers discontinuing service. Additional deposits
and interest amounting to $2,950 were refunded by check to customers
discontinuing service. (Note: Remember to adjust cash accounts for amounts no
longer restricted.)
14. [Para. 7b-14] Deposits totaling $7,304 were received from new customers.
15. [Para. 7b-15] Vouchers Payable paid during the year amounted to $352,600 for
operating supplies and $166,000 for materials used in construction, or $518,600 in
total.
16. [Para. 7b-16] Interest paid on customer deposits amounted to $2,154 (charge
Operation Expense). This interest was added to the customer deposit accounts, and
the restricted cash and cash accounts were adjusted.
17. Adjusting entries
[Para. 7b-17a] Depreciation on utility plant was calculated using a straight-line
rate of 2 percent of the beginning gross balance (round charge to the nearest
dollar).
[Para. 7b-17b] The Accumulated Provision for Uncollectible Accounts should
equal $5,820 at year-end.
[Para. 7b-17c] An adjusting entry for accrual of six months’ interest on bonds
payable and amortization of 1/40 of the debt discount using the straight-line basis
was recorded.
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 2020 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 Entry”
appears next to the [Add credit] field. 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 2020, and use
Excel to prepare a statement of net position for the Water Utility Fund as of
December 31, 2020. (See Illustration 7-6 for an example format.)
e. Click on [File>Export] to export a pre-closing trial balance for year 2020, and use
Excel to prepare a statement of revenues, expenses, and changes in net position for
the Water Utility Fund for the year ended December 31, 2020. Interest Expense
should be considered a nonoperating item. (See Illustration 7-7 for an example
format.)
f. Use the post-closing trial balance for year 2019 from Part a of this chapter, the trial
balances from parts d and e above, and Excel to prepare and save a statement of cash
flows for the Water Utility Fund for the year ended December 31, 2020. (See
Illustration 7-8 for an example format.)
[Note: Retain a printout of all worksheets and your financial statements in your
cumulative file until directed by your instructor to turn it in, unless your instructor
specifies computer files electronically.]
Before closing the City of Bingham it is recommended that you save a backup copy of
your work to another location by clicking on [File] and [Save As] for Windows and Mac.
Click on “Export my Project” if you are using the Chromebook version.
31
Chapter 8 Recording Fiduciary Fund Transactions—An Investment
Trust Fund
The city council of the City of Bingham decided in late 2020 to create an investment
pool that would put the city’s investments under professional management. The pool
will be accounted for as an investment trust fund. The name of the fund, when it is
established in early 2021, will be the Investment Pool Fund. The initial participants
in the Investment Pool Fund will be the city’s debt service fund and the Bingham
Consolidated School District (CSD). The pool will be accounted for in accordance
with GASB standards applicable to fiduciary funds; therefore, the city’s debt service
fund assets managed by the investment pool will not be reported in the Investment
Pool Fund financial statements. Unless there is a request for a withdrawal, investment
earnings and changes in the fair value of investments are distributed to participants
only at year-end. During the year, investment earnings are added to an Undistributed
Earnings on Pooled Investments account and changes in fair value are added to or
subtracted from an Undistributed Change in Fair Value of Investments Account.
a. Record the following transactions that occurred during 2021 in the Investment
Pool Fund. Do not forget to click on [Year] to change the date to 2021.
1. [Para. 8a-1] On March 1, 2021, the Investment Pool Fund was formally
established with the receipt of $220,000 in cash from the city’s own debt
service fund, plus receipt from the Bingham CSD of cash bonds having a
market value of $622,000 on this date. The bonds purchased by the Bingham
CSD had a book value of $620,000 on March 1, 2021. The bonds receive
semi-annual interest of 3 percent per annum, on July 1 and January 1 each
year. The CSD’s equity is to also be credited for $3,100, which represents
the two months of interest receivable on the bonds for January and February
2021.
2. [Para. 8a-2] The Investment Pool Fund manager purchased 4.5 percent
bonds on March 1 in the amount of $200,000. Because the bonds pay
interest semi-annually on January 1 and July 1, $1,500 in accrued interest
was also paid. (Note: Interest Receivable on Investments should be debited
for the accrued interest.)
3. [Para. 8a-3] On March 1, the Investment Pool Fund manager also purchased
a 9-month certificate of deposit (CD) for $10,000. The interest rate on the
CD is 2 percent per annum.
4. [Para. 8a-4] On July 1, interest on both bonds in the amount of $13,800
($9,300 and $4,500) was received in cash. (Note: Adjust for accrued
interest.)
32
5. [Para. 8a-5] On November 30, the 9-month CD matured and interest was
received.
6. [Para. 8a-6] On December 31, interest was accrued on bond investments.
7. [Para. 8a-7]. On December 31, the fair value of investments in bonds was
$826,000. (Note: Credit Undistributed Change in Fair Value of Investments
for the increase in fair value.)
8. [Para. 8a-8]. On December 31, the proportionate equities of the city’s debt
service fund and the Bingham CSD were calculated and investment earnings
and changes in fair value of investments were distributed accordingly. In the
journal entries round all calculations to the nearest whole dollar. (Note: You
should complete 8-c below prior to making this journal entry.)
9. [Para. 8a-9]. Subsequent to the distribution of earnings and changes in fair
value, the Bingham CSD withdrew $200,000 to meet certain obligations
coming due. To provide the cash needed for the withdrawal, the Investment
Pool Fund manager sold the 4.5 percent bonds on December 31 for $200,000,
plus interest of $4,500, receiving in total $204,500 from the sale. (Note:
Adjust Interest Receivable on Investments for the interest received.)
b. Post the journal entries for all the preceding transactions then prepare entries to
close the temporary accounts. Be sure and click on the box for [Closing Entries]
to checkmark it; “Closing Entry” checkbox will appear next to the [Add credit]
field for the account being closed. Be sure the checkmark is present for each
account being closed.
c. Prepare a schedule in good form showing the proportionate equities of each of
the Investment Pool Fund’s two participants before the Bingham CSD’s
$200,000 withdrawal on December 31, 2021. Round calculations to the nearest
full percent.
d. Prepare a schedule in good form showing the proportionate equities of each of
the Investment Pool Fund’s two participants after the Bingham CSD’s $200,000
withdrawal on December 31, 2021. Round calculations to the nearest full
percent.
e. Export the post-closing trial balance and prepare a statement of fiduciary net
position for the Investment Pool Fund as of December 31, 2021. (Note: To avoid
a rounding error use a spreadsheet to calculate the proportionate share of each
asset held by the CSD: Asset account*[CSD total equities after withdrawal/Total
equities.] Follow the format of Illustration 8-6.)
33
f. Export the pre-closing trial balance for this fund and prepare a statement of
changes in fiduciary net position for the Investment Pool Fund for the year ended
December 31, 2021. (Note: Follow the format of Illustration 8-7.)
Print and retain all the documents generated in paragraphs c. through f. in your
cumulative folder, unless your instructor requests electronic submission of your
documents.
Before closing the City of Bingham it is recommended that you save a backup copy of
your work to another location by clicking on [File] and [Save As] for Windows and Mac.
Click on “Export my Project” if you are using the Chromebook version.
34
Chapter 9 Adjusting and Closing Entries for Governmental Activities,
Government-Wide Level; Preparation of Government-Wide
and Major Fund Financial Statements
Before the 2020 basic financial statements, both government-wide and fund, can be
prepared for the City of Bingham, you must first record and post adjusting and closing
entries for governmental activities as described below.
a. [Para. 9a] Record depreciation expense for the year 2020 in the governmental
activities general journal at the government-wide level using the following
information. Verify accuracy of the adjusting entries and post to the general ledger
by clicking [Post Entries].
Depreciation Expense Applied to Functions:
General Government $ 705,000
Public Safety 1,409,000
Public Works 528,000
Health and Welfare 351,000
Culture and Recreation 351,000
Total depreciation expense $3,344,000
Depreciation Applicable to Asset Categories (Increases in accumulated
depreciation):
Improvements Other Than
Buildings $ 197,000
Infrastructure 639,000
Buildings 502,000
Equipment 2,006,000
Total depreciation expense $3,344,000
b. [Para. 9b] Provide the journal entries to reclassify the current portion of long-term
debt related to the two serial bonds payable.
c. Although closing entries were made in each governmental fund 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 Net Position—Net Investment in Capital
Assets and Net Position—Restricted for Debt Service. For each account to be closed
or reclassified, be sure the check mark for [Closing Entry] ] is selected for each
account being closed; “Closing Enty” appears next to the [Add credit] field. Post
the closing entries to the general ledger by clicking on [Post entries].
d. Use the exportable trial balances found in Chapters 2 through 7 of this problem, and
the exportable pre-closing trial balance and post-closing trial balance for
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governmental activities, to prepare all government-wide and fund financial statements
that must be presented by the City of Bingham in order for its basic financial
statements to be in conformity with generally accepted accounting principles. (See the
list that follows this paragraph and Illustrations 9-3 through 9-8 and Illustrations 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;
however, your instructor may require that they be prepared manually. Since the Water
Utility Fund is the only fund in the proprietary funds category, you may reprint the
statement of net position, statement of revenues, expenses, and changes in net
position and the statement of cash flows prepared for the Water Utility Fund as the
required statements for the proprietary fund basic financial statements. With suitable
changes in the titles, these statements also represent Business-type Activities in the
government-wide financial statements.
(Note: The City of Bingham 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 Investment Pool 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.)
Government-wide Financial Statements
1. Statement of net position
2. Statement of activities
Fund Financial Statements
1. Balance sheet—governmental funds (with reconciliation of this statement to the
government-wide statement of activities)
2. Statement of revenues, expenditures, and changes in fund balances—
governmental funds (with reconciliation of this statement to the government–
wide statement of activities)
3. Statement of net position—proprietary funds
4. Statement of revenues, expenses, and changes in fund net position—proprietary
funds
5. Statement of cash flows—proprietary funds
Before closing the City of Bingham it is recommended that you save a backup copy of
your work to another location by clicking on [File] and [Save As] for Windows and Mac.
Click on “Export my Project” if you are using the Chromebook version.
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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, 2020, using appropriate ratios such as the ratios included in Illustration
10-4 of the textbook. For purposes of calculating per capita ratios, assume the population
of the City of Bingham is 75,000.
Your written analysis should be addressed to the Honorable Mayor, City Council, and
City Manager of the City of Bingham and should summarize the financial condition of
the city overall and its funds. Be sure also to note significant changes since the end of the
prior year.
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 Bingham. Explain the
rationale for the nature of the audit report (qualified or unmodified) 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—