9. [Para. 5-a-9] In July 2020, the contractor for the Elm Street Project reported that
the project was one-half completed and requested a progress payment of
10. [Para. 5-a-10] Additional sales taxes were collected in the amount of $320,000
11. [Para. 5-a-11] On December 10, 2020 the Elm Street project was completed and
the contractor for the project requested a final payment of $1,200,000. This
12. [Para. 5-a-12] The city submitted a $190,000 purchase order for design plans and
13. [Para. 5-a-13] The city engineer approved the final construction on the Elm
Street Project, and the city paid the retained percentage (Transactions 9 and 11) to
14. Verify the accuracy of all your preceding entries in the Street Improvement Fund
and governmental activities general journals, then click [Post entries] of each
entity to post the entries to the respective general ledgers. For the Street
Improvement Fund only, prepare year-end closing entries for 2020 and post them
21
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] dropdown menu.
d. 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
Click on “Export my Project” if you are using the Chromebook version.
Chapter 6 Transactions Affecting General Long-term Liabilities and
Debt Service
The City of Smithville created a Street Improvement Bond Debt Service Fund to be used
thereafter until all the bonds issued in 2020 have been retired. Thus, these bonds are
deferred serial bonds as discussed in Chapter 6 of the textbook. Make entries as
instructed in the following paragraphs.
Bond covenants related to this bond issue require the city to levy property taxes sufficient
to make principal and interest payments until the bonds have been retired. The city
2021. As the bond issue did not occur until April 2020, the city will not levy debt service
property taxes until next year.
1. [Para. 6-a-1] In early April 2020, an amendment to the annual budget for 2020
was approved by the city council for inflows and outflows in the Street
Improvement Bond Debt Service Fund related to the bond issue. The debt service
fund budget amendment provides for estimated other financing sources of
23
2. [Para. 6-a-2] On April 1, 2020, the premium and accrued interest on bonds sold
were received by the Street Improvement Bond Debt Service Fund. (See
3. [Para. 6-a-3] The July 1, 2020, interest payment was made in the amount of
$25,000.
Required: Record this transaction in both the debt service fund and the
4. [Para. 6-a-4] Make the required journal entry in the governmental activities
general journal to accrue six months of interest payable on the 2.5% deferred
5. [Para. 6-a-5] To permit payment of the $25,000 interest payment due on January
1, 2021, the Street Improvement Bond Debt Service Fund received $17,500 from
6. Verify the accuracy of journal entries, including dates and paragraph numbers,
and, if you have not already done so, post all entries to the general ledger of both
the Street Improvement Bond Debt Service Fund and governmental activities by
clicking on [Post entries]. Make the entries needed to close the budgetary and
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in
whole or part.
24
operating statement accounts at the end of fiscal year 2020. Budgetary and
operating statement accounts should be closed to Budgetary Fund Balance and
Fund Balance—Restricted, as appropriate. Make this entry only in the Street
Improvement Bond Debt Service Fund journal. Be sure that for each account
being closed that the check mark for [Closing Entry] is selected. The “Closing
Entry” appears next to the [Add credit] field. (Note: Closing entries for
governmental activities at the government-wide level will be made in Chapter 9 of
this cumulative problem.)
b. Go to [File>Export] and export Excel files of the pre-closing and post-closing trial
balances for the Street Improvement Bond Debt Service Fund as of December 31,
2020, and use them to prepare a balance sheet; statement of revenues, expenditures,
and changes in fund balances; schedule of revenues, expenditures, and changes in
fund balances—budget and actual for the Street Improvement Bond Debt Service
Fund. The format for the statements will be similar to that of the combing statements
in Illustrations 6-8, 6-9, and 6-10 of the textbook.
legal debt limit, debt outstanding subject to the limit, and the legal debt margin of the
city as of December 31, 2020, rounding the debt limit to the nearest whole dollar (see
Illustration 6-3 for an example). A note at the bottom of the schedule should disclose
the bonds authorized but unissued, as described in the introductory paragraph of
Chapter 5 of the City of Smithville cumulative problem. This will inform the reader
amount of $200,000 will mature on January 1, 2022, and in the same amount at each
interest payment date thereafter until all bonds of the 2021 issue have been retired.
To give you some additional practice on accounting for a debt service fund record the
following events and transactions that are presumed to occur in fiscal year 2021. The
transactions are to be recorded in the Street Improvement Bond Debt Service
1. [Para. 6-d-1] On January 2, 2021, the Street Improvement Bond Debt Service
Fund budget for 2021 is legally adopted. The budget should provide for estimated
property tax revenue of $640,000, of which $120,000 will be invested to
2018. The property tax levy will also provide resources to help pay interest of
$107,500 due on January 1, 2022 ($25,000 interest on the 2.5% deferred serial
bonds and $82,500 on the 2.75% serial bonds). No premium or accrued interest on
3. [Para. 6-d-3] Bond interest due on January 1, 2021 in the amount of $25,000 was
paid for the 2.5% deferred serial bonds.
4. [Para. 6-d-4] On March 1, 2021, the Street Improvement Debt Service Fund
received $90,000 of premium from the sale of the additional $6,000,000 street
improvement bonds (see first paragraph of section d.), plus $27,500 for two
months of accrued interest ($117,500 in total). The $117,500 of premium and
26
5. [Para. 6-d-5] By June 30, 2021, property taxes had been collected in the amount
6. [Para. 6-d-6] Bond interest of $25,000 due July 1, 2021 on the deferred serial
7. [Para. 6-d-7] During the second half of 2021, property taxes were collected in the
amount of $290,000.
At year-end, the uncollected amount of current property taxes receivable and
8. [Para. 6-d-8] Of the amount classified as delinquent in 6-d-7, it was determined
10. After verifying the accuracy of the preceding entries, post the amounts to the
general ledger accounts by clicking [Post entries]. Prepare closing entries for
the Street Improvement Bond Debt Service Fund as of December 31, 2021. For
each account closed, be sure to select the checkbox for [Closing Entry]. The
© 2019 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or
distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in
whole or part.
27
[Closing Entry] checkbox appears next to the [Add credit] field. Post the closing
entries to the general ledger by clicking [Post entries].
e. Export the post-closing trial balance (click on [File>Export]) for year 2021 to Excel
to prepare a balance sheet for the Street Improvement Bond Debt Service Fund as of
December 31, 2021.
f. Export a pre-closing trial balance for year 2021 to Excel to prepare a statement of
revenues, expenditures, and changes in fund balance for the Street Improvement
Bond Debt Service Fund for the year ended December 31, 2021.
g. Use the same trial balance exported in item f above to prepare a schedule of revenues,
expenditures, and changes in fund balance—budget and actual for the Street
Improvement Bond Debt Service Fund for the year ended December 31, 2021.
[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 files electronically, in which case you will
need to save a .pdf version of your trial balance.]
28
Solid Waste Disposal Fund
Post-closing Trial Balance
As of December 31, 2019
Account Title Debits Credits
Cash $ 265,000
Due to Other Funds 12,000
Accrued Payroll and Fringe Benefits 166,720
Net Position—Net Investment in Capital Assets 2,043,510
Net Position—Unrestricted 212,520
Totals $4,032,960 $4,032,960
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
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in
whole or part.
29
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. 7-b-1] Billings to customers for Charges for Services of the Solid Waste
2. [Para. 7-b-2] Equipment costing $395,300 was purchased on July 1, 2020. Cash
in the amount of $195,300 was paid at the time of purchase; the vendor accepted
3. [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 $896,320 (debit Inventories).
b-1 above).
6. [Para. 7-b-6] Accrued salaries and fringe benefits at year-end amounted to
7. [Para. 7-b-7] Vouchers in the amount of $848,600 and the amount Due to Other
Funds were paid during the year.
8. [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
9. [Para. 7-b-9] Interest of $3,500 had accrued on the notes payable as of 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 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 Entries”
trial balances from parts d and e above to prepare and save an Excel version
statement of cash flows (see Illustration 7-8 in textbook) for the Solid Waste Disposal
Fund for the year ended December 31, 2020.
[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
31
(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 2021,
the tax custodial 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 2020.) As
permitted by state law, the City of Smithville charges a collection fee of 1 percent of all
Totals $1,977,075 $1,977,075
Required
a. Open a general journal as of December 31, 2019, for the Tax Custodial Fund by
entering the two accounts and amounts shown in the above post-closing trial balance.
Enter 2020 from the drop-down [Year] menu. Each of the account titles will be found
taxing authorities for fiscal year 2020.
32
Tax Rates Applicable to Governments
Served by the Tax Custodial Fund
Fiscal Year 2020
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
1. [Para. 8-b-1] On January 2, 2020, the city’s tax administrator mailed annual tax
bills to all property owners in the total amount of $15,467,668 (see preceding
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
3. [Para. 8-b-3] All cash collected in paragraph 8-b-2 was transferred to the other
4. [Para. 8-b-4] Current taxes were collected during the year for the funds and
governments shown below:
Current Taxes
Funds/Governments: Collected
5. [Para. 8-b-5] All cash collected in paragraph 8-b-4 was transferred to the other
6. [Para. 8-b-6] Make a year-end aggregate journal entry to reflect the additions
and deductions made to net position for the reporting period.
7. [Para. 8-b-7] Make the year-end journal entry to reclassify all uncollected
current taxes as delinquent. Add to the receivable amount interest and penalties
of 6 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
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
35
Before closing the City of Smithville 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.
Chapter 9 Adjusting and Closing Entries for Governmental Activities,
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
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
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in
whole or part.
37
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, 2020 balance of Net Position—Restricted
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
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
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in
whole or part.
38
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. 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
10-16, 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.