For use with McGraw Hill
Accounting for Governmental & Nonprofit Entities
19th Edition
By Jacqueline L. Reck, Suzanne L. Lowensohn, and Daniel G. Neely
Instructions
City of Smithville
Full Version
Computerized Cumulative Problem
Table of Contents
Completing Chapters 2 through 11 of the City of Smithville Full Version ……………….. 3
Chapter 2 Opening the Books ……………………………………………………………………………… 4
Chapter 3 Recording the Annual Budget ………………………………………………………………. 8
Chapter 4 Recording Operating Transactions Affecting the General Fund and
Governmental Activities at the Government-wide Level ………………………………………. 10
Chapter 5 Recording Capital Asset Transactions …………………………………………………. 17
Chapter 6 Transactions Affecting General Long-term Liabilities and Debt Service …. 21
Chapter 7 Recording Transactions Affecting the Enterprise Fund and Business-type
Activities ………………………………………………………………………………………………………… 27
Chapter 8 Recording Transactions Affecting a Fiduciary Fund—a Tax Custodial Fund
……………………………………………………………………………………………………………………… 30
Completing Chapters 2 through 11 of the City of Smithville Full
Version
Foreword
This full version of a cumulative problem written for the computer presents a series of
transactions covering activities for the City of Smithville, assuming the city utilizes the
dual-track accounting approach to the GASB reporting model described in Reck,
Lowensohn, and Neely, Accounting for Governmental & Nonprofit Entities, 19th edition.
The transactions presented relate to the city’s General Fund, capital projects, debt service,
enterprise, and fiduciary funds, as well as to an additional accounting entity,
governmental activities at the government-wide level. The transactions and instructions
in this series are designated Chapter 2, Chapter 3, etc., corresponding to the chapters of
Reck, Lowensohn, and Neely, Accounting for Governmental & Nonprofit Entities, 19th
edition.
To minimize errors, you should read and follow all instructions carefully. Students find
that this computerized cumulative problem significantly enhances their learning if they
complete each City of Smithville chapter as the corresponding chapter of the textbook is
covered. Conversely, students who procrastinate often find that the project takes more
time than they expected and that it is harder to recall how to make the journal entries
covered in the earlier chapters. Thus, delaying until your project is nearly due may
increase the total time it takes you to do the project and leave you little time for anything
else that week. So, our advice is to stay current with the project.
4
Chapter 2 Opening the Books
The City of Smithville just implemented a dual-track computerized accounting system,
which provides files for general journal entries and posting to appropriate general
ledger/subsidiary ledger accounts. Budgetary, operating statement, and balance sheet
accounts are provided for the General Fund and the other governmental fund types.
Operating statement accounts and balance sheet accounts are also provided for
governmental activities at the government-wide level and the proprietary and fiduciary
funds of the City of Smithville that you will use in Chapters 5-9 of the problem. As the
city’s new accountant, it is your job to enter the city’s initial accounting information as of
December 31, 2022, in preparation for placing the new accounting system in full
operation effective January 1, 2023.
Required
Refer to [Help] to understand the general instructions on how to navigate and use this
application.
To protect yourself from possible hard drive failure or corruption of your project data
file, we recommend that you save your file to not only your hard drive but also another
location (e.g., flash drive or the cloud), creating a backup file for your project at the end
of each session. You can create multiple files by changing the name or putting the date on
the file when saving it to your backup location.
To open an existing project, click on [Open Project] in the opening window or select the
project from the “Recent projects” list.
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purposes of this exercise, date suffixes are omitted from the Expenditures and
Encumbrances accounts as expenditures occur only from a single year’s
appropriations. You will not use all accounts listed for this project.
b. The trial balance for the General Fund of the City of Smithville as of December 31,
2022, follows. Select the [Journal] tab and create a journal entry to enter the balance
sheet accounts and amounts shown in the trial balance. To create an entry start by
clicking on [Add new entry]. Select the desired account name from the drop down
[Account] window. Be sure to enter 2022 from the drop-down [Year] menu and
enter the paragraph number from these instructions in the [Add description] box of
the [Journal]. For this entry you should enter 2-b. Select the appropriate accounts
individually and insert the appropriate amounts. You should enter all dollar
amounts without dollar signs, commas, and decimal points. For all entries, it is
vitally important that the correct year be selected.
CITY OF SMITHVILLE
General Fund Post-Closing Trial Balance
As of December 31, 2022
Account Title Debits Credits
Cash $ 342,223
Taxes Receivable—Delinquent 391,756
Allowance for Uncollectible Delinquent Taxes $ 4,752
Interest and Penalties Receivable on Taxes 37,718
Inventory of Supplies 59,000
Vouchers Payable 272,187
Due to Other Funds 7,400
Due to Federal Government 135,720
Due to State Government 32,600
Deferred Inflows of Resources 97,704
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Fund Balance—Unassigned 218,931
Totals $1,000,297 $1,000,297
Unpost capability. As discussed in Chapter 1 of these instructions, the City of
Smithville software program permits students to “unpost” a particular batch of
posted transactions. Unposted entries then can be edited and re-posted. In addition,
any omitted entries can be inserted above or below a selected balance sheet account
journal line in any unposted batch of entries. Prior to unposting a batch, all
batches must be posted.
c. Select [Governmental Activities, Government-wide Level] in the [Current
Accounting Entity] drop-down box and the [Accounts] tab. You will see most of
the accounts included in the preceding trial balance, plus many other accounts that
will be used in the various chapters of the City of Smithville project.
CITY OF SMITHVILLE
Governmental Activities Government-wide Level
Post-Closing Trial Balance
As of December 31, 2022
Account Title Debits Credits
Cash $ 342,223
Taxes Receivable—Delinquent 391,756
Allowance for Uncollectible Delinquent Taxes $ 4,752
Interest and Penalties Receivable on Taxes 37,718
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Land 4,231,000
Infrastructure 9,802,000
Accumulated Depreciation—Infrastructure 2,773,944
Buildings 6,296,000
Vouchers Payable 272,187
Due to Federal Government 135,720
Due to State Government 32,600
Internal Payables to Business-type Activities 7,400
e. Select [Reports, Trial Balances, Post-Closing Trial Balance] and print the trial
balance for 2022 or submit a saved .pdf version of the trial balance electronically if
directed to do so by your instructor. Retain in your cumulative file until the due date
for your project or the time specified by your instructor.
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]. Click on “Export my
Project” if you are using Chromebook.
8
Chapter 3 Recording the Annual Budget
The following budget for the General Fund of the City of Smithville was legally adopted
for the fiscal year ending December 31, 2023.
Estimated Revenues:
Taxes:
Property $1,859,913
Sales 1,578,000
Interest and Penalties on Taxes 37,000
Licenses and Permits 500,000
Fines and Forfeits 175,000
Appropriations:
General Government $1,169,500
Public Safety 2,206,000
Public Works 875,700
Health and Welfare 735,000
Culture and Recreation 660,500
Total Appropriations $5,646,700
Estimated Other Financing Sources and Uses:
Interfund Transfers Out $ 38,750
Required
a. After opening the 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 2023. Enter 3-a in
When you have finished entering the estimated revenue detail information, verify
that the correct total amount is shown in the Detail Journal, then click on [Add entry
and return to Journal] and the total estimated revenues will be entered in the
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To finish recording the budget debit Budgetary Fund Balance and credit Estimated
Other Financing Uses—Interfund Transfer Out for $38,750. 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.
b. Go to [Reports], print the pre-closing subsidiary ledgers and pre-closing trial
balance for year 2023 and retain them 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.
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 Smithville that occurred
during fiscal year 2023, 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 2023. 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
1. [Para. 4-a-1] On January 2, 2023, property taxes were levied for the year in the
amount of $1,878,700. It was estimated that 1 percent of the levy would be
uncollectible.
Required: Record this transaction in both the General Fund and governmental
activities journal. Type 4-a-1 as the paragraph number in the [Add description]
2. [Para. 4-a-2] Encumbrances were recorded in the following amounts for purchase
orders issued against the appropriations indicated:
General Government $ 193,220
Public Safety 442,900
Public Works 216,632
Health and Welfare 162,045
Culture and Recreation 143,580
Total $1,158,377
Required: Record the encumbrances in the General Fund general journal and
3. [4-a-3] The General Fund transferred $38,750 to the Street Improvement Bond
Debt Service Fund to assist with interest payments due on July 1, 2023 and
January 1, 2024.
Required: Record this transaction in the General Fund only. The transaction has
4. [Para. 4-a-4] Cash was received during the year in the total amount of $5,980,222
for collections from the following receivables and cash revenues, as indicated:
Receivable Collections:
Current Property Taxes $1,596,895
Delinquent Property Taxes 387,201
Interest and Penalties Receivable on Taxes 34,270
Due from Other Funds/Internal Receivables 4,600
Due from State Government 165,000
Cash Collections of Revenues: (total: $3,792,256)
Sales Taxes 1,579,203
Licenses and Permits 497,960
Fines and Forfeits 173,590
Intergovernmental 789,000
Charges for Services 661,253
Miscellaneous 91,250
Total $5,980,222
Required: Record the receipt of cash and the related credits to receivables and
revenues accounts, as applicable, in both the General Fund and governmental
Grants and Contributions, $360,000
Program Revenues—Health and Welfare—
Operating Grants and Contributions,
$429,000
Charges for Services Program Revenues—General Government—
5. [Para. 4-a-5] Of the $387,201 in delinquent property taxes collected in
transaction 4-a-3, $88,115 had been recorded in the Deferred Inflows of
Resources account. Additionally, $7,766 of the interest and penalties collected in
4-a-3 had also been recorded as deferred inflows of resources.
Required: In the General Fund recognize the property tax revenues and the
interest and penalties revenues related to the deferred inflows of resources. To do
this debit the Deferred Inflows of Resources account and credit related property
6. [Para. 4-a-6] General Fund payrolls for the year totaled $4,460,212. Of that
amount, $936,701 was withheld for employees’ federal income taxes; $535,258
for federal payroll taxes; $133,815 for employees’ state income taxes; $267,629
for retirement funds administered by the state government; and the remaining
$2,586,809 was paid to employees in cash. The City of Smithville does not record
encumbrances for payrolls. The payrolls were chargeable against the following
functions’ appropriations:
General Government $ 956,254
Public Safety 1,771,480
Public Works 656,690
Health and Welfare 572,370
Culture and Recreation 503.418
Total $4,460,212
7. [Para. 4-a-7] Invoices for some of the goods recorded as encumbrances in
transaction 4-a-2 were received and vouchered for later payment, as listed below.
Related encumbrances were canceled in the amounts shown. Select “Elimination”
in the drop down [Description] menu in the Detail Journal.
Expenditures Encumbrances
General Government $ 191,709 $ 191,720
Public Safety 442,870 442,900
Public Works 206,308 206,241
Health and Welfare 162,020 162,045
Culture and Recreation 141,990 142,000
Total $1,144,897 $1,144,906
Required: Record the receipt of these goods and services and the related
vouchers payable in both the General Fund and governmental activities journals.
In the Detail Journal select “Goods received” for expenditure description. At the
8. [Para. 4-a-8] Checks were written in the total amount of $3,076,943 during 2023.
These checks were in payment of the following items:
Vouchers Payable $1,197,963
Due to Other Funds/Internal Payables 7,400
Due to Federal Government 1,473,706
Due to State Government 397,874
Total amount paid $3,076, 943
Required: Record the payment of these items in both the General Fund and
governmental activities general journals.
8. [Para. 4-a-9] Current taxes receivable uncollected at year-end, and the related
Allowance for Uncollectible Current Taxes account, were both reclassified as
delinquent.
Of the amount classified as delinquent it was determined $70,450 would not be
collected within 60 days of the fiscal year end and would therefore be unavailable
for use in the current period. As a result, the related amount of revenues was
reclassified as deferred inflows of resources.
Required: Record the reclassification of the balances in the current taxes
10. [Para. 4-a-10] The city’s budget for 2023 was legally amended as follows:
Estimated Revenues:
Decreases Increases
Property Taxes $17,500
Interest and Penalties $ 22,000
Appropriations:
General Government $ 8,500
Public Safety $ 9,000
Culture and Recreation $ 13,000
Required: Record the budget amendments in the General Fund general journal
11. [Para. 4-a-11] Interest and penalties receivable on delinquent taxes was increased
by $8,454; $1,536 of this was estimated as uncollectible and based on past history
$2,113 was considered to be unavailable for use in the current fiscal year.
Required: Record this transaction in the General Fund and governmental
activities journals. The $2,113 considered unavailable for use is recorded as
governmental activities journal.
12. [Para. 4-a-12] Services received by the General Government function of the
General Fund from the Solid Waste Disposal Fund amounted to $28,500 during
the year. Of this amount, $25,400 was paid in cash and $3,100 remained unpaid at
year-end.
Required: Record the receipt of these services, amounts paid during the year,
and remaining liability in the General Fund and governmental activities journals.
13. [4-a-13] Adjusting Entry. Because the city uses a periodic inventory system a
physical count of consumable supplies was taken at year-end showing an ending
balance of $60,420, an increase of $1,420 during the year. The city uses the
consumption method of accounting for its inventory in the General Fund and at
the government-wide level. Recall that inventory purchases were initially
recorded as expenditures in the General Fund and as expenses at the government–
wide level. Therefore, an increase in inventory requires adjustments to the
expenditure and expense accounts of the General Government function.
Required: Prepare the adjusting journal entries in the General Fund journal to
adjust General Government expenditures and Inventory of Supplies, and the Fund
14. Closing Entry. Following the instructions in the next paragraph, prepare and post
the necessary entries to close the General Fund Estimated Revenues,
Appropriations, and Estimated Other Financing Uses accounts to Budgetary Fund
Balance, and Revenues, Expenditures, and Other Financing Uses to Fund
Balance—Unassigned. Because the City of Smithville 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. If, however, 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.
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. You should consider the beginning of year balances in fund balance
accounts when calculating the amounts to be reclassified. Be sure the check mark
in the box for [Closing Entry] is showing before closing each individual account.
Fund Balance—Committed—Health and Welfare 43,000
Fund Balance—Assigned—Culture and Recreation 0
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 worksheet of the
General Fund post-closing trial balance as of December 31, 2023. Use Excel to
prepare in good form a balance sheet for the General Fund as of December 31, 2023.
Follow the format shown in Illustration 4-4 of Reck, Lowensohn, and Neely,
Accounting for Governmental & Nonprofit Entities,19th edition textbook (hereafter
referred to as “the textbook”).
d. Use the Excel worksheet of the General Fund pre-closing subsidiary ledger account
balances created in part c above to prepare in good form a schedule of revenues,
expenditures, and changes in fund balance—budget and actual for the General Fund
for the year ended December 31, 2023. See Illustration 4-6 in the textbook for an
example format.
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].
Chapter 5 Recording Capital Asset Transactions
Street Improvement Capital Projects Fund and Governmental Activities at the
Government-wide Level
During late 2022, the voters of the City of Smithville authorized tax-supported bond
issues totaling $9,000,000 as partial financing for projects to construct the extension of
two streets and the related curbs, culverts, and storm sewers in the city. The estimated
total cost of the projects, which are expected to extend over the next three years, was
$11,200,000. In addition to the bond financing, voters also approved a special 1 cent sales
tax to assist in financing the projects. The sales tax begins January 1, 2023 and will
continue for seven years. The sales tax is projected to generate $380,000 each year.
Required
1. [Para. 5-a-1] In early 2023, design plans and specifications for the first project,
the Elm Street Project, were submitted by a construction engineering firm. The
firm billed the Street Improvement Fund for $110,000.
Required: Record this billing and the related Vouchers Payable liability in the
2. [Para. 5-a-2] On February 1, 2023, 2.5% deferred serial bonds with a face value
of $3,000,000 were sold for a total amount of $3,036,250, of which $6,250 was
for accrued interest from the January 1, 2023 date of the bonds and $30,000 was a
premium on the bonds sold. Cash in the amount of the accrued interest and
premium was deposited directly in the Street Improvement Bond Debt Service
Fund. Cash in the amount of $3,000,000 was deposited and recorded in the Street
Improvement Fund.
Required: Record these transactions in the Street Improvement Fund and
governmental activities journals. In addition to recording the liability for bonds
3. [Para. 5-a-3] On February 21, 2023, construction bids were opened and analyzed.
A bid of $3,300,000 was accepted, and the contract was awarded for the Elm
Street Project. The contract provided for a retained percentage of 5 percent from
each progress payment, and from the final payment, until final inspection and
acceptance by the city’s public works inspectors.
Required: Record the signing of the contract in the Street Improvement Fund
general journal. This transaction has no effect at the government-wide level.
4. [Para. 5-a-4] Sales tax revenue of $83,000 was received.
5. [Para. 5-a-5] Vouchers payable accumulated to date were paid on March 30,
2023.
Required: Record this transaction in both the Street Improvement Fund and
governmental activities general journals.
6. [Para. 5-a-6] July 6, 2023, the contractor for the Elm Street Project reported that
the project was about one-half completed and requested a progress payment of
$1,600,000. This amount was paid July 25, 2023, less the 5% retained percentage.
7. [Para. 5-a-7] Additional sales taxes were collected in the amount of $278,000 on
December 1, 2023.
Required: Record this transaction in both the Street Improvement Fund and
governmental activities journals.
8. [Para. 5-a-8] On December 10, 2023 the Elm Street project was completed and
the contractor for the project requested a final payment of $1,650,000. This
amount was recorded as a liability. Payment was made, less the retained
percentage, on December 15, 2023.
9. [Para. 5-a-9] The city submitted a $190,000 purchase order for design plans and
specifications for the second street improvement project, the “Spruce Street
Project.”
Required: Record this encumbrance in the Street Improvement Fund.
10. [Para. 5-a-10] The city engineer approved the final construction on the Elm
Street Project, and the city paid the retained percentage (Transactions 6 and 8) to
the contractor.
11. 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 2023 and post them
to the fund’s general ledger, Fund Balance—Restricted. You must click on the
c. Export the post-closing trial balance for year 2023 to an Excel worksheet and use
Excel to prepare a balance sheet for the Street Improvement Fund as of December 31,
2023. See Illustration 4-4 in the textbook for an example of an appropriate format of a
governmental fund balance sheet. In addition, print or save as a .pdf the post-closing
trial balance from the [Reports] drop-down menu.