20
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.
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.
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
$3,300,000.
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 $3,200,000 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.
21
17. [Para. 5a-17] The City Hall Annex Construction Fund paid all outstanding
liabilities on December 31, 2023.
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.
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 2023 and post them to the fund’s
general ledger. 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.
[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.]
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, 2022,
one issue of tax-supported serial bonds was outstanding.
payments.
a. Record the following accounts and balances in the debt service fund general journal,
selecting 2022 from the [Year] menu and using 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, 2022
Debits Credits
Cash $ 950,000
Taxes Receivable—Delinquent 87,625
Allowance for Uncollectible Delinquent
Taxes $ 7,450
Interest and Penalties Receivable on Taxes 5,915
Additional Information:
On April 1, 2023, the City of Bingham sold a 10-year issue of tax-supported serial
bonds to finance the construction and equipping of an annex to City Hall. As
23
October 1 of each year; bonds in the amount of $375,000 will mature on April 1,
2024, and every six months thereafter until maturity. The premium on these bonds
will be amortized using the effective interest method. Cash for the payment of interest
in 2023 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 2023 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, 2023, and the City Hall Annex Construction Fund bond issue projected
to be sold on April 1, city officials adopted a legal budget for the fiscal year ended
December 31, 2023.
Required: Record the budget for the Bingham Debt Service Fund for year 2023.
Budgetary entries have no effect on the government-wide accounting records.
The budget provides for estimated revenues of $704,000 from property taxes,
2. [Para. 6b-2] Property taxes were levied by the debt service fund in the amount of
$704,545. Of this amount, $6,500 was expected to be uncollectible.
Required: Record these transactions in both the debt service fund and
governmental activities journals.
4. [Para. 6b-4] Cash in the amount of the $50,225 premium on the bonds sold on
April 1, 2023 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,
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including the related premium and accrued interest, was recorded in the
governmental activities general journal in transaction 5a-1.
5. [Para. 6b-5] Current taxes receivable were collected in the amount of $695,500.
Also, delinquent taxes receivable were collected in the amount of $9,900, along
with Interest and Penalties Receivable on Taxes of $630.
Required: Record these transactions in both the debt service fund and
6. [Para. 6b-6] Checks were written and mailed to bondholders for principal and
interest payable on June 30, 2023.
Required: Record this transaction in both the debt service fund and
governmental activities journals. In the governmental activities journal, reduce the
premium on bonds payable by $4,709.
7. [Para. 6b-7] Interest on temporary investments was received in cash in the
amount of $5,000.
8. [Para. 6b-8] Temporary investments amounting to $300,000 were sold at par. No
interest had accrued at the time of sale.
Required: Record this transaction in both the debt service fund and
governmental activities journals.
9. [Para. 6b-9] On October 1, the debt service fund received $75,000 from the
General Fund for interest payment on the 2% serial bonds. Checks were written
and mailed to bondholders for the interest payment due October 1, 2023.
Required: Record the transfer in the debt service fund and the interest payment
10. [Para. 6b-10] Cash to close the City Hall Annex Construction Fund was received
in the amount of $8,000. (See Chapter 5, para. 5a-18). The city council
authorized a budget amendment for this unexpected transfer.
Required: Record the budget amendment and transfer in the debt service fund.
25
11. [Para. 6b-11] On December 30, the debt service fund made the principal and
interest payments associated with the 3% serial bond.
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.
13. [Para. 6b-13] At December 31, 2023, accrued interest expense on the 2% bond
issue was recorded in the governmental activities general journal. Amortization
of the premium on the 2% bonds sold was also recorded in the amount of $2,128.
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 2023 and post them to the fund’s general ledger.
You must click on the box for [Closing Entry] to check mark it; “Closing Entry”
c. Export the post-closing trial balance for year 2023 to an Excel worksheet and use
Excel to prepare a balance sheet for the debt service 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 the post-closing trial balance
from the [Reports] drop-down menu.
26
f. Assuming that the assessed valuation of property within the City of Bingham is
$1,409,090,909, and the legal general obligation debt limit is 5 percent of assessed
valuation, compute the legal debt margin of the city as of December 31, 2023.
Prepare a schedule in good form showing calculation of the legal debt limit, debt
subject to the limit, and debt margin. 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.]
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, 2022, follows:
CITY OF BINGHAM
Water Utility Fund
Trial Balance
As of December 31, 2022
Debits Credits
Cash $ 659,776
Restricted Cash—Customer Deposits 78,840
Customer Accounts Receivable 193,524
Due from Other Funds 19,400
Utility Plant in Service 15,781,847
Accumulated Depreciation—
Utility Plant 3,574,381
Construction Work in Progress 1,478,945
Vouchers Payable 92,550
Net Position—Unrestricted 732,493
Totals $18,404,976 $18,404,976
Additional information:
The following information is provided about accounts shown on the December 31,
2022, trial balance:
A 3%, $10,000,000 revenue bond was issued on 6/30/2021 at a 3.25% market rate.
28
Required
a. Open a general journal as of December 31, 2022 for the Water Utility Fund by
entering each of the accounts and amounts shown in the above post-closing trial
balance. Enter 2022 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, 2022, and retain it in your cumulative file until
directed by your instructor to submit it.
b. Record the following events and transactions, which occurred during the year ended
December 31, 2023. Be sure that 2023 appears in the [Year] menu.
1. [Para. 7b-1] A $500,000 principal payment and bond interest accrued and due on
January 1, 2023 was paid to holders of the revenue bonds.
3. [Para. 7b-3] Collections from customers totaled $3,144,100; $19,400 was also
received from the city’s General Fund.
5. [Para. 7b-5] Payrolls were paid totaling $545,750 for operations; $269,400 for
maintenance; and $186,500 for construction.
29
7. [Para. 7b-7] 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.
9. [Para. 7b-9] A progress billing for $495,000 was received from the construction
contractor and paid.
10. [Para. 7b-10] 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 $1,420,750.
12. [Para. 7b-12] 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.)
13. [Para. 7b-13] Deposits totaling $6,504 were received from new customers.
15. [Para. 7b-15] Interest paid on customer deposits amounted to $2,054 (charge
Operation Expense). This interest was added to the customer deposit accounts, and
the restricted cash and cash accounts were adjusted.
[Para. 7b-16c] An adjusting entry for accrual of six months’ interest on the bonds
payable balance and amortization of $8,473 of the debt discount using the effective
interest method was recorded.
After verifying the accuracy of all entries for the preceding transactions, post amounts
to the general ledger accounts by clicking [Post entries].
d. Click on [File>Export] to export a post-closing trial balance for year 2023, and use
Excel to prepare a statement of net position for the Water Utility Fund as of
December 31, 2023. (See Illustration 7-6 for an example format.)
f. Use the post-closing trial balance for year 2022 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, 2023. (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—A Tax Custodial
Fund
The City of Bingham administers a tax custodial fund that bills and collects property
taxes levied by the governing bodies of the Bingham School District (BSD) and the
CITY OF BINGHAM
Tax Custodial Fund
Post-closing Trial Balance
As of December 31, 2022
Account Title Debits Credits
Taxes Receivable for Other Funds and $1,684,422
Governments—Delinquent (including
related interest and penalties)
Required
a. Open a general journal as of December 31, 2022, for the Tax Custodial Fund by
entering the accounts and amounts shown in the above post-closing trial balance.
Enter 2022 from the drop-down [Year] menu. Each of the account titles will be found
in the drop-down menu [Account] in the [Journal] view of the program. Be sure to
enter 8a as your paragraph number in the [Add description] field. Verify the
32
b. The following schedule shows the tax rates that have been established by the various
taxing authorities for fiscal year 2023.
Tax Rates Applicable to Governments
Served by the Tax Custodial Fund
Fiscal Year 2023
(All amounts rounded to next higher dollar)
Tax Rate
(Per $100 Assessed Tax
Governments/Funds of Assessed Valuation) Valuation Levy
City of Bingham:
General Fund $0.55 $1,409,090,909 $7,750,000
Debt service fund 0.05 704,545
Total city rate and levy $0.60 $8,454,545
Bingham School District:
General Fund $2.20 $570,782,907 $12,557,224
* 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 Custodial Fund to all taxpayers in
each jurisdiction.
Record the following transactions that occurred during 2023 in the general journal of
the Tax Custodial Fund.
1. [Para. 8b-1] On January 2, 2023, the city’s tax administrator mailed annual tax
bills to all property owners in the total amount of $24,063,176 (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.
33
2. [Para. 8b-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 Bingham General Fund $378,000 $22,860 $400,860
City of Bingham debt service fund 9,900 630 10,530
3. [Para. 8b-3] The 1 percent collection fee was assessed on the Bingham School
District and the Sunrise County Library collections.
Calculate the 1 percent collection fee on the amounts due to other governments;
the total collection fee from other governments should be recorded as
Deductions—Administrative Fee and a Due to Other Funds for the amount due
4. [Para. 8b-4] All cash collected in paragraph 8-b-2 was transferred to the other
5. [Para. 8b-5] Current taxes were collected during the year for the funds and
governments shown below:
Current Taxes
Funds/Governments: __Collected__
City of Bingham General Fund $ 7,302,000
Bingham debt service fund 695,500
Bingham School District 12,869,800
Central County Library 2,147,540
Total collected $23,014,840
Required: Record the collections of current taxes, make these entries only in the
Tax Custodial Fund general journal.
34
6. [Para. 8b-6] The 1 percent collection fee was assessed on the Bingham School
District and the Sunrise County Library collections.
Calculate the 1 percent collection fee on the amounts due to other governments;
7. [Para. 8b-7] All cash collected in paragraph 8-b-5 was transferred to the other
funds and governments, adjusted for collection fees deducted or added (see 8b-
6).
8. [Para. 8b-8] Make the year-end journal entry to reclassify all uncollected
receivables as delinquent. Add to the receivable amount interest and penalties of
$82,195 on the reclassified amount. The interest and penalties portion of the
for Other Governments for the remaining $40,765.
9. [Para. 8b-9] Make the year-end closing journal entry to close deductions and
additions to Net Position—Restricted for Other Governments.
c. Post the journal entries for all the preceding transactions. Prepare closing entries to
close the additions and deductions accounts.
Export a post-closing trial balance for 2023 to prepare a statement of fiduciary net
position for the Tax Custodial Fund (for an example of a custodial fund statement, see
the last column of Illustration 8-6 of the textbook). You should deduct the city’s
General Fund and debt service fund portions of delinquent taxes receivable and
related interest and penalties receivable from the amounts recorded as Taxes
d. Use the exported pre-closing 2023 trial balance to prepare a statement of changes in
fiduciary net position for the Tax Custodial Fund (for an example of a custodial fund
statement, see the last column of Illustration 8-7 of the textbook).
[Note: Retain the post-closing trial balance as of December 31, 2023, the
statement of fiduciary net position, and the statement of changes in fiduciary net
35
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.]
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.
36
Chapter 9 Adjusting and Closing Entries for Governmental Activities,
Government-Wide Level; Preparation of Government-Wide
and Major Fund Financial Statements
Before the 2023 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 2023 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 $ 352,250
Depreciation Applicable to Asset Categories (Increases in accumulated
depreciation):
Improvements Other Than
Buildings $ 103,500
Infrastructure 314,500
Buildings 252,125
Equipment 994,500
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, 2023, 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
37
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
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
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-
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.
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, 2023, using appropriate ratios such as the ratios and financial indicators
included in Illustrations 10-3 and 10-4 of the textbook. For purposes of calculating per
capita ratios, assume the population of the City of Bingham is 10,000. One hundred fifty-
nine citizens work for the City of Bingham. Compute financial indicators using
governmental activities only, unless advised otherwise by your instructor.
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.
—The End—