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Instructions

City of Bingham
Computerized Cumulative Problem

For use with McGraw-Hill Education


Accounting for Governmental & Nonprofit Entities
18th Edition

By Jacqueline L. Reck, Suzanne L. Lowensohn, and Daniel G. Neely

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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.
Table of Contents
Completing Chapters 2 through 11 of the City of Bingham ............................................... 3

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 and Capital Project Transactions .............................. 18

Chapter 6 Transactions Affecting General Long-Term Liabilities and Debt Service ...... 22

Chapter 7 Recording Transactions Affecting the Enterprise Fund and Business-Type


Activities .......................................................................................................... 27

Chapter 8 Recording Fiduciary Fund Transactions—An Investment Trust Fund ............ 31

Chapter 9 Adjusting and Closing Entries for Governmental Activities, Government-Wide


Level; Preparation of Government-Wide and Major Fund Financial Statements
.......................................................................................................................... 34

Chapter 10 Analysis of Financial Condition ..................................................................... 36

Chapter 11 Preparation of Audit Report ........................................................................... 36

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© 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.
Completing Chapters 2 through 11 of the City of Bingham
This version of a cumulative problem written for the computer presents a series of
transactions, covering activities of the City of Bingham, assuming the city utilizes the
dual-track accounting approach to the GASB governmental reporting model described in
Reck, Lowensohn and Neely, Accounting for Governmental and Nonprofit Entities, 18th
Edition. The transactions presented relate to the city’s General, 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 and Nonprofit Entities,
18thEdition.

You should begin the project with Chapter 2 of the instructions as you complete Chapter
2 of the textbook. Some problems require you to print trial balances or other documents.
Other problems require the preparation of financial statements or other documents. The
specified documents can either be turned in chapter by chapter or retained in a cumulative
folder until the end of the project, depending on your instructor’s preference and
instructions. Some instructors may prefer that you electronically submit your project data
file and either Excel or PDF files containing your trial balances, financial statements, and
other, rather than submitting printed copies.

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 Bingham chapter as the corresponding chapter of the textbook is
covered. Conversely, students who procrastinate often find that the project takes much
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 the deadline for 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.

Chapter 2 Opening the Books


The City of Bingham has installed a new 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 used by the City of Bingham that you will use in Chapters 5-9 of the problem. To
begin this case, you must enter the city’s initial accounting information as of December
31, 2019, so that all transactions can be recorded for the next fiscal year beginning
January 1, 2020.

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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.
Required
Open the City of Bingham software by clicking on the MHECitiesSmithvilleBingham
program. Access the instructions for the City of Bingham project by clicking on
[Instructions] in the opening screen of the application and then select [Bingham] which
appears at the top of the window.

If creating a new project, click “Create New Project,” when the “Create New Project”
window appears choose the “Bingham” icon. In addition, in the “Your name” field
type in your first and last name so that your name will appear on all printable reports and
click [Create] button. This will create the project and provide access to all of the funds
and accounts that you will need to complete the “City of Bingham” cumulative problem.

To protect yourself from possible hard drive failure or corruption of your project data
file, we recommended that you save your file to not only your hard drive but also another
location (e.g., flash drive or the cloud), creating a dated backup file for your project at the
end of each session.

To open an existing project, click on “Open Project” in the opening window or select
the project from the “Recent projects” list.

a. If it is not already displayed, select [General Fund] in the “Current accounting


entity” window and the [Accounts] tab. Clicking on the [Accounts] tab allows you
to see the chart of accounts that will be used for the [General Fund]. A different
chart of accounts is provided for each of the accounting entities. Next, select the
[Journal] tab and click the [Add new entry] button. Click on [Select account or
search by account name or number] in the [Account] column. You should see the
same general ledger accounts that were listed when you clicked on the [Accounts]
tab. (Note: For purposes of this exercise, date suffixes are omitted from the
Expenditures and Encumbrances accounts as expenditures occur only from a single
year’s appropriations.)

b. The trial balance for the General Fund of the City of Bingham as of December 31,
2019, is shown on the following page. 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 2019 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 2b. Select
the appropriate accounts individually and insert the appropriate amounts. (Note:
Enter all dollar amounts without dollar signs, commas, and decimal points. All
amounts in this project should be rounded to the nearest whole dollar. For all
entries, it is vitally important that the correct year be selected.)

You enter each account and amount one line at a time by clicking [Add]. The [Add]
button will not be active if information for the entry is missing (e.g., the transaction
description is missing.)

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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.
The year and transaction description need only be entered for the first line of the
journal entry; it should remain in the boxes for the rest of the accounts. When you
have completed entering all account data and amounts, verify the accuracy of all your
entries, including date and paragraph numbers. When you are sure that your entries
are correct, click [Post entries] to post the items to the general ledger of the General
Fund.

CITY OF BINGHAM
General Fund
Post-closing Trial Balance
As of December 31, 2019

Account Title Debits Credits


Cash $ 381,000
Taxes Receivable—Delinquent 387,750
Allowance for Uncollectible Delinquent Taxes $ 36,795
Interest and Penalties Receivable on Taxes 26,059
Allowance for Uncollectible Interest and Penalties 1,434
Vouchers Payable 168,556
Due to Other Funds 22,400
Deferred Inflows of Resources 405,580
Fund Balance—Committed—Public Safety 16,750
Fund Balance—Committed—Public Works 32,640
Fund Balance—Assigned—Health and Welfare 24,682
Fund Balance—Unassigned 85,972
Totals $ 794,809 $ 794,809

Unpost capability. As mentioned in the “User Guide” page, the City of Bingham
software program permits students to “unpost” a particular batch of posted
transactions. Unposted entries then can be edited and reposted. In addition, any
omitted entries can be inserted above a selected journal line in any unposted batch of
entries. Prior to unposting a batch all batches must be posted.

Select [Reports>Trial Balances>Post-Closing Trial Balance] and print or save as


a .pdf file the post-closing trial balance for year 2019. Retain the printed trial balance
in your personal cumulative folder until the due date assigned by your instructor for
the project, or submit a saved version of the trial balance electronically if directed to
do so by your instructor.

c. Select [Governmental Activities—Government-Wide] in the [Current


Accounting Entity] drop-down menu and the [Accounts] tab. You will see all of
the accounts included in the trial balance below, plus many other accounts that will
be used in the various chapters of the City of Bingham project.

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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.
d. Select the [Journal] tab and create a journal entry to enter the statement of net
position (i.e., balance sheet) accounts and amounts shown in the following trial
balance. It is necessary to enter these items in the accounts of the governmental
activities category at the government-wide level as the general journal and general
ledger for governmental activities comprise a separate “set of books” from those for
the General Fund. Be sure to enter 2019 from the dropdown menu in the [Year]
column and enter 2d in the [Add description] field in the [Description] column.
Select each account individually and insert the appropriate debit or credit amount for
each account. When you have completed entering the initial data, verify the
accuracy of all entries and click [Post entries] to post the entries to the
governmental activities, government-wide general ledger.

CITY OF BINGHAM
Governmental Activities, Government-wide Level
Post-closing Trial Balance
As of December 31, 2019

Account Title Debits Credits


Cash $ 1,331,000
Taxes Receivable—Delinquent 472,750
Allowance for Uncollectible Delinquent Taxes $ 90,795
Interest and Penalties Receivable on Taxes 35,659
Allowance for Uncollectible Interest and Penalties 2,394
Land 1,210,000
Improvements Other than Buildings 9,900,000
Accumulated Depreciation—Improvements
Other Than Buildings 2,310,000
Infrastructure 32,109,000
Accumulated Depreciation—Infrastructure 12,408,000
Buildings 11,020,000
Accumulated Depreciation—Buildings 3,100,000
Equipment 8,360,000
Accumulated Depreciation—Equipment 4,030,400
Vouchers Payable 168,556
Accrued Interest Payable on Long-term Debt 50,000
Internal Payables to Business-type Activities 22,400
Current Portion of Long-term Debt 500,000
Serial Bonds Payable—2% 9,500,000
Deferred Inflows of Resources 30,000
Net Position—Net Investment in Capital Assets 30,750,600
Net Position—Restricted for Debt Service 900,000
Net Position—Unrestricted 575,264
Totals $64,438,409 $64,438,409

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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.
e. Select [Reports>Trial Balances>Post-Closing Trial Balance] and print the trial
balance for 2019, 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 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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© 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.
Chapter 3 Recording the Annual Budget
The following budget for the General Fund of the City of Bingham was legally adopted
for the fiscal year ending December 31, 2020.

Estimated Revenues:
Real Property Taxes $6,792,000
Sales Taxes 775,000
Interest and Penalties on Taxes 49,000
Licenses and Permits 485,000
Fines and Forfeits 515,000
Intergovernmental Revenue 535,000
Charges for Services 350,000
Miscellaneous Revenues 220,000
Total Estimated Revenues $9,721,000

Appropriations:
General Government $1,905,000
Public Safety 3,675,000
Public Works 1,775,000
Health and Welfare 1,065,000
Culture and Recreation 1,080,000
Miscellaneous 105,000
Total Appropriations $9,605,000

Estimated Other Financing Uses:


Interfund Transfers Out $ 50,000

Required

a. After opening the data 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” dropdown
menu from the [Journal] tab. Click on the [Add new entry] to start your entry. In
the [Year] field, be sure to select the year 2020. Enter 3a in the [Add description]
field. Select “Estimated Revenues” in the drop down [Account] window. Click
[Add subsidiary] to go to the Detail Journal where you will enter the detail for each
estimated revenue source. In the Detail Journal, select “Budget Authorization” from
the dropdown menu for [Description].

When you have finished entering the estimated revenue detail information, verify
that the correct balance 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 general
journal Estimated Revenues control account. Follow the same procedure to record
the budget detail for Appropriations. To complete the budgetary entry credit

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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.
Estimated Other Financing Uses—Interfund Transfer Out and debit or credit
Budgetary Fund Balance as appropriate to balance the budgetary entry. 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.

When you are satisfied you have made the entries correctly, post them to the General
Ledger by clicking on [Post entries]. Before posting, or after unposting as
described previously, you can edit your journal entries by placing the cursor in the
line you want to edit, then right-clicking and selecting “Edit.” After unposting, any
entry can be edited or deleted, and any omitted entry can be inserted above or below
a highlighted entry. Note that the “Insert Entry” function will work if you are
inserting an entry prior to a balance sheet account. However, it will not work when
inserting an entry prior to any account that has an associated subsidiary ledger (e.g.,
estimated revenues, expenditures).

b. Go to [Reports], print the pre-closing subsidiary ledgers and pre-closing trial


balance for year 2020 from the “Reports” window for retention in your cumulative
file until directed by your instructor to submit them, or save and submit 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.

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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© 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.
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 Bingham that occurred
during the 2020 fiscal year; 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 2020. 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
basis or, alternatively, record all the General Fund journal entries first for all
paragraphs, then complete the governmental activities journal entries for all
paragraphs. If you choose the latter method, it might be useful to print the General
Fund general journal entries to assist in making the entries in the governmental
activities journal. Regardless of the method you choose, we recommend that you
refer to the illustrative journal entries in Chapter 4 of the Reck Lowensohn, and Neely
textbook (18th edition) for guidance in making all entries.

For each entry affecting budgetary accounts or operating statement accounts, the
Detail Journal will automatically open to allow you to record the appropriate amounts
in the detail budgetary or actual accounts, as was the case in Chapter 3.

1. [Para. 4a-1] Property taxes were levied in the amount of $7,075,000. It is


estimated that 4 percent of the tax will be uncollectible.

Required: Record this transaction in both the General Fund and governmental
activities journal. Record the tax levy as a revenue in both journals; you will
adjust for unavailable revenues at year end. (Note: Type 4a-1 as the paragraph
number in the [Add description] box for this entry; 4a-2 for the next transaction,
etc. Careful referencing by paragraph number is very helpful should you need to
determine where you may have omitted a required journal entry or made an error.)
Select “Accrued Revenue” in the drop down [Description] menu in the Detail
Journal related to the General Fund entry.

2. [Para. 4a-2] Tax anticipation notes were issued in the amount of $500,000.

Required: Record the issuance of this note in both the General Fund and
governmental activities general journals.

3. [Para. 4a-3] Purchase orders, contracts, and other commitment documents were
issued in the following amounts for the following functions:

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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.
General Government $ 395,000
Public Safety 1,095,000
Public Works 985,750
Health and Welfare 665,725
Culture and Recreation 625,125
Miscellaneous 98,000
Total $3,864,600

Required: Record the encumbrances in the General Fund general journal and
Detail Journal as appropriate. In the Detail Journal, select “Purchase Orders”
from the drop down [Description] menu.

4. [Para. 4a-4] Grant funds of $30,000 recorded as Deferred Inflows of Resources at


the end of FY 2019 were recognized as revenue when timing requirements were
met.

Required: Record the revenue in both the General Fund and governmental
activities general journals by debiting Deferred Inflows of Resources and
crediting Revenue. Select “Previous Deferral” in the drop down [Description]
menu in the Detail Journal. (This amount was included in the budget as
Intergovernmental Revenue in the General Fund.) At the government-wide level
the grant funds can be recognized as a revenue now that all eligibility
requirements have been met (see Chapter 4 Appendix A) and should be classified
as Program Revenues-Culture and Recreation-Operating Grants and
Contributions.

5. [Para. 4a-5] The General Fund paid $165,000 on the vouchers payable that were
outstanding at the end of FY 2019.

Required: Record the payment of this amount in both the General Fund and
governmental activities general journals.

6. [Para. 4a-6] The General Fund collected the following amounts in cash:

Current year Real Property Taxes $6,484,000


Delinquent Taxes 348,000
Interest and Penalties Receivable on Taxes 23,860
Sales Taxes 748,000
Licenses and Permits 479,000
Fines and Forfeits 519,000
Intergovernmental Revenues 515,000
Charges for Services 361,000
Miscellaneous Revenues 226,500
Total $9,704,360

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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.
Required: Record the receipt of cash and the related credits to receivables and
revenues accounts, as applicable, in both the General Fund and governmental
activities journals. (Select “Received in Cash” in the drop down [Description]
menu in the Detail Journal related to the General Fund revenue entries.) For
governmental activities at the government-wide level, all Licenses and Permits
and Charges for Services were attributable to the General Government function as
Program Revenue-Charges for Services. Fines and forfeits were collected by
General Government departments in the amount of $200,000 and by Public Safety
departments in the amount of $319,000. Intergovernmental Revenues should be
credited to “Program Revenues—General Government—Operating Grants and
Contributions.” (In addition to the cash collection, remember to recognize
revenue in the General Fund for the delinquent taxes and interest and penalties
collected by reducing the deferred inflows of resources balance. These revenues
were not expected to be collected within 60 days of year end, thus they were not
considered “available” under the modified accrual basis of accounting and were
classified as Deferred Inflows of Resources in the General Fund. Select
“Previous Deferral” in the drop down [Description] menu in the Detail Journal.)

7. [Para. 4a-7] The General Fund paid the $22,400 reported as Due to Other Funds
at the end of FY 2019. This amount was reported as Internal Payables to Business
-type Activities at the government-wide level. (Note: Do not record this
transaction in the Water Utility Fund until instructed to do so in Chapter 7 of this
case.)

Required: Record the payment of this amount in both the General Fund and
governmental activities general journals.

8. [Para. 4a-8] Delinquent taxes receivable in the amount of $18,000 were written
off as uncollectible. Interest and penalties accrued on these taxes in the amount of
$1,300 were also written off.

Required: Record the writeoffs in both the General Fund and governmental
activities general journals.

9. [Para. 4a-9] General Fund payrolls for the year totaled $5,673,038. Of that
amount, $867,975 was withheld for employees' federal income taxes; $964,416
for federal payroll taxes; $324,551 for employees’ state income taxes; $357,312
for retirement funds administered by the state government; and the remaining
$3,158,784 was paid to employees in cash. The City of Bingham does not record
encumbrances for payrolls. The payrolls were chargeable against the following
functions’ appropriations:

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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.
General Government $ 1,500,376
Public Safety 2,531,644
Public Works 790,481
Health and Welfare 401,673
Culture and Recreation 448,864
Total $5,673,038

Required: Make summary journal entries for payroll in both the General Fund
and governmental activities general journals for the year.

10. [Para. 4a-10] Invoices for some of goods and services ordered in transaction 4a-3
were received and vouchered for later payment. (Select “Elimination” in the drop
down [Description] menu in the Detail Journal):

Actual Estimated
General Government $ 395,940 $ 394,060
Public Safety 1,086,650 1,088,600
Public Works 962,300 967,620
Health and Welfare 661,200 663,600
Culture and Recreation 613,750 617,000
Miscellaneous 98,000 98,000
Totals $3,817,840 $3,828,880

Required: Record the receipt of these goods and the related vouchers payable in
both the General Fund and governmental activities journals. At the government-
wide level, you should assume the city uses the purchases inventory method.
Thus, the invoiced amounts above should be recorded as expenses of the
appropriate functions, except for $75,000 of playground equipment ordered by
Culture and Recreation. The equipment meets the city’s threshold for
capitalization (debit Equipment for this item at the government-wide level).
Record expenditures charged to the miscellaneous appropriation as General
Government expenses at the government-wide level.

11. [Para. 4a-11] The General Fund paid vouchers during the year in the amount of
$3,210,000 as well as its liabilities for employees’ federal and state income taxes
withheld and payroll taxes.

Required: Record the payment of these items in both the General Fund and
governmental activities general journals.

12. [Para. 4a-12] The General Fund transferred $50,000 to the debt service fund so
the debt service fund could make a bond interest payment.

Required: Record this transaction in the General Fund only. The transaction has
no effect at the government-wide level since it occurs between two governmental

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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.
activities. (Do not record this transaction in the debt service fund until instructed
to do so in Chapter 6 of this case.)

13. [Para. 4a-13] Tax anticipation notes issued by the General Fund were paid at
maturity at the face amount plus interest of $10,000.

Required: Record the payment of these items in both the General Fund and
governmental activities general journals. For the General Fund charge
Miscellaneous for the interest expenditure. At the government-wide level, debit
Expenses—Interest on Tax Anticipation Notes.

14. [Para. 4a-14] The General Fund recorded liabilities of $50,000 to other funds for
services received from the Water Utility Fund during the year. Of this amount,
$39,000 should be charged to Public Safety and $11,000 to General Government.

Required: Record the receipt of these services and the associated liability in the
General Fund and governmental activities journals. At the government-wide level
the liability should be credited to Internal Payables to Business-type Activities.
Do not record these items in the Water Utility Fund until instructed to do so in
Chapter 7 of this case.

15. [Para. 4a-15] The year-end balance of supplies inventory is $12,000.

Required: Adjust the inventory of supplies account in both the General Fund and
governmental activities journals. At the government-wide level expenses in
General Government can be reduced by $9,000 and Culture and Recreation can be
reduced by $3,000. In the General Fund, fund balance should be classified as
nonspendable.

16. [Para. 4a-16] The balances in the current taxes receivable and related estimated
uncollectibles accounts were reclassified as delinquent. Interest and penalties of
$56,580 were also recorded on the delinquent taxes, of which $10,500 was
estimated to be uncollectible.

Required: Record this transaction and reclassification in the General Fund and
governmental activities journals. Property tax revenues should be reduced and
Deferred Inflows of Resources should be recorded in the General Fund, since
these revenues are considered “unavailable” under the modified accrual basis of
accounting used in governmental funds. Interest and penalties should be recorded
as Deferred Inflows of Resources, rather than interest and penalties revenue, in
the General Fund. At the government-wide level, the property taxes continue to be
included in current year revenue, and interest and penalties are also recorded as
current year revenue at the government-wide level.)

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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.
17. [Para. 4a-17] In view of unexpected revenue and expenditure developments the
city council revised the budgets for the current year as shown below:

Budget Adjustments
Estimated Revenues:
Property Tax $ 40,000 increase
Sales Tax 25,000 decrease
Interest and Penalties 25,000 decrease

Appropriations:
Public Safety $ 10,000 decrease
General Government 5,000 increase

Required: Record the budget amendments in the General Fund general journal
only. Budgetary items do not affect the government-wide accounting records.
(Note: Select “Budget Amendment” in the [Description] field in the Detail
Journal.)

Post all journal entries to the general and subsidiary ledgers: After reviewing
all entries for accuracy, including year and paragraph numbers, post all entries to
the general ledger accounts and to all subsidiary ledger accounts, by clicking on
[Post entries]. Also post all entries in the governmental activities journal.

18. [Closing Entry] Following the instructions in the next paragraph, prepare and
post the necessary entries to close the 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 Bingham 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. However, if 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, although entries are not required in
this problem for the next year.

To close the temporary accounts, you must click on the box for [Closing Entry],
“Closing Entry” checkbox will appear next to the [Add credit] field. Be sure the
checkmark in the box for [Closing Entry] is showing as selected before closing
each individual account. Also, with the exception of Estimated Other Financing
Uses—Interfund Transfers Out and Other Financing Uses—Interfund Transfers
Out, you will be sent to the Detail Journal where you must close each individual
budgetary or operating statement account. To determine the closing amounts for
both General Ledger and subsidiary ledger accounts, you should first print the
pre-closing version of these ledgers for year 2020 from the [Reports] menu.

15
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whole or part.
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. (Note: You should consider the beginning of year balances in fund
balance accounts in calculating the amounts to be reclassified.)

Account Amount
Fund Balance—Assigned—Culture and Recreation $57,650
Fund Balance—Assigned— Health and Welfare 25,000
Fund Balance—Committed—Public Safety 12,300
Fund Balance—Committed—Public Works 33,790
Fund Balance—Nonspendable—Inventory of Supplies 12,000

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 or other
worksheet of the General Fund post-closing trial balance as of December 31,
2020. Use Excel or other spreadsheet software to prepare in good form a balance
sheet for the General Fund as of December 31, 2020. Follow the format shown in
Illustration 4-4 of Reck, Lowensohn, and Neely, Accounting for Governmental
and Nonprofit Entities, 18th edition textbook (hereafter referred to as “the
textbook.”)

c. Select [Export] from the drop down [File] menu to create an Excel worksheet of
the General Fund pre-closing subsidiary ledger account balances for the year
2020. Use Excel or other spreadsheet software to prepare in good form a
statement of revenues, expenditures, and changes in fund balances for the General
Fund for the year ended December 31, 2020. (See Illustration 4-5 in the textbook
for an example format.)

d. Refer to the General Fund pre-closing subsidiary ledger account balances found in
part c above to prepare in good form a statement of revenues, expenditures, and
changes in fund balances—budget and actual for the General Fund for the year
ended December 31, 2020. (See Illustration 4-6 in the textbook for an example
format.) Note that the change in inventory balance and accompanying change in
nonspendable fund balance (see 4a-15) must be included on this statement.

e. Prepare a reconciliation of total expenditures reported in your solution to part c of


this problem with the total expenditures and encumbrances reported in your

16
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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.
solution to part d of this problem. (See example in Chapter 4 of the textbook
which compares Illustrations 4-5 and 4-6.)

[Note: File the printouts of all your exported or printed documents and your
completed financial statements in your cumulative problem folder until
directed by your instructor to submit them, unless your instructor specifies
submission of 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.

17
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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.
Chapter 5 Recording Capital Asset and Capital Project Transactions
City Hall Annex Construction Fund and Governmental Activities at the
Government-wide Level

During fiscal year 2019, the voters of the City of Bingham approved the issuance of 3
percent tax-supported serial bonds in the face amount of $7,500,000 to construct and
equip an annex to the City Hall. The bonds are to mature in blocks of $312,500 every six
months over a 12-year period commencing January 1, 2021.

Required

a. Prepare general journal entries as necessary to record the following transactions in the
general journals of the City Hall Annex Construction Fund and, if applicable, in the
governmental activities general journal at the government-wide level. Do not record
entries at this time in any other affected funds; those entries will be made in later
chapters of this cumulative problem that cover those funds. Use account titles listed
under the drop-down [Account] menu. Be sure the year 2020 is selected from the
dropdown [Year] menu and the appropriate paragraph number shown in bold-face
font below is in the [Description] field.

1. [Para. 5a-1] On the first day of the 2020 fiscal year (January 1, 2020), the bond
issue was sold at 101. Cash in the face amount of the bonds, $7,500,000, was
deposited in the City Hall Annex Construction Fund; the premium was deposited
in the debt service fund, as required by state law.

Required: Record these transactions in the City Hall Annex Construction Fund
and governmental activities journals. (Hint: In addition to recording the liability
for 3% serial bonds payable in the governmental activities journal, you should
record the premium on the bonds payable [credit Premium on Serial Bonds
Payable] in the governmental activities general journal.) Wait until instructed in
Chapter 6 to make the corresponding entry in the debt service fund.

2. [Para. 5a-2] The city invested $5,000,000 of the bond proceeds in 90-day notes.

Required: Record this transaction in both the City Hall Annex Construction
Fund and governmental activities general journals.

3. [Para. 5a-3] The City Hall Annex Construction Fund purchased land for the
annex for $450,000. This amount was vouchered.

Required: Record this transaction in both the City Hall Annex Construction
Fund and governmental activities general journals. In the governmental activities
general journal at the government-wide level, this purchase should be debited to
Land. (Note: This transaction was not encumbered.)

18
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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.
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.

19
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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.
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.

20
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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.
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.

21
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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.
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

22
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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.
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.

23
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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.
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.

24
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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.
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.

25
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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.
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.

26
© 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.
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.

27
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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.
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

28
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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.
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.

29
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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.
[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.

30
© 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.
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.)

31
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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.
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.)

32
© 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.
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.

33
© 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.
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

34
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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.
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.

35
© 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.
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--

36
© 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.