I NEED HELP WITH CLOSING ENTRIES CHAPTER 4

Chapter 2 Opening the Books The City of Smithville has just implemented 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 As the citys new accountant (lucky you!), it is your job to enter the citys initial accounting information as of December 31, 2013, and to prepare to place the new accounting system in full operation effective January 1, 2014. Required Open the City of Smithville software by double clicking on the Smithville_Bingham folder and then clicking on either the Program or Start icon. When the Application Page appears, select Launch Application. If creating a new project, click [Create New Project], when the [Create New Project] window appears choose City of Smithville from the [Choose a City] drop down menu. In addition, in the [Enter your name] box please type in your first and last name so that your name will appear on all printable reports and click [Create]. This will create the project and provide all of the funds and accounts that you will need to complete the Short Version City of Smithville cumulative problem. To protect yourself from possible hard drive failure or corruption of your project data file, we recommend that you save your file to a removable storage device (e.g., flash drive), creating a backup file for your project at the end of each session. To open an existing project, click on [Open Existing Project] in the opening window. a. If it is not already displayed, select [General Fund] in the [Current Accounting Entity] window and the [Accounts] tab. Verify that the following accounts are listed. (Note: In addition to the accounts listed below you will see detail accounts that will be used in subsequent chapters for achieving budgetary control and recording revenues and expenditures detail.) Select the [Journal] tab and click the drop down menu for [Account (# - Description)]. You will see many accounts in the list that follows, as well as in the chart of accounts, that will not be required to complete the short version of the problem. (Note: For purposes of this exercise, date suffixes are omitted from the Expenditures and Encumbrances accounts as expenditures occur only from a single years appropriations.) You should use only the accounts that are needed to complete the short version project. In addition, certain entities (the Solid Waste Disposal Fund and Tax Agency Fund) are used in the full version of the City of Smithville project but not in the short version. You should ignore these entities. Cash Taxes ReceivableCurrent Estimated Uncollectible Current Taxes Taxes ReceivableDelinquent Estimated Uncollectible Delinquent Taxes Interest and Penalties Receivable on Taxes Estimated Uncollectible Interest and Penalties Due from Other Funds Interfund Loans ReceivableCurrent Due from State Government Inventory of Supplies Vouchers Payable Tax Anticipation Notes Payable Due to Other Funds Interfund Loans PayableCurrent Due to Federal Government Due to State Government Fund BalanceNonspendableInventory of Supplies Fund BalanceRestrictedGeneral Government Fund BalanceRestrictedPublic Safety Fund BalanceRestrictedPublic Works Fund BalanceRestrictedHealth and Welfare Fund BalanceRestrictedCulture and Recreation Fund BalanceCommittedGeneral Government Fund BalanceCommittedPublic Safety Fund BalanceCommittedPublic Works Fund BalanceCommittedHealth and Welfare Fund BalanceCommittedCulture and Recreation Fund BalanceAssignedGeneral Government Fund BalanceAssignedPublic Safety Fund BalanceAssignedPublic Works Fund BalanceAssignedHealth and Welfare Fund BalanceAssignedCulture and Recreation Fund BalanceUnassigned Budgetary Fund Balance Encumbrances Outstanding Estimated Revenues Estimated Other Financing Sources Revenues Other Financing SourcesInterfund Transfers In Appropriations Estimated Other Financing Uses Expenditures Other Financing UsesInterfund Transfers Out Encumbrances b. The trial balance of the General Fund of the City of Smithville as of December 31, 2013, 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 (review software operating procedures in Chapter 1 of these instructions if necessary). Be sure to enter 2013 from the drop-down [Year] menu and enter the paragraph number from these instructions in the [Transaction Description] box of the [Journal]. For this entry you should enter 2-b. Select the appropriate accounts individually and insert the appropriate amounts. (Note: Enter all dollar amounts without dollar signs and without commas. 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 Entry]. The year and transaction description need only be entered for the first line of the journal entry; it will remain in the boxes for the rest of the accounts. When you have completed entering all account data and amounts, verify all of 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. Unpost capability. As discussed in Chapter 1 of these instructions, the City of Smithville software program permits students to unpost a particular batch of posted transactions. Unposted entries then can be edited and re-posted. In addition, any omitted entries can be inserted above any selected journal line in any unposted batch of entries. Select [Reports, Trial Balances, Post-Closing Trial Balance] and print the post-closing trial balance for year 2013. 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 by e-mail if directed to do so by your instructor. CITY OF SMITHVILLE General Fund Post-closing Trial Balance As of December 31, 2013 General Ledger Account Title Debits Credits Cash $ 281,410 Taxes ReceivableDelinquent 618,706 Estimated Uncollectible Delinquent Taxes $ 36,890 Interest and Penalties Receivable on Taxes 69,380 Estimated Uncollectible Interest and Penalties 18,226 Due from State Government 125,000 Vouchers Payable 482,844 Due to Federal Government 148,600 Due to State Government 27,300 Fund BalanceCommittedPublic Works 72,600 Fund BalanceAssignedCulture and Recreation 54,850 Fund BalanceUnassigned 253,186 Totals $1,094,496 $1,094,496 c. Select [Governmental Activities, Government-wide Level] in the [Current Accounting Entity] drop-down box and the [Accounts] tab. You will see most of the accounts included in the preceding trial balance, plus many other accounts that will be used in the various chapters of the City of Smithville project. 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 2013 from the drop-down date menu and enter 2-d in the [Transaction Description] box. 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 and click [Post Entries] to post the entry to the governmental activities, government-wide general ledger. Select [Reports, Trial Balances, Post-Closing Trial Balance] and print the post-closing trial balance for 2013, or submit a saved PDF version of the trial balance by e-mail if directed to do so by your instructor. Retain in your cumulative file until the due date for your project or the time specified by your instructor. Before closing the City of Smithville, click on [File], and [Save/Save As] to save your work. Your work is NOT automatically saved. CITY OF SMITHVILLE Governmental Activities Post-closing Trial Balance As of December 31, 2013 General Ledger Account Title Debits Credits Cash $ 281,410 Taxes ReceivableDelinquent 618,706 Estimated Uncollectible Delinquent Taxes $ 36,890 Interest and Penalties Receivable on Taxes 69,380 Estimated Uncollectible Interest and Penalties 18,226 Due from State Government 125,000 Land 4,180,000 Infrastructure 9,862,000 Accumulated DepreciationInfrastructure 2,595,600 Buildings 6,296,000 Accumulated DepreciationBuildings 1,583,000 Equipment 3,529,000 Accumulated DepreciationEquipment 1,342,000 Vouchers Payable 482,844 Due to Federal Government 148,600 Due to State Government 27,300 Net PositionNet Investment in Capital Assets, 18,346,400 Net PositionUnrestricted 380,636 Totals $24,961,496 $24,961,496 Chapter 3 Recording the Annual Budget The following budget for the General Fund of the City of Smithville was legally adopted for the fiscal year ending December 31, 2014. Estimated Revenues: TaxesReal Property $1,646,000 Interest and Penalties on Taxes 7,000 Licenses and Permits 568,000 Fines and Forfeits 420,000 Intergovernmental Revenue 325,000 Charges for Services 230,000 Total Estimated Revenues $3,196,000 Appropriations: General Government $ 631,600 Public Safety 1,136,600 Public Works 935,600 Culture and Recreation 475,200 Total Appropriations $3,179,000 Required a. Record the budget in the general journal, providing entries in the Detail Journal when directed. Begin by selecting [General Fund] in the [Current Accounting Entity] drop-down box and the [Journal] tab. In the [Year] box, be sure to select the year 2014. Enter 3-a in the [Transaction Description] box. Select Estimated Revenues in the drop down [Account (# - Description)] window. This will take you automatically to the Detail Journal where you will enter the detail for each estimated revenue source. In the Detail Journal, select Budget Authorization from the drop-down menu for [Transaction 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 [Return to General 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. Complete the general journal entry by debiting or crediting Budgetary Fund Balance as appropriate to make the journal entry balance. 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 entry correctly, post it to the general ledger by clicking on [Post Entries]. Before posting, or after unposting as described previously, you can edit any of your journal entries by placing the cursor in the line you want to edit, then right-clicking and selecting Edit. If you make too many errors and want to start over from scratch, you can select Student Assistance from the [File] menu and completely wipe out all data from the current fund or entity (i.e., governmental activities, government-wide) on which you are working. Generally, such radical action should be unnecessary given the [Unpost] and [Insert] capabilities of the program, as described previously. After unposting, any entry can be edited or deleted and any omitted entry can be added at the bottom of the journal and moved to the correct location in the journal. b. Go to [Reports], print the pre-closing subsidiary ledgers and pre-closing General Fund trial balance for year 2014 and retain them in your cumulative file until directed by your instructor to submit them, or save and submit these documents by e-mail 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 budgetary 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 Smithville, click on [File], and [Save/Save As] to save your work. Your work is NOT automatically saved. Chapter 4 Recording Operating Transactions Affecting the General Fund and Governmental Activities at the Government-wide Level Presented below are a number of transactions for the City of Smithville that occurred during the fiscal year for which the budget given in Chapter 3 was recorded, the calendar year 2014. Read all instructions carefully. a. 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 2014. 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 next. 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 highly recommend that you refer to the illustrative journal entries in Chapter 4 of the Reck, Lowensohn, and Wilson textbook (16h edition) for guidance in making all entries. For each entry affecting budgetary accounts or operating statement accounts, the Detail Journal will automatically open, as was the case in Chapter 3, to record the appropriate amounts in the detail budgetary or actual accounts. Please remember that before closing the City of Smithville, you must click on [File], and [Save/Save As] to save your work. Your work is NOT automatically saved. 1. [Para. 4-a-1] On January 2, 2014, real property taxes were levied for the year in the amount of $1,697,000. It was estimated that 3 percent of the levy would be uncollectible. Required: Record this transaction in both the General Fund and governmental activities journal. (Note: Type 4-a-1 as the paragraph number in the [Transaction Description] box for this entry; 4-a-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 may have made an error.) (Select Accrued Revenue in the drop down [Transaction Description] menu in the Detail Journal related to the General Fund entry.) 2. [Para. 4-a-2] Encumbrances were recorded in the following amounts for purchase orders issued against the appropriations indicated: General Government $ 98,453 Public Safety 185,259 Public Works 247,675 Culture and Recreation 108,927 Total $640,314 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 [Transaction Description] menu. You can also type in an alternative description, if desired. 3. [Para. 4-a-3] Cash was received during the year in the total amount of $3,469,420 for collections from the following receivables and cash revenues, as indicated: Current Property Taxes $1,546,800 Delinquent Property Taxes 360,000 Interest and Penalties Receivable on Taxes 34,270 Due from State Government 125,000 Revenues: (total: $1,403,350) Licenses and Permits 576,920 Fines and Forfeits 423,360 Intergovernmental 168,000 Charges for Services 235,070 Total $3,469,420 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 Cash in the drop down [Transaction Description] menu in the Detail Journal related to the General Fund revenue entries.) For purposes of the governmental activities entries at the government-wide level assume the following classifications: General Fund Governmental Activities Licenses and Permits Program RevenuesGeneral Government Charges for Services Fines and Forfeits Program RevenuesGeneral Government Charges for Services Intergovernmental Program RevenuesPublic SafetyOperating Grants and Contributions Charges for Services Program RevenuesGeneral Government Charges for Services, $150,100 Program RevenuesCulture and Recreation Charges for Services, $84,970 4. [Para. 4-a-4] Gross General Fund payrolls for the year totaled $2,259,220. Of that amount, $472,040 was withheld for employees' federal income taxes; $166,070 for employees share of FICA taxes; $171,610 for employees state income taxes; and the balance was paid to employees in cash. The City of Smithville does not record encumbrances for payrolls. The payrolls were chargeable against the following functions appropriations: General Government $ 476,376 Public Safety 847,402 Public Works 612,881 Culture and Recreation 322,561 Total $2,259,220 Required: Make summary journal entries for payroll in both the General Fund and governmental activities general journals for the year. 5. [Para. 4-a-5] The citys share of FICA taxes, $166,070, and the city's contribution of $105,380 to retirement funds administered by the state government were recorded as liabilities. Required: Record this transaction in both the General Fund and governmental activities general journals. Assume that the total $271,450 should be allocated in the same proportions as in paragraph 4-a-4 above, rounded to nearest whole dollar: General Government: ($476,376)/$2,259,220 x $271,450 = $57,238 Public Safety: ($847,402/$2,259,220) x $271,450 = $101,817 Public Works: ($612,881/$2,259,220) x $271,450 = $73,639 Culture and Recreation: ($322,561/$2,259,220) x $271,450 = $38,756 6. [Para. 4-a-6] Invoices for some of the goods recorded as encumbrances in transaction 4-a-2 were received and vouchered for payment, as listed below. Related encumbrances were canceled in the amounts listed below (Select Elimination in the drop down [Transaction Description] menu in the Detail Journal): Expenditures Encumbrances General Government $ 93,838 $ 94,752 Public Safety 173,669 173,357 Public Works 241,996 242,512 Culture and Recreation 109,280 108,927 $618,783 $619,548 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 periodic inventory method. Thus, the invoiced amounts above should be recorded as expenses of the appropriate functions, except that $27,800 of the amount charged to the Public Works function was for a vehicle (debit Equipment for this item at the government-wide level). 7. [Para. 4-a-7] During FY 2014, the City of Smithville received notification that the state government would remit $165,000 to it early in the next fiscal year, although this amount is intended to finance certain public safety operations of the current year. This amount had been anticipated and was included in the budget for the current year as "Intergovernmental Revenue, and may be used in the current fiscal year. Required: Record this transaction as a receivable and revenue in the General Fund and governmental activities journals. (Note: Select Accrued Revenue in the [Transaction Description] box in the Detail Journal). At the government-wide level, assume that this item is an operating grant to the Public Safety function. 8. [Para. 4-a-8] Checks were written in the total amount of $2,252,670 during 2014. These checks were in payment of the following items: Vouchers Payable $ 995,600 Due to Federal Government 952,780 Due to State Government 304,290 Total amount paid $2,252,670 Required: Record the payment of these items in both the General Fund and governmental activities general journals. 9. [Para. 4-a-9] Current taxes receivable uncollected at year-end, and the related Estimated Uncollectible Current Taxes account, were both reclassified as delinquent. Required: Record this transaction in the General Fund and governmental activities journals. 10. [Para. 4-a-10] Interest and penalties receivable on delinquent taxes was increased by $11,000; $3,500 of this was estimated as uncollectible. Required: Record this transaction in the General Fund and governmental activities journals. 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. Closing Entry. Following the instructions in the next paragraph, prepare and post the necessary entries to close the Estimated Revenues and Appropriations accounts to Budgetary Fund Balance, and Revenues and Expenditures to Fund BalanceUnassigned. Because the City of Smithville honors all outstanding encumbrances at year-end, it is not necessary to close Encumbrances to Encumbrances Outstanding at year-end since encumbrances do not affect the General Fund balance sheet or statement of revenues, expenses, and changes in fund balances. If, however, you would like to avoid having these accounts appear in the post-closing trial balance, you can opt to close Encumbrances to Encumbrances Outstanding. If the accounts are closed, they would need to be reestablished at the beginning of the next year. To close the temporary accounts, you must click on the check mark for [Closing Entry], Closing Entry will appear in the [Transaction Description] box. Be sure the check mark in the box for [Closing Entry] is showing before closing each individual account. Also, 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 will need to first save and print the pre-closing version of these ledgers for year 2014 from the [Reports] menu. At year-end, an analysis by the citys finance department determined the following constraints on fund balances in the General Fund. Prepare the appropriate closing/reclassification journal entry in the General Fund to reclassify amounts between Fund BalanceUnassigned 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. Be sure the check mark in the box for [Closing Entry] is showing before closing each individual account.) Account Amount Fund BalanceRestricted $15,000 Public Safety Fund BalanceCommitted 29,700 Public Works Fund BalanceAssigned 56,800 Culture and Recreation Note: DO NOT PREPARE CLOSING ENTRIES FOR GOVERNMENTAL ACTIVITIES AT THIS TIME since governmental activities will not be closed until Chapter 9, after the capital projects fund (Chapter 5) and debt service fund (Chapter 6) transactions affecting governmental activities at the government-wide level have been recorded. b. Select Export from the drop down [File] menu to create an Excel worksheet of the General Fund post-closing trial balance as of December 31, 2014. Use Excel to prepare in good form a balance sheet for the General Fund as of December 31, 2014. Follow the format shown in Illustration 4-3 of Reck, Lowensohn, and Wilson, Accounting for Governmental and Nonprofit Entities, 16th 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 2014. Use Excel to prepare in good form a statement of revenues, expenditures, and changes in fund balance for the General Fund for the year ended December 31, 2014. (See Illustration 4-4 in the textbook for an example format.) d. Use the Excel worksheet of the General Fund Pre-Closing Subsidiary Ledger Account Balances created in part c above to prepare in good form a schedule of revenues, expenditures, and changes in fund balancebudget and actual for the General Fund for the year ended December 31, 2014. (See Illustration 4-5 in the textbook for an example format.) 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 solution to part d of this problem. (In Chapter 4 below Illustration 4-5, see discussion and example which compares Illustrations 4-4 and 4-5.) [Note: File the printouts of all your worksheets and your completed financial statements in your cumulative problem folder until directed by your instructor to submit them, unless your instructor specifies submission of computer files via e-mail.] Before closing the City of Smithville, click on [File], and [Save/Save As] to save your work. Your work is NOT automatically saved.