Portfolio Project

Read the information contained in the Portfolio Project Instructions. Prepare the audit report, using this template, 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 unqualified) rendered. If you have been maintaining a cumulative file, assemble all required printed reports and financial statements in the proper sequence in one MSWord document. You may submit only one document for the Portfolio Project, so all of your work needs to be contained in that one document. Label your answers clearly and use APA for formatting and citation as required.                1     For use with McGraw-Hill/Irwin  Accounting for Governmental & Nonprofit Entities  16 th  Edition   By Jacqueline L. Reck, Suzanne L. Lowensohn, and Earl R. Wilson     Instructions  City of Bingham       Computerized Cumulative Problem    Table of Contents   Chapter 1 Introduction and Use of the City of    Smithville/City of Bingham Software ……………………………..  3  Project Instructions and Information ……………………………….. 13   Chapter 2 Opening the Books ……………………………………... 14  Chapter 3 Recording the Annual Budget …………………………. 19  Chapter 4 Recording Operating Transactions   the General Fund and Governmental Activities   at the Government-wide Level ……………………………………. 21  Chapter 5 Recording Capital Assets and    Capital Projects Transactions ………………………………………. 27  Chapter 6 Transactions Affecting General    Long-term Liabilities and Debt Service …………………………… 30  Chapter 7 Recording Transactions Affecting   the Enterprise Fund and Business-type   Activities …………………………………………………………… 34  Chapter 8 Recording Transactions Affecting a   Fiduciary Fund—an Investment Trust Fund ……………………… 38  Chapter 9 Adjusting and Closing Entries for   Governmental Activities, Government-wide    Level; Preparation of Government-wide and    Major Fund Financial Statements …………………………………. 41  Chapter 10 Analysis of Financial Condition ………………………. 43  Chapter 11 Preparation of Audit Report …………………………… 43  Appendix A ………………………………………………………… 44     2  CHAPTER 1  INTRODUCTION AND USE OF THE CITY OF SMITHVILLE/CITY OF BINGHAM SOFTWARE  Welcome  Thank you for purchasing the City of Smithville/City of Bingham Governmental Accounting Software.  This software is designed to be used with the McGraw-Hill/Irwin textbook Accounting for Governmental and Nonprofit Entities, 16 th  Edition.  System Requirements   To use the City of Smithville/City of Bingham accounting software application, you must have the following:    Operating System:  Microsoft® Windows 2000 or later  Mac OS X  v10.4 or 10.5  Linux Red Hat® Enterprise Linux (RHEL) 5   Hardware:  Windows ®: Intel® Pentium® II 450MHz or faster processor (or  equivalent)  Macintosh: PowerPC® G3 500MHz or faster processor;                            Intel Core™ Duo 1.33GHz or faster processor   Recommended screen resolution of 1024 x 768 minimum  128MB of RAM minimum  Spreadsheet program (in order to easily view the exported CSV files)  Excel 2003 or later (in order to view the exported Excel files)  Internet Explorer 7 or later, Mozilla Firefox 3.x or later, Safari 3.x or later  Adobe Flash Player version 10.1 or above  Adobe Reader 9 or later to read saved report files   Special instruction for MAC and Linux users:  Users have to manually open the program.html file that resides in the Smithville_Bingham folder because start instructor is an .exe file and will run only in Windows environment.  Licensing   This manual was written for use with the City of Bingham application.  The manual and the software described in it are copyrighted, with all rights reserved.  This manual and the City of Smithville/City of Bingham software may not be copied,   3  except as otherwise provided in your software license or as expressly permitted in writing by McGraw-Hill Higher Education, Inc.   Use of the City of Smithville/City of Bingham governmental accounting software (the “Software”) and its documentation are governed by the terms set forth in your license.  Such use is at your sole risk.  The software and its documentation (including this manual) are provided “AS-IS” and without warranty of any kind.   [Note: Read the following instructions on pages 4-11 before beginning your first assignment.  Refer back to this information as needed.]  RUNNING OR REMOVING THE CITY OF BINGHAM  Running the City of Bingham  The City of Bingham can be started by clicking on the Smithville_Bingham folder as indicated in the “Opening the City of Bingham” instructions below.  As the City of Bingham is a web-based application, it need not be installed onto your local computer. However, the software is downloaded as a .zip file, copied to your computer or a removable medium (i.e., CD/DVD, USB flash drive, etc.), unzipped, and run locally on your Web browser.   As computers are often configured differently, you may need to change your Adobe Flash Player Security settings in order to run the City of Bingham. For more information and detailed instructions, please see Appendix A.   You may exit the program by clicking the "X" button at the top right corner of the browser. However, before closing the browser window you MUST SAVE your work or else all changes will be lost.   Removing the City of Bingham    You can remove the City of Bingham by deleting the Smithville_Bingham folder.  It is unnecessary to uninstall the software.   GENERAL OPERATING INSTRUCTIONS  Opening the City of Bingham  You can open the City of Bingham at any time by clicking on the Smithville_Bingham folder and then clicking on either the Program or Start icon. The application requires the Web Browser pop-up blocker be turned off in order to run the application properly.    4  Creating a New Project  If you will need the instructions for the Bingham project before creating a new project, click on the appropriate file on the Launch window or on “Open Instructions in the opening window. Open or print the project instructions file. To create a new project, click on “Create New Project.” The Create New Project window will appear, as shown below.       Enter your first and last name, then select City of Bingham as your project and click [Create].  The main project window will pop-up once the project is created and you will be ready to begin entering journal entry data for your first assignment. This step creates the accounts and funds that you will need to complete the “City of Bingham” project. After you have completed the journal entries for each assignment, you should save your project data file in the Projects folder located in the Smithville_Bingham folder that was created when the download file was unzipped.  For your own protection against hard-drive failure or file corruption, we recommend that you create a dated backup file on a removable device (CD/DVD/USB Flash Drive) or a server at the end of each session. This will permit you to reopen your project to the current stage of completion should you make serious errors on the next session.  Opening an Existing Project  After your initial data entry session, click on “Open Existing Project,” and then select and open the data file you saved at the end of your first session.   Saving the Current Project  During, or at the end of each assignment, click on <File and <Save/Save As.  If a filename has already been specified, the current filename should be displayed in the Save dialog but may be changed if desired.  Be sure NOT to exit your browser   5  until you have saved your project file or all changes made during the current session will be lost.   6  City Of Bingham Main Window  If you have opened a project file, the main project window should appear as follows:        To navigate between the Journal, Account, and Ledgers screens, simply click on the [TAB] for that particular screen.  To switch between different funds and governmental activities, government-wide, choose the desired entity from the drop-down menu.  You can verify which entity you are working on by the caption on the upper right corner of the window.  It will show the title of your project, and the current fund you are in.  The main window has the same standard window controls as most other applications.  To close down your project, simply click on the [X] box.  It is very important, however, that you save your project file before closing the browser.  Remember the folder location where you save your file so it will be easier to retrieve it when you want to reopen the file.    7  Adding and Posting Journal Entries  If you are looking at the main window, you need to switch to the Journal view before you can add any journal entries.  Once you have switched to the Journal view, you will see the journal entry panel on the lower portion of the window.      Before ANY entry can be added to the journal, a transaction description, account #-description, and debit or credit must be specified.    Once you have filled in the necessary fields, simply click on [Add Entry] to add the entry to the journal.  If the entry being made is a closing entry, you must click on the check mark for [Closing Entry].   If one of the fields is missing a value or contains an illegal character, the [Add Entry] button will remain disabled.  If you are adding an entry that also affects a detail journal, you must first select an item from the drop-down [Transaction Description] or type your own description in the box before selecting the account and select the corresponding control account from the drop-down [Account (# - Account Description)] menu. If the account selected is a control account, the detail journal will automatically open for entering the transaction detail.   Once you have entered a batch of entries into the general journal, you can post them to the general ledger at any time by clicking the [Post Entries] button.  In the case of the General Fund, posting transactions also posts entries from the detail journal to the Revenue ledger and Appropriations, Encumbrances, Expenditures ledgers. The [Post Entries] button only posts entries for the fund/entity that is currently open.    8  Editing/Deleting/Unposting Journal Entries  To edit entries that have already been entered, double click or right click on the entry, and select edit.  You will know you are in edit mode when the entry form turns red and the boxes fill in with the data from the journal. If you wish to delete an entry, right click on the item and select [Delete] or choose [Edit]-[Delete].  As in real-world systems, the software usually does not allow you to edit entries that have already been posted. So, it is recommended that you verify the accuracy of entries before clicking [Post Entries].  However, for your convenience we have added the capability to “unpost” individual batches of posted transactions.  Simply highlight any entry within the batch you want to unpost and either right click and select [Unpost] or select [Unpost] from the Edit menu.  Make all necessary editing changes to the appropriate accounts then click [Post Entries] and your corrections will be made to the appropriate accounts.  If you need to add an entry to a previously posted journal entry, then unpost as described above, highlight the line below which a new entry is to be added, and right click and select “Insert New Entry.”   Screen shot of “right clicking” on a journal entry.       Enter the data for the new entry and click “Add Entry” to insert the new entry. As in prior versions, a provision also allows you to clear all of the transactions from the current fund or entity.  Under [File]-[Student Assistance] you will find the option [Wipe out Current Fund or Entity].  The wipe out function should be used as a last resort since making changes by editing is quite easy.  Once you select this option, there is no going back.  It will remove ALL of the transactions for the current fund or entity.   9  Working with the Ledger Screen  Switch to the Ledgers screen by clicking on the Ledger tab.        Switch entities at any time by changing the selection. Depending on the fund or entity on which you are working, there may be different ledgers for you to view.  Choose the ledger you want to view from the drop-down list.    If you want to print out a ledger, you should open the [Reports] menu, and select the report to print.   Working with the Detail Journal Screen  The General Fund of the City of Bingham uses a Detail Journal to avoid recording operating or budget detail in the general journal/ledgers.  If you choose a control account that has subsidiary detail associated with it, you will be taken directly to the Detail Journal.  If you attempt to edit a journal entry that has associated subsidiary detail, you will automatically be prompted to also open the Detail Journal for editing, if desired.    The Detail Journal screen for the General Fund appears as shown on the following page.    10       The Detail Journal operates very similar to the entry screen on the General Journal.  Fill in the boxes or, in the case of the [Transaction Description] box, select a description from the drop-down menu, and click [Add Entry].  The balance of the entries for this transaction is automatically updated.  When you exit the Detail Journal the balance will be copied into a single control account amount in the General Journal. Please note that the year and reference numbers of these transactions are based on the originating entry (the line in the General Journal).   Printing Reports (Not preferred)  All of the reports for the City of Bingham are available through the Reports menu.  Simply go to the menu and click on the report you want.  To print, click on the “Print” icon and print in the normal manner.  If you need to create a “Save as Printable PDF File,” accept the default file name and save location, or change the name and/or location if you prefer.     11  Exporting Trial Balances (Preferred Method)  To make it easier to prepare financial statements/schedules, spreadsheet files for all trial balances for each entity and each year of transactions, as well as detail subsidiary account balances (General Fund only), can be exported to either Excel or CVS for non-Microsoft applications. To export an item, select it from the <File <Export menu, add the instruction number before the default file name and folder location, and save it.  You can change the file name and/or location if you prefer.  For example, the Excel output file from instruction Chapter 2 – letter “b” should be named “2b-Post-Closing Trial Balance to Excel—General Fund—2013”.   12  Instructions and Information for Completing Chapters 2 through 10 and 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 Wilson, Accounting for Governmental and Nonprofit Entities, 16  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 Wilson, Accounting for Governmental and Nonprofit Entities, 16  Edition.   If you have not yet read the Chapter 1 instructions for using the City of Bingham software program, you should do so before beginning the project.  When finished reading those instructions, begin the project with Chapter 2 of the instructions as you complete Chapter 2 of the textbook.   Some problems require you to export trial balances or other documents.  Other problems require the preparation of financial statements.  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 attach your project data file and a spreadsheet file containing your trial balances, financial statements, and other required documents to an e-mail for submission.    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.   13  th th 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. Accounts are provided for both budgetary and operating statement accounts and balance sheet accounts for the General Fund, as well as accounts needed for governmental activities at the government-wide level.  Accounts are also provided as appropriate for all other funds used by the City of Bingham, which 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, 2013, so that all transactions can be recorded for the next fiscal year beginning January 1, 2014.      Required  Open the City of Smithville/City of Bingham software by double clicking on the Smithville_Bingham folder and then clicking on either the Program or Start icon. When the Launch 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 Bingham 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 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 a removable device (e.g., flash drive), or location other than your hard drive, creating a dated 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 should see all of the following general ledger accounts listed (Note: For purposes of this exercise, date suffixes are omitted from the Expenditures and Encumbrances accounts as expenditures from two year’s appropriations do not occur in this problem.)   Cash Taxes Receivable—Current Estimated Uncollectible Current Taxes Taxes Receivable—Delinquent  Estimated Uncollectible Delinquent Taxes   14  Interest and Penalties Receivable on Taxes Estimated Uncollectible Interest and Penalties Due from Other Funds Due from State Government Inventory of Supplies Vouchers Payable Tax Anticipation Notes Payable Due to Other Funds Due to Federal Government Due to State Government Fund Balance—Nonspendable—Inventory of Supplies Fund Balance—Restricted—General Government Fund Balance—Restricted—Public Safety Fund Balance—Restricted—Public Works Fund Balance—Restricted—Health and Welfare Fund Balance—Restricted—Culture and Recreation Fund Balance—Committed—General Government Fund Balance—Committed—Public Safety Fund Balance—Committed—Public Works Fund Balance—Committed—Health and Welfare Fund Balance—Committed—Culture and Recreation Fund Balance—Assigned—General Government Fund Balance—Assigned—Public Safety Fund Balance—Assigned—Public Works Fund Balance—Assigned—Health and Welfare Fund Balance—Assigned—Culture and Recreation Fund Balance—Unassigned Budgetary Fund Balance Encumbrances Outstanding Estimated Revenues Revenues Appropriations Estimated Other Financing Uses—Interfund Transfers Out Expenditures Other Financing Uses—Interfund Transfers Out Encumbrances   b.  The post-closing trial balance for the General Fund of the City of Bingham as of December 31, 2013, is shown on the following page.  Select the [Journal] view 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] view.  For this entry you should enter 2-b. Select the appropriate accounts individually and insert the appropriate amounts.  (Note: Enter all dollar   15  amounts without dollar signs and without commas.  For all entries, it is vitally important that the correct year be selected.)     You must 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 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.   Unpost capability.  As discussed in Chapter 1 of these instructions, the City of Smithville/City of Bingham software program permits students to “unpost” a particular batch of posted transactions.  Unposted entries then can be edited or missing entries can be inserted before re-posting entries.    Export the post-closing trial balance for year 2013 and save in the Excel template.   CITY OF BINGHAM General Fund Post-closing Trial Balance  As of December 31, 2013 General Ledger        Account Title        Debits Credits Cash       $    110,000 Taxes Receivable—Delinquent 470,000 Estimated Uncollectible    Delinquent Taxes  $   42,500 Interest and Penalties    Receivable on Taxes 23,690 Estimated Uncollectible    Interest and Penalties   1,304 Vouchers Payable  394,000 Due to Other Funds    13,000 Fund Balance—Assigned—General Government  30,560 Fund Balance—Committed—Public Safety  15,200 Fund Balance—Committed—Public Works  28,300 Fund Balance—Unassigned             78,826    Totals $  603,690 $  603,690  c.  Select [Governmental Activities—Government-Wide] in the [Current    Accounting Entity] drop-down menu and the [Accounts] view tab.  You will see all of the accounts included in the trial balance on the next page, plus many other accounts that will be used in the various chapters of the City of Bingham project.  d.  Select the [Journal] view and create a journal entry to enter the statement of net position (i.e., balance sheet) accounts and amounts shown in the governmental   16    activities, government-wide post-closing trial balance presented on the next page.  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 [Year] 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.    CITY OF BINGHAM Governmental Activities, Government-wide Level  Post-closing Trial Balance As of December 31, 2013         Account Title        Debits Credits Cash $   1,090,000 Taxes Receivable—Delinquent 554,000 Estimated Uncollectible    Delinquent Taxes  $      98,500 Interest and Penalties    Receivable on Taxes 31,290 Estimated Uncollectible Interest and Penalties   2,064 Land 1,100,000 Improvements Other than Buildings 9,000,000 Accumulated Depreciation—Improvements     Other Than Buildings  2,100,000 Infrastructure 29,190,000 Accumulated Depreciation—Infrastructure  11,280,000 Buildings 9,300,000 Accumulated Depreciation—Buildings  2,100,000 Equipment 7,600,000 Accumulated Depreciation—Equipment  3,664,000 Vouchers Payable  394,000 Accrued Interest Payable on Long-term Debt   360,000 Internal Payables to Business-type Activities   13,000 Current Portion of Long-term Debt   600,000 6% Serial Bonds Payable   11,400,000 Net Position—Net Investment in Capital Assets   25,046,000 Net Position—Restricted for Debt Service   654,840  Net Position—Unrestricted           152,886      Totals $57,865,290 $57,865,290  e.  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.   f.  Export the trial balance according to the instructions on page 18   17      Before closing the City of Bingham click on [File] and [Save/Save As] to save your work.  Your work is NOT automatically saved.      18    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, 2014.   Estimated Revenues:  Property Taxes  $6,000,000  Sales Taxes 250,000  Interest and Penalties on Taxes  44,000  Licenses and Permits  477,000  Fines and Forfeits  603,000  Intergovernmental Revenue    500,000  Charges for Services  360,000  Miscellaneous Revenues           125,000   Total Estimated Revenues  $8,359,000      Appropriations:  General Government  $1,510,000   Public Safety  3,370,000  Public Works  1,450,000  Health and Welfare  965,000  Culture and Recreation  770,000  Miscellaneous          95,000   Total Appropriations  $8,160,000   Estimated Other Financing Uses:  Interfund Transfers Out $     90,000  Required  a.  Launch the program and select [Open Existing Project] and then select the file you  saved at the end of your Chapter 2 session.  Select [General Fund] in the [Current Accounting Entity] drop-down menu, if it is not already displayed. Select the [Journal] tab.  In the [Year] menu, be sure to select the year 2014.  Enter 3-a in the [Transaction Description] box and record the budget adopted for fiscal year 2014. Begin by selecting “Estimated Revenues” in the drop down [Account #-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   19  Estimated Revenues control account.  Follow the same procedure to record the budget detail for Appropriations. Complete the General Journal entry by crediting “Estimated Other Financing Uses—Interfund Transfer Out,” and 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, so 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 Entry].  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, an unposted entry can be edited or deleted, and any omitted entry can be inserted above a highlighted unposted entry.    b.  Go to [Reports], export the pre-closing subsidiary ledgers and pre-closing trial  balance for year 2014 following the export and naming convention described on page 18.  As of this time, only the budget has been recorded.  (Note: To ensure that your saved files are not erased when year-end trial balances or subsidiary ledger account balances are saved in Chapter 4, you should add “_after Ch3” to your saved file names.  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, click on [File], and [Save/Save As] to save your work.  Your work is NOT automatically saved.   20  Chapter 4  Recording Operating Transactions Affecting the General Fund and Governmental Activities at the Government-wide Level    Presented below are a number of transactions that the City of Bingham made during the 2014 fiscal year; the fiscal year for which the budget given in Chapter 3 was recorded.   Launch the software program and select [Open Existing Project] and open the project data file you saved at the end of your Chapter 3 session. Read and follow these 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 last.  If you choose the latter method, it might be useful to export 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 (16  Edition) for guidance in making all entries.   For each entry affecting budgetary accounts or operating statement accounts, you will be sent to the Detail Journal, as was the case in Chapter 3, to record the appropriate amounts in the detail budgetary or actual accounts. Be sure to record the paragraph number (e.g., 4-a-1) in the [Transaction Description] window for each entry.   1. [Para. 4-a-1] Tax anticipation notes were issued in the amount of $400,000.  2. [Para. 4-a-2] Property taxes were levied in the amount of $6,200,000.  It is  estimated that 3 percent of the tax will be uncollectible.   3. [Para. 4-a-3] The General Fund paid $350,000 on the vouchers payable that were outstanding at the end of FY 2013.   4. [Para. 4-a-4] Purchase orders, contracts, and other commitment documents were  issued in the following amounts for the following functions:   General Government  $   394,900  Public Safety  1,143,000  Public Works  915,420  Health and Welfare 663,600  Culture and Recreation  461,080  Miscellaneous                                86,000       Total  $3,664,000   21  th 5. [Para. 4-a-5] The General Fund collected the following amounts in cash: Delinquent Taxes, $418,000; Interest and Penalties Receivable on Taxes, $20,860; Sales Taxes, $251,000; Licenses and Permits, $468,000; Fines and Forfeits, $605,000; Intergovernmental Revenues, $500,000; Charges for Services, $351,000; and Miscellaneous Revenues, $110,500.  (Note: For the General Fund detail revenue accounts, select “Received in Cash” from the drop-down [Transaction Description] menu.)  For governmental activities at the government-wide level, all Licenses and Permits and Charges for Services were attributable to the General Government function.  Fines and forfeits were collected by General Government departments in the amount of $285,000 and by Public Safety departments in the amount of $320,000. Intergovernmental Revenues should be credited to “Program Revenues—General Government—Operating Grants and Contributions.”   6. [Para. 4-a-6] The General Fund paid the $13,000 reported as Due to Other Funds at  the end of FY 2013.  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.)   7. [Para. 4-a-7] Delinquent taxes receivable in the amount of $26,000 were written  off as uncollectible. Interest and penalties accrued on these taxes in the amount of $1,300 were also written off.   8. [Para. 4-a-8] Collections of current year property taxes totaled $5,964,000.    9. [Para. 4-a-9] General Fund payrolls totaled $4,199,100. Of that amount, $553,400  was withheld for employees’ federal income taxes, $316,000 for employees’ FICA tax liability, and $88,100 for state income taxes; the balance of $3,241,600 was paid in cash. Encumbrances are not used for payroll. The payroll amounts by function are as follows:    General Government  $ 1,135,066  Public Safety  2,047,942  Public Works  497,464  Health and Welfare 263,538  Culture and Recreation       255,090       Total  $4,199,100   10. [Para. 4-a-10] A liability was recorded in the amount of $321,000 for the city’s  share of FICA taxes, applicable to functions in the amounts shown below.    General Government  $ 86,343  Public Safety    157,363  Public Works    37,842  Health and Welfare  20,047  Culture and Recreation      19,405       Total  $321,000   22   11. [Para. 4-a-11] Invoices for goods and services ordered in transaction 4-a-4 were  received.  One of the invoices received was for $51,500 of playground equipment ordered by Culture and Recreation. The equipment meets the city’s threshold for capitalization.  Vouchers were recorded for the following actual amounts: (Note: At the government-wide level, expenditures charged to miscellaneous are reported as Expenses—General Government.)      Actual  Estimated  General Government  $   399,940  $   392,060  Public Safety  1,123,650  1,128,600  Public Works  902,300  907,620  Health and Welfare  681,200  663,600  Culture and Recreation  438,750  452,000  Miscellaneous       83,600         85,000       Totals  $3,629,440  $3,628,880    12. [Para. 4-a-12] The General Fund paid its liability for employees’ federal and state  income taxes withheld and the total liability for FICA taxes.  13. [Para. 4-a-13] The General Fund transferred $90,000 to the debt service fund so  the debt service fund could make a bond interest payment. (Note: Because this transaction involves two governmental funds it is not recorded in the governmental activities journal. Do not record this transaction in the debt service fund until instructed to do so in Chapter 6 of this case.)   14. [Para. 4-a-14] Tax anticipation notes issued by the General Fund were paid at maturity at the face amount plus interest of $10,000. For the General Fund charge Miscellaneous for the interest expenditure.  At the government-wide level, debit Expenses—Interest on Tax Anticipation Notes.   15. [Para. 4-a-15] The General Fund paid vouchers during the year in the amount of  $3,500,000.   16. [Para. 4-a-16] The General Fund recorded liabilities of $40,000 to other funds for services received from the Water Utility Fund during the year. Of this amount, $31,000 should be charged to Public Safety and $9,000 to General Government.  At the government-wide level, you should credit Internal Payables to Business-type Activities. (Note: Do not record this transaction in the Water Utility Fund until instructed to do so in Chapter 7 of this case.)   17. [Para. 4-a-17] The balances in the current taxes receivable and related estimated  uncollectibles accounts were reclassified as delinquent. Interest and penalties of   23  $52,480 were recorded on the delinquent taxes, of which $10,500 was estimated to be uncollectible.   18. [Para. 4-a-18]  In view of unexpected revenue and expenditure developments the  city council revised the budgets for the current year as shown below:    Budget Adjustments          Inc. (Dec.)                            Estimated Revenues:  Licenses and Permits $ (10,000)  Charges for Services (6,000)  Miscellaneous Revenue  (15,000)          Appropriations:  General Government  125,000  Public Safety  5,000  Public Works  (4,000)  Health and Welfare 0  Culture and Recreation  (46,000)  Miscellaneous 0    19. [Review and Post all Entries] 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.   20. [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—Interfund Transfers Out accounts to Budgetary Fund Balance; and Revenues, Expenditures, and Other Financing Uses—Interfund Transfers Out 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 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, 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   24  budgetary or operating statement account.  To determine the closing amounts for both General Ledger and subsidiary ledger accounts, you should first export the pre-closing version of these ledgers for year 2014 into an Excel file.    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—General Government  $55,660 Fund Balance—Assigned—Culture and Recreation  7,500 Fund Balance—Committed—Public Safety  11,400 Fund Balance—Committed—Public Works  36,790     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, 2014.  Use Excel or other spreadsheet software 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 or other worksheet  of the General Fund pre-closing subsidiary ledger account balances for the year 2014.  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, 2014. (See Illustration 4-4 in the textbook for an example format.)   d. Use the Excel or other worksheet of the General Fund pre-closing subsidiary ledger account balances created 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, 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. (See example in Chapter 4 of the textbook following Illustration 4-5, which compares Illustrations 4-4 and 4-5.)   25    [Note: Copy the exported files into the appropriate worksheet (tab) of the Excel template until directed by your instructor to submit them, unless your instructor specifies submission of computer files via e-mail.]   Before closing the City of Bingham click on [File] and [Save/Save As] to save your work.  Your work is NOT automatically saved.   26  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 2013, the voters of the City of Bingham approved the issuance of 3 percent tax supported bonds in the face amount of $6,000,000 to construct and equip an annex to the City Hall. The bonds are to mature in blocks of $250,000 every six months over a 12-year period commencing January 1, 2015.   Required     a. Record the following transactions in the general journals of the City Hall Annex  Construction Fund and governmental activities 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 #-Account Description] menu.  Select 2014 for each transaction in the [Year] menu of the [Journal] view.  Enter the paragraph reference; i.e., 5-a-(1, 2, 3, etc.), corresponding to each transaction in the [Transaction Description] box.  The following account titles should appear in the [Accounts] view:  Cash Investments Special Assessments Receivable—Current Interest Receivable on Investments Vouchers Payable Judgments Payable Contracts Payable Contracts Payable—Retained Percentage Fund Balance—Restricted   Encumbrances Outstanding Revenues Other Financing Sources—Proceeds of Bonds Construction Expenditures Interest Expenditures Other Financing Uses—Interfund Transfers Out Encumbrances  Please remember that before closing the City of Bingham, you must click on [File], and [Save/Save As] to save your work.  Your work is NOT automatically saved.   1. [Para. 5-a-1] On the first day of the 2014 fiscal year (January 1, 2014), the bond  issue was sold at 101.  Cash in the face amount of the bonds, $6,000,000, was deposited in the City Hall Annex Construction Fund; the premium was deposited in   27  the debt service fund, as required by state law.   Make the appropriate entries in the general journals of the Capital Projects Fund and governmental activities at the government-wide level.  Wait until instructed in Chapter 6 to make the corresponding entry in the debt service fund.   2. [Para. 5-a-2] The city invested $3,000,000 of the bond proceeds in 90-day notes.   3. [Para. 5-a-3] The City Hall Annex Construction Fund purchased land for the annex for $500,000.  This amount was vouchered.  In the governmental activities general journal at the government-wide level, this purchase should be debited to Land.   4. [Para. 5-a-4] A contract for architectural services was signed at an estimated  amount of $320,000 for the design of the City Hall Annex.   5. [Para. 5-a-5] Legal and other capitalizable costs of the bond issue were vouchered in the amount of $100,000.   6. [Para. 5-a-6] Preliminary plans were received (related to the contract signed in  paragraph 5-a-3) for which architectural fees of $75,000 were vouchered.   7. [Para. 5-a-7] Advertisements soliciting construction bids were vouchered at a cost of $4,000.    8. [Para. 5-a-8] Vouchers payable were recorded in the amount of $260,000 for the  final architectural plans and specifications for the construction project (see para. 5-a-4).    9. [Para. 5-a-9] Construction bids were opened and analyzed. A contract was signed  with the firm that submitted the winning bid of $4,000,000.  A provision of the contract permits the city to withhold 5 percent of payment pending final acceptance of the completed project.    10. [Para. 5-a-10] The 90-day notes matured, paying $11,250 in interest (see para. 5-a-2).  The interest should be recorded as general revenue in the governmental activities journal.   11. [Para. 5-a-11] The contractor submitted a billing for $2,000,000. This amount was  recorded as a contract payable.    12. [Para. 5-a-12] The contractor’s billing (see para. 5-a-11) was paid, less a 5 percent retained percentage.    13. [Para. 5-a-13]  All pending vouchers were approved and paid.      28  14. [Para. 5-a-14] Furniture and equipment for the annex were ordered at an estimated total cost of $685,000.   15. [Para. 5-a-15] The contractor completed construction, submitted the final bill, and  requested payment of the balance due.  A liability was recorded in the amount of $2,300,000.   16. [Para. 5-a-16] After final inspection, a final payment was made to the contractor,  including the amount retained in para. 5-a-12.   17. [Para. 5-a-17] Furniture and equipment were received (see para. 5-a-14) at a total cost of $681,500.  Invoices were vouchered for payment.  In the governmental activities general journal, you should debit Equipment.   18. [Para. 5-a-18] The City Hall Annex Construction Fund paid all outstanding  liabilities on December 31, 2014.  The completed building was recorded in the governmental activities general journal.  Remaining cash in the City Hall Annex Construction Fund was transferred to the debt service fund.  (Note: Record the transfer of cash in the City Hall Annex Construction Fund general journal.  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.)   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 2014 and post them to the fund’s general ledger.  (Note: Be sure to click on the check mark for [Closing Entry] and that “Closing Entry” appears in the [Transaction Description] box for the accounts 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 2014 to an Excel or other 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, 2014.  (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.). Export the pre-closing trial balance according to the instructions on page 18.  (Note: A balance sheet is not required since the capital project fund was closed prior to end of FY 2014.)   [Note: Copy the exported files into the appropriate worksheet (tab) of the Excel template until directed by your instructor to submit them, unless your instructor specifies submission of computer files via e-mail.]     29  Chapter 6  Transactions Affecting General Long-Term Liabilities and Debt Service   a. 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, 2013, one issue of tax-supported serial bonds was outstanding.   The post-closing trial balance of the debt service fund as of December 31, 2013, is shown below.  The issue of tax-supported serial bonds outstanding on December 31, 2013, amounted to $12,000,000.  Bonds of this issue in the amount of $600,000 mature on January 1 of each year. This bond issue bears interest at the annual rate of 6 percent, payable on January 1 and July 1 of each year. The cash balance of the debt service fund on December 31, 2013, is restricted for the repayment of tax- supported bond principal and interest payments, such as the principal maturing on January 1, 2014, and bond interest due in 2014.    Required:  Record the following accounts and balances in the debt service fund general journal, selecting 2013 from the [Year] menu and using para. 6-a for the [Transaction  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, 2013    Debits  Credits  Cash  $   980,000  Taxes Receivable—Delinquent  84,000  Estimated Uncollectible Delinquent   $   56,000   Taxes     Interest and Penalties Receivable               7,600              on Taxes    Estimated Uncollectible Interest   760              and Penalties  Fund Balance—Restricted         1,014,840   Totals  $1,071,600  $1,071,600   Additional Information:  On January 1, 2014, 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   30  was $6,000,000, sold at 101. The issue bears interest at the annual rate of 3 percent, payable on January 1 and July 1 of each year; bonds in the amount of $250,000 will mature on January 1, 2015, and every six months thereafter until maturity.  The premium on these bonds will be amortized using the effective interest rate method. Cash for the payment of interest in 2014 will be provided by the General Fund (see Chapter 4).   Please remember that before closing the City of Bingham, you must click on [File], and [Save/Save As] to save your work.  Your work is NOT automatically saved.   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 in the drop down Account #-Account Description menu for each of these accounting entities.  Be sure to select 2014 from the [Year] menu of the [Journal] view.  Enter the appropriate paragraph number shown below in bold-face font in the [Transaction Description] box.    1.  [Para. 6-b-1] From the data given about the bond issue already outstanding on  January 1, 2014, and the City Hall Annex Construction Fund bond issue sold on that date, record the adoption of the legal budget for the fiscal year ended December 31, 2014. The budget provides for estimated revenues of $1,600,000 from property taxes, $7,000 of interest and penalties on taxes, and $17,000 of earnings on investments.  It also provides for estimated other financing sources for premiums on bonds of $60,000 and interfund transfers in from the General Fund of $90,0000.  Appropriations of $1,392,000 were provided for the payment of bond principal of $600,000 maturing on January 1, 2014 and $792,000 for bond interest payments due on January 1, 2014, and July 1, 2014 (.03 X $12,000,000 + .03 X $11,400,000  + .015 X $6,000,000).    2. [Para. 6-b-2] Taxes were levied by the debt service fund in the amount of  $1,620,000. Of this amount, $20,000 was expected to be uncollectible.  3. [Para. 6-b-3] Cash in the amount of the $60,000 premium on the bonds sold on  January 1, 2014 was received and recorded in the debt service fund. The premium will be amortized in governmental activities at the government-wide level but not in the debt service fund.  In the debt service fund journal entry, you should credit Other Financing Sources—Premium on Bonds for the entire $60,000.  The credits for this entry in the governmental activities general journal were made as part of the requirements for Chapter 5.   4.  [Para. 6-b-4] Temporary investments were purchased in the amount of $50,000.    31  5. [Para. 6-b-5] Checks were written and mailed to bondholders for bonds maturing on January 1, 2014, and to pay all bond interest due that day.  In the governmental activities general journal, debit Accrued Interest Payable as these amounts were expensed on December 31, 2013, the end of the preceding fiscal year.   6. [Para. 6-b-6] Current taxes receivable were collected in the amount of $1,030,000.   Also, delinquent taxes receivable were collected in the amount of $8,000, along with Interest and Penalties Receivable on Taxes of $700.   7. [Para. 6-b-7] Temporary investments were purchased in the amount of $900,000.  8. [Para. 6-b-8] Interest on temporary investments was received in cash in the amount  of $7,000.  9. [Para. 6-b-9] Temporary investments amounting to $400,000 were sold at par.  10. [Para. 6-b-10] On July 1, the debt service fund received $90,000 from the General  Fund for interest payment on the 3% serial bonds.  Checks were written and mailed to bondholders for all of the interest payments due July 1, 2014. At the government-wide level, $1,827 was debited for amortization of the premium on bonds sold for the 3% serial bonds.   11. [Para. 6-b-11] Current taxes of $520,000, delinquent taxes of $9,000, and interest  and penalties on taxes of $815 were collected.   12. [Para. 6-b-12] The uncollected balance of current taxes receivable and the related  estimated uncollectible account were reclassified as delinquent.  Interest and penalties of $1,200 were accrued, of which $120 was estimated to be uncollectible.   13. [Para. 6-b-13] Cash to close the City Hall Annex Construction Fund was received  in the amount of $90,750. (See Chapter 5, Para. 5-a-18).  The city council authorized a budget amendment for this unexpected transfer.   14. [Para. 6-b-14] At December 31, 2014, interest on temporary investments was  accrued in the amount of $8,000. Record in the debt service fund and the governmental activities journal.   15. [Para. 6-b-15] At December 31, 2014, 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 $1,854.     16. Verify the accuracy of journal entries, including dates and paragraph numbers, and,  if you have not already done so, post all entries to the general ledger of both the debt service fund and governmental activities by clicking on [Post Entries].  Make the entries needed to close the budgetary and operating statement accounts at the   32  end of fiscal year 2014.  Make this entry only in the journal for the debt service fund.  Since the resources of the debt service fund are restricted for principal and interest payments, the nominal accounts should be closed to Fund Balance—Restricted.  Be sure for each account being closed that the check mark for [Closing Entry] is on and that “Closing Entry” appears in the [Transaction Description] box.  (Note: Closing entries for governmental activities at the government-wide level will be made in Chapter 9 of this cumulative problem.)   c.  Export the pre-closing and post-closing trial balances for the debt service fund as of  December 31, 2014 according to the instructions on page 18.  Copy the exported files into the appropriate worksheet (tab) of the Excel template until directed by your instructor to submit them, unless your instructor specifies submission of computer files via e-mail.    d.  Export the post-closing trial balance for year 2014 to an Excel or other worksheet to  prepare a balance sheet for the debt service fund as of December 31, 2014.    e.  Export a pre-closing trial balance for year 2014 to an Excel or other worksheet to  prepare a statement of revenues, expenditures, and changes in fund balance for the debt service fund for the year ended December 31, 2014.    f.  Use the same trial balance exported in item e above to prepare a statement of revenues,  expenditures, and changes in fund balance—budget and actual for the debt service fund for the year ended December 31, 2014.   g.  Assuming that the assessed valuation of property within the City of Bingham is  $400,000,000, and the legal general obligation debt limit is 10 percent of assessed valuation, compute the legal debt margin of the city as of December 31, 2014. Prepare a schedule in good form showing calculation of the legal debt limit, debt subject to the limit, and debt margin. (Note: Since there is no requirement stating what amount of the restricted fund balance must be dedicated to principal versus interest payment, do not include the amount of restricted fund balance in your calculations.) (See Illustration 6-3 for an example).   [Note: Copy the exported files into the appropriate worksheet (tab) of the  Excel template until directed by your instructor to submit them, unless your instructor specifies submission of computer files via e-mail.]   33  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, 2013, follows:   CITY OF BINGHAM  Water Utility Fund Trial Balance  As of December 31, 2013    Debits  Credits  Cash  $    284,904  Restricted Cash—Customer Deposits  57,200  Customer Accounts Receivable  160,440  Accumulated Provision for    Uncollectible Accounts  $      4,720  Inventory of Supplies 94,146  Due from Other Funds 13,000  Utility Plant in Service 19,000,390  Accumulated Depreciation—   Utility Plant  4,011,278  Construction Work in Progress 1,189,400  Vouchers Payable  72,420  Customer Deposits  57,200  Accrued Interest Payable  434,100  6% Revenue Bonds Payable  14,470,000  Unamortized Bond Discounts      on Revenue Bonds Payable 65,200  Net Position, Net Investment in Capital   Assets   1,773,712  Net Position, Unrestricted            41,250   Totals   $20,864,680  $20,864,680   Additional information:  The following information is provided about accounts shown on the December 31, 2013, trial balance:  Accrued Interest Payable represents six months’ accrual of interest on the 6 % revenue bonds payable. Interest is payable semiannually on January 1 and July 1 of each year. Unamortized 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 $65,200 is to be amortized over 20 years commencing in 2014.   34  Required   a. Prepare general journal entries to record the December 31, 2013, accounts and balances for the Water Utility Fund, selecting the corresponding accounts from drop-down [Account #-Account  Description] menu.  Be sure to enter 7-a as your paragraph number in the [Transaction Description] box and enter the appropriate paragraph number for all subsequent journal entries.  Verify accuracy of your journal entries and post to general ledger by clicking [Post Entries].  Unless your instructor specifies e-mail submission, export a post-closing trial balance as of December 31, 2013 and retain in your cumulative Excel template file until directed by your instructor to turn it in.  Note that 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, 2014.  Be sure to enter the paragraph number shown for each transaction in the [Transaction Description] box.   1. [Para. 7-b-1] Bond interest due on January 1, 2014 was paid to holders of the 6%  revenue bonds.  2. [Para. 7-b-2] Billings to customers for water service for the year totaled $3,026,700.  Billings to the City of Bingham General Fund for water service totaled $40,000.  3. [Para. 7-b-3] Collections from customers totaled $2,981,100; $13,000 was also  received from the city’s General Fund.  4.  [Para. 7-b-4] A $725,000 contract was signed for a construction project expected to  cost $970,000. Water utility employees will complete $245,000 of the project.  5. [Para. 7-b-5] Materials and supplies were ordered and received during the period in  the amount of $520,400. 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. 7-b-6] Payrolls were paid totaling $670,530 for operations; $166,400 for  maintenance; and $70,500 for construction.  7. [Para. 7-b-7] Materials and supplies issued during the period amounted to $245,000  for operations; $102,000 for maintenance; and $166,000 for construction.    35  8. [Para. 7-b-8] Bond interest due on July 1, 2014 was paid. As part of the journal entry, 1/40 th  of the Unamortized Bond Discount on Revenue Bonds Payable should be amortized.   9. [Para. 7-b-9] Interest of $29,000 that was recorded as an expense was determined to  have been incurred during construction and should be charged to Construction Work in Progress.    10. [Para. 7-b-10] A progress billing for $435,000 was received from the construction  contractor and paid.  11. [Para. 7-b-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 $902,600.   12. [Para. 7-b-12] Collection efforts were discontinued on bills amounting to $4,050;  the customers owing the bills had paid deposits and interest to the water utility in the amount of $1,350. (Note: Remember to adjust cash accounts for amounts no longer restricted.)   13. [Para. 7-b-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 $3,050 were refunded by check to customers discontinuing service. (Note: Remember to adjust cash accounts for amounts no longer restricted.) Deposits totaling $6,904 were received from new customers.   14. [Para. 7-b-14] Vouchers Payable paid during the year amounted to $332,800 for  operating supplies and $166,000 for materials used in construction, or $498,800 in total.   15. [Para. 7-b-15] Interest paid on customer deposits amounted to $1,256 (charge  Operation Expense). This interest was added to the customer deposit accounts, and the restricted cash and cash accounts were adjusted.    16. [Para. 7-b-16] 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). The Accumulated Provision for Uncollectible Accounts should equal $5,820 at year-end. 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.   17. 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 2014 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   36  in the [Transaction Description] box.  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 2014, and use  Excel or other spreadsheet software to prepare a statement of net position for the Water Utility Fund as of December 31, 2014.   e. Click on [File]-[Export] to export a pre-closing trial balance for year 2014, and use   Excel or other spreadsheet software to prepare a statement of revenues, expenses, and changes in net position for the Water Utility Fund for the year ended December 31, 2014.  Interest Expense should be considered a nonoperating item.    f. Use the post-closing trial balance for year 2013 exported in paragraph 7-a and the trial  balances from parts d and e above and use Excel or other worksheet to prepare a statement of cash flows for the Water Utility Fund for the year ended December 31, 2014.  Save your project data file and create a dated backup file on a removable device before exiting the browser.   [Note: Copy the exported files into the appropriate worksheet (tab) of the Excel template until directed by your instructor to submit them, unless your instructor specifies submission of computer files via e-mail.]       37       Chapter 8 Recording Transactions Affecting a Fiduciary Fund—An Investment Trust Fund    The city council of the City of Bingham decided in late 2014 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 2015, 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 R4 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 2015 in the Investment  Pool Fund. Do not forget to click on [Year] to change the date to 2015.   Please remember that before closing the City of Bingham, you must click on [File], and [Save/Save As] to save your work.  Your work is NOT automatically saved.   1. [Para. 8-a-1] On March 1, 2015, the Investment Pool Fund was formally  established with the receipt of $190,000 in cash from the city’s own debt service fund, plus receipt from the Bingham CSD of bonds having a market value of $605,000 on this date.  The bonds purchased by the Bingham CSD had a book value of $600,000 on March 1, 2015. The bonds receive semi annual interest of 5 percent per annum, on July 1 and January 1 each year.  The CSD’s equity is to also be credited for $5,000, which represents the two months of interest receivable on the bonds for January and February 2015.    2. [Para. 8-a-2] The Investment Pool Fund manager purchased 4 percent bonds  on March 1 in the amount of $150,000.  Because the bonds pay interest semi-annually on January 1 and July 1, $1,000 in accrued interest was also paid. (Note: Interest Receivable on Investments should be debited for the accrued interest.)    3. [Para. 8-a-3] On March 1, the Investment Pool Fund manager also purchased    a 9-month certificate of deposit (CD) for $30,000.  The interest rate on the CD is 1 percent per annum.   38  4. [Para. 8-a-4] On July 1, interest on the bonds in the amount of $18,000 ($15,000 and $3,000) was received in cash. (Note: Adjust for accrued interest.)    5. [Para. 8-a-5] On November 30, the 9-month CD matured and interest was  received.   6. [Para. 8-a-6] On December 31, interest was accrued on bond investments.   7. [Para. 8-a-7]. On December 31, the fair value of investments in bonds was $760,000. (Note: Credit Undistributed Change in Fair Value of Investments for the increase in fair value.)   8. [Para. 8-a-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. 8-a-9]. Subsequent to the distribution of earnings and changes in fair  value, the Bingham CSD withdrew $100,000 to meet certain obligations coming due.  To provide the cash needed for the withdrawal, the Investment Pool Fund manager sold 5 percent bonds on December 31 for $100,000, plus interest of $2,500, receiving in total $102,500 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 and  post-closing entries to close the temporary accounts.  Be sure and click on the check mark for [Closing Entries] and check that “Closing Entry” appears in the [Transaction Description] box for each account 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 $100,000 withdrawal on December 31, 2015.  Round calculations to four decimal places.     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 $100,000 withdrawal on December 31, 2015.  Round calculations to four decimal places.   e. Export the post-closing trial balance and prepare a statement of net position for the  Investment Pool Fund as of December 31, 2015. (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 A2-10.)   Export the pre-closing trial balance for this fund and prepare a statement of changes in net position for the Investment Pool Fund for the year ended December 31, 2015.   39  (Note: Follow the format of Illustration A2-11.)  [Note: Copy the exported files into the appropriate worksheet (tab) of the Excel template until directed by your instructor to submit them, unless your instructor specifies submission of computer files via e-mail.]      40  Chapter 9  Adjusting and Closing Entries for Governmental Activities, Government-Wide Level; Preparation of Government-Wide and Major Fund Financial Statements   Before the 2014 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. 9-a] Record depreciation expense for the year 2014 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  $   640,000 Public Safety 1,280,000 Public Works 480,000 Health and Welfare 320,000 Culture and Recreation       320,000  Total depreciation expense $3,040,000   Depreciation Applicable to Asset Categories (Increases in accumulated depreciation): Improvements Other Than  Buildings $  180,000 Infrastructure      580,000  Buildings    460,000 Equipment   1,820,000  Total depreciation expense $3,040,000    b. [Para. 9-b] Provide the journal entries to reclassify the current portion of long-term  debt related to the 5% and 3% 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: [Closing Entries] Provide the journal entries required on December 31, 2014, 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.  (Note: Be sure to deduct accrued interest on long-term debt in calculating the December 31, 2014 balance of Net Position—Restricted for Debt Service.)  For each account to be closed or reclassified, be sure the check mark for [Closing Entry] is on and that “Closing Entry” appears in the [Transaction   Description] box.  Post the closing entries to the general ledger by clicking on [Post Entries].   d. Use the exportable trial balances used in Chapters 2 through 7 of this problem, and the exportable pre-closing trial balance and post-closing trial balance for governmental activities, to prepare all government-wide and fund financial statements that must be presented by the City of Bingham in order for its basic financial statements to be in conformity with generally accepted accounting principles. (See the list that follows this paragraph and Illustrations 9-3 through 9-8 and Illustrations A2-1 through A2-9 of the Reck, Lowensohn and Wilson textbook for examples of these statements.) We recommend that you use Excel or other spreadsheet software 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 change in the titles of the statements, to meet the requirement of all proprietary type funds and Business-type Activities in the government-wide financial statements. Finally, The City of Bingham is a primary government and has no other organizations for which it is accountable as component units.    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   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, 2014, using appropriate ratios such as the Crawford and Associates ratios illustrated in Chapter 10 of the textbook.  For purposes of calculating per capita ratios, assume the population of the City of Bingham is 50,000.  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.       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 unqualified) 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.      43       Appendix A - Adobe Flash Player Security Settings  When first starting the Smithville_Bingham program in a browser, an Adobe Flash Player Security warning pop-up might show up:  Click on "Settings..." button to be directed to the Adobe Flash Player™ Settings Manager and select "Always allow" radio button to allow the player working properly:       Comment: The above screenshots are the result of the default features of the Flash player, which are common across all the platforms. Whenever a user is getting a pop-up message, the setting needs to be changed as shown in the above screenshot.      
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