Exam 5: Recognizing Expenditures in Governmental Funds

Star City leased a bulldozer for use in activities accounted for in the general fund. The city paid $40,000 and agreed to pay $40,000 per year for 3 years. The bulldozer has a useful life of six years. The lease qualified as a capital lease. Assuming that the city maintains is books and records in a manner that facilitates the preparation of the government-wide financial statements, the appropriate entry at the date of acquisition would be

When accounting for inventory items in a governmental fund, GASB standards permit the use of the consumption method only.

Campbell County uses the consumption method to record all inventories and prepayments. The County has a 9/30 fiscal year-end. On April 1, 2018, the county purchased a two-year insurance policy at a total cost of $400,000, paying for the policy out of the general fund. In the fund financial statements, the amount of insurance expenditures for the fiscal year ended 9/30/18 would be

Paid vacations, paid sick leave, and pensions are employee benefits frequently offered by governments. Discuss the reporting requirements related to each of these benefits and explain, if necessary, any differences between reporting for vacation pay earned but unused, sick leave earned but unused, and pensions earned during the current period.

State University, a public university, has a policy of granting faculty members a one-year paid sabbatical leave after a period of seven years continuous employment. The leave is for further study, research, or public service. A particular faculty member earns $90,000 per year. Assuming that the college maintains its books and records in a manner that facilitates the preparation of government-wide financial statements and assuming that any appropriate accruals have been made, what is the appropriate entry to record the employee's salary paid while on sabbatical leave?

A state government has the following transactions during its fiscal year ending June 30, 2018. The state defines "available" as within 60 days after year-end. REQUIRED: Prepare journal entries to record each of these transactions in the state's general fund. Comment on how each of these transactions would be different when reported in the state's government-wide financial statements. a. The state issues $50 million of 30-year debt to finance renovations to its capitol building. Due to changes in interest rates, the state receives only $49.2 million in cash. b. The state workers earn $40 million in wages during the year. However, in an effort to balance its budget, the state defers payment of $2 million in wages until July 5, 2018. c. Required contributions for pension benefits for 2015 are $7 million, which the state transfers to its pension trust fund. d. The state makes grants of $4.5 million based on a formula to school districts within its boundaries. The schools must use these grants to finance operating expenditures incurred during the current fiscal year. e. The state agrees to share $6.0 million of its 2018 sales (derived tax) revenues with all towns within its boundaries based on a formula established by the legislature. The resources must be used by the towns during the state's next fiscal year (2019). f. During the fiscal year, the state makes interest and principal payments of $18 million on its bonded debt.

The following schedule shows the amounts related to supplies that a city debited and credited to the indicated accounts during a year (not necessarily the year-end balances), excluding closing entries. The organization records its budget, encumbers all of its expenditures, and initially vouchers all payments. It accounts for supplies on a purchases basis. A. Some information is missing. Determine the missing data by reconstructing the entries that the organization made during the year.. You need not show the entries; simply fill in the blanks. The city began the year with $5,000 of supplies in inventory and ended the year with $6,500. B. Assume instead that the city accounts for supplies on a consumption basis. 1. Which of the above amounts (assuming that appropriations remained unchanged) would be different? What would be the new value(s)? 2. When applying the consumption method, some governments either elect or are required to offset "supplies inventory" with "fund balance - nonspendable" rather than "fund balance -unassigned." What is the rationale for such practice? C. The mayor of the city requests your advice as to whether it is actually necessary to (1) incorporate the budget into the accounting system and (2) use fund accounting. What is your response?

This year, Port City was sued for injuries sustained when a citizen slipped and broke her hip on the icy City Hall steps. The city attorney estimates the city will be held liable by the courts and a judgment of $300,000 will result. Because of the nature of the case it will likely be four years before the city makes any payment related to the accident. The present value of the likely future payment is $251,000. In the government-wide financial statements, at the end of the current fiscal year, Port City should recognize a liability of

Culver City recognizes as revenues/expenditures those amounts collected/paid during the year or within 60 days of fiscal year-end. The city offers a pension benefit to its employees who meet certain age and years of employment criteria. The city participates in the State Pension Plan. Per its contractual arrangement, the city's required contribution to the State Pension Plan for the fiscal year ended 6/30/18 is $5 million. Due to cash inflow shortages the city, which budgeted $5 million for pension contributions, paid only $4 million in the fiscal year ended 6/30/18. The city paid the remaining amount on September 30, 2018. Assuming the city maintains its books and records in a manner that facilitates the preparation of its fund financial statements, how should the city record the pension contribution and any associated liability for the year ended 6/30/18?

Shoshone County uses the consumption method to account for supplies. At the beginning of the year the city had no supplies on hand. During the year the city purchased $450,000 of supplies for use by activities accounted for in the general fund. The city used $300,000 of those supplies during the year. At fiscal year-end, the appropriate account balances on the general fund financial statements would be

Which of the following funds would use the accrual basis of accounting in preparing its fund financial statements?

The amount of pension expense that a government should recognize in its government-wide financial statements during the current year is

On July 1, Gilbert County bought computer equipment for use in the administrative offices of the county. The equipment has an estimated useful life of three years and salvage of $10,000. The county has a 6/30 fiscal year-end. Assuming that the county maintains its books and records in a manner that facilitates the preparation of fund financial statements, the $85,000 cost of this equipment would require which of the following entries?

Governmental fund liabilities are considered current only when they must be liquidated with expendable available financial resources

Harris County transferred $300,000 from the general fund to the Motor Pool Internal Service Fund to pay for the use of automobiles during the first six months of FY 2018. The appropriate entry in the general fund to record this transfer of cash would be

The City of Holbrook transferred $100,000 from the general fund to a debt service fund for payment of interest. The appropriate entry in the general fund to record this transfer would be

Most governments budget (appropriate) resources for principal and interest only for the period in which a payment is due-not for future payments.

The City of Upper Falls accounts for its inventory using the purchases method. During the year the city bought $500,000 of supplies, for which it owed $100,000 at year-end. The city will pay for the supplies from available expendable financial resources. The entry that should be recorded in the city's general fund is

State employees earn $10 million in vacation leave. $7 million is paid in the current year and the remaining amount is deferred to future years. Which of the following the accounts will be credited in the general fund entry and the government-wide entry?

Employees of the general fund of Scott City earn ten days of vacation for each 12 months of employment. The city permits employees to carry the vacation days forward as long as they wish. During the current year employees earned $800,000 of vacation benefits, of which the city estimates $500,000 will be taken in the next year and the balance will be carried forward. Assuming that the city maintains its books and records in a manner that facilitates the preparation of fund financial statements, which of the following entries should be made in the general fund to record the vacation pay earned during the current period?