Exam 4: Recognizing Revenues in Governmental Funds

A city levies a 2 percent sales tax. Sales taxes must be remitted by the merchants to the city by the twentieth day of the month following the month in which the sale occurred. Cash received by the city related to sales taxes is as follows: Assuming the city uses the same period to define "available" as the maximum period allowable for property taxes, what amount should it recognize in the government-wide financial statements as sales tax revenue for the fiscal year ended 12/31/17?

A city that has property taxes of $720,000 (of which 10 percent are estimated to be uncollectible) which are levied in October 2016 to finance the activities of the fiscal year 2017. During 2017, cash collections related to property taxes levied in October 2016 were $600,000. In 2018 the following amounts related to the property taxes levied in October 2016 were collected: January $30,000; March, $6,000. For the fiscal year ended 12/31/17, what amount should be recognized as property tax revenues related to the 2016 levy on the governmental fund financial statements?

Unrestricted grant revenues with a time requirement should be recognized

Under GAAP, income tax revenues should be recognized in the government-wide financial statements in the accounting period

A city that has a 12/31 fiscal year end has adopted a policy of recognizing property tax revenue consistent with the 60-day rule allowable period under GAAP. Property taxes of $600,000 (of which none are estimated to be uncollectible) are levied in October 2016 to finance the activities of fiscal year 2017. Property taxes are due in two installments June 20 and December 20. Cash collections related to property taxes are as follows: The total amount of property tax revenue that should be recognized in the governmental fund financial statements in 2017 is:

A city levies a 2 percent sales tax that is collected for them by the state. Sales taxes must be remitted by the merchants to the state by the 20^th day of the month following the month in which the sale occurred. The state has a policy of remitting sales taxes to the city within 30 days of collection by the state. Cash received by the state related to sales taxes is as follows: Assuming the city uses the same period to define "available" as the maximum period allowable for property taxes, what amount should it recognize as sales tax revenue in its governmental fund financial statements for the fiscal year ended 12/31/17?

If an entity elects to focus on all economic resources, then it should adopt a modified accrual basis of accounting.

Under GAAP, property taxes levied in one fiscal period to finance the activities of the following fiscal period are recognized as revenue in the governmental fund financial statements

A city that has property taxes of $720,000 (of which 10 percent are estimated to be uncollectible) which are levied in October 2016 to finance the activities of the fiscal year 2017. During 2017, cash collections related to property taxes levied in October 2016 were $600,000. In 2018 the following amounts related to the property taxes levied in October 2016 were collected: January $30,000; March $6,000. For the fiscal year ended 12/31/17, what amount should be recognized as property tax revenues related to the 2016 levy on the government-wide financial statements?

An anonymous benefactor has pledged to give the state a gift of $100,000 without criteria for the state to meet. There is no reason to believe that the benefactor will not honor their pledge. The government should recognize revenue as

The City of Jolie maintains its books and records in a manner that facilitates the preparation of fund financial statements. Prepare all necessary journal entries to record the city's investment income and related transactions for the year 2017. The city has a 12/31 fiscal year-end. All of the City's investments are required to be reported at fair value. The beginning securities portfolio held by the general fund was as follows: a.) Dividends received related to investments held in the general fund, $75. b.) On March 1, Security B is sold for $105. c.) On April 1, Security E is purchased for $145 d.) On May 1 Security D is sold for $140. e.) On December 31, necessary adjusting entries are made to recognize appropriate amounts of gains/losses associated with the securities. The market values of the securities at year-end were as follows:

For fund financial statements, the measurement focus and basis of accounting used by governmental fund types are

Under GAAP, property taxes levied in one fiscal period to finance the activities of the following fiscal period are recognized as revenue in the government-wide financial statements

The revenue-recognition issues facing governments are generally focused on the exchange transaction earning process, like those of businesses.

GASB suggests that income tax revenues should be recognized in the governmental fund financial statements in the accounting period

Under the modified accrual basis of accounting, derived nonexchange revenues are recognized when

Governmental activities tend to derive most of their revenues from foreign exchange transactions.

Answer the following questions with regard to the preparation of fund financial statements. At fiscal year-end, a city holds an investment portfolio in its general fund that has a fair market value of $15 million and a historical cost of $28 million. The portfolio had a fair value of $18 million at the beginning of the current fiscal year. The portfolio is composed of a variety of bonds with a face value $29 and a due date five years in the future. The bonds were acquired to meet a $29 million debt due five years in the future. a.) At what amount should the portfolio be valued on the balance sheet? b.) What amount, if any, should appear on the operating statement? c.) Defend the valuation method required by GAAP. d.) Argue against the valuation method required by GAAP. e.) At what amount would the city want to record these investments on its financial statements for the current year? Why?

In accounting for property taxes, under the modified accrual basis, existing standards provide that, except in unusual circumstances, revenues should be recognized only if cash is expected to be collected by year-end.

During 2017, a state has the following cash collections related to state income taxes Assuming that the state defines "available" as the maximum period allowable for property taxes, what is the amount of revenue that will be recognized in the 2017 governmental fund financial statements related to state income taxes?