Exam 3: Issues of Budgeting and Control

Washington County received goods that had been approved for purchase but for which payment had not yet been made. Should the following accounts be increased?

A governmental entity has formally integrated the budget into its accounting records and uses encumbrance accounting. During the year the government ordered but had not yet received a new police car. What effect will this event have on the unencumbered balance in the account "Expenditures-capital outlay, police department"?

Per GASB standards, a budget-to-actual comparison must include columns for the actual results and

Which of the following bases of accounting has been established by GASB for use in the preparation of the general fund budget?

A governmental entity has formally integrated the budget into its accounting records. At year-end the ledger account "Estimated Revenues" has a debit balance. Which of the following is the best explanation for the debit balance?

Which of the following is NOT true about cash basis budgeting?

The City of Lakeview adopts its budget on a basis of accounting that permits outstanding purchase commitments to be charged against the budget in the year that the goods are ordered instead of in the year they are received. During 2018, the city received $4,000 of supplies (of which $3,000 had been ordered in 2018 and $1,000 was ordered in 2017) and had $500 of outstanding purchase commitments for supplies at year-end. In the budget-to-actual comparison, the expenditures for supplies would be:

To close Reserve for encumbrances at the end of the year which of the following entries should be made?

The following schedule shows the amounts related to supplies that the City of Pascal debited and Credited to the indicated accounts during the year (not necessarily year-end balances), before closing entries. The city records its budget, encumbers all of its expenditures, and initially vouchers all payments. All revenue was collected in cash. REQUIRED: Some information is missing in the schedule below. Determine the missing data by reconstructing (in summary) the journal entries the city must have made during the year.

The Breast Cancer Fund, a not-for-profit organization, receives its funding primarily from government grants and private contributions. In turn, the Fund provides resources to other organizations and individuals for breast cancer research. Many of the government grants it receives are reimbursement-type. That is, the Fund must incur specific costs to be eligible for grants that reimburse those costs. The Fund makes the following estimates as to its next fiscal year: a. It will be awarded $7 million in government grants; all but $0.5 million will be received during the fiscal year. The balance will be reimbursed in the first six months after year-end. The Fund will also receive $0.2 million in reimbursement grants related to the previous year. b. It will receive $600,000 in pledges from private donors. It expects to collect $450,000 during the year and $125,000 in the following year. It estimates that $25,000 will never be received. It also expects to collect $80,000 in pledges made the prior year. c. It will pay $7 million for outside research. d. It will purchase new computer equipment costing $100,000. The Fund currently owns its own building, which it had purchased for $800,000, and additional furniture and equipment that it acquired for $250,000. The building has a useful life of twenty years; the furniture and equipment have useful lives of 5 years. It is the Fund's policy to record a full year of depreciation expense in the year that assets are placed in service. e. Employees will earn wages and salaries of $340,000, of which they will be paid $320,000 during the year and the balance in the next year. The Fund will also pay another $15,000 in payroll costs incurred in the prior year. f. It will pay the $75,000 insurance deductible on an employee-related lawsuit settled the previous year. g. It will incur operating costs of $90,000, of which it will pay $70,000 during the year and $20,000 in the following year. It will also pay another $10,000 in costs incurred in the previous year. REQUIRED: 1. Prepare two budgets, one on the cash basis, the other on the full accrual basis. Show both on the same schedule-the full accrual basis in the first column and the cash basis in the second column. 2. Comment on which budget better shows whether the Breast Cancer Fund is covering the economic cost of the services it provides. 3. Which budget is likely to be more useful to Breast Cancer Fund managers?

Many governments formally integrate the budget into the accounting system. Explain how this is accomplished. Also, explain why a government would formally integrate the budget into the accounting system.

In what way will budgetary entries and encumbrances affect amounts reported in year-end GAAP balance sheets and operating statements of state and local governments?

A city received supplies that had been previously encumbered. The supplies were encumbered for $5,000 and had an actual cost of $4,900. To recognize this event the county should make which of the following entries?

During the previous year, Bane County closed its Encumbrances account. At the end of the previous year there was $5,000 of outstanding purchase commitments. To restore these commitments to the accounts, which of the following entries would be required?

A public school district formally adopted a budget with estimated revenues of $800 and approved expenditures of $780. Which of the following is the appropriate entry to record the budget?

At year-end Oakland County had $3,000 of outstanding purchase commitments on the books. After the appropriate closing entries are made, what is the effect on the total fund balance of Oakland County?

For most governments, the "variance" column on general fund budget-to-actual statements is likely to report relatively small amounts. Do you agree? Explain.

GASB requires that government entities present their budget-to-actual comparison data on which of the following bases of accounting?

Which of the following is a primary benefit of a performance budget?

Assume that the County of Katerah maintains its books and records in a manner that facilitates preparation of the fund financial statements. The county formally integrates the budget into the accounting system and uses the encumbrance system. All appropriations lapse at year-end. At the beginning of the fiscal year, the county had the following balances in its accounts. All amounts are in thousands. REQUIRED: Prepare the necessary entries for the current fiscal year. (a) The county made the appropriate entry to restore the prior-year purchase commitments. (b) The county board approved a budget with revenues estimated to be $800 and expenditures of $750. (c) The county received the items that had been ordered in the prior year at an actual cost of $135. (d) The county ordered supplies at an estimated cost of $50 and equipment at an estimated cost of $70. (e) The county incurred salaries and other operating expenses during the year totaling $600. The county paid these items in cash. (f) The county received the equipment at an actual cost of $75. (g) The county earned and collected, in cash, revenues of $810.