Homework Lance
Answer: The appropriate term is expenditure.
Learning Objective: 16-06
Topic: Expenditures
Difficulty: 1 Easy
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
54. Under modified accrual accounting, when are expenditures recorded?
Answer: Under modified accrual accounting, expenditures are usually recorded when they reduce current financial resources.
Learning Objective: 16-02
Topic: Expenditures
Difficulty: 2 Medium
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
55. What assets would be included in the accounting records of a city’s general fund?
Answer: The assets in the accounting records of a city’s general fund would typically include financial resources such as (1) cash, (2) receivables, and (3) investments other than capital assets.
Learning Objective: 16-02
Learning Objective: 16-04
Topic: Financial statements―Two sets
Topic: Funds―Distinguish the types―Governmental
Difficulty: 2 Medium
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
56. Under modified accrual accounting, when should revenues be recognized by a governmental-type fund?
Answer: Under modified accrual accounting, revenues should be recognized by a governmental-type fund when they are both measurable and available. Revenues are measurable when they are subject to reasonable estimation. Identifying when revenue is available means that current financial resources will be received soon enough in the future to use for payment of current period expenditures. The determination of what is meant by “soon enough” is up to the reporting government. For property taxes to be recognized as revenue in a fiscal year, they must available within sixty days of the fiscal year-end.
Learning Objective: 16-02
Learning Objective: 16-08
Topic: Financial statements―Two sets
Topic: Revenue recognition
Difficulty: 2 Medium
Blooms: Understand
AACSB: Communication
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
57. When should property taxes be recognized under modified accrual accounting?
Answer: Property taxes should be recognized under modified accrual accounting when they are measurable which is when an enforceable claim comes into existence. For property taxes to be recognized as revenue in a fiscal year, they must also be available to pay for current fiscal-year expenditures within sixty days of the fiscal year-end. This would be the period in which they are required to be used or in the first period in which use is permitted.
Learning Objective: 16-02
Learning Objective: 16-08
Topic: Financial statements―Two sets
Topic: Revenue recognition
Difficulty: 3 Hard
Blooms: Understand
AACSB: Communication
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
58. What are the two sets of financial statements mandated by GASB for state and local governments? For each set, what are the names of the individual statements that must be produced?
Answer: GASB requires two sets of financial statements. They are the Government-Wide Financial Statements and the Fund Financial Statements. The Government-Wide Financial Statements include the Statement of Net Position and the Statement of Activities. The Fund Financial Statements include the Balance Sheet and the Statement of Revenues, Expenditures, and Changes in Fund Balance.
Learning Objective: 16-05
Topic: Financial statements―Overview of structure
Difficulty: 2 Medium
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
59. What is the primary difference between monies accounted for in the general fund and monies accounted for in the special revenue fund?
Answer: Monies in the special revenue fund are resources that are restricted or committed for a specific purpose other than debt payments or capital projects. Because of donor stipulations or legislative mandates, there are restrictions that require expenditures be limited to specific operating purposes for public benefit.
Monies in the general fund are unassigned resources, not accounted for in another fund, that are used for public benefit.
Learning Objective: 16-04
Topic: Funds―Distinguish the types―Governmental
Difficulty: 3 Hard
Blooms: Understand
AACSB: Communication
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
60. What are the two proprietary fund types?
Answer: Internal service funds and enterprise funds.
Learning Objective: 16-04
Topic: Funds―Distinguish the types―Proprietary
Difficulty: 1 Easy
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
61. What are the four fiduciary fund types?
Answer: Investment trust funds, private-purpose trust funds, pension trust funds, and agency funds.
Learning Objective: 16-04
Topic: Funds―Distinguish the types―Fiduciary
Difficulty: 2 Medium
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
62. What is the purpose of fund financial statements?
Answer: The purpose of the fund financial statements is to present individual government activities and the amount of financial resources allocated to them as well as the use made of those resources.
Learning Objective: 16-02
Topic: Financial statements―Two sets
Difficulty: 1 Easy
Blooms: Understand
AACSB: Communication
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
63. What is the purpose of government-wide financial statements?
Answer: Government-wide financial statements present information about a government’s financial affairs as a whole. These financial statements provide a method of assessing operational accountability and the government’s ability to meet its operating objectives.
Learning Objective: 16-02
Topic: Financial statements―Two sets
Difficulty: 2 Medium
Blooms: Understand
AACSB: Communication
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
64. The board of commissioners of the city of Jarmaine adopted a General fund budget for the year ending June 30, 2018, which indicated tax levy revenues of $1,300,000, bond proceeds of $520,000, appropriations for government operations of $1,170,000, and operating transfers out of $390,000.
Required:
If this budget was formally integrated into the accounting records used to produce the governmental fund financial statements, what was the required journal entry at the beginning of the year?
Answer:
Governmental fund financial statements – General fund
Estimated revenues – Tax levy
$1,300,000
Estimated other financing sources – Bond proceeds
520,000
Appropriations – Government operations
$1,170,000
Appropriations – Other financing uses – Operating transfers out
390,000
Budgetary fund balance
260,000
Learning Objective: 16-06
Topic: Budgets
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
65. On July 1, 2018, Fred City ordered $1,500 of office supplies. They were to be paid for out of the general fund.
Required:
(A) What journal entry was required for the governmental fund financial statements?
(B) What journal entry was required for the government-wide financial statements?
Answer:
(A) For the governmental fund financial statements, an encumbrance must be recorded in the feneral fund.
Encumbrances – Office supplies
1,500
Encumbrances outstanding
1,500
(B.) For the government-wide financial statements, no entry is required because under accrual accounting, no entry is made until a transaction occurs.
Learning Objective: 16-06
Topic: Encumbrances
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
66. On July 12, 2018, Fred City ordered a new computer at an anticipated cost of $114,400. The computer was received on July 16, 2018 with an actual cost of $116,220. Payment was subsequently made on August 15, 2018.
Required:
(A) Prepare all the required journal entries and identify the type of fund in which each entry was recorded for the governmental fund financial statements.
(B) Prepare all the required journal entries to be recorded for the government-wide financial statements.
Answer:
(A) Governmental fund financial statements – General fund
7/12
Encumbrances – Computer
114,400
Encumbrances outstanding
114,400
7/16
Encumbrances outstanding
114,400
Encumbrances – Computer
114,400
7/16
Expenditures – Computer
116,220
Vouchers (or Accounts) payable
116,220
8/15
Vouchers payable
116,220
Cash
116,220
(B) Government-wide financial statements
7/12
No entry
7/16
Computer
116,220
Vouchers (or Accounts) payable
116,220
8/15
Vouchers (or Accounts) payable
116,220
Cash
116,220
Learning Objective: 16-06
Topic: Encumbrances
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
67. A new truck was ordered for the sanitation department at a cost of $122,200 on September 3, 2018.
Required:
(A) Prepare the required journal entry in the general fund for the governmental fund financial statements.
(B) Prepare the required journal entry for the government-wide financial statements.
Answer:
(A) Governmental fund financial statements – General fund
9/3
Encumbrances – Truck
122,200
Encumbrances outstanding
122,200
(B) Government-wide financial statements
9/3
No entry
Learning Objective: 16-06
Topic: Encumbrances
Difficulty: 1 Easy
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
68. The school system had some brochures printed by a local printing service on September 22, 2018. The school system received an invoice showing an amount of $1,560 for the printing, but the bill is not due until October 15, 2018.
Required:
(A) Prepare the required journal entry in the general fund for the governmental fund financial statements.
(B) Prepare the required journal entry for the government-wide financial statements.
Answer:
(A) Governmental fund financial statements – General fund
9/22
Expenditures – Printing
1,560
Vouchers (or Accounts) payable
1,560
(B) Government-wide financial statements
9/22
Printing Expense
1,560
Vouchers (or Accounts) payable
1,560
Learning Objective: 16-06
Topic: Expenditures
Difficulty: 1 Easy
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
69. A $910,000 bond was issued on October 1, 2018 to build a new road. The bonds carried a 6% interest rate and are due in 10 years.
Required:
(A.) Prepare the required journal entry in the capital projects fund on October 1 for the governmental fund financial statements.
(B.) Prepare the required journal entry for the government-wide financial statements.
Answer:
(A.) Governmental fund financial statements – Capital projects fund
10/1
Cash
910,000
Other financing sources – Bond proceeds
910,000
(B.) Government-wide financial statements
10/1
Cash
910,000
Bonds payable
910,000
Learning Objective: 16-09
Topic: Bond issuance and liabilities
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
70. On June 14, 2018, Fred City agreed to transfer cash of $52,000 from the general fund to provide permanent financing for a municipal swimming pool that will be viewed as an enterprise fund. The cash was transferred on June 30, 2018.
Required:
(A) Prepare all the required journal entries and identify the fund in which each entry was recorded for the fund financial statements.
(B) Prepare all the required journal entries and identify the type of activity for the government-wide financial statements.
Answer:
(A) Fund financial statements – General fund
6/14
Other financing use – Transfers out – Enterprise fund
52,000
Due to Enterprise fund
52,000
6/30
Due to Enterprise fund
52,000
Cash
52,000
Fund Financial Statements – Enterprise fund
6/14
Due from General fund
52,000
Other financing Source – Transfers in – General fund
52,000
6/30
Cash
52,000
Due from General fund
52,000
(B) Government-wide financial statements – Governmental activities
6/14
No entry
6/30
Transfers out – Swimming pool
52,000
Cash
52,000
Government-wide financial statements – Business-type activities
6/14
No entry
6/30
Cash
52,000
Transfers in – General fund
52,000
Learning Objective: 16-11
Topic: Interfund transactions
Difficulty: 3 Hard
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
71. On August 21, 2018, Fred City transferred $100,000 from one fund to another fund to cover major repairs to the town hall building.
Required:
Prepare all the required journal entries and identify the fund in which each entry was recorded for the governmental fund financial statements.
Answer:
Governmental fund financial statements – General fund
8/21
Other financing uses – Transfers out – Capital projects fund
100,000
Cash
100,000
Governmental fund financial statements – Capital projects fund
8/21
Cash
100,000
Other Financing Sources – Transfers in – General fund
100,000
Learning Objective: 16-04
Learning Objective: 16-11
Topic: Funds―Distinguish the types―Governmental
Topic: Interfund transactions
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
72. On January 1, 2018, Wakefield City purchased office supplies for $40,000. During the year, $35,000 of these supplies were used.
Required:
Record the journal entries for these transactions using the purchases method. (Disregard the encumbrance entries.)
Answer:
Expenditures – Supplies
40,000
Vouchers (or Accounts) payable
40,000
To record the purchase of supplies
Inventory of supplies
5,000
Fund balance – Nonspendable
5,000
To establish balance for supplies remaining at year-end
Learning Objective: 16-07
Topic: Consumption and purchases methods
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
73. On January 1, 2018, Wakefield City purchased office supplies for $40,000. During the year, $35,000 of these supplies were used.
Required:
Record the journal entries for these transactions using the consumption method. (Disregard the encumbrance entries.)
Answer:
Inventory of supplies
40,000
Vouchers (or Accounts) payable
40,000
To record the purchase of supplies
Expenditures – Control (or Supplies)
35,000
Inventory of supplies
35,000
To record consumption of supplies during the period
Learning Objective: 16-07
Topic: Consumption and purchases methods
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Industry
AICPA: FN Measurement
[QUESTION]
74. The town council adopted an annual budget estimating general revenues of $2,000,000, approved expenditures for general town operations of $1,700,000, and use of other financing reources of $130,000.
Required:
Record the journal entry to record the budget and identify the fund in which it is recorded.
A
nswer:
In General fund:
Estimated revenues – General revenues
2,000,000
Appropriations – General operations
1,700,000
Estimated other financing uses
130,000
Budgetary fund balance
170,000
Learning Objective: 16-06
Topic: Budgets
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Industry
AICPA: FN Measurement
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