Question 1

A city government purchased a new fire truck in Year 1 for $270,000. The city incurred an additional $30,000 in transportation and calibration costs to ready it for use. It has an estimated useful life of 20 years, though it is being financed over a 15 year period. The amount of depreciation that will be reported each year in the General Fund will be

Accepted Answer

Depreciation is not reported in the General Fund because it is a fund accounting for current financial resources and does not account for fixed assets or long-term liabilities. Depreciation is recorded in government-wide financial statements, not in the General Fund.

Question 2

The General Fund reported a beginning balance of inventory of materials and supplies of $122,000. The ending balance was $150,000. Supplies purchased during the year totaled $600,000. The county uses the consumption method. The General Fund should report expenditures for materials and supplies for the year of

Accepted Answer

Under the consumption method, expenditures are recognized when supplies are used. The amount used is calculated as beginning inventory plus purchases minus ending inventory: $122,000 + $600,000 - $150,000 = $572,000.

Question 3

Listed below are various transactions affecting the City of Highland Flats General Fund for the fiscal year ending June 30, 20X4.

Transactions:
1. Near the beginning of the year, the City was sued by one of its residents claiming that the resident was injured due to a hazardous sidewalk. The resident is asking for damages of $500,000. The City expects to win the case.
2. Later in the year, the City decided to settle the aforementioned lawsuit on the advice of its legal counsel. The government settled the suit for $300,000, paying $100,000 now, and $50,000 on August 1 for each of the next 4 years. For these types of lawsuits, the City is self-insured for the first $50,000 and 100% insured for the remaining payments. Because of a cash flow issue, the city borrowed $50,000 on a 6 month, 3% note that comes due 2 months after year end. No money was received from the insurance company by year end, but the total amount due was expected by August 15.
3. The city's employees earned $25,000 in compensated absences during the year. Of this amount, $10,000 was paid during the year, and another $7,500 is due and payable in the first 45 days of the following year. In addition, $5,000 due at the end of previous year was paid in the current year. Finally, $7,000 earned in earlier years became due and payable and was paid this year.
4. The City's OPEB Plan's net OPEB liability, none of which is due and payable, increased $15,000 during the year. $5,000-the approximate amount of retiree healthcare costs paid for the year-was paid to the plan.

Requirements:
1. Prepare the journal entries for the above events, including any necessary year-end adjusting entries. If a transaction requires no entry, state "No entry required" and explain why.
2. Demonstrate the effects of these transactions on the accounting equation for the General Fund and the General Capital Assets and General Long-term Liabilities accounts.

Accepted Answer

"1. Journal entries:
  "
"2. Effects on accounting equations for the General Fund (Deferred Outflows and Deferred Inflows have been excluded since all are no effect) and the General Capital Assets and General Long-Term Liabilities accounts.
 $\begin{array}{|r|c|c|c|c|c|c|c|}
\hline \begin{array}{c}
\text { Trans } \
\#
\end{array} & \text { Assets } & \text { Liabilities } & \begin{array}{c}
\text { Fund } \
\text { Balance }
\end{array} & & \text { GCA } & \text { GLTL } & \begin{array}{c}
\text { Net } \
\text { Position }
\end{array} \
\hline 1 & \mathrm{NE} & \mathrm{NE} & \mathrm{NE} & & \mathrm{NE} & \mathrm{NE} & \mathrm{NE} \
\hline 2 \mathrm{a} & \mathrm{NE} & \mathrm{NE} & \mathrm{NE} & & \mathrm{NE} & 200,000 & (200,000) \
\hline 2 \mathrm{~b} & 50,000 & 50,000 & \mathrm{NE} & & \mathrm{NE} & \mathrm{NE} & \mathrm{NE} \
\hline 2 \mathrm{c} & \mathrm{NE} & 500 & (500) & & \mathrm{NE} & \mathrm{NE} & \mathrm{NE} \
\hline 3 & (22,000) & (5000) & (17,000) & & \mathrm{NE} & 15,000 & (15,000) \
\hline 4 & (5,000) & \mathrm{NE} & (5,000) && \mathrm{NE} & 15,000 & (15,000) \
\hline
\end{array}$
 "

Question 4

Assume that the Village of Hannah uses the purchases method of inventory accounting. At the end of the year, the inventory levels have increased. What entry would be made to reflect the inventory increase?

Accepted Answer

The answer of Assume that the Village of Hannah uses...

Question 5

The purchases method of accounting is permitted for

Accepted Answer

The purchases method of accounting is permitted for both prepaid insurance and materials and supplies. Under this method, the cost of materials and supplies or prepaid insurance is recorded as an expense when they are purchased rather than when they are used.

Question 6

Expenditures in a governmental fund are recognized when due for

Accepted Answer

Interest on general long-term debt is recognized as an expenditure when it is due in governmental funds, following the modified accrual basis of accounting.

Question 7

Which of the following governmental fund expenditures would not be considered a current operating expenditure?

Accepted Answer

Capital outlay refers to expenditures related to acquiring, upgrading or constructing capital assets such as buildings, equipment, and infrastructure. These expenditures are not considered current operating expenses because they result in long-term benefits to the government, unlike rent, salaries and wages, and employee benefits which are regular expenses incurred in the day-to-day operations of a government.

Question 8

Which of the following is $\textbf{   not      }$  a typical governmental fund liability, and thus not an expenditure that is recognized when the liability is incurred?

Accepted Answer

Long-term note payable is a non-current liability and is typically accounted for in the government's proprietary funds, not the governmental funds. Therefore, it is not an expenditure that is recognized when the liability is incurred in the governmental funds. Accounts payable, salaries payable, and rent payable are all typical governmental fund liabilities that are recognized as expenditures when the liability is incurred.

Question 9

If a government uses a perpetual inventory system for its General Fund and there is an inventory overage at the end of the year, the inventory asset account should

Accepted Answer

When there is an inventory overage in a perpetual inventory system, the inventory asset account should be increased to reflect the additional assets. Correspondingly, the expenditure account should be decreased because the overage indicates that less was spent than initially recorded.

Question 10

Assume that General Fund employees accrued $125,000 of compensated absences liability during the year. Compensated absences liability, which is considered to be a long-term liability, decreased $30,000 from the beginning of the year to the end of the year. The fund also actually paid $550,000 in salaries and wages during the year. At the end of the fiscal year, salaries and wages payable was $12,000. The General Fund would report salaries and wages expenditures for the year of

Accepted Answer

The correct answer is A.The General Fund would report salaries and wages expenditures for the year of $532,000. This is calculated as follows:Salaries and wages paid $550,000Less: Salaries and wages payable at end of year 12,000Add: Compensated absences liability at beginning of year 155,000Less: Compensated absences liability at end of year 125,000Salaries and wages expenditures $532,000

Question 11

The General Fund reported a beginning balance of inventory of materials and supplies of $122,000. The ending balance was $150,000. Supplies received during the year (purchases) totaled $600,000. The county uses the purchases method. The General Fund should report expenditures for materials and supplies for the year of

Accepted Answer

Under the purchases method, expenditures for materials and supplies are equal to the total amount of supplies purchased during the year, regardless of changes in inventory levels. Therefore, the correct answer is $600,000, as this is the total amount of supplies received (purchased) during the year.

Question 12

A government with a beginning inventory of supplies of $100 in its General Fund and had the following transactions during the year (all amounts are in thousands). Transactions: 1. Ordered supplies with an estimated cost of $3,150. 2. Received supplies with an actual invoice cost of $2,920. No payment was made upon receipt; $2,950 was the encumbered amount. 3. Paid $2,300 on account for supplies received in #2. 4. During the year, the inventory warehouse issued $2,900 in supplies to general government departments. 5. The ending physical inventory of General Fund supplies found $150 on hand at year end. Requirements: A. Consumption method of accounting for inventory 1. Prepare the general journal entries required to account for the previous information. 2. Indicate the effects of the general journal entries on the Balance Sheet equation. 3. Indicate amounts reported on Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balance with respect to the Inventory of Supplies. B. Purchases method of accounting for inventory 1. Prepare the general journal entries required to account for the previous information. 2. Indicate the effects of the general journal entries on the Balance Sheet equation. 3. Indicate amounts reported on Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balance with respect to the Inventory of Supplies.

Accepted Answer

The answer of A government with a beginning inventory of...

Question 13

Rutherford County uses the consumption method to account for General Fund materials and supplies. The beginning inventory of materials and supplies was $122,000. The ending inventory was $150,000. The beginning balance of reserve for encumbrances (for supplies ordered but not received at the beginning of the year) was $50,000; the ending balance was $20,000. Supplies purchased during the year totaled $750,000. The county General Fund should report expenditures for materials and supplies for the year of

Accepted Answer

Under the consumption method, expenditures are recognized when supplies are used. The calculation is: Beginning Inventory ($122,000) + Purchases ($750,000) - Ending Inventory ($150,000) = Expenditures ($722,000). The reserve for encumbrances does not affect the expenditure calculation.

Question 14

The minimum amount of detail permitted by GAAP for governmental fund expenditure classifications in the basic financial statements is by

Accepted Answer

The minimum amount of detail permitted by GAAP for governmental fund expenditure classifications in the basic financial statements is by fund and function (or program).

Question 15

The village of Bear Creek uses General Fund resources to pay debt service payments for its sole outstanding general obligation bonds, which were issued to finance the new Village Hall. Which of the following statements is false?

Accepted Answer

The General Fund records expenditures for both the principal and interest portions of the debt service payment, not just the interest portion.

Question 16

Assume that a government purchases $85,000 of inventory for the General Fund during the year. The General Fund began the year with an inventory balance of $15,000 and ended the year with a balance of $35,000. The General Fund uses the consumption method of inventory accounting and a perpetual inventory system. The General Fund should report

Accepted Answer

Under the consumption method with a perpetual inventory system, expenditures are recognized as inventory is consumed. The beginning inventory was $15,000, and $85,000 was purchased, making the total available inventory $100,000. Ending inventory was $35,000, so $65,000 ($100,000 - $35,000) was consumed during the year, which is the amount reported as expenditures.

Question 17

Which of the following is not a managerial problem associated with expenditures?

Accepted Answer

The availability criterion relates to whether funds are available for use, not how they are spent. Therefore, misapplication of the availability criterion is not a managerial problem associated with expenditures.

Question 18

A general government department of the City of Rocky Flats leased specialized equipment under a multi-year, noncancelable lease agreement that qualifies as a capital lease. The lease required a down payment of $500 and the present value of the minimum lease payments (i.e., the capitalizable cost of the leased asset) was $5,000. The implicit rate of interest on the lease is 10%. Subsequent lease payments of $750 are required annually beginning in 20X2. All amounts are in thousands of dollars. Transactions: 1. The lease was signed on March 1, 20X1. 2. Prepare any adjusting entries required at December 31, 20X1, the end of Rocky Flats fiscal year. 3. The City made the required payment on February 28, 20X2. Requirements: 1. Prepare the general ledger journal entries for the transactions for the General Fund. If no entry is required, do not leave it blank. State "No Entry Required" and briefly explain why. 2. Indicate the effects of the transaction on the accounting equations for the General Fund and the General Capital Assets and General Long-Term Liabilities accounts. Do not leave a cell blank. 3. How will the capital lease be reported on the General Fund financial statements for the year ended December 31, 20X1?

Accepted Answer

The answer of A general government department of the City...

Question 19

Expenditures are defined as

Accepted Answer

The answer of Expenditures are defined as
...

Question 20

City of Alnwick makes pension contributions on behalf of its employees to both a defined benefit plan and a defined contribution plan. Assume that the employer contributions for the fiscal year totaled $55,000 for the defined benefit plan and $35,000 for the defined contribution plan. The net pension liability grew by $70,000 during the fiscal year. None of the liability was due and payable either at the beginning of the year or at the end of the year. The General Fund will report

Accepted Answer

The answer of City of Alnwick makes pension contributions on...

Quiz 6: Expenditure Accountinggovernmental Funds