A government has claims and judgments outstanding at the beginning of 20X5 of $1,000,000. These claims and judgments are expected to result in awards against the government of $800,000. $75,000 of these claims were due and payable from the General Fund at December 31, 20X4. At the end of 20X5, the government has claims and judgments outstanding of $2,000,000. These claims and judgments are expected to result in awards against the government of $1,200,000. None of these claims is due and payable from the General Fund at December 31, 20X5. The government paid claims and judgments of $400,000 during 20X5. General Fund expenditures for claims and judgments for 20X5 should be reported at what amount?

Question

Quizplus · Accepted Answer

The General Fund expenditures for claims and judgments for 20X5 should be reported at $325,000. This is calculated by adding the $75,000 of claims that were due and payable at the end of 20X4 (and presumably paid during 20X5) to the $400,000 in claims and judgments paid during 20X5, minus the $150,000 reduction in the expected awards (from $800,000 to $1,200,000, but the outstanding claims increased by $1,000,000, so the net increase in expected awards is $400,000 - $400,000 paid = $0 change in expenditure recognition). Thus, only the $75,000 due from the previous year plus the $400,000 paid this year are recognized, totaling $475,000. However, considering the information provided and the typical accounting for such transactions, the calculation directly considers the payments made during the year ($400,000) and adjustments for any due and payable amounts from the previous period, leading to the conclusion that there might have been a misunderstanding in the detailed explanation. The correct approach is to consider the actual payments made during the year without subtracting the change in expected awards, as such changes do not affect the actual expenditures recorded for the year. Therefore, the expenditures should reflect the payments and obligations recognized during the year, which are directly mentioned as $400,000 paid during 20X5 plus the $75,000 due from the previous year, without adjustments for the change in expected awards, leading to a reevaluation of the correct answer focusing on the payments and obligations directly mentioned.

A Government Has Claims and Judgments Outstanding at the Beginning