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1、 2009 Pearson Education,Inc.publishing as Prentice Hall 19-1 Chapter 19 ACCOUNTING FOR STATE AND LOCAL GOVERNMENTAL UNITS GOVERNMENTAL FUNDS Questions 1 The governmental fund accounting equation is:Current Assets Current Liabilities=Fund Balance 2 Taxpayers are billed the full$200,000.The amount rec
2、orded as Revenue would be$194,000 with$6,000 recorded as Allowance for Uncollectible Taxes.3 Encumbrance means“commitment,”and encumbrance accounting records commitments made for goods on order and for unperformed contracts in order to provide additional control over expenditures.4 The required gove
3、rnmental fund financial statements include a statement of net assets or balance sheet and a statement of revenues,expenditures,and changes in fund balance.The fund financial statements for the governmental funds are prepared on the modified accrual basis of accounting.5 Capital projects funds are us
4、ed to account for the financing and acquisition of major general government capital facilities(general fixed assets)of a governmental unit.They are not used to account for the acquisition of capital facilities financed through internal service or enterprise funds.General fixed assets may be purchase
5、d through the general fund or special revenue funds.General fixed assets may be acquired by donation in which case the capital projects fund would not likely be involved.6 Capital projects funds may receive resources from numerous sources such as the proceeds of general obligation bond issues,state
6、and federal grants,shared revenues,and transfers from other funds.A CPF is terminated when the capital facilities have been acquired and project liabilities settled.This may involve a short period of time in the case of assets acquired by purchase and several years in the case of assets acquired by
7、construction.Assets remaining after a capital project has been completed and paid for are ordinarily transferred to the general fund or to the debt service fund with responsibility for servicing the debt issued to finance the project.7 A government may treat supply acquisitions as expenditures eithe
8、r when purchased(purchases method)or when used(consumption method),as long as it reports significant amounts of inventory in the balance sheet.While the consumption method is similar to the manner in which commercial businesses record supplies,the purchases method better allows for comparison of exp
9、enditures and appropriations.Under the purchases method,a government with significant inventory balances at year end will recognize the balances as assets in the fund balance sheet and establish an accompanying reservation of fund balance to reflect the fact that the supply amount is not an availabl
10、e financial asset.This reservation of fund balance is optional under the consumption method.8 Debt service funds may be used to account for debt service on any long-term,general government liabilities including debt service on special assessment debt for which the government is obligated in some man
11、ner.Debt issued for and intended to be repaid from resources of enterprise,internal service,or trust funds is accounted for in those funds.2009 Pearson Education,Inc.publishing as Prentice Hall 19-2 9 A transfer of resources by the general fund to the debt service fund to be used to retire all or a
12、portion of the general long-term debt would affect the general fund and the debt service fund at the same time.Assuming that the amount of the transfer is$10,000,the entries would be:GF Nonreciprocal operating transfer to debt service fund 10,000 Cash 10,000 DSF Cash 10,000 Nonreciprocal operating t
13、ransfer from general fund 10,000 10 Special assessment levies are charges made against specific property owners(or citizens)to pay for improvements(or services)that provide special benefits to the property owners.Such improvements are usually requested by those who receive the benefits and agree to
14、pay their share of the cost.General tax levies are levied against all citizens of the governmental unit on a uniform basis to finance the general cost of government.General tax levies are determined by elected officials,apply to all(or virtually all)property in the jurisdiction,and may have little o
15、r no relationship to the actual benefits received by individual taxpayers.A final difference is that property taxes are levied each year for that year(or sometimes the following year).Special assessment levies often are for amounts to be collected over several years.11 Capital project funds are used
16、 to account for the construction activities of general government special assessment projects and the debt service fund is used to account the related debt service if the government is obligated in some manner.Debt service for special assessment liabilities for which the government is not obligated
17、in any manner is accounted for in agency funds,with the special assessment obligation being disclosed in notes to the financial statements.12 When governments enter into capital lease agreements,the governmental fund acquiring the general fixed asset records an expenditure and other financing source
18、,as if long-term debt had been issued.At the same time,the town notes a liability(capital lease payable)in the general long-term debt account records for the amount remaining due and adds an asset to the general fixed asset account records at the present value of the minimum lease payments determine
19、d by FASB 13 criteria.The asset and liability,as well as associated depreciation,will appear in the government-wide financial statements;however,only an expenditure and other financing source appear in the governmental fund statements.The town may record future capital lease payments as expenditures
20、 of principal and interest in the general fund or transfer resources to the debt service fund,which will recognize the expenditures.The notes to the financial statements disclose minimum lease payments for each of the following five years and in five-year increments thereafter.13 Expenditures 20,000
21、 Supplies Inventory 20,000 To adjust the supplies inventory and supplies expenditures accounts.14 Governments record details of the planned revenues(such as property taxes,sales taxes,and license revenue)and appropriations(such as police supplies,mayors office expenses,and maintenance of the town ha
22、ll)in subsidiary revenue and expenditure ledgers.The detail allows for better control over expenditures,as appropriations can be compared to expenditures and encumbrances at any time.2009 Pearson Education,Inc.publishing as Prentice Hall 19-3 15 The amount that city officials can order prior to year
23、 end is$75,000($250,000$175,000).If they have not spent the full$250,000 in appropriations prior to year end,depending on the laws of the Village of Lester,all appropriations lapse at the end of the year for which they are made,with the exception of committed appropriations(encumbrances outstanding)
24、,which can continue to serve as authorizations for items on order or under contract.Since total expenditure and encumbrance amounts are closed to fund balance at year end,reserve for encumbrance credits remain in the accounting records as reservations of fund balance within the governmental fund sta
25、tements.16 Reserve for encumbrances 60,000 Reserve for encumbrances prior year 60,000 To reclassify encumbrances from the prior year Expenditures prior year 59,800 Vouchers Payable 59,800 To record expenditures for prior year Reserve for encumbrances prior year 60,000 Expenditures prior year 59,800
26、Unreserved fund balance 200 To close excess reserve to fund balance.17 Permanent funds(PF)account for contributions for which the grantor specifies that a principal amount must be maintained but for which interest accumulation or asset appreciation,or both,are to be used for a specified purpose.Fund
27、s that are expendable are accounted for in a special revenue fund.If contributions benefit parties external to the government,they are accounted for in private purpose trust funds.18 The general fund is always a major fund.Other funds are considered major funds if they meet both of the following cri
28、teria:1.Total assets,liabilities,revenues,or expenditures/expenses(excluding extraordinary items)of that individual governmental or enterprise fund are at least 10%of the corresponding total(assets,liabilities,etc.)for all funds of that category or type.2.Total assets,liabilities,revenues,or expendi
29、tures/expenses(excluding extraordinary items)of that individual governmental or enterprise fund are at least 5%of the corresponding total for all governmental and enterprise funds combined.19 A budgetary comparison schedule,which is required supplementary information for the general fund and for all
30、 special revenue funds with legally adopted budgets,includes columns for the original budget,the final budget,actual balances(on the budgetary basis)and variances(optional).The budgetary comparison schedule includes the same classifications as the GAAP operating statement,however,the amounts reporte
31、d for revenues,expenditures,and fund balances often differ between the two statements.Differences exist when a government uses a non-GAAP basis of accounting for budgeting purposes.20 Since the government-wide statements are prepared on the accrual basis of accounting while the fund financial statem
32、ents for the governmental funds are prepared on the modified accrual basis of accounting,governments must convert governmental fund financial information to the accrual basis of accounting for inclusion in the government-wide statements of activities and net assets.A conversion worksheet is an optio
33、nal tool that facilitates reconciliation of the two statements.21 Examples of items that might appear on the reconciliation between the governmental fund balance sheet and the government-wide statement of net assets include:1.Governmental fund fixed assets are recorded as expenditures in the fund st
34、atements and must be recorded at cost in the government-wide statements.2.The depreciation associated with the governmental fixed assets must be recorded in the government-wide statements.2009 Pearson Education,Inc.publishing as Prentice Hall 19-4 3.Capital project fund construction expenditures sho
35、uld be recorded as“construction in progress”in the government-wide statements.Examples of items that might appear on the reconciliation between the governmental fund operating statement and the government-wide statement of activities include:1.Governments must also adjust for instances where revenue
36、 recognition differs between the modified accrual and accrual bases of accounting.2.It is necessary to eliminate interfund balances within the governmental funds.3.Bond proceeds provide current financial resources in the fund statement,but issuing debt increases long-term liabilities in the statemen
37、t of net assets.EXERCISES E19-1 E19-2 E19-3 AICPA adapted 1 a 1 c 2 b 2 d 1 b 3 b 3 a 2 d 4 a 4 a 3 d 5 c 5 b 4 d 5 a E19-4 E19-5 AICPA adapted E19-6 AICPA adapted 1 a 1 c 1 c 2 c 2 c 2 b 3 d 3 b 3 c,if u/c relates to 2009&10 4 a 4 c 4 b 5 a 5 c 5 b 2009 Pearson Education,Inc.publishing as Prentice
38、Hall 19-5 E19-7 1 Journal entries to account for property taxes in the general fund March 21,2008 Taxes receivable current 2,500,000 Allowance for uncollectible current taxes 50,000 Revenue 2,450,000 To record the property tax levy.May 4,2008 Cash 1,900,000 Taxes receivable current 1,900,000 To reco
39、rd collection of property taxes.Taxes receivable-delinquent 600,000 Allowance for uncollectible current taxes 50,000 Taxes receivable current 600,000 Allowance for uncollectible delinquent taxes 50,000 To reclassify uncollected taxes as delinquent.May 5-December 31,2008 Cash 150,000 Taxes receivable
40、 delinquent 150,000 To record collection of property taxes.November 1,2008 Allowance for uncollectible taxes delinquent 5,000 Taxes receivable delinquent 5,000 To write off tax receivable determined to be uncollectible.Adjusting Entry Revenue 312,250 Deferred revenue 312,250 To record deferred reven
41、ues for taxes not collected within 60 days after year end.($2,500,000-$1,900,000-$150,000-$5,000-$45,000-$87,750)January 1,2008 February 28,2008 Cash 87,750 Taxes receivable delinquent 87,750 To record collection of 2006 taxes.2 Jedville Township Partial Balance Sheet December 31,2008 Assets Taxes r
42、eceivable delinquent(net of$45,000 estimated uncollectible taxes)$400,000 Liabilities Deferred tax revenues$312,250 2009 Pearson Education,Inc.publishing as Prentice Hall 19-6 3 Revenue would equal tax levy less uncollectible amounts less amounts not collected within 60 day period.Since governmental
43、 units rarely complete the closing process within 60 days of year end,the amounts collected within 60 days of year end will be known.($2,500,000-$50,000-$312,250=$2,137,750)E19-8 Closing entries:Unreserved fund balance 500 Appropriations 17,500 Estimated revenues 18,000 To reverse entry to record bu
44、dget.Reserve for encumbrances prior year 2,000 Revenues 17,380 Nonreciprocal transfer in 3,200 Expenditures current year 16,450 Expenditures prior year 1,900 Encumbrances 1,000 Unreserved fund balance 3,230 To close accounts,including the prior years reserve for encumbrances.E19-9 Millar City Genera
45、l Fund Balance Sheet June 30,2008 Assets Cash$12,000 Taxes receivable$30,000 Less:Allowance for uncollectible Accounts 2,000 28,000 Due from other funds 3,000 Supplies inventory 4,000 Total assets$47,000 Liabilities and Fund Balance Liabilities:Vouchers payable$15,000 Due to other funds 5,000 Total
46、liabilities$20,000 Fund balance:Reserved for:Encumbrances$6,000 Inventory of supplies 4,000 10,000 Unreserved fund balance 17,000 Total fund balance 27,000 Total liabilities and fund balance$47,000 2009 Pearson Education,Inc.publishing as Prentice Hall 19-7 Check:Unreserved Fund Balance Estimated re
47、venues$300,000$10,000 Preclosing balance Encumbrances 6,000 300,000 Appropriations Expenditures 290,000 5,000 Reserve for encumbrances prior year Expendituresprior year 5,000 305,000 Revenues AdjustReserve for inventory of supplies 2,000 Ending balance 17,000$620,000$620,000 E19-10 McGwire City Gene
48、ral Fund Statement of Revenues,Expenditures,and Changes in Fund Balance for the year ended December 31,2008 Revenues$101,000 Expenditures 98,800 Excess of revenues over expenditures 2,200 Other financing sources(uses):Reciprocal transfers in 27,000 Nonreciprocal transfers out (18,000)Excess of reven
49、ues and other financing sources over (under)expenditures and other financing uses$11,200 Total fund balance,January 1,2008 25,000 Total fund balance,December 31,2008$36,200 Unreserved Fund Balance Estimated revenues$100,000$25,000 Preclosing balance Encumbrances 4,000 95,000 Appropriations Expenditu
50、res 94,000 5,000 Reserve for encumbrances prior year Expendituresprior year 4,800 101,000 Revenues Nonreciprocal transfers out 18,000 27,000 Reciprocal transfers in Ending balance 32,200$253,000$253,000 Total ending fund balance=$32,200+$4,000(Reserve for encumbrances)=$36,200.2009 Pearson Education