ACG 3501 Lecture Notes - Lecture 19: Interest Expense, Governmental Accounting Standards Board

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6 Apr 2017

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Enhances management of activities in which goods or services are provided on a cost reimbursement basis to. General public on a user charge basis. To compare benefits and costs of the business type activities of a government. Proprietary funds accounting equation (assets + deferred inflows) = net position. Gasb requires that revenues and expenses be identified as operating or nonoperating. Operating activities relate to the primary functions of the proprietary fund. Separate subtotals are to be provided for operating info. Interest expense on long term debt (vs. operating) Cash flows from operating activities must be shown using the direct method. To account for provision of goods and services to department of the same government. To improve management of common resources by placing them under centralized management and control. Know pricing policies (she has powerpoint slide in webcourses) Same accounting procedures that a similar for profit entity would use. Revenues and expenses closed at year end to.

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Please I need help with the Smithville project full versionChapter 9 and the complete instructions are below. Thank you

Chapter 9 Adjusting and Closing Entries for GovernmentalActivities, Government-wide Level; Preparation of Government-wideand Major Fund Financial Statements

Prior to preparing financial statements at the end of FY 2014,it is necessary to record depreciation expense for the year forgovernmental activities at the government-wide level.

Based on general capital assetsassigned to specific functions, depreciation expense related toequipment and infrastructure is allocated to functions as shownbelow:

Equipment Infrastructure

GeneralGovernment $ 42,348

PublicSafety 220,212

PublicWorks 84,696 $118,344

Health andWelfare 21,168

Culture andRecreation 55,056

Totals $423,480 $118,344

In addition, depreciation expense forbuildings in the amount of $188,000 is allocated to functionsaccording to the percentage of total floor space of buildings usedby each function. The Public Works director has provided thefollowing information for the current year:

Percentage of Building

Floor Space Used

GeneralGovernment 20%

PublicSafety 35

PublicWorks 22

Health andWelfare 10

Culture andRecreation 13

Total 100%

Required:[Para. 9-a] Record depreciation expense for theyear 2014 in the governmental activities general journal at thegovernment-wide level. Round all amounts to the nearest wholedollar. Verify accuracy of the adjusting entries and post to thegeneral ledger by clicking [Post Entries].

b. Although closing entries were made in each fund in Chapters 4through 7 of this cumulative problem, they have not yet beenrecorded at the government-wide level.

Required: ClosingEntries. Record the journal entries required on December31, 2014, to close all temporary accounts for governmentalactivities at the government-wide level. These entries should alsorecognize changes in the accounts Net PositionâNet Investment inCapital Assets, Net PositionâRestricted for Public Safety (seeGeneral Fund), Net PositionâRestricted for Capital Projects, andNet PositionâRestricted for Debt Service. (Note: Be sure todeduct accrued interest on long-term debt in calculating theDecember 31, 2014 balance of Net PositionâRestricted for DebtService.) For each account to be closed or reclassified,be sure and click on the check mark for [ClosingEntry] and that âClosing Entriesâ appears in the[Transaction Description] box. Post the closingentries to the general ledger by clicking on [PostEntries].

Please remember that beforeclosing the City of Smithville, you must click on [File],and [Save/Save As] to save your work. Your work is NOTautomatically saved.

Usethe exportable trial balances used in Chapters 2 through 7 of thisproblem and export the pre-closing trial balance and post-closingtrial balance for governmental activities to prepare allgovernment-wide and fund financial statements that the City ofSmithville must present for its basic financial statements to be inconformity with generally accepted accounting principles. (SeeIllustrations A2-1 through A2-11 of the Reck, Lowensohn, and Wilsontextbook for examples of these statements.) We recommend that youuse Excel to prepare these financial statements; however, yourinstructor may want you to do these manually. Since the Solid WasteDisposal Fund is the only fund in the proprietary funds category,you may reprint the statement of net assets; statement of revenues,expenses, and changes in net assets; and the statement of cashflows prepared for the Solid Waste Disposal Fund as the requiredstatements for the proprietary fund basic financial statements,with appropriate changes to the titles of the statements. Theinformation for the Solid Waste Disposal Fund can also be used tocomplete the Business-type Activities columns of thegovernment-wide financial statements.

(Notes: The City ofSmithville is a primary government and has no other organizationsfor which it is accountable as component units. Also, the FY 2015financial information for the Street Improvement Debt Service Fundis not included in any of the basic financial statements you arepreparing, as the statements you are preparing pertain only to FY2014.)

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2. Prepare worksheet entries and postto the worksheet for the following items. Identify each adjustmentby the letter used in the problem:

a. Record the January 1, 2015balances of general fixed assets and related accumulateddepreciation accounts. The City of Monroe had the followingbalances (excluding Internal Service Funds):

	Cost	Accumulated Depreciation
Totals	$ 65,900,000	29,800,000

b. Eliminate thecapital expenditures shown in the governmental funds Statement ofRevenues, Expenditures, and Changes in Fund Balances.

c. Depreciation expense(governmental activities) for the year totaled $ 5,750,000.

d. Eliminate theother financing sources from the sale of bonds by recording aliability for bonds payable and the related premium.

e. As of January1, 2015, the City of Monroe had $12,000,000 in general obligationbonds outstanding.

f. Eliminate the expenditures for bondprincipal.

g. Accrueinterest in the amount of $328,000. (Two bond issues wereoutstanding; interest payments for both were last made on July 1,2015. The computation is as follows: ($11,200,000 Ã .03 Ã 6/12) +($4,000,000 Ã. 08 Ã 6/12) = $328,000).

h. Adjust for theinterest accrued in the prior year government-wide statements, butrecorded as an expenditure in the 2015 fund basis statements,($12,000,000 Ã .03 Ã 6/12) = $180,000.

i. Amortize bondpremium in the amount of $ 10,000.

j. Makeadjustments for additional revenue accrual. The only adjustment isfor property taxes to eliminate the current year deferral ofproperty taxes.

k. Adjust for the$21,000 of property taxes that was deferred in 2014 and recognizedas revenue in the 2015 fund-basis statements.

l. Assume theCity adopted a policy in 2015 of allowing employees to accumulatecompensated absences. Make an adjustment accruing the expense of $39,500 Charge compensated absences expense.

m. Bring in thebalances of the internal service fund balance sheet accounts.Again, use a single account for all capital assets and a secondaccount for all accumulated depreciation balances (use a separatecolumn of the worksheet to enter Internal Service Fundentries).

n. No revenuesfrom internal service funds were with external parties. Assume$3,200 of the $11,200 âDue from Other Fundsâ in the internalservice accounts represents a receivable from the General Fund andthe remaining $8,000 is due from the enterprise fund. Eliminate the$3,200 interfund receivables.

o. Reducegovernmental fund expenses by the net operating profit of internalservice funds. As the amount is small, reduce general governmentexpenses for the entire amount.

p. Eliminatetransfers that are between departments reported within governmentalactivities.

Gov'tal Fund Balances

Adjustments &Eliminations

Govern-mental Funds Adjusted

Internal Service Funds

Balances for Gov't-wide Stmts

Cash with Fiscal Agent

928,000

Investments

259,000

Taxes Receivable, net

274,000

Interest Receivable, net

Expenditures (expenses) Current

Culture and Recreation

917,300

Compensated Absences Exp

Other Expenditures (expenses)

- Debt Service Principal

800,000

- Interest(expenditure/expense)

Other Fin. Uses - Transfers Out

Accrued Interest Payable

Bonds Payalbe

bothrows

Premium on Bonds

Compensated Absence Payable

Advance from Water Utility Fund

Deferred Inflows: Property Taxes

27,500

Accumulated Depreciation

State Grant for Highway StreetExpenses

1,072,000

Capital Grant- Gen Gov't

332,000

Capital Grant- Public Safety

1,320,000

Other Financing Sources

Net Position at beginning of year

12. For the purpose of government-wide financial statements, thecost of cleaning up a government-owned landfill and closing thelandfill

A) Is not recognized until the costs are actually incurred
B) Is accrued and amortized over the expected useful life of thelandfill
C) Is accrued on a pro-rated basis each period based on how fullthe landfill is
D) Is accrued in full at the time the costs become estimable
E) Is treated as an encumbrance at the time it become estimable andas an expenditure when it is actually paid

13. Drye Township has received adonation of a rare painting worth $1,000,000. For Drye'sgovernment-wide financial statements, three criteria must be metbefore Drye can opt not to recognize the painting as an asset.Which of the following is not one of the three criteria?(1.) Thepainting is held for public exhibition, education, or research infurtherance of public service, rather than financial gain.(2.) Thepainting is scheduled to be sold immediately at auction.(3.) Thepainting is protected, kept unencumbered, cared for, andpreserved.

A) Item 1 is not one of the three criteria
B) Item 2 is not one of the three criteria
C) Item 3 is not one of the three criteria
D) All three items are required criteria
E) None of the three items are required criteria

14. Which of the following is nota criterion of a capital lease?

A) The lease transfers ownership of the property to the lesseeby the end of the lease term
B) The present value of the minimum lease payments equals orexceeds 90 percent of the fair value of the leased property, net oflessor's investment tax credit
C) The lease contains an option to purchase the leased property ata bargain price
D) The lease contains an option to renew
E) The lease term is equal to or greater than 75 percent of theestimated economic life of the leased property

15. Which statement is falseregarding the government-wide Statement of Net Assets?

A) The purpose of the Statement of Net Assets is to report theeconomic resources of the government as a whole
B) Assets are reported excluding capital assets
C) Capital assets are reported net of depreciation
D) Investments are reported at fair value rather than historicalcost
E) Business-type activities include Enterprise Funds

16. Which statement is falseregarding the Balance Sheet for Fund-Based Statements?

A) The Balance Sheet for Fund-Based Statements measures onlycurrent financial resources of the governmental entity
B) The Balance Sheet for Fund-Based Statements uses the modifiedaccrual method for timing purposes
C) Capital assets are not reported on the Balance Sheet forFund-Based Statements
D) The Balance Sheet for Fund-Based Statements measures onlylong-term financial resources of the governmental entity
E) Long-term debts are not reported on the Balance Sheet forFund-Based Statements

17. The city operates a publicpool where each person is assessed a $2 entrance fee. Which fund ismost appropriate to record these revenues?

A) General Fund
B) Enterprise Fund
C) Special Revenue Fund
D) Internal Service Fund
E) Capital Projects Fund

18. Which of the following typesof health care organizations follow FASB Accounting StandardsCodification for GAAP?

	Investor-Owned Health Care Enterprises	Not-for-Profit Organizations	Governmental Health Care Organizations
A)	Yes	Yes	No
B)	Yes	Yes	Yes
C)	No	No	Yes
D)	Yes	No	Yes
E)	Yes	No	No

A) Entry A
B) Entry B
C) Entry C
D) Entry D
E) Entry E

19. In accruing patient chargesfor the current month, which one of the following accounts should ahospital credit?

A) Accounts Payable
B) Deferred Revenue
C) Unearned Revenue
D) Patient Service Revenues
E) Accounts Receivable

20. Which account would becredited in recording a gift of medicine to a nursing home from anoutside party?

A) Nonoperating Gain - Contributions
B) Contractual Adjustments
C) Patient Service Revenues
D) Drugs and Medicines
E) Nonoperating Revenues - Contribution

21. Unconditional transfers ofcash or other resources to an entity in a voluntary nonreciprocaltransaction is the GAAP definition for

A) miscellaneous revenues
B) contributions
C) unconditional promises to give
D) exchange transactions
E) pledges

22. On a statement of functionalexpenses for a voluntary health and welfare organization, how areexpenses classified?

A) Health services expenses and operating expenses
B) Program services expenses and administrative servicesexpenses
C) Program services expenses and supporting services expenses
D) Operating expenses and supporting services expenses
E) Operating expenses and administrative expenses

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ACG 3501 Lecture Notes - Lecture 19: Interest Expense, Governmental Accounting Standards Board

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