FAR 13 Flashcards
Appropriations vs Encumbrances vs Expenditures.
Appropriations are set aside for use during the year (i.e. $10,000 set aside for computer equipment). Encumbrance is when some of these funds are set aside for the intended use (i.e. A PURCHASE ORDER FOR $2,000 is issued for computers). When the goods are received, you reverse the Encumbrance and record an Expenditure. Appropriations are a credit balance.
Tinsel Co.’s balances in allowance for uncollectible accounts were $70,000 at the beginning of the current year and $55,000 at year end. During the year, receivables of $35,000 were written off as uncollectible. What amount should Tinsel report as uncollectible accounts expense at year end?
B. $20,000
In Year 20x1 a local government levied $5,000,000 in special assessments. The assessments are due and payable in five equal installments at the beginning of each of the next five fiscal years, starting in Year 20x2. Assume that all installments are collected four months (120 days) into the year that they are due. The Special Assessment Debt Service Fund would report revenue in Year 20x1 in the amount of:
0
What are the appropriate fund balance classifications?
GASB Statement No. 54 eliminated the use of “reserve” and “unreserved” fund balances. The appropriate fund balance classifications are Nonspendable, Restricted, Committed, Assigned, and Unassigned.
A Capital Projects Fund has outstanding encumbrances of $250,000 as of the end of the fiscal year. Assume that all resources in the Capital Projects Fund are considered to be committed due to the constraints established by the enabling legislation of the governing body of the government. How should the encumbrances be reported in the year-end external financial statements?
The encumbrances would only be reported in the note disclosures.
What is the minimum reporting requirement for a government?
The minimum reporting requirement for a government is a General Purpose Financial Statement, which has three main components: (1) management’s discussion and analysis, (2) basic financial statements, and (3) required supplementary information.
What are the 3 sections of the CAFR (Comprehensive Annual Financial Report)?
The CAFR has three sections: (1) introductory, (2) financial, and (3) statistical.
Tree City reported a $1,500 net increase in the fund balance for Governmental Funds. During the year, Tree purchased general capital assets totaling $9,000 and recorded a depreciation expense of $3,000.
What amount should Tree report as the Change in Net Position for governmental activities in Tree’s Statement of Activities?
The increase in the fund balance for Governmental Funds is measured on the modified accrual basis, while the Change in Net Position for governmental activities is measure on the full accrual basis. To convert the increase in fund balance to full accrual:
Increase in Fund Balance + $1,500
Add back the Expenditures related to the purchase of capital assets + 9,000
Deduct the depreciation expense not included in Fund Balance - 3,000
Change in Net Position
In Soan County’s General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances, which of the following has an effect on the excess of revenues over expenditures?
Purchase of fixed assets.
Excel City has $1,000,000 of 8%, 10 year general obligation bonds outstanding. The bonds were issue on October 1, 20x8 to finance construction of city park improvements. Interest is payable semiannually on October 1 and April 1. The bonds also require an annual principal payment of $100,000 each April 1. What amount of debt service expenditures should the government report in its Debt Service Fund for the year ended December 31, 20x9?
$176,000
Both Interest Expenditures and Principal Expenditures are recognized in the Debt Service Fund. Debt Service Expenditures are usually not accrued at year-end but are recorded as Expenditures when due and payable. In 20x9 the Debt Service Fund paid a total of $176,000-$ $40,000 interest and $100,000 principal on April 1 (both Expenditures of the fund) and $36,000 interest on October 1.
Sig City used the following funds for financial reporting purposes:
General Fund Capital Projects Fund
Internal Service Fund Special Revenue Fund
Airport Enterprise Fund Debt Service Fund
Pension Trust Fund
How many of Sig’s funds use the accrual basis of accounting?
Three of the funds use full accrual basis (Internal Service Fund, Airport Enterprise Fund, and Pension Trust Fund) and four of the funds use modified accrual basis (General Fund, Capital Projects Fund, Special Revenue Fund, and Debt Service Fund).
A local citizen donated land and an office complex to a city with the stipulation that net income from the office complex be used help finance the operations of a teenage alcohol and drug treatment center. At the time of donation, the property’s fair market value was $800,000. The donor paid $500,000 for the land and house twenty years ago. The city spent $125,000 to upgrade the office complex. The city would capitalize the land and office complex in its permanent fund at:
$925,000
Shared revenues received by an Enterprise Fund of a local government for operating purposes should be recorded as:
Nonoperating Revenues.
An Enterprise Fund is a type of Proprietary Fund.
Shared Revenues received by a Proprietary Fund for operating purposes should be recorded as Non-Operating Revenues in the period in which they are earned and become measurable.
Which format must an Enterprise Fund use to report cash flow operating activities in the Statement of Cash Flows?
Direct method.
The City of Scarmont manages $200,000 in securities given to it in trust by the Citizens for City Beautification (CCB), a not-for-profit organization. Each year, the CCB receives proposals for beautification projects from various individuals and groups and selects two to three projects for funding. The City is responsible for managing the investment and disbursing the funds in accordance with the CCB request. The City accounts for the securities in a separate fund.
During the year, the City received $10,000 in investment earnings on the securities, $1,000 of which was related to earnings from the previous year, which were not received 60 days after the fiscal year end. At the end of the year, the market value of the securities was $208,000. How much revenue should be recognized in the fund in conjunction with these activities?
$17,000
