FAR Module 9 Part 6 Flashcards
The City of Mountain Lake Leases a small plan for 5 years to be used by officials whenever necessary. In preparing its financial statements for this year, the city’s accountant is attempting to ascertain if this is a capital lease. How is that determination made?
The same four criteria used in financial accounting are used in accounting for state and local governments
All leases are viewed as capital leases in the financial reporting of state and local governments
No leases are viewed as capital leases in the financial reporting of state and local governments
In the financial statements for a state or local government, all leases that last over 50% of the life of the asset are reported as capital leases.
The GASB decided to adopt the four criteria that had been used for several decades in financial accounting.
The town of Oceanview budgeted $500,000 for the purchase of two fully equipped fire trucks during the fiscal year ended December 31, Year 1. The Town issued a purchase order for the acquisition of both trucks for a total for $480,000 on February 1, Year 1 and accepted delivery of one of the trucks, valued at $280,000 on March 31, Year 1. As a result of this delivery of one of the ordered vehicles, the Town of Oceanview General Fund would record a:
Debit to appropriations control for $280,000
Debit to property and equipment for $280,000
Credit to encumbrances for $240,000
Debit to encumbrances for $240,000
Delivery of goods associated with encumbered funds would result in reversal of the applicable portion ($240,000) of the original encumbrance entry ($480,000). This is one half of encumbered value of the original order.
At time of acquisition
DR Encumbrances $480,000
CR Budgetary control $480,000
To reverse original encumbrance
DR Budgetary control
CR encumbrance
Elm City issued a purchase order for supplies with an estimated cost of $5,000. When the supplies were received, the accompanying invoice indicated an actual price of $4,950. What amount should Elm debit (credit) to the budgetary control after the supplies and invoice were received?
($50)
$5,000
$4,950
$50
After the supplies and invoice are received, Elm should debit the internal account for budgetary control for the same $5,000 estimated amount that the account was credited when the purchase order was issued.
In Year 1, New City issued purchase orders and contracts of $850,000 that were chargeable against Year 1 budgeted appropriations of $1,000,000. The journal entry to record the issuance of the purchase orders and contracts should include a:
Debit to appropriations $850,000
Debit to expenditures of $1,000,000
Credit to budgetary control of $850,000
Credit to vouchers payable of $1,000,000
The issuance of purchase orders or the signing of contracts represents a commitment to expend resources. Such a commitment is recorded as an encumbrance and a credit to budgetary control. The entry to record the issuance of the purchase orders and contract is:
DR Encumbrances $850,000
CR Budgetary Control $850,000
wood City, which is legally obligated to maintain a debt service fund, issued the following general obligation bonds on July 1, Year 1:
Term of bonds 10 years
Face amount $1,000,000
Issue price 101
Stated interest rate 6%
Interest is payable January 1 and July 1. What amount of bond premium should be amorized in Wood’s debt service fund for purpose of fund financial reporting for the year ended December 31, Year 1?
$250
$0
$500
$1,000
Since the measurement focus is sources and uses of financial resources, bond premium/discount is not amortized in its governmental funds, including the debt service fund. The bond premium/discount is usually recorded in the fund receiving the proceeds. If the premium is accounted for in debt service fund.
You are studying a set of financial statements prepared for the city of Wichita. You find an asset listed as a building which is reported as $2.4 million. The statement also shows accumulated depreciation of $700,000 for a book value of $1.7 million. In which of the following are you not looking as you study the statements for the city of Wichita?
Fund-based financial statements for governmental funds
Government-wide financial statements for business-type activities
Government-wide financial statements for governmental activities
Fund-based financial statements for proprietary funds
Financial statements for business and governmental activities report all economic resources including assets.
Fund-based statements for governmental funds only report current financial resources, a building is not a current financial resource and is not reported in those statements.
At the end of Year One, the City of Anna is creating fund-based financial statements for its governmental funds. Late in that year, the city acquired supplies at a cost of $12,000. This amount will be paid on March 12 of Year Two. Which of the following statements is true?
A liability for $12,000 must be reported on the balance sheet at the end of Year One
A liability for $12,000 might be reported on the balance sheet at the end of Year One.
A liability for $12,000 cannot be reported on the balance sheet at the end of Year One
A liability for $12,000 is reported if the money is paid before the financial statements are released
For fund-based financial statements for the governmental funds, the only liabilities reported are the current claims to current financial resources.
This based on when this will be paid.
