Question

In: Accounting

Which of the following best expresses the accounting standard regarding accounting for purchases and inventories in...

Which of the following best expresses the accounting standard regarding accounting for purchases and inventories in the General Fund?

Select one:

a. Purchases may be recorded as expenditures either when acquired or consumed; if accounted for as expenditures when acquired, year-end inventories are ignored.

b. They must be accounted for in a manner similar to that of commercial enterprises.

c. All purchases must be accounted for as expenditures upon acquisition.

d. Purchases may be recorded as expenditures either when acquired or consumed; if accounted for as expenditures when acquired, year-end inventories must be reported if the amount is significant.

Which of the following transactions creates an expenditure on the General Fund statement of revenues, expenditures, and changes in fund balance?

Select one:

a. A purchase of water from the Water Enterprise Fund

b. A transfer of resources to the Debt Service Fund so the Debt Service Fund can pay debt service on general obligation debt

c. A transfer of resources to the Capital Projects Fund to help pay for a major capital project

d. A loan to the Sewage Enterprise Fund

At the end of fiscal year 2019, Carson City had outstanding encumbrances of $15,000. Although the city follows a policy of allowing outstanding encumbrances to lapse, it plans to honor the related purchase orders in fiscal year 2020. How should the city report the existence of the outstanding encumbrances in the financial statements if the encumbrances do not relate to a resource classified as restricted or committed?

Select one:

a. It should be reported as Reserved for Encumbrances.

b. It should be reported as Nonspendable fund balance.

c. It should be reported as Unassigned fund balance.

d. It should be reported as Assigned fund balance.

A state provides pension benefits to retired employees who have worked at least five years for the state. Based on employee salaries during 2019, the state actuary calculated that the employees earned pension benefits totaling $14 million. The state appropriated $10 million to the General Fund for payment to its Pension Trust Fund. However, the state encountered financial problems during 2019. It sent its pension system a check for $8 million in October 2019, saying that it would pay no more for the year. The Pension Trust Fund actually paid pension benefits of $3 million during 2019. How much should the General Fund recognize as pension expenditures for 2019?

Select one:

a. $14 million

b. $8 million

c. $10 million

d. $3 million

Which of the following transactions or events best describes when a grant recipient may recognize revenues from intergovernmental grants in governmental-type funds?

Select one:

a. The recipient spends all the resources made available in the grant.

b. The recipient receives cash from the grant provider.

c. The recipient complies with all grant eligibility requirements, and the resources are “available.”

d. The recipient enters into a contract with the grant provider.

Solutions

Expert Solution

1) Solution: a. Purchases may be recorded as expenditures either when acquired or consumed; if accounted for as expenditures when acquired, year-end inventories are ignored.

Explanation: The above statement best describes the accounting standard in regard to accounting for purchases and inventories in the General Fund

2) Solution: Payment of Debt Service Fund for debt service on general obligation debt

Explanation: The statement of Revenues, Expenditures, and Changes in Fund Balances focuses on the inflows as well as outflows of current financial resources

3) Solution: It should be reported as Assigned fund balance.

Explanation: The Accountant should credit assigned fund balance

4) Solution: $8 million

Explanation: General Fund will recognize $8 million as pension expenditures for 2019

5) Solution: The recipient complies with all grant eligibility requirements, and the resources are “available.”

Explanation: The recipient is required to meet all grant eligibility requirements, and the resources must be “available.”


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