In: Accounting
1.A county uses the legal budgetary basis to report encumbrances. Information for its latest fiscal year is as follows:
Encumbrances outstanding at the beginning of the year | $50,000 |
Encumbrances outstanding at the end of the year | 75,000 |
Excess of revenues and other financing sources over expenditures and other financing uses, legal budgetary basis | 860,000 |
What is the excess of revenues and other financing sources over expenditures and other financing uses, using the GAAP budgetary basis?
A.$810,000
B.$835,000
C.$885,000
D.$935,000
2.A county's general fund bought equipment for $50,000. The equipment was estimated to have a 10-year life, straight-line, no salvage value. Four years later, it sold the equipment for $18,000. In the year of the sale, the government-wide statement of activities will report
A.Loss on sale of capital assets of $12,000
B.Proceeds from sale of capital assets of $18,000
C.Loss on sale of capital assets of $32,000
D.Proceeds from sale of capital assets of $32,000
Ans:-
1. Given
Encumbrance related to beginning of the year=$50,000
Encumbrance related to end of the year=$75,000
Excess of revenue and other financing sources=$860,000
Now
Excess of revenue and other financing sources over expenditure and other financing uses, through use of GAAP budgetary basis.
Over Change in encumbrance at the end is $25,000 i.e..,($75,000-$50,000)
We have an excess revenue and other financing sources is $860,000
Change in encumbrance shall be diducted from excess revenue=$860,000-$25,000
=$835,000
Here we have an excess of revenue over other financing sources and other expenditure. So, the change in encumbrance from beginning to ending is eligible for diduction from above excess values.
So option B is correct
2.
The general fund brought for equipment is $50,000
It's useful life is about 10 years
No salvage
And depreciation shall be calculated on straight line basis
So,
Depreciation on equipment=(cost of asset-salvage value)/Number of years
=($50,000-$0)/10
=$5,000
Depreciation for every year is $5,000
Depreciation for the 4years=$5,000*4=$20,000
Value of equipment after 4 years =$50,000-$20,000
=$30,000
Sale value of the equipment is $18,000
So, the loss on sale of equipment is
=$30,000-$18,000
=$12,000
But in government wise statment of activities will report as Proceeds from sale of capital asset is $18,000.
And the related loss on sale of equipment will.be shown in notes below the statements.
So, the Option B is correct