Wk 3 Textbook Assignment

Ch 2
Ex. 2-1
Match the fund items below with the amounts that follow. An amount may be selected once,
more than once, or not at all.
1. Revenue to be recognized in an enterprise fund j. $8,000
2. Revenue to be recognized in special revenue fundsg. $2,200
3. Bonds payable to be recognized in the general funda. $0
4. Bonds payable to be recognized in enterprise funds h. $4,000
5. Depreciation expenditure to be recognized in the general fund a. $0
6. Depreciation expense to be recognized in internal service funds b. $140
7. Revenue to be recognized in an internal service funda. $0
8. Revenue to be recognized in the general fund i. $6,300
9. Long-lived assets to be recognized in the general funda. $0
10. Long-lived assets to be recognized in internal service fundsf. $1,400

Ch 4
Ex 4-1
Select the best answer.
1. Under the modified accrual basis of accounting, revenues cannot be recognized
d. Until they are measurable and available
2. Available (as in measurable and available) means
a. Available to finance expenditures of the current period
3. Property taxes are an example of
b. An imposed nonexchange transaction
4. To be considered available, property taxes must have been collected either during the
governments fiscal year or within
c. Sixty days of year-end
5. For its fiscal year ending September 30, 2011, Twin City levied $500 million in property taxes.
It collected taxes applicable to fiscal 2011 as follows (in millions):

Wk 3 Textbook Assignment

June 1, 2010, through September 30, 2010

$ 20

October 1, 2010, through September 30, 2011

$440

October 1, 2011, through November 30, 2011

$ 15

December 2011

$4

The city estimates that $10 million of the outstanding balance will be uncollectible. For the fiscal
year ending September 30, 2011, how much should Twin City recognize in property tax revenue
(in millions) in its general fund?
c. $475
6. Assume the same facts as in the previous example. How much should Twin City recognize in
property tax revenue (in millions) in its government-wide statement of activities?
d. $490
7. Central City was awarded two state grants during its fiscal year ending September 30, 2011: a
$2 million block grant that can be used to cover any operating expenses incurred during fiscal
2012, and a $1 million grant that can be used any time to acquire equipment for its police
department. For the year ending September 30, 2011, Central City should recognize in grant
revenue in its funds statements (in millions):
b. $1
8. Assume the same facts as in the previous example. How much should the city recognize in
grant revenue in its government-wide statements?
b. $1
9. Assuming that a government will collect its sales taxes in sufficient time to satisfy the
available criterion, it would ordinarily recognize revenue from sales taxes in its governmental
fund statements
a. When the underlying sales transaction takes place
10. Assuming that a government will collect its sales taxes in sufficient time to satisfy the
available criterion, it would ordinarily recognize revenue from sales taxes in its governmentwide statements
a. When the underlying sales transaction takes place
Ex 4-7
Sales taxes should be recognized when the underlying event takes place.
A state requires large merchants (i.e., those with sales over a specified dollar amount) to report
and remit their sales taxes within fifteen days of the end of each month. It requires small
merchants to report and remit their taxes within fifteen days of the end of each quarter. In
January 2012, large merchants remitted sales taxes of $400 million owing to sales of December

Wk 3 Textbook Assignment

2011. In February 2012, they remitted $280 million of sales taxes owing to sales of January
2012. In January small merchants remitted sales taxes of $150 million owing to sales of the
fourth quarter of 2011.
1. Prepare an appropriate journal entry to indicate the impact of the transactions on the states
fund financial statements for the year ending December 31, 2011.
12/31/2011

Sales tax receivable

400

Sales tax revenue

400

To summarize Dec. 2011 sales tax activity

12/31/2011

Sales tax receivable

Sales tax revenue

280
280

To summarize Dec. 2011 sales tax activity

2. Suppose, instead, that 10 percent of the taxes received by the state were collected on behalf of
a city within the state. It is the policy of the state to remit the taxes to the city 30 days after it
receives them. Prepare an appropriate journal entry to indicate the impact of the transactions on
the citys fund financial statements for the year ending December 31, 2011.
The journal entry would be the same as in the previous question.
Ch 5
Questions for Review and Discussion
1. What is the distinction between expenditures and expenses as the terms are used in
governmental accounting?
Expenditures decrease net financial resources. Expenses decrease overall net assets.
Expenditures are used in government accounting, whereas expenses are used in financial
accounting.
2. A government expects to pay its electric bill relating to its current fiscal year sometime in the
following year. An official of the government requests your advice as to whether the anticipated
payment should be charged as an expenditure of the current or the following year. How would
you respond?
The electric bill should be recognized as an expenditure in the period or year in which the
services were used.
CH 6
Questions for Review and Discussion
1. Although many governments prepare budgets for both capital projects and debt service funds
and integrate them into their accounts, budgetary control over these funds is not as essential as it

Wk 3 Textbook Assignment

is for other governmental funds. Do you agree? Explain. If budgets are prepared for capital
projects funds, in what significant way may they differ from those prepared for other funds?
I disagree, capital projects and debt service funds are just as essential as other governmental
funds. Capital fund projects differ in the fact that they can be save for more years than other
funds.
6. How should governments report their capital projects and debt service activities in their
government-wide statements?
They should be reported as a long term obligation.