Exam 17: Accounting for State and Local Governments

What three criteria must be met to identify a governmental unit as a primary government?

The City of Wetteville has a fiscal year ending June 30. Examine the following transactions for Wetteville: (A.) On 6/1/11, Wetteville enters into a 5-year lease on a copying machine. The lease meets the criteria of a capital lease and carries an implied interest rate of 10%. The copier has a present value of $2,300. Wetteville has to put a $300 down payment on the lease at the beginning of the lease with monthly payments thereafter of $42.49. (B.) On 6/5/11, Wetteville opens a new landfill. The engineers estimate that at the end of 10 years the landfill will be full. Estimated costs to close the landfill are currently at $3,500,000. (C.) On 6/15/11, the end of the two-week pay period, Wetteville has $20,000 in accrued vacation pay related to the payroll for the period. The city estimates that $5,000 of this pay will be taken by the end of this summer and the rest will be used next summer. (D.) On 6/18/11, Wetteville receives a donation of a vintage railroad steam engine. The engine will be put on display at the local town park. A fee will be charged to actually climb up into the engine. The engine has been valued at $500,000. (E.) On 6/30/11, Wetteville makes its first payment on the leased copier. The $42.49 payment includes $16.68 interest. (F.) On 6/30/11, Wetteville estimates that the landfill is 2% filled. Required: Prepare the journal entries for the above transactions in the general fund, on the dates mentioned for each lettered item, for the purposes of preparing the fund financial statements.

The City of Nextville operates a motor pool serving all city-owned vehicles. The motor pool bought a new garage by paying $29,000 in cash and signing a note with the local bank for $280,000. Subsequently, the motor pool performed work for the police department at a cost of $17,000, which had not yet been collected. Depreciation on the garage amounted to $20,000. The first $12,000 payment made on the note included $4,800 in interest. Required: Prepare the journal entries for these transactions that are necessary to prepare government-wide financial statements.

Which of the following must be presented in the MD&A of a government?

The Town of Portsmouth has at the beginning of the year a $213,000 Net Asset balance, and a $52,000 Fund Balance. The following information relates to the activities within the Town of Portsmouth for the year of 2011. Prepare a Statement of Revenues, Expenditures and Changes in Fund Balances

According to the GASB (Governmental Accounting Standards Board), which one of the following is not a criterion for determining whether a government is legally separate?

A five-year lease is signed by the City of Wachovia for equipment with a seven-year life. The asset will be returned to the lessor at the end of the lease. The present value of the lease is $20,000, and annual payments of $5,411.41 are payable beginning on the date the lease is signed. The interest portion of the second payment is $1,604.75. The equipment is to be used in City Hall and was purchased from appropriated funds of the General Fund. What should be recorded in the General Fund one year from the date the lease is signed?

Drye Township has received a donation of a rare painting worth $1,000,000. For Drye's government-wide financial statements, three criteria must be met before Drye can opt not to recognize the painting as an asset. Which of the following is not one of the three criteria? (1.) The painting is held for public exhibition, education, or research in furtherance of public service, rather than financial gain. (2)) The painting is scheduled to be sold immediately at auction. (3)) The painting is protected, kept unencumbered, cared for, and preserved.

Which one of the following is a criterion for identifying a primary government?

For fund financial statements, what account is credited when a piece of equipment is leased on a capital lease?

The Town of Portsmouth has at the beginning of the year a $213,000 Net Asset balance, and a $52,000 Fund Balance. The following information relates to the activities within the Town of Portsmouth for the year of 2011. Prepare a Statement of Net Assets