Assessment 5 Instructions: Government Accounting

 

Complete two exercises in government accounting.

Introduction

Just as for-profit businesses must prepare financial statements for their stakeholders, state and local government entities must also assemble their financial data and report the results to their constituents. Readers of government financial statements have a wide variety of information needs; no single set of statements is able to meet the needs of all of the users. Accountability of government officials and control over public spending have always been essential elements of government accounting. The Governmental Accounting Standards Board (GASB) is the authority that is charged with setting accounting standards for state and local government entities.

In addition to the issues you examined in the previous assessment, there remain a number of other asset issues to deal with when governmental accounting procedures are involved. The first such issue involves obtaining assets through leasing arrangements. Government accounting applies the same criteria for identifying a capital lease as a for-profit organization.

These are some examples of governmental accounting situations:

• Solid waste landfills creating large potential debts for a government due to costs related to closure and postclosure.
• Future compensated employee absences due to holidays, sick leave, and vacations.
• A state or local government obtaining a work of art or historical treasure

Preparation

The following resources are required to complete the assessment.

• Assessment 5 Problems [DOCX].
• Assessment 5 Problem Templates [DOCX].

Complete the problems in the Assessment 5 Problems document using the related template, both of which are linked in the Required Resources for this assessment. All financial information and applicable instructions are provided.

In these problems you will:

• Record basic journal entries for fund-based and government-wide financial statements.
• Differentiate between encumbrances and expenditures.
• Differentiate between government activities and business-type activities.
• Determine the consequences of certain transactions for state and local governments.

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the course competencies through the following assessment scoring guide criteria:

• Competency 4: Analyze accounting issues related to government.

  Record basic journal entries for fund financial statements.
  Record basic journal entries for government-wide financial statements.
  Differentiate between encumbrances and expenditures.
  Differentiate between government activities and business-type activities.
  Determine the consequences of certain transactions for state and local governments.

• Competency 5: Communicate in a manner that is professional and consistent with expectations for professionals in the field of accounting.

  Communicate results from accounting calculations accurately and clearly.

Assessment 5: Government Accounting Template

Fund Financial Statements

Fund		Item		Credit		Debit

Government-Wide Financial Statements

Add more rows as needed.

Item

Credit

Debit

Activity

City Operations Transactions

Indicate whether the statement in the assessment is true or false and include a brief explanation for your answer.

Scenario	True or false	Brief Explanation
a.
b.
c.
d.
e.
f.
g.
h.

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>Assessment 5: Government Accounting

Prepare journal entries for the City of Mansion’s governmental funds to record the following transactions, first for fund financial statements and then for government-wide financial statements.

a. A new truck for the street department was ordered at a cost of $5

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,700.

b. The city print shop did $2,640 worth of work for the public school system (but has not yet been paid).

c. A $6.05 million bond was issued to build a new bridge.

d. Cash of $308,000 is transferred from the General Fund to provide permanent financing for a municipal swimming pool that will be viewed as an Enterprise Fund.

e. The truck ordered in (a) is received at an actual cost of $53,900. Payment is not made at this time.

f. Cash of $70,400 is transferred from the General Fund to the Capital Projects Fund.

g. A state grant of $66,000 is received that must be spent to promote recycling.

h. The first $16,500 of the state grant received in (g) is appropriately expended.

For each of the following, indicate whether the statement is true or false and include a brief explanation for your answer.

a. A pension trust fund will be disclosed in the government-wide financial statements but not in the fund financial statements.

b. Permanent funds are disclosed as one of the governmental funds.

c. A police department placed orders of $44,000 for equipment. The equipment has been received but at a cost of $45,760. In compliance with requirements for fund financial statements, an encumbrance of $44,000 was recorded when the order was placed, and an expenditure of $45,760 was recorded when the order was received.

d. The government reported a biomass energy plant as an enterprise fund. At the end of Year 1, the government estimated that the biomass project will cost $962,500 to clean up when it is eventually closed. Currently, it is 12 percent expended. At the end of Year 2, the estimation was changed to $1,056,000 when it was 20 percent expended. No payments are due for several years. Fund financial statements for Year 2 should report a $95,700 expense.

e. A city reports a landfill in the General Fund. At the end of Year 1, the government anticipated the landfill would cost $1,320,000 to clean up when it is full and reported that it was 11 percent filled. At the end of Year 2, the estimates were changed to $1,265,000 and 20 percent filled. No payments are due for several years. Government-wide financial statements for Year 2 should report a $107,800 expense.

f. A lease for a communications system (that has a six-year life) is signed on January 1, Year 1, with six annual payments of $16,500. The police department will use the communications system. The first payment is to be made immediately. The present value of the $99,000 in cash flows is $71,862 based on a 10 percent rate. Fund financial statements for Year 1 should report total expenditures of $16,500.

g. An agency fund has neither revenues nor expenses but reports expenditures.

h.

A lease for a communications system (that has a six-year life) is signed on January 1, Year 1, with six annual payments of $16,500. The communications system is to be used by the police department. The first payment is to be made immediately. The present value of the $99,000 in cash flows is $71,862 based on a 10 percent rate. Government- wide financial statements for Year 1 should report expenses of $22,036.

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