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sunnydelite
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Regular

Joined: 07 Jul 2010
Location: United States
Online Status: Offline
Posts: 109

Posted: 07 Jul 2010 at 15:01 \| IP Logged

Hi,
Becker Final review government accounting question below;
The City of Richardson reported a change in fund balance
of $2,020,000 in its governmental funds Statement of
Revenue, expenditures, and Changes in Fund Balance of the
year ended December 31, 2004 Additional Information:

1. Capital outlay expenditure amounted to $10,000,000 in
the modified accrual statement, General government fixed
assets amounted to $160,000,000 excluding land and had an
average life of 20 years

2.The modified accrual statement reported proceeds from
the sale of land in the amount of $1,000,000. the Land
had a basis of $800,000

3. Property taxes had been levied in the amount of
$20,000,000. It was estimated that 3% would be
uncollected, that $1,000,000 would be collected within 60
days of year-end, and that $400,000 would be collected
more than 60 days from year-end. The City had recognized
the maximum permitted under modified accrual accounting.
4.     $370,000 of property taxes had been deferred at
the end of the previous year and was recognized under
modified accrual as revenue in the current year.
5.     The modified accrual statement reflected debt
service expenditures in the amount of $1,000,000 for
interest and $1,500,000 for principal. No adjustment was
necessary for interest accruals at year-end.
6.     Compensated absences charges, on the full accrual
basis, amounted to $100,000 more than under the modified
accrual basis.

The change in net assets in the governmental column in
the government-wide Statement of Activities for the year
ended December 31, 2004 is
A) 4,602,000
B) 5,202,000
C) 3,832,000
D) 4,632,000

The correct answer is D.

I do not understand Becker's explanation about
information #2, why $800,000 need be subtracted, can
someone explain to me? thank you so much!!!

1tryCPA
Major Contributor

Joined: 27 Jun 2010
Online Status: Offline
Posts: 337

Posted: 08 Jul 2010 at 05:46 \| IP Logged

the governmental fund recorded 1,000,000 revenue ( increase in fund balance) for the proceeds of the land. GW should record only 200,000 gain on the sale. To get from fund revenue to GW revenue, 800,000 should be deducted from governmental fund revenues.

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tetsuwangatomu
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Regular

Joined: 08 Oct 2010
Location: United States
Online Status: Offline
Posts: 133

Posted: 31 Oct 2010 at 04:57 \| IP Logged

Nice explanation. Thanks.

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