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lucyinthesky
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| Posted: 16 Apr 2009 at 19:47 | IP Logged
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The City of Bending Willows, a general purpose government, reported fund balances in the amount of $48,200,000 in the governmental funds balance sheet dated December 31, 2004. Additional information:
1. General government fixed assts amounted to $70,000,000. Accumulated depreciation of those fixed assets amounted to $36,000,000.
2. General long-term liabilities of the government amounted to $12,000,000.
3. Property taxes, which should be recognized as receivables in the government-wide statements, amount to $6,000,000. Property taxes recognized as receivables in the governmental funds balance sheet amounted to $4,000,000; the remainder had been deferred, in accord with modified accrual accounting. Additionally, $1,800,000 of property taxes had been deferred at the end of the previous year (2003) and was recognized under modified accrual as revenue in the current year.
4. Internal service funds net assets amounted to $10,000,000. These were reported in the proprietary funds balance sheet.
5. Liabilities, in addition to the amount reported in the governmental funds balance sheet, included: (1) accrued interest payable, $600,000; (2) compensated absences payable, $9,000,000.
The net assets recognized in the governmental funds column of the government-wide Statement of Net Assets are:
a 70,000,000
b 72,600,000
c 70,600,000
d 72,400,000
Hi guys,
I just stuck by this question, my answer is 70,800,000, the difference is I substracted the 1,800,000 deferred revenue from last year into this year, I think this revenue should be subtracted since it should have been recognized as revenue last year on basis of full accrual accounting, that's why we need to subtract it from current year revenue. However, the becker question doesn't mention this part in its anwder key.
Is there anyone who can help me with this????
Really appreciate in advance!
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cinnamon
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| Posted: 16 Apr 2009 at 20:15 | IP Logged
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I think you are right. 1800000 should be deducted because under accrual method it is included in last year;s revenue. Where does this question come from? Passmaster, sim, final exam, final review software of Becker? May be I can see what their answer is
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lucyinthesky
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| Posted: 16 Apr 2009 at 20:38 | IP Logged
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cinnamon wrote:
| I think you are right. 1800000 should be deducted because under accrual method it is included in last year;s revenue. Where does this question come from? Passmaster, sim, final exam, final review software of Becker? May be I can see what their answer is |
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This question is from Becker final review, section of" Governmental accounting", the right anwser per becker is " b", but I think they missed the 1800000 thing.....
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divyagovil1
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| Posted: 16 Apr 2009 at 20:41 | IP Logged
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To the best of my knowledge, i would approach this question in the following manner :-
| Fund Balance as per governmental funds balance sheet :- |
$48,200,000 |
| Add. |
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| General govt fixed assets - gross |
70,000,000 |
| Internal service fund net assets |
10,000,000 |
| Property taxes receivable |
2,000,000 |
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| Less. |
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| General long term liabilities of govt |
-12,000,000 |
| Accumulated depreciation |
-36,000,000 |
| Accrued Interest Payable |
-600,000 |
| Compensated absences payable |
-9000000 |
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| Net assets in governmental funds column of the |
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| govt wide Statement of Net assets |
$72,600,000 |
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| Property taxes receivable as at Dec 31, 2004 - $6,000,000. Out of this $4000,000 already recognized in the government funds B/S. |
| Thus, remaining $2,000,000 to be recognized on full accrual basis in statement of govt wide statement of net assets. |
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| $1,800,000 balance at last year end collected in this year & recognized in the governmental funds,i.e., included in the fund balance as per modified accrual accounting. |
| In case, we would have followed full accrual, still this amount would have been collected and included in cash in balance sheet and moved from property taxes receivable. |
| Be it the modified accrual or full accrual, effect is same so need to deduct it … It's just the movement of assets on the same side of the balance sheet. |
__________________
Divya - CO State
Passed using Becker Review :
FAR - 04/11/09 - 94
BEC - 05/30/09 - 86
REG - 08/29/09 - 95
AUD - 11/21/09 - 92
Ethics - 2011
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divyagovil1
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| Posted: 16 Apr 2009 at 20:57 | IP Logged
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Remember, in "governmental funds balance sheet" :-
$1,800,000 of property taxes had been deferred at the end of the previous year (2003) and was recognized under modified accrual as revenue in the current year.
It had not been recognized even as a receivable in governmental funds balance sheet last year, that is, no revenue last year. It had only been deferred.
So, even last year, this would have been our reconciling item.
Entry this year would be on governmental funds B/S :-
DR Property taxes receivable
CR Revenue
However, on the "govt wide statement of net assets", it had been recognized as receivable last year under full accrual basis.
Thus, this year, $4000,000 receivables recorded this year already include $1,800,000 if not collected.
So, now the balance is reconciled.. We only include addl. $2000,000 as reconciling item...
Apologies for the windy explanation !
__________________
Divya - CO State
Passed using Becker Review :
FAR - 04/11/09 - 94
BEC - 05/30/09 - 86
REG - 08/29/09 - 95
AUD - 11/21/09 - 92
Ethics - 2011
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Topic: Who can help me with this?
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