Active TopicsActive Topics  Display List of Forum MembersMemberlist  Search The ForumSearch  HelpHelp
  RegisterRegister  LoginLogin
FAR STUDY GROUP
 CPAnet Forum : FAR STUDY GROUP
Subject Topic: government accounting question (Topic Closed Topic Closed) Post ReplyPost New Topic
  
Author
Message << Prev Topic | Next Topic >>
hanhan2008
Regular
Regular


Joined: 01 Jan 2009
Online Status: Offline
Posts: 115
Posted: 04 May 2010 at 12:40 | IP Logged  

Hi all,

I got this question from AICPA released question 2008, but selected a wrong answer. I think I here got confused about a very basic concept... can anyone help? Thanks!

A state had general obligation bonds outstanding that required payment of interest on July 1 and January 1 of each year. State law allowed for the general fund to make debt payments without the use of a fiscal agent. The fiscal year ended June 30. Which of the following accounts would have decreased when the state paid the interest due on July 1?

a. Interest expenditures.

b. Interest payable.

c. Interest expense.

d. Fund balance.

Choice "d" is correct. I selected " b" instead.



__________________
It's amazing what you can accomplish if you do not care who gets the credits.
Back to Top View hanhan2008's Profile Search for other posts by hanhan2008
 
CharliePetApple
Regular
Regular


Joined: 30 Oct 2009
Location: United States
Online Status: Offline
Posts: 173
Posted: 05 May 2010 at 01:30 | IP Logged  

I believe it is "d" since general fund like any governmental fund uses modified accrual method, not the full accrual method used  by proprietary funds or businesses.

According to this method you don't accrue the interest, but expense it when money transfer out of the fund is made. Usually interest and debt is transferred to Debt fund which takes care of all interest and debt payments



__________________
BEC - PASS 11/17/09 Wiley 2008
AUD - PASS 02/25/10 Wiley 2008
REG - PASS 03/23/10 Wiley 2010
FAR - PASS 06/22/10 Wiley 2010
There is no failure except in no longer trying
Back to Top View CharliePetApple's Profile Search for other posts by CharliePetApple
 
caixinran
Regular
Regular


Joined: 10 Jun 2009
Online Status: Offline
Posts: 159
Posted: 05 May 2010 at 18:53 | IP Logged  

D is the correct answer.

__________________
REG - July 21, 2009 - 94
BEC - Nov. 03, 2009 - 90
FAR - Aug. 07, 2010 - 96
AUD - Nov, 23, 2010 - 87
Back to Top View caixinran's Profile Search for other posts by caixinran
 
hanhan2008
Regular
Regular


Joined: 01 Jan 2009
Online Status: Offline
Posts: 115
Posted: 07 May 2010 at 09:49 | IP Logged  

[Thank you! So there is never Accounts Payable using modified accural method? I need to go back to check the book later...

QUOTE=CharliePetApple]

I believe it is "d" since general fund like any governmental fund uses modified accrual method, not the full accrual method used  by proprietary funds or businesses.

According to this method you don't accrue the interest, but expense it when money transfer out of the fund is made. Usually interest and debt is transferred to Debt fund which takes care of all interest and debt payments

[/QUOTE]

__________________
It's amazing what you can accomplish if you do not care who gets the credits.
Back to Top View hanhan2008's Profile Search for other posts by hanhan2008
 
hanhan2008
Regular
Regular


Joined: 01 Jan 2009
Online Status: Offline
Posts: 115
Posted: 08 May 2010 at 19:12 | IP Logged  

Confirmed from the book. There is no accrual of interest expenditures or int. payable. JE to record pmt of int.:
DR Expenditures   $$$
CR  Cash(matured int. payable) $$$

So the fund balance would be decreased.

Thank you all!


__________________
It's amazing what you can accomplish if you do not care who gets the credits.
Back to Top View hanhan2008's Profile Search for other posts by hanhan2008
 



Sorry, you can NOT post a reply.
This topic is closed.


  Post ReplyPost New Topic
Printable version Printable version

Forum Jump
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot delete your posts in this forum
You cannot edit your posts in this forum
You cannot create polls in this forum
You cannot vote in polls in this forum

Powered by Web Wiz Forums version 7.9
Copyright ©2001-2010 Web Wiz Guide

This page was generated in 0.1250 seconds.

Copyright © 1996-2016 CPAnet/MizWeb Communities All Rights Reserved
Twitter
|Facebook |CPA Exam Club | About | Contact | Newsletter | Advertise & Promote