A city engages in the transactions that follow For each transaction indicate the amount of revenue or expenditure that it should report in 2014 Assume rst that the main objective of the nancial statements is to enable users to assess budgetary compliance Then calculate the amounts, assuming that th...

The objective of budgetary compliance can best be served by recording each transaction on the same basis as it is budgeted X in this case on a modifie ...

A city engages in the transactions that follow. For each transaction indicate the amount of revenue or

Question:

A city engages in the transactions that follow. For each transaction indicate the amount of revenue or expenditure that it should report in 2014. Assume ﬁrst that the main objective of the ﬁnancial statements is to enable users to assess budgetary compliance. Then calculate the amounts, assuming that the main objective is to assess inter-period equity. The city prepares its budget on a ‘‘modiﬁed’’ cash basis (that is, it expands the deﬁnition of cash to include short-term marketable securities), and its ﬁscal year ends on December 31.
1. Employees earned $128,000 in salaries and wages for the last ﬁve days in December 2014. They were paid on January 8, 2015.
2. A consulting actuary calculated that per an accepted actuarial cost method, the city should contribute $225,000 to its ﬁreﬁghters’ pension fund for beneﬁts earned in 2014. However, the city contributed only $170,000, the amount budgeted at the start of the year.
3. The city acquired three police cars for $35,000 cash each. The vehicles are expected to last for three years.
4. On December 1, 2014, the city invested $99,000 in short-term commercial paper (promissory notes). The notes matured on January 1, 2015. The city received $100,000. The $1,000 difference between the two amounts represents the city’s return (interest) on the investment.
5. On January 2, 2014, the city acquired a new $10 million ofﬁce building, ﬁnancing it with 25-year serial bonds. The bonds are to be repaid evenly over the period they are outstanding—that is, $400,000 per year. The useful life of the building is 25 years.
6. On January 3, 2014, the city acquired another $10 million ofﬁce building, ﬁnancing this facility with 25-year term bonds. These bonds will be repaid entirely when they mature on January 1, 2039. The useful life of this building is also 25 years.
7. City restaurants are required to pay a $1,200 annual license fee, the proceeds of which the city uses to fund its restaurant inspection program. The license covers the period July 1 through June 30. In 2014 the city collected $120,000 in fees for the license period beginning July 1, 2014.
8. Thecityborrowed$300,000inNovember2014tocover a temporary shortage of cash. It expects to repay the loan in February 2015.