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Financial Accounting an introduction to concepts, methods and uses 13th Edition Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis - Solutions
Identify the different types of trust funds and explain the purpose of each type.
Must an agency fund be used to account for withholding taxes, retirement contributions, and (if applicable) social security taxes of General Fund employees? Explain.
Why do agency funds have no fund equity?
What is a “pass-through” agency fund and under what conditions is it appropriate to use such a fund?
How does the accounting for an internal investment pool differ from the accounting for an external investment pool?
GASB standards require that investments be reported at fair value. Explain the GASB reporting requirements related to fair value. How do these requirements differ from reporting requirements for corporate entities?
Explain the difference between a private-purpose trust and a public-purpose trust. How does the reporting for the two types of trusts differ?
If you were trying to assess the financial health of a government administered pension plan, which financial statements or schedules would you review and why?
What are the two types of risk that are of concern to investment managers? Define each type of risk.
Internet Case—CalPFRS. While the examples in this chapter have focused on a single-employer plan, many states operate statewide plans, referred to as Public Employee Retirement Systems (PERS), to which multiple employers contribute. One of the largest PERS plans in the nation is operated in the
Identification of Fiduciary Funds. Following is a list of fund names and descriptions of funds from comprehensive annual financial reports (CAFRs).RequiredFor each fund, indicate which type of fund should be used to account for the activities and explain why that fund is most appropriate.a.
Other Postemployment Benefit (OPEB) Plans. GASB standards require that governments report other postemployment benefits offered to employees. A typical example of such benefits is health care provided to retirees. It is estimated that the unrecorded and unfunded liability related to OPEB is huge.
Multiple Choice. Choose the best answer.1. Which of the following is riot a fiduciary fund?a. Permanent fund.b. Agency fund.c. Investment trust fund.d. Pension trust fund.2. Which of the following is an example of a trust fund?a. A fund used to account for the collection and distribution of taxes
Multiple Choice. Choose the best answer.Items 1 through 3 relate to the following information.The county administers a tax agency fund that collects taxes on behalf of the county city, and a special purpose district. For 2011, the taxes to be levied by the government are:County
Tax Agency Fund. The county collector of Lincoln County is responsible for collecting all property taxes levied by funds and governments within the boundaries of the county. To reimburse the county for estimated administrative expenses of operating the tax agency fund, the agency fund deducts 1
Special Assessment Debt. Fawn community, located in the City of Deerville, voted to form a local improvement district to fund the construction of a new community center. The city agreed to construct the community center and administer the bond debt; however. Fawn community was solely responsible
Identification of Fund St. George County has entered into a contract for the demolition and construction of a six-lane bridge. It is expected that the project will take three years to complete. The terms of the contract indicate that the county will retain 5 percent (retained percentage) from each
Investment Trust Fund. The Albertville City Council decided to pool the investments of its General Fund with Albertville Schools and Richwood Township in an investment pool to be managed by the city. Each of the pool participants had reported its investments at fair value as of the end of the last
Pension Plan Calculation The Village of Dover administers a defined benefit pension plan for its police and fire personnel. Employees are not required to contribute to the plan. The village received from the actuary and other sources the following information about the Public Safety Employees’
Pension Plan Financial Statements. The State of Nodak operates a Public Employees Retirement System (PERS) for all employees of the state. The preclosing trial balance of the PERS as of June 30, 2011, follows (in thousands of dollars):Requireda. Prepare a statement of changes in plan net assets for
Fiduciary Financial Statements Ray County administers a tax agency fund, an investment trust fund, and a private-purpose trust fund. The tax agency fund acts as an agent for the county, a city within the county, and the school district within the county. Participants in the investment trust fund
What is a special district and why might a government create one or more special districts?
What is the difference between a note to the financial statements and required supplementary information?
A city manager was overheard saying. “Since we don’t release them to the public, I don’t see any value in taking the time to prepare interim reports.” Explain why you agree or disagree with this statement.
What is a financial reporting entity and what organizations generally make up a financial reporting entity?
Explain the difference between a primary government and a component unit.
The controller is considering whether a component unit should be presented in the financial statements as a discrete or a blended component unit. What should be considered in making the decision?
Explain the difference between a CAFR and general purpose external financial reports.
Assuming that a government has governmental, proprietary, and fiduciary funds, identify the nine financial statements that must be prepared for the CAFR.
Give examples of items (transactions) that would require reconciliation of total governmental fund balances to net assets of governmental activities.
What is OCBOA and why would a government choose to use OCBOA rather than GAAP?
Identification of Component Units. Following are descriptions of several relationships between primary governments and other organizations.RequiredUsing just the information provided, indicate whether you believe the primary government should include the organization as a component unit. Please
MD&A and Statistical Tables. The MD&A for the 2007 City and County of Denver CAFR is included as Appendix B in this chapter. On the following pages are selected tables from the statistical section of the 2007 CAFR. Use the MD&A and the provided statistical tables to complete this case.Requireda.
Internet Case—Popular Reports. You have just been hired as an accountant for a large metropolitan city in the eastern part of the country. Your first assignment is to assist the finance director in the preparation of a “popular report.” The city has long been concerned with the difficulty
Multiple Choice. Choose the best answer.1. Which of the following fund type(s) uses the accrual basis of accounting?a. Special revenue.b. Internal service.c. Pension trust.d. Both b and c.2. Which of the following items would generally be reported as a program revenue in the Governmental Activities
Multiple Choice. Choose the best answer.1. Some governments have begun to provide highly condensed financial information, budget summaries, and narrative descriptions, in addition to their traditional CAFR. This type of report is generally referred to as a (an):a. Popular report.b. MD&A.c.
Comprehensive Set of Transactions. The City of Lynnwood was recently incorporated and had the following transactions for the fiscal year ended December 31, 2011.1. The city council adopted a General Fund budget for the fiscal year. Revenues were estimated at $2,000,000 and appropriations were
General Fund Adjustments. The City of Allenton has engaged you to examine its June 20, 2011, financial statements. You are the first CPA ever engaged by the city and you find that the city€™s accounting staff is unfamiliar with GAAP accounting and reporting requirements. Following is the
Matching. Section A provides a list of transactions or events that occurred during the year, followed by Section B. a list of the possible effects each transaction or event has on adjusting net asset accounts at year-end, assuming that all temporary accounts have already been closed to the account
Change in Net Assets of Governmental Activities. You have been provided with the following information concerning operating activity for Leesburg County. For the year ended June 30, 2011, the net change in total governmental fund balances was $131,700, and the change in net assets of governmental
Governmental Funds Statement of Revenues Expenditures and Changes in Fund Balance. You have recently started working as the controller for a small county. The county is preparing its financial statements for the comprehensive annual financial report and you have been given the following statement
Government-wide Financial Statements. Following is the governmental activities pre-closing trial balance for the Town of Freaz. Freaz is a relatively small town and, as a result, it has only governmental funds (i. e., it uses no proprietary funds). There are no component units. To complete the
Converting from Modified Accrual to Accrual Accounting. The Village of Rodale keeps its governmental find accounting records on a modified accrual basis. At the end of the fiscal year, the village accountant must convert the modified accrual information to accrual information to allow for
Describe some typical causes of municipal financial crises. How could an effective monitoring system reduce the risk of a financial crisis?
Which of the following terms best represents a broad concept of financial health encompassing the government’s ability and willingness to meet its financial obligations and commitments to provide services: financial position, financial condition, or economic condition? Explain the other two terms.
The International City/County Management Association (ICMA) describes four types of solvency within the concept of financial condition. Identify each type and explain why each is important to the long-term financial health of a government.
Describe how citizens can use the financial trend monitoring system (FTMS) of the ICMA to assess the financial condition of their local government.
Describe how a taxpayer might assess the financial solvency and viability of a government using government-wide financial statements prepared according to generally accepted accounting principles.
Explain what assessment can be made from the ratio unrestricted net assets as a percentage of total revenue that cannot be made from the ratio unreserved fund balances as a percentage of total revenues.
Explain how organizational factors, such as management practices and legislative policies, affect a government’s financial condition.
Should citizens be concerned if the pension plan funding measure decreases over time? Why?
Identify some financial indicators or ratios that are designed to measure the short-term financial position of a governmental entity. Why are these measures not as useful in assessing long-term financial or economic condition?
Credit or bond analysts are interested only in the financial condition of the government when determining bond ratings. Do you agree or disagree with this statement? Explain.
NASRA and the GASAC. You are an accountant with the national office of the National Association of State Retirement Administrators (NASRA) and have just been appointed by the membership as its representative to the Governmental Accounting Standards Advisory Council (GASAC) for a four-year term. In
Internet Case—Municipal Credit Analysis For the fiscal year 2007, the City and County of Denver, Colorado, had approximately $4.9 billion in bonded debt. You are a senior accountant in the controller’s office of the City and County of Denver and have been asked to make a presentation at the
Financial Trends. You are a new city council person for the City of Scottsdale. Arizona. You are aware that several cities have been in the news recently for financial crises for which the council or board is being held accountable. The governing bodies have been criticized for not being aware of
Analysis of Overall Performance. The City of Edmond, Oklahoma, uses the Crawford Performeter® as a financial analysis tool and presents the results of this analysis in its Management€™s Discussion and Analysis in the annual audited financial statements. For the year ended June 30,
Multiple Choice. Choose the best answer.1. Which of the following groups or parties generally has taken the most initiative to evaluate the financial condition of a city?a. Citizens.b. Managers.c. Credit market analysts.d. Legislative and oversight bodies.2. Which of the following terms or concepts
Financial Condition. Write the letters a through o on a sheet of paper. Beside each letter, put a plus (+) if a high or increasing value of the item is generally associated with stronger financial condition, a minus (–) if a high or increasing value of the item is generally associated with a
Benchmarks. Examine the following tables from the 2009 Financial Trend Monitoring Report for the Town of Oakdale that reports on fiscal year 2008. The performance indicators selected are total revenue and revenue per capita. The town provides three reference groups with which to compare Oakdale:
Financial Trend 1onitoring System—Reserves. The City of Scottsdale, Arizona, provides the following report on the following page about its reserve policies on page 12 of its October 2007 financial trends booklet.Requireda. Refer to Illustration 10—1. To which categories of factors affecting
Factors Affecting Financial Condition. The transmittal letter from the chief financial officer to the mayor and city council of Detroit that accompanies the City of Detroit’s Comprehensive Annual Financial Report for the Year Ended June 30, 2004, includes the following:Economic ConsiderationsThis
Government-wide Financial Analysis. Condensed government-wide financial information from the comprehensive annual financial report for the Commonwealth of Pennsylvania for the fiscal year ended June 30, 2007, is provided below.Requireda. Identify significant trends that appear in the condensed
The cost recovery method and the completed contract method of recognizing revenues are similar in that both methods delay the recognition of income even if a firm collects cash. In what ways do the two methods differ?
The accounting for a multiple element contract separates the contract with a customer into pieces (components or deliverables) and assigns each component a portion of the total contract revenue. The percentage of completion method of accounting for a longterm construction contract also separates
The allowance method of accounting for uncollectible accounts receivable involves the creation of contra account that shows the estimated amount of uncollectible receivables. Why would financial statement users want to know both this number and the gross amount of accounts receivable?
(a) An old wisdom in tennis holds that if your first serves are always good, you are not hitting them hard enough. An analogous statement in business might be that if you have no uncollectible accounts, you probably are not selling enough on credit. Comment on the validity and parallelism of these
Under what circumstances will the Allowance for Uncollectible Accounts have a debit balance during the accounting period? The balance sheet figure for the Allowance for Uncollectible Accounts at the end of the period should never show a debit balance. Why?
Construction companies often use the percentage-of-completion method. Why doesn’t a typical manufacturing firm use this method of income recognition?
Both the installment method and the cost recovery method recognize revenue when a firm collects cash. Why, then, does the pattern of income (that is, revenues minus expenses) over time differ under these two methods?
When the total amount of cash that a firm expects to collect from a customer is highly uncertain, the cost recovery method seems more appropriate than the installment method.” Explain.
A magazine publisher offers a reduced annual subscription fee if customers pay for three years in advance. Under this subscription program, the magazine publisher receives from customers $45,000, which it credits to Advances from Customers. The estimated cost of publishing and distributing
Both bad debt expense and expected returns reduce income in the period of sale. How does the accounting for these tow items differ and how is it similar?
Conceptually, what kind of account is the Deferred Gross Margin account that arises under the installment method of accounting? How is this account typically classified on balance sheets?
Discuss when each of the following types of businesses is likely to recognize revenue:a. A shoe store.b. A shipbuilding firm constructing an aircraft carrier under a government contract.c. A real estate developer selling lots on long-term contracts with small down payments required.d. A
Income recognition for various business arrangements. Refer to the conceptual revenue recognition guidance given in Appendix 7.1. Applying this conceptual guidance, discuss the timing of revenue recognition and any related measurement issues.a. Company A develops software and sells it to customers
Meaning of allowance For uncollectible accounts. Indicate whether each of the following accurately describes the meaning of the Allowance for Uncollectible Accounts account when properly used. If the description does not apply to this account, discuss why it does not.a. Assets available in case
Revenue recognition at time of sale. Prêt a manager is a food retailer with stores in the U.K. and the United States and is known for its fast but fresh food menu. A customer shopping at a London Heathrow store purchased a ham and cheese baguette (£4.50), a small fruit salad (£2.40), and a
Revenue recognition at and after time of sale. A customer shopping at Bed, Bath & Beyond, a home products retailer in the United States, made the following purchases:$100 for bath towels, $135 for a top-of-the-line iron, $45 for an ironing board, and $250 for a gift certificate sent as a
Revenue recognition at time of sale. Marks and Spencer Group. Plc., a U.K. retailer, applies IFRS and reports its results in millions of pounds sterling (£). The notes to its financial statements for the year ended March 29, 2008, provide the following information:• Revenue comprises sales of
Revenue recognition at time of sale. Assume that Lentiva Group Limited provided the following description of its revenue recognition practices in the notes to its 2007 financial statements.• Lentiva recognizes revenue from the sale of goods (such as sales of hardware and software) when it
Journal entries for coupons. Morrison's Cafeteria sells coupons that customers may use later to purchase meals. Each coupon book sells for $25 and has a face value of $30: that is, the customer can use the book to purchase meals with menu prices of $30. On January 1, 2008, redeemable unused
Journal entries for service contracts. Abson Corporation began business on January 1, 2008, selling copiers. It also sells service contracts to maintain and repair copiers for $600 per year. When a customer signs a service contract, Abson collects the $600 fee and credits Service Contract Fees
Allowance method fur uncollectible accounts. Diversified Technologies opened for business on January 1, 2008. Sales on account during 2008 were $126,900 Collections from customers from sales on account during 2008 were $94,300. Diversified Technologies estimates that it will ultimately not collect
Aging of account receivable. York company's account receivable show the following balance:York Company uses the aging-of-accounts-receivable procedure for uncollectible accounts. The credit balance in the Allowance for Uncollectible Accounts is now $1 6,000. Analysis of collection expenence
Aging of account receivable. Dove company's accounts receivable show the following balance by ages:The credit balance in the Allowance for Uncollectible Accounts is now $17,200. Dove Company's analyses of its collection experience suggest that Dove should use the following percentages to compute
Aging of accounts receivable. Hamilia S.A.'s financial records show the following balances in its accounts receivable for fiscal 2008:Hamilia uses the aging-of-accounts-receivable procedure for uncollectible accounts. At the end of fiscal 2008, the credit balance in the Allowance for
Reconstructing when the allowance method. Selected data from the accounts of Seward Corporation appear next for the year ended December 31, 2008:The firm makes all sales on account. There were no recoveries during the year of accounts written off in previous years.Give the journal entries for the
Allowance method; reconstructing journal entry from events. (From a problem by S. A. Zeff.) During 2008, Pandora Company wrote off $2,200 of accounts receivable as uncollectible. Pandora Company collected no cash during 2008 for amounts it had written off in previous years. The balance in the
Allowance method; reconstructing, journal entries from events. (From a problem by S. A. Zeff.) The balance sheets of Milton Corporation on December 31, 2008 and 2009, showed gross accounts receivable of $15,200,000 and $17,600,000, respectively. The balances in the Allowance for Uncollectible
Reconstructing events from journal entries. Give the likely transaction or event that would result in making each of the independent journal entries that follow.(a) Bad Debt Expense ................. 2,300Allowance for uncollectible accounts ........ 2,300(b) Allowance for Uncollectible
Journal entries for the allowance method. Data related to sales on accounts of Health Company for its first three year of operations, 2006-2008 appear next:Heath Company estimates that 3% of sales on account will ultimately become uncollectible. Uncollectible accounts generally occur within three
Journal entries for the allowance method. The following data relate to sales made on account by Schneider Corporation for the years ended October 31, 2006, 2007, and 2008:Schneider Corporation estimates that 2% of sales on account will ultimately become uncollectible. Uncollectible accounts
Reconstructing events when using the allowance method. Selected data from the accounts of Fujitsu Limited for the years ended March 31, 2007, and March 31, 2006, appear next. Fujitsu follows Japanese accounting standards and reports its results in millions of yen (Ұ). For purposes of this problem,
Effect of transaction involving suppliers and customers on cash flows. WollyMartin Limited, a large retailer, provided the following information from its accounting records for the war ended September 30, 2008:WollyMartin€™s business is characterized by many retail customers-some of whom
Percentages-of-completion and completed contract methods of income recognition. The Shannon Construction Company agreed to build a warehouse for $6,000,000. Expected and actual costs to construct the warehouse were as follows: 2007, $1,200,000; 2008, $3,000,000; and 2009, $600,000. The firm
Percentage-of-completion and completed contract methods of income recognition. Raytheon has agreed to construct a high-tech missile detection system for $900 million. Expected and actual costs to construct the detection system were as follows: 2006, $200 million; 2007, $200 million; and 2008, $300
Installment and const recovery methods of income recognition. Raytheon has agreed to construct a high-tech missile detection system for $900 million. Expected and actual costs to construct the detection system were as follows: 2006, $200 million; 2007, $200 million; and 2008, $300 million. Raytheon
Installment and cost recovery methods of income recognition. During the year ended December 31, 2007. Boeing sold a jet to the chief executive officer (CEO) of a local bank for $72 million; assume that manufacturer’s cost to produce the jet was $57 million. The CEO agreed to pay Boeing $24
Revenue recognition at and after time of sale. Assume that during December 2008, Nordstrom sold $20 million of merchandise and another $12 million of gift cards, of which $24 million was on credit and the rest in cash. Nordstrom acquired the merchandise for $7.2 million. Further assume that
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