Your portfolio project will provide specific answers to questions that follow. Apply what you have learned in this course to your answers to these questions.
P. 2-6: The nature of a transaction gives a clue as to the type of fund in which it should be recorded. (80 points)
Kendal County engaged in the following transactions:
11. Prepare appropriate journal entries.
12. Indicate the type of funds in which these transactions would most likely be recorded.
P. 5-4: Generally accepted modified accrual accounting practices pertaining to inventories may not fulfill the objectives of financial reporting. (80 points)
The following is an excerpt from a note to the financial statements of the city of Dallas (dates changed):
The city prepares its annual appropriated general fund, debt service fund, and proprietary operating funds budgets on a basis (budget basis) which differs from generally accepted accounting principles (GAAP basis). The major differences between the budget and GAAP bases are that encumbrances are recorded as the equivalent of expenditures (budget) rather than a commitment of fund balance (GAAP) in the governmental funds.
The city accounts for inventories on the purchases basis. One of the city’s departments, which is accounted for in the general fund, budgeted $195,000 in supplies expenditures for fiscal 2015. It began the 2015 fiscal year with $30,000 of supplies on hand. It also had $12,000 of supplies on order. During the year it ordered an additional $180,000 of supplies, received (and paid for in cash) $185,000 of supplies, and consumed $178,000 of supplies.
13. Prepare all journal entries, consistent with GAAP, including budgetary and encumbrance entries that the department should make in 2015.
14. Indicate the accounts and amounts related to supplies that the city would report on its year-end statement of revenues, expenditures, and changes in fund balance and balance sheet.
15. By how much did the department over- or under-spend its supplies budget (on a budget basis)?
16. Comment on the extent to which the city’s statement provides a basis to:
1. Assess the ‘‘true’’ economic costs associated with supplies
2. Determine whether the city adhered to budgetary spending mandates
17. Suppose that in the last quarter of the year, department officials realized that the department was about to overspend its supplies budget. They therefore ceased placing new orders for supplies. However, they imposed no restrictions on the use of supplies and thereby allowed the supplies inventory to decline to near zero.
1. What impact would these cost-cutting measures have on supplies expenditures as reported in an actual-to budget comparison (on a budget basis)?
2. What impact would the year-end measures have on reported supplies expenditures (per GAAP)? Would your response be different if the city accounted for supplies on the consumption basis?
EX. 10-4: Investment gains and losses may have to be accounted for differently in nonexpendable than in expendable funds. (70 points)
The McCracken County Humane Society (MCHS), which is part of a county’s reporting entity, established a permanent fund to provide support for its pet neutering program. As of the start of the year, the fund had a balance of $600,000, composed of both cash and marketable securities.
The program itself, which is accounted for in a special revenue fund, is funded by both direct contributions and the income from the permanent fund. At the start of the year, the special revenue fund had assets (all investments) of $26,000.
The following transactions and events occurred in a recent year.
· The MCHS conducted a Walk Your Pet Day fundraising drive. The event raised $120,000, of which $20,000 was in pledges expected to be collected shortly after year-end.
· The society acquired food and medicine at a cost of $60,000 (cash). During the year, it used $30,000 of these supplies. The society accounts for supplies on a consumption basis. It incurred other operating costs (all paid in cash) of $85,000.
· The society earned interest of $45,000 on investments accounted for in the permanent fund.
· During the year, the market value of the investments held by the permanent fund increased by $30,000. Per the terms of the agreement establishing the endowment, all capital gains, both realized and unrealized, must be added to principal.
· During the year, the value of investments held by the special revenue fund increased by $3,000.
· The society transferred cash to the special revenue fund in the amount of the earnings of the permanent fund.
24. Prepare journal entries to record the events and transactions. Be sure you indicate the fund in which they would be recorded.
25. In your opinion, should the unrealized gains on the investments held in the special revenue fund be considered expendable or nonexpendable? Explain.
26. How would the transfer from the permanent fund to the special revenue fund be reported in the government-wide statements?
· Include a cover page denoting the paper title, your name, the course number and name, your instructor’s name, and the date you are making the submission.
· Format your paper according to CSU-Global APA and Writing Requirements. Use APA citations where appropriate, and include an APA- formatted reference page at the end.
· Submit your final case study to the Week 8 Assignment page