Government and Not for profit Accounting – Ch 4 Lab
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The assignment is below : Please Read the attached material My assigned State is New Mexico
Q1 For each of the following revenues of a state or local governmental entity, state:
1. Whether it is an exchange or nonexchange revenue
2. Revenue recognition rules for modified accrual accounting
3. Examples of journal entries for modified accrual accounting
4. General rules for revenue recognition for government-wide reporting
Q2 SLG Revenues
a) Property Taxes
) Fines
c) Sales Taxes
d) Income Taxes
e) Reimbursement (Eligibility) Grants
f) License Fees
Make this into an exam review document. Provide details that will help you remember the material. Do your own work and put this into your own words. Avoid merely copying and pasting from the text or other sources. When you take the time to make a meaningful review document that is accurate and uses your own words, you are ready for the exam coverage. Discuss key definitions. As you use your own words, you must be accurate.
Submit one rtf, doc, or docx file.
Q3 . Discussion Board Posting
Make at least 2 separate postings about the material covered in Chapter 4. Make substantial postings - go beyond making a general comment or posing a general question. As you work with the videos and the study material, discuss the content. This includes a discussion of how you worked with the practice items, developed study tools, overcame confusion, etc. The postings must be made on at least 2 separate days. Posting must be made for the Ch 4 objectives.
Chapter 4
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Page 2
Chapter 4
Recognizing Revenue in Governmental Funds
Chapter Overview
The discussion of revenue recognition begins by explaining the relationship between measurement focus and basis of accounting. We can focus on anywhere from a single asset (e.g. cash) to a wide range of assets (e.g. all economic resources). The range of assets that we choose to focus on automatically establishes the basis of accounting. If we focus on cash, we will use a cash basis of accounting; if on all economic resources then we will be on a full accrual basis. If we focus on a limited range of net assets (e.g. cu
ent financial resources) then we will use a basis of accounting in between the cash and full accrual (i.e. a modified accrual basis of accounting).
Per Section 1600 of the GASB Codification, the measurement focus and basis of accounting is described and justified as established by the National Council of Governmental Accountants adopted by the GASB, and which underlies the fund statements. Revenue cannot be recognized until it is both “measurable and available to finance EXPENDITURES of the fiscal period.”
We need to review the basic provisions of GASB Statement No. 33. This will be accomplished by discussions of actual revenue recognition issues. We need to know when each of the revenues in question should be recognized. This leads to the question of what constitutes the significant event in the “earning” process, and when the resources to be received are available for expenditure. There is often a conflict between when the government has “earned” its revenues and when it can first spend them
The chapter discusses GASB Statements No. 63 and 65, both of which pertain to defe
ed inflows and outflows (introduced earlier).
We will cover the following revenues (using modified accrual accounting and full-accrual accounting as required in the government-wide statement of activities –Thus, each type of revenue will be analyzed using the modified accrual basis of accounting (used for the 5 governmental funds) and the government-wide financial statements (full accrual accounting per GASB Statement 34).
Property taxes and other imposed revenues
Fines
Sales taxes and other derived revenues
Reimbursement, restricted grants
Pass-through grants
Sales of capital assets
Chapter 4
Chapter 4
Chapter 4
Granof, Khumawala, Cala
ese, & Smith 7e, Government and Not-for-Profit Accounting
Chapter 4Exercises
EX 4-2
1. Amount of sales tax revenue that the city should recognize in its funds statements:
Answer o $1.3M
Retailers collected $1.7 M. As of 12/31 $400,000 is expected to be collected in April 2018.
As of 12/31/17, the amount of sales tax revenue (modified accrual accounting) is the amount that is measurable $1.7M less the amount expected to be collected more than 60 days after fiscal year end $400,000.
1. Amount of sales tax revenue that the city should recognize in its government-wide financial statements
Full accrual accounting Answer q: $1.7M
2. Increase in defe
ed inflows in funds statements from sales tax revenues not yet received
Answer j $400K This is the amount expected to be collected in April 2018 (more than 60 days after year end.
3. We are not covering this topic in Ch 4.
4. We are not covering this topic in Ch 4.
5. Revenue from License Fees to be recognized in funds statements
Modified accrual accounting: The revenue = the cash received Answer i $240K.
6. Increase in general fund balance owing to sale of fire engine
The increase is the amount of cash received $40,000 Answer f The fire truck had been recorded as an EXPENDITURE when acquired, thus there is nothing on the books.
7. Increase in the net position (government-wide financial statements) owing to the sale of the fire engine. Government Wide is full accrual/all economic resources thus this is the same as for profit accounting: Cost $250,000 less accumulated depreciation of $225,000 which results in a book value of $25,000. Selling price $40,000 less book value $25,000 equals a gain of $15,000 Answer c
8. Revenue in fund statement from police training grant This is a reimbursement grant. Revenue equals the amount of allowable costs incu
ed (EXPENDITURES). For 2017, the EXPENDITURES are $1.5M Answer p
9. Revenues in government-wide statements for the police training grant. The revenues are the same for this reimbursement grant. Revenue equals the EXPENSES which for 2017 equals $1.5M Answer p
EX 4-3
1.
2017
(a)
Property taxes receivable $170,000,000
Allowance for uncollectible taxes $ 1,700,000
Defe
ed inflows of resources 168,300,000
To record 2017 tax levy and defer revenue prior to payment due date
(b)
Cash $120,000,000
Property taxes receivable $120,000,000
To record the collection of cash
Defe
ed inflows of respources $120,000,000
Property tax revenues $120,000,000
To recognize revenue on the taxes collected subsequent to due date
(c)
Cash $ 45,000,000
Property taxes receivable $ 45,000,000
To record collection of property taxes in January and Fe
uary
Defe
ed inflows of resources $ 45,000,000
Property tax revenues $ 45,000,000
To recognize revenue on the taxes collected in January and Fe
uary 2018
Property taxes receivable—delinquent $ 5,000,000
Property taxes receivable $ 5,000,000
To reclassify 2017 taxes as delinquent
2018
(d)
Property taxes receivable $190,000,000
Allowance for uncollectible taxes $ 2,090,000
Defe
ed inflows of resources 187,910,000
To record 2018 tax levy
(e)
Cash $164,400,000
Property taxes receivable $160,000,000
Property taxes receivable—delinquent 2,500,000
Property taxes collected in advance 1,900,000
To record taxes collected in 2018 including those applicable to 2017 and 2018 as well as 2019
Defe
ed inflow of resources $162,500,000
Property tax revenues $162,500,000
To recognize revenue on the taxes applicable to 2017 and 2018
(f)
Allowance for uncollectible taxes $ 1,000,000
Property taxes receivable—delinquent $1,000,000
To write-off uncollectible taxes
2. In its government-wide, full accrual statements, the county would recognize as revenue the full amount of the tax levy (less the estimated allowance for uncollectible taxes) in the year of the tax levy. The county would not have to distinguish between taxes collected in the first 60 days of the following year and those expected to be collected thereafter.
EX 4-4
1.
2017
No entry is necessary. The city has not fulfilled the eligibility requirements and has no claim to the grant.
2018
Expenditures $ 30,000
Cash $ 30,000
To record grant-related expenditures
Grants receivable $ 10,000
Cash $ 20,000
Grant revenue $30,000
To recognize revenue from grants (on the basis of expenditures)
2019
Expenditures $120,000
Cash $120,000
To record grant-related expenditures
Cash $130,000
Grant revenue $120,000
Grants receivable 10,000
To recognize revenue from grants (on the basis of expenditures) and collection of amounts from cu
ent and past year expenditures
2. The city would recognize the same amount of revenue in each of the three years as it did in the entries above — i.e., $0 in 2017, $30,000 in 2018 and $120,000 in 2019. Reimbursement grants are “expenditure driven.” As long as the funds are “available,” revenue should be recognized in the same period as the expenditures.
3. Unrestricted grants may be recognized in the period the award is announced, as long as the resources are available for expenditure in that period. Thus, the entire $150,000 may be recognized as revenue in 2017.
EX 4-5
a. Modified accrual basis
(1)
Cash $20,000,000
Proceeds from bo
owing $20,000,000
To record the issuance of bonds (capital projects fund)
(2)
Expenditure (Building) $20,000,000
Cash $20,000,000
To record the acquisition of a building (capital projects fund)
(3)
No entry required. Depreciation is not recognized in fund statements that are on a modified accrual basis.
(4)
Operating transfer-out to debt service fund $2,060,000
Cash $2,060,000
To record the transfer from the general fund to the debt service fund (journal entry made in the general fund)
Cash $2,060,000
Operating transfer-in from the general fund $2,060,000
To record the transfer from the general fund to the debt service fund (journal entry made in the debt service fund)
(5)
Expenditure — principal $2,000,000
Expenditure — interest 60,000
Cash $2,060,000
To record the payment of principal and interest (journal entry made in the debt service fund)
(6)
Cash $5,000,000
Proceeds from sale of land $5,000,000
To record the sale of land (journal entry made in the general fund)
. Full accrual basis
(1)
Cash $20,000,000
Bonds payable $20,000,000
To record the issuance of bonds
(2)
Building $20,000,000
Cash $20,000,000
To record the acquisition of a building
(3)
Depreciation expense $300,000
Accumulated depreciation — vehicles $300,000
To record depreciation on vehicles
(4)
No entry is required to record a transfer from one fund to another in as much as government-wide statements are consolidated