Understanding the Impact of Transactions on a Government's

School: Kennesaw State University - Course: ACC 499 - Subject: Accounting

Week 4 - Activity: Homework Chapter 5 Jenna Paz Strayer University

EX. 5-3 Transactions may have significantly different impacts on a government's budget, governmental fund statements, and government‐wide statements. A city prepares its budget on a cash basis. For each of the following, indicate the amount (if any) of an expenditure/expense that the city would be recognize in (1) its budget, (2) its fund statements, and (3) its government‐wide statements. Provide a brief explanation of your response. The city uses the consumption method to account for its inventory. It is the policy of the city to take a full year's depreciation in the year of acquisition and no depreciation in the year of sale or retirement. It recognizes depreciation on a straight‐line basis. 1.As budgeted, the city ordered supplies that cost $8 million, received supplies (including those ordered in a prior year) that cost $9 million, paid for supplies that cost $7 million, and used supplies that cost $7.5 million. The city began the year with a supplies inventory that cost $1.5 million. i.Budget - $7million - recognizes supplies when paid for ii.Fund Statements - $9 million - recognizes when received iii.Government - wide - $7.5 million - recognized when used 2.In the prior year, the city signed a five‐year lease of telecommunications equipment. The equipment had a fair‐market value of $5 million. In the current year, the city made its first required annual rent payment of $1,252,282. This