ACC 312 Study Guide - Midterm Guide: Capital Expenditure, Cash Flow Statement, Balance Sheet

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greenwalrus59

29 Nov 2017

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This expenditure includes repairs and depreciation of fixed assets as distinct from the provision of these assets. Revenue expenditure relates to expenditure on those items where the full benefit is received within the normal accounting period. Capital expenditure (not to be confused with share capital or capital account, which are something completely different) relates to the cost of acquiring, producing or enhancing fixed assets. Capital expenditure is extremely important because it is usually much higher in value and follows the appropriate authorisation of expenditure on items of plant or equipment, or on a specific project. Such expenditure is usually expected to generate future earnings for the entity, protect existing revenue or profit levels, or provide compliance with, for example, health and safety or fire regulation requirements. Capital expenditure does not necessarily relate directly to sales derived in the period that the expenditure was made.

Related Questions

1. Which standard issued by the Governmental AccountingStandards Board in 1999 requires two distinct sets of financialstatements for state and local governments?

A) GASB Statement No. 32
B) GASB Statement No. 33
C) GASB Statement No. 34
D) GASB Statement No. 35
E) GASB Statement No. 36

2. Which group of governmental financial statements reports allrevenues and all costs of providing services each year?

A) GAAP-Based Financial Statements
B) Fund-Based Financial Statements
C) Cost-Based Financial Statements
D) Government-Wide Financial Statements
E) General Fund Financial Statements

3. Proprietary fundsare

A) Funds used to account for the activities of a government thatare carried out primarily to provide services to citizens
B) Funds used to account for a government's ongoing organizationsand activities that are similar to those operated by for-profitorganizations
C) Funds used to account for monies held by the government in atrustee capacity
D) Funds used to account for all financial resources except thoserequired to be accounted for in another fund
E) Funds used to account for revenues that have been legallyrestricted as to expenditure

4. Fiduciary fundsare

5. The term "current financial resources" refers to

A) Those assets that can quickly be converted into cash
B) Monetary assets that are available to meet the government'sneeds
C) The government's current assets and current liabilities
D) The current value of all net assets owned by the governmentalunit
E) Financial resources used to provide electricity to localcitizens

6. Which group of financial statements is prepared using the"modified accrual accounting" approach?

A) GAAP-Based Financial Statements
B) Fund-Based Financial Statements
C) Cost-Based Financial Statements
D) Government-Wide Financial Statements
E) General Purpose Financial Statements

7. Under modified accrual accounting, when should anexpenditure to recognize interest on long-term debt berecorded?

A) At the end of each accounting period
B) When payment is due within one fiscal year
C) When payment is due
D) When cash is available to pay the interest
E) When the interest is incurred

8. Revenue from property taxesshould be recorded in the General Fund

A) when received
B) when there is an enforceable legal claim
C) when they are available for recognition
D) in the period for which they are required or permitted to beused
E) in the period in which the tax bills are mailed

9. A city received a grant of$5,000,000 from a private agency. The money was to be used to builda new city library. In which fund should the money be recorded forthe Fund-Based Financial Statements?

A) The General Fund
B) An Expendable Trust Fund
C) A Capital Projects Fund
D) An Agency Fund
E) A Permanent Fund

10. For government-wide financialstatements, what account is credited when a piece of equipment isleased on a capital lease?

A) Equipment - Capital Lease
B) Encumbrances - Long Term
C) Encumbrances - Lease Obligations
D) Capital Lease Obligation
E) The lease is not recorded

11. Jones College, a publicinstitution of higher education, must prepare financialstatements

A) As if the college was an enterprise fund
B) Following the same rules as state and local governments
C) According to GAAP
D) As if the college was a fiduciary fund
E) In the same manner as private colleges anduniversities

peachlion740

Using the financial statements below,please calculate thefollowing

The current position of each company,

The market value of each company,

The amount of profit generated by each dollar ofassets or equity,

How much debt is involved in each company compared to equity,and

How solvent each business is.

THE PEOPLESâ CREDIT UNION LIMITED

Financial statements for THE PEOPLESâ CREDIT UNION LIMITD) forthe year ended December 31, 2017.

Each share costs $5.00

The dividend paid was 3.75%

	December 31, 2017
Cash Resources:
Cash in hand and at bank	11,961,005
Short-term investments	71,000,511
Total cash resources	82,691,516

Other Assets:
Accounts receivable and prepayments	2,738,666
Net loans to members	343,075,646
Long-term investments	71,513,400
Fixed assets	29,202,515
Total Assets	529,221,743

Liabilities:
Accounts payable and accruals	7,800,932
Membersâ deposit savings	34,623,468
Membersâ time deposits (fixed deposits)	90,629,600
Provision for terminal benefits	5,303,180
Retirement benefit obligations	638,200
Membersâ share savings	324,230,903
Total liabilities	463,226,283

Institutional Capital:
Reserve fund	22,992,421
Education fund	1,446,107
Loan protection fund	836,726
Building fund	12,250,000
Investment re-measurement reserve	15,266,397
Undivided earnings	13,203,809
Total institutional capital	65,995,460
Total Liabilities and Institutional Capital	529,221,743

	For the year ended December 31 2017
Income:
Interest on loans	37,358,266
Investment income (net)	2,020,571
Other income	1,262,899
Total Income	40,671,736

Expenditure:
Administrative expenses	7,956,429
Board and committeesâ expenses	1,072,631
Life saving insurance	866,002
Loan protection expense	1,716,236
Loan loss expense	129,286
Interest on membersâ expense	2,170,128
Members education, training and development expenses	1,636,889
Personnel costs	10,635,898
Total expenditure	26,183,499
Net surplus for the year	14,458,237

Other comprehensive income
Items that may be re-classified later as profit or loss
Unrealised (loss)/gain on available-for-sale financialassets	974,380
Items that may be re-classified later as profit or loss
Net actuarial (loss)/gain on retirement benefit obligations	(294,500)
	679,880
Total Comprehensive Income for the year	15,138,117

	Reserve fund	Education fund	Loan protection fund	Building fund	Investment re-measurement fund	Undivided earnings
Balance as at January 1, 2017	21,523,987	1,170,891	711,676	11,500,000	14,292,017	11,819,316
Total comprehensive income for the year					974,380	14,163,737
Appropriation of net surplus for the year:
10 % to the Reserve Fund	1,416,374					(1,416,374)
13.5% to the Education Fund		1,912,105				(1,912,105)
13% to the Loan Protection Fund			1,841,286			(1,841,286)
	22,940,361	3,082,996	2,552,962	11,500,000	15,266,397	20,813,288
Add/(less) adjustments as follows:
Dividends (2016)						(10,160,544)
Entrance fees	52,060					(52,060)
Member education, training and development expenses		(1,636,889)				1,636,889
Transfer to Building Fund				750,000		(750,000)
Loan protection expense			(1,716,236)			1,716,236
Balance as at December 31, 2017	22,992,421	1,446,107	836,726	12,250,000	15,266,397	13,203,809

ceruleanbear388

I need assistance with preparing journal entries for the belowitems.

This is the first year of operations for the city â 20X4. Thefollowing transactions are summarized for the city this year:

The city levied $9,000,000 of general property taxes, $8,800,000of which has been collected. It expects to collect the balanceshortly after the end of the year. These taxes are unassigned; theycan be used for any legitimate city purpose. You believe thesetaxes should be recorded in the general fund, but you decide todouble check by reviewing the GASBâs following website: Touringthe Financial Statements, Part III: The Governmental Fundsnoting the explanation for general funds.http://www.gasb.org/cs/ContentServer?pagename=GASB/GASBContent_C/UsersArticlePage&cid=1176156735732

The City received a state grant of $200,000 to purchasecomputers. This grant is restricted by the state for a specificpurpose. You need to determine in which fund you should record(categorize) the state grant for the purchase of the computers. Youremember reading in GASB Statement No. 54 that governmental fundbalance information is reported in five different classifications(nonspendable, restricted, committed, assigned and unassigned).Further, you decide to read the Fact Sheet about Fund BalanceReporting and Governmental Fund Type Definitions.

The City issued $12,000,000 in long-term bonds to construct acity building. The proceeds must be used for the intended purpose.You are unsure of the fund in which you record the proceeds of thelong-term bonds, designated to construct a city building; however,you remember the major types of expenditures: operating, capital,debt service, and intergovernmental charges. Capital expendituresrelate to the acquisition of capital assets (such as the citybuilding). You recall that such expenditures may be recorded in theGeneral Fund, Special Revenue Funds, or Capital Projects Funds,depending on the source of funding. You review the National Centerfor Education Statistics Government-wide Reporting requirements fortypes of expenditures and accounting treatments.

The City constructed the school building for $11,000,000. Youdecide to account for the construction of the school building as anexpenditure, causing the City Controllerâs asking for yourjustification in doing so. In gathering information from which toprepare a response, you note two things: 1) fund accounting followsthe modified accrual basis of accounting and 2) fund accountingfinancial statements are the Fund Balance Sheet and the Statementof Fund Revenues, Expenditures, and Other Changes in Fund Balances.To prepare the memo to explain your decision to the CityController, you browse the GASB Website in search of anauthoritative explanation about the use of expenditure or expensesfor fund accounting.

Knowing that GASB Statement No. 54 provides governmental fundrequirements for constructing buildings, you search GASB for anexplanation as to why capital assets and long-term liabilities arenot included on Fund Balance Sheets. Further, you are interested inlearning more about the nature of the Statement of Fund Revenues,Expenditures and Other Changes in Fund Balances.

The City incurred $6,000,000 in general operating expenditures,$5.5. million of which has been paid. You review GASB No 54 and theGASB website to help you explain why the City uses the termexpenditures instead of expenses for fund accounting.

Using its state grant, the City purchased computers for$100,000. As with the construction of the building, the City wouldrecognize the acquisition as an expenditure. You must justify tothe City Controller why the correct recording of the computers areexpenditures, even though the City would record them as assets in asupplementary ledger or list. When the government-wide statementsare prepared, the computers would be recognized asassets.

The City transferred $1,100,000 from the general fund to thedebt service fund to make the first payments of both principal andinterest that are due the following year. Viewed as broken downinto its components, this transaction is straightforward, involvingsimple entries to each of the two funds. You research which fundsto use for this transfer using the GASB websites above and otherwebsites that you find during your research.

ACC 312 Study Guide - Midterm Guide: Capital Expenditure, Cash Flow Statement, Balance Sheet

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