Leah Pasternak Government & Not for Profit ACC410

Chapter 5: Governmental Activities Expenditures and Expenses - Homework Submission 5-1 1. B 2. C 3. A 4. B 5. A 6. C 7. B 8. C 9. D 10. B 5-2 1. G 2. L 3. M 4. K 5. F 6. N 7. A 8. J 9. J 10. O 5-5 1. Vacation Pay Expenditure Cash 2. Sick Leave Expenditure Public Safety 4,200,000 4,200,000 1,500,000 1.500,000

3. With sick leave, recognition of sick leave on a full accrual basis would not affect the measurement of the obligation, only when it is reported. Sick leave is the same as vacation pay where the expense and liability would be reported in the government wide statements in the period the sick leave and vacation pay is earned. 5-8

1. Economic cost should ideally be offset by commeasuring economic gain according to projections made at the time of borrowing. Alternative 1: It has to report interest expenditure of $ 200,000. Alternative 2: It has to report interest expenditure of $ 300,000. Alternative 3: It has to report interest expenditure of $ 300,000. Because interest has to be accounted for every year as per U.S. GASB standards. 2. a. Debt Service Fund General Fund 200,000 200,000

General Fund will be credited by $ 200,000 meaning $ 200,000 will be transferred from the fund. b. Debt service fund will be debited by $200,000, meaning $200,000 will be transferred into the fund. This should be accounted in the concerned year. The other option is it can be accounted on 1st Jan 2014 which is the next year. According to GASB Standards Interest accrued is allowed to be accounted in the respective year, the relevant portion of GASB Standard No. 34, Basic Financial Statements and Management Discussion and Analysisfor Statement and Local Governments states Expenditures are recognized when the related liabilities are incurred, if measurable, except for unmatured interest on long-term debt, which is recognized when legally due. 3. a. The apparent towns economic gain will be $200,000 because the same might not have been accounted at the time of proposal. b. Investment revenue the town would be offset against the costs.