ACCT 4421 Exam 2 Questions and
Answers
integrated funds - ANSWER-In Capital Project Funds, you can have budgets, but
you don't have to.
o GASB requires budgeting over ______________________ when control cannot be
established by other means (e.g. fixed-price contracts).
Record budget
Dr. Estimated OFS - bond proceeds $20,000,000
Dr. Estimated Grant Revenues $10,000,000
Cr. Appropriations $30,000,000 - ANSWER-COMPREHENSIVE EXAMPLE
Voters of New Town authorize the issuance of $20 million in general obligation
bonds to finance the construction of a new highway. The project is expected to cost
$30 million (including bond issue costs), with the additional $10 million to be financed
with a state grant. Although the grant may be paid in advance, it is intended to
reimburse the New Town for actual costs incurred (reimbursement grant).
Issue bonds
Dr. Cash $20,050,000
Dr. Expenditure - bond issue costs $150,000
Cr. OFS - bond proceeds (FV) $20,000,000
Cr. OFS - bond proceeds (premium) $200,000
Transfer premium
Dr. OFU - nonreciprocal transfer to DSF $50,000
Cr. Cash $50,000 - ANSWER-COMPREHENSIVE EXAMPLE
New Town issues $20 million of bonds at a premium of $200,000. Issue costs total
$150,000.
Dr. Encumbrances $16,000,000
Cr. Reserve for Encumbrances $16,000,000 - ANSWER-COMPREHENSIVE
EXAMPLE
Encumbrances
New Town signs contracts totaling $16 million
record revenue - ANSWER-When eligibility requirement is met and available then
___________________
, deferred inflow - ANSWER-when eligibility requirements are met (except time), not
available then _______________________
record liability - grant received in advance (unearned revenue)
LSU ticket example - ANSWER-when eligibility requirements not met, but money is
received then _______________________________________
Dr. Cash $8,000,000
Cr. Grant received in advance (liability) $8,000,000 - ANSWER-COMPREHENSIVE
EXAMPLE
Receive Grant Money in Advance of Expenditures
New Town receives $8 million of grant money from the state. (assume no time
restrictions)
To reserve encumbrances
Dr. Reserve for Encumbrances $15,000,000
Cr. Encumbrances $15,000,000
To record expenditures
Dr. Expenditures $15,000,000
Cr. Cash $15,000,000 - ANSWER-COMPREHENSIVE EXAMPLE
Record expenditures
New Town receives and pays contractor invoices of $15,000,000 for services
performed.
Dr. Grant received in advance (liability) $8,000,000
Dr. Grant Receivable $2,000,000
Cr. Grant Revenue $10,000,000 - ANSWER-COMPREHENSIVE EXAMPLE
Recognize grant revenue
Dr. Investments - marketable securities $5,000,000
Cr. Cash $5,000,000 - ANSWER-COMPREHENSIVE EXAMPLE
Investments
The city invests $5 million in US Treasury Notes to earn a return on temporarily
available cash
Dr. Investment - marketable securities $150,000
Cr. Investment revenue $150,000 - ANSWER-COMPREHENSIVE EXAMPLE
Answers
integrated funds - ANSWER-In Capital Project Funds, you can have budgets, but
you don't have to.
o GASB requires budgeting over ______________________ when control cannot be
established by other means (e.g. fixed-price contracts).
Record budget
Dr. Estimated OFS - bond proceeds $20,000,000
Dr. Estimated Grant Revenues $10,000,000
Cr. Appropriations $30,000,000 - ANSWER-COMPREHENSIVE EXAMPLE
Voters of New Town authorize the issuance of $20 million in general obligation
bonds to finance the construction of a new highway. The project is expected to cost
$30 million (including bond issue costs), with the additional $10 million to be financed
with a state grant. Although the grant may be paid in advance, it is intended to
reimburse the New Town for actual costs incurred (reimbursement grant).
Issue bonds
Dr. Cash $20,050,000
Dr. Expenditure - bond issue costs $150,000
Cr. OFS - bond proceeds (FV) $20,000,000
Cr. OFS - bond proceeds (premium) $200,000
Transfer premium
Dr. OFU - nonreciprocal transfer to DSF $50,000
Cr. Cash $50,000 - ANSWER-COMPREHENSIVE EXAMPLE
New Town issues $20 million of bonds at a premium of $200,000. Issue costs total
$150,000.
Dr. Encumbrances $16,000,000
Cr. Reserve for Encumbrances $16,000,000 - ANSWER-COMPREHENSIVE
EXAMPLE
Encumbrances
New Town signs contracts totaling $16 million
record revenue - ANSWER-When eligibility requirement is met and available then
___________________
, deferred inflow - ANSWER-when eligibility requirements are met (except time), not
available then _______________________
record liability - grant received in advance (unearned revenue)
LSU ticket example - ANSWER-when eligibility requirements not met, but money is
received then _______________________________________
Dr. Cash $8,000,000
Cr. Grant received in advance (liability) $8,000,000 - ANSWER-COMPREHENSIVE
EXAMPLE
Receive Grant Money in Advance of Expenditures
New Town receives $8 million of grant money from the state. (assume no time
restrictions)
To reserve encumbrances
Dr. Reserve for Encumbrances $15,000,000
Cr. Encumbrances $15,000,000
To record expenditures
Dr. Expenditures $15,000,000
Cr. Cash $15,000,000 - ANSWER-COMPREHENSIVE EXAMPLE
Record expenditures
New Town receives and pays contractor invoices of $15,000,000 for services
performed.
Dr. Grant received in advance (liability) $8,000,000
Dr. Grant Receivable $2,000,000
Cr. Grant Revenue $10,000,000 - ANSWER-COMPREHENSIVE EXAMPLE
Recognize grant revenue
Dr. Investments - marketable securities $5,000,000
Cr. Cash $5,000,000 - ANSWER-COMPREHENSIVE EXAMPLE
Investments
The city invests $5 million in US Treasury Notes to earn a return on temporarily
available cash
Dr. Investment - marketable securities $150,000
Cr. Investment revenue $150,000 - ANSWER-COMPREHENSIVE EXAMPLE
