ACCT 4421 Exam 2 Questions and
Answers
claims/judgements - ANSWER-GASB states that the liability will be accrued if its
probable that asset impaired/liability incurred by BS date and loss can be reasonably
estimated; an expenditure is recorded in the period the liability is paid, not when the
offending incident took place or when a settlement was reached
inventories - ANSWER-govt's do not acquire them w the intention to resell them but
use them to carry out day-to-day operations; not an expendable financial resource
1. purchases method
2. consumption method - ANSWER-inventories: GASB provides a choice in
accounting for inventory with these 2 methods
purchase method - ANSWER-expenditure when purchased, reverse (set up as a
current asset) for items not used during the period (still on hand)
consumption method - ANSWER-set up as a current asset when purchased,
expenditure items as consumed
govt wide statements - ANSWER-inventories: should be reported on a consumption
basis (no purchase method); supplies expense would be debited instead of
expenditure and no need for inventory reclass; net postion= RUN
prepayments - ANSWER-insurance, operating leases and similar services; GASB
allows expenditures extending over more than one accounting period to be recorded
as expenditures in the period of acquisition (all in one year for purchase method);
does not prescribe govt's using the "purchase method" report material amounts on
the BS; reclass entry for consumption method still required
capital assets - ANSWER-provide services in periods beyond those in which they are
acquired; neither reported on govt fund balance sheet nor depreciated on govt fund
statements of rev, expenditures, and changed in fund balance
capital assets - ANSWER-GASB standards state that govt's report these in the
period requiring the outflow of expendable available financial resources; govt fund=
record an expenditure when purchase/ govt wide= capitalize and depreciate
OFS - ANSWER-capital assets: LT debt not reported in govt funds, GASb standards
require that the proceeds of LT debt be shown as ____________
capital lease - ANSWER-equivalent of a purchase/borrow acquisition transaction; in
economic substance, the lessee becomes the owner of the leased asset and the
debt
Answers
claims/judgements - ANSWER-GASB states that the liability will be accrued if its
probable that asset impaired/liability incurred by BS date and loss can be reasonably
estimated; an expenditure is recorded in the period the liability is paid, not when the
offending incident took place or when a settlement was reached
inventories - ANSWER-govt's do not acquire them w the intention to resell them but
use them to carry out day-to-day operations; not an expendable financial resource
1. purchases method
2. consumption method - ANSWER-inventories: GASB provides a choice in
accounting for inventory with these 2 methods
purchase method - ANSWER-expenditure when purchased, reverse (set up as a
current asset) for items not used during the period (still on hand)
consumption method - ANSWER-set up as a current asset when purchased,
expenditure items as consumed
govt wide statements - ANSWER-inventories: should be reported on a consumption
basis (no purchase method); supplies expense would be debited instead of
expenditure and no need for inventory reclass; net postion= RUN
prepayments - ANSWER-insurance, operating leases and similar services; GASB
allows expenditures extending over more than one accounting period to be recorded
as expenditures in the period of acquisition (all in one year for purchase method);
does not prescribe govt's using the "purchase method" report material amounts on
the BS; reclass entry for consumption method still required
capital assets - ANSWER-provide services in periods beyond those in which they are
acquired; neither reported on govt fund balance sheet nor depreciated on govt fund
statements of rev, expenditures, and changed in fund balance
capital assets - ANSWER-GASB standards state that govt's report these in the
period requiring the outflow of expendable available financial resources; govt fund=
record an expenditure when purchase/ govt wide= capitalize and depreciate
OFS - ANSWER-capital assets: LT debt not reported in govt funds, GASb standards
require that the proceeds of LT debt be shown as ____________
capital lease - ANSWER-equivalent of a purchase/borrow acquisition transaction; in
economic substance, the lessee becomes the owner of the leased asset and the
debt
