A legally separate organization for which the elected officials of the primary government are financially accountable describes a
Answer(s): B
A component unit is a legally separate entity for which the elected officials of the primary government are financially accountable. This accountability may arise if the primary government:Appoints a majority of the governing board, andIs able to impose its will or has the potential to receive financial benefits or bear financial burdens.Component units are reported in the financial statements of the primary government, either as blended or discretely presented entities.Relevant Standards and
GASB Statement No. 14, The Financial Reporting EntityGASB Statement No. 61, The Financial Reporting Entity: OmnibusGASB Codification Section 2100: Defining the Financial Reporting EntityTherefore, Option B is correct.
An independent school district completed construction on a new high school during the current fiscal year. The amount paid to the construction manager was $900,000 and the amount paid to the architect was $100,000. The entity depreciates buildings over 50 years, using the straight line, half- year depreciation method. What is the amount reported on the Statement of Activities in the current fiscal year?
Answer(s): C
The $900,000 paid to the construction manager and $100,000 paid to the architect are capitalized as part of the building's total cost, totaling $1,000,000.Using straight-line depreciation over 50 years with the half-year convention:Annual depreciation = $1,000,000 ÷ 50 = $20,000Since the half-year convention is used in the year the asset is placed in service, only 50% of the full- year depreciation is recorded.Depreciation for the current year = $20,000 × 0.5 = $10,000However, Note: since both amounts ($900,000 + $100,000) were paid during construction and the school was completed and placed into service this year, the full capitalized amount applies.GASB and GAAP allow the half-year rule unless the asset was placed into service at the beginning of the year. In this case, since placed during the year, the half-year rule applies.Correct depreciation for the first year = $10,000So, the correct answer is:Answer : B. $10,000Correction Note: While option C ($20,000) may seem valid for full-year depreciation, the use of the "half-year depreciation method" dictates that only half of the full-year amount is expensed in the first year.Relevant
GASB Statement No. 34 Capital Assets and DepreciationGFOA Best Practices on Capital Asset Accounting and Reporting
What is the entry when rent of $500 is paid?
Answer(s): D
When a payment is made for rent, an expense is incurred and cash is reduced. The correct journal entry is:Debit Rent Expense $500 to recognize the costCredit Cash $500 to reflect the cash outflowAnswer : D. debit expense $500, credit cash $500Relevant
FASAB SFFAS No. 4 Managerial Cost Accounting Concepts and StandardsBasic governmental and commercial accounting journal entry conventions
A city utilizing a 60-day availability period has a June 30 year-end. It levies property taxes in January that are due in March, which are used to finance the general fund. The city levied S15 million in taxes in the current fiscal year, collecting $12 million during the fiscal year. In addition, the following amounts were collected in the months after year-end:July $1,000,000August $ 500,000September $ 250,000How much revenue should the general fund recognize for the fiscal year?
The city has a June 30 fiscal year-end and applies the 60-day availability rule, which is standard under modified accrual accounting for governmental funds like the general fund.Total collections within:Fiscal year: $12 million60-day window (July + August): $1 million + $500,000 = $1.5 millionRevenue recognized = $12 million + $1.5 million = $13.5 millionHowever, under GASB Interpretation No. 5 and GASB Statement No. 33, only amounts expected to be collected within 60 days after year-end should be recognized as revenue in the general fund. The city uses the 60-day rule.Thus, the correct amount to recognize is:$12 million (collected during fiscal year)$1 million (July)$500,000 (August) = $13.5 millionAnswer : C. $13.5 millionRelevant
GASB Statement No. 33 Accounting and Financial Reporting for Nonexchange TransactionsGASB Interpretation No. 5 Property Tax Revenue RecognitionGASB Codification Section 1600.115 (Modified Accrual Basis)
The objectives of federal financial reporting include all of the following EXCEPT
Comprehensive DetailedAccording to FASAB's Objectives of Federal Financial Reporting (Statements of Federal Financial Accounting Concepts, particularly SFFAC No. 1), the four major objectives of federal financial reporting are:Budgetary IntegrityOperating PerformanceStewardshipSystems and ControlMission readiness is not one of the core federal financial reporting objectives under FASAB standards, although it may be a goal of some federal agencies operationally (e.g., DOD), it is not one of the defined financial reporting objectives.Answer : C. mission readinessRelevant
FASAB SFFAC No. 1 Objectives of Federal Financial ReportingFASAB Handbook of Accounting Standards and Other Pronouncements
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