1.99 See Answer

Question: What account is used to earmark the


What account is used to earmark the fund balance to recognize the contingent obligations of goods ordered but not yet received?

Appropriations.
Encumbrances.
Obligations.
Fund Balance—Assigned for Encumbrances.


> Refer to the facts in Problem 16-15. The partners have decided to liquidate their partnership by installments instead of accepting the $100,000 offer. Cash is distributed to the partners at the end of each month. A summary of the liquidation transactions

> Which of the following accounts of a governmental unit is credited when taxpayers are billed for property taxes? Estimated Revenue. Revenue. Appropriations. Fund Balance—Assigned for Encumbrances.

> Nelson, Osman, Peters, and Quincy have decided to terminate their partnership because of recurrent arguments among the partners. The partnership’s balance sheet when they decide to wind up follows: During the winding-up of the p

> The postclosing trial balance of the general fund of the town of Pine Ridge on December 31, 20X1, is as follows: Additional Information: Related to 20X2 Estimated revenue consisted of property taxes, $1,584,000 from a tax levy of $1,600,000 of which 1

> Partners Maness and Joiner have decided to liquidate their business. The ledger shows the following account balances: Maness and Joiner share profits and losses in an 8:2 ratio. During the first month of liquidation, half the inventory was sold for $40

> The following trial balances were taken from the accounts of Omega City’s general fund before the books had been closed for the fiscal year ended June 30, 20X2: Additional Information: The estimated taxes receivable for the year end

> After working for in the Kitchen remodeling business for several years, Terry and Phyllis decided to go into business for themselves and formed the Kitchens Just for You Partnership. Three years ago, they admitted Connie as a partner and recognized goodw

> The following information was abstracted from the accounts of the general fund of the City of Noble after the books had been closed for the fiscal year ended June 30, 20X2. Additional Information: The budget for the fiscal year ended June 30, 20X

> When Alice and Betty decided to incorporate their partnership, its trial balance was as follows: The partnership’s books will be closed, and new books will be used for A & B Corporation. The following additional information is ava

> Explain the difference between an interfund service provided and used and an interfund transfer. Give examples of each.

> Leonard and Michelle have asked you to prepare their statement of changes in net worth for the year ended August 31, 20X3. They have prepared the following comparative statement of financial condition based on estimated current values as required by ASC

> How are taxpayer-assessed income and sales taxes recognized in the general fund? Why?

> Select the correct answer for each of the following questions. (Note: The following information is for questions 1, 2, and 3.) The balance sheet for the partnership of Joan, Charles, and Thomas, whose shares of profits and losses are 40, 50, an

> Refer to the preclosing trial balance in Exercise 17-10. Assume that the balances on December 31, 20X0, were as follows: Required: Prepare a general fund–only statement of revenues, expenditures, and changes in fund balance for fis

> What are the main differences between the lapsing and nonlapsing methods of accounting for encumbrances outstanding at the fiscal year-end? What are the differences in accounting between the lapsing and nonlapsing methods when accounting for the actual e

> The preclosing trial balance at December 31, 20X1, for Lone Wolf’s general fund follows. Lone Wolf uses the purchase method of accounting for inventories and the lapsing method of accounting for encumbrances. Required:

> Not all governmental funds need to be separately presented on the governmental funds financial statements. What are the two tests for determining major governmental funds for which separate disclosure is required?

> Benson City had the following transactions involving resource outflows from its general fund for the year ended June 30, 20X8: During March 20X8, the general fund transferred $150,000 to a capital projects fund to help pay for the construction

> What are the primary differences between a permanent fund (governmental) and a private-purpose trust fund (fiduciary)?

> Gilbert City had the following transactions involving resource inflows into its general fund for the year ended June 30, 20X8: The general fund levied $2,000,000 of property taxes in July 20X7. The city estimated that 2 percent of the levy wou

> How are the proceeds from a bond issue accounted for in governmental funds? Where are these proceeds reported on the governmental funds’ statement of revenues, expenditures, and changes in fund balance?

> Prepare journal entries for Iron City’s general fund for the following, including any adjusting and closing entries on December 31, 20X1: Acquired a three-year fire insurance policy for $5,400 on September 1, 20X1. Ordered new furniture for the ci

> What financial statements must be prepared for the governmental funds? For the enterprise funds?

> Belle Valley incurred $100,000 of salaries and wages for the month ended March 31, 20X2. How should this be recorded on that date? Debit Credit a. Expenditures-Salaries and Wages Vouchers Payable 100,000 100,000 b. Salaries and Wages Expense 100,0

> Georgetown purchased supplies on August 8, 20X2, for $3,600. At the fiscal year-end on September 30, the inventory of supplies was $2,800. Required: Assume that Georgetown uses the consumption method of accounting for inventories. (1) Pr

> The financial reports of governmental entities must provide footnote disclosure of the deposit and investment risks the entity faces. GASB 40 amended GASB 3. The GASB requires disclosures of (1) the nature of the deposits and of investment risks the gov

> The City of Batavia ordered new computer equipment for $21,000 on November 3, 20X2. The equipment had not been received by December 31, 20X2, Batavia’s fiscal year-end. Required: Assume that the city has a policy that outstanding encumbra

> W hich of the following statements is correct regarding comparability of governmental financial reports? Comparability is not relevant in governmental financial reporting. Differences between financial reports should be due to substantive di

> Interperiod equity is an objective of financial reporting for governmental entities. According to the Governmental Accounting Standards Board, is interperiod equity fundamental to public administration? Is it a component of accountability? Fundame

> Encumbrances outstanding at year-end in a state’s general fund should be reported as a Liability in the general fund. Fund balance designation in the general fund. Fund balance reserve in the general fund. Liability in the gen

> For the budgetary year ending December 31, 20X6, Johnson City expects the following inflows of resources in its general fund: In the budgetary entry, what amount should Johnson City record for estimated revenues? $9,000,000 $9,500,000 $10,

> Oak City issued a purchase order for supplies with an estimated cost of $5,000. When the supplies and accompanying invoice were received, the invoice indicated a $4,950 actual price. What amount should Oak City debit (credit) to Budgetary Fund Balance—As

> The following pertains to property taxes levied by Cedar City for the calendar year 20X6: City Cedar should report revenues from property taxes for 20X6 of $700,000 $600,000 $690,000 $500,000 Expected collections duri

> The Encumbrances Control account of a governmental unit is debited when Goods are received. A voucher payable is recorded. A purchase order is approved. The budget is recorded.

> Select the correct answer for each of the following questions. One difference between accounting for a governmental (not-for-profit) unit and a commercial (for-profit) enterprise is that a governmental unit should Not record depreciation expense

> A Budgetary Fund Balance—Assigned for Encumbrances in excess of a balance of Encumbrances Control indicates An excess of vouchers payable over encumbrances. An excess of purchase orders over invoices received. A recording error.

> The governmental fund measurement focus is the determination of Financial Flow of Financial Resources Income Position Yes b. No Yes Yes No No Yes Yes а. C. No No d. No Yes

> The primary focus in accounting and reporting for governmental funds is Income determination. Flow of financial resources. Capital maintenance. Transfers relating to proprietary activities

> This case focuses on a governmental unit’s general fund. Required: Using the CAFR for a governmental entity chosen by your instructor, answer the following questions that relate to the overall government and governmental funds: Find the

> Matthews, Mitchell, and Michaels are partners in BG Land Development Company and share losses in a 5:3:2 ratio, respectively. The balance sheet on June 30, 20X1, when they decide to liquidate the business, is as follows: The noncash assets are so

> Which of the following accounts of a governmental unit is credited to close it out at the fiscal year-end? Appropriations Control. Revenue—Property Tax. Budgetary Fund Balance—Assigned for Encumbrances. Encumbrances.

> Which of the following situations will increase a governmental unit’s fund balance at the fiscal year-end? Appropriations are less than expenditures and budgetary fund balance assigned for encumbrances. Appropriations are less than expendit

> Which of the following accounts of a governmental unit is debited when supplies previously ordered are received? Encumbrances. Budgetary Fund Balance—Assigned for Encumbrances. Vouchers Payable. Appropriations Control.

> Which of the following accounts of a governmental unit is credited when the budget is recorded? a. Encumbrances. b. Budgetary Fund Balance—Assigned for Encumbrances. c. Estimated Revenue Control. d. Appropriations Control.

> The board of commissioners of the City of Elgin adopted its budget for the year ending July 31, 20X2, which indicated revenue of $1,000,000 and appropriations of $900,000. If the budget is formally integrated into the accounting records, what is the requ

> Select the correct answer for each of the following questions. (Note: The following information is for questions 1, 2, and 3.) The balance sheet for the partnership of Joan, Charles, and Thomas, whose shares of profits and losses are 40, 50, an

> The following balances are included in the subsidiary records of Dogwood’s Parks and Recreation Department on March 31, 20X2: How much does the department have available to purchase additional supplies? $0 $2,250 $3,000 $

> Carson City’s general fund issued purchase orders of $630,000 to vendors for supplies. Which of the following entries should the city make to record this transaction? Debit Credit a. ENCUMBRANCES 630,000 BUDGE

> When a governmental unit’s Estimated Revenues Control account is closed out at the end of the fiscal year, the excess of estimated revenues over estimated appropriations is Debited to Fund Balance—Unassigned. Debited to Fund Balance—Assigned

> Which of the following steps in the acquisition of goods and services occurs first? Appropriation. Encumbrance. Budget. Expenditure.

> The bookkeeper for the community of Spring Valley has asked for your assistance regarding the following items. Required: Prepare a memo discussing the proper accounting and financial reporting in the general fund for each of the following item

> Bracken, Louden, and Menser, who share profits and losses in a ratio of 4:3:3, respectively are partners in a home decorating business that has not been able to generate the income the partners had hoped for. They have decided to liquidate the business a

> Wilma Bates is executive vice president of Mavis Industries Inc., a publicly held industrial corporation. She has just been elected to Gotham City’s council. Before assuming office, she asks you to explain the major differences in accounting and financia

> For each general fund transaction in items 1 through 12, select its appropriate recording next to letters A through O. A letter may be selected once, more than once, or not at all. Recording of Transactions A. Credit Revenues B. Debit Expenditures C

> After all noncash assets have been converted into cash in the liquidation of the Adam and Kay Partnership, the ledger contains the following account balances: Available cash should be distributed with $32,000 going to accounts payable and then $

> Governmental accounting gives substantial recognition to budgets, which are being recorded in the governmental unit’s accounts. Required: What is the purpose of a governmental accounting system, and why is the budget recorded in the accounts

> On the balance sheet, the net fixed assets (NFA) account is equal to the gross fixed assets (FA) account, which records the acquisition cost of fixed assets, minus the accumulated depreciation (AD) account, which records the total depreciation taken by t

> Imprudential, Inc., has an unfunded pension liability of $550 million that must be paid in 20 years. To assess the value of the firm’s stock, financial analysts want to discount this liability back to the present. If the relevant discount rate is 6.4 per

> Gordon Driving School’s 2014 balance sheet showed net fixed assets of $1.32 million, and the 2015 balance sheet showed net fixed assets of $1.51 million. The company’s 2015 income statement showed a depreciation expense of $137,000. What was the company’

> Barrett, Inc., has sales of $19,800, costs of $10,900, depreciation expense of $2,100, and interest expense of $1,250. If the tax rate is 40 percent, what is the operating cash flow, or OCF?

> You are planning to save for retirement over the next 30 years. To do this, you will invest $750 per month in a stock account and $250 per month in a bond account. The return of the stock account is expected to be 11 percent per year, and the bond accoun

> In Problem 21, suppose the firm wishes to keep its debt–equity ratio constant. What is EFN now?

> Draw up an income statement and balance sheet for this company for 2014 and 2015.

> First Simple Bank pays 4.1 percent simple interest on its investment accounts. If First Complex Bank pays interest on its accounts compounded annually, what rate should the bank set if it wants to match First Simple Bank over an investment horizon of 10

> The discussion of EFN in the chapter implicitly assumed that the company was operating at full capacity. Often, this is not the case. For example, assume that Rosengarten was operating at 90 percent capacity. Full-capacity sales would be $1,000/.90 = $1,

> Consider the following abbreviated financial statements for Weston Enterprises: a. What is owners’ equity for 2014 and 2015? b. What is the change in net working capital for 2015? c. In 2015, Weston Enterprises purchased $2,350 in new

> What is the future value in six years of $1,000 invested in an account with an APR of 7.5 percent, a. Compounded annually? b. Compounded semiannually? c. Compounded monthly? d. Compounded continuously? e. Why does the future value increase as the compoun

> The most recent financial statements for Moose Tours, Inc., appear below. Sales for 2016 are projected to grow by 20 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expense

> Cusic Industries had the following operating results for 2015: sales 5 $20,300; cost of goods sold 5 $14,500; depreciation expense 5 $2,900; interest expense 5 $690; dividends paid 5 $660. At the beginning of the year, net fixed assets were $15,470, curr

> The discussion of EFN in the chapter implicitly assumed that the company was operating at full capacity. Often, this is not the case. For example, assume that Rosengarten was operating at 90 percent capacity. Full-capacity sales would be $1,000/.90 = $1,

> Shelton, Inc., has sales of $435,000, costs of $216,000, depreciation expense of $40,000, interest expense of $21,000, and a tax rate of 35 percent. What is the net income for the firm? Suppose the company paid out $30,000 in cash dividends. What is the

> In Problem 18, suppose Rainbow Umbrella Corp. paid out $34,000 in cash dividends. Is this possible? If spending on net fixed assets and net working capital was zero, and if no new stock was issued during the year, what was the change in the firm’s long-t

> One of your customers is delinquent on his accounts payable balance. You’ve mutually agreed to a repayment schedule of $500 per month. You will charge 1.1 percent per month interest on the overdue balance. If the current balance is $18,450, how long will

> The discussion of EFN in the chapter implicitly assumed that the company was operating at full capacity. Often, this is not the case. For example, assume that Rosengarten was operating at 90 percent capacity. Full-capacity sales would be $1,000/.90 = $1,

> During 2015, Rainbow Umbrella Corp. had sales of $590,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $455,000, $85,000, and $125,000, respectively. In addition, the company had an interest expense of $65,000

> Well-known financial writer Andrew Tobias argues that he can earn 177 percent per year buying wine by the case. Specifically, he assumes that he will consume one $10 bottle of fine Bordeaux per week for the next 12 weeks. He can either pay $10 per week o

> In addition to common- size financial statements, common–base year financial statements are often used. Common–base year financial statements are constructed by dividing the current year account value by the base year

> Corporation Growth has $82,500 in taxable income, and Corporation Income has $8,250,000 in taxable income. a. What is the tax bill for each firm? b. Suppose both firms have identified a new project that will increase taxable income by $10,000. How much

> First National Bank charges 10.3 percent compounded monthly on its business loans. First United Bank charges 10.5 percent compounded semiannually. As a potential borrower, to which bank would you go for a new loan?

> The DuPont identity presented in the chapter is commonly referred to as the three-factor DuPont identity. Another common way that the DuPont identity is expressed is the five-factor model, which is: Derive the five-factor DuPont identity (EBT is earnings

> Josipovich, Inc., is obligated to pay its creditors $11,300 very soon. a. What is the market value of the shareholders’ equity if assets have a market value of $12,400? b. What if assets equal $9,600?

> Compute the future value of $1,000 compounded annually for a. 10 years at 6 percent. b. 10 years at 12 percent. c. 20 years at 6 percent. d. Why is the interest earned in part (c) not twice the amount earned in part (a)?

> Find the APR, in each of the following cases: APR Number of Times Compounded EAR Semiannually 8.9% Monthly 18.8 Weekly 10.4 Infinite 13.6

> Panda Inc.’s net income for the most recent year was $9,620. The tax rate was 34 percent. The firm paid $2,380 in total interest expense and deducted $3,170 in depreciation expense. What was the company’s cash coverage ratio for the year?

> Given the following information for O’Hara Marine Co., calculate the depreciation expense: sales 5 $44,000; costs 5 $27,500; addition to retained earnings 5 $5,200; dividends paid 5 $1,670; interest expense 5 $1,850; tax rate 5 40 percent.

> A small business called The Grandmother Calendar Company began selling personalized photo calendar kits. The kits were a hit, and sales soon sharply exceeded forecasts. The rush of orders created a huge backlog, so the company leased more space and expan

> Find the EAR in each of the following cases: APR Number of Times Compounded EAR 6.7% Quarterly 12.4 Monthly 9.8 Daily 8.4 Infinite

> The Whisenhunt Company has a ratio of long-term debt to long-term debt and equity of .29 and a current ratio of 1.20. Current liabilities are $1,280, sales are $6,140, profit margin is 8.9 percent, and ROE is 17.6 percent. What is the amount of the firm’

> Schwert Corp. shows the following information on its 2015 income statement: sales = $215,000; costs = $117,000; other expenses = $6,700; depreciation expense = $18,400; interest expense = $10,000; taxes = $25,370; dividends = $9,500. In addition, you’re

> A small business called The Grandmother Calendar Company began selling personalized photo calendar kits. The kits were a hit, and sales soon sharply exceeded forecasts. The rush of orders created a huge backlog, so the company leased more space and expan

> The Perpetual Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $12,000 per year forever. If the required return on this investment is 4.7 percent, how much will you pay for the policy? Suppose the Perpetual L

> A company has net income of $314,000 a profit margin of 8.9 percent, and an accounts receivable balance of $152,800. Assuming 80 percent of sales are on credit, what is the company’s days’ sales in receivables?

> Synovec Company has a debt–equity ratio of .70. Return on assets is 8.4 percent, and total equity is $840,000. What is the equity multiplier? Return on equity? Net income?

> During the year, the Senbet Discount Tire Company had gross sales of $925,000. The firm’s cost of goods sold and selling expenses were $490,000 and $220,000, respectively. Senbet also had notes payable of $740,000. These notes carried an interest rate of

> A small business called The Grandmother Calendar Company began selling personalized photo calendar kits. The kits were a hit, and sales soon sharply exceeded forecasts. The rush of orders created a huge backlog, so the company leased more space and expan

> An investment offers $5,650 per year for 15 years, with the first payment occurring one year from now. If the required return is 8 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 years?

> The Optical Scam Company has forecast a sales growth rate of 15 percent for next year. The current financial statements are shown here: a. Using the equation from the chapter, calculate the external funds needed for next year. b. Construct the firm&acir

> A small business called The Grandmother Calendar Company began selling personalized photo calendar kits. The kits were a hit, and sales soon sharply exceeded forecasts. The rush of orders created a huge backlog, so the company leased more space and expan

> The Stancil Corporation provided the following current information: Determine the cash flows from the firm and the cash flows to investors of the firm. Proceeds from long-term borrowing $17,800 Proceeds from the sale of common stock 5,000 Purchases o

> Investment X offers to pay you $3,900 per year for nine years, whereas Investment Y offers to pay you $6,100 per year for five years. Which of these cash flow streams has the higher present value if the discount rate is 5 percent? If the discount rate is

1.99

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