Believing that it is more economical to manage its risks internally, a county elects not to purchase
Question:
1. Prepare the journal entries in the internal service fund to record:
a. The claims recognized and paid.
b. The premiums billed and collected.
2. Suppose instead that the county accounted for self-insurance within its general fund. As in part 1, of the $2.0 million in premiums charged, $1.2million were billed to the other departments accounted for in the general fund and $0.8 million were billed to the utility department.
a. Prepare the general fund journal entry to record the claims recognized and paid.
b. Prepare the general fund entry to record the premiums billed and collected from the utility fund. (Those billed and collected from the other general fund departments would ''net out'' against their premium expenditures for purposes of external reporting.)
3. What would be the net expenses (i.e., expenditures less premium revenues) reported by the general fund if the self-insurance were accounted for: (1) in the internal service fund, and (2) in the general fund? What would be the total expenses charged by the utility fund if the self-insurance were accounted for: (1) in the internal service fund, and (2) in the general fund? Comment on the rationale for standards that permit such differences.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Government and Not for Profit Accounting Concepts and Practices
ISBN: 978-1118155974
6th edition
Authors: Michael H. Granof, Saleha B. Khumawala
Question Posted: