answer questions 8-1 through 8-4

Questions and Exercises 8-1. Using the annual financial report obtained for Exercise 1-1, answering lowing questions: Examine the reconciliation between the governmental fund balances and the governmental-type activities net position. This might be on the gov- ernmental rund Balance Sheet or in a separate schedule in the basic finan- cial statements. List the major differences. What is the amount shown to capital assets? How much (if any) is due to the incorporation of internal service funds? Was an adjustment made for deferred property taxes or any other revenue? What is the adjustment due to the inclusion of long-term liabilities? What other adjustments are made? b. Examine the reconciliation between the governmental fund changes in fund balances and the governmental-type activities changes in net position. This might be on the governmental Statement of Revenues, Expenditures, and Changes in Fund Balances or in a separate schedule. List the major differences. How much is due to the difference between depreciation reported on the Statement of Activities and the reported expenditures for capital outlays on the Statement of Revenues, Expenditures, and Changes in Fund Balances? How much is due to differences in reporting expendi- tures versus expenses for debt service? How much is due to the incorpo ration of internal service funds? How much (if any) is due to differences in reporting proceeds versus gains on sale of capital assets? How much is due to additional revenue accruals? How much is due to additional expense accruals? What other items are listed? c. Examine the Statement of Net Position. Attempt to prove the Net Investment in Capital Assets figure from the information in the statement or the notes. List the individual items that are restricted; this might require examination of the notes to the financial statements, Government-wide Statements. Capital Assets, Long-Term Debt 247 d. Examine the Statement of Activities. List the net expenses (revenues) for governmental activities, business-type activities, and component units. List the change in net position for governmental activities, business-type activities, and component units. Attempt to find from the notes the com- ponent units that are discretely presented. e. Look throughout the annual report for disclosures related to capital assets. This would include the notes to the financial statements, any schedules, and information in the Management's Discussion and Analysis (MD&A). Summarize what is included. What depreciation method is used? Are lives of major classes of capital assets disclosed? f. Look throughout the annual report for disclosures related to long-term debt. This would include the notes to the financial statements, any sched- ules in the financial and statistical sections, and the MD&A. Summarize what is included. Are the schedules listed in this chapter included? What is the debt limit and margin? What is the direct debt per capita? The direct and overlapping debt per capita? 8-2. Identify the types of nonexchange revenues that are most likely to result in differences in the timing of recognition between the accrual and modified accrual bases of accounting. 8-3. The government-wide Statement of Net Position separately displays govern- mental activities and business activities. Why are internal service funds most commonly displayed as governmental activities? 8-4. Answer the following questions with regard to infrastructure: a. What is infrastructure? b. What are the two methods that might be used to record infrastructure expense from year to year? How is the accounting different under the two methods? c. What conditions must exist in order to use the modified approach to record and report infrastructure? d. What are the disclosure requirements if the modified approach is used? 214 Chapter 8 ILLUSTRATION 8-1 Information Flow to the formation Flow to the Government-wide Statements Government-wide Statement of Net Position Government-wide Statement of Activities Conversion Worksheet Dr Cr Fund-Basis Balances Statements: Adjusted for Governmental Worksheet Government-wide Funds Entries Statements Modified Accrual Basis Enterprise Funds Accrual Basis Internal Service Funds Fiduciary funds are not included. Fund-Basis Financial Statements: Governmental Funds Fund-Basis Financial Statements: Proprietary Funds Fund-Basis Financial Statements: Fiduciary Funds Accounting Ledgers: Records of General Governmental Fixed Assets and Funds Long-Term Debt Accounting Ledgers: Proprietary Funds Accounting Ledgers: Fiducian Funds Questions and Exercises 8-1. Using the annual financial report obtained for Exercise 1-1, answering lowing questions: Examine the reconciliation between the governmental fund balances and the governmental-type activities net position. This might be on the gov- ernmental rund Balance Sheet or in a separate schedule in the basic finan- cial statements. List the major differences. What is the amount shown to capital assets? How much (if any) is due to the incorporation of internal service funds? Was an adjustment made for deferred property taxes or any other revenue? What is the adjustment due to the inclusion of long-term liabilities? What other adjustments are made? b. Examine the reconciliation between the governmental fund changes in fund balances and the governmental-type activities changes in net position. This might be on the governmental Statement of Revenues, Expenditures, and Changes in Fund Balances or in a separate schedule. List the major differences. How much is due to the difference between depreciation reported on the Statement of Activities and the reported expenditures for capital outlays on the Statement of Revenues, Expenditures, and Changes in Fund Balances? How much is due to differences in reporting expendi- tures versus expenses for debt service? How much is due to the incorpo ration of internal service funds? How much (if any) is due to differences in reporting proceeds versus gains on sale of capital assets? How much is due to additional revenue accruals? How much is due to additional expense accruals? What other items are listed? c. Examine the Statement of Net Position. Attempt to prove the Net Investment in Capital Assets figure from the information in the statement or the notes. List the individual items that are restricted; this might require examination of the notes to the financial statements, Government-wide Statements. Capital Assets, Long-Term Debt 247 d. Examine the Statement of Activities. List the net expenses (revenues) for governmental activities, business-type activities, and component units. List the change in net position for governmental activities, business-type activities, and component units. Attempt to find from the notes the com- ponent units that are discretely presented. e. Look throughout the annual report for disclosures related to capital assets. This would include the notes to the financial statements, any schedules, and information in the Management's Discussion and Analysis (MD&A). Summarize what is included. What depreciation method is used? Are lives of major classes of capital assets disclosed? f. Look throughout the annual report for disclosures related to long-term debt. This would include the notes to the financial statements, any sched- ules in the financial and statistical sections, and the MD&A. Summarize what is included. Are the schedules listed in this chapter included? What is the debt limit and margin? What is the direct debt per capita? The direct and overlapping debt per capita? 8-2. Identify the types of nonexchange revenues that are most likely to result in differences in the timing of recognition between the accrual and modified accrual bases of accounting. 8-3. The government-wide Statement of Net Position separately displays govern- mental activities and business activities. Why are internal service funds most commonly displayed as governmental activities? 8-4. Answer the following questions with regard to infrastructure: a. What is infrastructure? b. What are the two methods that might be used to record infrastructure expense from year to year? How is the accounting different under the two methods? c. What conditions must exist in order to use the modified approach to record and report infrastructure? d. What are the disclosure requirements if the modified approach is used? 214 Chapter 8 ILLUSTRATION 8-1 Information Flow to the formation Flow to the Government-wide Statements Government-wide Statement of Net Position Government-wide Statement of Activities Conversion Worksheet Dr Cr Fund-Basis Balances Statements: Adjusted for Governmental Worksheet Government-wide Funds Entries Statements Modified Accrual Basis Enterprise Funds Accrual Basis Internal Service Funds Fiduciary funds are not included. Fund-Basis Financial Statements: Governmental Funds Fund-Basis Financial Statements: Proprietary Funds Fund-Basis Financial Statements: Fiduciary Funds Accounting Ledgers: Records of General Governmental Fixed Assets and Funds Long-Term Debt Accounting Ledgers: Proprietary Funds Accounting Ledgers: Fiducian Funds