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Answer the following multiple choice questions and explain why you selected the choice that you did. Homework Week 4 Instructions A. Answer the following multiple

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Answer the following multiple choice questions and explain why you selected the choice that you did.
image text in transcribed Homework Week 4 Instructions A. Answer the following multiple choice questions and explain why you selected the choice that you did. 1. Property taxes and fines represent which of the following classes of nonexchange transactions for governmental units? a. Derived tax revenues b. Imposed nonexchange revenues c. Government-mandated nonexchange transactions d. Voluntary nonexchange transactions 2. In accordance with GASB 33, Accounting for Financial Reporting for Nonexchange Transactions, which of the following transactions would qualify as a nonexchange transaction in the City of Althea? a. The water utility (enterprise) fund billed the general fund for water usage. b. Property taxes were levied by the general fund. c. The motor pool (internal service) fund billed other departments for services rendered. d. The general fund sold police cars for their estimated residual value. Items 3 and 4 are based on the following: The general fund of Beta City received a $100,000 grant from the state to be used for retraining its police force in modern crime-fighting methods. The state recently passed legislation that requires retraining for all police departments in the state. The grant was received in cash on June 15, 2015, and was used for retraining seminars during July 2015. The state mandated that the grant be spent in the fiscal year ending June 30, 2016. Beta's fiscal year ends on June 30. Answer each of the questions below based upon the guidance provided by GASB 33, Accounting and Financial Reporting for Nonexchange Transactions. 3. What account should be credited in the general fund on the date the grant was received? a. Restricted revenue b. Deferred revenue c. Revenue d. Unreserved fund balance 4. The grant from the state is an example of what type of nonexchange transaction? a. Government-mandated b. Imposed c. Voluntary d. Derived Items 5 and 6 are based on the following: The merchants of Charleston City collect a sales tax of 5% on retail sales. The sales tax are remitted by retailers to the state and distributed by the state to the various governmental units that are within the boundaries of Charleston City. During the month of June 2015, the state received $50,000 of sales taxes from merchants in Charleston City. As of June 30, 2015 none of the sales taxes had been remitted to Charleston City or to any of the other governments that were within the boundaries of Charleston City. Charleston City estimated that its share of the sales taxes would be received in early July 2015 and would be used to pay for expenditures incurred during the year ended June 30, 2015. Charleston City's fiscal year ends on June 30. Answer both of the questions below using the guidance provided in GASB 33, Accounting and Financial Reporting for Nonexchange Transactions. 5. From the perspective of Charleston City, the sales taxes are an example of what type of nonexchange transaction? a. Imposed b. Voluntary c. Derived d. Government-mandated 6. On the statement of revenues, expenditures, and changes in fund balance for the year ended June 30, 2015, how should the general fund of Charleston City report its share of the sales taxes that will be received in July 2015? a. Deferred revenue b. Restricted revenue c. Revenue d. Unreserved fund balance. 7. On July 1, 2015 the general fund of Darien City levied property taxes for the fiscal year ending June 30, 2016. According to GASB 33, Accounting and Financial Reporting for nonexchange Transactions, property taxes are an example of what type of nonexchange transaction? a. Voluntary b. Government-mandated c. Imposed d. Derived 8. For the year ended December 31, 2015 the general fund of Eagle City levied property taxes of $1,000,000. The city estimated that $10,000 of the levy would not be collectible. By December 31, 2015 the city had collected $850,000 of property taxes and expected to collect the remainder of the taxes as follows: $100,000 by March 1, 2016 $40,000 during the remainder of 2016 In accordance with GASB 33, Accounting and Reporting for Nonexchange Transactions, how much property tax revenue should be reported by the general fund on the statement of revenues, expenditures, and changes in fund balances prepared for the year ended December 31, 2015? a. $850,000 b. $950,000 c. $990,000 d. $1,000,000 9. For the year ended December 31, 2015 the general fund of Fuller Village reported revenues from the following sources on the statement of revenues, expenditures, and changes in fund balances: Sales taxes $25,000 Property taxes 125,000 Income taxes 15,000 Fines 10,000 In accordance with GASB 33, Accounting and Reporting for Nonexchange Transactions, what is the amount of revenues that came from imposed nonexchange transactions? a. $175,000 b. $150,000 c. $140,000 d. $135,000 10. In December 2015 the general fund of Gainer City received $25,000 from the state as an advance on the city's portion of sales tax revenues, and it received $20,000 from property owners for property taxes to be levied in 2016. The advance payment of sales taxes represented the amount that the state collected in 2015 that would have been distributed to Gainer city in the early part of 2016. Gainer city used the advance to pay for expenditures incurred by the general fund in 2015. The cash received from property owners for property taxes to be levied in 2016 will be used to pay for expenditures incurred in 2016. In accordance with GASB 33, Accounting and Reporting for Nonexchange Transactions, what amount of revenue from these transactions should be reported by Gainer City's general fund on the statement of revenues, expenditures, and changes in fund balances for the year ended December 31, 2015? a. $25,000 b. $20,000 c. $0 d. $45,000 11. In accordance with GASB 33, Accounting and Reporting for Nonexchange Transactions which of the following revenues results from taxes assessed by a government on exchange transactions (a derived tax revenue?) a. Property tax revenues b. Fines and forfeits c. Motor fuel taxes d. Unrestricted government grants 12. In accordance with GASB 33, Accounting and Reporting for Nonexchange Transactions which of the following revenues results from taxes and other assessments imposed by governments that are not derived from underlying transactions? a. Income taxes b. Sales taxes c. Motor fuel taxes d. Fines and forfeits 13. The State of Iowa is scheduled to receive a substantial amount of revenues as a part of a tobacco settlement. The revenues for the next five years have been sold to a commercial business for $5,000,000. In accordance with GASB 48, how should it account for this transaction assuming that Iowa has no involvement with the future revenues? a. Recognize $5,000,000 of revenue at the date of the transaction b. Recognize $5,000,000 in liability to the commercial business c. Recognize $5,000,000 in deferred revenue and recognize the revenue over a five-year period d. Recognize the difference between cash received and the amount of future revenues sold as an expense. B. The town of Laurelton has the following transactions and events during its fiscal year ending September 30, 2015. (Dollar amounts are in thousands.) 1. During fiscal 2015 the town levied property taxes of $154,000; it collected $120,000 prior to September 30, 2015, and expects to collect $5,000 over each of the next six months. It estimated that $4,000 will be uncollectible. 2. On November 20, 2015, it received $12,000 from the state for sales taxes collected on its behalf. The payment was for sales made in September 2015 that merchants were required to remit to the state by October 15, 2015. 3. The town requires each vendor who sells at its farmers' market to obtain an annual permit. The funds generated by the sale of these permits are used to maintain the market. The permits, which cover the period from June 1 through May 31, 2015, are not refundable. In May 2015, the town issued $36 worth in permits. 4. Several years earlier the town received a donation of a parcel of land, upon which it expected to build. During fiscal 2015 it opted to sell the land for $135. When acquired by the town, the land had a market value of $119. The town sold the land in 2015 and received $135 cash. Required: Prepare summary journal entries to record the transactions above for the general fund on a modified accrual basis. Base your entries on generally accepted accounting principles now in effect

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