EX. 5-2

The Eaton School District engaged in the following transactions during its fiscal year ending August 31, 2021.

• It established a purchasing department, which would be accounted for in a new internal service fund, to purchase supplies and distribute them to operating units. To provide working capital for the new department, it transferred $1.7 million from its general fund to the internal service fund.
• During the year, operating departments that are accounted for in the general fund acquired supplies from the internal service fund for which they were billed $300,000. Of this amount, the government transferred $200,000 from the general fund to the internal service fund, expecting to transfer the balance in the following fiscal year. The supplies had cost the purchasing department $190,000. During 2021, the operating departments used only $220,000 of the supplies for which they were billed. They had no supplies on hand at the start of the year.
• The school district transferred $150,000 from its general fund to its debt service fund to make its required March 31, 2021 interest payment. This amount was paid from the debt service fund when due. It represented interest on $8 million of bonds that were issued, at par, on September 30, 2020. The next interest payment of $150,000 is due on September 30, 2021. The district also transferred $75,000 from the general fund to the debt service fund to provide for the eventual repayment of principal.
• The district transferred $4.5 million from the general fund to its pension fund (a fiduciary fund) in partial payment of its actuarially determined contribution of $5.0 million for the year.
• On August 31, the district acquired school buses at a cost of $900,000. The district gave the supplier installment notes that required the district to make three annual payments of $361,903. The first payment is due on August 2022. The buses have a useful life of 10 years, with no salvage value.
• On March 1, the district purchased and paid $150,000 for a oneyear insurance policy.

Refer to the two lists below. Select the appropriate amounts from the lettered list for each item in the numbered list. An amount may be selected once, more than once, or not at all.

1. Amount that the general fund should recognize as supplies expenditure, assuming that inventory is accounted for on a consumption basis
2. Amount that the district should recognize as a pension expenditure in its general fund
3. Amount that the district should recognize as a pension expense in its governmentwide statements
4. Amount that the general fund should recognize as nonreciprocal transfersout
5. Amount that the district should recognize as total debt service expenditures in its governmental funds
6. Amount that the government should recognize as total debt service expense in its governmentwide statements
7. Amount that the district should recognize as other financing sources in its general fund financial statements
8. Amount that the district should recognize as capitalrelated expenditures, including depreciation, pertaining to its buses in its governmental fund financial statements (the district recognizes a full year's depreciation on all capital assets in the year of acquisition)
9. Amount that the district should recognize as capitalrelated expenses, including depreciation, pertaining to its buses in its governmentwide financial statements (the district recognizes a full year's depreciation on all capital assets in the year of acquisition)
10. Amount that the district should recognize as nonspendable fund balance in its governmental fund statements

11.Amount that the district should recognize as a deferred outflow of resources relating to its insurance policy.

1. $0
2. $75,000
3. $80,000
4. $90,000
5. $137,500
6. $150,000
7. $220,000
8. $275,000
9. $300,000
10. $900,000
11. $1,925,000
12. $4,500,000
13. $5,000,000
14. $8,000,000
15. $8,900,000

CONTINUING PROBLEM

Review the Comprehensive Annual Financial Report (CAFR) that you obtained.

1. How does the government classify its governmental expenditures, by function or by "object"? Are the classifications approximately the same in both the governmentwide and the fund statements?
2. What was the city's largest expenditure for fiscal year 2017? By how much did this increase or decrease since FY 2016? Since FY 2012 (see statistical section)? Can you draw any inferences from this comparison as to the efficiency and effectiveness of the city in providing this service? If not, what other information would you need to make such a judgment?
3. What are the major differences in expenditures/expenses (i.e., reconciling items) as they are reported in the governmental fund and the governmentwide statements?
4. On what basis does the government account for its inventories (purchases or consumption)? Does the City maintain a "fund balancenonspendable" amount for inventories?
5. On what basis does it account for insurance or other prepaid items in its governmental funds? How can you tell?
6. To and from which funds or component units have there been general fund transfers?
7. Explain the nature of any governmental fund balance sheet classifications related to expenditures.
8. Does the entity report depreciation as an expense in its governmentwide statements? If not, why not?
9. What types of other financing sources and uses does the governmental entity report in the general fund? What effect do these items have on the net change in fund balance for the year?