P. 5-1

Transactions may have significantly different impacts on a government's budget, governmental funds statements, and governmentwide statements.

A school district prepares its budget on a cash basis. It is contemplating the changes or actions that follow. For each, indicate the impact that the change would have (1) on yearending June 30 2020, general fund expenditures or transfers and (2) on yearending June 30, 2020, governmentwide expenses (e.g., increase expenditures by $X or no impact). Provide a brief explanation of your response, indicating that you are aware of the relevant financial reporting issue.

1. Owing to a special discount offered by a supplier, the district will purchase $100,000 of supplies in June 2020 that they otherwise would not have purchased until July 2020. They will not, however, have to pay for the supplies until July. The district accounts for supplies on a consumption basis.
2. In fiscal 2020, the district increases the number of vacation days to which employees are entitled to take, thereby increasing the cost of vacation leave that employees earned in 2020 but will take in subsequent fiscal years by $250,000. The vacation days vest; they can be taken as termination benefits.
3. The district increased the number of sick days to which employees are entitled to take, thereby increasing the cost of sick days that employees earned in 2020 but will take in future years by $150,000. The sick leave can be taken only as employees are sick; it cannot be paid for as a termination benefit.
4. In 2020, the district established a sabbatical leave program for certain categories of teachers. Teachers will be granted one year of leave after each seven years of service. Teachers granted the leave will have to spend it engaging in various specified activities, such as research, aimed at improving their teaching. Teachers will first be eligible to take the leave in 2027. The district estimates that oneseventh of the cost will be $1,500,000.
5. The district delayed from June to July the approval of a grant of $50,000 to a local health clinic that provides examinations to lowincome students. The funds are to be paid out of resources budgeted for the fiscal year ending June 30, 2020, and are intended for use by the clinic in that same period.
6. The district delayed from June to July purchasing, and paying for, 10 school buses at a cost of $750,000. The buses are expected to last for 10 years and have no salvage value. The district charges depreciation on a straightline basis and takes a full year's depreciation in the year of acquisition.
7. The district is required to transfer 50 percent of any annual surplus from the general fund to a rainy day fund (a special revenue fund). Usually the transfer based on the surplus of the fiscal previous year is made in December. The district proposes to delay the transfer that would ordinarily be made in December 2020 until July 2021, thereby decreasing its cash outlay for fiscal year 2020 by $3 million

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