Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The dual objectives of assessing interperiod equity and ensuring budgetary compliance may necessitate different accounting practices. A city engages in the transactions that follow. For

The dual objectives of assessing interperiod equity and ensuring budgetary compliance may necessitate different accounting practices.

A city engages in the transactions that follow. For each transaction indicate the amount of revenue or expenditure that it should report in 2014. Assume first that the main objective of the financial statements is to enable users to assess budgetary compliance. Then calculate the amounts, assuming that the main objective is to assess interperiod equity. The city prepares its budget on a modified cash basis (that is, it expands the definition of cash to include short-term marketable securities), and its fiscal year ends on December 31.

1. Employees earned $128,000 in salaries and wages for the last five days in December 2014. They were paid on January 8, 2015.

2. A consulting actuary calculated that per an accepted actuarial cost method, the city should contribute $225,000 to its firefighters pension fund for benefits earned in 2014. However, the city contributed only$170,000, the amount budgeted at the start of the year.

3. The city acquired three police cars for $35,000 cash each. The vehicles are expected to last for three years.

4. On December 1, 2014, the city invested $99,000 in short-term commercial paper (promissory notes). The notes matured on January 1, 2015. The city received $100,000. The $1,000 difference between the two amounts represents the citys return (interest) on the investment.

5. On January 2, 2014, the city acquired a new $10 million office building, financing it with twenty-five-year serial bonds. The bonds are to be repaid evenly over the period they are outstandingthat is, $400,000 per year. The useful life of the building is twenty-five years.

6. On January 3, 2014, the city acquired another $10 million office building, financing this facility with twenty five- year term bonds. These bonds will be repaid entirely when they mature on January 1, 2039. The useful life of this building is also twenty-five years.

7. City restaurants are required to pay a $1,200 annual license fee, the proceeds of which the city uses to fund its restaurant inspection program. The license covers the period July 1 through June 30. In 2014 the city collected $120,000 in fees for the license period beginning July 1, 2014.

8. The city borrowed $300,000 in November 2014 to cover a temporary shortage of cash. It expects to repay the loan in February 2015.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamental Accounting Principles

Authors: John J Wild, Ken Shaw

24th edition

1259916960, 978-1259916960

More Books

Students also viewed these Accounting questions

Question

Describe paraphrasing and explain why it is useful.

Answered: 1 week ago

Question

Annoyance about a statement that has been made by somebody

Answered: 1 week ago

Question

Self-confidence

Answered: 1 week ago