To complete the 3rd research assignment, complete Problem 17?5. In this problem, you will research reporting entities for governments in the GASB?s Governmental Accounting Research System (GARS). Access the GARS database citing your results from the GASB guidance with utmost authoritative guidance. Provide requisite examples as requested from the GARS and cite your results from the Codification. Minimum of 2 pages required

17-5. Define a financial reporting entity. Give an example of a primary government. Define and give an example of a component unit. Explain the two methods of reporting the primary government and component units in the financial reporting entity and when each is required

Case #1 Date: 11 - 6 - 2015 To: Melissa Barns, President of Felix Company From: Linda Bell, CPA Re: Case #1 Facts: Felix Company purchased a building for $100,000 with a $20,000 down payment and signing a mortgage for the remaining $80,000. Issues: 1. How to report a partial cash payment for the purchase of a building. 2. Whether a noncash financing and investing activity should be reported on the Statement of Cash Flows and/or disclosed elsewhere. Conclusion: 1. According to paragraph #230-10-50-5 of the FASB Accounting Standards Codification (ASC), Felix Company should report the $20,000 down payment in the body of the company's 2015 Statement of Cash Flows as follows: Cash Flows from Investing Activities Payment for purchase of a building $(20,000) 2. According to paragraphs #230-10-50-3, 4, and 6 of the FASB ASC the $80,000 non-cash portion should be disclosed either in a narrative or a schedule. Given this is Felix's only non-cash investing and financing activity, we recommend including the following disclosure statement at the bottom of the Statement of Cash Flows to clearly communicate the transaction. Felix Company invested $80,000 in the acquisition of a $100,000 building by financing the transaction through the issuance of an $80,000 mortgage. Reasoning/Support: 1. The following paragraph of the FASB ASC provides authoritative guidance for reporting the cash portion of Felix Company's building purchase. 230-10-50-5 Some transactions are part cash and part noncash; only the cash portion shall be reported in the statement of cash flows. 2. Here are pertinent paragraphs from the FASB ASC providing authoritative guidance for reporting noncash financing and investing activities. 230-10-50-3 Information about all investing and financing activities of an entity during a period that affect recognized assets or liabilities but that do not result in cash receipts or cash payments in the period shall be disclosed. Those disclosures may be either narrative or summarized in a schedule, and they shall clearly relate the cash and noncash aspects of transactions involving similar items. 230-10-50-4 Examples of noncash investing and financing transactions are converting debt to equity; acquiring assets by assuming directly related liabilities, such as purchasing a building by incurring a mortgage to the seller; obtaining an asset by entering into a capital lease; obtaining a building or investment asset by receiving a gift; and exchanging noncash assets or liabilities for other noncash assets or liabilities. 230-10-50-6 If there are only a few such noncash transactions, it may be convenient to include them on the same page as the statement of cash flows. Otherwise, the transactions may be reported elsewhere in the financial statements, clearly referenced to the statement of cash flows. Case #2 Date: 11 - 6 - 2015 To: Joe Combs, Plant Manager From: Linda Bell, CPA Re: Case #2 Facts: Finch & Company purchased a machine at the beginning of the year that is currently used in the factory. The machine was recorded at cost. The manager asked us to research if there are additional accounting issues for the machine. Issue: How should a machine used in production be reported in the financial statements? Conclusion: According to paragraph #360-10-35-4 of the FASB Accounting Standards Codification (ASC), Finch & Company should report a machine used in production on the balance sheet at cost less accumulated depreciation, otherwise known as \"depreciated cost.\" The balance sheet presentation (or note disclosure) should appear as follows: Assets - Property, Plant, & Equipment Machine Less: Accumulated Depreciation Net Book Value $ Historical Cost (XXXXX) XXXXXXXXXXXX The typical journal entry to record depreciation on a long-term asset used in productions is as follows: Depreciation Expense (Operating Expense) Accumulated Depreciation - Machine XXXXX XXXXX Reasoning/Support: The following paragraph of the FASB ASC provides authoritative guidance for the subsequent reporting of the cost of a productive asset. 360-10-35-4 The cost of a productive facility is one of the costs of the services it renders during its useful economic life. Generally accepted accounting principles (GAAP) require that this cost be spread over the expected useful life of the facility in such a way as to allocate it as equitably as possible to the periods during which services are obtained from the use of the facility. This procedure is known as depreciation accounting, a system of accounting which aims to distribute the cost or other basic value of tangible capital assets, less salvage (if any), over the estimated useful life of the unit (which may be a group of assets) in a systematic and rational manner. It is a process of allocation, not of valuation