The following applies to Q 28,29,30 For years beginning January 1, 2018, the Cit

Question

The following applies to Q 28,29,30 For years beginning January 1, 2018, the City of New York will finance its parks and recreation activities with a special property tax levy. Accordingly, it will account for resources related to parks and recreation in a special revense fund. During 2018 it engaged in the following transactions: A. During 2018 the city ordered $0.80 million in parks and recreation supplies. Of this amount, it received S0.70 million, used $0.55 million, and paid for $0.50 million. The city uses the purchases method to account for supplies Inventory B. In December 2018, the City approved, and made payment on, a grant to the local food bank for S.15 million. could be applied to the food bank costs only in the calendar year 2019. At the time of payment the food bank had met al eligibility requirements other than the time requirement 28. The Supplies Expenditure Account balance at Year- End under the Purchases method vs. Consumption method is a. b. c. $.15 million more S.15 million less No difference 29. The Non spendable fund balance at the governmental fund financial statement should be $80 million S.70 million c. $.55 million d. S.15 million b. a. Asset decreased by $.15 million and Deferred inflow of resources increased by S.15 million b. Asset decreased by S. 15 million and Deferred outflow of resources increased by S.15 million c. Asset decreased by S. 15 million and Grant Expenditure increased by S.15 million b. Asset decreased by S.15 million and Grant Expenses increased by $.15 million 30. The financial statement impact related to the Food bank transaction at 2018 should be

Explanation / Answer

Expenditure Recognition – Consumption Method and Purchases Method
Under accrual accounting, expenditures are recognized as soon as a liability is incurred regardless of the timing of related cash flows. However, under the modified accrual basis, GAAP provided modifications to the general rule in the areas of inventories and prepaid items.

A)Under the purchases method — inventories and prepaid items are reported as expenditures when purchased rather than capitalized as an asset.
B)Under the consumption method — governments may initially report inventories and prepaid items they purchased as an asset and defer the recognition of the expenditure until the period the inventories and prepaid items are actually consumed or used.

NOW ,THE GOVERNMENT USES PURHASES METHOD TO ACCOUNT FOR SUPPLIES OF INVENTORY

THEREFORE,UNDER PURCHASES METHOD THE .15 MILLION SPENT ON A GRANT TO LOCAL FOOD BANK WILL BE TREATED AS GRANT EXPENDITURE

THEREFORE YOUR ANSWER TO: 28 a) .15 million more since under consumption method the .15 million the grant would have been capitalised.

using above logic; your answer to q 30 c)Asset decreased by .15 million and grant expenditure increased by .15 million

and your non spendable governement fund would be the amount that has been allocated for parks and recreational activities and hence it is not in spendabel form to government

so .80 million allocated for such purposes could not e used by government for any other purpose

therfore answer to q29-a).80 million

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