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Accounting Question-The Financial Reporting Entity

Q1. ABC Construction receives an annual appropriation to perform construction activities. ABC does not use commitment accounting; instead, it obligates funds upon the award of contracts. Prepare budgetary and proprietary journal entries to record the following transactions.                   (1.5 Marks)

1. ABC received an appropriation of $3,000,000.
2. The Office of Management and Budget apportioned $750,000 of the appropriation to the Department of Domestic Construction, which oversees the ABC.
3. The Department allotted the entire $750,000 apportionment to the ABC.
4. ABC awarded a building construction contract for $450,000.
5. The contractor completed construction of the building. Because of a change order, however, the total cost of the work was $486,000. ABC accepted the work and recorded the asset and the invoice for $486,000.

Q2. An NFPO operates a clinic that provides services to substance abusers. During calendar year 2015, it receives the following donations that may be used for any purpose and at any time:

1. $37,500 of cash.
2. 150 shares of stock having a fair value of $60 a share at the time of the donation.

• Medical supplies (from a pharmaceutical company) having a fair value of $15,000.

Make necessary journal entries in the books of NFPO to record the above transactions.

Q3. The following information is extracted from a City’s government-wide statement of net position at December 31, 2015:                                                                                                               (1.5 Marks)

Capital assets                                                                            $4,500,000

Accumulated depreciation, capital assets                                $2,400,000

Bonds payable                                                                                 -0-

The following information is extracted from the city’s governmental funds statement of revenues, expenditures, and changes in fund balances for the year ended December 31, 2015.

Expenditures – capital outlay (General Fund)                              $ 60,000

Expenditures – capital outlay (Capital Projects Fund)                $900,000

Depreciation on old and new assets during the year was $546,000.

Prepare journal entries so the foregoing information can be used in a work sheet to prepare government-wide financial statements for the year ended December 31, 2015.

Q4. Describe the term “The Financial Reporting Entity” and its various types.