Question

PROBLEMS P.5-1 Transactions may have significantly different impact on a government's udget governmental funds state ments, and government-wide 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 year-ending June 30 2020. general fund expenditures or transfers and (2) on year-ending June 30, 2020, government-wide expenses (e.g.. "increase expenditures by SX" 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 2000, the district increases the number of vacation days to which employees are entitled to take, thereby increasing the cost of vacation leave that employees camed in 2020 but will take in subsequent fiscal years by $250,000. The vacation days vest; they can be taken as termination benefits The district increased the number of sick days to which employees are entitled to take, thereby increasing the cost of sick days that employees eamed 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 termina tion benefit. In 2030, 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 one seventh of the cost will be $1,500,000 The district delayed from June to July the approval of a grant of $50,000 to a local health clinic that provides examinations to low.income 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 straight-line basis and takes a full year's depreciation in the year of acquisition 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 S3 million

Answer 1

Answer Transalechs may have significantly different impact on a governo Budget School district propcare il dedged on a cash Baris indicate the impact that the change would (1) One year ending June 30/2017 - General fund expenditures on year ending June 30, 2017 W A special discount offered by supplies the district will purchase =) No impact because the perchase would . not be paid until July ②) the number of vacation day to which Employce are entitled to take

=) No impact because it activity will take place in 2018 The 2018 Budgel would be in Greased as the district want to increase the number of vaction day expens would be increase by 250,000 ® No impact because the sick lears should be sich days that employee earned but will take recorded only when expected to be paid to enmployee upon their resignation Lease program for centaen Colegauies of teachers No impad because the liability is accrued during the period the leave is carmed @

6 the approval of a grant local heall clinic that provids until eligibity equirements for the grand have been met by incuring Expenditures for intended purpose there are no impact ② Budget and general fund decrease by . 750.000 The buses are expected to last for lo year and have no salvage Value Government wide statement decrease by capitalizes and depreciation Cost ③ Transfor so percent of any annual supples from the general fund to

proposes No impact to delay becomes until transactions July 2018