How are the component units presented in the government-wide financial statements?

Continuing Problem (Questions 1 through 6) textbook pages 509-510 – 2020 Town of Cary, NC CAFR is used for these questions found at https://www.townofcary.org/home/showpublisheddocument?id=25355

Here are the questions from pages 509-510

1.      Do the notes to the financial statements indicate the component units and other related entities that are included within the reporting entity? Do they indicate any units that are not included? Do they explain why these units are included or excluded?

2.     How are the component units presented in the government-wide financial statements?

3.     How are they presented in the fund statements?

4.     Has the government entered into any joint ventures? If so, how are they reported?

5.     What schedules or other information does the government report as “required supplementary information” (RSI)?

6.     Does the report contain all of the statistical information presented in ?

(Enter the answer to the question in the blanks provided.)

1.       Do the notes to the financial statements indicate the component units and other related entities that are included within the reporting entity? Yes or No ­­___________________________________ Do they indicate any units that are not included?  Yes or No ________________________________

Do they explain why these units are included or excluded?  Yes or No ________________________

2.   How are the component units presented in the government-wide financial statements?  __________________________________________________________________________

3.   How are they presented in the fund statements? ___________________________________ ___________________________________________________________________________

      ___________________________________________________________________________

4.  Has the government entered into any joint ventures?  Yes or No ______________________

      If so, how are they reported? _________________________________________________

      _________________________________________________________________________

5.  What schedules or other information does the government report as “required supplementary information”? (RSI) ______________________________________________

      __________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

6.   Does the report contain all of the statistical information presented in Table 11-3 on textbook page 482?  Yes or No _________________________________________________

EX. 16-4

Nonexchange, as opposed to exchange, revenues present the more difficult issues of accounting recognition.

The federal government, through its various government agencies, engaged in the following transactions involving revenues.

1. In the middle of its fiscal year, it rented land to a tenant. It signed a one‐year lease requiring monthly payments of $2,000. In the year in which the lease was signed, the tenant occupied the land for six months but paid an entire year’s rent (i.e., $24,000).
2. It signed two contracts to provide engineering services to a foreign government; each contract was for $50 million. During the year, the federal agency completed 100 percent of one contract and 60 percent of the other. It collected the entire $100 million in cash.
3. It assessed fines of $100,000 each on two firms for polluting waterways. One offender paid the fine; the other notified the government that it would contest the fine in court.
4. It accepted from a private foundation a pledge of $120,000 to fund an exhibit in a government museum. During the year the foundation paid $40,000 of its pledge, promising to pay the balance in the following year. The pledge does not constitute an enforceable legal agreement.
5. As the result of an audit, it assessed a company $250,000 in income taxes for a previous year, the entire amount of which was certain to be collected. In their audit report, the auditors estimated that audits of subsequent years would yield an additional $150,000.

Prepare journal entries to record the transactions. For each entry comment briefly on the amount of revenue recognized.

EX. 16-5

Low‐interest loans constitute a subsidy and hence an expense.

The Business Development Corporation (BDC), a federal agency (fictitious), makes loans to high‐tech companies that satisfy specified criteria. The loans are intended to encourage research and development and are made at rates substantially below market.

The BDC made a loan of $100,000 to Interface Networks, Inc. The interest rate was six percent, and the loan was payable over a three‐year period in equal installments of $37,411. At the time of the loan, prevailing Treasury interest rates for loans of comparable maturities were 10 percent.

1. What was the amount of the loan subsidy?
2. How and when should the agency recognize the value of the subsidy? Explain.
3. Prepare a journal entry to record the loan and recognize the subsidy.

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