Ives_SM_ch05 - 1Chapter 5 End of Chapter Material Solutions...

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1Chapter 5 End of Chapter Material Solutions REVIEW QUESTIONS Q5-1 A property tax calendar identifies dates important to administering the property tax, including date of levy, due dates for payments, and dates at which property taxes receivable become delinquent. Q5-2 The purpose of recording an Allowance for uncollectible property taxes is to recognize revenues equal to the expected net realizable value of property taxes receivable. Q5-3 A property tax lien is the legal right to prevent the sale of a piece of property as a means to satisfy a claim against the property's owner. Q5-4 Payments in lieu of property taxes are voluntary payments from other governments (or from not-for-profit organizations in some cases) to reimburse the recipient government for revenues lost because the paying organizations are not required to pay property taxes. Amounts received usually are based on amounts the governments would have received if the paying organizations had been required to pay these taxes or for specific services covered by the payments. Q5-5 A government may find it necessary to record deferred revenues if (1) property taxes will not be collected in time to pay liabilities of the fiscal year (that is, within 60 days after year end) or (2) cash proceeds of a grant are received before the recipient government incurs "qualifying" expenditures. Q5-6 Sales taxes and personal income taxes are two examples of derived tax revenues. .These revenues should be recognized during the period that the underlying transactions take place provided the revenues meet the "availability" criterion. In many cases, an adjusting entry will be prepared at fiscal year end to recognize derived tax revenues that will be received early enough in the following year. Q5-7 Reserved fund balance is that amount of a fund's net assets that is not available for appropriation and expenditure at a given time either because of circumstances, for example, in the case of inventory, or because of legal constraints, as in the case of open encumbrances. Designated fund balance refers to an amount of net assets for which tentative spending plans have been made by management. Reserved fund balance differs from designated fund balance in that reserved fund balances generally cannot be used for other purposes while designations are considered "informal" in that designations can be changed or eliminated at the discretion of management. 5-1
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Q5-8 If encumbrances outstanding at the end of a fiscal year lapse, it means that, under the government's budget law, amounts of encumbered appropriations become null and void as expenditure authority. Q5-9 One method is that in which encumbrances remain open. Under this method, a government's budget for the new fiscal year will include a "prior year" or "carryover" appropriation against which expenditures applicable to the open encumbrances will be charged. The other method is that in which encumbrances lapse. Under this method, the next year's appropriations are
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This note was uploaded on 11/20/2011 for the course ACCOUNTING Government taught by Professor Turn during the Spring '11 term at University of Houston.

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Ives_SM_ch05 - 1Chapter 5 End of Chapter Material Solutions...

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