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Unformatted text preview: Chapter 4 4-1. The solution to this and the first exercise of Chapters 13 and 59 will differ from student to student, assuming each has a different CAFR. 4-2. 1. C. 6. C. 2. C 7. D. 3. B. 8. D. 4. C. 9. A. 5. B. 10. C. 4-3. 1. D. 6. B. 2. B. 7. C. 3. A. 8. D. 4. B. 9. D. 5. C. 10. D. 4-4. A. (1) Exchange transactions are transactions in which each party receives and gives up essentially equal values. (2) nonexchange transactions are transactions in which a government gives (or receives) value without directly receiving (or giving) equal value in exchange. B. The four eligibility requirements are (1) required characteristics of recipients, (2) time requirements, (3) reimbursements, and (4) contingencies. First, required characteristics of recipients means that recipients must be the type specified in legislation or grant agreements. For example, if grants are to community colleges on a per credit hour basis, then the recipient must be a community college in order to meet this eligibility requirement. Second, if a donor specifies that a grant be expended by a recipient in a future period, then the recipient would not recognize the receivable or the revenue until that future period. Third, reimbursement grants require that expenditures must be incurred by a recipient before a revenue can be recognized. Any cash received before the expenditure must be recorded as deferred revenue. Finally, if a gift or grant has a contingency attached, such as the raising of additional revenue, that gift or grant would not be recognized until that revenue was raised. C. The four classes of nonexchange revenues are (1) imposed nonexchange transactions, (2) derived tax revenues, (3) government-mandated nonexchange transactions, and (4) voluntary nonexchange transactions. An example of imposed nonexchange revenues would be property taxes. Assets from property taxes are recognized when an enforceable legal claim exists, or when the resources are received, whichever occurs first. Revenues would be recognized in the period for which the taxes are levied. 4-1 4-4 (C) (Continued). Examples of derived tax revenues include sales, income, and motor fuel taxes. For derived tax revenues, assets are recognized when the tax is imposed or the resources are received, whichever occurs first. The tax is recognized as revenue at the same time as the asset, providing that the underlying transaction has taken place. An example of government-mandated nonexchange transactions would be state funding for mainstreaming handicapped children in classrooms, accomplanied by state law that mainstreaming take place. Assets and revenues should be recognized when eligibility requirements have been met. An example of a voluntary exchange transaction would be a contribution to a city library endowment fund. Voluntary nonexchange transactions should be recognized as assets and revenues when eligibility requirements have been met....
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This note was uploaded on 03/05/2012 for the course ACCT 400 taught by Professor Smith during the Spring '12 term at University of Texas at Dallas, Richardson.
- Spring '12