18. Our city had the following transactions involving resource outflows from its
ID: 2597560 • Letter: 1
Question
18. Our city had the following transactions involving resource outflows from its general fund for the year ended June 30, 20X8: During March 20X8, the general fund transferred $150,000 to a capital projects fund to help pay for the construction of a new police station. During August 20X7, the general fund ordered computer equipment at $200,000 estimated cost. The equipment arrived in September 20X7, and a S202,000 invoice was paid. During the year ended June 30, 20X8, the general fund received bills from the city's water department totaling $12,000. Of this amount, the general fund had paid all but $500 by June 30, 20x8 and plans to pay the balance next month. At June 30, 20X8, outstanding encumbrances for goods ordered in the general fund amounted to $25.000. Outstanding encumbrances do not lapse at the end of the fiscal year. On March 15. 20X8, the general fund repaid a local bank $265,000 for a loan of which $250.000 represented the principal borrowed. The general fund borrowed the money in July 20X7 and used collections of the property tax levy to repay the loan During May 20X8, the general fund decided to lease several copying machines instead of purchasing them. The lease arrangement was properly accounted for as an operating I lease payments of $10,000 to the owner. ease. By June 30. 20X8, the general fund had made Expenditures for 20X8 fiscal year are: a. $229,000 b. $237,000 c. $239,000 d. $389,000 e. None of the aboveExplanation / Answer
Answer:
Option c is correct.
Computer equipment acquisitions in September, 20X7 $ 202,000
Use of city water during the fiscal year 12,000
Interest paid on loan from local bank 15,000
Lease payments 10,000
Total amount reported for expenditures $239,000
(1) The $150,000 transfer to the capital projects fund in March, 20X8, is reported as an other financing use transfer out. Therefore, it should not be included in the amount reported for expenditures.
(2) The amount paid for the computer equipment is the amount reported for expenditures. Therefore, $202,000 is included in expenditures for equipment.
(3) The amount paid by the general fund,$11,500, is not the correct amount of the expenditures. The correct amount is $12,000
(4)
The outstanding encumbrances at June 30, 20X8, are not included in expenditures.The outstanding encumbrances will be reported on the general fund balance sheet as a reservation of fund equity.
(5)
The repayment of the principal of the bank loan is not an expenditure. However, the amount paid for interest, $15,000, should be included in expenditures for the year ended June 30, 20X8.
(6)
The general fund’s lease payments should be included in the amount reported for expenditures for the year ended June 30, 20X8
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