ACCT 4421- CH 5 UPDATED ACTUAL
Exam Questions and CORRECT Answers
Nolanville's payroll for one of its departments is $15K per week. It pays its employees on the
Thursday of the week following that in which the wages & salaries are earned.
In 2012, December 31 fell on a Wednesday. For the workweek beginning Monday, December 29,
2012, and ending Friday, Jan 2, 2013, employees were paid on Thursday, January 8, 2013.
For fiscal year 2012, what amount should the city recognize as wage and salary expenditure
pertaining to the week ending Friday, January 2, 2013, in its fund statements and in the
government wide statements? - CORRECT ANSWER - Fund Statements: $9K
Govt-Wide Statements: $9K
In the fund financial statements, the city would recognize the receipt of a new computer (to be
used for general purposes) that it had ordered the previous year as an - CORRECT
ANSWER - Expenditure
In 2012, city employees earned $1.4M in sick leave that they did not take during the year. The
city estimates that of this amount $0.8 will actually be paid to employees who take sick leave.
Of the balance, $0.1M will be paid to employees upon retirement or resignation and $0.5M will
not have to be paid (since sick days are use-or-lose).
The amount that the city should add to a fund-statement liability to account as of year-end is: -
CORRECT ANSWER - $0
Sick leave is not accounted for until used
In 2012, city employees earned $1.4M in sick leave that they did not take during the year. The
city estimates that of this amount $0.8 will actually be paid to employees who take sick leave.
, Of the balance, $0.1M will be paid to employees upon retirement or resignation and $0.5M will
not have to be paid (since sick days are use-or-lose).
Assume the same facts as Q3.
The amount that the city should add to government-wide statement liability account as of year-
end - CORRECT ANSWER - $0.1M
Per GASB, sick leave is only recognized as a liability to the extent that you know will be paid for
retirement, termination, etc. The rest is recognized when paid.
In 2012 city employees earned $3.6M in vacation pay that they did not use during the year. The
city estimates that of this amount $2.8M will be paid in 2013, $0.6M will be paid in subsequent
years, and the balance of $0.2M will not have to be paid.
The amount the city should add to a fund-statement liability account as of year-end 2012 is: -
CORRECT ANSWER - $0
Same as sick leave on modified accrual basis
In 2012 city employees earned $3.6M in vacation pay that they did not use during the year. The
city estimates that of this amount $2.8M will be paid in 2013, $0.6M will be paid in subsequent
years, and the balance of $0.2M will not have to be paid.
The amount that the city should add to a government wide statement liability account as of year
end 2012 is - CORRECT ANSWER - $3.4M (3.6 earned - 0.2 wont be used)
GASB states that because vacation leave is under the control of either the employee or employer,
then once the amount is earned it should be recognized as a liability for ACCRUAL BASIS
methods. Where as sick leave is out of the control of both the employee and employer.
Nolanville starts fiscal 2012 with $25K in supplies. During the year it orders $180K in supplies,
receives $170K, and uses $190K.
Exam Questions and CORRECT Answers
Nolanville's payroll for one of its departments is $15K per week. It pays its employees on the
Thursday of the week following that in which the wages & salaries are earned.
In 2012, December 31 fell on a Wednesday. For the workweek beginning Monday, December 29,
2012, and ending Friday, Jan 2, 2013, employees were paid on Thursday, January 8, 2013.
For fiscal year 2012, what amount should the city recognize as wage and salary expenditure
pertaining to the week ending Friday, January 2, 2013, in its fund statements and in the
government wide statements? - CORRECT ANSWER - Fund Statements: $9K
Govt-Wide Statements: $9K
In the fund financial statements, the city would recognize the receipt of a new computer (to be
used for general purposes) that it had ordered the previous year as an - CORRECT
ANSWER - Expenditure
In 2012, city employees earned $1.4M in sick leave that they did not take during the year. The
city estimates that of this amount $0.8 will actually be paid to employees who take sick leave.
Of the balance, $0.1M will be paid to employees upon retirement or resignation and $0.5M will
not have to be paid (since sick days are use-or-lose).
The amount that the city should add to a fund-statement liability to account as of year-end is: -
CORRECT ANSWER - $0
Sick leave is not accounted for until used
In 2012, city employees earned $1.4M in sick leave that they did not take during the year. The
city estimates that of this amount $0.8 will actually be paid to employees who take sick leave.
, Of the balance, $0.1M will be paid to employees upon retirement or resignation and $0.5M will
not have to be paid (since sick days are use-or-lose).
Assume the same facts as Q3.
The amount that the city should add to government-wide statement liability account as of year-
end - CORRECT ANSWER - $0.1M
Per GASB, sick leave is only recognized as a liability to the extent that you know will be paid for
retirement, termination, etc. The rest is recognized when paid.
In 2012 city employees earned $3.6M in vacation pay that they did not use during the year. The
city estimates that of this amount $2.8M will be paid in 2013, $0.6M will be paid in subsequent
years, and the balance of $0.2M will not have to be paid.
The amount the city should add to a fund-statement liability account as of year-end 2012 is: -
CORRECT ANSWER - $0
Same as sick leave on modified accrual basis
In 2012 city employees earned $3.6M in vacation pay that they did not use during the year. The
city estimates that of this amount $2.8M will be paid in 2013, $0.6M will be paid in subsequent
years, and the balance of $0.2M will not have to be paid.
The amount that the city should add to a government wide statement liability account as of year
end 2012 is - CORRECT ANSWER - $3.4M (3.6 earned - 0.2 wont be used)
GASB states that because vacation leave is under the control of either the employee or employer,
then once the amount is earned it should be recognized as a liability for ACCRUAL BASIS
methods. Where as sick leave is out of the control of both the employee and employer.
Nolanville starts fiscal 2012 with $25K in supplies. During the year it orders $180K in supplies,
receives $170K, and uses $190K.
