ACCT 4421 CHAPTER 5 EXAM QUESTIONS AND ANSWERS

when should governments accrue a liability trol of the employee and employer GASB sick leave: - Answer- sick leave is recognized as a liability only if it is probable that the employer will compensate the employees for the benefits through cash payments conditioned on the employees' termination or retirement sabbatical leave: - Answer- after a specified term of service employees may be granted a paid leave of absence for either a semester or an academic year GASB sabbatical leave: - Answer- 1. if leave will benefit employer (obtain additional training), the sabbatical leave should be accounted for in the period the leave is taken. no liability accrued in advance of the leave 2. if leave is for "compensated unrestricted time off" then the government should accrue a liability during the period the leave is earned pensions - Answer- amount of money paid to retired or disabled employees - funded throughout the employee's working line types of pensions: - Answer- - defined benefit plans - defined contribution plans GASB pensions: - Answer- the expenditure should be the amount that will be paid with expendable/available financial resources claims & judgement examples: - Answer- - injuries to employees (workers comp) - negligence of government employees (medical malpractice, wrongful arrests) - contractual disputes with suppliers - employment practices (civil rights, wrongful discharge, sexual harassment) GASB standard for claims and judgement: liability accrued if and when: - Answer- - probable that asset impaired/liability incurred by balance sheet date - loss can be easily estimated - only the portion of the liability that will be paid with current financial resources will be reported in the gov fund. the full amount will be reported in the GW statements and in the schedule of LT obligations - expenditure is recorded in the period the liability is paid, not when the incident took place governments- materials and supplies inventory - Answer- do not acquire inventories with the intention to resell them - use them to carry out day to day operations GASB standard provides a choice in accounting for inventory 2 methods: - Answer- 1. purchase method 2. consumption method purchase method - Answer- - expenditure when purchased - reverse for items not used during the period (still on hand) consumption method - Answer- - set up a current asset when purchased - expenditure items as consumed (by period physical count)