P. 5-1

Transactions may have significantly different impacts on agovernment's budget, governmental funds statements, andgovernment?wide statements.

A school district prepares its budget on a cash basis. It iscontemplating the changes or actions that follow. For each,indicate the impact that the change would have (1) on year?endingJune 30 2020, general fund expenditures or transfers and (2) onyear?ending June 30, 2020, government?wide expenses (e.g.,“increase expenditures by $X” or “no impact”). Provide a briefexplanation of your response, indicating that you are aware of therelevant financial reporting issue.

1. Owing to a special discount offered by a supplier, the districtwill purchase $100,000 of supplies in June 2020 that they otherwisewould not have purchased until July 2020. They will not, however,have to pay for the supplies until July. The district accounts forsupplies on a consumption basis.
2. In fiscal 2020, the district increases the number of vacationdays to which employees are entitled to take, thereby increasingthe cost of vacation leave that employees earned in 2020 but willtake in subsequent fiscal years by $250,000. The vacation daysvest; they can be taken as termination benefits.
3. The district increased the number of sick days to whichemployees are entitled to take, thereby increasing the cost of sickdays that employees earned in 2020 but will take in future years by$150,000. The sick leave can be taken only as employees are sick;it cannot be paid for as a termination benefit.
4. In 2020, the district established a sabbatical leave programfor certain categories of teachers. Teachers will be granted oneyear of leave after each seven years of service. Teachers grantedthe leave will have to spend it engaging in various specifiedactivities, such as research, aimed at improving their teaching.Teachers will first be eligible to take the leave in 2027. Thedistrict estimates that one?seventh of the cost will be$1,500,000.
5. The district delayed from June to July the approval of a grantof $50,000 to a local health clinic that provides examinations tolow?income students. The funds are to be paid out of resourcesbudgeted for the fiscal year ending June 30, 2020, and are intendedfor use by the clinic in that same period.
6. The district delayed from June to July purchasing, and payingfor, 10 school buses at a cost of $750,000. The buses are expectedto last for 10 years and have no salvage value. The districtcharges depreciation on a straight?line basis and takes a fullyear's depreciation in the year of acquisition.
7. The district is required to transfer 50 percent of any annualsurplus from the general fund to a “rainy day” fund (a specialrevenue fund). Usually the transfer based on the surplus of thefiscal previous year is made in December. The district proposes todelay the transfer that would ordinarily be made in December 2020until July 2021, thereby decreasing its cash outlay for fiscal year2020 by $3 million

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