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Bay City uses the purchases method to account for supplies. At the beginning of the year the city had no supplies on hand. During the year the city purchased $600,000 of supplies for use by activities accounted for in the general fund. The city used $400,000 of those supplies during the year. Assuming that the city maintains its books and records in a manner that facilitates the preparation of its fund financial statements, at fiscal year-end the appropriate account balances related to supplies expenditures and supplies inventory would be 120. a) Expenditures $600,000; Supplies inventory $200,000. b) Expenditures $600,000; Supplies inventory $0 c) Expenditures $400,000; Supplies inventory $200,000 d) Expenditures $400,000; Supplies inventory $0 S0. Shoshone County uses the consumption method to account for supplies. At the beginning of the year the city had no supplies on hand. During the year the city purchased $450.000 of supplies for use by activities accounted for in the general fund. The city used $300,000 of those supplies during 121. year. At fiscal year-end, the appropriate account balances on the general fund financial statements would be a) Expenditures $450,000: Supplies inventory $1 50,000 b) Expenditures $450,000; Supplies inventory $0.1 c) Expenditures $300,000; Supplies inventory $150,000 d) Expenditures $300,000; Supplies inventory $0 122. Sugar City uses the purchases method to record all prepayments. The city has a 6/30 fiscal year- end. On 12/31/14, the city purchased a three-year insurance policy covering all city owned vehicles acquired by the general fund to be used in general government activities. Cost of the policy was $360,000. After the 6/30/15 closing entries, the appropriate balance sheet accounts and balances in the city's general fund associated with this transaction are cit ch ) Prepaid insurance $300,000; Expenditures $60,000. b) Prepaid insurance $300,000; Expenditures $360,000 d) Prepaid insurance $0; Expenditures $60,000. ran Several years ago, Grant County was sued by a former county employee for wrongful discharge. Although it was to be contested by the county, at the time of the lawsuit the attorneys believed that the county was likely to lose the suit and the estimated amount of the ultimate judgment would be $100,000. This year, the case was finally settled with a judgment against the county of $150,000, which was paid. Assuming that the county maintains its books and records in a manner to facilitate the preparation of its fund financial statements, the entry in the current year should be a) Debit Expenditures $150,000: Credit Cash S150,000. b) Debit Expenses $150,000; Credit Cash $150,000. c) Debit Expenditures $50,000 and Claims payable $100,000; Credit Cash $150,000. d) Debit Expenses $50,000 and Claims payable $100,000; Credit Cash $150,000. 119

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