1. In the current year, a federal government agency engaged in the following transactions. Prepare j

1. In the current year, a federal government agency engaged in the following transactions. Prepare j

1. In the
current year, a federal government agency engaged in the following
transactions. Prepare journal entries to
record the transactions. If no entry is
required write “No Entry Required.”

a. The
agency signed a long-term $400,000 contract to provide management consulting
services to small businesses in a depressed area. The government estimates that the total costs
incurred in the contract will be $500,000.
During the year, the government incurred costs of $50,000 and received payment of $40,000.

b. Delivered
to a customer $14,000 of training manuals produced by the government. The amount was added to the customer’s
account.

c. Signed a
$100,000 contract to provide management consulting services for small
businesses in the Intermountain area and received payment immediately. During the year, the agency completed 75% of
the contract.

d. Collected
$200,000 of $230,000 income taxes due.

e. Received
a pledge of $250,000 from an Foundation
to support an educational program for children in economically depressed
areas.

f. During
the year the government received $100,000 from the Foundation. The pledge is not legally enforceable.

2. A federal
agency established to provide direct loans for older Americans enrolled in
school or college made a 3-year, 3% direct loan of $1,000 to be repaid in three
equal yearly installments of $353.53.
The prevailing Treasury rate on short- and intermediate-term securities
is 6%. Prepare journal entries for the
loan and the three payments. If no entry
is required, write “No Entry Required.”

Present value factors, if needed
Present value of an
annuity for 3 periods @ 6% = 2.67301
Present value of an
annuity for 3 periods @ 3% = 2.82861
Present value of
$1, @ 6%, 3 periods = .83962
Present value of
$1, @ 3%, 3 periods = .91513

3. A federal
agency was established to provide loan guarantees for students. At the beginning of year 1 the agency
guarantees $100,000 of student loans.
The payments that the agency estimates it will have to make to lenders
as a result of student defaults are as listed below. The agency uses a discount rate of 6
percent. Prepare the necessary journal
entry to record the loan guarantee expense in Year 1 and the payment of $200 to
the lenders on defaulted loans in Year 2.
If no entry is required, write “No Entry Required.”

Present value factors if needed, at 6% PV of $1 PV of an Annuity
1
period .94340 .94340
2
periods .89000 1.83339
3
periods .83962 2.67301
4
periods .79209 3.46511
5
periods .74726 4.21236

Estimates made at the end of year 1 Estimates made at the end of Year 2
End of Year Amount End of Year Amount
1 $200 2 $150
2 $100 3 $ 50
3 $ 50

4. The
federal government general fund reports the following transactions during
2006. Prepare journal entries to record
each of these transactions. If no entry
is required, write “No Entry Required.â€

a. The
general fund contracts with a construction firm to build an Iraqi war memorial
based on a design selected by the Iraqi War Veterans Commission. The estimated cost of the project is $3.5
million.
b. The
general fund makes a $750,000 progress payment on the Iraqi War Memorial
contract.
c. The
general fund purchases new window treatments for the living areas of the White
House. The cost is $650,000.
d. The
general fund reviews and accepts a design for the 2007 White House Christmas
ornament. The design cost is $500,000.
e. The
general fund contracts for the manufacture of 1.5 million 2007 Christmas
ornaments. The manufacturing cost for
each ornament is $2.00. The ornaments
are paid for and will be available for sale in the White House beginning in
August 2007.
f. The
general fund elects to record its inventory of assets held for sale at
historical cost.

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