Question

The City of Willows is preparing its government-wide financial statements from its fund financial statements. The City records Deferred Revenue with a book value of $3,500 and Compensated Absences of $1,000 (all numbers in $1,000s) at the beginning of the year. During the year, these accounts increased by $500 and $150, respectively. What reconciliation entries must the City include in its government-wide financial statements relating to Deferred Revenues and Compensated Absences

Answer 1

To reconcile the Deferred Revenues and Compensated Absences accounts in the government-wide financial statements, the City of Willows needs to add the changes to the beginning book values. Deferred Revenues should be adjusted to $4,000 and Compensated Absences to $1,150.

Step-by-step explanation:

To reconcile the Deferred Revenues and Compensated Absences accounts in the government-wide financial statements, the City of Willows will need to consider any changes in these accounts during the year. For Deferred Revenues, the City's book value increased by $500, so it should add $500 to the beginning book value to reflect the change. This will result in a total Deferred Revenue of $4,000 ($3,500 + $500). Similarly, for Compensated Absences, the City's book value increased by $150, so it should add $150 to the beginning book value to reflect the change. This will result in a total Compensated Absences of $1,150 ($1,000 + $150).