You have been asked to write a brief accounting issues memo to the Erie County government files…

Facts:Frustrated by high property tax rates, residents in the Village of Williamsvillevoted to dissolve their village government, instead of agreeing to receive similar services (formerly provided by the Village government) from their county government, Erie County. No consideration must be paid by (or to) the county to effect this transfer. The effects of this transfer/dissolution will be that all village assets and liabilities (cash balances, buildings, infrastructure, and accounts payable) will become property and responsibility of the county, six employees will transfer to the Erie County district offices, and three employees will be involuntarily terminated and given 3 months of severance pay. The three terminated employees were responsible for Williamsville’s animal control division, which will be discontinued.
Required: You have been asked to write a brief accounting issues memo to the Erie County government files describing the accounting implications of the Williamsville dissolution. In your memo, address the appropriate accounting for the transaction: merger, acquisition, or transfer of operations? Also, address how Erie County should recognize and measure the additional assets and liabilities, and describe—broadly—the accounting implications of the discontinuation of the animal control operations and the principle for recognition of the related employee terminations. In doing so, assume that the Village of Williamsville has prepared financial statements as of the merger date. Feel free to identify other issues that should be considered, as well.

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