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Homework 2
1. Gold County received goods that had been approved for purchase but for which payment had not yet been made. Should the accounts be increased?
Encumbrances Expenditures
No No
No Yes
Yes No
Yes Yes
2 Fixed assets of a governmental unit, other than those accounted for in proprietary funds or fiduciary funds, should be accounted for in the:
Governmental activities column of the government-wide statements of net position.
General fund.
Capital projects fund.
Permanent fund.
3. Tott City’s serial bonds are serviced through a debt service fund with cash provided by the general fund. In a debt service fund’s statements, how are cash receipts reported?
Transfers
Revenues
Expenditures
4. Tott City’s serial bonds are serviced through a debt service fund with cash provided by the general fund. In a debt service fund’s statements, how are cash payments reported?
Expenditures
Transfers
Revenues
5. On September 30, Year 1, a local township entered into an interest rate swap to hedge the risk associated with fair value changes to its recently issued bonds. The fair value of the interest rate swap was $0 and $18,000 at September 30, Year 1, and December 31, Year 1, respectively. Assuming that the fair value hedge is 100 percent effective and will be fully executed on March 31, Year 2. How would the change in fair value of the hedge be reported by the township at the December 31, Year 1 end?
$18,000 differed inflow or resources.
$18,000 income in reported earnings
$18.000 investing cash inflow.
A footnote until transaction settlement.
6. Olde Towne has relatively few records pertaining to the value of its roads. bridges, and other general governmental infrastructure and has elected to use the modified approach for reporting infrastructure. In order to comply with the requirements of the modified approach to reporting infrastructure, Olde Towne must prepare schedules which:
Describe the assessed condition of the infrastructure (updated once every three years) and the estimated annual amount to maintain and preserve the condition level established and disclosed. Disclose me historical cost of all infrastructure assets, inflated using the historical cost constant dollar index net of associated depreciation.
Disclose the government’s election, by policy to provide no accounting for infrastructure assets
Disclose the assumptions made as part of the annual appraisal of infrastructure value and useful life along with the associated allocation of costs to prior periods.
7. The only fund that should show a positive amount in its unassigned fund balance classification would the:
General fund.
Special revenue fund.
Capital projects fund.
Permanent fund.
8. “The following transactions were among those reported by Corfe City’s electric utility enterprise fund for Year I
Capital contributed by subdividers – $900,000
Cash received from customer households – 2,700,000
Proceeds from sale of revenue bonds – 4,500,000
.In the electric utility enterprise fund’s statement of cash flows for the year ended December 31, Year 1, what amount should be reported as cash flows from capital and related financing activities? “
$5,400,000
$7,200,000
$8,100,000
$4,500,000
9. Which of the following items is likely classified as an expenditure the general fund?
Lease principal payments for a lease other than a short-term lease and contract that transfers ownership
Transfers out
Bond discount
Pension benefits payments
10. Under the modified accrual basis of accounting for a governmental unit, earned revenues that are measurable should be recognized in the accounting period in which they are:
Available.
Budgeted.
Collected.
Appropriated.
11. A city’s water division generated $1.5 million in revenue. It reported expenses of $1 million, which included $200.000 paid to an internal service fund. The water division also transferred S50,000 to the general fund. What amount is the water division’s change in net position on the statement of revenues, expenses, and changes in fund net position?
$450,000
$500,000
$250,000
$300,000
12. Each Of the following statements describes how modified accrual accounting and commercial GAAP full accrual accounting are similar except:
Both have a profit motive which is reflected in the income statement and statement of retained earnings.
Both are concerned with safeguarding assets and providing information for internal and external use.
Both use historical cost and comply with most GAAP.
Both can use double-entry bookkeeping (debit/credit)
13. Hunt Community Development Agency (HCDA), a financially independent authority, provides loans to commercial businesses operating in Hunt County. This year, HCDA made loans totaling $500,000. How should HCDA classify the disbursements of loans on the cash flow statement?
Operating activities.
Non-capital financing activities.
Capital and related financing activities.
Investing activities.
14. “Maple Township issued the following bonds during the year ended June 30, Year 1:
Bonds issued for the garbage collection enterprise fund that will service the debt – $500,000
Revenue bonds to be repaid from admission fees collected by the Township Zoo enterprise fund – $350,000
What amount of these bonds should be accounted for in Maple’s non-current liabilities in the governmental activities column of the government-wide statement of net position? “
$0
$350,000
$500,000
$850,000
15. Foster Township levies property taxes to subsidize the ongoing operations of its Water & Sewer Fund. What category would Foster use to classify cash receipts from property taxes on its Water & Sewer enterprise fund statement of cash flows?
Noncapital financing activities.
Capital and related financing activities.
Investing activities
Operating activities.
16. During the current year, Wythe County levied $2,000,000 property taxes. 1% of which is expected to be uncollectible. During the year, the county collected $1,800,000 and wrote off $15,000 as uncollectible. What amount should Wythe County report as property tax revenue in its government-wide statement of activities for the current year?
$1,980,000
$1,985,000
$2,000,000
$1,800,000
17. Assuming no outstanding encumbrances at year end, closing entries for which of the following situations would increase the unassigned fund balance in the general fund at year end?
Appropriations exceed actual expenditure.
Actual revenues were less than estimated revenues.
Estimated revenues exceed actual appropriations.
Actual expenditures exceed appropriations.
18. On January 2, the city of Walton issued $500,000, 10-year, 7 percent general obligation bonds. Interest is payable annually, beginning January 2 of the following year. What amount of bond interest is Walton required to report in the statement of revenues, expenditures, and changes fund balance of its governmental funds at the close of this fiscal year, September 30?
$0
$17,500
$26,250
$35,000
19. Which of the following statements describes a characteristic of the capital projects fund?
The life of capital projects fund is short and is limited to a construction period of one to three years.
Capital project funds cannot be used for leased projects.
Capital project funds cannot be used for special assessment projects.
Capital project fund expenditures are usually entirely classified as outlays and are subject to depreciation recognition.
20. The City of Sharpton budgeted $230,000 for capital equipment purchases its police department for the current budget year. The City issued a purchase order on January 1 for the acquisition of five police cars. Each vehicle is priced at $40,000. The City received four of the vehicles on June 30 for $180,000. On its June 30 interim General Fund financial statements, the City would report:
Capital outlay expenditures of $180,000.
Budgetary control of $20,000.
Available appropriations of $30,000.
Property and equipment additions of S180,000
21. Which of the following accounts of a governmental unit is credited when taxpayers are billed for property taxes?
Revenues.
Appropriations.
Taxes receivable current.
Estimated revenues.
22. At the December, Year 1, Clear Lake Planning Board meeting, a citizen proposal for a new bandstand was approved and recommended to the full City Council. The City Council, which is the governing authority of the city, has indicated that it will finalize details and formally approve the proposal when it meets in January, Year 2. On December 31, Year 1, what would be the classification of the project cost in the general fund of Clear Lake?
Assigned
Unassigned
Restricted
Committed
23. “On March 2, Year 1, Finch City issued 10-year general obligation bonds at face amount, with interest payable March 1 and September 1. The proceeds were to be used to finance the construction of a civic center over the period April 1, Year 1, to March 31, Year 2. During the fiscal year ended June 30, Year 1, no resources had been provided to the debt service fund for the payment of principal and interest
On June 30, Year 1, Finch’s financial statements should report the construction in progress for the civic center in the Captal projects fund.
No
Yes
24. “On March 2, Year 1, Finch City issued 10-year general obligation bonds at face amount, with interest payable March 1 and September 1. The proceeds were to be used to finance the construction of a civic center over the period April 1, Year 1, to March 31, Year 2. During the fiscal year ended June 30, Year 1, no resources had been provided to the debt service fund for the payment of principal and interest
On June 30, Year 1, Finch’s financial statements should report the construction in progress for the civic center in the Government-wide financial statements.
Yes
No
25. Receipts from a special tax levy to retire and pay interest on general obligation bonds should be recorded in which fund?
Debt service.
Special revenue.
General.
Capital projects.
26. Based on an analysis of the below funds and their related revenues, which of the following statements is correct regarding the classification as a major fund?
- General fund (revenues $125 million)
- Capital projects fund (revenues $50 million)
- Permanent fund (revenues $105 million)
- Total government funds (revenues $1,050 mllion)
- Airport enterprise fund (revenues $ 175 million)
- Utility enterprise fund (revenues $180 million)
- Total enterprise funds (revenues $1,300 million)
The capital projects fund should not be classified as a major fund
The permanent fund should be classified as a major fund.
The general fund should not be classified as a major fund.
The airport enterprise fund should not be classified as a major fund.
27. Riche Township recorded more estimated revenues than appropriations for the coming fiscal year. In integrating its adopted budget with its financial accounting records, the town would:
Credit budgetary control.
Debit encumbrance control.
Credit encumbrance control
Debit budgetary control.
28. A government’s assets include inventory of $2 million, roads constructed for $25 million with accumulated depreciation of $10 million, and equipment acquired for $5 million with accumulated depreciation of $1 million. Its liabilities include an outstanding balance of $5 million for bonds payable issued to construct the roads and a $1 million short-term loan for inventory purchases. What amount should be reported as the net investment in capital assets in the government-wide statement of net position?
$14 million.
$10 million.
$26 million.
$25 million.
29. During Year 1, Oldtowne issued $3,000,000 of purchase orders for various contracts and purchases. These were properly charged to encumbrances at the time. Purchases related to appropriations in one year often are not received until the next year. Oldtowne received $1,250,000 of the goods and services it originally ordered. Invoices of $750,000 were paid during Year 1. If Oldtowne is normally given credit terms of 60 days and it expects to receive the rest of the goods and services it ordered early in Year 2, what amount of cash should Oldtowne expect to have to pay in Year 2 related to the Year 1 orders?
$2,250,000
$1,250,000
$500,000
$3,000,000
30. Which of the following fund types used by a government most likely would have a fund balance non-spendable inventory of supplies?
General.
Internal service.
Private purpose.
Capital projects.
31. General fund resources that are limited as to use by constraints imposed by the law through constitutional or enabling legislation would be classified within fund balance as:
Restricted.
Committed.
Assigned.
Nonspendable.
32. When a snowplow purchased by a governmental unit is received, it should be recorded in the general fund as a(an):
Expenditure.
Capital asset.
Appropriation.
Encumbrance
33. Assets (such as property taxes receivable) associated with unavailable revenues (such as property taxes collected more than 60 days after year-end) should be recorded by crediting:
A deferred inflow of resources.
An increase to nonspendable fund balance.
An allowance.
A deferred outflow of resources.
34. “A county that operates a capital projects fund for infrastructure needs had the following information available on transactions for the current year.
Proceeds from debt is suance $1,000.000
Transfer from general fund $500,000
Special assessments $400,000
Fees for extra services – $100,000
How much would the capital projects fund report as other financing sources for the current year?
$1,500,000
$1,000,000
$900,000
$500,000
35. The City of Durst leased a convention center from Prime Time Entertainment Inc. for a period of three years to provide a venue for a fee-supported convention center fund. Ownership of the convention center remain with Prime Time Entertainment at the end of the lease. The accounts the city would debit to initially record the lease is:
Right-of-use asset
Capital outlay expenditure
Other financing uses
36. The City of Durst leased a convention center from Prime Time Entertainment Inc. for a period of three years to provide a venue for a fee-supported convention center fund. Ownership of the convention center remain with Prime Time Entertainment at the end of the lease. The accounts the city would credit to initially record the lease is:
Lease Liability
Deferred inflows of resources
Other financing sources
37. Stone Corp. donated investments to Pine City and stipulated that the income from the investments be used to acquire art for the city’s museum. Which of the following funds should be used to account for the investments?
Permanent fund.
Endowment fund.
Special revenue fund.
Private purpose trust fund.
38 How should a local government’s internal service fund report depreciation expense its fund financial statements?
Operating expense.
Nonoperating expense.
Separate from revenues and expense.
Not reported.
39. Grove Township issued $50,000 of bond anticipation notes at face amount in Year 1 and placed the proceeds into its capital projects fund. All legal steps were taken to refinance the notes, but Grove was unable to consummate refinancing. In the capital projects fund, what account should be credited to record the $50,000 proceeds?
Bond anticipation notes payable.
Other financing sources control.
Revenues control.
Deferred inflows of resources
40. When a lease of a governmental unit represents the acquisition of a general fixed asset through a contract that transfers ownership, the acquisition should be reflected in fund financial statements as:
Both an expenditure and an other financing source.
Neither an expenditure nor an other financing source.
An expenditure but not as another financing source.
An other financing source but not as an expenditure.
41. The encumbrance account of a governmental unit is debited when:
A purchase order is approved.
Goods are received.
A voucher payable is recorded.
The budget is recorded.
42. Which of the following statements defines a characteristic of the special revenue fund?
The special revenue fund is set up to account for revenues from specific taxes or other earmarked sources that (by law) are restricted or committed to finance particular activities of government.
The special revenue fund is used to report resources that are legally restricted to the extent that income, and not principal, may be used for purposes supporting the reporting government’s programs
The special revenue fund is set up to account for resources restricted, committed, or assigned for the acquision or construction of major capital assets by a governmental unit, except those projects financed by an enterprise fund or by a special assessment.
The special revenue fund is set up to account for the accumulation of resources and the payment of interest and principal on all “general obligation debt”
43. When a purchase order is released, a commitment is made by a governmental unit to buy a computer to be manufactured to specifications for use in tax administration. This commitment should be recorded in the general fund as a (an):
Encumbrance.
Expenditure.
Fixed asset.
Appropriation.
44. Which of the following does not accurately reflect major fund reporting criteria (rules) under GASB 34?
The major fund reporting criteria include internal service funds in the evaluation of major and nonmajor funds.
Under the 5 percent test, this percentage represents 5 percent or more of the revenues, expenditures, assets, or liabilities from all governmental funds and all enterprise funds
Under the 10 percent test, the individual GRSPP funds and the individual enterprise funds are each separately compared to the total of all governmental and enterprise funds.
Major funds are expected to meet the 10 percent criteria within its specific category and the 5 percent criteria for both the governmental and enterprise funds categories.
45. The debt service fund of a governmental unit is used to account for the accumulation of resources for, and the payment of, principal and interest in connection with a Fiduciary Fund.
No
Yes
46. The debt service fund of a governmental unit is used to account for the accumulation of resources for, and the payment of, principal and interest in connection with a Proprietary Fund.
No
Yes
47. “The following information pertains to property taxes levied by Oak City for the calendar year Year 1:
Collections during Year 1 $500,000
Expected collections during the first 60 days of Year 2 100,000
Expected collections during the balance of Year 2 60,000
Expected collections during January Year 3 30,000
Estimated to be uncollectible 10,000
Total levy $700,000
What amount should Oak report for Year 1 net property tax revenues in its fund financial statements?
$600,000
$500,000
$700,000
$690,000
48. “The city of Faberville is evaluating which of its funds it will present as a major fund in its fund financial statements at December 31 Year 1. The city presents the following partial listing of asset data at December 31, Year 1:
Total governmental fund type assets $3,000,000
Total enterprise fund assets 2,000,000
General fund assets 280,000
Community development special revenue fund 290,000
Sales tax special revenue fund 350,000
General revenue bonds debt service fund 120,000
Faberville river bridge capital project fund 1,500,000
Faberville water and sewer utility fund 1,800,000
Faberville landfill 200,000
Based purely on assets, how many funds should be displayed as major funds?
Four
Five
Six
Three
49. The portion of special assessment debt maturing in 5 years, to be repaid from general resources of the government, should be reported in the:
Government-wide statement of net position.
Custodial fund.
Capital projects fund.
General fund.
50. How should a city’s general fund report the acquisition of a new police car in its governmental fund statement of revenues, expenditures, and changes in fund balances?
Expenditure.
Expense.
Property, plant and equipment
Noncurrent asset.
51. Harbor City’s appropriations control account at December 31, Year 1, had a balance of $7,000.000. When the budgetary accounts were closed at year-end, this appropriations control balance should have:
Been debited
Been credited
Remained open
Appeared as a contra account
52. Cable Township entered into a lease for equipment to be used by its fire department. The lease is for a period of three years and the property reverts back to the lessor at the end of the lease. The city would classify this lease as a (an):
Agreement other than a short-term lease and contract that transfers ownership
Finance lease
Short-term lease
Contract that transfers ownership
53. Which of the following statements is correct concerning a governmental entity’s statement of cash flows?
Cash flows from capital financing activities are reported separately from cash flows from non-capital financing activities.
The statement format is the same as that of a business enterprise’s statement of cash flows.
Cash flows from operating activities may use the indirect method.
The statement format includes columns for the general, governmental, and proprietary types.
54. Park City uses encumbrance accounting and formally integrates its budget into the general funds accounting records. For the year ending July 31, Year 1, the following budget was adopted:
Estimated revenues $30,000,000
Appropriations 27,000,000
Estimated transfer to debt service fund 900,000
Park incurred salaries and wages of $800,000 for the month of April Year 1. What account should Park debit to record this $800,000?
Expenditures control.
Operating funds control
Encumbrances control.
Salaries and wages expense control
55. John City entered into a lease agreement representing a contract that transfers ownership for equipment during the year. How should the asset obtained through the lease be reported in John City’s government-wide statement of net position?
General capital asset
Other financing use
Expenditure
Not reported
56. Large City does not use the modified approach to account for roads. At the beginning of the current year, the city spent $800,000 on new roads. The roads have a 20-year useful life. What amount should Large City report as an expense related to the new roads in the statement of activities for the current year?
$40,000
$800,000
$0
$20,000
57. Zarr Town levied property taxes of $500,000, of which 1 percent is expected to be uncollectible. During the year, Zarr Town collected $450,000. What amount of property tax revenue should Zarr Town report in its government-wide statement of activities for the current year?
$495,000
$500,000
$0
$450,000
58. The budget for the City of Goodville for the year ending December 31 was adopted and recorded on January 2 of the same year. After recording the budget, the accounting records showed a debit balance of $50,000 in the Budgetary Control account. What does this indicate?
Appropriations are $50,000 greater than estimated revenues.
Estimated revenues are $50,000 greater than appropriations.
Appropriations are $50,000 greater than revenues.
Revenues are $50,000 greater than appropriations.
59. “Durban Township’s Water and Sewer Fund had $40,000 in operating income and a total change in net assets of 150,000. The Water and Sewer Fund also had the transactions either derived from a comparison of current and prior year Statements of Net Assets or displayed on the current year Statement of Activities:
Increase in current assets other than cash including amounts due from other funds for water services – $30,000
Increase in current liabilities including the current portion of bonded indebtedness of $25,000 – 50,000
Depreciation expense -70,000
Gain on disposal of fixed assets -2,000
60. Cash flows from operating activities would reconcile to what amount?
$105,000
$107,000
$130,000
$242,000
61. Which event(s) should be included in a statement of cash flows for a governmental entity?
- Cash inflow from issuing bonds to finance city hall construction.
- Cash outflow from a city utility representing payments in lieu of property taxes.”
Il only.
Both I and II.
Neither I nor II.
I only.
62. Walden County has spent the following amount on construction projects during Year 1:
Utility building addition – $250,000
Administrative office remodeling -140,000
Storage garage for police vehicles – 55,000
63. The county utility records its accounts using full accrual accounting. The utility building and storage garage are uncompleted at the end of Year 1. The office remodeling was started and finished in Year 1.
The capital projects fund for Walden County would most likely display capital outlay expenditures for the year ended December 31, Year 1. equal to?
$195,000
$140,000
$445,000
$250,000
64. “Dayne County’s general fund had the following disbursements during the year.
Payment of principal on long-term debt $100,000
Payments to vendors 500,000
Purchase of a computer 300,000
What amount should Dayne County report as expenditures in its governmental funds statement of revenues, expenditures, and changes in fund balances?
$900,000
$300,000
$500,000
$800,000
65. Dugger County appropriated $45,000 in its General Fund for miscellaneous supplies for its fiscal year ended September 30, Year 2. The County found that it had paid $15,000 for miscellaneous supplies in November Year 1 and issued a $30,000 purchase order to a sole source vendor for miscellaneous supplies in December Year 1. By August Year 2, the County had received $20,000 related to the order but did not pay the vendor until October pending tax receipts. Appropriations do not lapse. What entry would Dugger County make at year-end to close books on September 30, Year 2?
Debit Appropriations Control for $45,000.
Debit Appropriations Control for $35,000.
Debit Appropriations Control for $10,000.
Credit Appropriations Control for $35,000.
66. Financial statements for which fund type generally report net position in their individual fund financial statements?
Enterprise.
Special revenue.
Permanent.
Capital projects.
67. Interfund transfers received by a governmental-type fund should be reported in the Statement of Revenues, and changes in Fund balance as a (an):
Other financing source.
Reimbursement
Addition to contributed capital.
Addition to net assets.
68. A city received a $9,000,000 federal grant to finance the construction of a homeless shelter In Which fund should the proceeds be recorded?
Capital project.
Special revenue.
Permanent.
General.
69. The city of Gering budgeted $100,000 for the purchase of two new, identical police cruisers. A purchase order was issued on that date. By the end of the year, one of the cruisers had been received and paid for in full, and the other still was on backorder.
Which of the following journal entries would you not find as of year-end related to this transaction?
A debit to encumbrances and a credit to budgetary control in the amount of $100,000.
A debit to encumbrances and a credit to budgetary control in the amount of $100,000.
A debit to expenditures and a credit to cash in the amount of $50,000.
A debit to budgetary control and a credit to encumbrances in the amount of $50,000.
70 A capital projects fund for a new city courthouse recorded a receivable of $300,000 for a state grant and a $450,000 transfer from the general fund. What amount should be reported as revenue by the capital projects fund?
$300,000
$450,000
$750,000
$0
71. “The following information pertains to Park Township’s general fund at December 31, Year 1:
Total assets, including $200,000 of cash $1,000,000
Total liabilities 600,000
Budgetary control (open purchase orders) 100,000
Appropriations do not lapse at year-end. At December 31, Year 1, what amount should Park report as unassigned fund balance in its general fund balance sheet?
$300,000
$400,000
$500,000
$200,000
2 Fixed assets of a governmental unit, other than those accounted for in proprietary funds or fiduciary funds, should be accounted for in the:
Governmental activities column of the government-wide statements of net position.
General fund.
Capital projects fund.
Permanent fund.
Answer: Governmental activities column of the government-wide statements of net position.