Governmental Accounting Final

Assume that the following is found on the statement of activities of a local municipality: • Public safety expenses of $2,755,500 • Public safety charges for services of $20,500 • Public safety operating grants and contributions of $105,000 • Public safety capital grants and contributions of $75,000 • General government charges for services of $455,500 • Property tax general revenues of $2,905,000 • Unrestricted grants of $300,000 Net revenue / (net expense) for the public safety function would be

$(2,555,000)

Assume that the General Fund paid out in cash, $195,000 related to compensated absences during the year. If the beginning balance of compensated absences for the governmental activities was $65,000 and the ending balance was $55,000, then the expenses related to compensated absences in the governmental activities column would be

$185,000

The minimum requirements for general purpose external financial reporting does not include

A transmittal letter

When preparing external financial statements that are in accordance with generally accepted accounting principles, a government is required to prepare

Basic financial statements, management's discussion and analysis, and other required supplementary information

Generally accepted accounting principles require the use of an Investment Trust Fund

For governments that sponsor external investment pools

Which of the following funds would not be eligible for major fund reporting?

Internal Service Fund

The General Fund borrowed $100,000 from a Special Revenue Fund. Interest will be paid on the loan annually for five years and the principal repaid in full at the end of the fifth year. The governmental activities column should report

Nothing related to the loan arrangement

Depreciation expense for the current year was $366,750 in the Water Enterprise Fund. Depreciation expense will be reported at the government-wide level as

Part of the business-type activities expenses for the water segment

If an Enterprise Fund transfers employer contributions to the Pension Trust Fund, which of the following best describes the effect of the transaction on each fund?

The Enterprise Fund will report expenses and the Pension Trust Fund will report additions

One similarity between federal government accounting and state and local government accounting in governmental-type funds is that placing an order causes the recording of a budgetary entry, while receipt of the supplies ordered causes both a budgetary and a financial accounting entry

True

Equity in a fiduciary fund is referred to as a Net position b Fund balance c Retained earnings d None of the above

a Net position

To obtain a frame of reference for assessing financial trends of a particular city, you decide to compare them with financial trends of other municipalities. Which approach will provide the most appropriate reference group for this purpose?

a sample of cities of roughly similar population size and that perform similar functions in the same state

When a not-for-profit entity's funds are classified as restricted, who has imposed the restrictions?

donors

A hospital that carries no malpractice insurance has several outstanding malpractice claims, including one for $1.5 million. Hospital attorneys believe the claim can be settled in the range of $200,000 to $340,000, but negotiations have not reached the point where they can estimate where within that range they can reach agreement. How should the hospital handle this claim in its financial statements?

report an expense and a liability of $340,000, the upper end of the range.

A hospital had gross patient billings of $50 million, contractual adjustments of $20 million, and charity care of $5 million. How much is the hospital's net patient service revenue?

$25 million

The Turtle Island Singers receive three gifts during the year 2012: (a) $3,000, which may be used for any purpose at any time; (b) $5,000, which must be used for a special concert in a nursing home; and (c) $1,000, which may be used for any purpose, but only in the year 2013. When it receives the gifts, how should the entity classify them:

$3,000 as unrestricted revenue and $6,000 as temporarily restricted revenue

Matt Shaw buys 100 shares of common stock for $8,000 in January. The value of the stock fluctuates in a narrow range (averaging $8,700) throughout the year. In November, when it has a value of $9,500, he donates it to a not-for-profit entity. On December 31, the stock has a fair value of $8,200. At what amount should the entity value the stock on its December 31 statement of financial position?

$8,200

This statement of facts is presented for problems 4 and 5: A hospital's trial balance shows the following captions: (1) cash equivalents; (2) prepaid insurance on buildings;(3) inventory of medicines; (4) short-term investments; (5) accumulated depreciation on buildings; (6) current portion of long-term debt; and (7) accounts receivable. 5.Which of these seven accounts do not enter into the calculation of the quick ratio?

(2), (3), and (5)

The following information comes from a hospital's financial statements: Net patient accounts receivable - $3.5 million; Gross patient service revenues - $15 million; Contractual adjustments - $3 million; and Charity care - $1 million. What is the hospital's number of days' revenue in patient accounts receivable (rounded to nearest whole day)?

116

Which of the following worksheet adjustments would not be made for the balance sheet? Add capital assets Add accrued interest payable Add depreciation expenses Add bonds payable All of the above worksheet adjustments are necessary for the balance sheet

Add depreciation expenses

The following worksheet adjustments would be made for the operating statement except Adding depreciation expense Adding accumulated depreciation Converting interest expenditures to interest expenses Eliminating other financing sources or uses All of the above worksheet adjustments would be made for the operating statement

Adding accumulated depreciation

Which of the following actions will reduce the balance in the budgetary account "Allotments - realized resources"?

Agency, which uses commitment accounting, makes a commitment to acquire materials

Governmental activities include

All the governmental funds General capital assets GCA General long-term liabilities GLTL

Which of the following types of entries are not part of the conversion process for the governmental activities column?

Amortization of deferred issuance costs Recording of depreciation expense Inclusion of Internal Service Fund assets Retirement of bond principal

A Scholarship Private-Purpose Trust Fund of a local school board pays tuition of $10,000. What journal entry would be made to record this transaction?

Deductions — Tuition $10,000 Cash $10,000

In the proprietary fund financial statements, a government should include a separate column for

Each major Enterprise Fund, the nonmajor Enterprise Funds in the aggregate and the Internal Service Funds in the aggregate

Internal Service Funds, classified as a proprietary fund type, are reported in the government-wide statements as

Either governmental or business-type activities depending upon the activity that is the primary consumer

A city determines that it has three major governmental funds, including the General Fund, and two major enterprise funds. The city will

Evaluate each year which funds are major and which funds are considered to be nonmajor

For every entry made in the budgetary accounts, a corresponding entry must be made in the proprietary accounts.

False. Some budgetary entries do not have corresponding proprietary entries and vice versa. For example, placing an order for supplies creates a budgetary entry, but not a proprietary entry. The consumption of inventory creates a proprietary entry, but not a budgetary entry

Which of the following items is NOT included in reconciling the governmental funds operating statement information to the changes in net assets in the government-wide statement? Depreciation Amortization of bond premiums Expenditures for retirement of general long-term debt principal Increase in salaries payable

Increase in salaries payable

The required reconciliation of the governmental fund financial statement information to the governmental activities information in the corresponding government-wide financial statements

May be presented either at the bottom of the fund financial statements or in separate schedules

A government receives a bequest of $300,000 to establish an endowment fund whose income is to be used to support scholarships for local high school students. The school district is not part of the government. The government should report this activity in which type of fund?

Private-purpose Trust Fund

A not-for-profit entity conducts a special fund-raising campaign at the end of fiscal year 2012, intended to raise funds for general operations that take place during fiscal year 2013. It receives pledges totaling $200,000. Based on past experience, the entity expects to receive $150,000 in cash. How should the entity report these events?

Recognize the amount pledged (net of a $50,000 allowance for estimated uncollectibles) as temporarily restricted contribution revenue in 2012; and reclassify the net assets as unrestricted at the beginning of 2013

Ruth Richter gives a not-for-profit entity $25,000 in cash. She tells the entity that it may use the gift for particular research project but only after it receives at least $20,000 cash from other donors to help complete the project. If the entity fails to raise the additional $20,000, it must return Ruth's gift. What account should the entity credit when it receives Ruth's gift?

Refundable advance (deferred revenue)

Which financial statements are required for a private purpose trust fund?

Statement of Fiduciary Net position and statement of changes in fiduciary net position

Which of the following statements is false?

Vacation leave cannot be accrued at year-end unless the agency has sufficient appropriated funds to pay for it.

An Enterprise Fund made a debt service payment of $75,000 ($45,000 principal, $30,000 interest). The Enterprise Fund will report a $30,000 of expense. b $75,000 of expense. c $0 expenses. d a liability reduction of $75,000

a $30,000 of expense.

The local school board received a bequest of $1,000,000 to establish a scholarship fund for graduating students. The scholarship is accounted for in a Private-Purpose Trust Fund. The fund would report a Additions of $1,000,000 b Revenues of $1,000,000 c A transfer of $1,000,000 d Accounts payable of $1,000,000

a Additions of $1,000,000

The difference between a hospital's established billing rate and the amount paid by a third-party payer is referred to as:

a contractual adjustment

Which one of the following actions requires both budgetary accounting and proprietary accounting entries in an agency's accounts?

agency records year-end accrual for funded salaries

A not-for-profit hospital purchased an equity security for $150,000 on September, 2012. When it prepared its 2012 financial statements, the security had a fair value of $145,000. It sold the security for $160,000 in 2013. What was the net effect of the sale of the security on the hospital's net assets in the year 2013?

an increase of $15,000

Which of the following is the correct sequence of activities within the federal budgetary accounting cycle?

appropriation, apportionment, allotment, obligation.

A not-for-profit arts organization receives a $300,000 gift from a donor who specifies that the gift must be maintained in perpetuity and that the income from the gift is to be used only to take disabled persons to the theater. How should the entity report the $300,000 gift in the net asset section of its statement of financial position?

as permanently restricted

A not-for-profit hospital receives a $150,000 donation that must be used for a specific research project. The hospital anticipates that it will undertake the project next year. How should the hospital report the donation?

as temporarily restricted support.

A developer agreed to pay for water and wastewater infrastructure associated with one of his development projects. Once the work is completed and the new lines are connected, they will become part of the city's Enterprise Fund capital assets. The entry that should be recorded by the Enterprise Fund would be a A DEBIT to capital assets and a CREDIT to invested in capital assets, net of related debt. b A DEBIT to capital assets and a CREDIT to capital contribution. c A DEBIT to capital assets and a CREDIT to transfer in. d A DEBIT to capital assets and a CREDIT to nonoperating revenues.

b A DEBIT to capital assets and a CREDIT to capital contribution.

Which of the following would likely be accounted for in an Internal Service Fund? a A government's water and sewer department if it provides water and sewer services to government departments as well as to residents and businesses in the community. b A government's central printing shop that provides a very minimal amount of services to a few outside customers. c The Payroll and Benefits Department of the government d All of the above are likely to be accounted for in an Internal Service Fund

b A government's central printing shop that provides a very minimal amount of services to a few outside customers.

Interest revenue earned by an Internal Service Fund will be reported on the statement of revenues, expenses, and changes in net assets as a Operating revenue. b Non-operating revenue. c An other financing source d A capital contribution

b Non-operating revenue.

A city Enterprise Fund received an operating grant during the fiscal year. The Enterprise Fund will report this grant on the statement of revenues, expenses, and changes in net asset as a Operating revenues. b Non-operating revenues. c Other financing sources. d Other financing uses.

b Non-operating revenues.

Which of the following is reported as an expense by not-for-profit hospitals?

bad debts.

When a federal agency receives supplies that have been ordered previously, what kind of entry (or entries) is (or are) required?

both a budgetary and a proprietary entry.

Which of the following statements is generally true about the basis of accounting used by governmental and not-for-profit hospitals?

both use the full accrual basis of accounting

The General Fund's share of its contribution to a Pension Trust Fund on behalf of the its employees would be reported by the General Fund as a A transfer out b Another financing source c An expenditure d None of the above

c An expenditure

Caraway County has a Self-Insurance Internal Service Fund. If the fund purchases $100,000 of investments during the month, the a Fund's total assets will increase by $100,000 b Fund's total assets will decrease by $100,000 c Fund's total assets will remain the same d Fund's expenditures will increase by $100,000

c Fund's total assets will remain the same

An Enterprise Fund incurs $35,000 in interest during the current year related to its outstanding bonds. The $35,000 will be reported as a Other financing uses. b Operating expenses. c Non-operating expenses. d Capitalized interest because all interest must be capitalized in an Enterprise fund.

c Non-operating expenses.

The General Fund transfers $500,000 to a Printing Internal Service Fund (ISF), which the ISF uses to acquire machinery. How should the ISF account for the cost of acquiring and using the equipment? a Record the acquisition cost as an expenditure and ignore any depreciation b Record the acquisition cost as an expenditure of the General Fund c Record the acquisition cost as an asset and depreciate it over its estimated useful life d Record the acquisition cost as an asset, credit investment in capital assets, do not depreciate the asset, and write off the entire asset when it is disposed of

c Record the acquisition cost as an asset and depreciate it over its estimated useful life

In the statement of operations of a not-for-profit hospital, which of the following is not likely to be a factor in determining Excess of revenues over expenses?

change in unrealized gains and losses on investments.

The principal of a Private-Purpose Trust Fund a Must be nonspendable in nature b Must be spendable in nature c Must never fall below a pre-determined threshold that is determined by generally accepted accounting principles d May be spendable or nonspendable in nature

d May be spendable or nonspendable in nature

Under which of the following circumstances would a not-for-profit organization's net assets be classified as temporarily restricted?

donors impose stipulations on the use of resources that expire with the passage of time or that can be fulfilled by actions of the organization

Assume that an Enterprise Fund contributed $85,000 to the General Fund for operations. The money is not intended to be a loan. Which of the following statements is true? a The Enterprise Fund will report capital contributions of $85,000. b The Enterprise Fund will report expenses of $85,000. c The Enterprise Fund will report other financing uses of $85,000 d The Enterprise Fund will report advances of $85,000. e The Enterprise Fund will report transfers out of $85,000.

e The Enterprise Fund will report transfers out of $85,000.

What is the reporting requirement for the fund balance section of the governmental funds balance sheet?

governmental fund balances should be segregated in five components: nonspendable, restricted, committed, assigned and unassigned

Which fund categories should be included in the fund-level financial statements?

governmental, proprietary, and fiduciary

Which of the following items should be excluded from the assets or liabilities when computing the quick ratio?

inventories

The Government Finance Officers Association recommends general-purpose government's have a financial policy to maintain the General Fund's unrestricted fund balance at:

no less than two months of regular General Fund revenues or expenditures.

What is the federal counterpart of the state and local government "encumbrance"?

obligation

This statement of facts is presented for problems 4 and 5: A hospital's trial balance shows the following captions: (1) cash equivalents; (2) prepaid insurance on buildings;(3) inventory of medicines; (4) short-term investments; (5) accumulated depreciation on buildings; (6) current portion of long-term debt; and (7) accounts receivable. 4.Which of these seven accounts do not enter into the calculation of the current ratio ?

only (5)

In which classification of net assets are expenses reported?

only in unrestricted net assets

A group of retired registered nurses decide to volunteer their services to a not-for-profit hospital. They perform a variety of tasks, including: (a) filling in for regular nurses when they are out sick; (b) helping out in food preparation; and (c) selling in the hospital gift shop. For which of the three tasks must donated revenues and expenses be recognized?

only task (a).

Which of the following characteristics of a brochure prepared by an NFPO is not relevant to whether the cost of the brochure can be allocated between program and fund-raising functions?

page count

Several high school seniors donate some time to a not-for-profit hospital. They perform services the hospital would not otherwise provide, such as reading to patients and wheeling them around hospital grounds. The hospital estimates the value of these services at $6,500 if they had paid the students the minimum wage and at $8,800 if they had paid at fair value. How should the hospital report these donated services on the face of its operating statement?

report neither donated revenue nor expenses.

You are assessing the financial condition of a county. Its financial statements have captions for "transfers in" and "transfers out," both containing significant amounts. What consideration should you give to these transfers in assessing financial condition?

see if the transfers are recurring, rather than one-shots. If they are recurring, no further inquiry is needed

Which of the following account captions are you most likely to see on a governmental funds balance sheet?

supplies inventory

What is the name of the entity that recommends accounting standards for the federal government?

the Federal Accounting Standards Advisory Board

What can a financial analyst learn from computing a hospital's debt service coverage?

the number of times the debt service is covered by the hospital's earnings

Which of the following factors is the most important consideration about the organizations that comprise a reference group for financial analysis purposes?

they should perform the same functions and be about the same size as the entity studied

Assume that a governmental entity has, in addition to the General Fund, four other governmental funds. Upon applying the quantitative criteria to determine the minimum requirements for major fund reporting it is determined that two of those four funds meet the criteria. At a minimum, the governmental entity will report how many major funds?

three

What is the major purpose of the statement of net position from a financial analysis perspective?

to provides information about the entity's liquidity and financial flexibility

When are expenses and liabilities recognized for the federal social security program?

when benefits are due and payable at the end of a reporting period

A not-for-profit organization receives $3,400,000 of pledges in its annual telethon. When should the organization recognize contribution revenue?

when the pledges are received, less an appropriate allowance for uncollectible pledges