Chapter 18 - Governmental Entities: Special Funds and Governmentwide Financial Statements

*Governmental entities must record capital leases in accordance with:* A. generally accepted accounting principles B. governmental accounting standards C. GASB principles

*A. generally accepted accounting principles* B. governmental accounting standards C. GASB principles

*On January 1, 20X2, Sunny City established a capital projects fund to account for the construction of a parking garage. The expected cost of the construction was $175,000 and the actual cost was $190,000. The cost of additional items for the construction was $7,000. Contract terms included a retained percentage of $10,000 until full and final acceptance of the project. The journal entry to record payment of the current portion of the construction contract and vouchers is:* A. Debit Vouchers Payable for $7,000; Debit Contract Payable by $180,000; Credit Cash for $187,000 B. Debit Vouchers Payable for $197,000; Credit Contract Payable for $197,000 C. Debit Vouchers Payable for $15,000; Debit Contract Payable for $180,000; Credit Expenditures for $195,000 D. Debit Expenditures for $175,000; Debit Cash for $7,000; Credit Vouchers Payable for $182,000

*A. Debit Vouchers Payable for $7,000; Debit Contract Payable by $180,000; Credit Cash for $187,000* B. Debit Vouchers Payable for $197,000; Credit Contract Payable for $197,000 C. Debit Vouchers Payable for $15,000; Debit Contract Payable for $180,000; Credit Expenditures for $195,000 D. Debit Expenditures for $175,000; Debit Cash for $7,000; Credit Vouchers Payable for $182,000

*On January 1, 20X2, Union City established a capital projects fund to account for an addition to its courthouse. A $100,000, 10 percent general obligation bond issue was sold at 105 for total proceeds of $105,000. The capital projects fund also received $15,000 from the city's general fund. The journal entry to close interfund transfers includes credits to:* A. Other Financing Uses-Transfer Out to Debt Service Fund for $5,000 B. Revenue-Received from General Fund for $15,000 C. Other Financing Sources-Transfer In from General Fund for $15,000 D. Fund Balance-Unassigned for $10,000

*A. Other Financing Uses-Transfer Out to Debt Service Fund for $5,000* B. Revenue-Received from General Fund for $15,000 C. Other Financing Sources-Transfer In from General Fund for $15,000 *D. Fund Balance-Unassigned for $10,000*

*Individuals or entities having a significant role in the federal budgeting and expending process include the:* A. President B. Congressional Budget Office C. Federal Accountability Office D. Secretary of the Treasury

*A. President* *B. Congressional Budget Office* C. Federal Accountability Office *D. Secretary of the Treasury*

*Which of the following financial statements is included in governmental funds' financial reports?* A. Statement of revenues, expenditures, and changes in fund balance B. Reconciliation of fund-based statements to governmentwide statements C. Balance sheet D. Statement of nongovernmental activities

*A. Statement of revenues, expenditures, and changes in fund balance* B. Reconciliation of fund-based statements to governmentwide statements *C. Balance sheet* D. Statement of nongovernmental activities

*Which of the following statements is are true about the difference between a private-purpose trust fund and a permanent fund?* A. The private-purpose trust fund is used for purposes stipulated by the donor, whereas the permanent fund is used for government's general programs. B. The private-purpose trust fund acts as a fiduciary for properties held for individuals, whereas the permanent fund earns revenue by selling supplies C. The private-purpose trust fund uses accrual basis of accounting, whereas the permanent fund uses modified accrual basis of accounting. D. The private-purpose trust fund has an expendable principal, whereas the permanent fund must maintain its principal.

*A. The private-purpose trust fund is used for purposes stipulated by the donor, whereas the permanent fund is used for government's general programs.* B. The private-purpose trust fund acts as a fiduciary for properties held for individuals, whereas the permanent fund earns revenue by selling supplies *C. The private-purpose trust fund uses accrual basis of accounting, whereas the permanent fund uses modified accrual basis of accounting.* *D. The private-purpose trust fund has an expendable principal, whereas the permanent fund must maintain its principal.*

*GASB 34 states the reporting entity includes:* A. a component unit for which the primary government is financially accountable B. the primary government, such as a city, county, or state C. an entity that provides financing for goods or services on a cost-reimbursement basis D. any organization that has a significant relationship with the primary government

*A. a component unit for which the primary government is financially accountable* *B. the primary government, such as a city, county, or state* C. an entity that provides financing for goods or services on a cost-reimbursement basis *D. any organization that has a significant relationship with the primary government (which should be included to avoid misleading or incomplete financial statements)*

*The modified approach to accounting for the depreciation of infrastructure assets:* A. annually expenses actual renewal costs associated with the assets B. allows governments to avoid estimating depreciation expense on the assets C. requires the government to estimate the useful lives of the assets

*A. annually expenses actual renewal costs associated with the assets* *B. allows governments to avoid estimating depreciation expense on the assets* C. requires the government to estimate the useful lives of the assets

*Internal service funds:* A. are established separately for each of the functions maintained by a local governmental unit B. use the accrual basis of accounting C. report income on the statement of revenue, expenses, and changes in fund net position D. provide services to both other governmental units and the general public

*A. are established separately for each of the functions maintained by a local governmental unit* *B. use the accrual basis of accounting* *C. report income on the statement of revenue, expenses, and changes in fund net position* D. provide services to both other governmental units and the general public

*The construction of a library, bridge, or city municipal building would be accounted for in a(n)________ fund.* A. capital projects B. internal service C. special revenue D. agency

*A. capital projects* B. internal service C. special revenue D. agency

*Expenses reported on the statement of activities of the governmentwide financial statements include:* A. depreciation of the capital assets B. any expenditures in the governmental funds that were made for long-term capital assets C. contributions to permanent endowments D. expenses for any infrastructure assets

*A. depreciation of the capital assets* B. any expenditures in the governmental funds that were made for long-term capital assets C. contributions to permanent endowments *D. expenses for any infrastructure assets*

*Restricted and unrestricted on the governmentwide statement of net position _____ mean the same things as assigned and unassigned as used for the fund-based statements.* A. do not B. do

*A. do not* B. do

*To ensure that the contractor fully completes the project to the unit's satisfaction, governmental units:* A. hold back a retained percentage of the total amount due to a construction contract B. receive a percentage of the total amount due under a construction contract from the contractor before the construction starts C. pay a percentage of the estimated construction costs specified in the contract before the construction process starts D. pay a percentage of the total amount due under a construction contract in advance

*A. hold back a retained percentage of the total amount due to a construction contract* B. receive a percentage of the total amount due under a construction contract from the contractor before the construction starts C. pay a percentage of the estimated construction costs specified in the contract before the construction process starts D. pay a percentage of the total amount due under a construction contract in advance

*Interim reporting by governmental entities:* A. is a valuable internal management control instrument B. is generally required C. determines the current progress of compliance with the legal and budgetary limitations D. is generally made available to the general public to provide information about government performance

*A. is a valuable internal management control instrument* B. is generally required *C. determines the current progress of compliance with the legal and budgetary limitations* D. is generally made available to the general public to provide information about government performance

*School districts that are legally separate, fiscally independent entities:* A. must provide MD&A and specified supplementary information B. are considered component units of a primary government C. engage in both governmental and business-type activities D. have their own tax levy authority

*A. must provide MD&A and specified supplementary information* B. are considered component units of a primary government *C. engage in both governmental and business-type activities* *D. have their own tax levy authority*

*At the close of the fiscal year, the enterprise fund's:* A. nominal accounts are closed B. profit or loss for the period is determined C. interfund transactions are reclassified as short-term loans D. components of net position are reclassified by the government

*A. nominal accounts are closed* *B. profit or loss for the period is determined* C. interfund transactions are reclassified as short-term loans *D. components of net position are reclassified by the government*

*A fiduciary fund:* A. prepares the statement of fiduciary net position B. is included in the statement of changes in fiduciary net position if it is a trust or an agency fund C. uses the accrual basis of accounting

*A. prepares the statement of fiduciary net position* B. is included in the statement of changes in fiduciary net position if it is a trust or an agency fund *C. uses the accrual basis of accounting* The statement of changes in fiduciary net position includes only the trust funds because agency funds do not have a net asset balance.

*Management's Discussion and Analysis (MD&A):* A. provides an analytical overview of the government's financial and operating activities B. must include information about the current period only although prior periods may be included C. comes after the financial statements D. is included in the required supplementary information (RSI) of the governmentwide financial statements

*A. provides an analytical overview of the government's financial and operating activities* B. must include information about the current period only although prior periods may be included C. comes after the financial statements *D. is included in the required supplementary information (RSI) of the governmentwide financial statements* MD&A discusses current period operations and financial position and then compares those with the same information for prior periods. The purpose of this RSI item is to provide financial statement users an objective discussion of whether the government's financial position has improved or deteriorated during the year.

*Debt service funds:* A. record matured bonds payable as the debt becomes due B. treat the payment of principal on bonds as an expenditure C. typically use an encumbrance system for matured principal and interest D. treat the payment of principal on bonds as an expense

*A. record matured bonds payable as the debt becomes due* *B. treat the payment of principal on bonds as an expenditure* C. typically use an encumbrance system for matured principal and interest D. treat the payment of principal on bonds as an expense Governmental entities typically do not use an encumbrance system for matured principal and interest because the debt agreement serves as the expenditure control mechanism

*Enterprise funds:* A. record similar adjusting journal entries to those of commercial entities B. do not record depreciation expense on long-term assets C. only record general operating expenses when cash is paid

*A. record similar adjusting journal entries to those of commercial entities* B. do not record depreciation expense on long-term assets C. only record general operating expenses when cash is paid

*The primary government imposes its will on a component organization by:* A. removing appointed members of the organization's governing board B. implementing the decisions of the organization's governing body C. modifying the organization's budget D. dismissing the persons responsible for the organizations day-to-day operations

*A. removing appointed members of the organization's governing board* B. implementing the decisions of the organization's governing body *C. modifying the organization's budget* *D. dismissing the persons responsible for the organizations day-to-day operations*

*According to GASB 34, the net position section for proprietary funds should be separated into:* A. restricted because of circumstances beyond the government's control B. unrestricted C. invested in capital assets, net of related debt D. available for debt service only

*A. restricted because of circumstances beyond the government's control* *B. unrestricted* *C. invested in capital assets, net of related debt* D. available for debt service only

*As specified by GASB 44, the statistical section of the comprehensive annual financial report (CAFR) reports ____________ information.* A. revenue capacity B. debt capacity C. fund accumulation D. financial trend

*A. revenue capacity* *B. debt capacity* C. fund accumulation *D. financial trend* Also, (4) demographic and economic information and (5) operating information

*Revenue sources of public school systems include:* A. state school aid B. debt servicing C. federal sources D. local property taxes and fees

*A. state school aid* B. debt servicing *C. federal sources* *D. local property taxes and fees*

*GASB 34 specifies that:* A. the general fund is always a major fund B. other funds must meet either the 10 percent of 5 percent criterion to be classified as a major fund C. enterprise funds are always major funds D. non-major funds are aggregated and presented in a single column

*A. the general fund is always a major fund* B. other funds must meet either the 10 percent or 5 percent criterion to be classified as a major fund C. enterprise funds are always major funds *D. non-major funds are aggregated and presented in a single column* Other funds must meet BOTH the 10 percent and 5 percent criterion to be classified as a major fund.

*Upon completion of a capital project that has unassigned funds remaining, the governmental unit may:* A. transfer the funds to the general fund B. transfer the funds to a special revenue fund C. retain the funds in the capital projects fund for future projects D. transfer the funds to the debt service fund

*A. transfer the funds to the general fund* B. transfer the funds to a special revenue fund C. retain the funds in the capital projects fund for future projects *D. transfer the funds to the debt service fund*

*Agency funds:* A. use the accrual basis of accounting B. require a statement of changes in fiduciary net position C. account for resources held by a governmental unit as a custodial agent for individuals D. require a statement of cash flows

*A. use the accrual basis of accounting* B. require a statement of changes in fiduciary net position *C. account for resources held by a governmental unit as a custodial agent for individuals* D. require a statement of cash flows Note that agency funds cannot have any net position balance; therefore, no statement of changes in fiduciary net position is required.

*Match the following special-purpose governments with their specific reporting requirements:* 1. Engaged in more than one governmental program 2. Engaged in managing pension funds 3. Engaged in only business-type activities

1. Must provide both fund financial statements and governmentwide financial statements 2. Not required to present the governmentwide financials but must provide only the financial statements required for fiduciary funds 3. Must present only the financial statements required for enterprise funds

*Match the following fund categories with their types.* 1. Governmental fund 2. Proprietary fund 3. Fiduciary fund

1. Special revenue funds 2. Enterprise funds 3. Trust funds

*Match bonds with their characteristics:* 1. Regular serial bonds 2. Serial bonds 3. Term bonds

1. The repayment installments are equal 2. The bonds are repaid in installments over the life of the debt 3. The entire principal of the debt is due at the maturity date

A component unit's financial results may be reported using either the _______ presentation or the ________ presentation method.

1. discrete 2. blended

*A debt service fund records a closing journal entry that debits Other Financing Sources-Transfer in from Capital Project Fund. This suggest the capital projects fund:* A. sold bonds at a discount B. sold bonds at a premium C. completed it project and had an assigned fund balance

A. sold bonds at a discount *B. sold bonds at a premium* C. completed it project and had an assigned fund balance

*A debt service fund is anticipating the receipt of a property tax levy of $25,000. The estimated uncollectible taxes are $2,500. The appropriate journal entry is a debit to Property Taxes Receivable for:* A. $25,000 and a credit to Revenue-Property Tax for $25,000 B. $25,000 and credits to Allowance for Uncollectible Taxes for $2,500 and Revenue-Property Tax for $22,500 C. $25,000 and credits to Other Financing Sources for $22,500 and Allowance for Uncollectible Taxes for $2,500 D. $22,500 and a credit to Revenue-Property Tax for $22,500

A. $25,000 and a credit to Revenue-Property Tax for $25,000 *B. $25,000 and credits to Allowance for Uncollectible Taxes for $2,500 and Revenue-Property Tax for $22,500* C. $25,000 and credits to Other Financing Sources for $22,500 and Allowance for Uncollectible Taxes for $2,500 D. $22,500 and a credit to Revenue-Property Tax for $22,500

*The water utility provides service and bills its customers $50,000 for the amount of water used. The utility estimates that 10 percent of its billings will not be collected. The journal entry for the collection of 90% of the recorded accounts receivable is a debit to Cash for:* A. $40,500 and a credit to Revenue-Water Sales for $40,500 B. $45,000 and credits to Accounts Receivable for $40,500 and Allowance for Uncollectibles of $4,500 C. $40,500 and a credit to Accounts Receivable for $40,500 D. $45,000 and a credit to Accounts Receivable for $45,000

A. $40,500 and a credit to Revenue-Water Sales for $40,500 B. $45,000 and credits to Accounts Receivable for $40,500 and Allowance for Uncollectibles of $4,500 *C. $40,500 and a credit to Accounts Receivable for $40,500* D. $45,000 and a credit to Accounts Receivable for $45,000

*The Single Audit Act applies to:* A. all governmental entities receiving federal assistance B. government entities that expend $500,000 or more in federal awards in a year C. Government entities that expend $1 million or more in federal awards in a year D. All government entities that have not had a program-specific audit for the year

A. All governmental entities receiving federal assistance *B. Government entities that expend $500,000 or more in federal awards in a year* C. Government entities that expend $1 million or more in federal awards in a year D. All government entities that have not had a program-specific audit for the year Governmental entities that expend less than $500,000 in federal awards in a year are exempt from the single audit requirement for that year.

*On January 1, 20X2, Watkins City established a capital projects fund to account for the construction of an addition to the city hall building. The expected cost of the addition is $125,000. The budgetary entry to record the issuance of a construction contract is a debit to:* A. BUDGETARY FUND BALANCE-ASSIGNED FOR ENCUMBRANCES and a credit to ENCUMBRANCES B. ENCUMBRANCES and a credit to CONTRACTS PAYABLE C. ENCUMBRANCES and a credit to BUDGETARY FUND BALANCE-ASSIGNED FOR ENCUMBRANCES D. BUDGETARY FUND BALANCE-ASSIGNED FOR ENCUMBRANCES and a credit to CONTRACTS PAYABLE

A. BUDGETARY FUND BALANCE-ASSIGNED FOR ENCUMBRANCES and a credit to ENCUMBRANCES B. ENCUMBRANCES and a credit to CONTRACTS PAYABLE *C. ENCUMBRANCES and a credit to BUDGETARY FUND BALANCE-ASSIGNED FOR ENCUMBRANCES* D. BUDGETARY FUND BALANCE-ASSIGNED FOR ENCUMBRANCES and a credit to CONTRACTS PAYABLE

*The GAO reviews the accounting systems of each executive agency and reports compliance exceptions to the:* A. Comptroller general B. Department of the Treasury C. Congressional Budget Office D. Congress

A. Comptroller general B. Department of the Treasury C. Congressional Budget Office *D. Congress*

*Which of the following budgetary entries would be made for term bonds for the periods prior to the maturity date?* A. Debit EARNINGS MADE; Credit REQUIRED CONTRIBUTIONS B. Debit REQUIRED CONTRIBUTIONS; Debit REQUIRED EARNINGS; Credit BUDGETARY FUND BALANCE C. Debit BUDGETARY FUND BALANCE; Credit REQUIRED CONTRIBUTIONS; Credit REQUIRED EARNINGS D. Debit BUDGETARY FUND BALANCE; Credit REQUIRED EARNINGS

A. Debit EARNINGS MADE; Credit REQUIRED CONTRIBUTIONS *B. Debit REQUIRED CONTRIBUTIONS; Debit REQUIRED EARNINGS; Credit BUDGETARY FUND BALANCE* C. Debit BUDGETARY FUND BALANCE; Credit REQUIRED CONTRIBUTIONS; Credit REQUIRED EARNINGS D. Debit BUDGETARY FUND BALANCE; Credit REQUIRED EARNINGS

*An entity starts its internal service fund with a transfer in from the general fund of $35,000. The internal service fund uses this amount to acquire supplies inventory of $4,500. Which of the following journal entries records the acquisition of the inventory?* A. Debit Inventory for $4,500; Credit Transfers in for $4,500 B. Debit Voucher Payable for $4,500; Credit Cash for $4,500 C. Debit Transfers in for $4,500; Credit Vouchers Payable for $4,500 D. Debit Inventory for $4,500; Credit Vouchers Payable for $4,500

A. Debit Inventory for $4,500; Credit Transfers in for $4,500 B. Debit Voucher Payable for $4,500; Credit Cash for $4,500 C. Debit Transfers in for $4,500; Credit Vouchers Payable for $4,500 *D. Debit Inventory for $4,500; Credit Vouchers Payable for $4,500*

*Which of the following journal entries records the reclassification of net position at end of a fiscal period?* A. Debit Net Position-Invested in Capital Assets; Credit Transfer In B. Debit Net Position-Unrestricted; Credit Net Position-Invested in Capital Assets, Net of Related Debt C. Debit Net Position-Invested in Capital Assets, Net of Related Debt; Credit Net Position-Unrestricted D. Debit Transfer In; Credit Net Position-Unrestricted

A. Debit Net Position-Invested in Capital Assets; Credit Transfer In *B. Debit Net Position-Unrestricted; Credit Net Position-Invested in Capital Assets, Net of Related Debt* C. Debit Net Position-Invested in Capital Assets, Net of Related Debt; Credit Net Position-Unrestricted D. Debit Transfer In; Credit Net Position-Unrestricted

*On January 1, 20X2, High Shoals City established a capital projects fund to account for the construction of a police station. The expected cost of the construction is $275,000. The capital project funds recorded an expected receipt of $15,000 from the general fund. When the funds are received the capital project fund will debit cash and credit:* A. Funds payable to General Fund B. Revenue C. Other Financing Sources - Transfer in from General Funds D. Due from General Fund

A. Funds payable to General Fund B. Revenue C. Other Financing Sources - Transfer in from General Funds *D. Due from General Fund*

*The primary agency responsible for obtaining revenue on behalf of the federal government is the:* A. Government Accountability Office B. Secretary of the Treasury C. Internal Revenue Service D. Office of Management and Budget

A. Government Accountability Office B. Secretary of the Treasury *C. Internal Revenue Service* D. Office of Management and Budget

*On January 1, 20X2, Ema City establishes a capital projects fund to account for the construction of a fire station. The expected cost of the construction is $50,000. The city receives a federal grant for $10,000 as financial support for part of the capital addition. The receipt of the grant will be recorded with a debit to cash and a credit to:* A. Other Financing Sources - Federal Grants B. Revenue - Federal Grant C. Due to General Fund D. Due to Federal Government

A. Other Financing Sources - Federal Grants *B. Revenue - Federal Grant* C. Due to General Fund D. Due to Federal Government

*Lind City used a permanent fund's resources to acquire $250,000 face value, high-grade, 8 percent governmental securities at 90 to yield an effective interest rate of 10 percent. Which of the following statements regarding this investment is correct* A. The fund will accrue $25,000 of interest the first year B. Cash of $20,000 will be received the first year C. Revenue of $20,000 will be recorded the first year D. The fund's financial statements show the discount amortization of $25,000

A. The fund will accrue $25,000 of interest the first year *B. Cash of $20,000 will be received the first year* *C. Revenue of $20,000 will be recorded the first year* D. The fund's financial statements show the discount amortization of $25,000 Modified accrual method for interest income, meaning that the revenue recognition may be for only the interest amount that is BOTH measurable and available to finance expenditures made during the current fiscal period. Modified accrual basis financial statements would not show discount amortization.

*Contributions and transfers in or out of proprietary funds are reported:* A. after reclassification on the year-end based on the amount received in capital contributions B. as revenue and closed to nominal accounts into profit and loss summary C. below the income (loss) line in the statement of revenues, expenses, and changes in fund net position D. as capital asset transfers to or from the proprietary funds

A. after reclassification on the year-end based on the amount received in capital contributions B. as revenue and closed to nominal accounts into profit and loss summary *C. below the income (loss) line in the statement of revenues, expenses, and changes in fund net position* D. as capital asset transfers to or from the proprietary funds

*The primary difference between an enterprise fund and a special revenue fund is the:* A. basis of accounting used B. revenue source C. measurement focus

A. basis of accounting used *B. revenue source* C. measurement focus

*Governmentwide statements are prepared using the _______ basis of accounting.* A. cash basis B. modified accrual C. accrual

A. cash basis B. modified accrual *C. accrual*

*Governmentwide financial statements include the statement of:* A. changes in financial position B. net position C. activities D. cash flow

A. changes in financial position *B. net position* *C. activities* D. cash flow

*The wastewater system of Cline City provides service and bills its customers $30,000 for the amount of water treated. The utility estimates that 5 percent of its billings will not be collected. The journal entry to record this transaction:* A. debits cash for $28,500 B. does not include an allowance for uncollectible accounts C. credits Revenue-Water Treated for $28,500 D. credits Revenue-Water Treated for $30,000

A. debits cash for $28,500 B. does not include an allowance for uncollectible accounts *C. credits Revenue-Water Treated for $28,500* D. credits Revenue-Water Treated for $30,000

*The total assets and liabilities of the governmental funds total $150,000 and $45,000, respectively. The total assets and liabilities of the enterprise funds are $225,000 and $35,000, respectively. The capital projects funds has assets of $16,000 and liabilities of $8,500. The capital projects fund:* A. does not meet the 5 percent criterion test B. is a major fund because its liabilities meet the 10 percent and the 5 percent criterion tests C. meets the 5 percent because liabilities are more than $4,000 D. meets the 5 percent criterion test because assets are more than $11,250

A. does not meet the 5 percent criterion test *B. is a major fund because its liabilities meet the 10 percent and the 5 percent criterion tests* *C. meets the 5 percent because liabilities are more than $4,000* D. meets the 5 percent criterion test because assets are more than $11,250

*GASB 34 specifies that all general-purpose units must provide _______ financial statements.* A. entity-based B. project-wise C. governmentwide D. fund-based

A. entity-based B. project-wise *C. governmentwide* *D. fund-based*

*The billing rate for an internal service fund is typically ________ the operating costs of the fund.* A. equal to B. more than C. less than

A. equal to *B. more than* C. less than The billing rate is typically established at more than the operating costs of the internal service fund so that the fund may acquire replacement assets or new assets

*GASB 31 allows governmental entities other than external investment pools to report market investments at _______ provided the investment has a remaining maturity of one year of less from the date of purchase.* A. fair value B. historical cost C. amortized cost

A. fair value B. historical cost *C. amortized cost* The general valuation standard in GASB 31 is fair value for most investments made by a governmental entity. However, an exception is allowed for governmental entities other than external investment pools in order to report market investments at amortized cost, provided the investment has a remaining maturity of one year or less from the date of purchase.

*Governmental entities recognize estimated uncollectible amounts as a(n):* A. increase in liabilities B. bad debt C. expense D. reduction of revenue

A. increase in liabilities B. bad debt C. expense *D. reduction of revenue*

*Resources received from tax levies that are restricted for specific purposes are accounted for in ______ funds.* A. internal service B. debt service C. special revenue D. enterprise

A. internal service B. debt service *C. special revenue* D. enterprise

*On January 1, 20X2, a long-term city resident bequeathed a gift of $200,000 to Alta City in his will. The will stipulates that the $200,000 be invested and the income be used to providde education for foster children that reside in the city. Based on this, the city will establish a ________ fund to account for the investment and earnings.* A. special revenue B. permanent C. fiduciary

A. special revenue B. permanent *C. fiduciary*

*The total assets and liabilities of the governmental funds total $450,000 and $165,000, respectively. The total assets and liabilities of the capital projects fund are $52,000 and $11,600, respectively. The capital projects fund:* A. is not a major fund because its total assets are less than 50% of the total assets of all the governmental funds B. meets the 10% criterion test because its total assets are more than 10% of the total assets of all governmental funds C. does not meet the 10% criterion because its total liabilities are less than 10% of all governmental funds liabilities

A. is not a major fund because its total assets are less than 50% of the total assets of all the governmental funds *B. meets the 10% criterion test because its total assets are more than 10% of the total assets of all governmental funds* C. does not meet the 10% criterion because its total liabilities are less than 10% of all governmental funds liabilities

*GASB 34 specifies that special-purpose governments engaged in a single governmental activity ________ financial statements.* A. must only provide governmentwide B. must provide fund-based and government wide C. do not need to provide any D. must only provide fund-based

A. must only provide governmentwide B. must provide fund-based and government wide C. do not need to provide any *D. must only provide fund-based*

*The reconciliation schedules required by GASB 34 reconcile the _______ with the amounts reported on the governmentwide statements.* A. net change in the total amounts of long-term assets written off B. total amount of expenditure from the governmental funds statements C. net amounts of interfund service reported on the governmental funds statements D. net change in the total amounts report on the governmental funds statement

A. net change in the total amounts of long-term assets written off B. total amount of expenditure from the governmental funds statements C. net amounts of interfund service reported on the governmental funds statements *D. net change in the total amounts report on the governmental funds statement*

*On January 1, 20X2, Ame City establishes a capital projects fund to account for an addition to the courthouse. The expected cost of the addition is $200,000. A 10 percent general obligation bond issue is sold at 102 for total proceeds of $204,000. The capital projects funds records the bond proceeds as:* A. other financing sources ($200,000) and revenue ($4,000) B. revenue of $204,000 C. other financing sources of $204,000

A. other financing sources ($200,000) and revenue ($4,000) B. revenue of $204,000 C. other financing sources of $204,000* Bond proceeds are NOT revenue to the capital projects fund; they are reported in the other financing sources section of the fund's statement of revenues, expenditures, and changes in fund balance.

*Debt service funds:* A. pay interest from a special revenue fund B. recognize interest when it becomes due and payable C. use the modified accrual basis of accounting D. accrue interest payable on long-term debt

A. pay interest from a special revenue fund *B. recognize interest when it becomes due and payable* *C. use the modified accrual basis of accounting* D. accrue interest payable on long-term debt Interest payable on long-term debt is not accrued; interest is recognized as a liability only when it comes due and payable.

*Debt service funds are:* A. prohibited from adopting operating budgets when bond agreements mandate fund expenditures B. required to adopt annual operating budgets C. not required to adopt annual operating budgets

A. prohibited from adopting operating budgets when bond agreements mandate fund expenditures B. required to adopt annual operating budgets *C. not required to adopt annual operating budgets*

*GASB 38 modifications to required footnotes include:* A. providing a schedule of changes in long-term debt during the year, including the purposes for which the debt was issued B. disclosing actions taken to address significant violations of contractual provisions C. providing details about significant individual accounts obscured by aggregation D. disclosing the purpose and amount of interfund transfers

A. providing a schedule of changes in long-term debt during the year, including the purposes for which the debt was issued *B. disclosing actions taken to address significant violations of contractual provisions* *C. providing details about significant individual accounts obscured by aggregation* *D. disclosing the purpose and amount of interfund transfers* GASB 34 requires note disclosures about long-term liabilities.

*Differences between the balance sheet of proprietary funds and commercial enterprises include that the proprietary fund's balance sheet:* A. reports the book value of capital assets B. has a relatively large amount of fixed assets C. does not have a stockholders' equity section D. typically only has short-term debt

A. reports the book value of capital assets *B. has a relatively large amount of fixed assets* *C. does not have a stockholders' equity section* D. typically only has short-term debt

*The budgetary comparison schedule required by GASB 34:* A. requires a separate column for the variance between the final budget and actual amounts B. should be presented in the same format as the original budget C. must be done for special revenue funds with legally adopted budgets D. only requires the final budget to be presented

A. requires a separate column for the variance between the final budget and actual amounts *B. should be presented in the same format as the original budget* *C. must be done for special revenue funds with legally adopted budgets* D. only requires the final budget to be presented GASB 34 requires that both the original budget and the final budget be presented. A separate column for the variance between the final budget and the actual amounts is encouraged but not required.

*GASB 34 required note disclosure in the governmentwide financial statements include the disclosure of:* A. short-term liabilities including a schedule of all vendor and other payables B. information about the depreciation expense and accumulated depreciation C. accounting and measurement policies used by the primary governmental entity D. donor-restricted endowments and the policy for spending investment income

A. short-term liabilities including a schedule of all vendor and other payables *B. information about the depreciation expense and accumulated depreciation* *C. accounting and measurement policies used by the primary governmental entity* *D. donor-restricted endowments and the policy for spending investment income*

*One event _______ entries in several funds.* A. should never require B. may require C. always requires

A. should never require *B. may require* C. always requires

*A fund meets the 5 percent criterion test when the total assets, liabilities, revenues, or expenditures/expenses of an individual governmental or enterprise fund are at least 5 percent of the corresponding total of:* A. the general fund B. all funds of that category or type C. all governmental plus enterprise funds combined

A. the general fund B. all funds of that category or type *C. all governmental plus enterprise funds combined*

*A private-purpose trust fund:* A. uses the cash basis of accounting for all investments B. must always preserve the principal C. benefits specific individuals D. may be charged a fee by the governmental entity for managing trust resources

A. uses the cash basis of accounting for all investments B. must always preserve the principal *C. benefits specific individuals* *D. may be charged a fee by the governmental entity for managing trust resources*

*T or F: Private-purpose trust funds do not make adjustments to revalue investments.*

False

*T or F: The borrowing or repaying of money to acquire, construct, or improve capital assets is included in the cash flows from investing activities*

False

*T or F: When an enterprise fund acquires a piece of equipment, it is recorded as an expenditure.*

False

*Government entities establish _______ funds when a donor restriction stipulates that the fund principal must be preserved and that income be used to benefit the government's programs or the general citizenry.*

Permanent

*The enterprise fund is a type of ______ fund.*

Proprietary

*T or F: Organizations for which the primary government is NOT financially accountable may be considered component units.*

True Three part test in GASB 14 to determine if certain legally separate, tax-exempt entities for which the primary government is not financially accountable are to be considered a component unit of the primary government.

*The accumulation and use of resources for the payment of general long-term debt principal and interest is accounted for in a(n) ___________ ___________ fund.*

debt service