Typical Items and Specific Types of Transactions and Events: Measurement, Valuation, Calculation

Program-specific operating grants and contributions are which of the following under governmental accounting? A Nonexchange revenues that are restricted to the operations of specific programs or functions B Exchange revenues that are restricted to the operations of specific programs or functions C Nonexchange revenues that are not restricted to the operations of specific programs or functions D Exchange revenues that are not restricted to the operations of specific programs or functions

A Nonexchange revenues that are restricted to the operations of specific programs or functions Program-specific operating grants and contributions are nonexchange revenues that are restricted to the operations of specific programs or functions.

On January 2, City of Walton issued $500,000, 10-year, 7% 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 revenue, expenditures, and changes in fund balance of its governmental funds at the close of this fiscal year, September 30? A $0 B $17,500 C $26,250 D $35,000

A $0 Interest on general long-term debt, usually accounted for in debt service funds, normally are recorded as an expenditure on its due date rather than being accrued prior to its due date.

The following information pertains to certain money held by Blair County at December 31 that are legally restricted to expenditures for specified purposes: Proceeds of long-term debt to be used for a major capital project $90,000 Proceeds of short-term notes to be used for advances to permanent trust funds 8,000 What amount of this restricted money should Blair account for in special revenue funds? A $0 B $8,000 C $90,000 D $98,000

A $0 Special revenue funds are used to account for financial resources that are restricted by law or by contractual agreement to specific purposes other than for permanent funds or major capital projects. Thus, neither the $8,000 of proceeds of the short-term notes to be used for advances to permanent fund nor the $90,000 of proceeds on long-term debt to be used for a major capital project should be accounted for in a special revenue fund.

Arlen City's fiduciary funds contained the following cash balances at December 31: Under the Forfeiture Act-cash confiscated from illegal activities; principal can be used only for law enforcement activities $300,000 Sales taxes collected by Arlen to be distributed to other governmental units 500,000 What amount of cash should Arlen report in its permanent funds at December 31? A $0 B $300,000 C $500,000 D $800,000

A $0 The cash collected under the For feiture Act, can only be used for law enforcement activities. It should be accounted for in a special revenue fund because the Act does not require the preservation of fund principal and the principal may be used for Arlen's benefit . An agency fund is established to account for assets received by a government in its capacity as an agent for individuals, businesses, or other governments. Therefore, the sales taxes collected by Arlen to be distributed to other governments are accounted for in an agency fund.

A local government has the following liabilities on its adjusted trial balance at the end of the current year. What amount would the government report on its statement of net position as total liabilities? $50,000 accrued payroll $100,000 bonds payable - current portion $900,000 bonds payable - long-term portion $25,000 accounts payable A $1,075,000 B $175,000 C $100,000 D $75,000

A $1,075,000 The statement of net position uses the full accrual method of accounting, which means that it will report all the listed items as liabilities.

The following equity balances are among those maintained by Cole City: Enterprise funds $1,000,000 Internal service funds 400,000 Cole's proprietary equity balances amount to A $1,400,000 B $1,000,000 C $ 400,000 D $0

A $1,400,000 The proprietary funds consist of the enterprise funds and the internal service funds. Therefore, Cole's proprietary equity balances amount to $1,400,000 (i.e., $1,000,000 + $400,000).

Brandon County's general fund had the following transactions during the year: Transfer to a debt service fund $100,000 Payment to a pension trust fund $500,000 Purchase of equipment $300,000 What amount should Brandon County report for the general fund as other financing uses in its governmental funds statement of revenues, expenditures, and changes in fund balances? A $100,000 B $400,000 C $800,000 D $900,000

A $100,000 Transfer to a debt service fund is an operating transfer (or inter-fund transfers). Since government funds use modified accrual basis of accounting $100,000 is reported as other financing uses. Payment to pension trust and purchase of equipment are both expenditures. Option (b) is incorrect because it includes purchase of equipment which is expenditure, not to be classified as other financing uses. Option (c) is incorrect because payment to pension trust and purchase of equipment are both expenditures, not other financing uses. Option (d) is incorrect because it includes payment to pension trust and purchase of equipment are both expenditures, not other financing uses.

The water department of a city provides water to the nearby districts for a monthly fee. In year 2, it decides to take machinery on lease from one of the firms in the city. The lease term was decided to be 3 years and the ownership of the machinery would not transfer to the department at the end of the term. Given that the useful life of the machinery was 2 years and the value of the leased asset was $120,000 in the books of the water department, what would be the amortization in the books in year 2? A $60,000 B $40,000 C $120,000 D $0

A $60,000 In leases other than a short-term lease and contracts that transfer ownership, the lessee recognizes a right-to-use asset in its books. The asset is required to be amortized over the life of the asset or the lease term, whichever is less. In the given question, the useful life of 2 years is less than the lease term of 3 years. The value of the ROU asset shall be amortized over a period of 2 years. Annual amortization = 120,000/2 = $60,000

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 2, no resources had been provided to the debt service fund for the payment of principal and interest. On June 30, year 2, Finch's debt service fund should include interest payable on the general obligation bonds for A 0 months. B 3 months. C 4 months. D 6 months.

A 0 months. Finch did not provide debt service fund resources during the current fiscal year for the payment of the interest on the general obligation bonds. Therefore, the interest expenditure related to the general obligation bonds should be recorded when it is due to be paid (i.e., September 1, year 2) rather than being accrued at year-end (i.e., June 30, year 2). Only if debt service fund resources had been provided during the current fiscal year for the payment of the interest, could the expenditure and related liability be recognized in the debt service fund.

Which of the following mandates the use of an enterprise fund? A Activity is financed with debt that is secured by a pledge of the net revenues from fees and charges of the activity. B User fees are charged to external users for goods and services. C The General Fund provides a subsidy to cover operating deficits. D All surplus funds are transferred to the General Fund as a return on capital.

A Activity is financed with debt that is secured by a pledge of the net revenues from fees and charges of the activity. GASB Statement No. 34 listed three criteria, any one of which requires the use of an enterprise fund. Activity being financed with debt that is secured by a pledge of the net revenues from fees and charges of the activity is the first of the listed criteria. User fees charged to external users for goods and services is an optional reason for using an enterprise fund. The General Fund might provide a subsidy, but this financing does not require the use of an enterprise fund. Surplus funds may be returned to the General Fund, but this transfer does not require the use of an enterprise fund.

Powell City purchased a piece of equipment to be used by a department financed by the general fund. How should Powell report the acquisition in the general fund? A As an expenditure B Capitalize, depreciation is optional C Capitalize, depreciation is required D Capitalize, depreciation is not permitted

A As an expenditure The modified accrual basis of accounting is used in the governmental-type fund statements such as the general fund. Under the modified accrual basis of accounting, fixed assets are expenditures and not capitalized.

The modified accrual basis of accounting should be used for which of the following funds? A Capital projects fund B Enterprise fund C Pension trust fund D Proprietary fund

A Capital projects fund The modified accrual basis is the appropriate basis of accounting for governmental-type funds (i.e., general, special revenue, capital projects, debt service, and permanent funds). The modified accrual basis of accounting for a governmental unit recognizes revenues in the accounting period in which they become available and measurable. Proprietary funds and fiduciary funds use the accrual basis of accounting in all financial statements in the GASB 34 reporting model

Which of the following is the primary objective for accounting principles for internal service funds? A Centralized management of services and cost recovery for those operations B Recovery of general capital assets C Issuance of revenue bonds to fund capital expansions and improvements D Accumulation of resources to repay bonded indebtedness

A Centralized management of services and cost recovery for those operations As the name implies, internal service funds provide a centralized management of shared services and allocate the costs of those services across the departments or agencies who participate. General capital assets are not included as a cost element in internal service funds, only the assets used directly in the operations. Enterprise funds are more likely to issue revenue debt. Accumulation of resources to repay bonded indebtedness describes a governmental debt service fund.

Ridge Township's governing body adopted its general fund budget for the year ended July 31, comprised of estimated revenues of $100,000 and appropriations of $80,000. Ridge formally integrates its budget into the accounting records. To record the appropriations of $80,000, Ridge should A Credit appropriations control. B Debit appropriations control. C Credit estimated expenditures control. D Debit estimated expenditures control.

A Credit appropriations control.

The town of Hill operates municipal electric and water utilities. In which of the following funds should the operations of the utilities be accounted for? A Enterprise fund B Internal service fund C Custodial fund D Special revenue fund

A Enterprise fund Enterprise funds are used to account for a government's "business-type" operations that are financed and operated like private businesses (i.e., where the government's intent is that all costs, including depreciation, of providing goods or services to the general public on a continuing basis are to be financed or recovered primarily through user charges). Most government-owned public utilities must be accounted for in the enterprise funds under these criteria.

Jonn City entered into a 3-year lease for equipment during the year. The ownership of the asset is transferred at the end of the lease term. How should the asset obtained through the lease be reported in Jonn City's governmentwide statement of net position? A General capital asset. B Other financing use. C Expenditure. D Not reported.

A General capital asset. General capital assets are not specifically related to activities reported in proprietary or fiduciary funds. They are associated with and generally arise from, governmental activities. They should not be reported as assets in governmental funds but should be reported in the governmental activity's column in the government-wide statement of net position.

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 # Private-purpose trust fund Proprietary funds A No No B No Yes C Yes Yes D Yes No

A No No Only general obligation long-term debt should be serviced through debt service funds. Fiduciary and proprietary fund debt are rarely general government obligations.

In Soan County's general fund statement of revenues, expenditures, and changes in fund balances, which of the following has an effect on the excess of revenues over expenditures? A Purchase of fixed assets B Payment to a debt-service fund C Special items D Proceeds from the sale of capital assets

A Purchase of fixed assets General fund uses modified accrual accounting, in which purchase of fixed asset is an expenditure, which would affect the excess of revenue over expenditure.

In the General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances, which of the following has an effect on the excess of revenues over expenditures? A Purchase of fixed assets B Payment to a debt-service fund C Special items D Proceeds from the sale of capital assets

A Purchase of fixed assets The General Fund uses modified accrual accounting, in which the purchase of a fixed asset is an expenditure, which would affect the excess of revenue over expenditure.

What is the major difference between an exchange transaction and a non-exchange transaction for governmental units? A The relationship between the amount of value given and received. B Time requirements and whether the transaction is required by law. C Purpose restrictions placed upon fund balances. D Whether resources acquired can be further exchanged.

A The relationship between the amount of value given and received. There are various types of non-exchange transactions for governmental units; imposed non-exchange transactions, government-mandated non-exchange transactions, and voluntary non-exchange transactions. The difference between an exchange transaction and a non-exchange transaction is the relationship between the amount of value given and received. In an exchange transaction the presumption is the amount of value given and received is the same. A nonexchange transaction does not involve an exchange of equal value.

Which of the following statements regarding governmental funds is true? A They are funded with general taxes, service fees, and intergovernmental revenues. B They are required for all special purpose governments. C They are subfunds of the general fund for general purpose governments. D They are only required when governments have issued special assessment debt.

A They are funded with general taxes, service fees, and intergovernmental revenues. Governmental funds rely on general taxes and intergovernmental revenues to finance services. They also impose service fees, but these revenues are not the principal source for funding programs. Governmental funds are used based on the types of services provided and the resources that finance those programs, not the type of organization. The general fund is just one of the governmental funds, but it is the only required fund. A special purpose government may only have enterprise funds, such as a water district or utility operation. Other governmental fund types are not subfunds. Fund types are not related to the issuance of debt.

Cal City maintains several major fund types. The following were among Cal's cash receipts: Unrestricted state grant $1,000,000 Interest on bank accounts held for employees' pension plan 200,000 What amount of these cash receipts should be accounted for in Cal's general fund? A $1,200,000 B $1,000,000 C $ 200,000 D $0

B $1,000,000 The $1,000,000 unrestricted grant received from the state should be accounted for as revenue in Cal City's general fund. The $200,000 of interest received on bank accounts held for employees' pension plans should be accounted for in Cal City's pension trust fund.

A city government reported a $9,000 increase in net position in the motor pool internal service fund, a $12,000 increase in net position in the water enterprise fund, and a $7,000 increase in the employee pension fund. The motor pool internal service fund provides service primarily to the police department. What amount should the city report as the change in net position for business-type activities in its statement of activities? A $9,000 B $12,000 C $21,000 D $28,000

B $12,000 Only the $12,000 increase in net position in the water enterprise fund would be reported as the change in net position for business-type activities in its statement of activities. The motor pool internal service fund transactions are eliminated to remove the "doubling-up" effect of the allocations of operating expenses from one function to another. The employee pension fund is a fiduciary fund and fiduciary funds are included in fund financial statements but not in the government-wide statements.

The following information pertains to Pine City's general fund for the current year: Appropriations $6,500,000 Expenditures 5,000,000 Other financing sources 1,500,000 Other financing uses 2,000,000 Revenues 8,000,000 After Pine's general fund accounts were closed at the end of the year, the unassigned fund balance increased by A $3,000,000 B $2,500,000 C $1,500,000 D $1,000,000

B $2,500,000 Appropriations is a budgetary account which will also be closed. However, since closing the budgetary accounts (which are not all given) simply reverses the entry to record the budget, their closing has no effect on fund balance. The closing entry for the activity accounts given would increase the fund balance, as follows: Revenues 8,000,000 Other financing sources 1,500,000 Expenditures 5,000,000 Other financing uses 2,000,000 Unassigned fund balance (difference) 2,500,000

Palm City acquired, through forfeiture as a result of nonpayment of property taxes, a parcel of land that the city intends to use as a parking lot for general governmental purposes. The total amount of taxes, liens, and other costs incurred by Palm incidental to acquiring ownership and perfecting title was $20,000. The land's fair market value at the forfeiture date was $60,000. What amount should be reported in the governmental activities column of the governmentwide financial statements for this land? A $0 B $20,000 C $60,000 D $80,000

B $20,000 General fixed assets acquired by foreclosure are recorded at the lower of (1) the amount due for taxes, special assessments, penalties and interest, plus foreclosure costs or (2) appraised fair market value. Therefore, since the $20,000 Palm incurred for taxes, liens, and other costs incidental to acquiring ownership and perfecting title is less than the land's $60,000 fair market value at the forfeiture date, the land should be reported in the governmental activities column of government-wide financial statements at $20,000.

A local municipality had the following account balances and information related to interest on its bonds payable. What amount of interest expenditure would be reported on the statement of revenues, expenditures, and changes in fund balance for the year ended December 31, Year 2? $50,000 accrued interest on December 31, Year 1 $250,000 in interest payments made during Year 2 $47,000 accrued interest on December 31, Year 2 A $253,000 B $250,000 C $247,000 D $0

B $250,000 The statement of revenues, expenditures, and changes in fund balance would report the amount of cash paid in interest during the year as the amount of interest expenditures. The change in accrual would not affect the interest expenditure at the fund level. $250,000 in interest was paid during the year.

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? A $0 B $300,000 C $450,000 D $750,000

B $300,000 The capital projects fund reports unrestricted grants received from other governmental units as revenue. Therefore, the $300,000 grant from the state is reported as revenue in the capital projects fund's operating statement. The capital projects fund reports long-term debt proceeds and operating transfers from other funds as other financing sources. Therefore, the $450,000 transfer from the general fund is reported as other financing sources in the capital project fund's operating statement.

The following information pertains to Park Township's general fund at December 31: Total assets, including $200,000 of cash $1,000,000 Total liabilities 600,000 Reserved for encumbrances 100,000Appropriations do not lapse at year-end. At December 31, what amount should Park report as unassigned fund balance in its general fund balance sheet? A $200,000 B $300,000 C $400,000 D $500,000

B $300,000 Total assets $1,000,000 Less: Total liabilities 600,000 Total fund balance $ 400,000 Less: Committed fund balance 100,000 Unassigned fund balance, December 31 $ 300,000

Nox City reported a $25,000 net increase in the fund balances for total governmental funds. Nox also reported an increase in net position for the following: Motor pool internal service fund $9,000 Water enterprise fund 12,000 Employee pension fund 7,000The motor pool internal service fund provides service to the general fund departments. What amount should Nox report as the change in net position for governmental activities? A $25,000 B $34,000 C $41,000 D $46,000

B $34,000 The GWS governmental activities column includes the governmental funds plus most internal service funds and capital assets not specific to business-type activities or fiduciary funds. $25,000 + $9,000 = $34,000. The water enterprise fund is a business-type activity. The employee pension fund is a fiduciary fund; it doesn't appear in the GWS.

Fixed assets donated to a governmental unit should be recorded A At the donor's carrying amount. B At estimated fair value when received. C At the lower of the donor's carrying amount or estimated fair value when received. D As a memorandum entry only.

B At estimated fair value when received. Fixed assets donated to a governmental unit are recorded at fair value when received.

Which of the following characteristics describe the financial resources for capital projects funds? A Revenues based on rates that will recover the cost of capital assets required to deliver services B Bond issue proceeds, grants, or interest earnings C Donations restricted, such that only investment earnings can be used for maintenance D Prior year encumbrances

B Bond issue proceeds, grants, or interest earnings Resources for capital project funds may arise from bond issue proceeds, grants, or interest earnings. Revenues based on rates that will recover the costs of capital assets required to deliver services describes the approach used in enterprise fund accounting. Donations restricted such that only investment earnings can be used for maintenance would be accounted for in a permanent fund. The encumbrance system is used in governmental funds (general, special revenue, and capital projects funds) to prevent over-expenditure and to demonstrate compliance with legal requirements. Encumbrances are a budgetary measurement element, not a criterion for determining fund type.

In the current year, New City issued purchase orders and contracts of $850,000 that were chargeable against current year budgeted appropriations of $1,000,000. The journal entry to record the issuance of the purchase orders and contracts should include a A Credit to vouchers payable of $1,000,000. B Credit to reserve for encumbrances of $850,000. C Debit to expenditures of $1,000,000. D Debit to appropriations of $850,000.

B Credit to reserve for encumbrances of $850,000. To record purchase orders issued or contract commitments, the Encumbrances account is debited and Reserve for Encumbrances is credited.

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 property tax administration. This commitment should be recorded in the general fund as a (an) A Appropriation. B Encumbrance. C Expenditure. D Fixed asset.

B Encumbrance. Commitments made by a government are encumbrances. Appropriations are amounts budgeted to be spent. Expenditures are amounts that have been spent. A fixed assets account is debited when the property is placed in service.

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? A Noncurrent asset B Expenditure C Expense D Property, plant and equipment

B Expenditure Both capital purchases and operating expenditures are considered spending of funds and are treated as current year expenditure. Dr: Expenditure XXXX Cr: Voucher Payable XXXX (Government fund purchases police cars).

During the year, a city's electric utility, which is operated as an enterprise fund, rendered billings for electricity supplied to the general fund. Which of the following accounts should be debited by the general fund? A Appropriations B Expenditures C Due to electric utility enterprise fund D Other financing uses—operating transfers out

B Expenditures This is a quasi-external transaction, or one that would result in recognizing revenues and expenditures or expenses, as appropriate, as if it was with an organization apart from the government. The general fund expenditures account is debited when the general fund liabilities increase.

Berry Township has adopted GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. Berry's eligible infrastructure assets are exempt from depreciation if the modified approach is used. Which of the following are requirements of the modified approach? -The entity performs condition assessments of eligible assets and summarizes the results using a measurement scale. -The entity annually estimates the amount to preserve the eligible assets at an established and disclosed condition level. -The entity assesses asset conditions in comparison to condition levels established by the National Association of Public Works Engineers or a comparable organization. A I B I and II C I and III D I, II, and III

B I and II Infrastructure assets that are part of a network or a sub-system of a network (eligible infrastructure assets) are not required to be depreciated, if the government: documents that eligible infrastructure assets are preserved approximately at (or above) a condition level established and disclosed by the government; has an up-to-date inventory of eligible infrastructure assets; consistently performs condition assessments of eligible assets at least tri-annually and summarizes the results using a measurement scale; and annually estimates the amount to preserve the eligible assets at a condition level established and disclosed by the government. .

Property taxes and fines represent which of the following classes of nonexchange transactions for governmental units? A Derived tax revenues B Imposed nonexchange revenues C Government-mandated nonexchange transactions D Voluntary nonexchange transactions

B Imposed nonexchange revenues Imposed nonexchange revenues are assessments on non-governmental entities, and include property taxes and fines or forfeitures.

A special-purpose government is distinguished from a general purpose government by which of the following? A It is established by a state government. B It provides limited services, such as only governmental or business-type activities. C It does not manage any fiduciary funds. D It is not governed by a separately elected legislative body.

B It provides limited services, such as only governmental or business-type activities. The distinction between general purpose and special-purpose governments is based on the entity's programs and services, not how the government was created. Special-purpose governments only provide limited services; unlike cities, counties, states, towns or villages that provide a broad range of services. It is possible that a special purpose government may only manage fiduciary programs. Governance structure is not the distinguishing feature of special-purpose governments.

Gold County received goods that had been approved for purchase but for which payment had not yet been made. Should the accounts listed below be increased? # Encumbrances Expenditures A No No B No Yes C Yes No D Yes Yes

B No Yes Thus, upon receipt of the goods, the Encumbrance account decreases and the Expenditures account increases.

Shared revenues received by an enterprise fund of a local government for operating purposes should be recorded as A Operating revenues. B Nonoperating revenues. C Other financing sources. D Interfund transfers.

B Nonoperating revenues. Grants, entitlements, and shared revenues received by proprietary funds should be reported as nonoperating revenues unless they are externally restricted to capital acquisitions.

An unrestricted grant received from another government to support enterprise fund operations should be reported as A Contributed capital. B Nonoperating revenues. C Operating revenues. D Revenues and expenditures.

B Nonoperating revenues. Interest income, interest expense, gain or loss on sales of capital assets, grants to or from other governments, operating transfers to or from other funds, and residual equity transfers are examples of transactions that are reported as nonoperating revenue.

The billings for transportation services provided to other governmental units are recorded by the internal service fund as A Transportation appropriations. B Operating revenues. C Interfund exchanges. D Intergovernmental transfers.

B Operating revenues. Internal service funds are accounted for in a similar manner to enterprise funds. A revenues or billings to others account is used for services provided to other departments or other governments. Appropriations accounts are budgetary accounts. Interfund exchanges would be between departments in the same governmental unit. Intergovernmental transfers are used when the same entity is doing the accounting for both governments.

Tang City received land from a donor who stipulated that the land must remain intact, but any income generated from the property may be used for general government services. In which fund should Tang City record the donated land? A Special revenue. B Permanent. C Private-purpose trust. D Agency.

B Permanent. The Permanent Fund accounts and reports assets whose principal is restricted and may not be spent, but must be invested on a permanent basis. Since land is restricted by the donor and income generated from the land can be spent, Tang city would record in permanent fund.

For state and local governmental units, generally accepted accounting principles require that encumbrances outstanding at year-end be reported as A Expenditure. B Reservations of fund balance. C Deferred liabilities. D Current liabilities.

B Reservations of fund balance. To assure that budgets are not overspent, most governmental units use an encumbrance system to keep track of outstanding purchase commitments that have not yet resulted in liabilities. When a purchase order or commitment is placed, the governmental unit reduces the amount of budgetary authority remaining in the budget category and records an outstanding encumbrance. It is only when the goods or services have been received that the encumbrance balance is reduced and the expenditure and a liability are recorded. Thus, encumbrances represent neither expenditures nor liabilities. Encumbrances outstanding at the end of a period should be carried forward as a reservation of fund balance, with a corresponding reduction in unreserved fund balance.

Except in specified circumstances, interest costs on long-term liabilities are reported under governmental accounting rules in which of the following manners? A Separately as a direct program cost B Separately as an indirect cost C In a particular note to the financial statements D None of the above

B Separately as an indirect cost In general, interest costs on long-term liabilities will be reported separately as an indirect cost (not in a particular note). Note disclosures will include information about how interest costs are reported and what amounts are included as direct expenses.

How would customers' security deposits which can not be spent for normal operating purposes be classified in the balance sheet of the enterprise fund of a governmental unit? # Restricted asset Liability Fund equity A No Yes No B Yes Yes No C Yes Yes Yes D Yes No Yes

B Yes Yes No The customers' security deposits cannot be spent for normal operating purposes. In the balance sheet of the enterprise fund, the cash received is classified as a restricted asset and a liability is created for the customer deposits payable.

Financing for the renovation of Fir City's municipal park, begun and completed during the year, came from the following sources: Grant from state government $400,000 Proceeds from general obligation bond issue $500,000 Transfer from Fir's general fund $100,000 In its capital projects fund operating statement, Fir should report these amounts as # Revenues Other Financing Sources A $1,000,000 $0 B $ 900,000 $ 100,000 C $ 400,000 $ 600,000 D $0 $1,000,000

C $ 400,000 $ 600,000 The capital projects fund reports unrestricted grants received from other governmental units as revenue. Therefore, the $400,000 grant from the state is reported as revenue in Fir's capital projects fund's operating statement. The capital projects fund reports long-term debt proceeds and operating transfers from other funds as other financing sources. Therefore, the $500,000 proceeds from the general obligation bond issue and the $100,000 transfer from Fir's general fund are reported as other financing sources of $600,000 in the capital projects fund's operating statement.

Cedar City issues $1,000,000, 6% revenue bonds were issued at par on April 1, to build a new water line for the water enterprise fund. Interest is payable every six months. What amount of interest expense should be reported for the year ended December 31? A $0 B $30,000 C $45,000 D $60,000

C $45,000 Since this is an enterprise fund, accrual accounting applies. Interest expense for the year includes the $30,000 ($1,000,000 × 6% × 1/2 year) paid on October 1st and the $15,000 ($1,000,000 × 6% × 1/4 year) accrued expense from October 1st through December 31 for a total of $45,000.

During the current year Knoxx County levied property taxes of $2,000,000, of which 1% is expected to be uncollectible. The following amounts were collected during the current year: Prior year taxes collected within the 60 days of the current year $ 50,000 Prior year taxes collected between 60 and 90 days into current year 120,000 Current year taxes collected in the current year 1,800,000 Current year taxes collected within the first 60 days of the subsequent year 80,000What amount of property tax revenue should Knoxx County report in its entity-wide statement of activities? A $1,800,000 B $1,970,000 C $1,980,000 D $2,000,000

C $1,980,000 Entity-wide statements, the government-wide statements, are done under normal accrual accounting. Only fund financial statements, done under modified accrual, would take into account any 60-day criteria. Under normal accrual accounting the amount of property tax revenue reported would be the $2,000,000 property taxes levied less the 1% ($20,000) for estimated uncollectible taxes for a total of $1,980,000. The entry would be: Taxes receivable - current 2,000,000 Estimated uncollectible taxes 20,000 Revenues control 1,980,000

A government makes a contribution to its pension plan in the amount of $10,000 for year 1. The actuarially-determined annual required contribution for year 1 was $13,500. The pension plan paid benefits of $8,200 and refunded employee contributions of $800 for year 1. What is the pension expenditure for the general fund for year 1? A $ 8,200 B $ 9,000 C $10,000 D $13,500

C $10,000 The annual pension cost differs from the pension expenditure/expense reported in the financial statements. The annual pension cost is the period cost of an employer's participation in a defined benefit pension plan. The pension expenditure/expense is the amount recognized by an employer in each accounting period for contributions to a pension plan.Therefore, the $10,000 contribution represents the pension expenditure for year 1.

Kingwood Town paid $22,000 cash for a flatbed trailer to be used in the general operations of the town. The expected useful life of the trailer is 6 years with an estimated $7,000 salvage value. Which of the following amounts would be reported? A $15,000 increase in equipment in the general fund. B $15,000 increase in investment in governmental activities column for fixed assets. C $22,000 increase in investment in governmental activities column for fixed assets. D $22,000 increase in equipment in the general fund.

C $22,000 increase in investment in governmental activities column for fixed assets. Purchased assets are reported in the governmental activities column at cost ($22,000). Long-term (capital) assets are not recorded in any governmental fund.

A local municipality had the following account balances and information related to interest on its bonds payable. What amount of interest expense would be reported its statement of activities for the year ended December 31, Year 2? $50,000 accrued interest on December 31, Year 1 $250,000 in interest payments made during Year 2 $47,000 accrued interest on December 31, Year 2 A $253,000 B $250,000 C $247,000 D $0

C $247,000 Because the statement of activities in a government-wide financial statement, it uses the full accrual method of accounting. This means that the change in interest accrual will affect the expense reported at the government-wide level. The reduction of $3,000 in accrued interest would reduce the amount of interest expense from the amount paid of $250,000 to $247,000.

The following obligations were among those reported by Fern Village at December 31: Vendor financing with a term of 10 months when incurred, in connection with a capital asset acquisition that is not part of a long-term financing plan $ 150,000 Long-term bonds for financing of capital asset acquisition 3,000,000 Bond anticipation notes due in six months, issued as part of a long-term financing plan for capital purposes 400,000What aggregate amount should Fern report as general long-term capital debt at December 31? A $3,000,000 B $3,150,000 C $3,400,000 D $3,550,000

C $3,400,000 Fern should report $3,400,000 as long-term capital debt. This amount is comprised of (1) $3,000,000 of long-term bonds for financing of capital asset acquisition and (2) $400,000 of bond anticipation notes due in six months that were issued as part of a long-term financing plan for capital purposes. Although the bond anticipation notes (BANs) are due in six months, the intent is to refinance the bond anticipation notes on a long-term basis. The vendor financing is not reported as long-term capital debt because it is not part of a long-term financing plan.

The following events relating to the City of Arrow's debt service funds occurred during the year ended December 31: All principal and interest due in the year were paid on time. Debt principal matured $ 3,000,000 Unmatured (accrued) interest on outstanding debt at Jan 1 45,000 Interest on matured debt 700,000 Unmatured (accrued) interest on outstanding debt at Dec 31 93,000 Interest revenue from investments 800,000 Cash transferred from general fund for retirement of debt principal 2,000,000 Cash transferred from general fund for payment of matured interest 600,000What is the total amount of expenditures that Arrow's debt service funds should record for the year? A $700,000 B $745,000 C $3,700,000 D $3,745,000

C $3,700,000 Mature long-term debt principal and related interest are recorded as debt service fund expenditures when due. Debt service funds are used to account for repayment of all general long-term debt and payment of related interest.

The following proceeds received by Arbor City are legally restricted to expenditure for specified purposes: Donation by a benefactor mandated to an expendable trust fund to provide meals for the needy $100,000 Sales taxes to finance the maintenance of tourist facilities in the shopping district 300,000 What amount should be accounted for in Arbor's special revenue funds? A $0 B $100,000 C $300,000 D $400,000

C $300,000 Special revenue funds are used to account for revenues that have been legally restricted as to expenditure. The NCGA provides several examples of revenues which would fall under this heading: (1) a state gasoline tax collected in order to maintain streets, (2) proceeds from parking meters which finance the local traffic court, and (3) state juvenile rehabilitation grants used to operate and maintain juvenile rehabilitation centers.

At the beginning of the current year, Paxx County's enterprise fund had a $125,000 balance for accrued compensated absences. At the end of the year, the balance was $150,000. During the year, Paxx paid $400,000 for compensated absences. What amount of compensated absences expense should Paxx County's enterprise fund report for the year? A $375,000 B $400,000 C $425,000 D $550,000

C $425,000 Enterprise funds must be used to account for a government's business-type operations that are financed and operated like private businesses--where the government's intent is that all costs of providing goods or services to the general public on a continuing basis are to be recovered primarily through user charges (operating revenue). Enterprise funds use normal accrual accounting. Compensated absence expense is $425,000 ($400,000 + $150,000-$125,000).

During its fiscal year ended June 30, Cliff City issued purchase orders totaling $5,000,000, which were properly charged to encumbrances at that time. Cliff received goods and related invoices at the encumbered amounts totaling $4,500,000 before year end. The remaining goods of $500,000 were not received until after year end. Cliff paid $4,200,000 of the invoices received during the year. What amount of Cliff's encumbrances were outstanding at June 30? A $0 B $300,000 C $500,000 D $800,000

C $500,000 The amount of Cliff's encumbrances that were outstanding at June 30 is $500,000 (i.e., $5,000,000- $4,500,000). When the purchase orders were issued, the following entry was made:

Baker City is planning to lease some trucks. Determine the lease term from the information given below: Non-cancellable period of the lease: 5 years Renewal periods not certain to be exercised: 2 years Periods covered under a termination option: 1 year Non-termination periods controlled by the lessor: 2 years It is to be assumed that the city won't exercise the termination option. A 5 years B 10 years C 8 years D 7 years

C 8 years For Governmental Accounting, the lease term is calculated the same way as it is in Financial Accounting under the FASB. The lease term or tenure of the lease is calculated as follows: Non-cancellable period: 5 years. Renewal periods "reasonably certain" of exercise Periods covered by a termination option reasonably certain not to be exercised: 1 Year Renewal periods (non-termination periods) controlled by lessor: 2 Years.Total: 8 Years.

When a lease of a governmental unit represents the acquisition of a general fixed asset, the acquisition should be reflected as A An expenditure but not as an other financing source. B An other financing source but not as an expenditure. C Both an expenditure and an other financing source. D Neither an expenditure nor an other financing source.

C Both an expenditure and an other financing source. When a lease represents the acquisition of a general capital asset, it is accounted for as a Contract that transfers ownership. The acquisition or construction of that asset should be reflected as an expenditure and Other Financing Source, consistent with the accounting and financial reporting for general obligation bonded debt.

On January 2, Basket ville City purchased equipment with a useful life of three years to be used by its water and sewer enterprise fund. Which of the following is the correct treatment for the asset? A Record the purchase of the equipment as an expenditure B Capitalize; depreciation is optional. C Capitalize; depreciation is required. D Capitalize; depreciation is not permitted.

C Capitalize; depreciation is required. Enterprise fund is a proprietary fund which uses accrual basis of accounting and applies economic resources approach. Preferred approach also called depreciation approach is to account for the assets and recognize depreciation.

Ridge Township's governing body adopted its general fund budget for the year ended July 31, comprised of estimated revenues of $100,000 and appropriations of $80,000. Ridge formally integrates its budget into the accounting records. To record the $20,000 budgeted excess of estimated revenues over appropriations, Ridge should A Credit estimated excess revenues control. B Debit estimated excess revenues control. C Credit budgetary fund balance. D Debit budgetary fund balance.

C Credit budgetary fund balance. The entry to record the adoption of the budget is as follows: Estimated Revenues Control 100,000 Appropriations Control 80,000 Budgetary Fund Balance--Unreserved 20,000

The budget of a governmental unit, for which the appropriations exceed the estimated revenues, was adopted and recorded in the general ledger at the beginning of the year. During the year, expenditures and encumbrances were less than appropriations; whereas revenues equaled estimated revenues. The budgetary fund balance account is A Credited at the beginning of the year and debited at the end of the year. B Credited at the beginning of the year and not changed at the end of the year. C Debited at the beginning of the year and credited at the end of the year. D Debited at the beginning of the year and not changed at the end of the year.

C Debited at the beginning of the year and credited at the end of the year. An excess of appropriations over estimated revenues calls causes a debit to the fund balance account at the beginning of the period. An excess of appropriations over expenditures and encumbrances causes a credit to the fund balance at the end of the period.

Park City uses encumbrance accounting and formally integrates its budget into the general fund's accounting records. Park incurred salaries and wages of $800,000 for the month of April. What account should Park debit to record this $800,000? A Encumbrances control B Salaries and wages expense control C Expenditures control D Operating funds control

C Expenditures control While goods and services committed for by purchase order or contract are encumbered in governmental funds to avoid overspending appropriations, some expenditures are controlled by other means and need not be encumbered. Salaries and wages are set by contract and controlled by established payroll procedures and are not encumbered. Salaries and wages expense would not be appropriate for a governmental-type fund. Salaries and wages should be recorded as follows: Expenditures control 800,000 Vouchers payable 800,000

Land and other real estate held as investments by endowments in a government's permanent fund should be reported at A Historical cost B The lower of cost and net realizable value C Fair value D Fair value less costs of disposal

C Fair value Endowments are donations and donations are recorded as revenue at fair value, regardless of their cost to the donor, and reported at fair value at statement dates.

Land and other real estate held as investments by endowments in a government's permanent fund should be reported at? A Historical cost. B The lower of cost and net realizable value. C Fair value. D Fair value less costs of disposal.

C Fair value. Land and other real estate held as investments by endowments should always be reported at fair value. And changes in fair value during the period should be reported as investment income/loss.

Which of the following funds of a governmental unit records depreciation? A Capital projects fund B Debt service fund C Internal service fund D Special revenue fund

C Internal service fund Internal Service fund is part of the proprietary funds which use the accrual basis of accounting with economic resources approach. Statement of revenue, expenses, and changes in net position: Operating revenues - Operating expenses +/- Non operating revenues (expenses) = Change in net position Depreciate capital assets

Farmer Township has adopted all provisions of GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. In which financial statements does Farmer present its general-use capital assets? # Fund Government-wide A Yes Yes B Yes No C No Yes D No No

C No Yes General capital assets are not specifically related to activities reported in proprietary or fiduciary funds. They are associated with, and generally arise from, governmental activities. They should not be reported as assets in governmental funds, but should be reported in the governmental activities column in the government-wide statement of net position.

Operating transfers received by a governmental-type fund should be reported in the Statement of Revenues, Expenditures, and Changes in Fund Balance as a(an) A Addition to contributed capital. B Addition to retained earnings. C Other financing source. D Reimbursement.

C Other financing source. Operating transfers should be recorded in distinctive Operating Transfers From (To) [Name of Fund] or Operating Transfers In (Out) accounts and reported after revenues and expenditures or expenses, but before determining the results of operations in the fund's operating statement.

Clay City levied property taxes of $600,000 for the current year, and estimated that $25,000 would be uncollectible. Which of the following is the correct general fund journal entry to record the property tax levy? A Property taxes receivable-current 600,000 Property tax revenue 600,000 B Property taxes receivable-current 575,000 Bad debt expense 25,000 Property tax revenue 600,000 C Property taxes receivable-current 600,000 Property tax revenue 575,000 Allowance for uncollectible property taxes-current 25,000 D Property taxes receivable-current 600,000 Bad debt expense 25,000 Property tax revenue 600,000 Allowance for uncollectible property taxes-current 25,000

C Property taxes receivable-current 600,000 Property tax revenue 575,000 Allowance for uncollectible property taxes-current 25,000 Property taxes are considered enforceable legal claim and is always recognized when billed. Government can expect to collect the amount billed to taxpayers once a property tax assessment is made as these taxes are mandatory. As a result, property taxes that have been billed usually satisfy the requirements of being measurable and available, and are accrued in advance of collection. However, an allowance for uncollectible must be established

In preparing combined financial statements for a governmental entity, interfund receivables and payables should be A Reported as reservations of fund balance. B Reported as additions to or reductions from the unassigned fund balance. C Reported as amounts due to and due from other funds. D Eliminated.

C Reported as amounts due to and due from other funds. Interfund receivables and payables are reported as amounts due to and due from other funds. They are not reported as reservations of fund balance or additions to or reductions from the unassigned fund balance. The option of eliminating the interfund assets and liabilities is allowed, but requires that such eliminations be apparent from the headings, or be disclosed in the notes to the financial statements.

Which of the following can be reported in a capital projects fund? A Bond proceeds for sewer treatment plant upgrades B Committed resources to expand water distribution system C Restricted, committed, or assigned resources for governmental capital outlays D Assigned resources for landfill postclosure care

C Restricted, committed, or assigned resources for governmental capital outlays Restricted, committed, or assigned resources for governmental capital outlays are reported in a capital projects fund. Sewer services, water utilities, and landfills are usually reported in an enterprise fund because these services are funded with user fees. Enterprise fund capital assets are not reported in a capital projects fund.

Special revenue funds are distinguished by which of the following characteristics? A User fees that recover costs of services, including capital costs, are imposed using the government's statutory authority to create a restricted revenue. B Beneficiaries are individuals, private organizations, or other governments. C Revenues are usually resources that are externally restricted or designated for specific general government purposes. D Restricted or committed proceeds cannot be the primary source of ongoing funding.

C Revenues are usually resources that are externally restricted or designated for specific general government purposes. The revenues in a special revenue fund must be restricted to a specific purpose to meet the GASB definition for this fund type. Special revenue funds are not required, unless there is a specific statutory or contractual requirement. Other resources may be included in the special revenue fund, but the restricted or committed proceeds must be the primary source of ongoing funding in the fund. User fees that recover costs or services is the characteristic for an enterprise fund. User fees that are restricted to the benefit of third-party beneficiaries refers to a private-purpose trust fund.

Which of the following transactions is an expenditure of a governmental unit's general fund? A Contribution of enterprise fund capital by the general fund B Operating subsidy transfer from the general fund to an enterprise fund C Routine employer contributions from the general fund to a pension trust fund D Transfer from the general fund to a capital projects fund

C Routine employer contributions from the general fund to a pension trust fund General funds use modified accrual accounting. Both capital purchases and operating expenditures are considered spending of funds and are treated as current year expenditure. Routine employer contribution to a pension trust fund is an expenditure.

The estimated revenues control account of a governmental unit is debited when A Actual revenues are recorded. B Actual revenues are collected. C The budget is recorded. D The budget is closed at the end of the year.

C The budget is recorded. The estimated revenues control account is a budgetary account. Budgetary accounts are generally opened with balances opposite of the corresponding actual account.

Gem City's internal service fund received a residual equity transfer of $50,000 cash from the general fund. This $50,000 transfer should be reported in Gem's internal service fund as a credit to A Revenues. B Other Financing Sources. C Transfers In. D Contributed Capital.

C Transfers In. Interfund transfers are flows of assets (such as cash or goods) without equivalent flows of assets in return and without a requirement for repayment. This category includes payments in lieu of taxes that are not payments for, and are not reasonably equivalent in value to, services provided. In governmental funds, transfers should be reported as other financing uses in the funds making transfers and as other financing sources in the funds receiving transfers. In proprietary funds, transfers should be reported after nonoperating revenues and expenses as transfers in or transfers out.

Elliott Township purchased a firetruck costing $1,000,000 in its general fund on January 1 of the current year. The truck had a useful life of 10 years and the Township has a policy of taking a full year's depreciation in the first year. How much depreciation related to the truck would the Township report on its statement of revenues, expenditures, and changes in fund balance? A $1,000,000 B $100,000 C $10,000 D $0

D $0 The statement of revenues, expenditures, and changes in fund balance is a fund-level financial statement for the governmental funds and uses the modified accrual method of accounting. The $1,000,000 for the firetruck would have been reported as an expenditure, and the truck itself would not have been capitalized at the fund level. Therefore, no depreciation would be reported on the statement of revenues, expenditures, and changes in fund balance.

Elm City issued a purchase order for supplies with an estimated cost of $5,000. When the supplies were received, the accompanying invoice indicated an actual price of $4,950. What amount should Elm debit (credit) to the reserve for encumbrances after the supplies and invoice were received? A $ (50) B $ 50 C $4,950 D $5,000

D $5,000 When the purchase order for the supplies was issued, the following entry was made: Encumbrances control (estimated cost of supplies) 5,000 Reserve for encumbrances 5,000

Dale City is accumulating financial resources that are legally restricted to payments of general long-term debt principal and interest maturing in future years. At December 31, $5,000,000 has been accumulated for principal payments and $300,000 has been accumulated for interest payments. These restricted funds should be accounted for in the # Debt service fund General fund A $ 0 $5,300,000 B $ 300,000 $5,000,000 C $5,000,000 $ 300,000 D $5,300,000 $ 0

D $5,300,000 $ 0 The debt service fund accounts for and reports the resources that are restricted, committed or assigned for this long-term debt purpose. This fund is responsible for accumulating and making both interest and principal payments on the tax supported debts of the government fund. Thus, both the accumulated principal and the interest payments will be accounted for in the debt service fund for $5,300,000. Only activities not accounted for in other funds will be reported in the general fund

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? A $300,000 B $500,000 C $800,000 D $900,000

D $900,000 Expenditures differ from expenses (as defined in commercial accounting) because expenditures include—in addition to current operating expenditures that benefit the current period—capital outlays for general fixed assets and repayment of general long-term debt principal. Payments of principal on long-term debt $100,000 Payments to vendors 500,000 Purchase of a computer 300,000 Total expenditures $900,000

The budgetary fund balance reserved for encumbrances account of a governmental-type fund is increased when A The budget is recorded. B Appropriations are recorded. C Supplies previously ordered are received. D A purchase order is approved.

D A purchase order is approved. The budgetary fund balance reserved for encumbrances is increased when a purchase order is approved. The budgetary fund balance reserved for encumbrances is not affected when the budget (along with the related appropriations) is recorded. Upon receipt of the item previously ordered, The budgetary fund balance reserved for encumbrances is decreased. The following entry is made when a purchase order of $50 is approved:

A budgetary fund balance reserved for encumbrances in excess of a balance of encumbrances indicates A An excess of vouchers payable over encumbrances. B An excess of purchase orders over invoices received. C An excess of appropriations over encumbrances. D A recording error.

D A recording error. The Encumbrance and BFBRFE accounts will have identical balances unless a recording error was made.

The following information pertains to Grove City's interfund receivables and payables at December 31: Due to special revenue fund from general fund $10,000 Due to custodial fund from special revenue fund 4,000 In Grove's special revenue fund balance sheet at December 31, how should these interfund amounts be reported? A As an asset of $6,000. B As a liability of $6,000. C As an asset of $4,000 and a liability of $10,000. D As an asset of $10,000 and a liability of $4,000.

D As an asset of $10,000 and a liability of $4,000. The interfund receivables and payables of a governmental fund should not be netted. Therefore, the special revenue fund should report an asset of $10,000 for the amount due from the general fund and a liability of $4,000 for the amount due to the custodial fund.

Grove Township issued $50,000 of bond anticipation notes at face amount in the current year 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? A Other Financing Sources Control B Revenues Control C Deferred Revenues D Bond Anticipation Notes Payable

D Bond Anticipation Notes Payable A governmental unit would issue bond anticipation notes (BANs) to provide funds to defray costs expected to be incurred before the related bonds are issued. Such notes are treated as long-term debt, even if due within one year, if (1) they are to be repaid with the proceeds of the bond issue, (2) all legal steps have been taken to refinance the notes, and (3) the intent is supported by an ability to refinance the short-term notes on a long-term basis. Since all of these criteria are not met for the bond anticipation notes in question, they are reported as a liability of the capital projects fund.

Arbor City has adopted GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. What basis of accounting does Arbor use to present the general fund in the financial statements? Modified accrual basis in all financial statements. Accrual basis in the government-wide statement of activities and statement of net position. Modified accrual basis in the fund financial statements with a reconciliation to the accrual basis. A I only B II only C III only D Both II and III

D Both II and III Government-wide statements aggregate information for all governmental and business-type activities on the accrual basis of accounting. Fund financial statements use modified accrual and a reconciliation to the government-wide statement must appear on the face of the governmental-type fund financial statements or in a separate schedule.

Which of the following is not reported in the enterprise fund Statement of Net Position? A Net investment in capital assets B Restricted C Unrestricted D Capital contributions

D Capital contributions Capital contributions is not a category used on the government-wide statement of net position. Net position will be displayed in the same three categories that we used on the government-wide statement of net position: invested in capital assets, net of related debt; restricted net position; and unrestricted net position.

It is inappropriate to record depreciation expense in a(n) A Enterprise fund. B Internal service fund. C Nonexpendable trust fund. D Capital projects fund.

D Capital projects fund. Capital project funds are designed only for construction in progress and have a limited life encompassing the construction period. Depreciation expense is not recorded during construction.

Central County received proceeds from various towns and cities for capital projects financed by Central's long-term debt. A special tax was assessed by each local government, and a portion of the tax was restricted to repay the long-term debt of Central's capital projects. Central should account for the restricted portion of the special tax in which of the following funds? A Internal service fund B Enterprise fund C Capital projects fund D Debt service fund

D Debt service fund Debt service funds account for the accumulation of resources for, and the payment of, general long-term debt principal and interest. Therefore, the portion of the special tax that is restricted to repay the long-term debt of the government's capital projects fund should be accounted for in a debt service fund.

Encumbrances would not appear in which fund? A Capital projects. B Special revenue. C General. D Enterprise.

D Enterprise. The encumbrance system is used in governmental funds (general, special revenue, and capital projects funds) to prevent over-expenditure and to demonstrate compliance with legal requirement

Financial statements for which fund type generally report net position? A Capital projects. B Expendable pension trust. C Special revenue. D Enterprise.

D Enterprise. The enterprise fund generally reports net position. The capital projects and special revenue funds are governmental-type funds, and thus report a fund balance. Expendable trusts (under the outgoing reporting model) use fund balance accounts also.

When Rolan County adopted its budget for the current year ending June 30, $20,000,000 was recorded for estimated revenues control. Actual revenues for the fiscal year amounted to $17,000,000. In closing the budgetary accounts at June 30, A Revenues control should be debited for $3,000,000. B Estimated revenues control should be debited for $3,000,000. C Revenues control should be credited for $20,000,000. D Estimated revenues control should be credited for $20,000,000.

D Estimated revenues control should be credited for $20,000,000. The estimated revenues control account of a governmental fund type is a budgetary account (i.e., it is not used to record actual revenues). Its balance is eliminated when the budgetary accounts are closed. The entry to close the estimated revenues control and revenues control accounts to unassigned fund balance is as follows: Revenues control 17,000,000 Unassigned Fund balance (difference) 3,000,000 Estimated revenues control 20,000,000

Which of the following journal entries should a city use to record $250,000 for fire department salaries incurred during May? # Debit Credit A Salaries expense Appropriations $250,000 $250,000 B Salaries expense Encumbrances $250,000 $250,000 C Encumbrances Salaries payable $250,000 $250,000 D Expenditures--salaries Salaries payable $250,000 $250,000

D Expenditures--salaries Salaries payable $250,000 $250,000 Fire department salaries and wages are expenditures of the general government, not expenses of a propriety fund. While goods and services committed for by purchase order or contract are encumbered in governmental funds to avoid overspending appropriations, some expenditures are controlled by other means and need not be encumbered. Salaries and wages are set by contract and controlled by established payroll procedures and are not encumbered.

A state had general obligation bonds outstanding that required payment of interest on July 1 and January 1 of each year. State law allowed for the general fund to make debt payments without the use of a fiscal agent. The fiscal year ended June 30. Which of the following accounts would have decreased when the state paid the interest due on July 1? A Interest expenditures B Interest payable C Interest expense D Fund balance

D Fund balance The general fund is used to account for most routine operations of the governmental entity. This fund accounts for all resources that are not required to be accounted for in other funds; in essence, it accounts for all unrestricted resources. The general fund uses modified accrual accounting. A fund balance is the difference between governmental fund assets and liabilities reported on the balance sheet.

GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, requires large governments (annual revenues in the range above $100 million) to Report all fixed assets (land, buildings, and equipment). In fiscal periods beginning after June 15, 2001, report major general infrastructure asset acquisitions. In fiscal periods beginning after June 15, 2005, retroactively report major general infrastructure assets acquired in fiscal years ending after June 30, 1980, and before adoption of GASB Statement No. 34. A I only B I and II only C I and III only D I, II, and III

D I, II, and III GASB 34 requires all governments to report all current fixed assets and new capital assets. Capital assets include assets formerly listed in the general fixed asset account group (land, buildings, and equipment) and infrastructure assets. The retroactive infrastructure asset reporting requirements are required for the largest two categories of governments and optional for small governments (annual revenues under $10 million). If determining the actual historical cost of general infrastructure assets is not practical because of inadequate records, governments should report the estimated historical cost for major general infrastructure assets that were acquired or significantly reconstructed, or that received significant improvements, in fiscal years ending after June 30, 1980. Capital assets should be depreciated over their estimated useful lives unless they are either inexhaustible or are eligible infrastructure assets reported using the modified approach; however, the modified approach condition assessment is not one of the answer options.

GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, does not require depreciation of which of the following assets purchased after June 30, 1980? Land and land improvements Historical treasures and works of art that meet the conditions of an inexhaustible collection Infrastructure assets that are part of a network or subsystem of a network, when the modified approach is used A I only B I and II only C I and III only D I, II, and III

D I, II, and III Unless held as a collection, works of art, historical treasures, and similar assets should be capitalized at historical cost or fair value at date of donation. Eligible infrastructure assets are not required to be depreciated, if the government meets certain conditons, including documenting that the assets are preserved approximately at (or above) a condition level established and disclosed by the government. Land and land improvements are not depreciable assets.

An enterprise fund would be used when the governing body requires that Accounting for the financing of an agency's services to other government departments be on a cost-reimbursement basis. User charges cover the costs of general public services. Net income information be provided for an activity. A I only B I and II C I and III D II and III

D II and III Enterprise funds should be used to account for operations (1) that are financed in a manner to private business enterprises—where the intent of the governing body is that the costs, including depreciation, of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges;

Nack City received a donation of a valuable painting. Nack planned to add the painting to its collection and display it in the protected exhibition area of city hall. Nack had a policy that if such donated art works were sold, the proceeds would be used to acquire other items for its collections. Which of the following would be correct regarding the donated painting? A Must be capitalized and depreciated. B Must be capitalized but not depreciated. C May be capitalized, but it is not required, and it must be depreciated. D May be capitalized, but it is not required, and depreciation is not required.

D May be capitalized, but it is not required, and depreciation is not required. Governments are encouraged, but not required, to capitalize a collection of works of art or historical treasures (and all additions to that collection) whether donated or purchased that meets all of the following conditions. The collection is 1) held for public exhibition, education, or research in furtherance of public service rather than financial gain, 2) protected, kept encumbered, cared for, and preserved, and 3) subject to an organizational policy that requires the proceeds from sales of collection items to be used to acquire other items for collections. Capitalized collections or individual items that are exhaustible, such as exhibits whose useful lives are diminished by display or educational or research applications, should be depreciated over their estimated useful lives. Depreciation is not required for collections or individual items that are inexhaustible.

Through an internal service fund, New County operates a centralized data processing center to provide services to New's other governmental units. This internal service fund billed New's parks and recreation fund $150,000 for data processing services. What account should New's internal service fund credit to record this $150,000 billing to the parks and recreation fund? A Data processing department expenses B Intergovernmental transfers C Interfund exchanges D Operating revenues control

D Operating revenues control Billings for services provided to other governmental units are recorded by the internal service fund as operating revenues.

Which of the following items is an example of imposed nonexchange revenue for a governmental entity? A Personal income taxes B Retail sales tax C Federal grant money D Property taxes

D Property taxes Imposed nonexchange revenues represent assessments imposed on non-governmental entities and include property taxes and fines or forfeitures. Taxes on earnings or consumption are classified as derived tax revenues. Certain grants, entitlements, and donations are classified as voluntary nonexchange transactions. Voluntary nonexchange transactions result from legislative or contractual agreements involving parties that may or may not be governmental entities, but do not involve an exchange of equal value.

Which of the following characteristics of service efforts and accomplishments is the most difficult to report for a governmental entity? A Comparability B Timeliness C Consistency D Relevance

D Relevance Comparability, consistency, and timeliness in SEA reporting are readily accomplished for a single governmental entity. Ensuring that reported performance yardsticks measure goals and desired effects is more complex.

Which account should Spring Township credit when it issues a purchase order for supplies? A Appropriations control. B Vouchers payable. C Encumbrance control. D Reserve for encumbrances.

D Reserve for encumbrances.