Chapter 4: Governmental Accounting
How much should be classified as capital assets in Wilson's General Fund balance sheet at June 30, 2015? A) $ -0-. B) $ 3,000. C) $ 9,000. D) $12,000.
A) $ -0-.
The journal entry to record the re-establishment of encumbrances that were outstanding at the close of the prior period would include: A) A credit to Budgetary Fund Balance - Reserve for Encumbrances B) A debit to Budgetary Fund Balance - Reserve for Encumbrances C) A credit to Encumbrance Control D) A and B would both be included in the journal entry
A) A credit to Budgetary Fund Balance - Reserve for Encumbrances
Under modified accrual accounting, revenues are recognized when measurable and: A) Available. B) Collected. C) Earned. D) Expenditures have been made.
A) Available.
Liabilities incurred, such as for accrued payroll, but still unpaid at year-end, should be recorded in the General Fund by a debit to which one of the following accounts? A) Current Expense. B) Appropriations. C) Encumbrances. D) Expenditures.
A) Current Expense.
When the materials and supplies are received and the invoice is more than the related purchase order, this entry should be made: A) Debit Expenditures Control for the amount of the invoice. B) Debit Expenditures Control for the amount of the purchase order. C) Credit Accounts Payable for the amount of the purchase order. D) Credit Encumbrances Control for the amount of the invoice.
A) Debit Expenditures Control for the amount of the invoice.
General Fund resources were expended in the amount of $185,000 to purchase a new fire truck. The General Fund would debit: A) Expenditures Control. B) Capital assets -Motor Vehicles. C) Both (a) and (b) above. D) None of the above; no entry is made in the General Fund when a motor vehicle is purchased because only current financial resources are recorded in the General Fund.
A) Expenditures Control.
The asset, equipment, used by a department accounted for by the General Fund of a governmental unit should be reported in the: A) Government-wide statements. B) General Fund. C) Both (a) and (b). D) None of the above.
A) Government-wide statements.
Moving cash from the General Fund to a debt service fund for payment of debt service is an example of a (an) A) Interfund transfer. B) Interfund loan. C) Interfund reimbursement. D) Quasi-external transaction.
A) Interfund transfer.
A donor pledged $200,000 to the fund raising drive of a local government to assist its police officers in obtaining the latest technology. The pledge was made on July 16, 2014, but was conditioned on the government raising an additional $200,000 from other donors. By the fiscal year-end of June 30, 2015, the local government had raised only $5,000 from other donors. What entry would be made for the initial pledge by the local government during the year ended June 30, 2015? A) No entry is required until the condition is fully met. B) Debit a receivable and credit deferred inflows. C) Debit a receivable and credit Fund Balance. D) Debit a receivable and credit revenue
A) No entry is required until the condition is fully met.
The city of Canandaigua receives proceeds from the sale of land, the transaction is considered to be a special item. The proceeds are: A) Reported separately after other financing sources and uses. B) Reported as a revenue. C) Reported as an item that changes the Fund Balance. D) Not recorded but the gain on the sale is.
A) Reported separately after other financing sources and uses.
A December 2015 year-end government should record which of the following as expenditures: A) Salaries Payable due January 20, 2015. B) Bond Payable that matures January 30, 2015. C) Bond Payable that matures February 14, 2015. D) Both A & B.
A) Salaries Payable due January 20, 2015.
Which of the following is true with respect to Special revenue funds? A) Special revenue funds are used when it is desirable to provide separate reporting of resources that are restricted or committed as to expenditure for purposes other than debt service or capital projects. B) Special revenue funds are used when it is desirable to provide separate reporting of resources that are designated for specific purposes. C) Special revenue funds are used when it is desirable to provide separate reporting for funds provided by other governments to support capital projects. D) Both B and C
A) Special revenue funds are used when it is desirable to provide separate reporting of resources that are restricted or committed as to expenditure for purposes other than debt service or capital projects.
The term special item is defined as: A) Unusual or infrequent but within management's control. B) Frequent and unusual but within management's control. C) Frequent and unusual and not within management's control. D) Unusual or infrequent and not within management's control.
A) Unusual or infrequent but within management's control.
Indicate which of the following use Modified Accrual Accounting? A) Yes No Yes No B) No Yes No Yes C) Yes No Yes Yes D) Yes Yes No No
A) Yes No Yes No
The General Fund of the City of Lexington approved a tax levy for the calendar year 2015 in the amount of $2,000,000. Of that amount, $30,000 is expected to be uncollectible. During 2015, $1,750,000 was collected. During 2016, $100,000 was collected during the first 30 days, $50,000 was collected during days 31-60, and $70,000 was collected during the days 61-90. During the post-audit, you discovered that the City showed $2,000,000 in revenues. How much revenue should the City recognize in 2015 from this tax levy? A) $ 1,850,000 B) $ 1,900,000 C) $ 1,920,000 D) $ 2,000,000
B) $ 1,900,000
The federal government sent the funds in the month following the expenditure. The local government would recognize revenues for the fiscal year ended June 30, 2015 in which amount? A) $ -0-. B) $400,000. C) $700,000. D) $950,000.
B) $400,000.
The City of Pine Cove levied property taxes for the fiscal year ended June 30, 2015, in the amount of $10,000,000. It is estimated that 2% will not be collected. During the year ended June 30, 2015, $8,500,000 in property taxes was collected. It is estimated that $550,000 will be collected during the next 60 days, $765,000 will be collected after 60 days, and $185,000 will not be collected. What is the maximum amount Lonesome Pines can recognize as property tax revenue for the fiscal year ended June 30, 2015, in its Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances, assuming there were no unpaid property taxes at the end of the previous year? A) $8,500,000. B) $9,050,000. C) $9,815,000. D) $10,000,000.
B) $9,050,000.
The journal entry to record the property tax levy for a municipality would include: A) A debit to Bad Debts Expense B) A credit to Estimated Uncollectible Current Taxes C) A credit to Taxes Receivable - Current D) A and B would both be included in the journal entry
B) A credit to Estimated Uncollectible Current Taxes
The entry to re-establish encumbrances related to purchase orders from the prior year would include: A) A debit to Budgetary Fund Balance - Reserved for Encumbrances. B) A debit to Encumbrances Control. C) A credit to Accounts Payable D) None of the above.
B) A debit to Encumbrances Control.
The journal entry to record the budget of a Special Revenue Fund would include: A) A debit to appropriations Control B) A debit to Estimated Revenues Control C) A credit to Estimated Revenues Control D) None of the above, Special Revenue Funds do not record budgets
B) A debit to Estimated Revenues Control
When supplies ordered by a governmental unit are received at an actual price which is less than the estimated price on the purchase order, the Encumbrance Control account is: A) Credited for the actual price on the purchase invoice. B) Credited for the original estimated price for the supplies. C) Debited for the original estimated price for the supplies D) Debited for the actual price on the purchase invoice.
B) Credited for the original estimated price for the supplies.
Which of the following statements is not true regarding modified accrual accounting? A) Expenditures and fund liabilities are recorded when goods and services are received. B) Debt service expenditures for principal and interest are accrued. C) Expenditures for claims and judgments and landfill post-closure care costs of governmental funds should be recognized to the extent that the liabilities are going to be paid with available resources. D) Compensated absences and special termination benefits of governmental funds that will not be paid with available resources should be reported as liabilities in the government-wide statements.
B) Debt service expenditures for principal and interest are accrued.
What is the effect on the General Fund's fund balance when capital assets are purchased during a year from General Fund revenues? A) Fund balance is increased. B) Fund balance is decreased. C) There is no effect, since one asset (cash) is replaced by another (capital asset). D) None of the above, capital assets must be purchased through a capital projects fund.
B) Fund balance is decreased.
When delinquent taxes are written off: A) Fund balance will decrease B) Fund balance will be unaffected C) Expenditures will increase D) Both a and c.
B) Fund balance will be unaffected
Under which fund type would you debit expenditure when land is acquired? A) Proprietary. B) Governmental. C) Both of the above. D) None of the above.
B) Governmental.
Regarding interfund transactions, which of the following is not correct? A) Transaction between funds are not assumed to be arm's length in nature B) Interfund transactions must be repaid. C) Failure to properly report interfund transactions will result in two funds being misstated. D) Interfund reimbursement is a payment by one fund to second fund to repay it for a purchase which belongs in the first fund.
B) Interfund transactions must be repaid.
Reciprocal interfund activity: A) Does not include interfund loans B) Is the internal counterpart to exchange transactions C) Includes interfund transfers D) None of the above
B) Is the internal counterpart to exchange transactions
Under the modified accrual basis of accounting, GASB standards for property tax revenue recognition provide that revenue should not be recognized for property taxes collected: A) More than 90 days after fiscal year end. B) More than 60 days after fiscal year end. C) More than 30 days after fiscal year end. D) After fiscal year end.
B) More than 60 days after fiscal year end.
The initial transfer of cash from the General Fund to establish a motor pool internal service fund would require the General Fund to credit Cash and debit: A) Investment in Internal Service Fund. B) Other Financing Uses-Transfers Out Control. C) Expenditures - Vehicle maintenance. D) Accounts Receivable-Internal Service Fund.
B) Other Financing Uses-Transfers Out Control.
The expenditures account equals the amount of supplies purchased during a period under which of the following inventory methods? A) Perpetual. B) Purchases. C) Periodic. D) Consumption.
B) Purchases.
When recording property taxes, the estimated uncollectible amount of property taxes is: A) Recognized as an expenditure. B) Recognized as a reduction of revenue. C) Not recognized. D) None of the above.
B) Recognized as a reduction of revenue.
Debt service expenditures for interest are: A) Accrued. B) Recorded when due but may be accrued at year end if the debt service due date is less than 30 days after year end. C) Recorded when due but may be accrued at year end if the debt service due date is less than 60 days after year. D) Reported only in the government-wide statements.
B) Recorded when due but may be accrued at year end if the debt service due date is less than 30 days after year end.
Which of the following General Fund accounts would be closed at year end? A) Due from State Government. B) Special Items - Proceeds from Sale of Land. C) Taxes Receivable - Delinquent. D) Deferred Inflows - Property Taxes.
B) Special Items - Proceeds from Sale of Land.
The journal entry to write off an uncollectible property tax receivable for a municipality would include: A) A credit to Estimated Uncollectible Current Taxes B) A debit to Bad Debts Expense C) A credit to Taxes Receivable - Current D) B and C would both be included in the journal entry
C) A credit to Taxes Receivable - Current
Interfund transfers occur between individual funds in the same government system without the requirement of repayment. If the General Fund transferred money to the Debt Service Fund, how would the Debt Service Fund account for the transaction? A) As non-operating revenue. B) As a liability on the balance sheet. C) As a source of funds on the activities statement. D) As a reduction in net liabilities.
C) As a source of funds on the activities statement.
Which of the following is true regarding modified accrual accounting? A) Revenues are recognized when measurable and available to finance expenditures of the current period. B) Expenditures are generally recognized as the related goods or services are received. C) Both (a) and (b) above. D) None of the above.
C) Both (a) and (b) above.
Which of the following accounts in the General Fund is credited when a purchase order is approved? A) Appropriations Control. B) Encumbrances Control. C) Budgetary Fund Balance -- Reserve for Encumbrances. D) Vouchers Payable.
C) Budgetary Fund Balance -- Reserve for Encumbrances.
Which of the following accounts of a governmental unit's General fund is debited when supplies previously ordered are received? A) Encumbrances Control. B) Reserve for Supplies. C) Budgetary Fund Balance -- Reserve for Encumbrances. D) Appropriations.
C) Budgetary Fund Balance -- Reserve for Encumbrances.
In February, X City ordered $550,000 of supplies. On March 17th it received all of the ordered supplies and an invoice of $551,000. Which of the following would be recorded upon receipt of the supplies and invoice? A) Debit Encumbrances Control for $550,000. B) Debit Encumbrances Control for $551,000. C) Debit Budgetary Fund Balance -- Reserve for Encumbrances for $550,000. D) Debit Budgetary Fund Balance -- Reserve for Encumbrances for $551,000.
C) Debit Budgetary Fund Balance -- Reserve for Encumbrances for $550,000.
Interfund Transfers are flows of cash or other assets that: A) Require repayment. B) Are an exchange between funds of equal value. C) Do not require repayment. D) Are taxable.
C) Do not require repayment.
Which account would be debited when the City of Corfu issued purchase orders for materials and supplies? A) Budgetary Fund Balance -- Reserve for Encumbrance. B) Expenditures. C) Encumbrances Control. D) Materials and supplies expense.
C) Encumbrances Control.
The City of Aurora increased its revenue budget by $75,000 and the appropriation for the Public Works Department was increased by $100,000. What is the journal entry to record this event in the General Fund? A) Estimated Revenues Control 75,000 Fund Balance 25,000 Appropriations Control 100,000 B) Appropriations Control 100,000 Estimated Revenues Control 75,000 Budgetary Fund Balance 25,000 C) Estimated Revenues Control 75,000 Budgetary Fund Balance 25,000 Appropriations Control 100,000 D) Estimated Revenues Control 75,000 Appropriations Control 75,000
C) Estimated Revenues Control 75,000 Budgetary Fund Balance 25,000
The General Fund of the City of Bangor purchased water from its Water Utility Fund in the amount of $20,000. The General Fund would debit: A) Water Expense. B) Other Financing Uses-Transfers Out. C) Expenditures Control. D) None of the above; no entries would be made.
C) Expenditures Control.
Interfund services purchased by the General Fund are recognized as: A) Transfers Out. B) Decreases in Fund Balance. C) Expenditures. D) None of the above.
C) Expenditures.
Which of the following statements is not correct? A) Transactions between funds of the same government may not be assumed to be arms' length in nature. B) Most interfund transactions are eliminated in the government-wide statements C) Interfund reimbursements are classified as other financing sources or uses D) Interfund transfers are classified as other financing sources or uses
C) Interfund reimbursements are classified as other financing sources or uses
Governmental fund financial statements are to be prepared on the A) Accrual basis of accounting. B) Cash basis of accounting. C) Modified accrual basis of accounting. D) Tax basis of accounting.
C) Modified accrual basis of accounting.
Which of the following occurs when uncollectible delinquent taxes are written off? (Ignore interest and penalties) A) Delinquent Tax Receivable is increased. B) Accounts receivable goes down and the Estimated Uncollectible Taxes Account is increased. C) Net receivables remain unchanged. D) Uncollectible Delinquent Tax Expense is increased.
C) Net receivables remain unchanged.
When would a special revenue fund be deemed to have satisfied the eligibility requirement of a reimbursement-type federal grant, under GASB Statement 33? A) Only after work is completely finished for the project. B) When a plan for use of the funds has been developed and approved. C) Only as qualified expenditures are incurred. D) When the grant is first approved by the granting agency.
C) Only as qualified expenditures are incurred.
A transfer should be reported in the operating statement of the General Fund as a(an): A) Revenue or Expenditure. B) Due from or Due to Other Funds. C) Other Financing Source or Use. D) None of the above, it is a direct increase or decrease to fund balance.
C) Other Financing Source or Use.
What would be the effect on the General Fund's Fund Balance at the end of the current fiscal year of recording the purchase of a $5,000 new computer with a five year estimated useful life and zero salvage? A) Have no effect on the General Fund's Fund Balance. B) Reduce the General Fund's Fund Balance $1,000. C) Reduce the General Fund's Fund Balance $5,000. D) Reduce the General Fund's Fund Balance $6,000.
C) Reduce the General Fund's Fund Balance $5,000.
Which of the following is not likely to be recorded in a special revenue fund? A) Phone fees restricted to supporting the emergency 911 access system. B) Hotel taxes restricted to promoting tourism. C) Sales taxes restricted to courthouse additions. D) State motor fuel tax restricted to road maintenance.
C) Sales taxes restricted to courthouse additions.
Which of the following is true regarding the use of Special Revenue Funds? A) Special Revenue Funds may be used whenever a government wishes to segregate income for specific purposes. B) Special Revenue Funds are appropriate if the sole source of resources are assigned funds C) Special Revenue Funds may only be used when a substantial portion of the resources are provided by restricted or committed revenue sources. D) Once a Special Revenue Fund is established, it will continue to be a Special Revenue Fund until all resources are exhausted.
C) Special Revenue Funds may only be used when a substantial portion of the resources are provided by restricted or committed revenue sources.
Which of the following is false with respect to Special revenue funds? A) Resources appropriately reported within proprietary or fiduciary funds are excluded from special revenue funds. B) A special revenue funds would be used to account for taxes which are required by state law to be used by the government to support specific activities. C) Special revenue funds may be used for any designated purpose to segregate revenues and ensure compliance with restrictions. D) None of the above
C) Special revenue funds may be used for any designated purpose to segregate revenues and ensure compliance with restrictions.
When payrolls and other liabilities are incurred and must be paid before substantial amounts of cash will be collected, what type of short-term note is desirable and secured by a government's power to tax? A) Tax Relief Note Payable. B) Tax Budget Note Payable. C) Tax Anticipation Note Payable. D) Tax Encumbrances Note Payable.
C) Tax Anticipation Note Payable.
The City of Brownsville had a balance in the Budgetary Fund Balance -- Reserve for Encumbrances account at the end of 2014 in the amount of $90,000. During 2015, all purchase orders related to the $90,000 were filled, and the invoice amount was $91,200. Which of the following would be true regarding the Statement of Revenues, Expenditures, and Changes in Fund Balances for 2015? (assume encumbrances do not lapse) A) The amount shown for Expenditures would include only the $1,200. B) The amount shown for Expenditures would include only the $90,000. C) The amount shown for Expenditures would include the $91,200. D) The amount shown for Expenditures would not include items related to orders placed in 2014.
C) The amount shown for Expenditures would include the $91,200.
GASB requires which of the following to be reported separately after other financing sources and uses in the Statement of Revenues, Expenditures, and Changes in Fund Balance? A) Special items. B) Extraordinary items. C) Interfund transfers. D) A and B
D) A and B
The journal entry to record an encumbrance would include: A) A debit to Encumbrance Control B) A debit to Budgetary Fund Balance - Reserve for Encumbrances C) A credit to Budgetary Fund Balance - Reserve for Encumbrances D) A and C would both be included in the journal entry
D) A and C would both be included in the journal entry
$60,000 of property tax owed to the city of Akron will not be collected within 60 days after year end. The year-end journal entry to record this information would include a: A) A credit to Revenues Control. B) A debit to Deferred Inflows - Property Taxes. C) A credit to Income Taxes Receivable. D) A debit to Revenues Control.
D) A debit to Revenues Control.
Purchase orders for items ordered by the General Fund totaled $ 205,000. Upon receipt, invoices for these items totaled $200,000. Which of the following will take place on the date the goods are received. A) An encumbrance is debited for $205,000. B) Budgetary Fund Balance -- Reserve for Encumbrances is credited for $200,000. C) An expenditure is credited for $205,000. D) A liability is credited for $200,000.
D) A liability is credited for $200,000.
When accounting for the General Fund, the Encumbrances Control account is credited when: A) A purchase order is approved. B) The budget is approved. C) An invoice is paid. D) A purchase order is filled or canceled.
D) A purchase order is filled or canceled.
Which of the following is correct with respect to accounting for supplies inventories in a governmental fund? A) Supplies inventories may be recorded using either the purchase method or the consumption method. B) An amount equal to the ending balance of supplies is reported as Nonspendable Fund Balance. C) The consumption method is preferable over the purchase method since it requires no adjustment to supplies expense when preparing the government-wide statements. D) All of the above are correct
D) All of the above are correct
Which of the following is an interfund transaction? A) Interfund services provided and used B) Interfund transfers C) Interfund loans D) All of the above are interfund transactions
D) All of the above are interfund transactions
The journal entry to record the prior year's deferred Inflows: property taxes (those expected to be collected more than 60 days beyond year-end) as revenue in the current year would include: A) A debit to Revenues Control B) A debit to Deferred Inflows: Revenues C) A credit to Revenues Control D) B and C would both be included in the journal entry
D) B and C would both be included in the journal entry
The Town of Little River expects to collect $90,000 in sales tax from the state government within 30 days of the end of fiscal year 2015 for retail sales taking place in fiscal year 2015. What entry, if any, would Little River make at the end of 2015? A) Taxes receivable - current 90,000 Deferred Inflows 90,000 B) Taxes receivable - deferred 90,000 Revenues control 90,000 C) Taxes receivable - current 90,000 Due from state government 90,000 D) Due from state government 90,000 Revenues control 90,000
D) Due from state government 90,000 Revenues control 90,000
The Expenditures control account in the General Fund is debited when: A) Supplies are ordered. B) The budget is recorded. C) The books are closed at the end of the year. D) Equipment previously ordered is received.
D) Equipment previously ordered is received.
When closing out the General Fund and Special Revenue Funds of a state or local governmental unit, the balance of the operating statement are closed to: A) Budgetary Fund Balance - Reserved for Encumbrances. B) Appropriations Control. C) Other Financing Sources - Transfer Out. D) Fund Balance.
D) Fund Balance.
Nonreciprocal interfund activity: A) Includes interfund services provided and used B) Includes exchange-like transactions C) Includes interfund loans D) Includes interfund transfers and reimbursements
D) Includes interfund transfers and reimbursements
The Revenues Control account of the General Fund is debited when: A) The budget is recorded at the beginning of the year. B) Uncollectible taxes receivable accounts are written off. C) Property taxes are collected. D) None of the above.
D) None of the above.
Which of the following accounts of a governmental unit's General Fund is credited to close it at the end of the fiscal year? A) Appropriations Control. B) Other Financing Sources-Transfers In. C) Budgetary Fund Balance -- Reserve for Encumbrances. D) None of the above.
D) None of the above.
Short-term loans which are backed by the taxing power of the governmental unit and used to meet working capital requirements are called: A) Appropriation loan. B) Inter-fund loans. C) Other financing sources. D) Tax anticipation notes.
D) Tax anticipation notes.
Expenditures are generally recorded and fund liabilities are recognized A) When goods and services are received, but only if resources are available in the fund. B) When invoices are paid. C) When purchase orders are issued, regardless of whether or not resources are available in the fund. D) When goods and services are received, regardless of whether or not resources are available in the fund.
D) When goods and services are received, regardless of whether or not resources are available in the fund.