Exam II Part 1

Which of the following are methods that governments use to finance capital assets? a. Capital leases b. Serial general obligation bonds c. Term general obligation bonds d. Service concession arrangements e. All of the above.

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On the first day of its fiscal year (January 1, 2019), a town recorded General Fund property tax receivables of $600,000. By year-end (December 31), taxpayers had paid a total $575,000. Based on previous experience, the town expected to collect the $25,000 of delinquent taxes as follows: $10,000 in January and February of 2020 and $15,000 between March 5th and August 30th of 2020. How much should the town report as property tax revenue in its General Fund statements for the year 2019? a. $585,000 b. $600,000 c. $590,000 d. $575,000

a. $585,000

The governmental fund balance sheet equation includes the following elements: a. Financial assets, near-term liabilities, deferred inflows of resources, and fund balance. b. Financial assets, long-term liabilities, deferred outflows of resources, and fund balance. c. Financial assets, capital assets, near-term liabilities, and long-term liabilities. d. Deferred outflows of resources, deferred inflows of resources, intangible assets, and fund balance.

a. Financial assets, near-term liabilities, deferred inflows of resources, and fund balance.

Governments may enter into short-term or long-term leases for nonfinancial assets, such as a building or equipment—for use in its everyday operations. What is a distinguishing factor of a short-term lease? a. A short-term lease is recorded at the present value of payments expected to made during the lease. b. A short-term lease has a maximum possible lease term of 12 months or less including any options that are expected to be exercised to extend the lease. c. A short-term lease provides the lessee with an intangible right to use an asset that should be recorded when the lease is signed. d. A short-term lease has a maximum possible lease term of three months or less if accounted for in a governmental-type fund.

b. A short-term lease has a maximum possible lease term of 12 months or less including any options that are expected to be exercised to extend the lease.

A city constructs a new building by issuing long-term debt in the amount of $3 million. How should the city report the debt proceeds in its Capital Projects Fund statement of revenues, expenditures, and changes in fund balance? a. As a revenue b. As an other financing source c. As a liability captioned general long-term obligations d. As a liability captioned due to the debt service fund

b. As an other financing source

Which of the following liabilities normally would not be reported in governmental-type funds? a. Accrued salaries payable b. Bonds payable c. Vouchers payable d. All of the above are commonly reported in governmental funds. e. None of the above are commonly reported in governmental funds.

b. Bonds payable

The General Fund lends cash at the beginning of the year to an Enterprise Fund, expecting to be repaid before the end of the year. What account should be debited in the General Fund? a. Transfer out to Enterprise Fund b. Due from Enterprise Fund c. Other financing uses—Enterprise Fund d. Expenditures—Enterprise Fund loans

b. Due from Enterprise Fund

Which of the following is not considered to be a "derived" tax revenue based on GASB standards? a. Sales taxes b. Property taxes c. Income taxes d. All of the above are derived tax revenues

b. Property taxes

What is the purpose of a Debt Service Fund? a. To account for resources that are restricted or otherwise limited to pay the debt service on all debt of the government, including Enterprise fund debt and short-term debt used to finance General Fund operations b. To account for resources that are restricted or otherwise limited to pay principal and interest on general long-term debt c. To account for resources that are restricted or otherwise limited to pay the debt service on all long-term debt of the government, and also to show how much long-term debt is outstanding d. To provide a means of reporting all outstanding long-term debt of the government in a single location

b. To account for resources that are restricted or otherwise limited to pay principal and interest on general long-term debt

The highest level of decision-making authority for the City of Palo Pinto passes an ordinance that states that all royalty payments received from oil or gas production on city property must be used for street maintenance. As of the end of its current fiscal year, the city has $1,250,000 of unspent royalty payments. These amounts should be reported in the General Fund as part of: a. Nonspendable fund balance b. Restricted fund balance c. Committed fund balance d. Assigned fund balance e. Unassigned fund balance

c. Committed fund balance

Which of the following is a characteristic of a Permanent Fund? a. Both the principal of the fund and its earnings must be kept intact permanently. b. Permanent Funds are created to support programs that benefit other governmental units. c. Earnings of a Permanent Fund are used to support programs that benefit the government or its citizens. d. Permanent Funds are established when a government receives a bequest without a legal trust agreement.

c. Earnings of a Permanent Fund are used to support programs that benefit the government or its citizens.

The statement of revenues, expenditures, and changes in fund balance for Special Revenue Funds includes which of the following major sections? a. Revenues b. Expenditures c. Other financing sources and uses d. All of the above e. Both a. and b.

c. Other financing sources and uses

The City of Twizzle issues $1,000,000 face value of general obligation bonds for $1,100,000. The bonds will be used for the construction of new city streets. What journal entry should the City make in its Capital Projects Fund to record the issuance of these bonds? a. Cash 1,100,000 Other financing source—long-term debt issued 1,100,000 b. Cash 1,000,000 Other financing source—long-term debt issued 1,000,000 c. Cash 1,100,000 Other financing source—long-term debt issued 1,000,000 Other financing source—bond issue discount 100,000 d. Cash 1,100,000 Other financing source—long-term debt issued 1,000,000 Other financing source—bond issue premium 100,000

d. Cash 1,100,000 Other financing source—long-term debt issued 1,000,000 Other financing source—bond issue premium 100,000

To achieve the pricing objective of an Internal Service Fund (ISF), which measurement focus and basis of accounting must be used? a. Cash measurement focus and cash basis of accounting b. Current financial resources measurement focus and full accrual basis of accounting c. Economic resources measurement focus and modified accrual basis of accounting d. Economic resources measurement focus and full accrual basis of accounting

d. Economic resources measurement focus and full accrual basis of accounting

The GASB allows which of the following method(s) to account for inventories and prepayments? a. Only the purchases method b. Only the modified method c. Only the consumption method d. Purchases method and consumption method e. Purchases method and modified method

d. Purchases method and consumption method