Format and Content of the Financial Section of the Comprehensive Annual Financial Report (CAFR)

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Which event(s) should be included in a statement of cash flows for a governmental entity? Cash inflow from issuing bonds to finance city hall construction. Cash outflow from a city utility representing payments in lieu of property taxes. A I only B II only C Both I and II D Neither I nor II

B II only Bonds issued to finance city hall construction is recorded in its Capital Projects Fund, which is a Governmental Fund. Governmental Funds are accounted on a modified accrual basis and a Statement of Cash Flows is not presented for Governmental Funds. Under governmental accounting, a Statement of Cash Flows is prepared only for Proprietary Funds. A cash flows statement includes receipts and payments resulting only from the Proprietary Fund's activities. The payments in lieu of property taxes are from an operating activity of an Enterprise Fund (Proprietary).

For funds other than the general fund, the definition of "major" generally is based on which of the following? A The cumulative materiality of the fund over five reporting periods B The current year's balance compared to the previous year's balance C An objective assessment of the relative size compared to the government's totals D None of the above

C An objective assessment of the relative size compared to the government's totals The definition of "major" for other than the general fund is based on an objective assessment of the relative size compared to the government's totals. The cumulative materiality of the fund over five reporting periods does not influence the determination of a major fund. The current year's balance compared to the previous year does not influence the determination of a major fund.

Which of the following funds would be reported as a fiduciary fund in Pine City's financial statements? A Special revenue B Permanent C Private-purpose trust D Internal service

C Private-purpose trust Fiduciary Funds include: Pension Trust Fund Investment Trust Fund Private Purpose Trust Fund Custodial Fund

Types of operating information required in the statistical section of the CAFR include which of the following? A The number of government employees B Operating indicators C Capital asset information D All of the above

D All of the above Three types of operating information are required in the statistical section of the CAFR: number of government employees, operating indicators, and capital asset information.

The significant accounting policies note in governmental financial statements must explain the measurement focus and basis of accounting for which of the following? A The fund and government-wide financial statements, and required supplementary information (RSI) B Only the government-wide financial statements C Only the fund financial statements D Both the fund and government-wide financial statements

D Both the fund and government-wide financial statements The GASB requirement calls for an explanation of the measurement focus and basis of accounting for the government-wide statements and fund financial statements.

Several Bay City employees accepted a voluntary termination plan during year 1. The city will pay a set amount to the terminated employees as follows: During year 1 $20,000 End of year 2 $30,000 End of year 3 $15,000 The discounted present value of the payment for year 2 and year 3 is $42,000. What amount of expenditures should be reported in the governmental fund-level financial statements in year 1? A $20,000 B $50,000 C $62,000 D $65,000

A $20,000 Because governmental fund-level financial statements use the current financial resources approach, only the $20,000 due from current financial resources will be included. When the flow of current financial resources measurement focus is used, the focus is on cash and/or assets that are expected to be converted to cash within the accounting period.

Fiduciary funds are accounted for using which of the following? A Accrual basis of accounting B Modified accrual basis of accounting C Flow of economic capital basis of accounting D Accrual or modified approach, whichever is most appropriate

A Accrual basis of accounting All fiduciary funds are accounted for on the accrual basis in essentially the same manner as proprietary funds. Governments do not have a choice of using modified accrual basis of accounting for fiduciary funds. The modified accrual method is used for governmental funds only. The flow of economic capital is not a basis recognized for governmental accounting purposes.

Where does GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, require management's discussion and analysis (MD&A) to be presented? A Before the financial statements B Before the notes to the financial statements, but after the financial statements C In the notes to the financial statements D After the notes to the financial statements, before other required supplementary information

A Before the financial statements GASB 34 (para. 8) states, "The basic financial statements should be preceded by MD&A, which is required supplementary information. MD&A should provide an objective and easily readable analysis of the government's financial activities based on currently known facts....".

Where does GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, require fund financial statements for major funds to be presented? A Before the notes to the financial statements B In the notes to the financial statements C After the notes to the financial statements, before other required supplementary information D After the notes to the financial statements and required supplementary information (RSI)

A Before the notes to the financial statements The major fund financial statements are presented before the notes to the financial statements, as part of the basic financial statements, not RSI. The basic financial statements should be preceded by MD&A, which is required supplementary information. The basic financial statements should include (1) the government-wide statements that display information about the reporting government as a whole, except for its fiduciary activities, (2) fund financial statements for the primary government's governmental, proprietary, and fiduciary funds should be presented after the government-wide statements, and notes to the financial statements. Except for MD&A, required supplementary information, including the required budgetary comparison information, should be presented immediately following the notes to the financial statements.

A city government levies a tax on its citizens for improvements to roads. How should the city report the tax in its statement of activities? A By type of tax in general revenues. B By type of tax in program revenues. C As program-specific contributions in program revenues. D In special items reported separately from general revenue.

A By type of tax in general revenues. Revenues of the Government are reported in the Statement of Activities under the following two major headings: Program Revenues: Includes charges levied for services, program-specific operating grants & contributions, and program-specific capital grants & contributions General Revenues: All revenues other than 'program revenues' It is clear from the definition of 'program revenues' that taxes collected for improvement to roads do not qualify as program revenues. They are to be classified as general revenues.

Seaview City received a pass-through grant from the state. The money is to be distributed to families who, as determined by the state, are eligible for summer camp scholarships for their children. Seaview does not have administrative or direct financial involvement in the program. In which fund should Seaview record the grant? A Custodial B General C Internal service D Enterprise

A Custodial Custodial funds account for collected amounts that must be transferred to other funds or outsiders. Seaview city received a pass-through grant from the state to distribute scholarship to the eligible children for the summer-camp and holding the cash temporarily and is not obligated. Thus, this is reported in the Custodial fund.

It is inappropriate to record depreciation expense in the government-wide financial statements related to the assets in which of Kellick City's funds? A Custodial fund B Enterprise fund C General fund D Special revenue fund

A Custodial fund Custodial funds should be used to report resources held by the reporting government in a purely custodial capacity (assets equal liabilities). These funds typically involve only the receipt, temporary investment, and remittance of fiduciary resources to individuals, private organizations, or other governments. Custodial funds generally have neither capital assets nor expenses, and as such would not have depreciation expense.

Which of the following funds should be reported as part of local government's governmental activities column in its government-wide statements? A Debt service B Custodial C Private-purpose trust D Pension trust

A Debt service The debt service fund should be reported as part of local government's governmental activities column in its government-wide statements. Reporting capital assets and long-term liabilities are required in the government-wide statements. Custodial, private-purpose trust, and pension trust funds are all fiduciary funds. Fiduciary activities are not included in the government-wide statements because the assets and liabilities cannot be used to support the government's own programs.

The link between government-wide and governmental fund statements requires a reconciliation to convert the governmental funds to the ______________ resources measurement focus and ______________ basis of accounting. A Economic; accrual B Economic; modified accrual C Current financial; accrual D Current financial; modified accrual

A Economic; accrual The link between government-wide and governmental fund statements requires a reconciliation to convert the governmental funds to the economic resources measurement focus and accrual basis of accounting.

Kenn City obtained a municipal landfill and passed a local ordinance that required the city to operate the landfill so that the costs of operating the landfill, as well as the capital costs, are to be recovered with charges to customers. Which of the following funds should Kenn City use to report the activities of the landfill? A Enterprise B Permanent C Special revenue D Internal service

A Enterprise A municipal landfill is generally accounted for in the general fund or an enterprise fund. Enterprise funds are 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 are to be recovered primarily through user charges (operating revenue).

Economic and demographic information in the statistical section of the CAFR helps users do which of the following? A Gauge the resources for the government's revenues and demands for public services B Calculate the debt burden per capita C Evaluate the direct and overlapping debt burden on the available taxpayers D Perform all of the above actions

A Gauge the resources for the government's revenues and demands for public services Economic and demographic information can help users gauge the economic health of a community, and thus, the demands for governmental services as well as the key factors that will impact revenues. The debt burden per capita is presented in the debt capacity tables. Overlapping debt information is presented in the debt capacity tables.

Which of the following are the minimum two primary columns/sections that the government-wide statements are separated into? A Governmental activities and business-type activities B Governmental activities and component unit activities C Business-type activities and trust fund activities D Business-type activities and component unit activities

A Governmental activities and business-type activities The government-wide statements are separated into at least two primary columns/sections: governmental activities are reported in one column, and businesstype activities are reported in another column on the statement of net position and in two different sections of the statement of net position. Additional columns/sections are necessary if the primary government has discretely presented component units. Trust fund activities are not one of the two primary sections.

Note disclosures in governmental external financial statements related to cash and cash equivalents explain which of the following? A How the government classified cash equivalents in the beginning and ending balances on the enterprise fund cash flow statements. B How the government classified cash flows among the four categories in the cash flows statements C Details of the maturities for cash equivalents included in the ending balance on the cash flows statements D Details of which cash equivalents are included in the operating flows section of the cash flows statement.

A How the government classified cash equivalents in the beginning and ending balances on the enterprise fund cash flow statements. Note disclosures related to cash and cash equivalents explain how cash equivalents are classified in the beginning and ending balances on the cash flows statement. How governments classify cash flows in the cash flows statement is outlined in GASB Statement No. 9. Governments are not required to disclose the details of maturities of cash equivalents included in the cash flows statement. Cash equivalents are not distributed among the four categories of the cash flows statement.

Which of the following is required by GASB No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments? 1.Governmental activities information using the economic resources measurement focus in the government-wide financial statements. 2.Governmental fund information included in the statement of cash flows. A I only B II only C Both I and II D Neither I nor II

A I only All funds use the economic resources measurement focus and accrual basis of accounting in the government-wide statements.Only business-type activities appear in the statement of cash flows. (The governmental funds pose problems for developing meaningful information for a government-wide cash flows statement.) .

The statement of activities of the government-wide financial statements is designed primarily to provide information to assess which of the following? A Operational accountability. B Financial accountability. C Fiscal accountability. D Functional accountability.

A Operational accountability. The government-wide statements, which include the statement of activities, are designed to provide operational accountability by showing an economic longterm view of a government's ability to provide services. Operational accountability includes the periodic economic cost of the services provided.

Which of the following information is needed to prepare the budgetary comparison schedules for a local government? A Original budget B Explanation of variances C Description of the local government's budgeting process D Computation of variances from budget to actual

A Original budget A budgetary comparison schedule is presented on the budgetary basis of accounting for the general fund and for each major special revenue fund that has a legally adopted annual budget.

All of the following statements regarding notes to the basic financial statements of governmental entities are true except A The notes contain disclosures related to required supplementary information. B Some notes presented by governments are identical to notes presented in business financial statements. C Notes that are considered essential to the basic financial statements need to be presented. D It is acceptable to present notes in a very extensive format.

A The notes contain disclosures related to required supplementary information. The notes to the basic financial statements of governmental entities do not contain disclosures related to required supplementary information. The Management's Discussion and Analysis (MD&A) is the required supplementary information in the government's general purpose external report and it is presented before the financial statements. .

GASB Statement No. 38 expanded the required disclosures for interfund balances and transfers because of which of the following? A Users were concerned about how these transactions affected resources available in any given fund. B Users were concerned that illegal transfers among funds were being made and wanted to shed light on the process. C Governments considered the details to be essential to demonstrating budgetary compliance. D Governments were burying details of such transactions in explanations provided in note disclosures.

A Users were concerned about how these transactions affected resources available in any given fund. GASB Statement No. 38 expanded the disclosures required related to interfund balances and transfers. The disclosures weren't required because governments considered the details to be essential to demonstrating budgetary compliance. Although more details could muddy the waters for users, in this case, users wanted more detail because they expressed concern about how these transactions affected resources available in any given fund.

Elliott City has a general fund, a water billing fund, a capital projects fund, and a special revenue fund. In which fund is depreciation recorded on the statement of revenues, expenses, and changes in net position? A Water billing fund B General fund C Capital projects fund D Special revenue fund

A Water billing fund Of the funds listed, one is a proprietary fund (water billing fund) and the remainder are governmental funds. At the fund level, governmental funds record purchases of capital assets as expenditures and the assets are not capitalized. For this reason, governmental funds do not record depreciation at the fund level. The correct answer is the water billing fund as proprietary funds DO record depreciation.

As described in GASB Concepts Statement No. 3, the distinction between required supplementary information (RSI) and other supplementary information (OSI) is generally based on which of the following? A Whether the GASB has specified the requirement to present the information B Whether the government has decided to present the information C The public's demand for information from the government D None of the above

A Whether the GASB has specified the requirement to present the information The distinction between RSI and OSI is generally based on whether the GASB has specified the requirement to present the information, not the public's demand for the information. Management can certainly add to RSI, but additional information must be presented separately so that users can consistently compare reports among governmental entities.

Smith City levied property taxes totaling $1,000,000 during the current year, of which $150,000 was collected within 60 days after year-end. What amount should Smith City record as property tax revenue? A $850,000 B $1,000,000 C $150,000 D $0

B $1,000,000 Property taxes are considered the enforceable legal claim and is always recognized when billed. A 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. Dr. Property Taxes Receivable-Current $1,000,000 Cr. Property Tax Revenue $1,000,000

During the current year, Wythe County levied $2,000,000 property taxes, 1% of which is expected to be uncollectible. During the year, the county collected $1,800,000 and wrote off $15,000 as uncollectible. What amount should Wythe County report as property tax revenue in its government-wide statement of activities for the current year? A $1,800,000 B $1,980,000 C $1,985,000 D $2,000,000

B $1,980,000 The $1,980,000 is derived from the total $2,000,000 levied less $20,000 (the 1% of $2,000,000) expected to be uncollectible. The $15,000 written off as uncollectible does not factor anywhere in the equation.

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 Business type activities that are normally financed through user charges and reports the consolidated results of all enterprise funds. It does not include internal service funds, which are accounted for in governmental activities. The employee pension fund is a fiduciary fund and not included in business-type activities. The $12,000 increase in net position from Water enterprise is included.

Lily City uses a pay-as-you-go approach for funding postemployment benefits other than pensions. The city reports no other postemployment benefits (OPEB) liability at the beginning of the year. At the end of the year, Lily City reported the following information related to OPEB for the water enterprise fund: Benefits paid $100,000 Annual required contribution 500,000 Unfunded actuarial accrued liability 800,000What amount of expense for OPEB should Lily City's water enterprise fund report in its fund level statements? A $100,000 B $500,000 C $600,000 D $1,400,000

B $500,000 Other postemployment benefits (OPEB) are typically in the form of health care coverage. Most entities fund their OPEB on a pay-as-you-go basis, paying only the amount equal to benefits claimed. GASB believes the pay-as-you-go approach does not reflect the true OPEB liability, and issued GASB 45 outlining OPEB reporting and disclosure requirement. The objective is to systematically and rationally allocate the present value of the projected cost of benefits over the working life of benefiting employees. This allocation is done with an actuarial valuation. The amount allocated to a given year is known as the annual required contribution (ARC), which is the basic amount of expense (i.e., $500,000). The present value of benefits earned to date by employees is known as the actuarial accrued liability. The difference between this amount and any resources placed in trust is known as the unfunded actuarial accrued liability.

Which of the following transactions should be reported as a liability in the general fund financial statements? A An amount that is due within one year of the balance sheet date B An amount to be paid from current financial resources C An amount set aside to pay for an unfilled contract D Principal on long-term debt due 90 days after the next balance sheet date

B An amount to be paid from current financial resources For general fund financial statements, we need to use modified accrual accounting as per current financial resources approach. In modified accrual accounting, a department will usually not account for long-term debt as this represents future periods and the focus is on a single period here (usually a year). Interest and principal on long-term debt are not recorded until the periods in which they must be paid. Thus, an amount to be paid from current financial resources should be reported as a liability in the general fund financial statements.

Marta City's school district is a legally separate entity but two of its seven board members are also city council members and the district is financially dependent on the city. The school district should be reported as a A Blended unit. B Discrete presentation. C Note disclosure. D Primary government.

B Discrete presentation. Component units should be presented discretely unless either (a) the components unit's governing body is substantively the same as the governing body of the primary government, or (b) the component unit provides services almost entirely to the primary government, or almost exclusively benefits the primary government although it does not provide services directly to it.

GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, requires presentation of a budgetary comparison schedule in required supplementary information. Which of the following must this schedule include? Actual inflows, outflows, and balances, along with a final budget Original budget A separate column to report the variances between the final budget and actual amounts A I only B I and II only C I and III only D I, II, and III

B I and II only The budgetary comparison schedule includes the original and final budgets as well as actual inflows, outflows, and balances, stated on the government's budgetary basis of accounting, with a reconciliation between the budgetary and GAAP information. The schedule may have the same format as the budget documents or the statement of revenues, expenditures, and changes in fund balances. A column reporting the variances between the final budget and actual amounts is encouraged, but not required.

Which of the following are required financial statements for fiduciary funds? A Statement of fiduciary net position and statement of revenues, expenditures, and changes in net position B Statement of fiduciary net position and statement of changes in fiduciary net position C Balance sheet and statement of revenues, expenditures, and changes in net position D Balance sheet, operating statement, and statement of cash flows

B Statement of fiduciary net position and statement of changes in fiduciary net position Fiduciary funds do not use the major fund reporting outlined for govern-mental and proprietary funds. The fiduciary fund statements are focused on the fund type and the specific reporting requirements for each type. Fiduciary funds should present the statement of fiduciary net position and the statement of changes in fiduciary net position in accordance with the guidance for each type of fund.

Which of the following is a required part of a local government's management's discussion and analysis (MD&A) as part of its financial statements? A The MD&A should be presented with other required supplementary information. B The MD&A should compare current-year results to the prior year with emphasis on the current year. C The MD&A should include an analysis for each fund. D The MD&A should present condensed financial information from the fund financial statements.

B The MD&A should compare current-year results to the prior year with emphasis on the current year. Management discussion and analysis (MD&A) is the portion of a public company's annual report in which management addresses the company's performance over the previous twelve months. It is a major part of the financial statement, not just supplementary material. MD&A covers major points but does not go into details for each fund. MD&A is not for the purpose of outlining condensed financial information from the fund financial statements. As part of MD&A, there is a requirement to compare current-year results to the prior year with an emphasis on the current year.

B The MD&A should compare current-year results to the prior year with emphasis on the current year. The management's discussion and analysis (MD&A) provides an analysis of the government's financial performance for the year, provides comparisons of the current-year results to the previous year, and discusses both the positive and negative aspects of the comparison. Overall, the emphasis should be on the current year and the focus should be on the primary government. Although considered RSI, the MD&A is presented before the basic financial statements. The MD&A should present condensed financial information derived from government-wide financial statements, not fund financial statements, comparing the current year to the prior year. Although the MD&A should include an analysis of balances and transactions of individual funds, the AICPA provided answer choice b, not c, as the correct answer response.

Governments are required to present budgetary comparisons for which of the following? A The general fund only B The general fund and all major special revenue funds C All governmental and proprietary funds D None of the above

B The general fund and all major special revenue funds Governmentsare required to present budgetary comparisons for the general fund and all major special revenue funds in the general purpose external financial reports, but not for proprietary funds.

Which of the following describes custodial credit risk in relation to a governmental entity? A The likelihood that an external party will not fulfill obligations as the government's investments mature B The risk that the government will not be able to recover deposits or the collateral securities when the depository financial institution fails C The risk that the depository financial institution will fail D Investments are held by a limited number of issuers

B The risk that the government will not be able to recover deposits or the collateral securities when the depository financial institution fails Custodial credit risk refers to the risk that financial institutions will not return the government's investment or collateral for deposit if that institution fails. The likelihood that an external party will not fulfill obligations as the government's investments mature describes the quality of credit risk, not custodial credit risk. The risk that the depository financial institution will fail is more related to credit quality than custody of the assets. Investments held by a limited number of users describes concentration of credit risk.

For governmental accounting, after determining whether a component unit is legally separate, the next step is to determine which of the following? A Whether or not the primary government elects a voting majority of the unit's board B Whether or not the primary government appoints a voting majority of the unit's board C Whether or not the voters of the jurisdiction elect the unit's board D Whether or not the voters of the jurisdiction appoint the unit's board

B Whether or not the primary government appoints a voting majority of the unit's board For those potential component units that are legally separate, the next step is to determine whether or not the primary government (not the voters) appoints (not elects) a voting majority of the unit's board.

Dale Town's public school system is administered by a separately elected board of education. The board of education is not organized as a separate legal entity and does not have the power to levy taxes or issue bonds. Dale's town council approves the school system's budget. Where should Dale report the public school system in its government-wide information? A Within the component units column B Within the governmental activities column C In the notes to the financial statements D In the required supplementary information

B Within the governmental activities column The government-wide statements should display information about the reporting government as a whole, except for its fiduciary activities. Governmental-Wide Financial Statement's, Statement of Net Position has four columns as follows: Governmental activities: Presents consolidated results of all the Governmental Funds and the Internal Service Funds including all component units subject to blended presentation Business-type activities: Presents consolidated results of all Enterprise Funds Total: Presents a total of Governmental Activities & Business-type Activities Component units: Presents results of all the component units subject to discrete presentation

The following are Boa City's fixed assets: Fixed assets used in enterprise fund activities $1,000,000 Infrastructure assets 9,000,000 All other fixed assets 1,800,000What aggregate amount should Boa report in the governmental activities column of the government-wide financial statements? A $ 9,000,000 B $ 10,000,000 C $10,800,000 D $11,800,000

C $10,800,000 The government-wide financial statements (GWS) reports all general government capital assets (fixed assets plus infrastructure) in the governmental activities column ($9,000 + $1,800 = $10,800). Enterprise funds appear in the business-type activities column in the GWS.

The following fund types used by Ridge City had total assets at December 31 as follows: Special revenue funds $100,000 Custodial funds 200,000 Pension funds 400,000 Total fiduciary fund assets amount to A $300,000. B $400,000. C $600,000. D $700,000.

C $600,000. Fiduciary funds are used to account for assets held by a governmental unit acting as a trustee or agent for individuals, organizations, other governmental units, or other funds of the same government. Four distinct types of fiduciary funds exist (1) pension trust funds, (2) investment trust funds, (3)private-purpose trust funds, and (4) custodial funds. The total fiduciary fund assets amounted to $600,000 ($200,000 of custodial fund assets and $400,000 of pension trust fund assets). The special revenue fund is a governmental fund

Several disclosures in the Significant Accounting Policies section of governmental financial statements describe which of the following? A How the government complied with applicable laws and regulations B Why the government exceeded its statutory budgetary authority C Accounting policies for recognizing revenues and expenditures D Why the notes are not necessary for a complete understanding of the government's financial statements

C Accounting policies for recognizing revenues and expenditures The Significant Accounting Policies section includes a number of explanations about what policies the government has adopted for recognition, such as how revenues are recognized, asset capitalization, program revenues, and the government's definition of operating transactions. Disclosures do not describe how the government complied with applicable laws and regulations, why the government exceeded its statutory budgetary authority, or why the notes are necessary.

Which of the following circumstances are indicative of a public employees' retirement system (PERS) administering a single plan? A Assets are held in a single investment portfolio B The plan document requires separate, restricted reserves for certain classes of employees C All assets accumulated may be legally used for payment of benefits to any beneficiary D The sponsoring government wants to consolidate reporting

C All assets accumulated may be legally used for payment of benefits to any beneficiary The primary distinction for a single plan is the ability to legally redirect resources among any of the beneficiaries, within the confines of the plan agreement. While it is not recommended, multiple employer plans may use a single portfolio to maximize earnings on investments. A single plan could have separate reserves, but this is not one of its distinguishing characteristics. Consolidated reporting is not available to sponsoring governments.

Cy City's Municipal Solid Waste Landfill Enterprise Fund was established when a new landfill was opened January 3, year 1. The landfill is expected to close December 31, year 20. Cy's year 1 expenses would include a portion of which of the year 21 expected disbursements? Cost of a final cover to be applied to the landfill. Cost of equipment to be installed to monitor methane gas buildup. A I only. B II only. C Both I and II. D Neither I nor II.

C Both I and II. In accounting for municipal solid waste landfill (MSWLF) costs, a portion of the estimated total current costs must be recognized as an expense and as a liability in each period during which the MSWLF accepts solid waste. The estimated total current costs of MSWLF closure and postclosure care should include those costs which result in disbursements near, or after, the date that the MSWLF stops accepting solid waste and during the postclosure period, including the cost of a final cover and monitoring equipment.

Which type of fund is allowed to incur long-term debt through the issuance of bonds? A Governmental funds B Proprietary funds C Both governmental and proprietary funds D Neither governmental nor proprietary funds

C Both governmental and proprietary funds Both governmental and proprietary funds could issue long-term debt in the form of bonds payable. The differences would lie in the reporting of the bond proceeds and the related liabilities on the financial statements.

Which format must an enterprise fund use to report cash flow operating activities in the statement of cash flows? A Indirect method, beginning with operating income. B Indirect method, beginning with change in net position. C Direct method. D Either direct or indirect method.

C Direct method. An enterprise fund is one of the governmental proprietary funds. Governments should present a statement of cash flows for proprietary funds based on the provisions of GASB statements. The GASB states the direct method of presenting cash flows from operating activities (including a reconciliation of operating cash flows to operating income) should be used.

If a city government is the primary reporting entity, which of the following is an acceptable method to present component units in its combined financialstatements? A Consolidation. B Cost method. C Discrete presentation. D Government-wide presentation

C Discrete presentation. Government-wide statements (GWS) aggregate information for all governmental and business-type activities. GASB 34 requires an economic resourcesmeasurement focus and accrual basis of accounting for all amounts in the GWS. There are f our required columns in the GWS, one each for: government alactivities, business-type activities, the primary government (sum of the previous two), and component units. Most component units should be included in thefinancial reporting entity by discrete presentation (reported in columns separate from primary government).

A city government would report each of the following categories in its government-wide statement of net position except A Governmental activities B Business-type activities C Fiduciary activities D Component units

C Fiduciary activities The focus of fiduciary funds is resources that are restricted to third parties and cannot be used for any general programs of the primary government. This emphasis carries through the financial statements where the fiduciary funds are included in fund financial statements but not in the government-wide statements. Governmental activities, business-type activities, and component units would all appear in the government-wide statement of net position.

A city government would report each of the following categories in its government-wide statement of net position except A Governmental activities. B Business-type activities. C Fiduciary activities. D Component units.

C Fiduciary activities. In the government-wide financial statements, all government and proprietary funds are included (but not fiduciary funds) along with discreetly presented component units in the statement of net position.

Programs funded with taxes, grant revenues, and other nonexchange resources are reported in the government-wide statements as which of the following? A Social service activities B Intergovernmental activities C Governmental activities D Business-type activities

C Governmental activities Governmental activities include those programs funded with taxes, grant revenues, and other nonexchange resources (not social service activities or intergovernmental activities). Business-type activities are financed in whole or in part by fees charged to external parties for goods and services. Enterprise funds are used to account for these programs.

The GASB Statement No. 34 reporting model results in which of the following? A Fiduciary fund reporting for pension trust funds B Internal service funds for self-insurance programs C Greater accountability by state and local governments by providing more useful information to a wider range of users. D Capital assets in the government-wide statements and infrastructure improvements expenditures in the fund statements

C Greater accountability by state and local governments by providing more useful information to a wider range of users. One objective of the GASB Statement No. 34 reporting model is greater accountability by state and local governments and providing more useful information to a wider range of users. Fiduciary fund reporting for pension funds was addressed in GASB Statement No. 25.

Users need information on how the government applies restricted resources when they have a choice between using restricted or unrestricted resources to evaluate which of the following? A Whether the government made improper payments from the restricted and unrestricted resources B Whether the government complied with laws and regulations associated with federal funds C How ending balances may be applied to continuation of programs and services in future periods D None of the above

C How ending balances may be applied to continuation of programs and services in future periods Governments rely on grants and other types of contributions to fund a variety of programs. The note disclosing how the government applies restricted resources when they have a choice between using restricted versus unrestricted resources provides users with information to evaluate how ending balances may be applied to continuation of programs and services in future periods (not whether the government made improper payments or whether the government complied with laws and regulations).

River City has a defined contribution pension plan. How should River report the pension plan in its financial statements? A Amortize any transition asset over the estimated number of years of current employees' service. B Disclose in the notes to the financial statements the amount of the pension benefit obligation and the net assets available for benefits. C Identify in the notes to financial statements the types of employees covered and the employer's and employees' obligations to contribute to the fund. D Accrue a liability for benefits earned but not paid to fund participants.

C Identify in the notes to financial statements the types of employees covered and the employer's and employees' obligations to contribute to the fund. Governmental employers identify in the notes to the financial statements the types of employees covered under the defined contribution pension plan and the employer's and employees' obligations to contribute to the fund.

Valley Town's public school system is administered by a separately elected board of education. The board of education is not organized as a separate legal entity and does not have the power to levy taxes or issue bonds. Valley's city council approves the school system's budget. How should Valley report the public school system's annual financial results? # Discrete presentation Blended A Yes Yes B Yes No C No Yes D No No

C No Yes GASB 39 provides additional guidance to determine whether certain entities for which a primary government is not accountable financially must be reported as component units based on the nature and significance of their relationship with the primary government. Legally separate, tax-exempt entities that meet all three criteria must be presented discretely as component units: (1) economic resources received or held by the separate entity are totally (or nearly totally) for the direct benefit of the primary government, its component units, or its constituents; (2) the primary government, or its component units, is entitled to a majority of the economic resources received or held by the separate entity; and (3) the economic resources received or held by an individual entity that the specific primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to that primary government.

A government entity is required to include a statement of cash flows in which of the following financial statements? A Governmental Fund financial statements. B Government-Wide financial Statements. C Proprietary Fund financial statements. D Fiduciary Fund financial statements.

C Proprietary Fund financial statements. As per GASB 34, a government entity is required to include the following components in the Proprietary Fund financial statements:• Statement of Fund Net Position• Statement of Revenues, Expenses, and Changes in Fund Net Position / Fund Equity• Statement of Cash Flows The Statement of Cash Flows is a part of the Proprietary Fund financial statements.

Which fund would include a statement of cash flows among its financial statements? A General fund B Capital projects funds C Proprietary funds D None of the above

C Proprietary funds Governmental funds do not provide a statement of cash flows, while proprietary funds are required to include a statement of cash flows among their financial statements. This means that C is the only correct answer among the choices listed.

Which of the following is included in the governmental fund statements? A Cash flows statements B Component unit information C Reconciliation between the fund statements and the government-wide statements D Major fiduciary funds

C Reconciliation between the fund statements and the government-wide statements Governmental fund financial statements present a reconciliation to the government-wide statements. Cash flows statements appear only in the fund statements for proprietary funds. Individual component unit information is presented in individual columns in the government-wide statements, after the primary government's fund statements, or in the notes to the financial statements. Governmental fund financial statements do not include major fiduciary funds. Even fiduciary fund statements present fund types, not major funds.

Which of the following is a financial statement that would be found in the annual report of a government with only governmental funds? A Statement of revenues, expenses, and changes in fund net position B Statement of cash flows C Statement of revenues, expenditures, and changes in fund balance D None of the above

C Statement of revenues, expenditures, and changes in fund balance The only answer choice listed that relates to governmental funds is the statement of revenues, expenditures, and changes in fund balance. The first two options do not apply to governmental funds. Remember that at the fund level, governmental funds report expenditures rather than expenses and fund balance rather than net position. Governmental funds do not provide a statement of cash flows.

Which of the following is one of the three standard sections of a governmental comprehensive annual financial report? A Investment. B Actuarial. C Statistical. D Single audit.

C Statistical. The comprehensive annual financial report contains the following sections: Introduction Section; Financial Section; and the Statistical Section.

If individual component units are consolidated on combined governmental statements, the data for the individual units must be presented in which of thefollowing? A Combining statements or in separately issued reports B Consolidated statements or in separately issued reports C The notes to the financial statements or in combining statements D The notes to the financial statements or in separately issued reports

C The notes to the financial statements or in combining statements If the individual component units are consolidated in any fashion on the combined statements, the data for individual units must be presented in either thenotes to the financial statements or in combining statements in the basic financial statements (but not in consolidated statements or a separately issued report).

For governmental external financial reporting, the note on significant accounting policies should include descriptive comments about the purposes and scope of which of the following? A Other supplementary information B Required supplementary information C The statements of net position and activities D The statement of net position and net liabilities

C The statements of net position and activities The note on significant accounting policies should include descriptive comments about the purposes and scope of the statements of net position and activities. The note on significant accounting policies will only focus on the government-wide statements and does not include comments about other or required supplementary information. There is no statement of net liabilities.

Which of the following statements about the statistical section of the Comprehensive Annual Financial Report (CAFR) of a governmental unit is true? A Statistical tables may not cover more than two fiscal years. B Statistical tables may not include nonaccounting information. C The statistical section is not part of the basic financial statements. D The statistical section is an integral part of the basic financial statements.

C The statistical section is not part of the basic financial statements. The basic financial statements include both the government-wide statements and the fund statements, as well as the notes, but not the statistical section.

Which fund would be financed primarily through the receipt of service fees and charges? A General fund B Private purpose trust fund C Water billing fund D Special revenue fund

C Water billing fund Proprietary funds are financed primarily through the receipt of service fees and charges, while governmental funds are primarily financed through taxes. The only proprietary fund listed is the water billing fund.

River City has adopted GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. River has a defined contribution pension plan. How should River report the pension plan in its financial statements? A Within the component units column of its government-wide financial statements B Within the fiduciary column of its government-wide financial statements C Within its fund financial statements D Within the governmental activities column of its government-wide financial statements

C Within its fund financial statements The government-wide statements should display information about the reporting government as a whole, except for its fiduciary activities. A pension plan is a fiduciary activity, and thus a pension trust fund is reported in the fund financial statements, but not the government-wide statements. Fiduciary statements should include financial information for fiduciary funds and similar component units.

For which of the following governmental entities that use proprietary fund accounting should a statement of cash flows be presented? # Public benefit corporations Governmental utilities A No No B No Yes C Yes Yes D Yes No

C Yes Yes As per GASB, the statement of cash flows needs to be presented for all proprietary funds. Proprietary funds could either be Internal service fund and Enterprise fund. These follow accrual accounting and economic resources approach. Both Tollway Public Benefit Corporations and Governmental utilities are Enterprise funds where the services are availed through voluntary payments. Thus, the statement of cash flows needs to be presented for both the funds. Options (A), (B) and (D) are incorrect based on the above explanation.

Smith City levied property taxes totaling $1,000,000 during the current year, of which $150,000 was collected within 60 days after year end. What amount should Smith City record as deferred revenue on its statement of net position? A $1,000,000 B $850,000 C $150,000 D $0

D $0 Remember that the statement of net position is a government-wide financial statement, which means that it will use the accrual method of accounting. The accrual method does not defer property tax revenues that are not received within 60 days of year end, so the answer to this question is $0.

Maple City's public employee retirement system (PERS) reported the following account balances at June 30: Reserve for employer's contributions $5,000,000 Actuarial deficiency in reserve for employer's contributions 300,000 Reserve for employees' contributions 9,000,000 Maple's PERS fund balance at June 30, should be A $ 5,000,000 B $ 5,300,000 C $14,000,000 D $14,300,000

D $14,300,000 The PERS should be accounted for in a pension trust fund. Under the traditional approach of accounting for pension trust funds under NCGA Statement 1, the $14,300,000 fund balance of the pension trust fund can be determined by adding the reserve for employee contributions (i.e., $9,000,000), the reserve for employer contributions (i.e., $5,000,000), and the actuarial deficiency in reserve for employer's contributions (i.e., $300,000).

A government-wide statement of net position must include which of the following? A Prior-year comparative financial data B Primary government fiduciary fund data C A consolidation of all government-wide activities D A distinction between governmental and business-type activities

D A distinction between governmental and business-type activities A government-wide statement of net position must include a distinction between governmental and business-type activities. The statement contains four columns:- Governmental activities: This column contains details of activities that are financed primarily through taxes and other non-exchange transactions. This column reports on the consolidated results of all the governmental funds and internal service funds. Business-type activities: This column contains activities normally financed through user charges. This column reports the consolidated results of all enterprise funds. Total: This column simply adds together the amounts from the two primary government columns for governmental activities and business-type activities. Component units: This column reports the combined results of all the component units for which separate reporting was selected.

The basic financial statements of a state government that has adopted GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments A Are comprised of the government-wide financial statements and related notes. B Are comprised of the primary government funds' financial statements and related notes. C Contain more detailed information regarding the state government's finances than is contained in the comprehensive annual financial report. D Do not include management's discussion and analysis (MD&A).

D Do not include management's discussion and analysis (MD&A). Management's discussion and analysis (MD&A) is classified as required supplementary information, not basic financial statements. The MD&A is a component of the minimum reporting requirements for state and local governments. The basic financial statements consist of both government-wide and fund financial statements along with the accompanying notes. A comprehensive annual financial report (CAFR) includes the basic fiancial statements.

Which of the following statements meet the measurement and recognition criteria for landfill closure and postclosure costs? A Landfills should only be accounted for in the general fund. B Total landfill liabilities should be recognized in the general long-term debt account group. C Expense recognition should begin when waste is accepted and should continue through the postclosure period. D Equipment and facilities included in estimated total current cost of closure and postclosure care should not be reported as capital assets.

D Equipment and facilities included in estimated total current cost of closure and postclosure care should not be reported as capital assets. Proprietary funds may account for landfills. Liabilities are recognized in a proprietary fund when a proprietary fund accounts for the landfill. Expense recognition should be finished when the post-closure period begins. Capital assets should be fully depreciated by the date the MSWLF stops accepting solid waste.

Which of the following should be included in financial reports to help users assess the government's operating results? A Cash flow statements B Other supplementary information C Management discussion and analysis D Explanation of the sources and uses of financial resources

D Explanation of the sources and uses of financial resources The second reporting objective discussed in Concepts Statement No. 1 suggests that governmental financial reporting should assist users in evaluating the government's operating results by explaining sources and uses of financial resources. Cash flow statements are a specific element in proprietary fund statements and are not discussed in Concepts Statement No. 1. Other supplementary information is useful for enhancing financial statements, but is not necessarily required. The management discussion and analysis is one of the components of required supplementary information, but is not discussed in Concepts Statement No. 1.

During the current year, Vann County's motor pool internal service fund sold two vehicles for $5,000. The vehicles had a cost of $6,000 and a carrying value of $4,000. How should Vann County's motor pool internal service fund report this transaction in its fund financial statements? A Revenue of $5,000 B Other financing source of $5,000 C Special item of $1,000 D Gain of $1,000

D Gain of $1,000 Both vehicles together have a cost of $6,000 and a carrying value of $4,000. Because the carrying value was $4,000 and the vehicles sold for $5,000, Vann County's motor pool internal service fund should report a gain of $1,000.

Which of the following funds of a local government would report transfers to other funds as another financing use? A Enterprise. B Internal service. C Pension trust. D General.

D General. The general fund of a local government is used to report transfers to other funds as an "other financing use." Only governmental funds (general, special revenue, debt service, capital projects, and permanent) report transfers to other funds as "other financing use."

Governmental budgetary comparisons may be presented as required supplementary information (RSI) or which of the following? A As a reconciling item in the statement of net assets B As supplementary information C In the notes to the financial statements D In the basic financial statements

D In the basic financial statements Governments are encouraged to present budgetary comparisons as part of required supplementary information (RSI). There was significant discussion about whether these reports should be part of the basic financial statements, in part to ensure that audit coverage provided additional credibility for the reports. The GASB allowed governments to elect to present budgetary comparisons as statements within the basic financial statements, but not as part of other supplementary information or notes to the financial statements.

The government-wide financial statements present which of the following? A Consolidation of governmental, proprietary, and fiduciary funds B Information to assess fiscal accountability C The corporate model for the operating statements D Information to assess operational accountability

D Information to assess operational accountability Key objectives for the government-wide financial statements are to view the primary government's financial position and to provide operational accountability for providing public programs and services. The government-wide financial statements do not include fiduciary funds because the governmentwide financial statements are intended to give the reader a view of the financial health of the government.

Which of the following would be reported as program revenues on a local government's government-wide statement of activities? A Charges for services B Taxes levied for a specific function C Proceeds from the sale of a capital asset used for a specific function D Interest revenues

D Interest revenues On the government-wide statement of activities, the net revenue (expense) format and net program cost format are used. Charges for services are one of the program revenues reported on a local government's government-wide statement of activities. Taxes levied, proceeds from the sale of a capital asset, and interest revenues would fall under general revenues.

Which of the following should be included in the introductory section of a local government's comprehensive annual financial report? A Auditor's report B Management letter C Engagement letter D Letter of transmittal

D Letter of transmittal The introductory section of a local government's comprehensive annual financial report would include a title page, a table of contents, and a letter of transmittal. It may also include other material deemed appropriate by management. Issues that may be included in the transmittal letter include, but are not limited to, a profile of the government, information useful in assessing the government's financial condition, and awards and acknowledgments. The financial section would include the auditor's report, management's discussion and analysis (MD&A), basic financial statements, notes, and any required supplementary information.

Which of the following is considered part of the required supplementary information for general-purpose external financial reporting of a local government? A Fund financial statement. B Combining non-major fund statement. C Notes to the financial statements. D Management discussion and analysis.

D Management discussion and analysis. Required Supplementary Information is the information that is mandated to be disclosed by the reporting entity. This information, though not a part of the financial statements, are considered a prerequisite for a complete understanding and overview of financial information. One such information is Management Discussion and Analysis (MD&A), which is the assessment of the organization's performance for the said period by the management. MD&A are a compulsory part of Required Supplementary Information for general purpose external financial reporting of a local government.

Polk County's solid waste landfill operation is accounted for in a governmental fund. Polk used available cash to purchase equipment that is included in the estimated current cost of closure and post-closure care of this operation. How would this purchase affect the long-term asset and the long-term liability amounts in Polk's general fund? # Asset Liability A Increase Decrease B Increase No effect C No effect No effect D No effect Decrease

D No effect Decrease A MSWLF (Municipal Solid Waste Landfill) is accounted for in a government-type fund and should accrue the cost of assets required for closure and post-closure on an annual basis with a corresponding liability. When the available cash is used to purchase equipment, it has no effect on the asset but the liability would be reduced.

Which GASB Statement required the use of government-wide financial statements prepared using the accrual method of accounting? A Statement No. 1 B Statement No. 99 C Statement No. 75 D Statement No. 34

D Statement No. 34 GASB Statement No. 34 introduced the use of government-wide financial statements prepared using the accrual method of accounting. Statement No. 1 related to the establishment of general purpose external financial reporting, Statement No. 75 relates to post-employment benefits other than pensions, and Statement No. 99 has not yet been issued.

Which of the following is a required financial statement for an investment trust fund? A Statement of revenues, expenditures, and changes in fiduciary net position B Statement of activities C Statement of revenues, expenses, and changes in fiduciary net position D Statement of changes in fiduciary net position

D Statement of changes in fiduciary net position Because an investment trust fund accounts for resources (and related liabilities) held by governments in a trustee capacity, it is considered a fiduciary fund type. Required statements for fiduciary funds are (1) statement of fiduciary net position and (2) statement of changes in fiduciary net position.

Which of the following statements are required to be presented for special-purpose governments engaged only in business-type activities (such as utilities)? A Statement of net assets only. B Management's Discussion and Analysis (MD&A) and Required Supplementary Information (RSI) only. C The financial statements required for governmental funds, including MD&A. D The financial statements required for enterprise funds, including MD&A and RSI.

D The financial statements required for enterprise funds, including MD&A and RSI. Activities that are normally financed through user charges and reports the consolidated results of all enterprise funds. It does not include internal service funds, which are accounted for in the governmental activities. The required financial statements are: Statement of net assets Statement of revenues and expenses Statement of cash flows Notes to the F/S Required supplementary information other than MD&A

Which of the following can be reported in a fiduciary fund? A The managing government's share of investments in a investment pool B Water and sewer operations that provide services to other cities and counties within the region C Special assessment bonds that are supported by general fund contributions for unpaid assessments that are delinquent more than five years D Trusts held specifically for the benefit of third parties

Which of the following can be reported in a fiduciary fund? A The managing government's share of investments in an investment pool B Water and sewer operations that provide services to other cities and counties within the region C Special assessment bonds that are supported by general fund contributions for unpaid assessments that are delinquent more than five years D Trusts held specifically for the benefit of third parties

D Trusts held specifically for the benefit of third parties GASB Statement No. 34 segregated fiduciary funds from the governmental and proprietary funds to carve out those activities that solely benefit third parties and provide no resources for the government's programs. The government's share of the investments must be segregated from the investment pool's assets. Water and sewer operations are generally reported in an enterprise fund, regardless of the area served. If the government has any obligation for special assessment bonds, these transactions cannot be reported in an agency fund.

A government's police department reports appropriations of $10,000, encumbrances of $2,000, and expenditures of $5,000. What is the amount of available appropriations for the police department? A $3,000 B $5,000 C $7,000 D $8,000

A $3,000 Available appropriations can be calculated as follows: Appropriations $10,0000 Encumbrances $(2,000) Expenditures $(5,000) Balance $3,000

The budget for the City of Goodville for the year ending December 31 was adopted and recorded on January 2 of the same year. After recording the budget, the accounting records showed a debit balance of $50,000 in the Budgetary Fund Balance account. What does this indicate? A Appropriations are $50,000 greater than estimated revenues B Estimated revenues are $50,000 greater than appropriations C Appropriations are $50,000 greater than revenues D Revenues are $50,000 greater than appropriations

A Appropriations are $50,000 greater than estimated revenues The accounting records showed a debit balance of $50,000 in the Budgetary Fund Balance account. This means that the appropriations are $50,000 greater than estimated revenues.

A city had to make significant repairs to a building damaged by flooding of a nearby river. Damage due to flooding is not unusual but has been infrequent in the last few years. How should the city's general fund report the cost of the repairs in its fund financial statements? A As an expenditure. B As another financing use. C As a special item. D As an extraordinary item.

A As an expenditure. In accordance with GASB 33, governmental fund accounting is based on modified accrual basis and current financial resources approach. Repairs to damaged buildings are treated as current-year expenditures. Repair is reported as expenditures and not as other uses of funds. Payment of interest and principal of long term debt is an example of other uses of funds reported on the statement of revenues, expenditures, and changes in fund balances

Chase City imposes a 2% tax on hotel charges. Revenues from this tax will be used to promote tourism in the city. Chase should record this tax as what typeof nonexchange transaction? A Derived tax revenue B Imposed nonexchange revenue C Government-mandated transaction D Voluntary nonexchange transaction

A Derived tax revenue Derived tax revenues are assessments imposed by governments on exchange transactions and generally include sales taxes, income taxes, motor fuel taxes,and similar taxes on earnings or consumption.

Which of the following is a minimum required report for the basic financial statements of a government entity? A Fund financial statements. B Management's discussion and analysis. C Required supplementary information. D Budgetary comparison schedules.

A Fund financial statements. The various elements of the basic financial statements of a government entity are: Government-Wide Financial Statements Fund Financial Statements Notes to the Financial Statements Hence, out of the given options, fund financial statements qualifies as the minimum required report for the basic financial statements of a government entity.

Chase City uses an internal service fund for its central motor pool. The assets and liabilities account balances for this fund that are not eliminated normally should be reported in the government-wide statement of net position as A Governmental activities B Business-type activities C Fiduciary activities D Note disclosures only

A Governmental activities Although internal service funds are proprietary funds, they appear in the government-wide statements as governmental activities in the new reporting model.

Zephyr City has adopted GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. Which activities and basis of accounting must appear in Zephyr's statement(s) of cash flows? Business-type activities on the accrual basis in the fund financial statements Government-type activities on the modified accrual basis in the fund financial statements Business-type and government-type activities on the accrual basis in the government-wide financial statements A I only B II only C III only D I and III only

A I only Governmental-type funds pose problems for developing a meaningful government-wide cash flows statement. Only funds for business-type activities are required in the statement of cash flows.

Eureka City should issue a statement of cash flows for which of the following funds? # Eureka City Hall Capital Projects Fund Eureka Water Enterprise Fund A No Yes B No No C Yes No D Yes Yes

A No Yes The capital projects fund is a governmental fund, whereas the enterprise fund is a proprietary fund. A statement of cash flows should be presented for all proprietary funds, but not for governmental funds.

Hunt Community Development Agency (HCDA), a financially independent authority, provides loans to commercial businesses operating in Hunt County. This year, HCDA made loans totaling $500,000. How should HCDA classify the disbursements of loans on the cash flow statement? A Operating activities. B Non-capital financing activities. C Capital and related financing activities. D Investing activities.

A Operating activities. Hunt Community Development Agency provides loans as its operating activity, not as financing or investing activities. As defined under Para 19 of GASB 9, these would be program loans that are made and collected as a part of a government program. The operational purpose of this entity is to disburse loans. The loan disbursement of $500,000 would be reported under Operating Activities in the Statement of Cash Flows.

Smith City levied property taxes totaling $1,000,000 during the current year, of which $150,000 was collected within 60 days after year end. Smith City expects to collect 99% of the total levy. What amount should Smith City record as property tax revenue on its statement of activities? A $1,000,000 B $990,000 C $850,000 D $150,000

B $990,000 The statement of activities is part of the government-wide financial statements, meaning that the revenue reported would be calculated using the accrual method. For this reason, the amount collected within 60 days does not apply to this question. Smith City will report $990,000, which is the 99% of the levy that it expects to collect.

Which of the following characteristics describe a multiple plan management of a PERS? A Assets accumulated for benefit payments are available to pay benefits for any of the plan members. B Assets are accumulated in separate reserves restricted for benefits of specific classes or groups of employees. C The government serves as a custodian for the accumulated assets and distributes funds based on instructions from member governments. D Assets are not accessible to creditors of member governments.

B Assets are accumulated in separate reserves restricted for benefits of specific classes or groups of employees. The PERS is responsible for multiple plans when assets are accumulated in separate reserves restricted for benefits of specific classes or groups of employees. Assets being accumulated for benefit payments available to pay benefits for any of the plan members is a characteristic of the single plan. The government serving as a custodian for the accumulated assets and distributing funds based on instructions from member governments describes an agency fund. Creditor access is not a distinguishing feature for pension trust plans.

South City School District has a separate elected governing body that administers the public school system. The district's budget is subject to the approval of the city council. The district's financial activity should be reported in the City's financial statements by A Blending only. B Discrete presentation. C Inclusion as a footnote only. D Either blending or inclusion as a footnote.

Which of the following activities should be excluded when governmental fund financial statements are converted to government-wide financial statements? A Proprietary activities. B Fiduciary activities. C Government activities. D Enterprise activities.

B Fiduciary activities. Fiduciary activities are not included in the government-wide statements because the assets and liabilities cannot be used to support the government's own programs. Proprietary, governmental and enterprise activities are all included in government-wide statements.

Which of the following is NOT included on the face of the government-wide statement of net position? A Governmental activities B General fund C Business-type activities D Component unit

B General fund The three primary columns shown on the face of the government-wide statement of net position are governmental activities, business-type activities, and component units if applicable. The balances for the general fund would be shown on the balance sheet of the governmental funds.

The portion of special assessment debt maturing in 5 years, to be repaid from general resources of the government, should be reported in the A General fund column. B Governmental activities column. C Agency column. D Capital projects column.

B Governmental activities column. General government fixed assets and long-term debt are not recorded in the governmental funds, but are shown in the governmental activities column of the governmental-wide financial statements. General long-term debt to be repaid from general resources of the government should not be reported in any fund.

Cash receipts from grants and subsidies to decrease operating deficits should be classified in which of the following sections of the statement of cash flows for governmental, not-for-profit entities? A Operating B Noncapital financing C Capital and related financing D Investing

B Noncapital financing Noncapital financing activities include cash receipts from grants and subsidies except (1) those specifically restricted for capital purposes and (2) those for specific activities that are considered to be operating activities of the grantor government. Operating activities include cash inflows, receipts, and payments that do not result from transactions defined as capital and related financing, noncapital financing, or investing activities. Capital and related financing activities include acquiring and disposing of capital assets used in providing services or producing goods; borrowing money for acquiring, constructing, or improving capital assets and repaying the amounts borrowed, including interest; and paying for capital assets obtained from vendors on credit. Investing activities include making and collecting loans (except program loans) and acquiring and disposing of debt or equity instruments.

Which of the following is considered the most prevalent fiduciary fund? A Custodial fund B Pension trust fund C Investment trust fund D Private-purpose trust fund

B Pension trust fund The most prevalent fiduciary fund is the pension trust fund, not the custodial fund, the investment trust fund, or the private-purpose trust fund.

Which fund would report the amount of bonds payable that are due within one year? A Governmental funds B Proprietary funds C Both governmental and proprietary funds D Neither governmental nor proprietary funds

B Proprietary funds Proprietary funds report the current amounts due for any bonds outstanding on its statement of net position. At the fund level, governmental funds do not report the current portions of principal or interest due.

Which fund would be financed primarily through the receipt of property and other taxes? A Governmental funds B Proprietary funds C Both governmental and proprietary funds D Neither governmental nor proprietary funds

A Governmental funds Governmental funds are financed primarily through the receipt of property and other taxes, while proprietary funds are financed primarily through the receipt of service fees and charges. Therefore, the answer is governmental funds.

For governmental external financial reporting, Management's Discussion and Analysis (MD&A) should provide which of the following? A Management's perspective on the government's significant financial transactions B Management's plans for the immediate subsequent year C Management's long-term capital improvement plan D All of the above

A Management's perspective on the government's significant financial transactions The MD&A allows management to highlight significant issues and discuss key issues from the financial statements. GASB requirements for the MD&A do not require management to make projections for future years. The section on capital assets only discusses current year projects and changes in capital assets.

At the end of the fiscal year, a state government reported capital assets of $20 million, accumulated depreciation of $5 million, restricted assets of $ 3 million, and liabilities of $7 million. What amount should the government report as the total net position in its government-wide financial statements? A $8 million B $11 million C $15 million D $18 million

B $11 million Net position in its government-wide financial statements = Assets - Liabilities = $15,000,000 + $3,000,000 - $7,000,000 = $11,000,000.

Dogwood City's water enterprise fund received interest of $10,000 on long-term investments. How should this amount be reported on the Statement of Cash Flows? A Operating activities B Non-capital financing activities C Capital and related financing activities D Investing activities

D Investing activities According to GASB 9, interest received by a governmental proprietary fund will be reported in the investing activities section of the cash flow statement. Thus, Dogwood, a water enterprise fund would report $10,000 interest received on long term investments in the investing activities section.

Which of the following is the measurement focus and basis of accounting for the government-wide financial statements? # Measurement Focus Basis of accounting A Economic resources Accrual B Economic resources Modified accrual C Current financial resources Accrual D Current financial resources Modified accrual

A Economic resources Accrual GASB 34 requires the economic resources measurement focus and accrual basis of accounting for all amounts in the government-wide financial statements.

Which of the following funds will Zebra Town rarely report within the same activity column as the general fund in the government-wide financial statements? A Debt service fund B Enterprise fund C Internal service fund D Permanent fund

B Enterprise fund The governmental-type funds and internal service funds usually appear in the government activities column in the government-wide financial statements. Enterprise funds generally appear in the business-type activities column in the government-wide financial statements.

According to GASB 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, certain budgetary schedules are required supplementary information. What is the minimum budgetary information required to be reported in those schedules? A A schedule of unfavorable variances at the functional level. B A schedule showing the final appropriations budget and actual expenditures on a budgetary basis. C A schedule showing the original budget, the final appropriations budget, and actual inflows, outflows, and balances on a budgetary basis. D A schedule showing the proposed budget, the approved budget, the final amended budget, actual inflows and outflows on a budgetary basis, and variances between budget and actual.

C A schedule showing the original budget, the final appropriations budget, and actual inflows, outflows, and balances on a budgetary basis. Budgetary Comparison Schedule (BCS) is presented for the general fund and for each major special revenue fund that has a legally adopted annual budget, on the budgetary basis of accounting. The BCS presents both the original and final budget as well as actual inflows, outflows, and balances. It uses the same format, terminology, and classifications as either the budget document or a statement of revenues, expenditures, and changes in fund balances.

Lys City reports a compensated absences liability in its combined balance sheet. The salary rate used to calculate the liability should normally be the rate in effect A When the unpaid compensated absences were earned. B When the compensated absences were earned or are to be paid, or at the balance sheet date, whichever results in the lowest amount. C At the balance sheet date. D When the compensated absences are to be paid.

C At the balance sheet date. Liabilities for compensated absences should be inventoried at the end of each accounting period and adjusted to current salary costs.

For governmental external financial reporting, the budget discussion of Management's Discussion and Analysis should analyze significant variations between: I. Final budget amounts and initial expectations of results II. Final budget and actual results III. Original and final budget A I only B I & II C II & III D I, II, & III

C II & III The budget discussion section should provide an analysis of significant variations between original and final budget amounts as well as the variances between budget and actual. It should explain why the budget was changed, not just how much it changed.

Which basis of accounting is required for a city's government-wide financial statements? A Cash B Modified cash C Modified accrual D Accrual

D Accrual GASB 34 requires the economic resources measurement focus and accrual basis of accounting for all amounts in the government-wide financial statements.

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