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1.
Each of the following would be defined as a governmental entity based on the definition of a government that was jointly developed by the GASB and FASB except
- A Historic Preservation District created by the governing board of the municipal government.A CharterSchool incorporated in accordance with state law and accountable to the state oversight agency.A hospital formerly owned by a local government entity that was sold to and is now owned by a private, for-profit health care management corporation.A financing authority that is legally separate from the municipal government, but provides financing for the government’s major capital projects. The governing board of the financing authority is appointed by the municipal government’s board.All of the above would be defined as governmental entities.
2. Business-type activities differ from governmental-type activities in that
Most capital assets of business-type activities are considered to be revenue producing capital assets, while those in governmental-type activities generally are not.Business-type activities never have the power to levy a tax.Business-type activities do not adopt a budget.All of the above statements accurately reflect actual differences between business-type and governmental-type activities.Items b and c only accurately reflect primary differences between business-type and governmental-type activities.
3. Which of the following is a characteristic that distinguishes government and not-for-profit (G&NP) organizations from business enterprises?
a.
Borrowing is not a significant source of financing.
b. The resource providers of G&NP organizations often do not receive services commensurate with the amount of resources they provide.
c. Net income is an appropriate performance evaluation measurement for most of these organizations.
d. Accumulating wealth on behalf of its constituents is a key goal of G&NP organizations and business enterprises.
4.
- Which of the following is a government?
a. An entity that has 4 of its 7 governing board members appointed by government entities.
b. An entity that has the power to enact and enforce a property tax levy.
c. An entity that can be dissolved at the pleasure of a government and the assets of which revert to a government upon dissolution.
d. All of the above would be considered government entities for the purpose of determining whether government GAAP must be followed for financial reporting purposes.
Which of the following is a government?
e. An entity that has 4 of its 7 governing board members appointed by government entities.
f. An entity that has the power to enact and enforce a property tax levy.
g. An entity that can be dissolved at the pleasure of a government and the assets of which revert to a government upon dissolution.
h. All of the above would be considered government entities for the purpose of determining whether government GAAP must be followed for financial reporting purposes.
- If a government is obligated legally to report information in a manner that differs from GAAP:
a. GAAP take precedence over the legal requirements.
b. Legal requirements take precedence over GAAP.
c. Both GAAP requirements and legal requirements must be met.
d. Information should be presented that meets as many legal requirements as possible without violating GAAP in a material manner.
7. Assume that the city of Wakefield purchased a tract of land to be used as a public park. The purchase was financed with proceeds from a five-year note issued by a local lending institution. The park itself will not be ready for public use, however, for at least two years. At the date of purchase, the city would most likely account for the transaction in
- the General Fund and General Long-Term Liabilities account.the Enterprise Fund.the General Fund.the General Fund, the General Capital Assets account, and the General Long-Term Liabilities account.the Enterprise Fund and the Capital Projects Fund.
8. Ashley Woods Village issued $4,000,000 in general obligation bonds to finance the widening of a local thoroughfare. This transaction will most likely
- increase fund balance in the General Fund by $4,000,000.decrease fund balance in the General Fund by $4,000,000.increase fund balance in the Capital Projects Fund by $4,000,000.decrease fund balance in the Capital Projects Fund by $4,000,000.have no effect on the fund balance of the Capital Projects Fund.
9. Government-wide financial statements include
- a statement of net assets.a statement of activities.a statement of cash flows.All of the above.Items a and b only.None of the above.
10. A computer was purchased from unrestricted resources for a general government department. The government paid cash for the computer at the purchase date. Which of the following is not an effect of this transaction in the General Fund?
a. Current assets decrease.
b. Capital assets increase.
c. Current liabilities do not change.
d. Fund balance decreases.
11. In which of the following financial statements should a government not report depreciation expense?
a. Fiduciary fund financial statements
b. Governmental fund financial statements
c. Proprietary fund financial statements
d. Government-wide financial statements
12. The city of Brittainville’s Special Revenue Fund levied $350,000 in taxes, of which 1% was expected to be uncollectible during the current year. Also during the year, the fund collected $ 7,500 of interest revenue and $ 50,000 was transferred from the General Fund. As a result of these transactions fund balance will increase by
- $407,500$404,000$357,500$354,000$400,000
13. A local school district issued a short-term note payable to purchase $500,000 of recreation equipment. The note will be repaid with General Fund resources. The General Fund would report
- expenditures of $500,000.a capital asset of $500,000 and a note payable of $500,000.a note payable of $500,000.a capital asset of $500,000.expenditures of $500,000 and revenues of $500,000 from issuance of the note.Both items a and c.
14. The Special Revenue Fund of the city of Wakefield ended its fiscal year with revenues of $750,000, other financing sources of $ 50,000, and expenditures of $725,000. The closing entry in the Special Revenue Fund would be
dr cr
- Expenditures $ 725,000
Net profit 75,000
Revenues $ 750,000
Other Financing Sources 50,000
Expenditures $ 725,000
Other Financing Uses 75,000
Revenues $ 750,000
Other Financing Sources 50,000
Expenditures $ 725,000
Unreserved Fund Balance 75,000
Revenues $ 750,000
Other Financing Sources 50,000
- Revenues $ 750,000
Other Financing Sources 50,000
Expenditures $ 725,000
Other Financing Uses 75,000
Revenues $ 750,000Other Financing Sources 50,000
Expenditures $ 725,000
Unreserved Fund Balance 75,000
15. The following information pertains to the Richardson County General Fund:
Expenditures 12,800,000
Revenues 9,200,000
Long-term note issue proceeds 1,000,000
Short-term note principal retirements 250,000
Operating transfers to other funds 75,000
The change in RichardsonCounty’s General Fund fund balance for the year is
a. a $2,600,000 decrease.
b. a $2,675,000 decrease.
c. a $2,925,000 decrease.
d. a $3,600,000 decrease.
e. a $3,675,000 decrease.
16. The purpose of encumbrance accounting is to
a. manage a government’s cash flows.
b. avoid expenditures exceeding appropriations.
c. replace expense accounting in governments.
d. prevent government waste.
17. Which of the following budgetary entries would the township of Brussels make upon adoption of its General Fund budget for the year? Assume the following:
Estimated Revenues $10,365,000
Appropriations 10,500,000
Estimated Other Financing Sources (OFS) 200,000
Estimated Other Financing Uses (OFU) 15,000
dr cr
a. Appropriations $10,500,000
Estimated OFU 15,000
Unreserved Fund Balance 50,000
Estimated Revenues $10,365,000
Estimated OFS 200,000
b. Appropriations $10,500,000
Unreserved Fund Balance 50,000
Estimated Revenues $10,365,000
Estimated OFS/OFU, net 185,000
c. Estimated Revenues $10,365,000
Estimated OFS 200,000
Appropriations $10,500,000
Estimated OFU 15,000
Unreserved Fund Balance 50,000
d. Estimated Revenues $10,365,000
Estimated OFS/OFU, net 185,000
Appropriations $10,500,000
Excess 50,000
18. A city ordered uniforms with an expected cost of $6,000 for policemen. This amount is encumbered. The uniforms are received with an invoice of $5,900. The entries to record the receipt of the uniforms should include a debit to
a. encumbrances of $6,000.
b. reserve for encumbrances of $5,900.
c. reserve for encumbrances of $6,000.
d. appropriations of $100.
19. Which of the following is not a common revenue source in a governmental fund budget?
a. Property taxes.
b. Other financing sources.
c. Charges for services.
d. Investment income or interest.
e. Licenses and permits.
20. A general budget is often a term used to describe a budget for all of the following except
a. a General Fund.
b. a Special Revenue Fund.
c. an Internal Service Fund.
d. an Enterprise Fund.
e. Both items c and d.
21. A city levies $200,000 of property taxes for its current fiscal year. One percent of the tax levy is expected to be uncollectible. The city collects $170,000 of its taxes during the year and another $25,000 during the first two months of the following year. In addition, the city collected $3,000 of prior year taxes during the first two months of the current fiscal year and another $2,000 during the remainder of the current fiscal year. What amount of property tax revenues should the city report in the General Fund financial statements for the current fiscal year?
a. $200,000.
b. $198,000.
c. $197,000.
d. $195,000.
22. Government A allows discounts on taxes. Specifically, taxpayers get a 1% discount on the total tax if it is paid within one month of the initial levy. What would the journal entry be to record the levy of $700,000 if the government anticipates there will be a 2% uncollectible rate and it is anticipated that the discounts will be $5,000?
dr cr
- Taxes Receivable $700,000
Allowance for Uncollectible Taxes $ 14,000
Allowance for Discounts 5,000
Revenues 681,000
Taxes Receivable $700,000
Revenues $700,000
- Taxes Receivable $695,000
Expenditures 5,000 Allowance for Uncollectible Taxes $ 14,000
Revenues 686,000
- Taxes Receivable $681,000
Revenues $681,000
Taxes Receivable $700,000
Allowance for Uncollectible Taxes $ 14,000
Revenues 686,000
23. If a city receives notification of a grant award and the actual proceeds sixty days prior to the start of the grant period, the entry to record the grant in the Special Revenue Fund would be
- a debit to grants receivable and a credit to grants revenue.a debit to cash and a credit to grants revenue.a debit to grants receivable and a credit to deferred revenue.a debit to cash and a credit to deferred revenue.None of the above.
24. The county received a $1,500,000 restricted grant from the state government to be used to improve its public safety department’s communication systems. The county will not meet all eligibility requirements of the grant until next fiscal year, when the county plans to begin incurring expenditures for this purpose. In the current year, the General Fund should report this grant as
a. other financing sources.
b. deferred revenues.
c. revenues.
d. None of the above
25. If an expenditure was inadvertently charged to the General Fund instead of the appropriate Special Revenue Fund, what effect would the correction of this error later in the same fiscal year have on the General Fund?
- An entry would be made directly to the General Fund’s fund balance to correct the error.Revenues would be increased.Expenditures would be decreased.Transfers in would be increased.None of the above.
26. If an expenditure was inadvertently charged to the General Fund instead of the appropriate Special Revenue Fund, what effect would the correction of this error later in the same fiscal year have on the General Fund?
An entry would be made directly to the General Fund’s fund balance to correct the error.Revenues would be increased.Expenditures would be decreased.Transfers in would be increased.None of the above.
27. A court judgment was rendered against a county in which they were ordered to pay $500,000 in equal installments over a five-year period to the plaintiff. The county’s General Fund will
- report a fund liability of $500,000 in Year 1.report expenditures of $500,000 in Year 1.report expenditures of $100,000 in Year 1.report expenditures of $100,000 in Year 1 and a fund liability of $400,000.report an other financing use of $100,000 in Year 1.
28. A General Fund transfers funds to a Debt Service Fund in late December. The Debt Service Fund will make the required debt service payment in early January. For the month of December, fund balance will
- decrease for the General Fund and increase for the Debt Service Fund.decrease for the General Fund and remain the same for the Debt Service Fund.decrease for both the General Fund and the Debt Service Fund.Either item a or b, depending on the government’s debt service expenditure accounting policy.None of the above.
29. A government entered into a general government capital lease for equipment during the year. The capitalizable cost of the equipment was $400,000. A down payment of $40,000 was made. The General Fund should report in its statement of revenues, expenditures, and changes in fund balance an
a. other financing use of $400,000.
b. expenditure of $360,000.
c. other financing source of $400,000.
d. other financing source of $360,000.
30. A county uses the consumption method to account for General Fund materials and supplies. The beginning inventory of materials and supplies was $122,000. The ending inventory was $150,000. The beginning balance of reserve for encumbrances (for supplies ordered but not received at the beginning of the year) was $50,000; the ending balance was $20,000. Supplies purchased during the year totaled $750,000. The county General Fund should report expenditures for materials and supplies for the year of
a. $722,000
b. $750,000
c. $752,000
d. $780,000
31. Government A secured a $400,000 short-term loan from a local bank for interim financing for a governmental capital project. What would the journal entry be in the Capital Projects Fund to account for this transaction?
dr cr
- Cash $400,000
Other Financing Sources $400,000
- Cash $400,000
Notes Payable $400,000
- Construction in Progress $400,000
Other Financing Sources $400,000
- Cash $400,000
Revenues $400,000
- No entry is required in the Capital Projects Fund as this is a financing agreement.
32. Ledford County issued $2,000,000 of general obligation bonds for the construction of a new recreation center. The bonds were sold at a 1% discount and the county incurred $150,000 in underwriter’s fees, both of which were withheld from the settlement proceeds. The journal entry required in the Capital Projects Fund for the issuance of the bonds would be
dr cr
- Cash $2,000,000
Other Financing Sources $2,000,000
- Cash $1,980,000
Bonds Payable $1,980,000
- Cash $1,830,000
Expenditures 170,000
Bonds Payable $2,000,000
- Cash $1,850,000
Expenditures 150,000
Other Financing Sources – Bonds $1,980,000
Other Financing Sources – Discount 20,000
Cash $1,830,000
Expenditures –Underwriter Fees 150,000
Other Financing Uses – Discount 20,000
Other Financing Sources – Bonds $2,000,000
33. A government was billed $3,000,000 during the year on its capital project, of which $2,700,000 was paid. The total contracted cost is $5,200,000. The government does not plan to pay the $300,000 balance currently owed to the contractor until the project has been completed and approved. The government should report Capital Projects Fund expenditures for the current year equal to:
a. $2,700,000
b. $3,000,000
c. $4,900,000
d. $5,200,000
34. Which of the following should be reported as other financing sources (uses) in a Capital Projects Fund?
a. Discount on general obligation bonds issued to finance a general government capital project.
b. Premium on general obligation bonds issued to finance a general government capital project.
c. Transfers.
d. All of the above
.
35. On October 1, the county issued a six-month, 6%, $200,000 bond anticipation note to provide temporary financing for a police station. The voters have approved the issuance of bonds to finance the project and the bonds are issued early in the following year. The county government was billed $150,000 during the year on its capital project and $125,000 was paid. The government should report Capital Projects Fund expenditures for the current year ending December 31 equal to:
a. $125,000
b. $150,000
c. $153,000
d. $162,000
36. If a special tax is levied to finance debt service for a particular debt issue, the entry to record the levy in the Debt Service Fund would be
- DEBIT Taxes Receivable and CREDIT to Revenues.DEBIT Taxes Receivable and credit to Fund Balance.DEBIT Taxes Receivable and credit to Other Financing Sources.DEBIT Prepaid Assets and CREDIT to Revenues.Tax levies may not be reported in a Debt Service Fund.
37. The town of Bakersville issued $700,000 of refunding bonds at a 1% premium. Bond issuance costs were $10,000; $695,000 is to be used to retire the existing bonds. Other financing uses will be debited for
- $0$7,000$10,000$695,000$683,000
38. A government has $1,000,000 of 6%, 10-year general obligation bonds outstanding. The bonds were issued on November 1, 20X7 to finance construction of a general capital asset. Interest is payable semiannually on November 1 and May 1. The bonds also require an annual principal payment of $100,000 on May 1. What amount of debt service expenditures should the government report for the year ended December 31, 20X8?
a. $60,000
b. $90,000
c. $160,000
d. $190,000
39. Debt Service Fund expenditures commonly include:
a. Fiscal agent fees
b. Interest expenditures
c. Principal retirement expenditures
d. All of the above
40. A Debt Service Fund received an annual payment from the General Fund to finance upcoming debt service payments. The amount received from the General Fund should be reported in the Debt Service Fund statement of revenues, expenditures, and changes in fund balance as
a. Other financing sources
b. Revenues
c. Proceeds from interfund loans
d. Special item
41. A local citizen donated land with a fair market value of $500,000 to the county government. The donor had paid $550,000 for the land five years ago. The county incurred $150,000 in development costs to convert the land into a public park. The county would capitalize the new public park at
- $0$500,000$550,000$650,000$700,000
42. A bridge construction project, accounted for in a Capital Projects Fund, is in Year 2 of an anticipated three year construction period. In Year 1, costs of $300,000 were incurred. In Year 2, $1,530,000 of costs were incurred. What entry would be necessary in the General Capital Assets accounts for Year 2?
dr cr
- Capital outlay $1,530,000
Cash $1,530,000
- Construction in progress $1,530,000
Cash $1,530,000Construction in progress $1,530,000
Invested in capital assets, net of related debt $1,530,000
- Construction in progress $1,830,000
Invested in capital assets, net of related debt $1,830,000
- Capital outlay $1,830,000
Cash $1,830,000
43. Assume that a governmental entity acquires a new garbage truck. The garbage truck costs $189,000. The vendor allowed a $30,000 allowance with the trade-in of the entity’s old garbage truck, which had a net book value of $42,000. The government financed the balance with a short-term bank note. The new garbage truck would be recorded in the General Capital Assets account at
- $ 0$189,000$159,000$177,000$207,000
44. If a government issues bonds with a face value of $5,000,000 at a 2% discount and incurs $55,000 of issuance costs, the General Long-Term Liabilities accounts will report a liability of
- $0$4,900,000$4,955,000$5,000,000$5,055,000
45. A government has general obligation bonds that mature in the next fiscal year. The bonds should be removed from the General Long-Term Liabilities accounts
a. At the end of the current fiscal year since they will be current liabilities at that time.
b. In the next fiscal year (in which they mature) if they are paid in that period.
c. In the next fiscal year (in which they mature).
d. None of the above.
46. Which of the following statements is true concerning interest capitalization?
- Generally accepted accounting principles require the capitalization of certain types of interest in Enterprise Funds.Interest cost should not be capitalized for asset acquisitions financed by restricted gifts or grants.Interest capitalization is computed differently for tax-exempt versus tax able debt.All of the above statements are true.
47. Refunding bonds were issued by an Enterprise Fund with a face value of $15,000,000 at a 1% discount. Issuance costs were $225,000. The entry to record the issuance of the refunding bonds would be
dr cr
- Cash $14,625,000
Expenditures 225,000
Other Financing Uses – Discount 150,000
Other Financing Sources – Bonds $15,000,000
- Cash $14,625,000
Expenditures 225,000
Other Financing Sources – Bonds $14,850,000
- Cash $15,000,000
Bonds Payable $15,000,000
Cash $14,625,000
Unamortized Deferred Charges/Discount 375,000
Bonds Payable $15,000,000
Cash $14,625,000 Expenditures 225,000
Unamortized Discount 150,000
Bonds Payable $15,000,000
48. The Public Utilities Enterprise Fund was ordered by the court to pay environmental damages of $500,000. The fund is to pay $100,000 immediately and the remaining $400,000 in equal installments for four additional years. In the year of the judgment, the Enterprise Fund would report
- $500,000 in expenses.$400,000 in liabilities.$100,000 in expenses.both items a and b.both items b and c.
49. A government borrowed $20 million by issuing general obligation bonds to finance construction of a new airport terminal for its Airport Enterprise Fund. The bonds were issued at par, and the government intends to service the bonds from Enterprise Fund revenues. The proceeds of the bonds should be reported as
a. An other financing source in the Enterprise Fund statement of revenues, expenses, and changes in net assets.
b. Capital and related financing activities in the Enterprise Fund statement of cash flows.
c. Revenues in the Enterprise Fund statement of revenues, expenses, and changes in net assets equity.
d. Both items a and b are correct.
50. A government defeased in substance $10 million of old Enterprise Fund bonds by paying $12 million into a qualifying trust for that purpose. The refunded bonds had an unamortized premium of $200,000 and bond issue costs of $50,000. Resources to finance the defeasance of the old bonds were provided by issuing $12,000,000 of new bonds issued at par. What amount of deferred interest expense adjustment should the government report?
a. $0
b. $1,850,000 debit
c. $1,800,000 debit
d. $1,850,000 credit
