Central City was awarded two state grants during its fiscal year ending September 30, 2003: a $2 million block grant that can be used to cover any operating expenses incurred during fiscal 2004 and a $1 million grant that can be used any time to acquire equipment for its police department

7. d
Governmental funds focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances remaining at year end that are available for spending. There are 3 million for available for spending at year end, so choose d.

8. c.
The statement of activities presents information showing how the state's net assets (the difference between assets and liabilities) changed during the fiscal year. All of the changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Revenues are recognized when earned and expenses are recorded at the time liabilities are incurred. So choose C.