Homework answers / question archive / Chapter 16 Accounting for State and Local Governments, Multiple Choice Questions Which standard issued by the Governmental Accounting Standards Board in 1999 requires two distinct sets of financial statements for state and local governments?      GASB Statement No

Chapter 16 Accounting for State and Local Governments, Multiple Choice Questions Which standard issued by the Governmental Accounting Standards Board in 1999 requires two distinct sets of financial statements for state and local governments?      GASB Statement No

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Chapter 16

Accounting for State and Local Governments,
Multiple Choice Questions

1. Which standard issued by the Governmental Accounting Standards Board in 1999 requires two distinct sets of financial statements for state and local governments?  

  

1. 1. GASB Statement No. 32.
   2. GASB Statement No. 33.
   3. GASB Statement No. 34.
   4. GASB Statement No. 35.
   5. GASB Statement No. 36.

 

2. Which group of governmental financial statements reports all revenues and all costs of providing services each year?  

  

1. 1. GAAP-Based Financial Statements.
   2. Fund-Based Financial Statements.
   3. Cost-Based Financial Statements.
   4. Government-Wide Financial Statements.
   5. General Fund Financial Statements.

 

3. Proprietary funds are  

  

1. 1. Funds used to account for the activities of a government that are carried out primarily to provide services to citizens.
   2. Funds used to account for a government's ongoing organizations and activities that are similar to those . operated by for-profit organizations.
   3. Funds used to account for monies held by the government in a trustee capacity.
   4. Funds used to account for all financial resources except those required to be accounted for in another fund.
   5. Funds used to account for revenues that have been legally restricted as to expenditure.

 

4. Fiduciary funds are  

  

1. 1. Funds used to account for the activities of a government that are carried out primarily to provide services to citizens.
   2. Funds used to account for a government's ongoing organizations and activities that are similar to those . operated by for-profit organizations.
   3. Funds used to account for monies held by the government in a trustee capacity.
   4. Funds used to account for all financial resources except those required to be accounted for in another fund.
   5. Funds used to account for revenues that have been legally restricted as to expenditure.

 

5. Governmental funds are  

  

1. 1. Funds used to account for the activities of a government that are carried out primarily to provide services to citizens.
   2. Funds used to account for a government's ongoing organizations and activities that are similar to those . operated by for-profit organizations.
   3. Funds used to account for monies held by the government in a trustee capacity.
   4. Funds used to account for all financial resources except those required to be accounted for in another fund.
   5. Funds used to account for revenues that have been legally restricted as to expenditure.

 

6. Special Revenue funds are  

  

1. 1. Funds used to account for the activities of a government that are carried out primarily to provide services to citizens.
   2. Funds used to account for a government's ongoing organizations and activities that are similar to those . operated by for-profit organizations.
   3. Funds used to account for monies held by the government in a trustee capacity.
   4. Funds used to account for all financial resources except those required to be accounted for in another fund.
   5. Funds used to account for revenues that have been legally restricted as to expenditure.

 

7. The term "current financial resources" refers to  

  

1. 1. Those assets that can quickly be converted into cash.
   2. Monetary assets that are available to meet the government's needs.
   3. The government's current assets and current liabilities.
   4. The current value of all net assets owned by the governmental unit.
   5. Financial resources used to provide electricity to local citizens.

 

8. What are the broad types or classifications of funds for a governmental entity such as a city?  

  

1. 1. General, governmental, and trust funds.
   2. Governmental, proprietary, and fiduciary funds.
   3. Revenue, trust, and governmental funds.
   4. Enterprise, revenue, and fiduciary funds.
   5. Governmental, agency, and enterprise funds.

 

9. Which group of financial statements is prepared using the "modified accrual accounting" approach?  

  

1. 1. GAAP-Based Financial Statements.
   2. Fund-Based Financial Statements.
   3. Cost-Based Financial Statements.
   4. Government-Wide Financial Statements.
   5. General Purpose Financial Statements.

 

10. Under modified accrual accounting, revenues should be recognized when they are  

  

1. 1. collected.
   2. realizable.
   3. reasonably estimable.
   4. measurable and available.
   5. earned.

 

11. Under modified accrual accounting, when should an expenditure to recognize interest on long-term debt be recorded?  

  

1. 1. At the end of each accounting period.
   2. When payment is due within one fiscal year.
   3. When payment is due.
   4. When cash is available to pay the interest.
   5. When the interest is incurred.

 

12. Which of the following funds is most likely created with an endowed gift?  

  

1. 1. Enterprise Fund.
   2. Internal Service Fund.
   3. Debt Service Fund.
   4. Capital Projects Fund.
   5. Permanent Fund.

 

13. Revenue from property taxes should be recorded in the General Fund  

  

1. 1. when received.
   2. when there is an enforceable legal claim.
   3. when they are available for recognition.
   4. in the period for which they are required or permitted to be used.
   5. in the period in which the tax bills are mailed.

 

14. Which type of fund is not included in the Government-Wide Financial Statements?  

  

1. 1. Governmental Funds
   2. Proprietary Funds
   3. Fiduciary Funds
   4. Debt Service Funds
   5. Special Revenue Funds

 

15. A city received a grant of $5,000,000 from a private agency. The money was to be used to build a new city library. In which fund should the money be recorded for the Fund-Based Financial Statements?  

  

1. 1. The General Fund.
   2. An Expendable Trust Fund.
   3. A Capital Projects Fund.
   4. An Agency Fund.
   5. A Permanent Fund.

 

16. When a city received a federal grant for providing food and other assistance to the homeless, the money should have been recorded in  

  

1. 1. the General Fund.
   2. an Expendable Trust Fund.
   3. a Capital Projects Fund.
   4. an Agency Fund.
   5. a Special Revenue Fund.

 

17. Bay City received a federal grant to provide health care services to low income mothers and children. When should the revenues be recognized?  

  

1. 1. As health care services are provided.
   2. When the awarding of the grant is announced.
   3. When the grant money is received.
   4. At the end of Bay City's fiscal year.
   5. When the grant money is receivable.

 

18. Trapper City issued 30-year bonds for the purpose of building a new City Hall. The proceeds of the bonds are deposited in the General Fund. For the Fund-Based Financial Statements, in what fund will Bonds Payable appear?  

  

1. 1. General Fund.
   2. Capital Projects Fund.
   3. Permanent Fund.
   4. Debt Service Fund.
   5. Bonds Payable do not appear in Fund-Based Financial Statements.

 

19. Which of the following is a governmental fund?  

  

1. 1. Enterprise fund.
   2. Internal service fund.
   3. Permanent fund.
   4. Investment trust fund.
   5. Agency fund.

 

20. Which of the following is a fiduciary fund?  

  

1. 1. Pension trust fund.
   2. Debt service fund.
   3. Permanent fund.
   4. Enterprise fund.
   5. Capital projects fund.

 

21. According to GASB Concepts Statement No. 1, what are the three groups of primary users of external state and local governmental financial reports?  

  

1. 1. The Securities Exchange Commission, the citizenry, and legislative and oversight bodies.
   2. The Securities Exchange Commission, legislative and oversight bodies, and investors and creditors.
   3. The Securities Exchange Commission, the citizenry, and investors and creditors.
   4. The citizenry, legislative and oversight bodies, and investors and creditors.
   5. The citizenry, management, and the Governmental Accounting Office.

 

22. Which of the following statements is true regarding fund-based financial statements?  

  

1. 1. Fund-based financial statements report a government's activities and financial position as a whole. BFund-based financial statements should tell the amount spent this year on such services as public safety, . education, health and sanitation, and the construction of a new road.

1. 3. Fund-based financial statements utilize the accrual basis of accounting much like any for-profit entity.
   4. Fund-based financial statements help to determine whether the government's overall financial position improved or deteriorated.
   5. Fund-based financial statements report all assets and liabilities in a way comparable to business-type accounting.

 

23. Which of the following statements is false regarding government-wide financial statements?

  

1. 1. Government-wide financial statements report a government's activities and financial position as a whole. BThe government-wide financial statement approach helps users make long-term evaluations of the . financial decisions and stability of the government.

1. 3. Government-wide financial statements focus on the short-term instead of the long-term.
   4. Government-wide financial statements assess the finances of the government in its entirety, including the year's operating results.
   5. The measurement focus of government-wide financial statements is on all economic resources and utilizes accrual accounting.

 

24. How do the balance sheet and statement of revenues, expenditures, and changes in fund balances of governmental funds differ from the financial statement presentation for the governmental activities in the government-wide statement of net assets and statement of activities?  
    1. Internal service funds are not included in the fund-based financial statements of governmental funds but could be reported in the governmental activities of government-wide financial statements.
    2. The economic resources measurement basis is used for fund-based financial statements of governmental funds and the current financial resources measurement basis is used for governmental activities in the government-wide financial statements.
    3. Modified accrual accounting is used for fund-based financial statements of governmental funds to time revenues and expenditures and accrual accounting is used for governmental activities of government-wide financial statements.
    4. The financial statements of governmental funds for fund-based financial statements are the same as governmental activities in government-wide financial statements but with different titles of the financial statements.  

  

1. 1. 1 and 2.
   2. 2, 3, and 4.
   3. 1, 2 and 3.
   4. 1 and 3.
   5. 1, 2, 3, and 4.

 

25. Which of the following is not a classification of nonexchange transactions according to GASB Statement Number 33?  

  

1. 1. Derived tax expenditures.
   2. Voluntary nonexchange transactions.
   3. Government-mandated nonexchange transactions.
   4. Derived tax revenues.
   5. Imposed nonexchange revenues.

 

26. GASB Statement Number 33 divides all eligibility requirements into four general classifications including all of the following except:  

  

1. 1. Required characteristics of the recipients.
   2. Time requirements.
   3. Reimbursement.
   4. Contingencies.
   5. Refunding.

 

27. Which statement is not correct?  

  

1. 1. Governmental funds account for expenditures of financial resources rather than matching revenues and expenses.
   2. The Fund Balance Reserved for Encumbrances account is not closed at the end of a fiscal year. CRevenues from licenses and permit fees are recognized when received in cash if using the modified . accrual basis of accounting for governmental funds.

DA fund is an independent accounting entity composed of cash and other financial resources, segregated . for the purpose of carrying on specific activities and objectives. E. Commitments for purchase orders are recorded as expenses.

 

28. For governmental entities, the accrual basis of accounting is used for:  

  

1. 1. Special revenue funds.
   2. Internal service funds.
   3. Debt service funds.
   4. General Fund.
   5. Capital Projects Fund.

 

29. What account is debited in the general fund when equipment is received by a governmental entity?  

  

1. 1. Expenditures.
   2. Encumbrances.
   3. Plant assets.
   4. Accounts Payable.
   5. Fund Balance-Reserve for Encumbrances.

 

30. Generally, annual budgets are recorded within the following funds:  

  

1. 1. General fund and special revenue funds.
   2. Capital projects funds and debt service fund.
   3. Enterprise funds and internal service funds.
   4. General Fund and Pension Trust Fund.
   5. Agency Funds and General Fund.

 

31. When a city received a federal grant for books to be purchased for a library, the money should have been recorded in  

  

1. 1. the Permanent Fund.
   2. an Expendable Trust Fund.
   3. a Capital Projects Fund.
   4. an Agency Fund.
   5. a Special Revenue Fund.

 

32. When a city holds pension monies for city employees, the monies should be recorded in  

  

1. 1. the General Fund.
   2. an Expendable Trust Fund.
   3. a Fiduciary Fund.
   4. an Agency Fund.
   5. a Special Revenue Fund.

 

33. When a city received a private donation of $1,000,000 stipulating that the principal donation would be preserved but allowing the interest income to be spent on building a city park with access for disabled children, which fund should the money be recorded in?  

  

1. 1. The General Fund.
   2. An Expendable Trust Fund.
   3. A Permanent Fund.
   4. An Agency Fund.
   5. A Special Revenue Fund.

 

34. When a city collects fees from citizens who use the public swimming pool, the money should be recorded

in  

  

1. 1. the General Fund.
   2. an Enterprise Fund.
   3. a Capital Projects Fund.
   4. an Agency Fund.
   5. an Internal Service Fund.

 

35. A city operates a central data processing facility. The expenses of this facility would be accounted for using  

  

1. 1. the General Fund
   2. an Enterprise Fund
   3. a Capital Projects Fund
   4. an Agency Fund
   5. an Internal Service Fund

 

36. What are the two proprietary fund types?  
    1. Internal service funds.
    2. Investment trust funds.
    3. Enterprise funds.
    4. Agency funds.  

  

1. 1. 1 and 2.
   2. 2 and 3.
   3. 1 and 3.
   4. 2 and 4.
   5. 1 and 4.

 

37. Salaries and wages that have been earned by governmental employees that have not yet been paid are recorded in the general fund as:  

  

1. 1. An expenditure.
   2. An encumbrance.
   3. An appropriation.
   4. An expense.
   5. An investment.

 

38. The reporting of the fund balance of governmental funds will result in a maximum of ___________ categories:  

  

1. 1. one B. two

1. 3. three
   4. four
   5. five

 

39. Which classifications may be not used for the Fund Balance of governmental funds?  

  

1. 1. Spendable
   2. Nonspendable
   3. Assigned
   4. Unassigned
   5. Restricted

 

40. Which of the following statements is true about Fund Balance classifications for the governmental funds?  

  

1. 1. A restricted fund balance is for monies the governing board has appropriated.
   2. An assigned fund balance has been designated for a specific purpose and is restricted to use for only that purpose.
   3. An unassigned fund balance has no restriction for use of the money and is only applicable to the General Fund.
   4. A committed fund balance has been designated by an outside party for a particular use.
   5. A nonspendable fund balance is designated only for Permanent Fund balances.

 

41. For each of the following transactions, select the area of accounting records in which an entry will be recorded.  

  

 

_

_

     The city council adopts an annual budget for the _

1. 1. General Fund only       General Fund. _

 

1. 2. Special _ Revenue Fund          _ and Governmental   _

Activities      Property taxes are levied. _

 

_

_

_

1. 3. General Fund only            Computers are ordered for the fire department. _

 

1. 4. Special _ Revenue Fund          _ and Governmental        A transfer of funds is made from the General Fund to _

Activities the Debt Service Fund. _

 

_

1. 5. Debt Service Fund       _ and Governmental   _

Activities      The principal and interest of a bond are paid. _

 

_

_ 6. Governmental      A building is acquired for the police department, and _

Activities only      renovations begin immediately. _

 

_

_

1. 7. General Fund and      _

Debt Service Fund                Depreciation on fire trucks is recorded. _

 

_

1. 8. General Fund             _ and Governmental        Citizens are assessed for a street lighting project_  Activities       that has been legally restricted for those citizens._ 

 

1. 9. Capital           _

Projects Fund and            _

Governmental           A grant is received to landscape tree-lined areas _

Activities beside city-owned streets. _

 

1. 10. Special           _

Revenue Fund           The city spends grant money received in (9.) _ and Governmental      above and landscapes the tree-lined areas beside _ Activities      the streets for which the grant money was received. _

 

42. What organization is responsible for establishing accounting principles for governmental entities? By whom was this organization established?  

  

 

 

 

 

  

 

43. What is a special revenue fund used to account for?  

  

 

 

 

 

  

 

44. What is the definition of the term fund?  

  

 

 

 

 

  

 

45. For a government, what kind of operations are accounted for using a proprietary fund? Give three examples.  

  

 

 

 

 

  

 

46. What are the five types of governmental funds?  

  

 

 

 

 

  

 

47. A city enacted a special tax levy and the money must be used to provide medical services at the municipal hospital. What kind of fund should be used to record the revenues generated by the tax?  

  

 

 

 

 

  

 

48. In governmental accounting, what term is used for a decrease in financial resources?  

  

 

 

 

 

  

 

49. Under modified accrual accounting, when are expenditures recorded?  

  

 

 

 

 

  

 

50. What assets would be included in the accounting records of a city's general fund?  

  

 

 

 

 

  

 

51. Under modified accrual accounting, when should revenues be reported by a governmental-type fund?  

  

 

 

 

 

  

 

52. When should property taxes be recognized under modified accrual accounting?  

  

 

 

 

 

  

 

53. What are the two groups of financial statements mandated by GASB Statement No. 34? For each group, what are the names of the individual statements that must be produced?  

  

 

 

 

 

  

 

54. What is the primary difference between monies accounted for in the general fund and monies accounted for in the special revenue fund?  

  

 

 

 

 

  

 

55. What are the two proprietary fund types?  

  

 

 

 

 

  

 

56. What are the four fiduciary fund types?  

  

 

 

 

 

  

 

57. What is the purpose of fund-based financial statements?

  

 

 

 

 

  

 

58. What is the purpose of government-wide financial statements?  

  

 

 

 

 

  

 

59. The board of commissioners of the city of Jarmaine adopted a General Fund budget for the year ending June 30, 2011, which indicated revenues of $1,300,000, bond proceeds of $520,000, appropriations of $1,170,000, and operating transfers out of $390,000. Required:

 

If this budget was formally integrated into the accounting records used to produce the Fund-Based Financial Statements, what was the required journal entry at the beginning of the year?  

  

 

 

 

 

  

 

60. On July 1, 2011, Fred City ordered $1,500 of office supplies. They were to be paid for out of the General Fund.

Required:

 

(A.) What journal entry was required for the Fund-Based Statements?

(B.) What journal entry was required for the Government-Wide Statements?  

  

 

 

 

 

  

 

61. On July 12, 2011, Fred City ordered a new computer at an anticipated cost of $114,400. The computer was received on July 16 with an actual cost of $116,220. Payment was subsequently made on August 15, 2011. Required:

 

(A.) Prepare all the required journal entries and identify the type of fund in which each entry was recorded for the Fund-Based Financial Statements.

(B.) Prepare all the required journal entries and identify the type of fund in which each entry was recorded for the Government-Wide Financial Statements.  

  

 

 

 

 

  

 

62. A new truck was ordered for the sanitation department at a cost of $122,200 on September 3, 2011. Required:

 

(A.) Prepare the required journal entry in the General Fund for the Fund-Based Financial Statements.

(B.) Prepare the required journal entry for the Government-Wide Financial Statements.  

  

 

 

 

 

  

 

63. The school system had some booklets printed by a local print shop on September 22, 2011. The school system was charged $1,560 for the printing, but the bill is not due until October. Required:

 

(A.) Prepare the required journal entry in the General Fund for the Fund-Based Financial Statements.

(B.) Prepare the required journal entry for the Government-Wide Financial Statements.  

  

 

 

 

 

  

 

64. A $910,000 bond was issued on October 1, 2011 to build a new road. The bonds carried a 6% interest rate and are due in 10 years. Required:

 

(A.) Prepare the required journal entry in the Capital Projects Fund on October 1 for the Fund-Based Financial Statements.

(B.) Prepare the required journal entry for the Government-Wide Financial Statements.  

  

 

 

 

 

  

 

65. On June 14, 2011, Fred City agreed to transfer cash of $52,000 from the General Fund to provide permanent financing for a municipal swimming pool that will be viewed as an Enterprise Fund. The cash was transferred on June 30. Required:

 

(A.) Prepare all the required journal entries and identify the fund in which each entry was recorded for the Fund-Based Financial Statements.

(B.) Prepare all the required journal entries and identify the type of activity for the Government-Wide Financial Statements.  

  

 

 

 

 

  

 

66. On August 21, 2011, Fred City transferred $100,000 to the School System to cover repairs to a school building.

Required:

 

Prepare all the required journal entries and identify the fund in which each entry was recorded for the FundBased Financial Statements.  

  

 

 

 

 

  

 

67. On January 1, 2011, Wakefield City purchased $40,000 office supplies. During the year $35,000 of these supplies were used. Required:

 

Record the journal entries for these transactions using the purchases method. (Disregard the encumbrance entries.)  

  

 

 

 

 

  

 

68. On January 1, 2011, Wakefield City purchased $40,000 office supplies. During the year $35,000 of these supplies were used.

Required:

Record the journal entries for these transactions using the consumption method. (Disregard the encumbrance entries.)  

  

 

 

 

 

  

 

69. The town council adopted an annual budget estimating general revenues of $2,000,000, approved expenditures of $1,700,000 and other financing for other funds of $130,000. Required:

 

Record the journal entry to record the budget and identify the fund in which it is recorded.  

  

 

 

 

 

  

 

70. Property taxes of 1,500,000 are levied for Miner County. The county expects that 5% will be uncollectible.

Required:

Prepare the required journal entry and identify the fund in which it is recorded.  

  

 

 

 

 

  

 

71. Shell City transfers $100,000 from the General Fund to the Debt Service fund. Required:

 

Prepare the required journal entries and identify the funds in which they are recorded.  

  

 

 

 

 

  

 

72. Prepare the journal entry and identify the fund to record the purchase order of two trucks owned by Simple City for $100,000. Identify the fund in which the entry is recorded.  

  

 

 

 

 

  

 

73. Simple City has recorded the purchase order of two trucks for a total of $100,000.

Prepare the journal entries to reflect that the two trucks have been received with a voucher price of $105,000. This amount has been approved but not yet paid. Identify the fund in which the entries are recorded.  

  

 

 

 

 

  

 

74. A $5,000,000 bond is issued by Northern City to build a new hospital. Required:

 

Prepare the journal entry and identify the fund in which it is recorded to reflect the bond issue.  

  

 

 

 

 

  

 

75. The Town of Anthrop receives a $10,000 grant to make the Town Hall handicapped-accessible. Required:

 

Prepare the journal entry, and identify the fund in which it is recorded, to record the receipt of the grant.  

  

 

 

 

 

  

 

76. The Town of Anthrop has recorded the receipt of a $10,000 grant to make its Town Hall handicappedaccessible. The town now spends $10,000 to make the Town Hall handicapped-accessible. Required:

 

Prepare the journal entry (or entries), and identify the fund for recording, to record that the town spends $10,000 of a grant it received to make the Town Hall handicapped-accessible.  

  

 

 

 

 

  

 

77. The city of Kamen collected $17,000 from parking meters that must be transferred to the county government. Required:

 

For fund-based financial statements, prepare the journal entry for this transaction including the fund type in which the entry would have been recorded.  

  

 

 

 

 

  

 

78. The city of Kamen transferred $27,000 into a Pension Trust Fund. Of this amount, $19,000 was contributed by the city with the remainder coming from the employees. Required:

 

For fund-based financial statements, prepare the journal entry for this transaction including the fund type in which the entry would have been recorded.