Westmoreland County Community College

ACCOUNTING 2265

Chapter 8 Government-Wide Statements, Capital Assets, Long-Term Debt

True/False Questions

1)Government-wide statements are prepared using the accrual basis; therefore, governmental fund-basis statements need to be adjusted from their original modified accrual basis.

2. Government-wide statements are prepared using the accrual basis; therefore, enterprise fund- basis statements need to be adjusted from their original modified accrual basis.

3. The government-wide statements include a government-wide Statement of Cash Flows.

4. The difference between assets and liabilities in the government-wide statements is called fund balance.

5. The difference between assets and liabilities in the government-wide statements is called Net Assets.

6. GASB requires a reconciliation from proprietary fund financial statements to the government-wide statements business-activities columns from modified accrual accounting to accrual accounting.

7. GASB requires a reconciliation from governmental fund financial statements to the government-wide statements governmental-activities columns from modified accrual accounting to accrual accounting.

8. Balances from enterprise fund statements, Statement of Net Assets and Statement of Revenues, Expenses, and Changes in Fund Net Assets, are reported in the business-type activities sections of government-wide statements.

9. When preparing the government-wide statements, worksheet entries are never booked; they are only used on the worksheets.

10. Using the worksheet approach, general (governmental) long term assets and long term debt have a balance of zero until the worksheet entries are made.

11. Government-wide financial statements are prepared using the accrual basis of accounting
12. Enterprise funds are reported in the business-type activities column of the government-wide statements.

13. When preparing the government-wide statements, worksheet entries are made to add the balances of the fiduciary funds

14. When preparing the government-wide statements, a worksheet entry is required to eliminate the current period expenditures for capital outlay and record those expenditures as capital assets

15. When preparing the government-wide statements, no entry is required to record depreciation expense on general capital assets

16. GASB Statement No. 34 states that general capital assets should not be reported as assets in governmental funds but should be reported in the governmental activities column of the government-wide statement of net assets.

17. In addition to the fund basis statement, GASB Statement 34 requires government-wide statements that are prepared using the accrual basis and the current financial resources measurement focus.

18. Fiduciary activities are reported in a separate column of the government-wide statements.

19. Capital assets acquired through proprietary funds are reported in both the Statement of Net Assets of those funds and the government-wide Statement of Net Assets.

20. GASB requires that general fixed assets acquired through General, special revenue or capital projects funds be included in the government-wide financial statements.

21. GASB specifically requires interest during construction in governments’ funds to be capitalized in the government-wide statements.

22. When preparing government-wide statements, depreciation expense must be eliminated.

23. When converting from governmental fund financial statements to the governmental activities column of the government-wide statements, the proceeds from the sale of capital assets which were listed as an “other financing source” are eliminated and the gain or loss is recorded when preparing the government-wide statements.

24. Assume a government reported $300,000 in capital outlay expenditures in the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances. Secondly, assume depreciation of capital assets amounted to $250,000, in the governmental activities column in the Statement of Activities. Those adjustments would cause an increase of $50,000 when preparing the reconciliation between the change in governmental fund balances to the change in net assets of governmental activities in the Statement of Activities.

25. Assume a government reported Other Financing Sources - Proceeds of Bonds in the amount of $1,000,000 in the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances. When preparing the reconciliation from the changes in fund balances in that statement to the changes in net assets in the governmental funds column in the Statement of Activities, an increase of $1,000,000 would be entered.

26. When converting from the enterprise funds Statement of Net Assets to the government-wide Statement of Net Assets (government-wide statements), it is necessary to add fixed assets and to deduct long-term debt.

27. Few adjustments to internal service funds are necessary when converting from proprietary funds statements to the government-wide statements as internal service funds are generally reported as business-type activities in the government-wide statements.

28. When converting from fund financial statements to government-wide statements, it is necessary to eliminate transfers that are between the categories of governmental activities and business-type activities.

29. An example of a program revenue in the government-wide Statement of Activities would be property taxes.

30. GASB requires that infrastructure be depreciated on the government-wide statements unless the government chooses to use the modified approach which expenses amounts expended to increase the life of infrastructure.

31. An asset may be considered impaired if either the decline in the service utility is unexpected or the amount of the decline in service utility is large.

32. GASB does not require that “collections” be capitalized and depreciated.

33. When using the modified approach to record infrastructure, expenditures to widen a 2-lane road to 4-lanes would be charged to an expense, in lieu of depreciation.

34. General long-term debt, to be paid out of resources of the government's taxing power, is reported in both the governmental fund Balance Sheet and the government-wide Statement of Net Assets.

35. The Statement of Net Assets and Statement of Activities are the only two statements for the government-wide financial statements.

36. Debt margin is the difference between the amount of debt limit outstanding and the amount of indebtedness allowed by law.

37. Internal Service Funds are most commonly included in the business-type activities category of the government-wide statements.

38. Internal Service Funds are most commonly incorporated into the governmental activities category of the government-wide statements.

39. Governments may choose either to depreciate infrastructure assets or use the modified approach.

40. Internal service funds primarily serve governmental departments; therefore they are not

incorporated into the business-type activities category of the government-wide statements.

41. Debt limit is the total amount of indebtedness of specified kinds that is allowed by law to be outstanding at any time.

42. GASB standards require a reconciliation from fund financial statements to government-wide financial statements.

43. When using the modified approach to account for infrastructures, expenditures to extend the life of the infrastructure assets are capitalized.

44. When using the modified approach to account for infrastructures, expenditures to extend the life of the infrastructure assets are expensed.

45. Governments must capitalize infrastructure assets in the government-wide statements
46. Governments have the option to capitalize infrastructure assets in the governmental funds’ fund-basis financial statements.

Multiple Choice Questions

47. Which of the following is false regarding government-wide financial statements?
    1. Government-wide financial statements are prepared using the accrual method of accounting
    2. General capital assets are required to be reported on the government-wide balance sheet.
    3. Worksheet entries are required to change the enterprise fund financial statements to the accrual basis of accounting
    4. GASB requires a reconciliation from fund financial statements to government-wide financial statements

48. With respect to government-wide statement, which of the following statements is correct?
    1. GASB requires a reconciliation from proprietary fund financial statements to the government-wide statements business-activities columns from modified accrual accounting to accrual accounting.
    2. General capital assets should not be reported as assets in governmental funds but should be reported in the governmental activities column of the government-wide statement of net assets.
    3. In addition to the fund basis statement, GASB Statement 34 requires government- wide statements that are prepared on the modified accrual basis using the economic resources measurement focus.
    4. Fiduciary activities are reported in the government-wide statements in a separate column.

49. Which of the following funds would not be included in the government-wide financial statements
    1. Private Purpose Trust Fund.
    2. Capital Project Fund.
    3. Enterprise Fund.
    4. Permanent Fund.

.

50. Which of the following would be included in the Equity section of the Statement of Net Assets?
    1. Retained Earnings.
    2. Unassigned Fund Balance.
    3. Invested in capital assets, net of related debt.
    4. Nonspendable fund balance.

51.    In addition to a Statement of Net Assets, which of the following are government-wide statements?
    1. Statement of Revenues, Expenses, and Changes in Fund Net Assets.
    2. Statement of Cash Flows.
    3. Neither A nor B.
    4. Both A and B.

52. Which of the following is not a reconciliation required by GASB?
    1. From governmental fund balance sheet to the Government-wide Statement of Net Assets.
    2. From governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities.
    3. From enterprise fund balance sheet to the Government-wide Statement of Net Assets.
    4. None of the above, all these reconciliations are required.

53. Which of the following is true regarding revenue recognition for sales taxes, when reporting in the government-wide statements?
    1. Assets are recognized when the underlying exchange (retail sale) has occurred or when resources are received, whichever occurs first.
    2. Revenues are recognized when the underlying exchange (retail sale) has occurred.
    3. Both of the above are true.
    4. Neither of the above is true.

54. Which of the following is true regarding revenue recognition for property taxes, when reporting in the government-wide statements?
    1. Assets are recognized when an enforceable legal claim has arisen or when resources are received, whichever is first.
    2. Revenues are recognized when measurable and available; that is, when collected during the current period or no more than 60 days after the end of the current period.
    3. Both of the above are true.
    4. Neither of the above is true.

55. When converting from fund basis reporting to government-wide reporting, which of the following would require an adjustment?
    1. Property taxes expected to be collected 61-90 days after the end of the fiscal year.
    2. A state grant received as reimbursement for a summer jobs program.
    3. Sales tax collected for sales from the current year.
    4. Receipt of advance funding on a grant.

56. Which of the following items are added to government-wide financial statements through worksheet journal entries?
    1. General Capital Assets.
    2. General Long Term Debt.
    3. Internal Service Funds servicing governmental departments.
    4. All of the above.

57. Governmental fund-basis statements are prepared using the                        , and must be converted to the                                    to be incorporated in the government-wide statements.
    1. Accrual basis,                              modified accrual basis.
    2. Accrual basis,                              tax basis.
    3. Modified accrual basis,           accrual basis.
    4. Cash basis,                                   accrual basis.

58. The governmental funds follow                                 where the government-wide statements follow

                             .

1. 1. Modified accrual accounting,               accrual accounting.
   2. Accrual accounting,                                  modified accrual accounting.
   3. Accrual accounting,                                  accrual accounting.
   4. None of the above.

59. The reconciliations required to be presented on the face of the governmental fund financial statements or in separate schedule immediately after the fund financial statements include:
    1. Reconciliation from the governmental fund Balance Sheet to the Statement of Net Assets.
    2. Reconciliation from the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities.
    3. Both A & B.
    4. No reconciliations are required to be submitted.

60. When preparing government-wide financial statements, the modified accrual basis governmental funds are adjusted for all of the following events except?
    1. Long-term debt related events
    2. Change in current assets and current liabilities from year to year
    3. Internal service fund activities
    4. Interfund activities
61. When preparing government-wide financial statements, the modified accrual basis governmental funds are adjusted for which of the following events?

61. 1. Capital asset related events
    2. Long-term debt related events
    3. Internal service fund activities
    4. All of the above
62. Which of the following would not be an adjustment for long-term debt when preparing government-wide financial statements?
    1. Changing “proceeds of bonds’ to debt liabilities
    2. Changing expenditures for debt service principal to reduction of liabilities
    3. Amortizing bond premiums
    4. Recording the cash received from a debt issue
63. Which of the following statements is not correct with respect to the preparation of government-wide statements?
    1. A worksheet entry is required to record depreciation expense on capital assets of governmental activities
    2. Enterprise funds are reported in the business-type activities column of the government-wide statements.
    3. Worksheet entries must be made to eliminate operating profits earned by enterprise funds.
    4. A worksheet entry is required to eliminate the charge to expenditures for capital outlay and record those expenditures as capital assets

64. A local government purchased a building and recorded the event by debiting Expenditures – Capital Outlay and crediting Cash. What would be the worksheet entry to prepare the government-wide statements?
    1. Debit to Capital Assets and credit to Expenditures – Capital Outlay
    2. Debit to Capital Assets and credit to Cash
    3. Debit to Capital Assets and credit to Accumulated Depreciation-Capital Assets and Expenditures – Capital Outlay
    4. Debit to Capital Assets for the book value of the asset and credit to Expenditures – Capital Outlay

65.    A local government recorded the sale of a capital asset at a gain by recording a debit to cash and credit to proceeds of sale of capital asset. What is the worksheet entry when preparing the government-wide statements?
    1. Debit to Proceeds of sale of capital asset and credit to Gain on sale of capital asset
    2. Debit to Cash and credit to capital asset (net) and credit to Gain on sale of capital asset
    3. Debit to Proceeds of sale of capital asset and credit to capital asset (net) and Gain on sale of capital asset
    4. None of the above
66. A local government issued bonds and recorded the event by debiting Cash and crediting Other Financing Source - Proceeds of Bonds and Other Financing Source - Premium on Bonds. What is the worksheet entry when preparing the government-wide statements?
    1. Debit Other Financing Sources – Proceeds of Bonds and Other Financing Sources – Premium on bonds and Credit Bonds Payable and Premium on Bonds
    2. Debit Cash and Credit Bonds Payable and Premium on bonds
    3. Debit Other Financing Sources – Proceeds of Bonds and Credit Bonds payable and Premium on Bonds
    4. No adjustment is necessary
67. A local government recorded the payment of bond principal by debiting Expenditure: bond principal and crediting Cash. What is the worksheet entry when preparing the government- wide statements?
    1. Debit Bonds Payable and credit Cash
    2. Debit Bonds Payable and credit Expenditure: Bond Principal
    3. Debit Cash and credit Expenditure: Bond Principal
    4. None of the above

68. In its Statement of Net Assets, a government reported:

• assets of $90 million, including $30 million in capital assets (net), and
• liabilities of $40 million, including long-term debt of $15 million, all related to capital asset acquisition.

The government also reported $10 million of net assets were restricted for payment of debt service. The government's unrestricted net assets would be reported as:

1. 1. $15 million.
   2. $25 million.
   3. $30 million.
   4. $35 million.

69. A governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances reported expenditures of $30 million, including capital outlay expenditures of $5 million. Capital assets for that government cost $90 million, including land of $10 million. Depreciable assets are amortized over 20 years, on average. The reconciliation from governmental changes in fund balances to governmental activities changes in net assets would reflect a(an):
    1. Decrease of $1 million.
    2. Increase of $l million.
    3. Increase of $5 million.
    4. Decrease of $4 million.

70. The City of Charlotte reported property tax revenues in 2014 in the amount of $10 million. The deferred property taxes reported in the General Fund’s balance sheet was $ 300,000 on December 31, 2013 and was $ 375,000 on December 31, 2014. During 2014, $9,000,000 was collected. What amount should the city report for Property Tax Revenue in its year ended December 31, 2014 government-wide Statement of Activities?

A) $ 9,075,000

B) $  9,975,000

C) $ 10,075,000

D) $ 10,375,000

71. A government's Statement of Revenues, Expenditures, and Changes in Fund Balances reflected proceeds of bonds in the amount of $1,000,000. That statement also reflected expenditures for debt service in the amount of $3,000,000, including $2,600,000 for principal payments. Assuming no other changes, the effect, when moving from the change in fund balances in the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the change in net assets for governmental activities in the Statement of Activities would be a:

A) $1,000,000 increase.

B) $1,000,000 decrease.

C) $1,600,000 increase.

D) $1,600,000 decrease.

72. A government had the following transfers reported in its governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances: (1) a transfer from the General Fund to a debt service fund in the amount of $l, 100,000; (2) a transfer from the General Fund to an enterprise fund in the amount of $1,300,000; and (3) a transfer from the General Fund to a special revenue fund in the amount of $500,000. The amount that would be shown as a transfer out in the governmental activities column in the Statement of Activities would be:

A) $  500,000.

B) $1,300,000.

C) $2,400,000.

D) $2,900,000.

73. Which of the following is true regarding the government-wide statements?
    1. Balances from enterprise funds’ statements are entered in the business-type activities sections of the government-wide statements without adjustment.
    2. Government-wide statements eliminate interfund transactions, within columns.
    3. Both of the above.
    4. Neither of the above.

74. A government reported an “other financing source” in the amount of $750,000, related to the sale of land in its governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances. The land had a cost of $275,000. The adjustment in the reconciliation, when moving from the governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the change in net assets for governmental activities in the Statement of Activities would be a(an):
    1. Increase of $475,000.
    2. Decrease of $475,000.
    3. Increase of $275,000.
    4. Decrease of $275,000.

75. A government incurred expenses for its infrastructure as follows: $20 million for general repairs; $18 million to extend the life for existing infrastructure; and $15 million for additions and betterments. The government chooses to use the modified approach to record infrastructure. The infrastructure has a basis of $400 million and would be depreciated over a 40 year life, if depreciation were charged. The amount that would be shown as expense in the Statement of Activities would be:
    1. $33 million.
    2. $35 million.
    3. $38 million.
    4. $53 million.

76. The total amount of indebtedness of specified kinds that is allowed by law to be outstanding at any time is known as:
    1. Debt margin.
    2. Debt limit.
    3. Borrowing power.
    4. Maximum debt.

77. Which of the following is true regarding the reporting of general capital assets by state and local governments?
    1. Capital assets are reported in the government-wide Statement of Net Assets.
    2. Capital assets are reported in the governmental funds Balance Sheet.
    3. Both of the above.
    4. Neither of the above.

78. A government incurred expenditures for its infrastructure as follows: $20 million for general repairs; $22 million to extend the life of existing infrastructure; $21 million for improvements and additions. If depreciation is to be charged, the amount would be $23 million. Which of the following would be true?
    1. If the government chose to use the modified approach to record infrastructure, the amount to be charged as expense would be $42 million.
    2. If the government chose not to use the modified approach to record infrastructure, the amount to be charged to expense would be $43 million.
    3. Both A and B.
    4. None of the above.

79. A government reported an other financing source in the amount of $900,000 related to the sale of land in its governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances. The land had a cost of $340,000. The amount that would be reported in the government-wide Statement of Activities would be:

A) A gain of $1,240,000.

2. A gain of $ 560,000.
3. A gain of $ 900,000.
4. A gain of $ 340,000.

80. A government recorded transfers out of the General Fund to the debt service fund in the amount of $ 300,000 and to the enterprise fund in the amount of $ 600,000. The amount that would be shown as a transfer in the governmental activities column of the Statement of Activities would be:

A) $900,000.

B) $600,000.

C) $300,000.

D) $ 0.

81. The City of Casper levied property taxes for 2014 in the amount of $8,000,000. By the end of the year, $7,300,000 had been collected. It was estimated that $400,000 would be collected during the next 60 days of 2015 and that $240,000 would be collected after that and the remainder would be uncollectible. The City has a policy of recognizing the full amount possible for property taxes. Which of the following statements is true?
    1. The amount reported for property tax revenue in the government-wide Statement of Activities would be $7,700,000.
    2. The amount reported for property tax revenue in the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances would be $7,940,000.
    3. Both A and B.
    4. None of the above.

82. A government's Statement of Revenues, Expenditures, and Changes in Fund Balances reported proceeds of bonds in the amount of $1,000,000. It also reported expenditures for bond principal in the amount of $400,000. The last interest payment was on the last day of the fiscal year. The reconciliation from the governmental funds changes in fund balances to the governmental activities change in net assets would reflect a(an):
    1. Increase of $600,000.
    2. Decrease of $600,000.
    3. Increase of $1,400,000.
    4. Decrease of $1,400,000.

83. A governmental fund’s Statement of Revenues, Expenditures, and Changes in Fund Balances reported expenditures for capital outlay in the amount of $5,000,000. Capital assets for that government cost $110,000,000, including $15,000,000 in land. Depreciable assets are amortized over 20 years, on average. The reconciliation from the governmental funds changes in fund balances to the governmental activities change in net assets would reflect a(an):
    1. Increase of $250,000.
    2. Decrease of $250,000.
    3. Increase of $500,000.
    4. Decrease of $500,000.

84. Which of the following is true regarding the government-wide Statement of Net Assets?
    1. Discretely presented component units are reported separately.
    2. Governmental and business-type activities are reported separately and are consolidated within columns.
    3. Both of the above.
    4. Neither of the above.

85. Which of the following is true regarding the government-wide Statement of Activities?
    1. Program revenues include charges for services, operating grants and contracts, capital grants and contracts, and taxes levied for specific purposes.
    2. The accrual basis of accounting is used to calculate revenues and expenses.
    3. Both of the above.
    4. Neither of the above.

86. In its government-wide Statement of Net Assets, a government reported assets of $155 million, including $50 million in capital assets (net of depreciation), and liabilities of $80 million, including long-term debt of $60 million, $40 million of which was issued to acquire capital assets. In addition, $30 million was restricted for debt service and other purposes. The government's unrestricted net assets would be reported as:
    1. $85 million.
    2. $55 million.
    3. $45 million.
    4. $35 million.

87. Which of the following would be considered a program revenue in the Statement of Activities of a local government?
    1. A grant from the state to construct utility plant.
    2. A motor fuel tax, restricted for road repairs.
    3. Both of the above.
    4. Neither of the above.

88. A government reported an Other Financing Source in the amount of $600,000 related to the sale of land in its governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances. The land had a cost of $150,000. The adjustment in the reconciliation when moving from the changes in fund balances in the Statement of Revenues, Expenditures, and Changes in Fund Balances to the change in net assets in the Statement of Activities would be:
    1. Increase of $150,000.
    2. Decrease of $150,000.
    3. Increase of $450,000.
    4. Decrease of $450,000.

89. A government reported the following transfers in its governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances: (1) a transfer from the General Fund to a special revenue fund in the amount of $400,000; (2) a transfer from the General Fund to an internal service fund in the amount of $300,000; (3) a transfer from the General Fund to a permanent fund in the amount of $200,000. The amount that would be shown as a transfer out in the governmental activities column in the Statement of Activities would be:
    1. $0; no transfer would be shown.

B) $ 400,000.

C) $ 600,000.

D) $1,000,000.

90. A governmental fund’s Statement of Revenues, Expenditures, and Changes in Fund Balances reported expenditures of $40 million, including capital outlay expenditures of $11 million. Capital assets for that government cost $80 million, including land in the amount of $10 million. Depreciable assets are amortized over 10 years, on average. The reconciliation from governmental fund changes in fund balances to governmental activities change in net assets would reflect a(an):
    1. $4 million increase.
    2. $4 million decrease.
    3. $3 million decrease.
    4. $11 million decrease.

91. The City of Smithfield levied property taxes in and for 2014 in the amount of $200 million. It is estimated that 1% will be uncollectible. During 2014, $180 million was collected, and

$12 million was collected during the next 60 days. Smithfield recognizes the maximum possible property taxes in its governmental funds. The adjustment, when moving from the governmental funds changes in fund balances to the governmental activities change in net assets would be:

1. 1. $6 million increase.
   2. $6 million decrease.
   3. $8 million increase.
   4. $8 million decrease.

92. Which of the following is true regarding the government-wide Statement of Net Assets?
    1. A classified approach is required, reflecting current assets separately from noncurrent assets and current liabilities from noncurrent liabilities.
    2. Major funds are reported for governmental and enterprise funds.
    3. Both of the above.
    4. Neither of the above.

93. A government's Statement of Revenues, Expenditures, and Changes in Fund Balances reflected expenditures for debt service in the amount of $12,000,000, including $7,000,000 for interest. It also reflected proceeds of bonds in the amount of $4,000,000. No interest accruals were involved. When moving from the changes in fund balances reported for the governmental funds to the change in net assets for governmental activities, the net change would be:
    1. $3,000,000 decrease
    2. $1,000,000 decrease
    3. $3,000,000 increase
    4. $1,000,000 increase
94. Which of the following is true regarding the government-wide Statement of Activities?
    1. Fiduciary activities are not reported.
    2. Discretely presented component units are not reported.
    3. Both of the above.
    4. Neither of the above.

95. A government reported expenditures for infrastructure as follows: $18 million for improvements and additions; $20 million to extend the life of existing infrastructure; $16 million for general repairs. The cost of its infrastructure, excluding land, is $750 million, and the infrastructure has an estimated life of 50 years, on average. Which of the following would be the reported expense (in millions) under each of the following options?
    1. Depreciation Approach: $15; Modified Approach: $36
    2. Depreciation Approach: $15; Modified Approach: $31
    3. Depreciation Approach: $31; Modified Approach: $31
    4. Depreciation Approach: $31; Modified Approach: $36
96. Which of the following fund types is not included in the government-wide financial statements?
    1. General Fund
    2. Pension Trust Fund
    3. Enterprise Fund
    4. Internal Service Fund
97. Which of the following is not required to convert from the modified accrual basis to the accrual basis in preparing the government-wide statements?
    1. Record general capital assets
    2. Change expenditures for debt service principal to reduction of liabilities
    3. Make adjustments to revenues deferred under the 60 day rule
    4. Accrue interest on enterprise fund bonds
98. The following balances exist at year end within the governmental activities of a government unit:

Transfers In:       150,000

Transfers Out: 120,000

When compiling the government-wide financial statements, the journal entry to eliminate the transfer activity will include:

1. 1. A debit of $120,000 to Transfers In
   2. A debit of $30,000 to Transfers In
   3. A debit of $120,000 to Transfers Out
   4. None of the above

99. A donated collection is not required to be capitalized. If a government decides not to capitalize them, how will they be accounted for at the time of the donation?
    1. Debit revenue, credit expense/expenditure
    2. Debit expense/expenditure, credit revenue
    3. Debit collections, credit revenue
    4. Debit collections, credit cash
100. Which of the following situations would be unlikely to result in the recognition of an asset impairment?
     1. A city warehouse is damaged by fire.
     2. Recently purchased city-owned voting booths are rendered obsolete by a federal law requiring a new technology.
     3. Ridership on city buses declines.
     4. Construction on a municipal sports complex stops when the city’s major league baseball team moves to another city.

101. A government reported, in its government-wide Statement of Net Assets:

• assets of $81 million, including $40 million in capital assets (cost), with $12 million in accumulated depreciation, and
• liabilities of $50 million, including long-term debt of $15 million related to capital asset acquisition.

In addition, $4 million of cash was restricted for payment of debt service. The government's unrestricted net assets would be reported as:

1. 1. $17 million.
   2. $14 million.
   3. $ 6 million.
   4. $ 4 million.

102. Which of the following adjustments would be made when moving from the governmental funds balance sheet to the governmental activities column in the government-wide Statement of Net Assets?
     1. Add balances of internal service fund assets and liabilities.
     2. Add beginning capital assets, net of depreciation.
     3. Both of the above.
     4. Neither of the above.

103. Which of the following is true regarding the government-wide financial statements?
     1. Government-wide statements include the Statement of Net Assets, the Statement of Activities, and the Statement of Cash Flows.
     2. Government-wide statements are prepared using the economic resources measurement focus and accrual basis of accounting.
     3. Both of the above are true.
     4. Neither of the above is true.

104. On April 1, 2014, a local government issued bonds in the amount of $1,500,000. The bonds were issued at par and carried an interest rate of 5%, payable October 1 and April 1. When moving from the change in fund balances in the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the change in net Assets in the governmental funds column of the Statement of Activities, both for the fiscal year ended June 30, 2014, the effect for the interest accrual only would be:
     1. An increase of $18,750
     2. A decrease of $18,750
     3. A decrease of $37,500
     4. An increase of $37,500
105. Where in the basic financial statements, in most cases, would one find internal service activities reported?
     1. In the proprietary funds statements and in the business-type activities column of the government-wide statements.
     2. In the governmental funds statements and in the governmental activities column of the government-wide statements.
     3. In the governmental funds statements and in the business-type activities column of the government-wide statements.
     4. In the proprietary funds statements and in the governmental activities column of the government-wide statements.

106. Where in the basic financial statements would one find fiduciary activities reported?
     1. In the fiduciary funds statements and in the governmental activities column of the government-wide statements.
     2. In the fiduciary funds statements and in the business like activities column of the government-wide statements.
     3. In the fiduciary funds statements only.
     4. In the government-wide statements only.

The following data applies to the next three questions:

The City of Charlestown levied property taxes in the amount of $9,000,000. It is estimated that 2% will not be collected. The taxes were levied July 1, 2013 for the fiscal year ended June 30, 2014. During the year ended June 30, 2014, $7,900,000 in property taxes were collected from this levy. It is estimated that $620,000 will be collected during the next 60 days, $300,000 will be collected more than 60 days after June 30, 2014, and $180,000 will never be collected.

107. When preparing the government-wide financial statements, how much property tax revenue should be recognized for the year ended June 30, 2014?

A) $7,900,000.

B) $8,820,000.

C) $8,200,000.

D) $9,000,000.

108. How much will the city report as Deferred Property Taxes in its June 30, 2014 government- wide Statement of Net Assets?

A) $ 620,000.

B) $ 320,000.

C) $ 300,000.

D) $ 0.

109. When preparing the General Fund financial statements, how much property tax revenue should be recognized from this levy for the year ended June 30, 2014?

A) $7,900,000.

B) $8,520,000.

C) $8,820,000.

D) $9,000,000.

110. The General Fund of the City of Plymouth purchased a police car in the amount of $25,000.

Which of the following would be true?

1. 1. The General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances would report an expenditure of $25,000.
   2. The government-wide Statement of Activities would report an expense of $25,000.
   3. Both of the above.
   4. Neither of the above.

111. Which of the following is not true regarding infrastructure assets?
     1. Governments can record depreciation in the same manner as for other depreciable fixed assets.
     2. Because they have such long useful lives, infrastructure assets are never depreciated.
     3. Governments can choose to expense expenditures that extend the life of infrastructure assets in lieu of depreciation.
     4. Expenditures to add to or improve infrastructure assets must be capitalized.

112. For the depreciation of infrastructure…
     1. Governments are required to record depreciation in the same manner as other depreciable fixed assets.
     2. Governments are required to record depreciation using a modified approach.
     3. Governments do not record depreciation for infrastructure.
     4. Governments can choose to expense expenditures that extend the life of infrastructure assets in lieu of depreciation

.

113. The difference between assets and liabilities in the government-wide statements is called                                     .
     1. Net Assets.
     2. Fund Balance.
     3. Net Equity.
     4. Accrued Equity.

114. When using the modified approach to account for infrastructures, expenditures to extend the life of the infrastructure assets are:
     1. Capitalized.
     2. Expensed.
     3. Either A or B.
     4. Neither A nor B.

115. What would be the appropriate journal entry to adjust to the accrual basis of accounting for depreciation on general capital assets related to prior years?
     1. Debit Depreciation expense, Credit Accumulated Depreciation.
     2. Debit Net Assets, Credit Accumulated Depreciation.
     3. Debit Accumulated Depreciation, Credit Net Assets.
     4. Debit Machinery, Credit Accumulated Depreciation.

116. The governmental funds report a total of $2,000,000 Transfers In and $1,500,000 Transfers Out. To consolidate governmental activities what amount will be eliminated from the Transfers In and Transfers Out accounts among the governmental funds?

A) $500,000

B) $1,500,000

C) $2,000,000

D) $3,500,000

117. Which of the following is considered a source of general revenue in the Government-wide Statement of Activities?
     1. Charges for Services
     2. Sales Taxes
     3. Operating Grants
     4. None of the Above
118. Which of the following is true concerning infrastructure assets?
     1. Capitalization of infrastructure is optional
     2. Capitalization of infrastructure is required
     3. Governments must depreciate infrastructure assets
     4. Governments rarely possess infrastructure .

119. Under which of the following circumstances would an asset be considered impaired?
     1. A costly piece of diagnostic equipment at a city hospital is no longer used because new technology exists that does a better job.
     2. A bridge is damaged by an earthquake.
     3. An expansion project at the city airport is halted because a major airline stops service to the city.
     4. All of the above.

120. The difference between the amount of debt limit calculated as prescribed by law and the net amount of outstanding indebtedness subject to limitation, is known as:
     1. Debt Limit
     2. Debt Margin
     3. Long-Term Debt
     4. General Long-Term Debt
121. Which of the following would not be determined to result in asset impairment under GASB Statement 42?
     1. An expansion project at a city airport is halted when a major airline discontinues service to city.
     2. A building is damaged by a hurricane
     3. A truck is at the end of its useful life
     4. New technology renders previous equipment obsolete
122. A company has bonds outstanding at the beginning of the current year. The debit in the worksheet entry to bring these on to the books would be to:
     1. Proceeds from Sale of Bonds
     2. Amount to be Provided for Long-Term Debt
     3. Expenditures – Bond Principal
     4. Net Assets – beginning balance .
123. If an Internal Service Fund has positive operating income, the worksheet entry to add the Internal Service Fund to governmental activities would include a:
     1. Debit to Transfers In
     2. Credit to Net Assets
     3. Debit to Expenditures/expense
     4. Credit to Expenditures/expense

124. When converting fund financial records to government-wide financial statements, worksheet entries are made to eliminate all of the following accounts expect:
     1. Capital Expenditures
     2. Bond Proceeds
     3. Debt Service Expenditure - Principal
     4. Interest Payable
125. Which of the following would not need to be addressed/adjusted in compiling the government-wide statements?
     1. Principal repayment on proprietary fund bonds
     2. Issuance of general obligation bonds
     3. Interfund transfers among governmental funds
     4. Interest accrual on general obligation bonds
126. Internal service funds are most commonly reported in which section of the Government- wide financial statements?
     1. Governmental Activities
     2. Business-type Activities
     3. Component Unit
     4. None of the above.

127. When converting to government-wide financial statements, the entry to record the amortization of the premium on a bond would:
     1. Debit the Premium on bonds payable and a credit premium expense
     2. Debit the Premium on bonds payable and a credit interest expense
     3. Debit the Bond Payable and a credit Premium on bonds payable
     4. There is no entry. You do not amortize the premium.

128. To qualify as a collection, a donated or purchased item must meet all of the following conditions except:
     1. Held for public exhibition, education, or research to further public service
     2. Protected, kept unencumbered, cared for, and preserved.
     3. Subject to an organizational policy that requires the proceeds from sales of collection items to be used to acquire other collectibles
     4. All of the above conditions must be met.

Short Answer Questions

129. With regard to the government-wide statements, list the required statements.

130. With regard to the government-wide statements, indicate the measurement focus and basis of accounting that should be employed.

131. With regard to the government-wide statements, indicate the three categories of net assets that should be reported and describe what would be put into each category.

132. With regard to the government-wide statements, distinguish between program revenues and general revenues. List three examples of each. What is the difference in reporting between program revenues and general revenues?

133. What conditions must be satisfied in order to use the modified approach for recording infrastructure?

134. Identify and describe the required supplementary information schedules that must be prepared when using the modified approach.

135. When preparing government-wide financial statements, the modified accrual based governments funds are adjusted. List 5 events involving long-term debt that are likely to require adjustments.

• .

136. When preparing government-wide financial statements, the modified accrual based governments funds are adjusted. List 4 events involving capital assets that are likely to require adjustments.

Exercises

137. The following entries were in the governmental funds.

12/31/2013

Capital Projects Fund

Cash                                                                                                                            2,631,200

Other Financing Sources – Proceeds sales of General

Obligation Bonds                                                                                                                          2,600,000

Other Financing Sources – Bond Premium                                                                                  31,200 (to reflect issuance of 10 year general obligation bond)

Required:

Part A. What is the worksheet entry required to adjust beginning net assets in the 12/31/2014 government-wide financial statements for long term debt?

Part B. What are the worksheet entries to adjust for current year activity in long-term debt for the year ended 12/31/2014? Assume interest for the year is due on 12/31 and the bond premium is amortized on the straight line basis.

138. The City of Thomasville maintains its books so as to prepare fund accounting statements and prepares worksheet adjustments in order to prepare government-wide financial statements. Required: You are to prepare, in journal form, worksheet adjustments for each of the following situations.

1.                 General fixed assets, as of the beginning of the year, which had not been recorded, were as follows:

2.                 During the year, expenditures for capital outlays amounted to $14,250,000. Of that amount, $11,900,000 was for buildings; $1,950,000 was for improvements other than buildings, $ 10,000 was capitalized interest and the remainder was for land.

3.                                     The capital outlay expenditures outlined in (B) were completed at the end of the year (no depreciation until next year). For purposes of financial statement presentation, all capital assets are depreciated using the straight-line method, with no estimated salvage value. Estimated lives are as follows: buildings, 50 years; improvements other than buildings, 20 years; equipment, 10 years.

4.                 Equipment with a cost of $ 86,600 and accumulated depreciation at the time of sale of $56,600 was sold for $35,000.

139. The City of Greystone maintains its books so as to prepare fund accounting statements and prepares worksheet adjustments in order to prepare government-wide statements. You are to prepare, in journal form, worksheet adjustments for each of the following situations:

1.                                     The City levied property taxes for the current fiscal year in the amount of $8,000,000. At year-end, $720,000 of the taxes had not been collected. It was estimated that $380,000 of that amount would be collected during the 60 days after the end of the fiscal year and that $200,000 would be collected after that time and the balance would be uncollectible. The City had recognized the maximum of property taxes allowable under modified accrual accounting.

2.                                     $187,000 of property taxes had been deferred at the end of the previous year and was recognized under modified accrual as revenue in the current year.

3.                                     In addition to the expenditures allowed under modified accrual accounting, the city computed that an additional $68,000 should be accrued for compensated absences.

4.                                     In the Statement of Revenues, Expenditures, and Changes in Fund Balances, General Fund transfers out included $400,000 to a debt service fund and

$270,000 to a special revenue fund. General Fund transfers in included $1,000,000 from an enterprise fund.

140. The City of Odessa maintains its books so as to prepare fund accounting statements and prepares worksheet adjustments in order to prepare government-wide statements. As such, the City's internal service fund, a print shop fund, is included in the proprietary funds statements. Required: Prepare necessary adjustments in order to incorporate the internal service fund in the government-wide statements as a part of governmental activities:

1. Balance sheet accounts include: Cash, $150,000; Inventories,

$425,000; Capital Assets, $1,200,000; Accumulated Depreciation, $600,000; Accounts Payable, $150,000; and Bonds Payable, $500,000.

2. The only transaction in the internal service fund that is external to the government is interest expense in the amount of $15,000.

3. Exclusive of the interest expense, the internal service fund reported operating income of $40,000. An examination of the records indicates that services were provided as follows: one half to general government, one fourth to public safety, one fourth to culture and recreation.

141. The City of Madison, a general purpose government, reported fund balances in the amount of $18,700,000 in the governmental funds balance sheet dated December 31, 2014. In addition, the following information is relevant:

1.                                     General government capital assets amounted to $28,000,000. Accumulated depreciation of those capital assets amounted to $12,000,000. Enterprise fund capital assets amounted to $ 17,000,000 with accumulated depreciation of $ 8,400,000.
2.                                     Internal service fund’s net assets amounted to $2,500,000. These were reported in the proprietary funds fund basis statements but serve departments in the General Fund.
3.                                     Deferred Property Taxes, which should be recognized as revenue in the government-wide statements, amounted to $ 200,000. The balance of deferred property taxes from the previous year was $ 170,000.
4.                                     Liabilities, in addition to the amount reported in the governmental funds balance sheet included accrued interest payable, $300,000;
5.                                     General long-term liabilities of the government amounted to (1) general obligation bonds of $ 6,000,000 and (2) compensated absences payable of

$1,500,000. Revenue Bonds Payable in the enterprise fund totaled $ 2,000,000.

Required: Prepare a reconciliation from the fund balances recognized in the governmental funds balance sheet to the net assets recognized in the governmental funds column of the government-wide statement of net assets.

142. The City of Henderson reported a change in fund balances of $2,762,000 in its governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances for the year ended December 31, 2014. In addition, the following information is relevant:

1.                                     Capital outlay expenditures amounted to $8,755,000 in the modified accrual statement. General government capital assets amounted to $90,000,000, excluding land and had an average life of 20 years.
2.                                     The modified accrual statement reported proceeds from the sale of land in the amount of $500,000.  The land had a basis of $390,000.
3.                                     Property taxes had been levied in the amount of $10,000,000. It was estimated that 3% would never be collected, that $500,000 would be collected within 60 days of year-end, and that $217,000 would be collected more than 60 days from year-end. The City had recognized the maximum permitted under modified accrual accounting.
4.                                     $205,000 of property taxes had been deferred at the end of the previous year and was recognized under modified accrual as revenue in the current year.
5.                                     The modified accrual statement reflected debt service expenditures in the amount of $500,000 for interest and $612,000 for principal. No adjustment was necessary for interest accruals at year-end.
6.                                     Long term compensated absences liabilities increased $120,000 from the previous year.

Required: Prepare a reconciliation from the change in fund balances reported above to the change in net assets in the governmental column in the government-wide Statement of Activities for the year ended December 31, 2014.

143. The Village of Canandaigua determined that, as of July 1, 2013, infrastructure assets estimated at $300 million were in place, with an estimated useful life of 25 years. During the year ended June 30, 2014, expenditures were $7 million for the routine maintenance of infrastructure, $3 million to extend the life of existing infrastructure, and $12 million for infrastructure additions and improvements.

Required:

1. If the modified approach is used, what would be the amount charged to expense during the fiscal year ended June 30, 2014. What amount would be capitalized?
2. What amount would have been charged to expense if the modified approach were

not used? What amount would be capitalized?

144. The following information is available for the preparation of the government-wide financial statements for the City of Fishersville for the year ended June 30, 2014:

Expenses:

Revenues:

Required: From the information given above, prepare, in good form, a Statement of Activities for the City of Fishersville for the year ended June 30, 2014. Fishersville has no component units.