Exam 4: Accounting for Governmental Operating Activities–Illustrative Transactions and Financial Statements

If a governmental fund issues debt to finance a capital acquisition, how should the proceeds of the debt be recorded?

The General Fund has transferred cash to the appropriate fund for eventual retirement of term bonds maturing in 10 years. Which funds would record this transaction? A- B- C- D-

Which of the following would be considered an internal exchange transaction?

Under GASB standards, Revenues must be credited for the total amount of the property tax levy.

During January 2020 General Fund supplies ordered in the previous fiscal year and encumbered at an estimated amount of $2,000 were received at an actual cost of $2,200. The entry to record this transaction will require a debit to:

Vacation City was awarded a $500,000 federal operating grant for use in year 2. On December 1 of year 1, half of the grant money was received by the City. The journal entry to record receipt of the grant funds will include:

The government-wide statement of net position is prepared using the same measurement focus and basis of accounting as the General Fund balance sheet.

The earnings on the assets of a permanent fund are to be used to support the city's library (special revenue fund). How would the earnings be recorded?

Beach City received a gift of corporate stock valued at $1,200,000 on the date of the gift. The donor specified that the principal amount of the gift be maintained in perpetuity, but that earnings can be used to acquire works of art to improve the appearance of public buildings. All changes in fair value are to increase or decrease the principal amount of the gift. Assuming that Beach City uses a permanent fund to account for the endowment and a special revenue fund to account for the earmarked earnings from the endowment, explain the accounting process for (1) receipt of the original gift, (2) receipt of quarterly dividends, (3) notification that fair value of the original stock increased by $3,000 during the year, and (4) the effect on fund balances of closing temporary accounts at year-end. (Note: Ignore the effects of the transactions at the government-wide level).

Year-end interfund receivable or payable balances will appear in the line item internal balances within their respective columns on the government-wide statement of net position.

Supplies recorded in the General Fund under the purchases method will initially include a

Revenues that are legally restricted for expenditure on specified operating purposes should be accounted for in special revenue funds, including

Grant funds received before time requirements are met, but after all other eligibility requirements have been met, should be reported as an asset and a deferred inflow of resources by the recipient.

Why might actual revenues and expenditures reported on the schedule of revenues, expenditures, and changes in fund balances-budget and actual differ from those reported on the GAAP-basis statement of revenues, expenditures, and changes in fund balances?

Recording the annual budget is optional in the General Fund.

All revenues of the City of Capri are accounted for on the modified accrual basis. Below is shown a list of Capri's General Fund transactions of a revenue nature. State which ones should be recognized by the General Fund as a revenue in the year of occurrence. If any item is not a current revenue, state the proper treatment for that item. 1) Receipt of money from issue of tax anticipation notes. 2) Collection of taxes that had been written off in prior year. 3) Collection of current-year property taxes. 4) Collection of prior years' delinquent property taxes. 5) Receipt of money in prepayment of a property owner's next-year taxes. 6) Collection of accounts receivable for charges for services. Amount is included in deferred inflows of resources.

Vehicles used by the police department should be reported in the governmental fund financial statements.

Which of the following will require a credit to Fund Balance-Unassigned of a governmental fund when operating statement accounts are closed at the end of the year, assuming there are no other financing sources or uses?

A payment made by the General Fund to a debt service fund would not be recorded in the governmental activities journal.

If the actual liability for goods received in the current year differs from the estimated liability recorded when the goods were ordered in the prior year, the Encumbrances account should be credited in the amount of the estimated liability.