Question 1

Custodial funds should utilize the modified accrual basis of accounting.

Accepted Answer

A) True 
 B)False  False

Question 2

Custodial funds are used only if a government holds resources in a custodial capacity for others.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following accounts is least likely to be used by a tax custodial fund?

Accepted Answer

A)  Cash. 
B)  Revenues. 
C)  Taxes receivable for other funds. 
D)  Due to other governments. 
A)  Cash. 
B)  Revenues. 
C)  Taxes receivable for other funds. 
D)  Due to other governments. B

Question 4

Fiduciary activities are reported only in the fiduciary fund financial statements; they have no effect on the governmental or business-type activities of the primary government reported in the government-wide financial statements.

Accepted Answer

A) True 
 B)False

Question 5

Other postemployment benefits may include:

Accepted Answer

A)  Health care. 
B)  Life insurance. 
C)  Long-term care. 
D)  All of these answers are correct. 
A)  Health care. 
B)  Life insurance. 
C)  Long-term care. 
D)  All of these answers are correct.

Question 6

Fiduciary funds use a basis of accounting similar to which of the following funds?

Accepted Answer

A)  Permanent funds. 
B)  Special revenue funds. 
C)  Enterprise funds. 
D)  Debt service funds. 
A)  Permanent funds. 
B)  Special revenue funds. 
C)  Enterprise funds. 
D)  Debt service funds.

Question 7

It is common for a government that collects taxes on behalf of other governments to be authorized to withhold a certain percentage from the collections for each government.

Accepted Answer

A) True 
 B)False

Question 8

At the government-wide level, where are fiduciary funds reported?

Accepted Answer

A)  In the Governmental Activities column. 
B)  In the Business-type Activities column. 
C)  As an internal balance in the total column. 
D)  Fiduciary funds are not reported at the government-wide level. 
A)  In the Governmental Activities column. 
B)  In the Business-type Activities column. 
C)  As an internal balance in the total column. 
D)  Fiduciary funds are not reported at the government-wide level.

Question 9

An investment pool could be reported as a custodial fund on the fiduciary fund financial statements.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is the appropriate measurement focus for custodial funds?

Accepted Answer

A)  Economic resources. 
B)  Current financial resources. 
C)  Cash and cash equivalents. 
D)  Accrual basis. 
A)  Economic resources. 
B)  Current financial resources. 
C)  Cash and cash equivalents. 
D)  Accrual basis.

Question 11

An investment policy should help an investment trust fund achieve maximum returns within the defined boundaries of safety and liquidity.

Accepted Answer

A) True 
 B)False

Question 12

Explain the purpose of the account "undistributed change in fair value of investments" used in an investment pool.

Accepted Answer

The account "undistributed change in fai

Question 13

A custodial fund should be used to account for special assessment billing and collection, and related debt service of special assessment debt, if the government has no responsibility for the debt.

Accepted Answer

A) True 
 B)False

Question 14

The cash and investment pool of Lake City allocates dividends, interest, and capital gains and losses on a periodic basis. When the cash and investment pool accrues interest earned on investments in debt securities, pending allocation to participating funds, it would credit which of the following accounts?

Accepted Answer

A)  Interfund Loans. 
B)  Revenues. 
C)  Undistributed Earnings on Pooled Investments. 
D)  Interfund Receivables. 
A)  Interfund Loans. 
B)  Revenues. 
C)  Undistributed Earnings on Pooled Investments. 
D)  Interfund Receivables.

Question 15

Each trust fund type must be reported in its own column on the fiduciary fund financial statements.

Accepted Answer

A) True 
 B)False

Question 16

By definition a fiduciary fund that does not meet the definition of a trust fund is a custodial fund.

Accepted Answer

A) True 
 B)False

Question 17

The collection of taxes or other revenues by one government for several of the funds it operates and for other governments often results in the creation of a trust fund.

Accepted Answer

A) True 
 B)False

Question 18

Accounting for other postemployment benefits is similar to accounting for defined contribution pension plans.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following activities would most appropriately be recorded by a trust fund?

Accepted Answer

A)  Donations collected for improvements to the public library. 
B)  Deposits held for customers of a municipal-owned electric utility. 
C)  Assets held for investment, the earnings from which are used for maintenance of the City Cemetery. 
D)  Assets held for college scholarships to be awarded to the children of police officers. 
A)  Donations collected for improvements to the public library. 
B)  Deposits held for customers of a municipal-owned electric utility. 
C)  Assets held for investment, the earnings from which are used for maintenance of the City Cemetery. 
D)  Assets held for college scholarships to be awarded to the children of police officers.

Question 20

Because a government does not have any administrative decision making, a custodial fund would not prepare a statement of net position.

Accepted Answer

A) True 
 B)False

Custodial funds should utilize the modified accrual basis of accounting.

Custodial funds are used only if a government holds resources in a custodial capacity for others.

Which of the following accounts is least likely to be used by a tax custodial fund?

Fiduciary activities are reported only in the fiduciary fund financial statements; they have no effect on the governmental or business-type activities of the primary government reported in the government-wide financial statements.

Other postemployment benefits may include:

Fiduciary funds use a basis of accounting similar to which of the following funds?

It is common for a government that collects taxes on behalf of other governments to be authorized to withhold a certain percentage from the collections for each government.

At the government-wide level, where are fiduciary funds reported?

An investment pool could be reported as a custodial fund on the fiduciary fund financial statements.

Which of the following is the appropriate measurement focus for custodial funds?

An investment policy should help an investment trust fund achieve maximum returns within the defined boundaries of safety and liquidity.

Explain the purpose of the account "undistributed change in fair value of investments" used in an investment pool.

A custodial fund should be used to account for special assessment billing and collection, and related debt service of special assessment debt, if the government has no responsibility for the debt.

Each trust fund type must be reported in its own column on the fiduciary fund financial statements.

By definition a fiduciary fund that does not meet the definition of a trust fund is a custodial fund.

The collection of taxes or other revenues by one government for several of the funds it operates and for other governments often results in the creation of a trust fund.

Accounting for other postemployment benefits is similar to accounting for defined contribution pension plans.

Which of the following activities would most appropriately be recorded by a trust fund?

Because a government does not have any administrative decision making, a custodial fund would not prepare a statement of net position.

Introduction to Accounting and Financial Reporting for Government and Not-for-Profit Entities

Principles of Accounting and Financial Reporting for State and Local Governments

Governmental Operating Statement Accounts; Budgetary Accounting

Accounting for Governmental Operating Activities–Illustrative Transactions and Financial Statements

Accounting for General Capital Assets and Capital Projects

Accounting for General Long-Term Liabilities and Debt Service

Accounting for the Business-type Activities of State and Local Governments

Financial Reporting of State and Local Governments

Analysis of Government Financial Performance

Auditing of Government and Not-for-Profit Organizations

Budgeting and Performance Measurement

Not-for-Profit Organizations—Regulatory, Taxation, and Performance Issues

Accounting for Not-for-Profit Organizations

Accounting for Colleges and Universities

Accounting for Health Care Organizations

Accounting and Reporting for the Federal Government

Filters

Exam 8: Accounting for Fiduciary Activities—Custodial and Trust Funds

Custodial funds should utilize the modified accrual basis of accounting.

Custodial funds are used only if a government holds resources in a custodial capacity for others.

Which of the following accounts is least likely to be used by a tax custodial fund?

Fiduciary activities are reported only in the fiduciary fund financial statements; they have no effect on the governmental or business-type activities of the primary government reported in the government-wide financial statements.

Other postemployment benefits may include:

Fiduciary funds use a basis of accounting similar to which of the following funds?

It is common for a government that collects taxes on behalf of other governments to be authorized to withhold a certain percentage from the collections for each government.

At the government-wide level, where are fiduciary funds reported?

An investment pool could be reported as a custodial fund on the fiduciary fund financial statements.

Which of the following is the appropriate measurement focus for custodial funds?

An investment policy should help an investment trust fund achieve maximum returns within the defined boundaries of safety and liquidity.

Explain the purpose of the account "undistributed change in fair value of investments" used in an investment pool.

A custodial fund should be used to account for special assessment billing and collection, and related debt service of special assessment debt, if the government has no responsibility for the debt.

Each trust fund type must be reported in its own column on the fiduciary fund financial statements.

By definition a fiduciary fund that does not meet the definition of a trust fund is a custodial fund.

The collection of taxes or other revenues by one government for several of the funds it operates and for other governments often results in the creation of a trust fund.

Accounting for other postemployment benefits is similar to accounting for defined contribution pension plans.

Which of the following activities would most appropriately be recorded by a trust fund?

Because a government does not have any administrative decision making, a custodial fund would not prepare a statement of net position.

Introduction to Accounting and Financial Reporting for Government and Not-for-Profit Entities

Principles of Accounting and Financial Reporting for State and Local Governments

Governmental Operating Statement Accounts; Budgetary Accounting

Accounting for Governmental Operating Activities–Illustrative Transactions and Financial Statements

Accounting for General Capital Assets and Capital Projects

Accounting for General Long-Term Liabilities and Debt Service

Accounting for the Business-type Activities of State and Local Governments

Financial Reporting of State and Local Governments

Analysis of Government Financial Performance

Auditing of Government and Not-for-Profit Organizations

Budgeting and Performance Measurement

Not-for-Profit Organizations—Regulatory, Taxation, and Performance Issues

Accounting for Not-for-Profit Organizations

Accounting for Colleges and Universities

Accounting for Health Care Organizations

Accounting and Reporting for the Federal Government

Filters