Exam 9: Financial Reporting of State and Local Governments

Which of the following is not a category found in the statistical section of the comprehensive annual financial report (CAFR)?

The accounting system used by a state or local government must make it possible to prepare financial statements as required by the Financial Accounting Standards Board.

An example of information found in the statistical section of the comprehensive annual financial report (CAFR) is demographic information such as unemployment rates, and personal income of citizens.

Under GASB standards, only proprietary funds prepare a statement of cash flows.

Which of the following circumstances would indicate that a potential component unit (PCU) should be included as part of the government financial reporting entity?

For each of the following definitions, indicate the key term from the list that best matches by placing the appropriate terms. A. Component unit B. Financial reporting entity C. Financial accountability D. Joint venture E. Other stand-alone government F. Primary government ________ 1. A separate government or agency that is combined for purposes of reporting on the whole entity ________ 2. The responsibility that exists when a primary government appoints a voting majority of an organization's governing board and it is able to (a) impose its will on the organization or (b) there is a potential for the organization to provide financial benefits or impose a financial burden on the primary government ________ 3. A state government, general purpose local government, or special purpose government that is independent of other state or local governments ________ 4. A legally separate governmental organization that does not have a separately elected government body ________ 5. Primary government and all related component units

Describe some items requiring adjustments when modified accrual basis accounting information must be converted to accrual basis accounting in preparation of government-wide statements.

The following transactions relate to the City of Middleton, which has a fiscal year end of December 31. The city adopts budgets for the General Fund and the debt service fund. NOTE: for simplicity, and contrary to GASB standards, assume straight-line amortization for this problem. 1. The City of Middleton sells a $2,000,000, 3%, 16-year general obligation bond issue on January 2 at par. The bond pays interest semiannually on July 1 and January 2, with the first principal payment scheduled for next year on January 2. A city hall annex must be constructed with the bond proceeds. The bond premium must be used to pay interest on the debt. 2. Budgets are adjusted to account for the sale of the bond. The debt service fund budget should be adjusted to accommodate the new debt issue. If the debt service fund does not have sufficient resources to pay expenditures, the needed funds will be provided by the General Fund. 3. On February 1, $1,000,000 of the cash from the sale of the bonds is invested for one year at a rate of 1.26%. Earnings on the investment are available for construction of the city hall annex. 4. July 1 the first interest payment is due. 5. December 31 adjusting entries are prepared. Required: For the five related transactions provided, prepare all necessary journal entries for the affected funds and at the governmental activities level. Clearly indicate the fund journal or the government-wide journal in which the entry is being recorded. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Some governments provide to their citizens highly condensed financial information, budget summaries, and narrative descriptions. This report is called a(an)

Which of the following statements concerning interfund transfers is True?

A financial reporting entity is defined as a primary government, as well as all other organizations that have an operational relationship with the primary government.

Which of the following are government-wide financial statements required by GASB standards?

Explain why special purpose frameworks (also known as other comprehensive bases of accounting) may be used by a state or local government instead of GASB standards, which are generally accepted accounting principles (GAAP).

Which of the following is a required program revenue category in the government-wide statement of activities?

"Interim financial reports are needed for state and local governments even though external users of financial reports have no need to assess monthly or quarterly performance of the government." Do you agree? Why or why not?

The comprehensive annual financial report (CAFR) of a government should contain a statement of revenues, expenses, and changes in net position for:

One of the required reconciliations in converting governmental fund financial statements to governmental activities statements at the government-wide level is an adjustment for internal service funds' assets, liabilities, operating income (loss), and transfers.

Which of the following is one of the three sections of a comprehensive annual financial report?

Where should infrastructure assets and long-term liabilities issued to finance infrastructure be reported?

Describe the alternative processes for capturing the financial accounting information required for government-wide financial statements.