Deck 5: Governmental Activities - Recognizing Expenditures and Expenses

Question 1

When accounting for inventory items in a governmental fund, GASB standards permit the use of the consumption method only.

Answer 1

False

Question 2

Assume that the City of Juneau maintains its books and records to facilitate the preparation of its government-wide financial statements.The City pays its employees bi-weekly on Friday.The fiscal year ended on Wednesday, June 30.Employees had been paid on Friday, June 25.The employees paid from the General Fund had earned $120,000 on Monday, Tuesday, and Wednesday (June 28, 29, and 30).They will earn $80,000 on Thursday and Friday (July 1 and 2).What entry, if any, should be made on June 30?

A)Debit Expenditures $120,000; Credit Wages and Salaries Payable $120,000.
B)Debit Expenditure $200,000; Credit Wages and Salaries Payable $200,000.
C)Debit Expenses $120,000; Credit Wages and Salaries Payable $120,000.
D)No entry is required.

Answer 2

C

Question 3

Which of the following funds would use the modified accrual basis of accounting in preparing its fund financial statements?

A)City Electric Utility Enterprise Fund.
B)City Hall Capital Project Fund.
C)City Motor Pool Internal Service Fund.
D)City Employee Pension Trust Fund.

Answer 3

B

Question 4

Employees of the City of Orleans earn ten days paid leave for each 12 months of employment.The City has a policy that employed must take their vacation days during the year following the year in which it is earned.If they do not take vacation in the allotted period, they forfeit the vacation pay benefit.Traditionally, employees have taken 80% of the vacation days earned.During the current year, employees of the City of Orleans earned $400,000 in vacation pay.Assuming the city maintains its books and records in a manner to facilitate the preparation of the government-wide financial statements, which of the following entries is the correct entry in the General Fund to record the vacation pay earned during the current period?

A)Debit Expenditures $400,000; Credit Vacation Payable $400,000.
B)Debit Expenses $400,000; Credit Vacation Payable $400,000.
C)Debit Expenses $320,000; Credit Vacation Pay Payable $320,000.
D)No entry required.

Question 5

In a governmental fund, expenditures for wages and salaries should be recognized in the period in which the employees earn them.

Question 6

Most governments budget (appropriate)resources for principal and interest only for the period in which a payment is due-not for future payments.

Question 7

Assume that the City of Juneau maintains its books and records to facilitate the preparation of its fund financial statements.The City pays its employees bi-weekly on Friday.The fiscal year ended on Wednesday, June 30.Employees had been paid on Friday, June 25.The employees paid from the General Fund had earned $120,000 on Monday, Tuesday, and Wednesday (June 28, 29, and 30).They will earn $80,000 on Thursday and Friday (July 1 and 2).What entry, if any, should be made on June 30?

A)Debit Expenditures $120,000; Credit Wages and Salaries Payable $120,000.
B)Debit Expenditure $200,000; Credit Wages and Salaries Payable $200,000.
C)Debit Expenses $120,000; Credit Wages and Salaries Payable $120,000.
D)No entry is required.

Question 8

When accounting for inventory items in a governmental fund, a reservation of fund balance is always required when the consumption method is used.

Question 9

Which of the following funds would use the accrual basis of accounting in preparing its fund financial statements?

A)City General Fund.
B)City Hall Capital Project Fund.
C)City Motor Pool Internal Service Fund.
D)None of the above.

Question 10

Per GASB standards, governments do not report general capital assets or depreciation in governmental funds.

Question 11

Government-wide statements present revenues and expenses from the perspective of the government, not of individual funds.

Question 12

Employees of the General Fund of Scott City earn ten days paid leave for each 12 months of employment.The City permits employees to carry the vacation days forward as long as they wish.During the current year employees earned $800,000 of vacation benefits of which the City estimates that $500,000 will be taken in the next year and the balance will be carried forward.Assuming that the City maintains its books and records in a manner that facilitates the preparation of their government-wide financial statements, which of the following entries is the correct entry in the General Fund to record the vacation pay earned during the current period?

A)Debit Expenditures $800,000; Credit Vacation Pay Payable $800,000.
B)Debit Expenditures $500,000; Credit Vacation Pay Payable $500,000.
C)Debit Vacation Expense $800,000; Credit Vacation Pay Payable $800,000.
D)No entry required.

Question 13

Assume that the City of Juneau maintains its books and records to facilitate the preparation of its fund financial statement.The City pays its employees bi-weekly on Friday.The fiscal year ended on Wednesday, June 30.Employees had been paid on Friday, June 25.The employees paid from the General Fund had earned $120,000 on Monday, Tuesday, and Wednesday (June 28, 29, and 30).What entry, if any, should be made on June 30?

A)Debit Expenditures; Credit Wages and Salaries Payable.
B)Debit Expenses; Credit Wages and Salaries Payable.
C)Debit Expenditures; Credit Encumbrances.
D)No entry is required.

Question 14

When recording a general long-term liability in a governmental fund upon issuing a bond, the credit should be to a bonds payable account.

Question 15

Employees of the City of Orleans earn ten days paid leave for each 12 months of employment.The City has a policy that employees must take their vacation days during the year following the year in which it is earned.If they do not take vacation in the allotted period, they forfeit the vacation pay benefit.Traditionally, employees have taken 80% of the vacation days earned.During the current year, employees of the City of Orleans earned $400,000 in vacation pay.Assuming the city maintains its books and records in a manner to facilitate the preparation of the fund financial statements, which of the following entries is the correct entry in the General Fund to record the vacation pay earned during the current period?

A)Debit Expenditures $400,000; Credit Vacation Payable $400,000.
B)Debit Expenses $400,000; Credit Vacation Payable $400,000.
C)Debit Expenditures $320,000; Credit Vacation Pay Payable $320,000.
D)No entry required.

Question 16

In budgeting for a governmental fund, the government should appropriate the resources for general capital assets in the periods when they are to be purchased, not those in which they will be used.

Question 17

Employees of the General Fund of Scott City earn ten days paid leave for each 12 months of employment.The City permits employees to carry the vacation days forward as long as they wish.During the current year employees earned $800,000 of vacation benefits of which the City estimates that $500,000 will be taken in the next year and the balance will be carried forward.Assuming that the City maintains its books and records in a manner that facilitates the preparation of their fund financial statements, which of the following entries is the correct entry in the General Fund to record the vacation pay earned during the current period?

A)Debit Expenditures $800,000; Credit Vacation Pay Payable $800,000.
B)Debit Expenditures $500,000; Credit Vacation Pay Payable $500,000.
C)Debit Vacation Expense $800,000; Credit Vacation Pay Payable $800,000.
D)No entry required.

Question 18

Governmental fund liabilities are considered current only when they must be liquidated with expendable available financial resources-not, as in businesses and in the government-wide statements, when they must be paid within a year.

Question 19

Expenditures are generally recognized when resources are acquired; expenses when resources are consumed.

Question 20

As used in governmental accounting, expenditures are decreases in

A)Net Assets.
B)Net Financial Resources.
C)Net Cash.
D)Net Economic Resources.

Question 21

Several years ago, Durham City issued $1 million in zero coupon bonds due and payable in 2010.The bonds were sold at an amount to yield investors 6% over the life of the bonds.During the current year, how much interest expenditures would Durham City recognize related to these bonds?

A)Difference between the present value of the bonds at the beginning of the period and the present value of the bonds at the end of the period.
B)Face amounts of bonds times 6%.
C)Book value of bonds times 6%.
D)None.

Question 22

Several years ago, Grant County was sued by a former County employee for wrongful discharge.Although it was to be contested by the County, at the time of the lawsuit the attorneys felt that that the County was likely to lose and the estimated amount of the ultimate judgment would be $100,000.This year, the case was finally settled with a judgment against the County of $150,000, which was paid.Assuming that the county maintains its books and records in a manner to facilitate the preparation of its government-wide financial statements, the entry in the current year should be

A)Debit Expenditures $150,000; Credit Cash $150,000
B)Debit Expenses $150,000; Credit Cash $150,000
C)Debit Expenditures $50,000 and Claims Payable $100,000; Credit Cash $150,000
D)Debit Expenses $50,000 and Claims Payable $100,000; Credit Cash $150,000

Question 23

Pocahontas School District, an independent public school district, financed the acquisition of a new school bus by signing a note for $90,000 plus interest on the unpaid balance at 6%.Annual principal payment of $30,000, plus interest, are due each July 1.Assuming that the District maintains its books and records in a manner that facilitates the preparation of the government-wide financial statements, the appropriate entry at the date of acquisition is

A)Debit Expenditures $90,000; Credit Notes Payable $90,000.
B)Debit Fixed Assets $90,000; Credit Notes Payable $90,000.
C)Debit Expenditures $90,000; Credit Other Financing Sources $90,000
D)Debit Fixed Assets $90,000; Credit Other Financing Sources $90,000

Question 24

On July 1 Gilbert County bought computer equipment for use in the administrative offices of the County.The equipment has an estimated useful life of three years and salvage of $10,000.Gilbert County has a 6/30 fiscal year-end.Assuming that the County maintains its books and records in a manner that facilitates the preparation of government-wide financial statements, the $70,000 cost of this equipment would require which of the following entries?

A)Debit Expenditures $70,000; Credit Cash $70,000
B)Debit Equipment $70,000; Credit Cash $70,000
C)Debit Expenses $70,000; Credit Cash $70,000
D)No entry in the General Fund

Question 25

Culver City recognized as revenues/expenditures those amounts collected/paid during the year or within 60 days of fiscal year-end.The City offers a pension benefit to its employees who meet certain age and years of employment criteria.The City participates in the State Pension Plan.The City's actuarially determined contribution to the State Pension Plan for the fiscal year ended 6/30/00 is $4 million.Due to cash inflow shortages the City, which budgeted $4 million for pension payments paid only $3 million in the fiscal year ended 6/30/00.The City made the final payment September 30, 2000.Assuming the City maintains its books and records in a manner that facilitates the preparation of the fund financial statements, what is the appropriate entry to record the pension payments and recognize any associated liability?

A)Debit Expenditures $4 million; Credit Cash $3 million and Pension Payable $1 million
B)Debit Expenses $4 million; Credit Cash $3 million and Pension Payable $1 million
C)Debit Expenditures $3 million; Credit Cash $3 million
D)Debit Expenses $3 million; Credit Cash $3 million

Question 26

Shoshone County uses the consumption method to account for supplies.At the beginning of the year the City had no supplies on hand.During the year the City purchases $600,000 of supplies for use by activities accounted for in the General Fund.The City used $400,000 of those supplies during the year.At fiscal year-end the appropriate account balances on the General Fund financial statements would be

A)Expenditures $600,000; Supplies Inventory $200,000.
B)Expenditures $600,000; Supplies Inventory $0.
C)Expenditures $400,000; Supplies Inventory $200,000.
D)Expenditures $400,000; Supplies Inventory $0.

Question 27

Harris County transferred $200,000 from the General Fund to the Motor Pool Internal Service Fund to pay for the use of automobiles during the first six months of FY 2001.The appropriate entry in the General Fund to record this transfer of cash would be

A)Debit Expenditures $200,000; Credit Cash $200,000.
B)Debit Other Financing Uses-Transfer Out $200,000; Credit Cash $200,000.
C)Debit Fund Balance-Transfer Out $200,000; Credit Cash $200,000.
D)Debit Other Financing Sources-Transfer In $200,000; Credit Cash $200,000.

Question 28

The amount of pension expenditures that should be recognized in the General Fund financial statements during the current year is

A)The amount paid.
B)The amount paid plus the amount that will be paid with available expendable financial resources.
C)The amount paid so long as it does not exceed the actuarially determined amount.
D)The actuarially determined amount.

Question 29

Pocahontas School District, an independent public school district, financed the acquisition of a new school bus by signing a note for $90,000 plus interest on the unpaid balance at 6%.Annual principal payment of $30,000, plus interest, are due each July 1.Assuming that the District maintains its books and records in a manner that facilitates the preparation of the fund financial statements, the appropriate entry in the General Fund at the date of acquisition is

A)Debit Expenditures $90,000; Credit Notes Payable $90,000.
B)Debit Fixed Assets $90,000; Credit Notes Payable $90,000.
C)Debit Expenditures $90,000; Credit Other Financing Sources $90,000.
D)Debit Fixed Assets $90,000; Credit Other Financing Sources $90,000.

Question 30

Sugar City uses the purchases method to record all prepayments.The City has a 6/30 fiscal year-end.On December 31, 2000, the city purchased a three-year insurance policy covering all city owned vehicles acquired by the General Fund to be used in general government activity.Cost of the policy was $360,000.After the 6/30/01 closing entries, the appropriate balance sheet accounts and balances associated with this transaction are:

A)Prepaid Insurance $300,000; Expenditure $60,000.
B)Prepaid Insurance $300,000; Expenditures $360,000
C)Prepaid Insurance $0; Expenditure $360,000.
D)Prepaid Insurance $0; Expenditures $60,000.

Question 31

The amount of pension expenditures that should be recognized in the government-wide financial statements during the current year is

A)The amount paid.
B)The amount paid plus the amount that will be paid with available expendable financial resources.
C)The amount paid so long as it does not exceed the actuarially determined amount.
D)The actuarially determined amount.

Question 32

Culver City recognized as revenues/expenditures those amounts collected/paid during the year or within 60 days of fiscal year-end.The City offers a pension benefit to its employees who meet certain age and years of employment criteria.The City participates in the State Pension Plan.The City's actuarially determined contribution to the State Pension Plan for the fiscal year ended 6/30/00 is $4 million.Due to cash inflow shortages the City, which budgeted $4 million for pension payments paid only $3 million in the fiscal year ended 6/30/00.The City made the final payment September 30, 2000.Assuming the City maintains its books and records in a manner that facilitates the preparation of the government-wide financial statements, what is the appropriate entry to record the pension payments and recognize any associated liability?

A)Debit Expenditures $4 million; Credit Cash $3 million and Pension Payable $1 million
B)Debit Expenses $4 million; Credit Cash $3 million and Pension Payable $1 million
C)Debit Expenditures $3 million; Credit Cash $3 million
D)Debit Expenses $3 million; Credit Cash $3 million

Question 33

The City of Upper Falls accounts for its inventory using the purchases method.During the year the City bought $400,000 of supplies, for which it owed $100,000 at year-end.The City will pay for the supplies from available expendable financial resources.The appropriate entry is

A)Debit Expenditures $400,000; Credit Cash $300,000 and Accounts Payable $100,000.
B)Debit Expenditures $300,000; Credit Cash $300,000.
C)Debit Supplies Inventory $400,000; Credit Cash $300,000 and Accounts Payable $100,000.
D)Debit Supplies Inventory $300,000; Credit Cash $300,000.

Question 34

The City of Holbrook transferred $100,000 from the General Fund to the Debt Service Fund for payment of interest.The appropriate entry in the General Fund to record this transfer would be

A)Debit Expenditures $100,000; Credit Cash $100,000.
B)Debit Other Financing Uses-Nonreciprocal Transfer Out $100,000; Credit Cash $100,000.
C)Debit Fund Balance-Transfer Out $100,000; Credit Cash $100,000.
D)Debit Other Financing Sources-Nonreciprocal Transfer In $100,000; Credit Cash $100,000.

Question 35

Bay City uses the purchases method to account for supplies.At the beginning of the year the City had no supplies on hand.During the year the City purchased $600,000 of supplies for use by activities accounted for in the General Fund.The City used $400,000 of those supplies during the year.Assuming that the city maintains its books and records in a manner that facilitates the preparation of the fund financial statements, at fiscal year-end the appropriate account balances related to supplies expenditures and supplies inventory would be

A)Expenditures $600,000; Supplies Inventory $200,000.
B)Expenditures $600,000; Supplies Inventory $0.
C)Expenditures $400,000; Supplies Inventory $200,000.
D)Expenditures $400,000; Supplies Inventory $0.

Question 36

Several years ago, Grant County was sued by a former County employee for wrongful discharge.Although it was to be contested by the County, at the time of the lawsuit the attorneys felt that that the County was likely to lose and the estimated amount of the ultimate judgment would be $100,000.This year, the case was finally settled with a judgment against the County of $150,000, which was paid.Assuming that the county maintains its books and records in a manner to facilitate the preparation of its fund financial statements, the entry in the current year should be

A)Debit Expenditures $150,000; Credit Cash $150,000
B)Debit Expenses $150,000; Credit Cash $150,000
C)Debit Expenditures $50,000 and Claims Payable $100,000; Credit Cash $150,000
D)Debit Expenses $50,000 and Claims Payable $100,000; Credit Cash $150,000

Question 37

This year Port City was sued for injuries sustained when a citizen slipped and broke her hip on the icy City Hall steps.The City attorney estimates the City will be held liable by the courts and a judgment of $200,000 will result.Because of the nature of the case it will likely be four years before the City makes any payment related to the accident.The present value of the likely future payment is $167,000.In the General Fund, at the end of the current fiscal year, Port City should recognize a liability of

A)$200,000.
B)$167,000.
C)$0 with required note disclosure.
D)$0 with no required not disclosure.

Question 38

Campbell County uses the consumption method to record all inventories and prepayments.The City has a 9/30 fiscal year-end.On April 1, 2000, the County purchased a two-year insurance policy at a total cost of $400,000, paying for the policy out of the General Fund.On the General Fund financial statements, the amount of insurance expenditures for the fiscal year ended 9/30/00 would be

A)$400,000.
B)$300,000.
C)$200,000.
D)$100,000.

Question 39

On July 1 Gilbert County bought computer equipment for use in the administrative offices of the County.The equipment has an estimated useful life of three years and salvage of $10,000.Gilbert County has a 6/30 fiscal year-end.Assuming that the County maintains its books and records in a manner that facilitates the preparation of fund financial statements, the $70,000 cost of this equipment would require which of the following entries?

A)Debit Expenditures $70,000; Credit Cash $70,000
B)Debit Equipment $70,000; Credit Cash $70,000
C)Debit Expenses $70,000; Credit Cash $70,000
D)No entry in the General Fund