Deck 5: Revenue Accountinggovernmental Funds

Question 1

A government has a fiscal year end of June 30, 20X6. Tax bills for each fiscal year are prepared and mailed in June prior to the beginning of the fiscal year for which they apply. Tax revenue for the fiscal year ending June 30, 20X6, would include

A) Only taxes levied in June 20X5 which came available in either June 20X5 or between July 1, 20X5, and June 30, 20X6, as well as any taxes associated with the June 20X5 levy collected within 60 days following June 30, 20X6.
B) Only the levy as of June 20X6.
C) Only the levy as of June 20X5.
D) Only taxes levied in June 20X5 which came available in either June 20X5 or between July 1, 20X5, and June 30, 20X6, as well as any taxes associated with either the June 20X5 or the June 20X6 levy collected within 60 days following June 30, 20X6.

Answer 1

A

Question 2

A government levies property taxes and awards discounts for timely payment. How should the government report discounts that it expects will be taken?

A) Report as expenditures in the year the taxes are levied.
B) Report as expenditures in the year the discounts are awarded for early payments received.
C) Report as other financing uses.
D) Deduct from the amount of taxes levied to determine property tax revenues.

Answer 2

D

Question 3

Which of the following statements regarding tax revenue recognition in the General Fund is false?

A) Tax revenues may be recorded when the tax is levied.
B) Governments may choose to recognize tax revenue as it becomes available, not when it is initially levied.
C) Tax revenues are generally recorded at gross amounts of the levy, regardless of expected collections.
D) Tax revenues are generally recorded net of the allowance for uncollectibles.

Answer 3

C

Question 4

A county anticipated that $6,500 of discounts would be taken on their initial tax levy. Which of the following statements is true if discounts were less than anticipated?

A) Revenues would be increased.
B) Revenues would be decreased.
C) Expenditures would be decreased.
D) Expenditures would be increased.

Question 5

Under the modified accrual basis, revenues are considered susceptible to accrual if

A) Available to finance current period expenditures.
B) Objectively measurable.
C) Collected during the current period.
D) Both available to finance current period expenditures and objectively measurable.

Question 6

When a tax lien is formalized, a government must record an allowance for uncollectible tax liens

A) In every possible situation.
B) Only if the expected salable value of the property against which the lien was established is less than the fair value of the property.
C) Only if the expected salable value of the property against which the lien was established is less than the total amount of the liens receivable against that property.
D) Only if the lien is contested in court.

Question 7

Sale taxes are an example of which category of nonexchange transactions?

A) Derived tax revenue.
B) Imposed tax revenue.
C) Government mandated nonexchange revenue.
D) Voluntary nonexchange revenue.

Question 8

A city levies $200,000 of property taxes for its current fiscal year. One percent of the tax levy is expected to be uncollectible. The city collects $170,000 of its taxes during the year and another $25,000 during the first two months of the following year. In addition, the city collected $3,000 of prior year taxes during the first two months of the current fiscal year and another $2,000 during the remainder of the current fiscal year. What amount of property tax revenues should the city report in the General Fund financial statements for the current fiscal year?

A) $200,000.
B) $198,000.
C) $197,000.
D) $195,000.

Question 9

The Town of Lily Branch anticipated that discount opportunities of up to $3,000 would be taken by their taxpayers. Which of the following statements accurately reflects the accounting for the anticipated discounts when the taxes are levied?

A) Revenues are initially recorded at the entire levy amount. Discounts taken are recorded as expenditures when they are actually taken.
B) Taxes receivable are reduced by the amount of discounts anticipated. The discounts anticipated are recorded as expenditures at the time of the levy.
C) Revenues are recorded at the time of levy net of anticipated discounts. Taxes receivable are recorded at the full levy amount.
D) Revenues are recorded at gross at the time of levy. At collection, taxes receivable are reduced by the gross amount, the discount is recognized as a miscellaneous revenue, and cash is recorded at net.

Question 10

State reimbursement to schools for a portion of any special education costs incurred is an example of which category of nonexchange transactions?

A) Derived tax revenue.
B) Imposed tax revenue.
C) Government mandated nonexchange revenue.
D) Voluntary nonexchange revenue.

Question 11

SEQ CHAPTER \h \r 1Listed below in the left column are some events that may or may not be revenues for the General Fund. Listed in the right column are the classifications of revenues for governmental funds. Correctly match each event with the appropriate revenue classification. Unless specifically stated otherwise, assume all amounts are earned, measurable, and available. If the event is not a revenue, state how the event would be reported in the current year General Fund financial statements.

Question 12

Which of the following governmental fund revenue sources are typically recorded as revenues only as they are actually received in cash?

A) Property taxes.
B) Interest.
C) Building permit fees.
D) Reimbursement grants.

Question 13

Under the modified accrual basis, revenues are considered available to finance current period expenditures if they are legally available and

A) Earned.
B) Collected during the current period.
C) Collected in the current period or soon enough thereafter to be used to pay liabilities of the current period.
D) Objective measureable.

Question 14

The City of Jonesboro allows discounts on taxes. Specifically, taxpayers get a 1% discount on the total tax if it is paid within one month of the initial levy. What would the journal entry be to record the levy of $700,000 if the government anticipates there will be a 2% uncollectible rate and it is anticipated that the discounts will be $5,000? $\begin{array}{lllr}&&\text {Debit}&\text {Credit}\\\text { A. }&\text { Taxes Receivable } & \$ 700,000 & \\&\quad \text { Allowance for Uncollectible Taxes } & & \$ 14,000 \\&\quad \text { Allowance for Discounts } & & 5,000 \\&\quad \text { Revenues }&&681,000 \\\text { B. }&\text { Taxes Receivable } & \$ 700,000 & \$ 700,000 \\&\quad \text { Revenues } & & \\\text { C.}&\text { Taxes Receivable } &\$6995,000 \\&\quad \text { Expenditures } & 5,000 & \\&\quad \text { Allowance for Uncollectible Taxes } &&\$14,000\\&\quad \text { Revenues } & & 686,000 \\\text { D. }&\text { Taxes Receivable } & \$ 700,000 \\&\quad \text { Allowance for Uncollectible Taxes }& & \$ 14,000 \\&\text { Revenues } & & 686,000\end{array}$

Question 15

Which of the following should be included in tax revenues for the current year?

A) Taxes collected this year that have been levied for next year.
B) Prior year taxes collected during the first 60 days of this year.
C) Taxes levied this year but not collected until mid-year of the next year.
D) Taxes levied 2 years ago and collected in first 60 days of the next year.

Question 16

The Jackson Independent School District began the year with the following accounts on its Balance Sheet related to property taxes all amounts are in thousands of dollars. All accounts have normal balances:
Taxes Receivable - Delinquent 2,000
Allowance for Uncollectible Taxes - Delinquent 400
Deferred Revenues 300
Selected transactions for the Jackson Independent School District are presented below.
1. On January 1 the school district levied property taxes of $8,000. The due date for the taxes is March 31. Taxes are considered delinquent after that date. The school district expects to collect all but 4% of the levy. In addition the district offers a 2% discount if the taxes are paid by February 28. The district expects 40% of the tax to qualify for the discount.
2. Between January 2 and February 28, the district collected $4,800 of the taxes due. Of this amount, $1,300 was due in the preceding fiscal year.
3. During March, an additional $3,500 of receivables were collected. Of this amount, $200 were for the preceding fiscal year. The remaining delinquent taxes from the preceding fiscal year were written off as uncollectible.
4. On April 1, the balance of the current year taxes is past due. A 10% penalty and 2% in interest was immediately assessed on the delinquent debt. It is estimated that $30 of the total interest and penalties will prove uncollectible.
5. On June 12 the school district wrote off $100 of property taxes, $10 in penalties, and $2 in interest as uncollectible.
6. From March 31 to December 31 the school district collected $300 of the property taxes that were levied on January 1. The school district expects to collect an additional $200 of these taxes during the first two months of the next fiscal year.
Requirements:
1. Prepare the necessary journal entries. Dates and explanations may be omitted. If a transaction requires no entry, do not leave it blank: state "No Entry Required" and explain why.
2. What was the total Revenues - Property Taxes earned in the current fiscal year.
3. Indicate the impact of each of the transactions on the Balance Sheet equation. If a transaction has no effect or if the net effect is zero, indicate it with "NE".

Question 17

How should taxes collected in advance in fiscal year 20X3 be reported in the fiscal year 20X3 General Fund financial statements?

A) As a liability on the balance sheet.
B) As a deferred inflow on the balance sheet.
C) As revenue on the statement of revenues, expenditures, and changes in fund balance.
D) As an other financing source on the statement of revenues, expenditures, and changes in fund balance.

Question 18

A city levies $200,000 of property taxes for its current fiscal year. One percent of the tax levy is expected to be uncollectible. The city collects $170,000 of its taxes during the year and another $25,000 during the first two months of the following year. What amount of property tax revenues should the city report in the General Fund financial statements for the current fiscal year?

A) $200,000
B) $198,000
C) $195,000
D) $170,000.

Question 19

A government allows discounts on taxes if payments are made within two months of the levy date. How does the government account for the discounts as they are being taken?

A) Allowance for discounts is debited for the amount of the discounts taken.
B) Expenditures are debited for the amount of the discounts taken.
C) Revenue is debited for the amount of the discounts taken.
D) Allowance is credited for the discount and is recorded at the time the discount is taken.

Question 20

Property taxes are an example of which category of nonexchange transactions?

A) Derived tax revenue.
B) Imposed tax revenue.
C) Government mandated nonexchange revenue.
D) Voluntary nonexchange revenue.

Question 21

A government received $30,000 of interest on investments of its General Fund during the year. The fair value of its investments increased by $3,500 during the year. In its General Fund statement of revenues, expenditures, and changes in fund balance the government should report

A) Investment income of $30,000 as revenues and the increase in the fair value of investments of $3,500 as an other financing source.
B) Investment income of $33,500 as revenues.
C) Investment income of $33,500 as an other financing source.
D) Investment income of $30,000 as revenues and disclose the increase in the fair value of investments in the notes to the financial statements.

Question 22

The City of Ruth has been awarded a $1,000,000 federal reimbursement grant to improve bike trails. The city has incurred $418,000 of qualifying expenditures to date, for which the federal government has reimbursed the city $180,000. How much should the city of Ruth show as due from the federal government?

A) $820,000.
B) $582,000.
C) $418,000.
D) $238,000.

Question 23

The City of Ruth has been awarded a $1,000,000 federal reimbursement grant to improve bike trails. The city has incurred $418,000 of qualifying expenditures during the current year, for which the federal government has reimbursed the city $180,000. How much should the city of Ruth recognize as revenue for the current year?

A) $1,000,000
B) $598,000.
C) $418,000.
D) $180,000.

Question 24

All of the following are examples of intergovernmental revenues except

A) Amounts to which a government is entitled as determined by the federal government pursuant to an allocation formula contained in a federal statute.
B) Revenues levied by a state government but shared on a predetermined basis with other governments.
C) Interest earned on investments in bonds issued by other governments.
D) Cash contributions received from another government to be used for a specified purpose.

Question 25

The county received a $1,500,000 restricted grant from the state government to be used to improve its public safety department's communication systems. The county will not meet all eligibility requirements of the grant until next fiscal year, when the county plans to begin incurring expenditures for this purpose. In the current year, the General Fund should report this grant as

A) Other financing sources.
B) Deferred revenues.
C) Revenues.
D) Unearned revenues.

Question 26

A city collected $750,000 of taxes levied during the current fiscal year the total levy was $780,000, $50,000 of past due taxes levied in a previous year, and $25,000 of prepayments for next year's taxes. The city should report tax revenue in the General Fund of

A) $750,000.
B) $800,000.
C) $825,000.
D) $855,000.

Question 27

If a city receives notification of a grant award and the actual proceeds sixty days prior to the start of the grant period, the entry to record the grant in the Special Revenue Fund would be

A) A debit to grants receivable and a credit to grants revenue.
B) A debit to cash and a credit to grants revenue.
C) A debit to grants receivable and a credit to unearned revenue.
D) A debit to cash and a credit to unearned revenue.

Question 28

Inactive bank accounts that revert to the state after a period of time should be

A) Reported at their full fair value as liabilities of the government.
B) Recognized as revenue-net of any amounts expected to be claimed by heirs.
C) Reported as unearned revenue.
D) Reported in a special revenue fund.

Question 29

The county received a $75,000 payment in lieu of taxes from the water Enterprise Fund. The Enterprise Fund receives no service from the county for this payment. The General Fund should report the payment in

A) Other financing sources - transfer.
B) Interfund charges.
C) Revenues.
D) Special item.

Question 30

The Ruby Falls Independent School District receives significant payments in lieu of taxes from the federal government to reimburse the district for lost revenues because a military base, which is not subject to property tax, is within the district's boundaries. These payments should be reported as

A) Other financing sources - transfer.
B) Revenue.
C) An extraordinary item.
D) A special item.

Question 31

The City of Ruth has been awarded a $1,000,000 federal expenditure-driven grant to improve bike trails. The federal government advanced the city $600,000 when the grant was awarded on January 10, 20X8. The city incurred $418,000 of qualifying expenditures during 20X8. How much should the city of Ruth recognize as unearned revenue for its fiscal year ending December 31, 20X8?

A) $182,000.
B) $418,000.
C) $582,000.
D) $600,000.

Question 32

Assume that a general capital asset was sold for $2,500. The asset was originally purchased for $10,000 and has been in use for 3 years. It has an estimated life of 5 years. What entry would be made in the General Fund to reflect this sale?

Question 33

When a governmental entity is decreasing the fair market value of an investment, the appropriate debit would be to

A) Investments.
B) Investment income.
C) Cash.
D) Loss on investments.

Question 34

GASB Statement No.31 requires the following investments to be recorded at fair value except

A) Participating interest-earning investment contracts.
B) Equity securities with readily determinable fair values.
C) Debt securities.
D) Nonparticipating interest-earning investment contracts.

Question 35

Which of the following statements regarding the accounting for investments in governmental funds is false?

A) Interest receivable should be accrued as it is earned.
B) Interest revenue should be recognized on a cash basis.
C) Interest revenue is accrued as it meets the availability criteria.
D) Decreases in the fair market value of equity securities with readily determinable fair values result in a decrease in investment income.

Question 36

Pass-through grants are accounted for

A) Only in Agency Funds.
B) By increasing or decreasing governmental fund assets and liabilities to reflect the agency relationship-no revenues are reported in the governmental fund.
C) As revenues and expenditures or expenses in the appropriate fund of the pass-through entity primary recipient.
D) As other financing sources and other financing uses in the appropriate fund of the pass-through entity primary recipient.

Question 37

Clark County was hired by Catlett City, the largest city in the county, to maintain some of its roads. Clark County billed Catlett City for its cost of maintaining the roads. The amount of the billing was $60,000. Clark County should report the $60,000 as

A) An other financing source.
B) A revenue.
C) A reduction of expenditures.
D) A gain on work performed for other governments.

Question 38

The county received $75,000 from the annual sale of surplus general government property. The proceeds are deposited in the General Fund. The General Fund should report the proceeds as

A) Other financing sources.
B) Due to other funds.
C) Revenues.
D) Special item.

Question 39

The county received a $1,500,000 restricted grant from the state government to be used to improve its public safety department's communication systems. The county has met all eligibility requirements of the grant. In the current year, the General Fund should report this grant as

A) Other financing sources.
B) Deferred revenues.
C) Revenues.
D) Unearned revenues.

Question 40

In Year 1, a county levied $1,500,000 of property taxes and collected $1,400,000 of that levy; in Year 2, the levy was $1,550,000 and the related collections totaled $1,495,000; in Year 3, the levy was $1,575,000 and the related collections totaled $1,530,000. Also, collections of past due taxes in Years 1, 2, and 3 were $15,000, $14,000, and $19,000, respectively. Assuming that the General Fund's deferred revenue at the beginning of Year 1 was $410,000, what would deferred revenue be as of the end of Year 3?

A) $362,000.
B) $562,000.
C) $610,000.
D) $658,000.

Question 41

Assume the following transactions occurred in a school district General Fund during the year:
-Charges for services collected - $25,000
-Taxes levied - $2,450,000
-Taxes collected from current year levy and prior year tax levies - $2,320,000
-Tax prepayments received - $10,000
-Grants earned and received during the year - $300,000
-Grants awarded but not yet available - $250,000
The amount of revenues recorded in the General Fund for the year would be

A) $2,895,000.
B) $2,655,000.
C) $2,645,000.
D) $2,450,000.

Question 42

If an expenditure was inadvertently charged to the General Fund instead of the appropriate Special Revenue Fund, what effect would the correction of this error later in the same fiscal year have on the General Fund?

A) An entry would be made directly to the General Fund's fund balance to correct the error.
B) Revenues would be increased.
C) Expenditures would be decreased.
D) Transfers in would be increased.