Deck 5: The Governmental Fund Accounting Cycle

Question 1

The measurement focus used by governmental fund measures:

A)capital resources
B)spendable resources
C)spendable resources and capital resources
D)economic resources

Answer 1

B

Question 2

On January 1,2013,a city recorded General Fund property tax revenues of $750,000,but made no provision for uncollectible receivables or tax refunds.During the year,it collected property taxes of $720,000,wrote off $4,000 as uncollectible,and made tax refunds of $3,000.At year-end,the city finance director concluded that $10,000 of the delinquent taxes would be collected in January and February of 2014,$12,000 would be collected later in 2014,and $1,000 would need to be written off as uncollectible.How much should the city report as property tax revenue in its General Fund financial statements for the year 2013?

A)$720,000
B)$730,000
C)$742,000
D)$713,000

Answer 2

B

Question 3

A city uses the allowance method to provide for uncollectible property taxes.At the start of the year,the city established an allowance of $100,000 for uncollectible taxes.During the year,it wrote off $80,000 as uncollectible.At year-end,the city still has some uncollected taxes,but believes it will need an allowance of only $15,000 to cover any receivables that it may need to write off as uncollectible.What adjusting entry should it make?

Answer 3

D

Question 4

When making its year-end entries,the city's accountant determines that $20,000 of the city's remaining current property taxes receivable would not be collected within the first sixty days of the next fiscal year,but would be collectible later in that year.At year-end,the city should report a $20,000 credit to:

A)revenues - property taxes
B)property taxes receivable - delinquent
C)deferred revenues - property taxes
D)allowance for uncollectible taxes

Question 5

A property owner receives a property tax bill for $4,000 and appeals the assessment.Before he pays the bill,the city reduces his property tax to $3,000.If the city had previously established an allowance for property tax refunds,what entry should it make to record the reduction?

Question 6

A city levies property taxes of $1,050,000,but believes that it will not be able to collect $50,000 of those taxes.What entry should it make when the taxes are levied?

Question 7

Which of the following best describes the general principle for recognizing property tax revenues in the General Fund?

A)They should be recognized in the current period to the extent that cash is collected
B)They should be recognized for the entire amount levied for the current period,regardless of when they are collected in cash
C)They should be recognized in the current period,less appropriate allowances for uncollectible accounts,tax refunds,and discounts
D)They should be recognized in the current period to the extent collected and also if collected early in the following year

Question 8

A state government receives a grant from the federal government that it disburses to local governments within the state.To meet federal grant requirements,the state government monitors the local governments to make sure that they comply with federal grant requirements.When the state government disburses the grant monies to the local governments,it should debit:

A)due to local governments
B)deferred revenues - grants
C)expenditures - federal grant
D)no entry is required

Question 9

At the time a government levies the property tax,an allowance for uncollectible property taxes is established so that

A)probable delinquent taxpayers can be identified individually
B)property tax revenues can be reported at a net collectible amount
C)an expenditure for bad debts is recorded in the accounts
D)property tax revenues will exceed the total amount of the levy

Question 10

At the beginning of the year 2013,a town recorded General Fund property tax receivables of $600,000.By year-end (December 31),taxpayers had paid a total $575,000.Based on previous experience,the town expected to collect the $25,000 of delinquent taxes as follows: $10,000 in January and February of 2014 and $15,000 between March and August of 2014.How much should the town report as property tax revenue in its General Fund statements for the year 2013?

A)$585,000
B)$600,000
C)$590,000
D)$575,000

Question 11

A government would refer to its property tax calendar to determine whether property taxes receivable at any given time are

A)collectible in part or in full
B)delinquent or current
C)sufficient to finance planned expenditures
D)larger or smaller than those of the prior year

Question 12

Which of the following is the most likely reason that deferred revenue is reported on the General Fund balance sheet?

A)qualifying expenditures have been incurred in conjunction with a federal grant
B)there are property taxes receivable at year end that probably will not be collected for at least 60 days after the end of the accounting period
C)there are property taxes receivable at year end that will probably be collected within 60 days after the end of the accounting period
D)the government owes refunds to property owners who have successfully appealed their property tax assessments

Question 13

A school district receives a grant from the federal government to reimburse the district for the salaries of teachers in an "English as a Second Language" program.The grant has no time requirements.The school district has paid the teachers and expects to receive payment from the federal government within 30 days of year-end.Which of the following journal entries would be needed for the school district?

A)debit cash and credit intergovernmental revenues - grants
B)debit deferred revenues - grants and credit intergovernmental revenues - grants
C)debit due from federal government and credit intergovernmental revenues - grants
D)debit due from federal government and credit deferred revenues - grants

Question 14

A state provides a city with a grant of $500,000 for a special "meals for the homeless" program.The city will receive payment from the state within 30 days of incurring eligible expenditures for homeless people.When should the city recognize revenues under this grant?

A)when it receives the cash payments from the state
B)at the end of the grant,when all expenditures have been incurred
C)when it sends bills to the state
D)when it incurs expenditures under the grant

Question 15

If a taxpayer fails to pay his property taxes on time and the city decides to foreclose the property,what accounting entry should the city make?

A)write off the property tax receivable as uncollectible
B)reduce property tax revenues by the amount of the receivable
C)reclassify the property tax receivable account to a delinquent receivable account
D)reclassify the property tax receivable account to a tax lien receivable account

Question 16

A state government receives a grant from the federal government that it disburses to local governments within the state.The state government disburses the cash received from the federal government to the local government,but the state government has no other administrative responsibilities regarding the grant.The state government should report the grant in:

A)an agency fund
B)a special revenue fund
C)internal service fund
D)the general fund

Question 17

When counties receive cash advances under grants from the state,what account should they credit?

A)grants receivable
B)revenues - grants
C)advance on state grants
D)grant expenditures

Question 18

A municipality uses the allowance method to record uncollectible property taxes.If it decides to write off an account as uncollectible,it should:

A)debit bad debts expenditures;credit allowance for uncollectible property taxes
B)debit allowance for uncollectible property taxes;credit property taxes receivable
C)debit allowance for uncollectible property taxes;credit property tax revenues
D)debit property tax revenues;credit property taxes receivable

Question 19

Which of the following is not considered to be a "derived" tax revenue based on GASB standards?

A)sales taxes
B)property taxes
C)income taxes
D)all of the above are derived tax revenues

Question 20

When reporting on the General Fund in the fund financial statements,what is the general principle regarding the accrual of sales taxes collected by merchants but not yet remitted to the taxing government?

A)sales taxes should be recognized only if received by the state by year end
B)sales taxes should be recognized when the merchant makes the sale provided taxes are received early enough in the following year to finance expenditures of the period covered by the statements
C)sales taxes should be accrued provided they are received within 15 days after the end of the accounting period
D)sales taxes should be accrued based on an estimate of amounts received by merchants but not yet remitted to the state,regardless of when the taxes are remitted

Question 21

The City of Maysville's General Fund balance sheet for its December 31,2013 year end shows inventory of $28,000 and prepaid rent of $10,000.The city also had $60,000 of outstanding encumbrances in its General Fund at year-end.In December 2013,a grantor provided the City with $42,000 that must be used to buy musical instruments for the city's youth orchestra.No instruments had been purchased at year-end.How much should the city report as restricted fund balance in its General Fund on December 31,2013?

A)$28,000
B)$38,000
C)$42,000
D)$60,000
E)$102,000

Question 22

A county has $3,650,000 of outstanding encumbrances related to unassigned resources at year-end,December 31,2013.It expects to accept delivery on all orders in 2014.How should the county handle the outstanding encumbrances in its General Fund balance sheet at December 31,2013?

A)it should report encumbrances as if they were expenditures and liabilities of the year 2013
B)it should close the open encumbrances and show them as part of unassigned fund balance
C)it should close the open encumbrances and show them as part of assigned fund balance
D)it should close the open encumbrances and make no adjustments to fund balance

Question 23

The attorneys for the City of Hensley believe that a lawsuit filed against the city will be settled late in the next fiscal year.The attorneys believe that it is probable that the city will have to pay the claimants $30,000 to settle the lawsuit,but it is possible that it could be settled for as little as $15,000 or as much as $40,000.How much should the city accrue as a liability in the General Fund for its current fiscal year?

A)$0
B)$15,000
C)$30,000
D)$40,000

Question 24

The General Fund lends cash at the beginning of the year to an Enterprise Fund,expecting to be repaid before the end of the year.What account should be debited in the General Fund?

A)transfer out to enterprise fund
B)due from enterprise fund
C)other financing uses - enterprise fund
D)expenditures - enterprise fund loans

Question 25

Which of the following describes the proper accounting procedure for supplies in the General Fund?

A)Supplies may be accounted for as expenditures either when purchased or when consumed.In either case,material amounts of inventory are shown on the balance sheet
B)Supplies must be accounted for as expenditures when purchased.Therefore,inventories are not shown on the balance sheet
C)Supplies must be initially recorded as assets,and then charged off as expenditures as the supplies are consumed
D)Supplies may be accounted for as expenditures either when purchased or when consumed.If the purchases method is used,inventories are not shown on the balance sheet.

Question 26

Which of the following best describes an assignment of fund balance?

A)it is a government's intent to spend resources for specific purposes
B)it is another term for a budgetary fund balance reserved for encumbrances
C)it is constrained as a result of a formal action by a government's legislative body
D)it is a legal segregation of fund balance,and must be used for the purpose assigned

Question 27

The General Fund provides a recurring annual subsidy to the Mass Transit Enterprise Fund to keep bus fares at a reasonable level.How should the General Fund report the subsidy in its financial statements?

A)as an expenditure
B)as a long-term advance
C)as a transfer out
D)as a reimbursement

Question 28

A General Fund receives an invoice from the Electric Utility Fund (an Enterprise Fund)for electricity provided by the Utility Fund.When it receives the invoice,what account should be debited in the General Fund?

A)due from electric utility fund
B)transfer in from electric utility fund
C)expenditures - utility services
D)due to electric utility fund

Question 29

A city paid $40,000 for police cars with the expectation that they would have a useful life of four years.After three years,the city sold the cars for $3,000.How should the city account for the sale in the General Fund?

A)debit cash for $3,000,debit accumulated depreciation for $30,000,debit loss on sale of general fixed assets for $7,000,and credit equipment for $40,000.
B)debit cash for $3,000 and credit other financing source--sale of capital assets for $3,000.
C)debit cash for $3,000,debit loss on sale of general fixed assets for $37,000,and credit equipment for $40,000.
D)debit cash for $3,000,debit other financing uses for $37,000,and credit equipment for $40,000.

Question 30

A town's garbage trucks accidentally sideswiped two parked automobiles in the year ended December 31,2013.One case was settled for $3,000,and the town expects to pay it in January 2014.In the other case,the claimant originally demanded $15,000.The town attorney thinks they can settle the claim for $10,000,but it probably will take two years to settle the case.What amount should the town report as a claims liability on the General Fund's December 31,2013 balance sheet?

A)$0
B)$3,000
C)$13,000
D)$18,000

Question 31

In the statement of revenues,expenditures,and changes in fund balances,a transfer received by the Debt Service Fund from the General Fund should be reported by the Debt Service Fund as a:

A)transfer in,in the other financing sources/uses section
B)negative expenditure,in the expenditure section
C)direct addition to equity,in the fund balance section
D)reimbursement,in the revenue section

Question 32

A city uses the purchases method of accounting for supplies in the General Fund.At year-end,the amount of supplies on hand is material and the city wants to report the inventory in its balance sheet.How should the General Fund record the inventory?

A)debit supplies inventory and credit expenditures--supplies used
B)debit supplies inventory and credit vouchers payable--supplies
C)debit supplies inventory and credit unassigned fund balance
D)debit supplies inventory and credit nonspendable fund balance

Question 33

The General Fund of a city pays all utility bills received from private companies for services provided to city agencies.It then bills other funds for their shares of the bills.On May 10,the General Fund pays an electric bill for $230,000.It then sends a bill to the Library Special Revenue Fund for $4,000,representing the library's share of the bill.Which account should the General Fund credit when it sends the bill to the Library Special Revenue Fund?

A)expenditures - utilities
B)due from library special revenue fund
C)transfer out to library special revenue fund
D)due to library special revenue fund

Question 34

Governmental fund liabilities are:

A)claims against current financial resources
B)obligations not currently payable
C)both a and b
D)none of the above

Question 35

Which of the following liabilities normally would not be reported in governmental funds?

A)accrued salaries payable
B)bonds payable
C)vouchers payable
D)all of the above are commonly reported in governmental funds
E)none of the above are commonly reported in governmental funds

Question 36

The City of Maysville's General Fund balance sheet for its December 31,2013 year end shows inventory of $28,000 and prepaid rent of $10,000.The city also had $60,000 of outstanding encumbrances in its General Fund at year-end.In December 2013,a grantor provided the City with $42,000 that must be used to pay musicians who perform in the city's series of summer concerts in the park during 2014.How much should the city report as nonspendable fund balance in its General Fund on December 31,2013?

A)$10,000
B)$28,000
C)$38,000
D)$42,000
E)$60,000

Question 37

The city council decides to close the Library Special Revenue fund and send its remaining resources ($45,000 cash)to the General Fund.What account should the Library Special Revenue Fund debit when it sends the cash to the General Fund?

A)advance to general fund
B)transfer out to general fund
C)due from general fund
D)expenditures - fund closeout

Question 38

Which of the following interfund transactions will be reported as a separate line item in the operating statement of a General Fund?

A)short-term interfund loan received
B)transfer out to a debt service fund
C)reimbursement received from a special revenue fund
D)long-term interfund loan received

Question 39

The City of Maysville's General Fund balance sheet for its December 31,2013 year end shows inventory of $28,000 and prepaid rent of $10,000.The city also had $60,000 of outstanding encumbrances related to unassigned resources in its General Fund at year-end.In December 2013,a grantor provided the City with $42,000 that must be used to pay musicians who perform in the city's series of summer concerts in the park during 2014.How much should the city report as assigned fund balance in its General Fund on December 31,2013?

A)$28,000
B)$38,000
C)$42,000
D)$60,000
E)$98,000

Question 40

The highest level of decision-making authority for the City of Palo Pinto passes an ordinance that states that all royalty payments received from oil or gas production on city property must be used for street maintenance or improvements.As of the end of its current fiscal year,the city has $1,250,000 of unspent royalty payments.These amounts should be reported as part of:

A)nonspendable fund balance
B)restricted fund balance
C)committed fund balance
D)assigned fund balance
E)unassigned fund balance

Question 41

(Journal entries - interfund transactions)
Theodore County uses a General Fund,a Special Revenue Fund,and an Enterprise Fund.The Special Revenue Fund is financed by a grant from the state to provide care for the elderly.The Enterprise Fund provides bus service both to the public and to government agencies.Prepare entries to record these transactions.Indentify the funds involved in each case.
a.The Enterprise Fund bills the Special Revenue Fund $15,000 for bus service provided to the elderly.
b.The General Fund receives an electricity bill for $20,000 and prepares a voucher to pay the bill.The General Fund then bills the Special Revenue Fund for $3,000,representing the portion of the electricity bill applicable to the senior citizens building.
c.The Enterprise Fund is short of cash to pay its bills.The General Fund lends the Enterprise Fund $50,000 in cash,which will be repaid before the end of the year.
d.The General Fund pays cash of $100,000 to the Enterprise Fund as a subsidy to help meet the operating costs of the Enterprise Fund.

Question 42

(Treatment of inventory-purchases method)
The General Fund of the City of Mineral Wells shows $40,000 in supplies inventory on January 1,2013.During the year 2013,General Fund cash is used to purchase $110,000 of supplies.On December 31,2013,the city conducts an inventory count and finds $50,000 of supplies inventory remains.Using the purchases method of accounting for inventory,prepare the journal entries necessary to record (a)the purchase of the inventory and (b)to make the year-end adjustment to inventory.

Question 43

(Property tax revenue recognition)
In its General Fund balance sheet at December 31,2013,Marathon City reported Property taxes receivable of $40,000,deferred property tax revenues of $15,000,and an allowance for uncollectible taxes of $0.At the start of the year 2014,Marathon City made the following journal entry to record its property tax levy:
Property taxes receivable 950,000
During the year 2014,the city collected all the property taxes receivable outstanding at December 31,2013.It also collected $920,000 of the receivables recognized at the beginning of 2014,and wrote off $6,000 of receivables against the allowance account.On December 31,2014,the Marathon City finance director made the following determinations regarding the property taxes outstanding at that date:
a.All outstanding property taxes would be collected,so there was no need for the allowance for uncollectible property taxes.
b.The City would collect about $15,000 of the outstanding property taxes receivable during the first 60 days of 2015 and the remainder during the latter part of 2015.
Required: Calculate how much property tax revenues Marathon City should recognize in 2014.

Question 44

The city council appropriates a portion of the government's current year-end fund balance to eliminate an anticipated budget deficit in next year's budget.Projected expenditures are anticipated to be greater than expected revenues next year.The appropriated portion of the current year's fund balance should be reported as:

A)unassigned fund balance
B)assigned fund balance
C)committed fund balance
D)restricted fund balance
E)nonspendable fund balance

Question 45

For the general fund,the residual fund balance classification is:

A)unassigned fund balance
B)assigned fund balance
C)committed fund balance
D)restricted fund balance

Question 46

A city has only one special revenue fund.All the fund balance classifications that it reports have positive balances.Which of the following fund balance classifications would not be reported by the city?

A)unassigned fund balance
B)assigned fund balance
C)committed fund balance
D)restricted fund balance

Question 47

The city's governing body gives the city's finance director the authority to set aside "excess" amounts in the General Fund to provide funds to build a new fire station.The finance director sets aside $200,000 for that purpose during the current fiscal year.This should be reported as part of:

A)unassigned fund balance
B)assigned fund balance
C)committed fund balance
D)restricted fund balance
E)nonspendable fund balance