Deck 9: Advanced Topics for State and Local Governments

Question 1

A County could be either a general-purpose or a special purpose government.

Answer 1

False
Explanation: General-purpose governments include states, counties, cities, towns and villages. While it is true that one government, such as a township, may be either a general-purpose or a special-purpose government, counties typically provide multiple services and should be accounted for as a general-purpose government.

Question 2

GASB standards permit exercise of judgment when determining whether a government is general-purpose or special-purpose.

Answer 2

True
Explanation: GASB does not give a clear definition of either general-purpose or special purpose governments so judgement must be applied when making the determination. General- purpose governments commonly provide multiple government services such as public safety, transportation, health and welfare. Special-purpose governments are commonly limited to one, or perhaps a few, service programs such as government-operated hospitals, public school systems, or public colleges.

Question 3

Financial reporting for a special-purpose local government depends on whether that government is engaged in governmental-type, business-type or fiduciary-type activities.

Answer 3

True
Explanation: The determining factor on what set of financial statements should be prepared is whether the special-purpose government is engaged solely in governmental-type activities, business-type activities or fiduciary-type activities. Special purpose governments that are engaged in only one governmental-type activity are permitted to combine the fund and government-wide financial statements.

Question 4

Special-purpose governmental entities that are engaged in a single business activity are not required to prepare government-wide financial statements, but issue only enterprise fund statements.

Question 5

Special-purpose governments generally provide a single or limited set of governmental services or programs.

Question 6

Special-purpose governments that are engaged in more than one governmental activity are required to use the full reporting model including MD&A, government-wide and fund-basis statements, notes to the financial statements and RSI.

Question 7

The central issue in evaluating a special-purpose entity is what set of financial statements fund-basis alone or fund-basis with government-wide) are required.

Question 8

Special-purpose governmental entities that are engaged in only a single governmental-type activity need only prepare the statements required for governmental fund basis financial statements.

Question 9

Special-purpose governments that are engaged in more than one governmental activity are permitted to combine the fund and government-wide financial statements.

Question 10

Special-purpose governments generally provide a limited set of services or programs.

Question 11

Special-purpose governments that are engaged in both governmental and business-type activities are permitted to combine the fund and government-wide financial statements.

Question 12

County governments are typically classified as special purpose governments.

Question 13

Special-purpose governments that are engaged in both governmental and business-type activities are required to use the full reporting model including MD&A, government-wide and fund-basis statements, notes to the financial statements and RSI.

Question 14

General-purpose governments are those that offer more than one type of basic governmental service, while special-purpose entities generally provide a limited, or single, set of programs or services.

Question 15

According to GASB "General-purpose governments are thought to be those that offer more than one type of basic governmental service".

Question 16

A special-purpose government engaged in business-type activities financed in whole or part by fees charged to external parties are usually reported in fiduciary funds.

Question 17

For financial reporting purposes, governmental health care entities, public school systems, other not-for-profit entities and public colleges and universities may be considered to be special-purpose entities.

Question 18

Special-purpose governments that are engaged in only one governmental-type activity are permitted to combine the fund and government-wide financial statements

Question 19

A fire protection district is an example of special-purpose local government.

Question 20

Special purpose governments must be stand-alone local governments.

Question 21

Capital assets leased through capital by the General Fund are reported in the government-wide Statement of Net Position

Question 22

At the inception of a lease, no entry is necessary to record capital lease agreements entered by the General Fund since neither the asset nor the lease obligation appear in the fund-basis statements.

Question 23

Assume a government makes a change of assumption that results in an increase in its estimate of the net pension liability. The resulting change in the net pension liability will be recorded as pension expense in the period of the change.

Question 24

So long as the reporting government is not primarily responsible for debt under a construction type special assessment, the special assessment may be reported in an Agency Fund.

Question 25

Governments with defined benefit pension plans will report a net pension liability in the government-wide Statement of Net Position if the amount the government anticipates paying to employees in the future is greater than the net fiduciary position of the pension trust fund.

Question 26

Capital assets acquired through capital by the General Fund are reported in the General Fund Balance Sheet.

Question 27

Under governmental accounting principles for capital and operating ; expenditures are recorded each period for the amount of the annual lease payment for all , but the expenditures are classified differently for capital and operating .

Question 28

Net pension liabilities are reported in statements prepared using the economic resource measurement focus and accrual basis of accounting.

Question 29

If a reporting government is only secondarily responsible for debt under a construction type special assessment, the special assessment is reported in an Agency Fund.

Question 30

Pension expenditures for governmental type funds are equal to the amounts paid to the pension fund for current year service plus any accruals for amounts to be paid from current financial resources.

Question 31

must meet all four of the criteria to be classified as capital .

Question 32

Service type are typically accounted for in the General Fund.

Question 33

Capital assets leased through operating by the General Fund are reported in the government-wide Statement of Net Position

Question 34

Governmental health care entities, public school systems, and museums are commonly accounted for as special-purpose governments.

Question 35

Governments should report the net pension liability in the governmental fund basis statements even if it is not expected to be paid from current financial resources.

Question 36

When governments construct projects that are financed with special assessment debt guaranteed by the government, those projects would be accounted for in the General Fund or a capital projects fund.

Question 37

Assume a government makes a change of assumption that results in an increase in its estimate of the net pension liability. This will be recorded in the government-wide statements as an increase in the net pension liability and an increase in deferred outflows of resources.

Question 38

A special assessment tax is a tax levy that is assessed against only those taxpayers who are deemed to benefit from the service or project paid for by the proceeds of the special assessment levy.

Question 39

Special assessment taxes may be levied to finance construction projects or to provide current services.

Question 40

Capital assets acquired through special assessment debt guaranteed by the government are reported in the government-wide statements.

Question 41

Which of the following statements is true of a special-purpose government?

A) Special-purpose governments that are engaged in more than one governmental-type activities can combine the fund and government-wide financial statements.
B) Special-purpose governments that are engaged in a single governmental-type activity may combine the fund and government-wide financial statements.
C) Special-purpose governments engaged in only one business-type activity have to prepare government-wide financial statements.
D) Special-purpose governments must be stand-alone local governments.

Question 42

Which of the following is not true regarding financial reporting of special-purpose entities?

A) Special-purpose entities might be included as component units in a primary government's financial statements.
B) Special-purpose entities that engage in a single governmental activity may prepare statements that combine government-wide and governmental fund statements.
C) Special-purpose entities that are engaged in multiple fiduciary activities must prepare both fund-basis and government-wide financial statements.
D) None of the above - all are true.

Question 43

Which of the following is not required for a special-purpose local government engaged in only fiduciary type activities?

A) Statement of Fiduciary Net position
B) Statement of Fiduciary Cash Flows
C) Notes to the Financial Statements
D) Required Supplementary Information other than MD&A

Question 44

Assume a government is a special-purpose entity engaged in fiduciary activities only. Which of the following financial statements would be required?

A) Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position.
B) Statement of Net Position and Statement of Activities.
C) Statement of Net Position, Statement of Activities, Statement of Fiduciary Net Position, Statement of Changes in Fiduciary Net Position.
D) Statement of Fiduciary Net Position, Statement of Changes in Fiduciary Net Position, and Statement of Cash Flows.

Question 45

Which of the following is not an example of a special-purpose government?

A) Village government
B) Tollway authority
C) Library district
D) Fire protection districts

Question 46

If the government is primarily or secondarily liable for the payment of debt principal and interest for a special assessment project:

A) The tax levy and debt service expenditures should be recorded in an internal service fund.
B) A special revenue fund should account for the proceeds of the debt and construction expenditures
C) The project is accounted for within governmental type funds as if it were a governmental project
D) The debt is not recorded in the government-wide statements

Question 47

Assume a government makes a change of assumption that results in an increase in its estimate of the net pension liability. The resulting change in the net pension liability will be recorded as a deferred outflow of resources in the period of the change.

Question 48

Assume a government makes a change in the terms of a pension increases benefits) that results in an increase in its estimate of the net pension liability. The resulting change in the net pension liability will be recorded as pension expense in the period of the change.

Question 49

Which of the following is true with respect to special assessment levies?

A) If the government is not liable for the special assessment debt directly or through guarantee, the special assessment is accounted for in an agency fund
B) Taxpayers may opt out of a service-type special assessment if they agree to not use the service funded by the assessment
C) Service-type may not be accounted for in the General or special revenue fund.
D) Construction-type are accumulated until there is enough money to finance the construction project

Question 50

Where should a government report special assessment debt that the government is not liable for in any way?

A) Capital projects fund.
B) Debt service fund.
C) Government-wide statements not in a fund).
D) None of the above.

Question 51

Assume a government is a special-purpose government engaged in only one governmental activity. Which financial statements would be required?

A) Government-wide statements only.
B) Statements combining the governmental funds and government-wide statements.
C) Both government-wide and governmental fund basis statements.
D) Either B or C above.

Question 52

Public colleges and universities that choose to report as special-purpose entities engaged only in business-type activities would have which of the following financial statements?

A) Statement of Net Position, Statement of Activities.
B) Statement of Net Position, Statement of Revenues, Expenses, and Changes in Net Position.
C) Statement of Net Position, Statement of Revenues, Expenses, and Changes in Net Position, Statement of Cash Flows.
D) None of the above.

Question 53

Which of the following is true regarding financial reporting of special-purpose entities?

A) might include park districts, school districts, and public colleges and universities.
B) Special-purpose entities, in some cases, have more limited reporting requirements than general-purpose entities.
C) Both of the above are true.
D) Neither of the above is true.

Question 54

Special purpose governments engaged only in fiduciary-type activities are required to prepare all of the following except:

A) Statement of Fiduciary Net Position
B) Statement of Cash Flows
C) Statement of Changes in Fiduciary Net Position
D) Management Discussion and Analysis

Question 55

Assume a government is determined to be a special-purpose government engaged in business-type activities only. Which of the following financial statements would be required?

A) Balance Sheet, Statement of Revenues, Expenditures, and Changes in fund Balances.
B) Statement of Net Position, Statement of Activities, Statement of Cash Flows.
C) Statement of Net Position, Statement of Revenues, Expenses, and Changes in Net Position, Statement of Cash Flows.
D) Statement of Net Position and Statement of Activities.

Question 56

Special-purpose governments that are engaged in both governmental and business-type activities or in more than one governmental activity are required to include all of the following in its financial statements except?

A) Required supplementary Information
B) Fund basis financial statements
C) Government-wide financial statements
D) None of the above, these are all required

Question 57

Which of the following is an example of a special-purpose government?

A) Park district
B) Village government
C) Community college
D) City government

Question 58

Which of the following would not be considered a special-purpose government for financial reporting purposes?

A) A public school system.
B) An art museum.
C) A public hospital.
D) A county board of supervisors.

Question 59

Which of the following is true regarding the financial statements for special-purpose entities?

A) Special-purpose entities that are engaged only in one governmental activity may combine government-wide and governmental fund statements.
B) Special-purpose entities that are engaged in fiduciary activities only prepare the statements required for fiduciary funds Statement of Fiduciary Net Position, Statement of Changes in Fiduciary Net Position).
C) Both of the above.
D) Neither of the above.

Question 60

Differences between the projected and actual returns on pension plan investments are deferred and recognized in expense over a five-year period.

Question 61

Which of the following is true regarding pension accounting and reporting?

A) Local governments include only the pension plans for which it is trustee in pension trust funds Statement of Fiduciary Net Position.
B) The Net Pension Liability reported by local governments include only the pension plans for which the local government is trustee, no liability needs to be reported for state sponsored plans in which the local government participates.
C) Both A and B.
D) Neither A nor B.

Question 62

Which of the following is true regarding fiduciary funds?

A) When a government provides employees a defined benefit pension plan, the government is required to present a ten year Schedule of Changes in Net Pension Liability and Related Ratios as required supplementary information
B) Governmental type funds report a net pension liability representing the unfunded pension obligation.
C) Both of the above.
D) Neither of the above.

Question 63

A government sponsoring a defined benefit pension plan changes an assumption underlying the measurement of the net pension liability. Assuming the estimated of this liability increases, how will this be reflected in the government-wide statements?

A) As an increase in the net pension liability and an expense.
B) As an increase in the net pension liability and a deferred outflow of resources.
C) As an increase in the net pension liability and an intangible asset.
D) None of the above, changes in estimated are not recorded.

Question 64

A government offering a defined benefit pension plan determines it is necessary to alter actuarial assumptions increasing the estimated cost of pension benefits. How would the resulting increase in the net pension liability be recognized in the financial statements in the year the plan is changed?

A) The increase in net pension liability would be expensed in the period the plan is changed.
B) The increase in net pension liability would be deferred and amortized over the remaining service life of the employees.
C) The increase in net pension liability would be deferred and amortized over five years.
D) The increase in net pension liability would be deferred and amortized over ten years.

Question 65

When accounting for pension benefits, the net pension obligation for employees of proprietary activities is:

A) Reported in the government-wide statements.
B) Reported in the proprietary fund-basis statements.
C) Both A and B.
D) Neither A nor B.

Question 66

Which of the following items does not increase the net pension liability and pension expense for a government offering a defined benefit pension plan?

A) Service cost
B) Interest
C) Benefit payments to retired employees
D) None of the above, all of these increase net pension liability and pension expense.

Question 67

Where is the net pension liability shown in a Comprehensive Annual Financial Report for employees of governmental type activities?

A) The Statement of Fiduciary Net Position.
B) The government-wide Statement of Net Position
C) Both A and B.
D) Neither A nor B.

Question 68

A downtown shopping district desires additional police patrols and agrees to pay for the service through a special assessment property tax. Which fund should be used to account for the special assessment tax proceeds?

A) General.
B) Capital projects.
C) Agency.
D) Debt service.

Question 69

The projected returns exceed actual returns on pension plan assets for a government offering a defined benefit pension plan. How would the resulting increase in the net pension liability be recognized in the financial statements in the year this difference is recognized?

A) The increase in net pension liability would be expensed in the period the plan is changed.
B) The increase in net pension liability would be deferred and amortized over the remaining service life of the employees.
C) The increase in net pension liability would be deferred and amortized over five years.
D) The increase in net pension liability would be deferred and amortized over ten years.

Question 70

A government entered into a capital lease agreement to acquire equipment for the general government on January 1, 2017. Five payments of $9,000 each are to be made, beginning on December 31, 2017. Discounting is at 6%, computed annually. The present value of the five payments is $37,911. Which of the following would be true as of January 1, 2017?

A) An entry would be made debiting Expenditures and crediting Other Financing Sources-Capital in a governmental fund, both in the amount of $45,000.
B) An entry would be made debiting Equipment and crediting Capital Payable in a governmental fund, both in the amount of $37,911.
C) An entry would be made debiting Capital Expenditure and crediting Capital Payable in a governmental fund, both in the amount of $37,911.
D) An entry would be made debiting Expenditures and crediting Other Financing Sources-Capital in a governmental fund, both in the amount of $37,911.

Question 71

When a governmental unit is primarily or secondarily liable for the debt, debt proceeds for special assessment obligations levied for the construction phase of a capital improvement project should be reported in which of the following fund types?

A) Special Assessment fund.
B) Capital projects.
C) Agency.
D) Debt service.

Question 72

Which of the following statements regarding employer reporting of pension trust funds is not correct?

A) Contributions by the governmental funds are recorded as expenditures in the General Fund.
B) The net pension liabilities are reported in the government-wide statements.
C) The net pension liabilities of proprietary fund employees are reported in the proprietary fund-basis statements
D) Governmental funds report net pension liabilities of governmental fund employees as a fund liability.

Question 73

Which of the following lease criteria would not qualify a lease as a capital lease?

A) The lease transfers ownership of the property to the lessee by the end of the lease term.
B) The lease contains an option to purchase the leased property at its fair market value.
C) The lease term is equal to or greater than 75% of the estimated economic life of the leased property.
D) The present value of the minimum lease payments equals or exceeds 90% of the fair value of the leased property.

Question 74

At the inception of a capital lease agreement for a piece of equipment used in governmental operations,

A) A liability is incurred and reported in the governmental fund's balance sheet.
B) A liability is incurred and reported in the government-wide financial statements.
C) An expenditure is recorded in the governmental fund.
D) Both B and C.

Question 75

A government signed a five-year capital lease on January 1, 2017 to obtain some equipment. The lease provided that the government would make a down payment of $20,000 and four $20,000 payments each year after that, beginning January 1, 2016. The government has a fiscal year ending December 31. Upon inception of the lease, the government, in its governmental fund accounting records would:

A) Debit expenditures for $20,000 and credit cash for $20,000.
B) Debit expenditures for $100,000, credit cash for $20,000, and credit accounts payable for $80,000.
C) Debit expenditures for the present value of the payments including the $20,000 down payment), credit cash for $20,000, and credit accounts payable for the difference between the $20,000 and the present value of the future payments.
D) Debit expenditures for the present value of the payments including the $20,000 down payment), credit cash for $20,000, and credit other financing sources for the difference between the $20,000 and the present value of the future payments.

Question 76

When accounting for defined benefit pensions, the net pension liability for employees of governmental activities is:

A) Reported in the government-wide statements.
B) Reported in the governmental fund-basis statements.
C) Both A and B.
D) Neither A nor B.

Question 77

Where is the net pension liability shown in a Comprehensive Annual Financial Report for employees of enterprise fund activities?

A) The enterprise fund Statement of Fund Net Position
B) The government-wide Statement of Net Position
C) Both A and B.
D) Neither A nor B.

Question 78

A government offering a defined benefit pension plan changes the plan terms with the result that pension benefit are increased. How would the resulting increase in the net pension liability be recognized in the financial statements in the year the plan is changed?

A) The increase in net pension liability would be expensed in the period the plan is changed.
B) The increase in net pension liability would be deferred and amortized over the remaining service life of the employees.
C) The increase in net pension liability would be deferred and amortized over five years.
D) The increase in net pension liability would be deferred and amortized over ten years.

Question 79

A special assessment tax is

A) Assessed against all property owners following a referendum in which voters approved the special project being constructed.
B) Assessed only against certain property owners who are deemed to benefit from the service or project being paid for by the proceeds of the special assessment levy.
C) A waiver of property taxes for businesses willing to locate within a government's jurisdiction.
D) None of the above

Question 80

When a government acquires general fixed assets under a capital lease agreement, the asset should be recorded in the General Fund's fund basis financial statements:

A) As a capital asset and lease obligation at the inception of the lease agreement at the lesser of the present value of the minimum lease payments or the fair market value of the property
B) as debt service expenditures when payments are made
C) As a capital asset and lease obligation at the inception of the lease agreement for the total lease payments
D) as an expense when payments are made