Question 1

The general fund of Richmond was billed $22,000 on August 15, 20X8, for using the services of one of its internal service funds (ISF). What accounts should be debited and credited, respectively, in the general fund on August 15, 20X8, to record this transaction?

Accepted Answer

A)  Expenditures and Transfer Out to ISF 
B)  Expenditures and Due to ISF 
C)  Encumbrances and Due to ISF 
D)  Encumbrances and Transfer Out to ISF

Question 2

What amount should be reported as expenditures for the current fiscal year when accounting for inventories of supplies under the purchase method and under the consumption method?

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 3

At the end of the fiscal year, uncollected property taxes in the general fund should be:

Accepted Answer

A)  reclassified from current to delinquent. 
B)  written off as uncollectible. 
C)  charged against unassigned fund balance. 
D)  reclassified from current to noncurrent.

Question 4

Which of the following describes how a governmental fund (e.g. general fund) accounts for a capital lease:

Accepted Answer

A)  noncurrent liability 
B)  bond accounting 
C)  an asset and a lease liability 
D)  none of these identifies the appropriate way to account for a capital lease.

Question 5

The general fund of Gillette levied property taxes of $400,000 on November 1, 20X8. However, the property taxes are not collectible until May and August of 20X9. Assume Gillette reports on the calendar year. On Gillette's general fund balance sheet at December 31, 20X8, the property taxes levied on November 1 should:

Accepted Answer

A)  be reported as an asset and as a decrease in unassigned fund balance. 
B)  be reported as an asset and as an increase in unassigned fund balance. 
C)  be reported as an asset and as a reservation of fund balance. 
D)  be reported as an asset and as a deferred revenue.

Question 6

Which of the following funds should use the accrual basis of accounting?

Accepted Answer

A)  Enterprise and private-purpose trust funds. 
B)  Permanent funds and internal service funds. 
C)  Debt service and agency funds. 
D)  Special revenue and capital projects funds.

Question 7

Works of art and historical treasures purchased by the general fund should be reported as:
I. an expenditure in the general fund.
II. assets in the government-wide financial statements.

Accepted Answer

A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II

Question 8

Which of the following funds are classified as proprietary funds?

Accepted Answer

A)  Agency and special revenue funds. 
B)  Enterprise and internal service funds. 
C)  Debt service and capital projects funds. 
D)  Agency and pension trust funds.

Question 9

Which of the financial statements described below is prepared by the general fund of a state or local government?

Accepted Answer

A)  A statement of cash flows. 
B)  An income statement. 
C)  A statement of revenues, expenses, and changes in retained earnings. 
D)  A statement of revenues, expenditures, and changes in fund balance.

Question 10

Note: This is a Kaplan CPA Review Question
When the budget of a governmental unit, for which the estimated revenues exceed the appropriations, is adopted and recorded in the general ledger at the beginning of the year, the budgetary fund balance account is

Accepted Answer

A)  Credited at the beginning of the year and debited at the end of the year. 
B)  Credited at the beginning of the year and no entry made at the end of the year. 
C)  Debited at the beginning of the year and no entry made at the end of the year. 
D)  Debited at the beginning of the year and credited at the end of the year.

Question 11

The general fund of Wold Township ordered office furniture for the mayor's office on August 1, 20X8. The office furniture was estimated to cost $12,000. The office furniture was received on September 1, 20X8, with the actual cost being $11,800. Which of the following accounts decreased on September 1, 20X8?

Accepted Answer

A)  Encumbrances only. 
B)  Expenditures only. 
C)  Encumbrances and Budgetary Fund Balance-Assigned for Encumbrances. 
D)  Expenditures and Budgetary Fund Balance-Assigned for Encumbrances.

Question 12

GASB 31 "Accounting for Financial Reporting for Certain Investments and for External Reporting Investment Pools," establishes a general rule that government entities value investments in option contracts, open-ended mutual funds, and debt securities for balance sheet presentation at:

Accepted Answer

A)  lower of cost or market. 
B)  fair value. 
C)  cost. 
D)  amortized cost.

Question 13

Which organization has the authority to establish generally accepted accounting principles for state and local government entities?

Accepted Answer

A)  The National Council on Governmental Accounting 
B)  The Governmental Accounting Standards Board 
C)  The Financial Accounting Standards Board 
D)  The Municipal Officers Finance Organization

Question 14

Briefly discuss the various types of governmental funds and proprietary funds.

Accepted Answer

The answer of Briefly discuss the various types of governmental...

Question 15

Which of the following observations concerning interfund transfers is true?

Accepted Answer

A)  They are expected to be repaid. 
B)  They are classified as fund revenues or expenditures. 
C)  The receiving fund recognizes these transfers as revenue. 
D)  These transfers are classified under "Other Financing Sources or Uses."

Question 16

Which accounts described below would have non-zero balances after the accounts are closed in the general fund of a state or local government?
I. Estimated Revenues Control.
II. Appropriations Control.
III. Budgetary Fund Balance Unreserved.
IV. Deferred Revenue.
V. Due to Internal Service Fund.
VI. Fund Balance-Reserved for Inventories.

Accepted Answer

A)  I, II, III. 
B)  I, II, IV. 
C)  IV, V, VI. 
D)  III, IV, V.

Question 17

All of the following funds have a financial resources measurement focus with the exception of which fund?

Accepted Answer

A)  debt service fund 
B)  special revenue fund 
C)  capital projects fund 
D)  private-purpose trust fund

Question 18

The general fund of the City of Atlanta received a check for $10,000 from an Atlanta resident on July 1, 20X8. Of the amount received, $4,800 represented full payment of property taxes for 20X8, and the remaining $5,200 represented an advance payment for property taxes of 20X9. On July 1, 20X8, the general fund should record the receipt by debiting Cash for $10,000 and by crediting

Accepted Answer

A)  Revenue-Property Tax for $10,000. 
B)  Property Taxes Receivable-Current for $4,800 and Deferred Revenue for $5,200. 
C)  Revenue-Property Tax for $4,800 and Deferred Revenue for $5,200. 
D)  Property Taxes Receivable-Current for $4,800 and Revenue- Property Tax for $5,200.

Question 19

Under the modified accrual basis of accounting for the general fund, expenditures should be recognized in the period in which the related liability is:
I. paid.
II. incurred.

Accepted Answer

A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II

Question 20

The City of Ames uses the consumption method to report its inventory of supplies on its general fund balance sheet. What account is debited in the general fund when Ames acquires supplies?

Accepted Answer

A)  Expenditures 
B)  Inventory of Supplies 
C)  Supplies Expense 
D)  Fund Balance-Nonspendable

Exam 17: Governmental Entities: Introduction and General Fund Accounting

The general fund of Richmond was billed $22,000 on August 15, 20X8, for using the services of one of its internal service funds (ISF) . What accounts should be debited and credited, respectively, in the general fund on August 15, 20X8, to record this transaction?