Question 1

Which of the following financial statements would not be reported anywhere in the fund financial statements presented as part of the basic financial statements?

Accepted Answer

A)  Statement of net position. 
B)  Statement of cash flows. 
C)  Balance sheet. 
D)  Statement of Changes in Assets and Liabilities.

Question 2

Which of the following scenarios does not describe governing boards of a primary government and a potential component unit that are substantially the same?

Accepted Answer

A)  A city's governing board members are the ex-officio governing board members of the Library District. 
B)  A county has a seven-member board. Five of these board members serve on an eight-member authority board. 
C)  A county has a seven-member board. Three of these board members serve on a five-member authority board. 
D)  There are seven members serving on the city council. Five of these council members are the entire governing board of a historical district board.

Question 3

If a state has three discretely presented component units, two of which are "governmental" in nature and one of which is "business-type" in nature, what is the minimum number of discretely presented component unit columns that can be reported in the government-wide statements?

Accepted Answer

A)  0. 
B)  1. 
C)  2. 
D)  3.

Question 4

The independent auditor's report is normally included within

Accepted Answer

A)  The introductory section of a CAFR. 
B)  Management's discussion and analysis. 
C)  The financial section of a CAFR. 
D)  The statistical section of a CAFR.

Question 5

The governing board of the City of Wheaton is also the governing board of Mosquito Abatement District, a business-type activity. A benefit or burden relationship exists between the city and the district. Which of the following statements regarding the financial reporting options is false?

Accepted Answer

A)  The District is a blended component unit and is reported in both the fund financial statements and the government-wide financial statements. 
B)  The District is not subject to major fund reporting criteria. 
C)  The District may be reported in a separate column on the Proprietary Fund financial statements, but would most likely be reported within the business-type activities column in the government-wide financial statements. 
D)  The District is not to be reported as a discretely presented component unit.

Question 6

In discrete presentation, component unit

Accepted Answer

A)  Funds are reported as the same type of funds of the primary government. 
B)  Funds are treated as Special Revenue Funds of the primary government since the resources can only be used for the component unit's programs. 
C)  Data is presented in the government-wide financial statements separate from the primary government data. 
D)  Basic financial statements must always be included in the primary government's comprehensive annual financial report.

Question 7

How should information about each major discretely presented component unit be presented in the financial statements?

Accepted Answer

A)  Report only as condensed financial statements reported in the notes to the financial statements. 
B)  Report only in single column in the government-wide statements. 
C)  Report only in combining financial statements which are included in the primary government's basic financial statements after the fund financial statements. 
D)  Report only in a single column in the government-wide statements with condensed financial statements in the notes.

Question 8

All of the following statistical tables should include ten individual years of trend information except

Accepted Answer

A)  Demographic and economic indicators. 
B)  Information about net position. 
C)  Information about government employees. 
D)  Information about principal revenue payers.

Question 9

If a primary government reports a discretely presented component unit, then the primary government must

Accepted Answer

A)  Prepare two separate Management's Discussion and Analyses. 
B)  Prepare two sets of note disclosures. 
C)  Include the financial information of the discretely presented component unit in the government-wide financial statements. 
D)  Include information related to the discretely presented component unit within the statistical section of the CAFR.

Question 10

Blended and discretely presented component units may issue separate financial statements. Which of the following statements is false related to this provision in GAAP?

Accepted Answer

A)  If a blended or discretely presented component unit issues separate financial statements, they are not required to be reported as part of the primary government's reporting entity. 
B)  GAAP require component units to report any component units they may have as part of their separately issued financial statements. 
C)  GAAP do not prevent component units from separately issuing their own financial statements. 
D)  The primary government must include any component units in their external financial reporting to comply with GAAP.

Question 11

Which fund types report the results of operations using a Statement of Revenues, Expenditures, and Changes in Fund Balances?

Accepted Answer

A)  General Fund, Special Revenue Funds, Debt Service Funds, Capital Projects Funds, Enterprise Funds, and Internal Service Funds. 
B)  General Fund, Special Revenue Funds, Debt Service Funds, and Enterprise Funds. 
C)  General Fund, Special Revenue Funds, Debt Service Funds, Capital Projects Funds. 
D)  General Fund, Special Revenue Funds, Debt Service Funds, Capital Projects Funds, Permanent Funds.

Question 12

A city has three related entities. Its finance and accounting staff is trying to determine which, if any, of those entities must be included in the city reporting entity. Also, for the entities that are included the staff must determine whether they are to be blended or discretely presented. Explain how each of the related entities should be treated and why.
Situations:
1. The first entity is the city school district. The district has a separately elected board and is legally separate from the city. The school board can establish its own budget except that its property tax levy must be approved by the city council. The city does not guarantee the debt of the schools or have any other authority over the school district.
2. The second entity is the municipal gas utility. The city appoints the seven members of the utility governing board and can remove them at will. The city must approve the budget and the rate structure of the utility. The utility cannot issue bonded debt without the city council's prior approval. The city is entitled to, and regularly receives, the operating surpluses of the utility.
3. The third entity is the City Library Commission. According to the commission's charter, the commission board consists of the city mayor, the city finance director, and the superintendent of the city schools, and two other members of city council besides the mayor. City council consists of the mayor and four other council members. The library commission budget must be approved by the city council, and all long-term debt issued by the Library Commission is to be repaid by the city.

Accepted Answer

The answer of A city has three related entities. Its...

Question 13

Britt County has seven discretely presented component units. Three of the component units are considered "governmental" in nature and the remaining four are considered "business-type" in nature. How many columns for the discretely presented component units would be reported on the General Fund balance sheet?

Accepted Answer

A)  0. 
B)  1. 
C)  2. 
D)  7.

Question 14

Whether or not to declare a fund as being major is not optional for

Accepted Answer

A)  The General Fund. 
B)  A Capital Projects Fund. 
C)  Debt Service Fund. 
D)  Enterprise Fund.

Question 15

Which of the following is not part of the financial section of a comprehensive annual financial report?

Accepted Answer

A)  Transmittal letter. 
B)  Management's discussion and analysis. 
C)  Required supplementary information. 
D)  Notes to the financial statements.

Question 16

Assume that a government has three nonmajor Enterprise Funds. Which of the following statements regarding the reporting requirements in a CAFR is false?

Accepted Answer

A)  Nonmajor funds are not reported on an Enterprise Fund statement of cash flows. 
B)  Even if the funds are nonmajor, the government may choose to declare them as major funds and report each in a separate column on the appropriate fund statements. 
C)  The CAFR must include combining financial statements for any nonmajor fund columns that include more than one fund. 
D)  Nonmajor funds are reported in the aggregate on all proprietary fund financial statements.

Question 17

The City of Newport appointed the original governing board of the Newport Historical Association, at which point the board became self-sustaining. The city has historically but voluntarily provided funding for the Association for the past several years. The city of Newport should

Accepted Answer

A)  Not report the Association as a component unit. 
B)  Report the Association as a blended component unit. 
C)  Report the Association as discretely presented component unit. 
D)  Disclose that the Association is a joint venture.

Question 18

A "dual opinion" audit is one where

Accepted Answer

A)  The auditors render an opinion on the primary government and any component units. 
B)  The auditors render an opinion on both the basic financial statements and the combining and individual fund financial statements. 
C)  The auditors render an opinion on both the financial and statistical sections of the CAFR. 
D)  The auditors render an opinion on the primary government, component units, and the CAFR as a whole.

Question 19

In the statistical section, the required demographic and economic information includes all of the following except

Accepted Answer

A)  Unemployment rate. 
B)  Total personal income. 
C)  Debt per capita. 
D)  Population.

Question 20

The Mount Pilot Airport Authority is governed by a seven-member board. Four of the board members are appointed by the town of Mount Pilot and the remaining three are appointed by the governing board of Griffith County. Neither the town nor the county share in any profits, nor are required to fund any deficits, of the Authority. The town, however, does approve the Authority's proposed budget. The county may make budgetary recommendations to the Authority, but they are not required to approve the proposed budget. The Authority should be reported as

Accepted Answer

A)  A jointly governed organization by both the town and the county. 
B)  A joint venture by both the town and the county. 
C)  Discrete component units of both the town and the county. 
D)  A discretely presented component unit of the town.

Exam 15: Financial Reportingthe Comprehensive Annual Financial Report and the Financial Reporting Entity