Question 1

In a governmental fund, expenditures for wages and salaries should be recognized in the period in which the employees earn them.

Accepted Answer

A) True 
 B)False

Question 2

Several years ago, Durham City issued $1 million in zero coupon bonds due and payable in 2013.The bonds were sold at an amount to yield investors 6% over the life of the bonds.During the current year, how much interest expenditures would Durham City recognize related to these bonds?

Accepted Answer

A) Difference between the present value of the bonds at the beginning of the period and th present value of the bonds at the end of the period. 
B) Face amounts of bonds times 6%. 
C) Book value of bonds times 6%. 
D) None.

Question 3

Other financing sources/uses would appear on which of the following statements?

Accepted Answer

A) Balance sheet. 
B) Statement of Revenues, Expenditures, and Changes in Fund Balance. 
C) Cash flow statement. 
D) None of the above.

Question 4

On July 1, Gilbert County bought computer equipment for use in the administrative offices of the County.The equipment has an estimated useful life of three years and salvage of $10,000.Gilbert County has a 6/30 fiscal year-end.Assuming that the County maintains its books and records in a manner that facilitates the preparation of government-wide financial statements, the $85,000 cost of this equipment would require which of the following entries?

Accepted Answer

A) Debit Expenditures $85,000; Credit Cash $85,000. 
B) Debit Equipment $85,000; Credit Cash $85,000. 
C) Debit Expenses $85,000; Credit Cash $85,000. 
D) No entry is required.

Question 5

As used in governmental accounting, expenditures are decreases in

Accepted Answer

A) Net Assets. 
B) Net Financial Resources. 
C) Net Cash. 
D) Net Economic Resources.

Question 6

Governmental fund liabilities are considered current only when they must be liquidated with expendable available financial resources-not, as in businesses and in the government-wide statements, when they must be paid within a year.

Accepted Answer

A) True 
 B)False

Question 7

Employees of the General Fund of Scott City earn ten days of vacation for each 12 months of employment.The City permits employees to carry the vacation days forward as long as they wish.During the current year employees earned $800,000 of vacation benefits, of which the City estimates that $500,000 will be taken in the next year and the balance will be carried forward.Assuming that the City maintains its books and records in a manner that facilitates the preparation of its fund financial statements, which of the following entries is the correct entry in the General Fund to record the vacation pay earned during the current period?

Accepted Answer

A) Debit Expenditures $800,000; Credit Vacation pay payable $800,000. 
B) Debit Expenditures $500,000; Credit Vacation pay payable $500,000. 
C) Debit Vacation expense $800,000; Credit Vacation pay payable $800,000. 
D) No entry required.

Question 8

Use the following information to Questions 
Lincoln City has a 6/30 fiscal year-end.The City has a policy of recognizing revenues/ expenditures when collected/paid or if expected to be collected/paid within 60 days of year-end.
The City has a sick leave benefit policy for its employees.The policy allows City employees one day of paid sick leave per month and permits them to accumulate sick leave they do not take.Sick leave vests at the completion of the fifth year of employment, and unused sick leave is paid in cash upon termination or retirement.During the fiscal year ended 6/30/11, City employees who are paid from the General Fund, earned $2.8 million of sick leave, of which $1.0 was taken.Of the balance, the City estimates $.2 million will be taken in the next sixty days, $.6 million will be taken in the next five years, $.4 million will vest, and $.6 million will never be taken.
-The amount of sick pay liability that should appear on the government-wide financial statements at 6/30/11 is

Accepted Answer

A) $.1.2 million. 
B) $.4 million. 
C) $.2 million. 
D) No liability should appear.

Question 9

Campbell County uses the consumption method to record all inventories and prepayments.The County has a 9/30 fiscal year-end.On April 1, 2011, the County purchased a two-year insurance policy at a total cost of $400,000, paying for the policy out of the General Fund.In the fund financial statements, the amount of insurance expenditures for the fiscal year ended 9/30/11 would be

Accepted Answer

A) $400,000. 
B) $300,000. 
C) $200,000. 
D) $100,000.

Question 10

Which of the following funds would use the accrual basis of accounting in preparing its fund financial statements?

Accepted Answer

A) City General Fund. 
B) City Hall Capital Project Fund. 
C) City Motor Pool Internal Service Fund. 
D) None of the above.

Question 11

In budgeting for governmental funds, governments appropriate the resources for general capital assets in the periods when they are to be purchased, not in the periods in which the assets will be used.

Accepted Answer

A) True 
 B)False

Question 12

Star City leased a bulldozer for use in activities accounted for in the General Fund.The City paid $40,000 and agreed to pay $40,000 per year for 3 years.The bulldozer has a useful life of six years.The lease qualified as a capital lease.Assuming that the city maintains is books and records in a manner that facilitates the preparation of the fund financial statements, the appropriate entry in the General Fund at the date of acquisition would be

Accepted Answer

A) Debit Expenditures $160,000; Credit Cash $40,000 and Other financing sources $120,000. 
B) Debit Expenditures $40,000 and Prepaid lease $120,000; Credit Cash $40,000 and Other financing sources $120,000. 
C) Debit Equipment $160,000; Credit Cash $40,000 and Other financing sources $120,000. 
D) Debit Expenditures $160,000; Credit Cash $40,000 and Lease payable $120,000.

Question 13

The amount of pension expenditures that should be recognized in the government-wide financial statements during the current year is

Accepted Answer

A) The amount paid. 
B) The amount paid plus the amount that will be paid with available expendable financial resources. 
C) The amount paid so long as it does not exceed the actuarially determined amount. 
D) The actuarially determined amount.

Question 14

Harris County transferred $300,000 from the General Fund to the Motor Pool Internal Service Fund to pay for the use of automobiles during the first six months of FY 2011.The appropriate entry in the General Fund to record this transfer of cash would be

Accepted Answer

A) Debit Expenditures $300,000; Credit Cash $300,000. 
B) Debit Other financing uses-transfer Out $300,000; Credit Cash $300,000. 
C) Debit Fund balance-transfer out $300,000; Credit Cash $300,000. 
D) Debit Other financing sources-transfer in $300,000; Credit Cash $300,000.

Question 15

Per GASB standards, governments do not report general capital assets or depreciation in governmental funds.

Accepted Answer

A) True 
 B)False

Question 16

Employees of the City of Orleans earn ten days paid leave for each 12 months of employment.The City has a policy that employees must take their vacation days during the year following the year in which it is earned.If they do not take vacation in the allotted period, they forfeit the vacation pay benefit.Traditionally, employees have taken 80% of the vacation days earned.During the current year, employees of the City of Orleans earned $600,000 in vacation pay.Assuming the city maintains its books and records in a manner to facilitate the preparation of its government-wide financial statements, which of the following entries should be made to record the vacation pay earned during the current period?

Accepted Answer

A) Debit Expenditures $600,000; Credit Vacation payable $600,000. 
B) Debit Expenses $600,000; Credit Vacation payable $600,000. 
C) Debit Expenses $480,000; Credit Vacation pay payable $480,000. 
D) No entry required.

Question 17

Expenditures are generally recognized when resources are acquired; expenses when resources are consumed.

Accepted Answer

A) True 
 B)False

Question 18

This year, Port City was sued for injuries sustained when a citizen slipped and broke her hip on the icy City Hall steps.The City attorney estimates the City will be held liable by the courts and a judgment of $300,000 will result.Because of the nature of the case it will likely be four years before the City makes any payment related to the accident.The present value of the likely future payment is $251,000.In the General Fund, at the end of the current fiscal year, Port City should recognize a liability of

Accepted Answer

A) $300,000. 
B) $251,000. 
C) $0. 
D) $75,000.

Question 19

Which of the following items is NOT an example of an item that would be reported as Other Financing Sources/Uses in the General Fund?

Accepted Answer

A) $10 million received from the issuance of bonds. 
B) $7,000 received from the sale of a used bulldozer. 
C) $200,000 capital lease obligation for a new bulldozer. 
D) $100,000 paid to a Motor Pool Internal Service Fund for automobile usage during the period.

Question 20

The City of Holbrook transferred $100,000 from the General Fund to the Debt Service Fund for payment of interest.The appropriate entry in the General Fund to record this transfer would be

Accepted Answer

A) Debit Expenditures $100,000; Credit Cash $100,000. 
B) Debit Other financing uses-transfer out $100,000; Credit Cash $100,000. 
C) Debit Fund balance-transfer out $100,000; Credit Cash $100,000. 
D) Debit Other financing sources-transfer in $100,000; Credit Cash $100,000.

Exam 5: Recognizing Expenditures in Governmental Funds

In a governmental fund, expenditures for wages and salaries should be recognized in the period in which the employees earn them.

Several years ago, Durham City issued $1 million in zero coupon bonds due and payable in 2013.The bonds were sold at an amount to yield investors 6% over the life of the bonds.During the current year, how much interest expenditures would Durham City recognize related to these bonds?

Other financing sources/uses would appear on which of the following statements?

As used in governmental accounting, expenditures are decreases in

Governmental fund liabilities are considered current only when they must be liquidated with expendable available financial resources-not, as in businesses and in the government-wide statements, when they must be paid within a year.

Which of the following funds would use the accrual basis of accounting in preparing its fund financial statements?

In budgeting for governmental funds, governments appropriate the resources for general capital assets in the periods when they are to be purchased, not in the periods in which the assets will be used.

The amount of pension expenditures that should be recognized in the government-wide financial statements during the current year is

Harris County transferred $300,000 from the General Fund to the Motor Pool Internal Service Fund to pay for the use of automobiles during the first six months of FY 2011.The appropriate entry in the General Fund to record this transfer of cash would be

Per GASB standards, governments do not report general capital assets or depreciation in governmental funds.

Expenditures are generally recognized when resources are acquired; expenses when resources are consumed.

Which of the following items is NOT an example of an item that would be reported as Other Financing Sources/Uses in the General Fund?

The City of Holbrook transferred $100,000 from the General Fund to the Debt Service Fund for payment of interest.The appropriate entry in the General Fund to record this transfer would be