Question 1

If a governmental fund issues debt to finance a capital acquisition, how should the proceeds of the debt be recorded?

Accepted Answer

A)  Long-term liability. 
B)  Revenue. 
C)  Other financing source. 
D)  Not reported by the governmental fund; only reported at the government-wide level.

Question 2

The General Fund has transferred cash to the appropriate fund for eventual retirement of term bonds maturing in 10 years. Which funds would record this transaction? 
A- 
B-
C- 
D-

Accepted Answer

A)  Choice A. 
B)  Choice B. 
C)  Choice C. 
D)  Choice D.

Question 3

Which of the following would be considered an internal exchange transaction?

Accepted Answer

A)  The General Fund transfers $200,000 to establish a Central Supplies Fund; this amount will not be repaid. 
B)  The General Fund transfers $125,000 to the Debt Service Fund for payment of currently due bond interest payments. 
C)  The General Fund transfers $9,000 to the Central Supplies Fund for supplies it received from Central Supplies. 
D)  The Capital Projects Fund completes a library building project and transfers the remaining cash to the Debt Service Fund.

Question 4

Under GASB standards, Revenues must be credited for the total amount of the property tax levy.

Accepted Answer

A) True 
 B)False

Question 5

During January 2020 General Fund supplies ordered in the previous fiscal year and encumbered at an estimated amount of $2,000 were received at an actual cost of $2,200. The entry to record this transaction will require a debit to:

Accepted Answer

A)  Expenditures-2020 in the amount of $2,200. 
B)  Expenditures-2019 in the amount of $200. 
C)  Expenditures-2020 in the amount of $200. 
D)  Expenditures-2019 in the amount of $2,200.

Question 6

Vacation City was awarded a $500,000 federal operating grant for use in year 2. On December 1 of year 1, half of the grant money was received by the City. The journal entry to record receipt of the grant funds will include:

Accepted Answer

A)  A credit to Revenues in the amount of $250,000. 
B)  A credit to Deferred Inflows of Resources-Grant Proceeds in the amount of $250,000. 
C)  A debit to Grant Expenditures in the amount of $250,000. 
D)  No journal entry will be made until expenditures are made in Year 2.

Question 7

The government-wide statement of net position is prepared using the same measurement focus and basis of accounting as the General Fund balance sheet.

Accepted Answer

A) True 
 B)False

Question 8

The earnings on the assets of a permanent fund are to be used to support the city's library (special revenue fund). How would the earnings be recorded?

Accepted Answer

A)  Revenues by the permanent fund. 
B)  Revenues by the library. 
C)  Revenues by both the permanent fund and the library. 
D)  Other financing source by the permanent fund.

Question 9

Beach City received a gift of corporate stock valued at $1,200,000 on the date of the gift. The donor specified that the principal amount of the gift be maintained in perpetuity, but that earnings can be used to acquire works of art to improve the appearance of public buildings. All changes in fair value are to increase or decrease the principal amount of the gift. Assuming that Beach City uses a permanent fund to account for the endowment and a special revenue fund to account for the earmarked earnings from the endowment, explain the accounting process for (1) receipt of the original gift, (2) receipt of quarterly dividends, (3) notification that fair value of the original stock increased by $3,000 during the year, and (4) the effect on fund balances of closing temporary accounts at year-end. (Note: Ignore the effects of the transactions at the government-wide level).

Accepted Answer

The answer of Beach City received a gift of corporate...

Question 10

Year-end interfund receivable or payable balances will appear in the line item internal balances within their respective columns on the government-wide statement of net position.

Accepted Answer

A) True 
 B)False

Question 11

Supplies recorded in the General Fund under the purchases method will initially include a

Accepted Answer

A)  Debit to Inventory of Supplies. 
B)  Credit to Fund Balance-Restricted-Inventory of Supplies. 
C)  Debit to Expenditures. 
D)  Debit to Fund Balance-Restricted-Inventory of Supplies.

Question 12

Revenues that are legally restricted for expenditure on specified operating purposes should be accounted for in special revenue funds, including

Accepted Answer

A)  Endowment where the investment earnings are to be used for public purposes. 
B)  Pension trust fund revenues. 
C)  Accumulation of resources for payment of general long-term debt principal and interest. 
D)  Gasoline taxes to finance road repairs.

Question 13

Grant funds received before time requirements are met, but after all other eligibility requirements have been met, should be reported as an asset and a deferred inflow of resources by the recipient.

Accepted Answer

A) True 
 B)False

Question 14

Why might actual revenues and expenditures reported on the schedule of revenues, expenditures, and changes in fund balances-budget and actual differ from those reported on the GAAP-basis statement of revenues, expenditures, and changes in fund balances?

Accepted Answer

The answer of Why might actual revenues and expenditures reported...

Question 15

Recording the annual budget is optional in the General Fund.

Accepted Answer

A) True 
 B)False

Question 16

All revenues of the City of Capri are accounted for on the modified accrual basis. Below is shown a list of Capri's General Fund transactions of a revenue nature. State which ones should be recognized by the General Fund as a revenue in the year of occurrence. If any item is not a current revenue, state the proper treatment for that item.
1) Receipt of money from issue of tax anticipation notes.
2) Collection of taxes that had been written off in prior year.
3) Collection of current-year property taxes.
4) Collection of prior years' delinquent property taxes.
5) Receipt of money in prepayment of a property owner's next-year taxes.
6) Collection of accounts receivable for charges for services. Amount is included in deferred inflows of resources.

Accepted Answer

The answer of All revenues of the City of Capri...

Question 17

Vehicles used by the police department should be reported in the governmental fund financial statements.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following will require a credit to Fund Balance-Unassigned of a governmental fund when operating statement accounts are closed at the end of the year, assuming there are no other financing sources or uses?

Accepted Answer

A)  Revenues are less than expenditures. 
B)  Revenues are more than expenditures. 
C)  Revenues are more than expenditures and encumbrances. 
D)  Revenues are less than expenditures and encumbrances.

Question 19

A payment made by the General Fund to a debt service fund would not be recorded in the governmental activities journal.

Accepted Answer

A) True 
 B)False

Question 20

If the actual liability for goods received in the current year differs from the estimated liability recorded when the goods were ordered in the prior year, the Encumbrances account should be credited in the amount of the estimated liability.

Accepted Answer

A) True 
 B)False

Exam 4: Accounting for Governmental Operating Activities–Illustrative Transactions and Financial Statements

If a governmental fund issues debt to finance a capital acquisition, how should the proceeds of the debt be recorded?

The General Fund has transferred cash to the appropriate fund for eventual retirement of term bonds maturing in 10 years. Which funds would record this transaction? A- B- C- D-

Which of the following would be considered an internal exchange transaction?

Under GASB standards, Revenues must be credited for the total amount of the property tax levy.

During January 2020 General Fund supplies ordered in the previous fiscal year and encumbered at an estimated amount of $2,000 were received at an actual cost of $2,200. The entry to record this transaction will require a debit to:

Vacation City was awarded a $500,000 federal operating grant for use in year 2. On December 1 of year 1, half of the grant money was received by the City. The journal entry to record receipt of the grant funds will include:

The government-wide statement of net position is prepared using the same measurement focus and basis of accounting as the General Fund balance sheet.

The earnings on the assets of a permanent fund are to be used to support the city's library (special revenue fund) . How would the earnings be recorded?

Year-end interfund receivable or payable balances will appear in the line item internal balances within their respective columns on the government-wide statement of net position.

Supplies recorded in the General Fund under the purchases method will initially include a

Revenues that are legally restricted for expenditure on specified operating purposes should be accounted for in special revenue funds, including

Grant funds received before time requirements are met, but after all other eligibility requirements have been met, should be reported as an asset and a deferred inflow of resources by the recipient.

Why might actual revenues and expenditures reported on the schedule of revenues, expenditures, and changes in fund balances-budget and actual differ from those reported on the GAAP-basis statement of revenues, expenditures, and changes in fund balances?

Recording the annual budget is optional in the General Fund.

Vehicles used by the police department should be reported in the governmental fund financial statements.

Which of the following will require a credit to Fund Balance-Unassigned of a governmental fund when operating statement accounts are closed at the end of the year, assuming there are no other financing sources or uses?

A payment made by the General Fund to a debt service fund would not be recorded in the governmental activities journal.

If the actual liability for goods received in the current year differs from the estimated liability recorded when the goods were ordered in the prior year, the Encumbrances account should be credited in the amount of the estimated liability.