Question 1

Which of the following is not a category found in the statistical section of the comprehensive annual financial report (CAFR)?

Accepted Answer

A)   Expenditure trend information.
B)   Revenue capacity information.
C)   Demographic and economic information.
D)   Debt capacity information. A

Question 2

The accounting system used by a state or local government must make it possible to prepare financial statements as required by the Financial Accounting Standards Board.

Accepted Answer

A) True 
 B)False  False

Question 3

An example of information found in the statistical section of the comprehensive annual financial report (CAFR) is demographic information such as unemployment rates, and personal income of citizens.

Accepted Answer

A) True 
 B)False  True

Question 4

Under GASB standards, only proprietary funds prepare a statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following circumstances would indicate that a potential component unit (PCU) should be included as part of the government financial reporting entity?

Accepted Answer

A)   The primary government is entitled to the resources of the PCU.
B)   Officials of the primary government appoint a majority of the members of the governing board of the PCU.
C)   The primary government significantly influences the programs and activities of the PCU.
D)   Officials of the primary government appoint a majority of the members of the PCU's governing board and the primary government is able to impose its will on the PCU.

Question 6

For each of the following definitions, indicate the key term from the list that best matches by placing the appropriate terms.
A. Component unit
B. Financial reporting entity
C. Financial accountability
D. Joint venture
E. Other stand-alone government
F. Primary government
________ 1. A separate government or agency that is combined for purposes of reporting on the whole entity
________ 2. The responsibility that exists when a primary government appoints a voting majority of an organization's governing board and it is able to (a) impose its will on the organization or (b) there is a potential for the organization to provide financial benefits or impose a financial burden on the primary government
________ 3. A state government, general purpose local government, or special purpose government that is independent of other state or local governments
________ 4. A legally separate governmental organization that does not have a separately elected government body
________ 5. Primary government and all related component units

Accepted Answer

The answer of For each of the following definitions, indicate...

Question 7

Describe some items requiring adjustments when modified accrual basis accounting information must be converted to accrual basis accounting in preparation of government-wide statements.

Accepted Answer

The answer of Describe some items requiring adjustments when modified...

Question 8

The following transactions relate to the City of Middleton, which has a fiscal year end of December 31. The city adopts budgets for the General Fund and the debt service fund. NOTE: for simplicity, and contrary to GASB standards, assume straight-line amortization for this problem.
1. The City of Middleton sells a $2,000,000, 3%, 16-year general obligation bond issue on January 2 at par. The bond pays interest semiannually on July 1 and January 2, with the first principal payment scheduled for next year on January 2. A city hall annex must be constructed with the bond proceeds. The bond premium must be used to pay interest on the debt.
2. Budgets are adjusted to account for the sale of the bond. The debt service fund budget should be adjusted to accommodate the new debt issue. If the debt service fund does not have sufficient resources to pay expenditures, the needed funds will be provided by the General Fund.
3. On February 1, $1,000,000 of the cash from the sale of the bonds is invested for one year at a rate of 1.26%. Earnings on the investment are available for construction of the city hall annex.
4. July 1 the first interest payment is due.
5. December 31 adjusting entries are prepared.
Required:
For the five related transactions provided, prepare all necessary journal entries for the affected funds and at the governmental activities level. Clearly indicate the fund journal or the government-wide journal in which the entry is being recorded. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Accepted Answer

The answer of The following transactions relate to the City...

Question 9

Some governments provide to their citizens highly condensed financial information, budget summaries, and narrative descriptions. This report is called a(an)

Accepted Answer

A)   Comprehensive annual financial report.
B)   Basic financial statements.
C)   Required supplementary information.
D)   Popular report.

Question 10

Which of the following statements concerning interfund transfers is True?

Accepted Answer

A)   Interfund transfers are reported in the statement of revenues, expenditures, and changes in fund balance when transfers occur among governmental funds.
B)   Interfund transfers are reported in the statement of activities when transfers occur among governmental funds.
C)   Interfund transfers are reported in the statement of revenues, expenditures, and changes in fund balance and the statement of activities when transfers occur among governmental funds.
D)   Interfund transfers are reported as internal balances on the statement of net position when activity occurs among governmental activities and business-type activities.

Question 11

A financial reporting entity is defined as a primary government, as well as all other organizations that have an operational relationship with the primary government.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following are government-wide financial statements required by GASB standards?

Accepted Answer

A)   Statement of net position and statement of cash flows.
B)   Statement of net position, statement of activities, and statement of cash flows.
C)   Statement of net position and statement of activities.
D)   Statement of activities and statement of cash flows.

Question 13

Explain why special purpose frameworks (also known as other comprehensive bases of accounting) may be used by a state or local government instead of GASB standards, which are generally accepted accounting principles (GAAP).

Accepted Answer

The answer of Explain why special purpose frameworks (also known...

Question 14

Which of the following is a required program revenue category in the government-wide statement of activities?

Accepted Answer

A)   Special assessments.
B)   Operating grants and contributions.
C)   Sales taxes.
D)   Transfers.

Question 15

"Interim financial reports are needed for state and local governments even though external users of financial reports have no need to assess monthly or quarterly performance of the government." Do you agree? Why or why not?

Accepted Answer

The answer of "Interim financial reports are needed for state...

Question 16

The comprehensive annual financial report (CAFR) of a government should contain a statement of revenues, expenses, and changes in net position for:

Accepted Answer

A)   Both proprietary and governmental funds.
B)   Governmental but not proprietary funds.
C)   Proprietary but not governmental funds.
D)   Both proprietary and fiduciary funds.

Question 17

One of the required reconciliations in converting governmental fund financial statements to governmental activities statements at the government-wide level is an adjustment for internal service funds' assets, liabilities, operating income (loss), and transfers.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is one of the three sections of a comprehensive annual financial report?

Accepted Answer

A)   Statistical section.
B)   Single audit section.
C)   Supplementary section.
D)   Investment section.

Question 19

Where should infrastructure assets and long-term liabilities issued to finance infrastructure be reported?

Accepted Answer

A)   Letter of transmittal.
B)   Fund financial statements.
C)   Management's discussion and analysis.
D)   Government-wide financial statements.

Question 20

Describe the alternative processes for capturing the financial accounting information required for government-wide financial statements.

Accepted Answer

The answer of Describe the alternative processes for capturing the...

Exam 9: Financial Reporting of State and Local Governments

Which of the following is not a category found in the statistical section of the comprehensive annual financial report (CAFR) ?

The accounting system used by a state or local government must make it possible to prepare financial statements as required by the Financial Accounting Standards Board.

An example of information found in the statistical section of the comprehensive annual financial report (CAFR) is demographic information such as unemployment rates, and personal income of citizens.

Under GASB standards, only proprietary funds prepare a statement of cash flows.

Which of the following circumstances would indicate that a potential component unit (PCU) should be included as part of the government financial reporting entity?

Describe some items requiring adjustments when modified accrual basis accounting information must be converted to accrual basis accounting in preparation of government-wide statements.

Some governments provide to their citizens highly condensed financial information, budget summaries, and narrative descriptions. This report is called a(an)

Which of the following statements concerning interfund transfers is True?

A financial reporting entity is defined as a primary government, as well as all other organizations that have an operational relationship with the primary government.

Which of the following are government-wide financial statements required by GASB standards?

Explain why special purpose frameworks (also known as other comprehensive bases of accounting) may be used by a state or local government instead of GASB standards, which are generally accepted accounting principles (GAAP).

Which of the following is a required program revenue category in the government-wide statement of activities?

"Interim financial reports are needed for state and local governments even though external users of financial reports have no need to assess monthly or quarterly performance of the government." Do you agree? Why or why not?

The comprehensive annual financial report (CAFR) of a government should contain a statement of revenues, expenses, and changes in net position for:

One of the required reconciliations in converting governmental fund financial statements to governmental activities statements at the government-wide level is an adjustment for internal service funds' assets, liabilities, operating income (loss), and transfers.

Which of the following is one of the three sections of a comprehensive annual financial report?

Where should infrastructure assets and long-term liabilities issued to finance infrastructure be reported?

Describe the alternative processes for capturing the financial accounting information required for government-wide financial statements.