Question 1

Which of the following statements is incorrect?

Accepted Answer

A)  Unless use of an agency fund is mandated by law, by GASB standards, or by decision of the governing board, an agency relationship may be accounted for within governmental and/or proprietary funds. 
B)  Escheat property generally should be reported as an asset in the governmental or proprietary fund to which the property ultimately reverts. 
C)  GASB has proposed a new category of fiduciary fund; the custodial fund which would be used exclusively for escheat property held by the government. 
D)  An agency fund accounts for assets held by a government temporarily as agent for individuals, organizations, or other governmental units.

Question 2

Lincoln County maintains an investment trust fund for the investments of governments within its borders. All the investments had determinable fair values. Which of the following is true regarding investment trust funds and investments in general?

Accepted Answer

A)  Lincoln County would report the investments of the other governments at fair value in the investment trust funds. 
B)  Lincoln County would report its own investments at fair value in the investment trust funds. 
C)  Both of the above. 
D)  Neither of the above.

Question 3

A fund that is the result of an agreement between a contributor and a government that the principal and/or income of trust assets is for the benefit of individuals, organizations, or other governments is an:

Accepted Answer

A)  Pension Trust Fund 
B)  Agency fund 
C)  Private-Purpose Trust Fund 
D)  Investment Trust Fund

Question 4

GASB No. 53 establishes reporting requirements for governments entering into derivative instruments. What is the treatment of hedging vs. investment derivatives?

Accepted Answer

The answer of GASB No. 53 establishes reporting requirements for...

Question 5

When a contributor and a government agree that the principle and/or income of trust assets is for the benefit of individuals, organizations, or other governments, an agency trust fund has been formed.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is true regarding the reporting of investments by state and local governmental units?

Accepted Answer

A)  Investments, for which a determinable fair value can be obtained, are to be reported at fair value. 
B)  Realized and unrealized gains and losses are to be combined in the relevant operating statement for example, the Statement of Changes in Fiduciary Net Position). 
C)  Both of the above. 
D)  Neither of the above.

Question 7

Describe the accounting treatment of Agency Funds, including the purpose, basis of accounting, and required financial statements

Accepted Answer

The answer of Describe the accounting treatment of Agency Funds,...

Question 8

Which of the following statements is not required for pension trust funds?

Accepted Answer

A)  Statement of Fiduciary Net Position. 
B)  Statement of Fiduciary Cash Flows. 
C)  Statement of Changes in Fiduciary Net Position. 
D)  None of the above; all three statements should be prepared for pension-trust funds.

Question 9

If a government has no potential liability for payment of special assessment debt in the event of default by the property owners, then an agency fund may be used to account for the proceeds of the special assessment.

Accepted Answer

A) True 
 B)False

Question 10

An employee enrolls in a pension plan that will pay out 3% of the employee's average salary for the last 3 years for each year of service that the employee worked. What type of pension plan does the employee have?

Accepted Answer

A)  Defined Contribution Plan. 
B)  Normal Payout Plan. 
C)  Defined Benefit Plan. 
D)  None of the above.

Question 11

Governments offering postemployment benefits to their retired employees must present two financial statements related to their plans: the Statement of Fiduciary Net Position and the Statement of Changes in Fiduciary Net Position, as well as additional required supplementary information.

Accepted Answer

A) True 
 B)False

Question 12

The tax agency fund of Eden County collected $1,400,000 for the Eden School District, $700,000 for the Village of Edenton, $840,000 for the Eden Park District, and $490,000 for Eden County. County General Fund employees handle the collections, and a 3 percent collection fee is charged all units except the county. How much revenue should be recognized by the General Fund as a result of these collection activities?

Accepted Answer

A)  $42,000 
B)  $63,000 
C)  $88,200 
D)  $102,900.

Question 13

Which of the following is true regarding fiduciary funds?

Accepted Answer

A)  Fiduciary funds use the economic resources measurement focus and accrual accounting. 
B)  Fiduciary funds include pension and other employee benefit) trust, investment trust, agency, and permanent funds. 
C)  Both of the above. 
D)  Neither of the above.

Question 14

GASB has issued a proposed standard that would more clearly define fiduciary activities and change the categories of fiduciary funds. One of the issues the proposed standard is intended to address is the practice of some governments to classify activities as trusts when no trust agreement exists. Activities meeting the definition of fiduciary in nature but that lack a formal trust agreement will in the future be reported in a new category. What is the new category?

Accepted Answer

A)  Custodial fund 
B)  Non-custodial fund 
C)  Dedicated fund 
D)  Pass-through activities fund

Question 15

Investments of investment pools are to be reported in:

Accepted Answer

A)  The funds providing the resources for the investments. 
B)  An investment trust fund. 
C)  An agency fund. 
D)  Either A or B.

Question 16

The Accrual Basis and Economic Resource Measurement Focus are used for Private-Purpose, Investment Trust and Pension Funds.

Accepted Answer

A) True 
 B)False

Question 17

Fiduciary Fund activities report in terms of Revenues and Expenses.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is correct with respect to defined benefit and defined contribution plans?

Accepted Answer

A)  A defined benefit plan is one where the plan is required to pay benefits for a certain term but the amount paid is not certain. 
B)  A defined contribution plan is one where the contributions are fixed, but the payout term and amount is dependent on the amount accumulated in the fund and the rate of return on the investments of the fund. 
C)  A defined benefit plan is one where the plan is required to pay a specific amount until the fund is depleted. 
D)  Defined contribution plans provide an individual retirement account for each participating employee and no obligation exists for pension benefits beyond what has been accumulated in each individual's account.

Question 19

Investment Trust Funds are restricted to:

Accepted Answer

A)  External investment pools. 
B)  Open-end mutual funds. 
C)  Debt securities. 
D)  All the above.

Question 20

The term "fiduciary funds" include agency, pension trust, investment trust, and private purpose trust funds.

Accepted Answer

A) True 
 B)False

Exam 7: Fiduciary Funds, Interfund Transactions

Which of the following statements is incorrect?

Lincoln County maintains an investment trust fund for the investments of governments within its borders. All the investments had determinable fair values. Which of the following is true regarding investment trust funds and investments in general?

A fund that is the result of an agreement between a contributor and a government that the principal and/or income of trust assets is for the benefit of individuals, organizations, or other governments is an:

GASB No. 53 establishes reporting requirements for governments entering into derivative instruments. What is the treatment of hedging vs. investment derivatives?

When a contributor and a government agree that the principle and/or income of trust assets is for the benefit of individuals, organizations, or other governments, an agency trust fund has been formed.

Which of the following is true regarding the reporting of investments by state and local governmental units?

Describe the accounting treatment of Agency Funds, including the purpose, basis of accounting, and required financial statements

Which of the following statements is not required for pension trust funds?

If a government has no potential liability for payment of special assessment debt in the event of default by the property owners, then an agency fund may be used to account for the proceeds of the special assessment.

An employee enrolls in a pension plan that will pay out 3% of the employee's average salary for the last 3 years for each year of service that the employee worked. What type of pension plan does the employee have?

Governments offering postemployment benefits to their retired employees must present two financial statements related to their plans: the Statement of Fiduciary Net Position and the Statement of Changes in Fiduciary Net Position, as well as additional required supplementary information.

Which of the following is true regarding fiduciary funds?

Investments of investment pools are to be reported in:

The Accrual Basis and Economic Resource Measurement Focus are used for Private-Purpose, Investment Trust and Pension Funds.

Fiduciary Fund activities report in terms of Revenues and Expenses.

Which of the following statements is correct with respect to defined benefit and defined contribution plans?

Investment Trust Funds are restricted to:

The term "fiduciary funds" include agency, pension trust, investment trust, and private purpose trust funds.