Deck 2: The Use of Funds in Governmental Accounting

Question 1

To determine whether they have obtained sufficient revenues to cover their expenses, funds that account for governmental business-type activities use the modified accrual basis of accounting.

Answer 1

False

Question 2

Depreciation of capital assets is not recognized as an expense in a Special Revenue Fund, but it is recognized as an expense in an Internal Service Fund.

Answer 2

True

Question 3

Governmental-type funds use the current financial resources measurement focus and the modified accrual basis of accounting.

Answer 3

True

Question 4

Property taxes are recognized as revenues in governmental type funds to the extent that they are collected in the year for which they are levied.

Question 5

Under the modified accrual basis of accounting, expenditures are generally recognized in the period that goods and services are received, but there are a number of exceptions to that rule.

Question 6

All funds report both financial assets and capital assets.

Question 7

Assets of governmental-type funds include cash and investments, but not capital assets.

Question 8

For financial reporting purposes, operating transfers from the General Fund to another fund are generally reported in a separate section of the operating statements for each of the funds.

Question 9

Special Revenue Funds are used to account for specific revenue sources that are restricted or committed to spending for specific operating purposes, debt service, or capital projects.

Question 10

Likely sources of funding major capital projects are proceeds from long-term borrowing, intergovernmental grants, and transfers from other funds.

Question 11

Long-term borrowing is a source of financing capital acquisitions, but the borrowing is not reported as a liability of the Capital Projects Fund.

Question 12

Capital assets are reported in the assets section of the Capital Projects Fund balance sheet.

Question 13

Capital asset acquisitions are always financed with Capital Projects Fund resources.

Question 14

It is not possible for expenditures of a Debt Service Fund to exceed revenues in a particular year.

Question 15

Enterprise Funds are financed to some degree through charges to external users.

Question 16

For financial reporting, current assets and liabilities are separated from noncurrent assets and liabilities in the balance sheets of Enterprise Funds.

Question 17

Enterprise Funds use a different basis of accounting than Internal Service Funds.

Question 18

All the long-term debt of a government, including the long-term debt that will be financed by Enterprise Fund revenues, is reported in the fund-level financial statements.

Question 19

The required financial statements for fiduciary type funds are a statement of changes in fiduciary net position and a statement of fiduciary net position.

Question 20

Governmental accounting normally

A) Uses separate funds to account for various activities
B) Uses the accrual basis of accounting
C) Measures the amount of profit earned during a fiscal year
D) Focuses on cash flows

Question 21

The broad categories of funds used in government accounting do not include which one of the following?

A) Business
B) Governmental
C) Proprietary
D) Fiduciary

Question 22

The General Fund levies property taxes in the amount of $1,000,000 for calendar year 2019. It expects to collect $950,000 during the year, $30,000 in the first 60 days of the next year, and $15,000 during the rest of the next year. It does not expect to collect the remaining $5,000. How much property tax revenue should it recognize for the year 2019?

A) $1,000,000
B) $980,000
C) $995,000
D) $990,000

Question 23

A General Fund has total liabilities in excess of its total assets at the end of the fiscal year. It has no deferred resource inflows or outflows. Which of the following statements is always true?

A) Fund balance is negative
B) Cash is less than short-term receivables
C) Payables exceed receivables
D) Payables exceed cash

Question 24

Which of the following is the appropriate measurement focus and basis of accounting for a Private-Purpose Trust Fund?

A) The current financial resources measurement focus and the accrual basis of accounting
B) The current financial resources measurement focus and the modified accrual basis of accounting
C) The economic resources measurement focus and the accrual basis of accounting
D) The economic resources measurement focus and the modified accrual basis of accounting

Question 25

A county collects property taxes not only for itself, but also on behalf of all cities within the county. What type of fund should the county use to account for the property taxes held for the cities?

A) Private Purpose Trust Fund
B) Custodial Fund
C) Special Revenue Fund
D) Investment Trust Fund

Question 26

Which of the following is a characteristic of a Custodial Fund's financial reporting?

A) Its statement of fiduciary net position shows assets, liabilities, and net position
B) Its statement of fiduciary net position shows no net position
C) Its statement of fiduciary net position shows no liabilities
D) Its statement of fiduciary net position shows no assets

Question 27

A city establishes a fund to accumulate resources that will be used to provide a college education to the children of police or fire personnel who die as a result of job-related activities. The resources are placed in a trust in which the assets are protected from the government's creditors. Which of the following funds should be used to account for this activity?

A) Permanent Fund
B) Custodial fund
C) Private-Purpose Trust Fund
D) Pension (and other employee benefit) Trust Fund
E) General Fund

Question 28

A small village maintains a General Fund, Special Revenue Fund, Capital Projects Fund, and Internal Service Fund. State the fund (or funds) that would be used to record each of the following events.
a. Property taxes were collected to finance the day-to-day activities of the village.
b. The village issued debt for the purpose of constructing a new firehouse.
c. The village paid an invoice for construction of a new firehouse.
d. Mechanics' salaries were paid by the Motor Pool Fund, which was established to provide a centralized location for servicing all village vehicles on a user-charge basis.
e. The village paid the salaries of its police officers.
f. The village received a check from the state to help finance the new firehouse.
g. The village received a grant, which must be used for beautifying and maintaining nature walks within a park.
h. The Motor Pool Fund sent an invoice for maintenance of police and fire vehicles.

Question 29

A large city uses certain governmental-type funds (General, Special Revenue, Debt Service, and Capital Projects) and proprietary-type funds (Internal Service and Enterprise). State the fund or funds that would be used to record the following transactions.
a. The city sent property tax bills to all taxpayers. Most of the taxes were to be used to finance the day-to-day activities of the city. A portion of the tax, however, was levied for the specific purpose of financing operations of the City Library District, created by vote of the public.
b. The city needed a new school. It issued $4 million of long-term debt and put the proceeds into a fund to finance school construction.
c. The city paid the salaries of its police and fire officers.
d. To help finance construction of the school, the city received $1 million from the state.
e. Central Vehicle Repair Shop is a city-operated facility that does work for all city agencies and bills the agencies at cost for the work. At the end of the month, Central Vehicle Repair Shop sent invoices to the police department for servicing the police vehicles.
f. To pay interest and principal on the debt issued to construct the school, the city transferred $150,000 from the fund that finances day-to-day activities to the fund that accumulates resources to pay off the debt.
g. Metro Bus is a city-operated mass transit facility. Metro Bus deposited passenger fares for the day into its bank account. Also, Metro Bus received an invoice from Central Vehicle Repair Shop for bus repair work.
h. The city paid $500,000 to the contractor that was building the new school.
i. The city bought a new police sedan. In accordance with city financial policies, the city paid for the sedan out of its day-to-day operating funds.
j. The new school was completed. In accordance with city statutes, all remaining construction assets were sent to the fund that pays the debt service on the construction bonds.

Question 30

Indicate which fund or funds would be used by a state to record each of the following events. Use the codes shown below:

a. The state collected personal income taxes to finance its day-to-day activities.
b. The state collected gasoline taxes, which in accordance with state law were dedicated solely to the maintenance of state roads.
c. The state collected a state-enacted sales tax at the rate of 4% of sales. Collections also included a 3% sales tax that certain counties piggy-backed on the state tax. All county sales taxes were deposited in a fund, pending county-by-county analysis of all sales tax returns to determine amounts due to the state and to each county.
d. As authorized by Public referendum, the state sold $55 million of bonds to finance a new highway construction program. The debt proceeds were deposited in a fund.
e. The state received $15 million from the federal government for the federal share of the costs of constructing the highways (see d. above).
f. The state office of general services performs centralized printing services for all state agencies, and bills the state agencies at cost for each printing project. The office sent a bill to the State Comptroller for printing the state's annual financial report.
g. The Office of the State Lottery sells lottery tickets to the public. In accordance with state law, 50% of all lottery ticket sales must be used to finance major capital projects including the acquisition of land for parks. The state received a check from the Office of the State lottery for the state share of the lottery ticket sales.
h. The state paid the regular bi-weekly payroll of the state police. The state also paid the payroll of personnel who maintain the state roads referred to in transaction b., above.
i. The state deposited funds received from three county governments into a trust fund. The state will invest the funds and send quarterly checks to the county governments based on the interest earned by the fund.
j. The Employees Retirement System, a state-operated agency that administers the payment of pensions to retired state employees, paid the monthly pensions.
k. The state purchased 5 police cars for the State Police at a cost of $80,000, using day-to-day operating funds. The police cars have a four-year life.
l. A partial payment was made to the contractors involved in constructing state highways.
m. The state made an operating transfer, using day-to-day operating funds, to the fund that accumulates resources for payment of debt service on capital projects.
n. The state paid interest and principal on the debt that had been issued earlier to finance the construction of highways.
o. The state received collections from individual citizens to pay college education expenses for state National Guard members, who are wounded in military service.