Deck 11: State and Local Governments: Other Transactions

Question 1

What is the only governmental fund that can report a positive unassigned fund balance?

A) Special revenue fund
B) Permanent fund
C) Capital projects fund
D) General fund

Answer 1

General fund

Question 2

A state's special revenue resources that are limited based on federal grant requirements are usually reported in which category of the special revenue fund's fund balance?

A) Committed
B) Restricted
C) Assigned
D) Nonspendable

Answer 2

Restricted

Question 3

A permanent fund reports endowment investments of $10 million, where donors specify that investment income be used for specific activities. On its balance sheet, the permanent fund reports the investments as assets, and also reports $10 million in which category of fund balance?

A) Nonspendable
B) Restricted
C) Committed
D) Assigned

Answer 3

Nonspendable

Question 4

A permanent fund reports endowment investments of $10 million, where donors specify that investment income be used for specific activities. Total unspent income on these investments at year-end is $45,000. On its balance sheet, the permanent fund reports the $45,000 in which category of fund balance?

A) Nonspendable
B) Restricted
C) Committed
D) Assigned

Question 5

A special revenue fund reports total assets of $400,000 and total liabilities of $375,000. It reports these fund balance categories: Nonspendable, $12,000, and restricted, $15,000. What other fund balance category is reported?

A) Committed, $(2,000)
B) Assigned, $(2,000)
C) Unassigned, $(2,000)
D) Restricted fund balance is reduced by $2,000.

Question 6

A county special revenue fund for special needs children is financed in its entirety by taxes set aside by the county budget for this purpose. The fund balance of the special revenue fund will be classified as:

A) Assigned
B) Nonspendable
C) Restricted
D) Committed

Question 7

On its balance sheet, a county's permanent fund reports a balance in unassigned fund balance when:

A) Its resources have no restrictions.
B) Total fund balance is less than the total of nonspendable, restricted, committed and assigned fund balances.
C) There are no nonspendable assets reported.
D) Its resources include amounts designated by the county budget for specific purposes.

Question 8

Cumberland County PA has a Mental Health and Intellectual and Developmental Disabilities special revenue fund that accounts for services provided to county residents. Resources are provided by federal and state grants. The fund reports what category(ies) of fund balance?

A) Restricted
B) Restricted and committed
C) Nonspendable and committed
D) Assigned

Question 9

A permanent fund will most likely report which of the following classifications of fund balance?

A) Committed and restricted
B) Nonspendable and restricted
C) Committed and assigned
D) Nonspendable and committed

Question 10

The State of California reports a transportation special revenue fund whose resources come from federal grants, contributions from private foundations, and taxes set aside by the state budget. Its year-end balance sheet reports total assets of $10,500,000, consisting of $8,500,000 in cash and $2,000,000 in receivables, and total liabilities of $1,300,000. Unspent taxes are $50,000, unspent federal grants are $9,000,000, and unspent contributions from private foundations are $150,000. The fund's balance sheet reports fund balances as follows:

A) Nonspendable, $2,000,000; Restricted, $9,150,000; Committed $50,000.
B) Restricted, $9,000,000; Committed, $200,000.
C) Restricted, $9,150,000; Committed, $50,000.
D) Restricted, $9,000,000; Committed, $150,000, Assigned, $50,000.

Question 11

The State of California reports an environmental resources special revenue fund whose funding comes from federal grants, contributions from private foundations, and taxes set aside by the state budget. Its year-end balance sheet reports total assets of $10,500,000, consisting of cash and short-term investments, and total liabilities of $1,500,000. Unspent taxes are $200,000, unspent federal grants are $8,850,000, and unspent contributions from private foundations are $100,000. The fund's balance sheet reports fund balances as follows:

A) Nonspendable, $2,000,000; Restricted, $9,150,000; Committed $50,000.
B) Restricted, $8,950,000; Committed, $200,000; Unassigned, $(150,000).
C) Restricted, $8,850,000; Committed, $300,000; Unassigned, $(150,000).
D) Restricted, $9,000,000.

Question 12

A county's special revenue fund reports total fund balances of $2,000,000 from resources restricted for fire protection services in unincorporated areas. The resources come from state grants and from allocations of general property taxes. The fund's assets consist of cash, receivables, prepaid expenses and inventories. The fund balance is most likely divided into which categories?

A) Restricted only
B) Committed and assigned
C) Nonspendable, restricted, and committed
D) Nonspendable and committed

Question 13

In 2020, a county receives a $5,000,000 endowment from a private citizen for community programs and reports it in a permanent fund. During 2020 the county invests the $5,000,000, earning $50,000 in investment income. It spends $35,000 for approved programs. At the end of 2017, how is fund balance for this permanent fund reported?

A) Fund balance-restricted, $5,015,000
B) Fund balance-committed, $5,015,000
C) Fund balance-nonspendable, $5,000,000, and fund balance-committed, $15,000
D) Fund balance-nonspendable, $5,000,000, and fund balance-restricted, $15,000

Question 14

A city has a special revenue fund that reports cash of $100,000, inventories of $25,000, and accounts payable of $60,000. The resources for the fund are provided by a county grant. How is fund balance reported for the special revenue fund?

A) Committed, $65,000
B) Nonspendable, $25,000; committed $40,000
C) Nonspendable, $25,000; restricted, $40,000
D) Restricted, $65,000

Question 15

The State of Alaska collects mineral-related revenues from businesses operating in the state. The revenues are invested and the income is distributed each year to qualified Alaskan citizens. The State of Alaska accounts for these transactions in:

A) A private purpose trust fund
B) A special revenue fund
C) A permanent fund
D) An enterprise fund

Question 16

A county acquires equipment for $10,000,000 for use for a community project, reported in a special revenue fund. The equipment has a 5-year life, no residual value. After 3 years, the equipment is sold for $1,000,000. Straight-line depreciation is used if appropriate. How is the sale reported in the special revenue fund?

A) Loss on sale, $3,000,000
B) Revenue, $1,000,000
C) Expenditure, $3,000,000
D) Other financing source, $1,000,000

Question 17

At the beginning of the year, a special revenue fund purchases equipment for $400,000 in cash. The equipment has a 5-year life, straight-line. The fund still holds the equipment at year-end. How is this equipment reported in the special revenue fund's operating statement for the year?

A) Expense, $80,000.
B) Expenditure, $400,000.
C) Other financing use, $400,000.
D) Not reported on the operating statement.

Question 18

Governments are required to return arbitrage profits to the federal government. What are arbitrage profits?

A) Amounts charged in excess of costs incurred for public services
B) Bond proceeds invested at a rate of return exceeding the bond interest rate
C) Returns on investments of tax dollars, in excess of the prime rate
D) Bond proceeds used to finance projects not approved in the legal budget

Question 19

At the beginning of the year, a capital projects fund purchases $4 million in equipment for cash. The equipment has a 10-year life, straight-line. A year-end, this purchase reduces the capital projects fund's fund balance by

A) $4 million.
B) $400,000.
C) $3.6 million.
D) No effect.

Question 20

Which one of these capital projects fund accounts is closed at year-end?

A) Accounts payable
B) Due from general fund
C) Capital outlay
D) Deferred outlays of resources

Question 21

A state issues bonds, and the money received is to be used for construction of roads. The cash received from the bond issue is recorded as:

A) A liability, in the debt service fund
B) An other financing source, in the debt service fund
C) An other financing source, in the capital projects fund
D) A liability, in the capital projects fund

Question 22

A county remits $5 million of property tax collections to the capital projects fund for use in construction projects. The capital projects fund records the cash received as

A) A liability.
B) An other financing source.
C) An investment.
D) A direct increase in committed fund balance.

Question 23

Which account will you never see on the balance sheet of a capital projects fund?

A) Due from other funds
B) Transfers in from other funds
C) Fund balance-nonspendable
D) Net position invested in capital assets

Question 24

A county general fund provides temporary funding to its capital projects fund for a construction project. The capital projects fund will pay it back to the general fund within the same fiscal year. How will this transaction be recorded by the general fund and the capital projects fund?
$\begin{array}{lrr} \underline{\text { General Fund}}&&&&&&&&\underline{\text { Capital Projects Fund}}\end{array}$

A) $\begin{array}{lrr}\text { Increase in current receivables}&\text { Increase in current payables}\end{array}$
B) $\begin{array}{lrr}\text { Expenditure}&&&&&&&&&\text { Revenue}\end{array}$
C) $\begin{array}{lrr}\text { Other financing use}&&&&&&\text { Increase in current payables}\end{array}$
D) $\begin{array}{lrr}\text { Other financing use}&&&&&&\text { Other financing source}\end{array}$

Question 25

A $25 million contract is awarded by a county for construction of a building. Bonds are issued to finance construction, in the amount of $25 million. During the first year, $6 million is paid in cash to contractors for work done. At year-end, the capital projects fund reports the following fund balances:

A) Restricted, $25 million.
B) Restricted, $13 million; Committed, $6 million.
C) Restricted, $19 million.
D) Committed, $19 million.

Question 26

A $30 million contract is awarded by a county for construction of a building. Bonds are issued to finance construction, in the amount of $30 million. During the first year, contractors bill the county $22 million for work done, and $20 million is paid in cash to contractors. At year-end, the capital projects fund reports the following fund balances:

A) Restricted, $8 million.
B) Restricted, $8 million; Committed, $2 million.
C) Restricted, $10 million.
D) Committed, $10 million.

Question 27

A state government begins a project to build administrative facilities, funded by a bond issue. A capital projects fund is set up to account for the construction activities, and an encumbrance is appropriately recognized in the capital projects fund for the full amount of the construction contracts, which is $10 million. At the end of the first year, only $2 million has been billed by contractors and recorded as expenditures. At the beginning of the second year, what entry is necessary in the capital projects fund to recognize the remaining encumbrances of $8 million?

A) Dr. expenditures, cr. encumbrances
B) Dr. encumbrances, cr. fund balance-committed
C) Dr. encumbrances, cr. fund balance-restricted
D) No entry is made.

Question 28

Use the following information to answer Questions
Construction activities for Oneida County for 2020 are as follows:
1) A capital projects fund is established for the construction of a recreation center. The total project is estimated to cost $15,000,000, with funding to come from a $9,000,000 general obligation bond issue, a $4,000,000 federal grant, and a $2,000,000 transfer from the general fund.
2) The general fund transfers $2,000,000 to the capital projects fund.
3) $3,500,000 of the federal grant is received in cash.
4) The bond issue with a par value of $9,000,000 yields $9,002,000. The premium is transferred to the debt service fund to finance payment of bond principal and interest.
5) A contract for $14,800,000 is awarded to a contractor.
6) Invoices for $8,000,000 are received for work performed by the contractor. The town has a 5% retainage policy and pays the contractor $7,600,000 in cash.
7) The county's spending policy is to use restricted resources first.
The county uses the GAAP budgetary basis for end-of-year encumbrances.

-What is the 2020 increase in total fund balances for the capital projects fund?

A) $7,400,000
B) $7,000,000
C) $6,500,000
D) $6,900,000

Question 29

Use the following information to answer Questions
Construction activities for Oneida County for 2020 are as follows:
1) A capital projects fund is established for the construction of a recreation center. The total project is estimated to cost $15,000,000, with funding to come from a $9,000,000 general obligation bond issue, a $4,000,000 federal grant, and a $2,000,000 transfer from the general fund.
2) The general fund transfers $2,000,000 to the capital projects fund.
3) $3,500,000 of the federal grant is received in cash.
4) The bond issue with a par value of $9,000,000 yields $9,002,000. The premium is transferred to the debt service fund to finance payment of bond principal and interest.
5) A contract for $14,800,000 is awarded to a contractor.
6) Invoices for $8,000,000 are received for work performed by the contractor. The town has a 5% retainage policy and pays the contractor $7,600,000 in cash.
7) The county's spending policy is to use restricted resources first.
The county uses the GAAP budgetary basis for end-of-year encumbrances.

-What is the end-of-2020 balance in fund balance-restricted for the capital projects fund?

A) $5,000,000
B) $5,400,000
C) $6,500,000
D) $7,000,000

Question 30

Use the following information to answer Questions
Construction activities for Oneida County for 2020 are as follows:
1) A capital projects fund is established for the construction of a recreation center. The total project is estimated to cost $15,000,000, with funding to come from a $9,000,000 general obligation bond issue, a $4,000,000 federal grant, and a $2,000,000 transfer from the general fund.
2) The general fund transfers $2,000,000 to the capital projects fund.
3) $3,500,000 of the federal grant is received in cash.
4) The bond issue with a par value of $9,000,000 yields $9,002,000. The premium is transferred to the debt service fund to finance payment of bond principal and interest.
5) A contract for $14,800,000 is awarded to a contractor.
6) Invoices for $8,000,000 are received for work performed by the contractor. The town has a 5% retainage policy and pays the contractor $7,600,000 in cash.
7) The county's spending policy is to use restricted resources first.
The county uses the GAAP budgetary basis for end-of-year encumbrances.

-What is the cash balance for the capital projects fund at the 2020 year-end?

A) $6,902,000
B) $7,300,000
C) $6,900,000
D) $7,400,000

Question 31

Use the following information to answer Questions
Construction activities for Oneida County for 2020 are as follows:
1) A capital projects fund is established for the construction of a recreation center. The total project is estimated to cost $15,000,000, with funding to come from a $9,000,000 general obligation bond issue, a $4,000,000 federal grant, and a $2,000,000 transfer from the general fund.
2) The general fund transfers $2,000,000 to the capital projects fund.
3) $3,500,000 of the federal grant is received in cash.
4) The bond issue with a par value of $9,000,000 yields $9,002,000. The premium is transferred to the debt service fund to finance payment of bond principal and interest.
5) A contract for $14,800,000 is awarded to a contractor.
6) Invoices for $8,000,000 are received for work performed by the contractor. The town has a 5% retainage policy and pays the contractor $7,600,000 in cash.
7) The county's spending policy is to use restricted resources first.
The county uses the GAAP budgetary basis for end-of-year encumbrances.

-What is the total for other financing sources for 2020, reported on the capital projects fund operating statement?

A) $ 2,000,000
B) $ 9,000,000
C) $13,000,000
D) $11,000,000

Question 32

The pre-closing trial balance of a county's debt service fund at year-end is provided below:
$$\begin{array} { | l | c | } \hline & \text { Dr (Cr) } \\\hline \text { Cash } & \$ 42,000 \\\hline \text { Investments } & 8,000 \\\hline \text { Required additions } & 100,000 \\\hline \text { Required earnings } & 200 \\\hline \text { Appropriations } & ( 65,000 ) \\\hline \text { Debt service: principal } & 15,000 \\\hline \text { Debt service: interest } & 50,000 \\\hline \text { Transfersin } &\underline{ ( 100,000)}\\\hline \text { Investment income } & (205 ) \\\hline \text { Fund balance-committed } &\underline{( 49,995 )} \\\hline \text { Total } & \$ \quad 0 \\\hline\end{array}$$ After the accounts are closed, what is the reported fund balance for the debt service fund?

A) $50,000
B) $60,000
C) $35,015
D) $42,995

Question 33

Use the following information to answer questions bellow.
The trial balance of a county's debt service fund at the beginning of the year is provided bellow:
$$\begin{array} { | l | r | } \hline & \text { Dr (Cr) } \\\hline \text { Cash } & \$ 15,000 \\\hline \text { Investments } & 12,000 \\\hline \text { Fund balance-committed } &\underline{(27,000)} \\\hline \text { Total } & \$ \quad 0 \\\hline\end{array}$$ General obligation debt payments for the year are estimated to be $80,000 for interest and $30,000 for principal. The county budget requires that the general fund transfer $100,000 to the debt service fund during the year. Income on investments is budgeted at $900. The debt service fund uses budget accounts. Transactions for the year are as follows:
•The general fund transfers $100,000 to the debt service fund.
•The capital projects fund transfers a bond premium on newly issued bonds to the debt service fund, in the amount of $1,000.
•The debt service fund invests $35,000 in securities and sells investments with a book value of $40,000 for $40,200. Interest income on securities held during the year is $375, received in cash. The fair value of investments held at year-end is $7,300.
•The debt service fund makes the principal and interest payments as budgeted.

-The balance for committed fund balance, immediately after the budget entry, is:

A) $27,000
B) $17,900
C) $18,875
D) $17,000

Question 34

Use the following information to answer questions bellow.
The trial balance of a county's debt service fund at the beginning of the year is provided bellow:
$$\begin{array} { | l | r | } \hline & \text { Dr (Cr) } \\\hline \text { Cash } & \$ 15,000 \\\hline \text { Investments } & 12,000 \\\hline \text { Fund balance-committed } &\underline{(27,000)} \\\hline \text { Total } & \$ \quad 0 \\\hline\end{array}$$ General obligation debt payments for the year are estimated to be $80,000 for interest and $30,000 for principal. The county budget requires that the general fund transfer $100,000 to the debt service fund during the year. Income on investments is budgeted at $900. The debt service fund uses budget accounts. Transactions for the year are as follows:
•The general fund transfers $100,000 to the debt service fund.
•The capital projects fund transfers a bond premium on newly issued bonds to the debt service fund, in the amount of $1,000.
•The debt service fund invests $35,000 in securities and sells investments with a book value of $40,000 for $40,200. Interest income on securities held during the year is $375, received in cash. The fair value of investments held at year-end is $7,300.
•The debt service fund makes the principal and interest payments as budgeted.

-The balance for committed fund balance, reported in the debt service fund's year-end balance sheet, is:

A) $27,000
B) $17,900
C) $18,875
D) $17,000

Question 35

Use the following information to answer questions bellow.
The trial balance of a county's debt service fund at the beginning of the year is provided bellow:
$$\begin{array} { | l | r | } \hline & \text { Dr (Cr) } \\\hline \text { Cash } & \$ 15,000 \\\hline \text { Investments } & 12,000 \\\hline \text { Fund balance-committed } &\underline{(27,000)} \\\hline \text { Total } & \$ \quad 0 \\\hline\end{array}$$ General obligation debt payments for the year are estimated to be $80,000 for interest and $30,000 for principal. The county budget requires that the general fund transfer $100,000 to the debt service fund during the year. Income on investments is budgeted at $900. The debt service fund uses budget accounts. Transactions for the year are as follows:
•The general fund transfers $100,000 to the debt service fund.
•The capital projects fund transfers a bond premium on newly issued bonds to the debt service fund, in the amount of $1,000.
•The debt service fund invests $35,000 in securities and sells investments with a book value of $40,000 for $40,200. Interest income on securities held during the year is $375, received in cash. The fair value of investments held at year-end is $7,300.
•The debt service fund makes the principal and interest payments as budgeted.

-Investments, reported in the debt service fund's year-end balance sheet, are:

A) $7,000
B) $7,375
C) $7,100
D) $7,300

Question 36

Use the following information to answer questions bellow.
The trial balance of a county's debt service fund at the beginning of the year is provided bellow:
$$\begin{array} { | l | r | } \hline & \text { Dr (Cr) } \\\hline \text { Cash } & \$ 15,000 \\\hline \text { Investments } & 12,000 \\\hline \text { Fund balance-committed } &\underline{(27,000)} \\\hline \text { Total } & \$ \quad 0 \\\hline\end{array}$$ General obligation debt payments for the year are estimated to be $80,000 for interest and $30,000 for principal. The county budget requires that the general fund transfer $100,000 to the debt service fund during the year. Income on investments is budgeted at $900. The debt service fund uses budget accounts. Transactions for the year are as follows:
•The general fund transfers $100,000 to the debt service fund.
•The capital projects fund transfers a bond premium on newly issued bonds to the debt service fund, in the amount of $1,000.
•The debt service fund invests $35,000 in securities and sells investments with a book value of $40,000 for $40,200. Interest income on securities held during the year is $375, received in cash. The fair value of investments held at year-end is $7,300.
•The debt service fund makes the principal and interest payments as budgeted.

-On its operating statement for the year, the debt service fund reports other financing sources of:

A) $101,000
B) $101,375
C) $101,500
D) $0

Question 37

A debt service fund for serial bonds obtains its funding through transfers from the general fund. The debt service fund will most likely report which one of the following classifications of fund balance?

A) Assigned
B) Restricted
C) Committed
D) Unassigned

Question 38

A debt service fund makes a principal payment on general obligation bonds. This payment is reported on the debt service fund's:

A) Operating statement as an other financing source
B) Balance sheet as a reduction in liabilities
C) Operating statement as an other financing use
D) Operating statement as an expenditure

Question 39

A debt service fund is used to report payments of principal and interest on bonds used for:

A) Governmental and proprietary activities
B) Proprietary activities
C) Governmental activities
D) Fiduciary activities

Question 40

A state lottery is reported in an enterprise fund. Its statement of cash flows reports a reconciliation of:

A) Capital and noncapital financing activities to investing activities
B) Change in net position to cash from operating activities
C) Operating income to cash from operating activities
D) Change in cash to cash from operating activities

Question 41

The statement of cash flows reconciliation schedule for a proprietary fund would never include which adjustment?

A) Add depreciation expense on operating capital assets
B) Subtract a decrease in accounts payable
C) Subtract a decrease in accounts receivable
D) Add an increase in compensated employee absences payable

Question 42

The investing activities section of a proprietary funds statement of cash flows includes:

A) Cash received from the sale of securities
B) Cash received from the sale of buildings and equipment
C) Cash paid for buildings and equipment
D) Cash paid for operating costs

Question 43

On the proprietary funds statement of net position, how is the net position section categorized?

A) Nonspendable and assigned
B) Net investment in capital assets, restricted, and unrestricted
C) Nonspendable, restricted, committed, assigned, and unassigned
D) Restricted and unrestricted

Question 44

A state lottery's operating statement is called:

A) A statement of revenue, expenses, and changes in fund balances
B) A statement of revenue, expenditures, and changes in fund balances
C) A statement of revenue, expenditures, and changes in net position
D) A statement of revenue, expenses, and changes in net position

Question 45

A county acquires equipment for $500,000, for use for a community program, reported in an enterprise fund. The equipment has a 5-year life, no residual value. After 3 years, the equipment is sold for $275,000. Straight-line depreciation is used if appropriate. How is the sale reported in the enterprise fund's operating statement?

A) Other financing source, $275,000
B) Revenue, $275,000
C) Gain on sale, $75,000
D) Loss on sale, $225,000

Question 46

An enterprise fund purchases equipment for $1,000,000. The equipment has a 5-year estimated life, straight-line, no residual value. The equipment is sold for $450,000 after 2 years. How does the enterprise fund report the sale? Dr cash for $450,000, and:

A) Cr equipment, net for $1,000,000, dr loss on sale for $550,000
B) Dr loss on sale of equipment for $150,000, cr equipment, net for $600,000
C) Cr revenues for $450,000
D) Cr proceeds from sale of equipment (other financing source) for $450,000

Question 47

On the statement of net position of proprietary funds, how is net investment in capital assets calculated?

A) Cost of capital assets, net of accumulated depreciation
B) Cost of capital assets, net of accumulated depreciation, less outstanding principal of related debt
C) Cost of capital assets less outstanding principal of related debt
D) Cost of capital assets

Question 48

Which of the following will not appear on the statement of net position of an enterprise fund?

A) Bonds payable
B) Fund balance-restricted
C) Accumulated depreciation
D) Intangible assets

Question 49

Which statement is false concerning the proprietary fund statement of cash flows?

A) Cash flows from operating activities can be displayed using the direct or indirect method.
B) Transfers from other funds are included in cash flows from noncapital financing activities.
C) Investments in securities are included in cash flows from investing activities.
D) Long-term borrowings to finance operations are included in cash flows from noncapital financing activities.

Question 50

Use the following information to answer questions bellow.
Listed bellow are accounts of a state lottery at year-end, as reported in the state's enterprise fund:
$$\begin{array} { | l | c | } \hline & \text { Dr (Cr) } \\\hline \text { Current assets } & \$ 5,000 \\\hline \text { Long-term investments } & 7,000 \\\hline \text { Long-term prizes payable } & ( 6,900 ) \\\hline \text { Current liabilities } & (4,800)\\\hline \text { Long-term pension liabilities } & (13 ) \\\hline \text { Net position restricted for future prizes } &( 200) \\\hline \text { Deferred outflows for pensions } & 12 \\\hline \text { Deferred inflowsfor pensions } & ( 8) \\\hline\end{array}$$

-On the lottery's year-end statement of net position, total assets are:

A) $12,012
B) $12,008
C) $12,004
D) $12,000

Question 51

Use the following information to answer questions bellow.
Listed bellow are accounts of a state lottery at year-end, as reported in the state's enterprise fund:
$$\begin{array} { | l | c | } \hline & \text { Dr (Cr) } \\\hline \text { Current assets } & \$ 5,000 \\\hline \text { Long-term investments } & 7,000 \\\hline \text { Long-term prizes payable } & ( 6,900 ) \\\hline \text { Current liabilities } & (4,800)\\\hline \text { Long-term pension liabilities } & (13 ) \\\hline \text { Net position restricted for future prizes } &( 200) \\\hline \text { Deferred outflows for pensions } & 12 \\\hline \text { Deferred inflowsfor pensions } & ( 8) \\\hline\end{array}$$

-On the lottery's year-end statement of net position, the balance for unrestricted net position is:

A) $99
B) $87
C) $91
D) $83

Question 52

Here is the year's financial information for a county's internal service fund:
$$\begin{array} { | l | r | } \hline \text { Change in net position } & \$ 40,000 \\\hline \text { Operating income } & 65,000 \\\hline \text { Depreciation expense } & 100,000 \\\hline \text { Increase in accounts receivable } & 5,000 \\\hline \text { Decrease in inventories } & 2,000 \\\hline \text { Increase in net pension and OPEB liability } & 20,000 \\\hline \text { Decrease in accounts payable } & 4,000 \\\hline\end{array}$$ In the internal service fund's statement of cash flows for the year, cash provided by operations is:

A) $153,000
B) $163,000
C) $186,000
D) $178,000

Question 53

In a state CAFR, which fund reports parents' contributions to state 529 plans, which encourage the accumulation of resources toward their children's future college tuition payments?

A) Special revenue fund
B) Private purpose trust fund
C) Permanent fund
D) Investment trust fund

Question 54

Unclaimed property held by a state is reported in a(n)

A) Internal service fund
B) Private-purpose trust fund
C) Custodial fund
D) Investment trust fund

Question 55

Use the following information to answer Questions.
A county installs utility lines to a remote part of the county, financing the project with $10,000,000 in 3.5% bonds. The bond principal will be repaid in ten equal installments over the next ten years. Affected residents will be assessed an equal amount per year over the next ten years to retire the bonds and pay interest on outstanding bonds. The county has no liability for the bonds, and records transactions related to assessment of the residents and payment of the bond principal and interest using a custodial fund.

-At the beginning of the first year, the custodial fund records:

A) No entry
B) Dr to assessments receivable and cr to additions for $1,350,000
C) Dr to assessments receivable and cr to assessments payable for $1,000,000
D) Dr to assessments receivable and cr to assessments payable for $1,350,000

Question 56

Use the following information to answer Questions.
A county installs utility lines to a remote part of the county, financing the project with $10,000,000 in 3.5% bonds. The bond principal will be repaid in ten equal installments over the next ten years. Affected residents will be assessed an equal amount per year over the next ten years to retire the bonds and pay interest on outstanding bonds. The county has no liability for the bonds, and records transactions related to assessment of the residents and payment of the bond principal and interest using a custodial fund.

-When the custodial fund pays assessments to the bondholders, which account is debited?

A) Assessments payable
B) Fund balance-restricted
C) Due to bondholders
D) Deductions

Question 57

Use the following information to answer Questions.
A county installs utility lines to a remote part of the county, financing the project with $10,000,000 in 3.5% bonds. The bond principal will be repaid in ten equal installments over the next ten years. Affected residents will be assessed an equal amount per year over the next ten years to retire the bonds and pay interest on outstanding bonds. The county has no liability for the bonds, and records transactions related to assessment of the residents and payment of the bond principal and interest using a custodial fund.

-At the end of the first year, after all assessments are collected and paid to the bondholders, the custodial fund's liabilities will total:

A) $9,350,000
B) $1,350,000
C) $9,000,000
D) Zero

Question 58

Use the following information to answer Questions.
A county installs utility lines to a remote part of the county, financing the project with $10,000,000 in 3.5% bonds. The bond principal will be repaid in ten equal installments over the next ten years. Affected residents will be assessed an equal amount per year over the next ten years to retire the bonds and pay interest on outstanding bonds. The county has no liability for the bonds, and records transactions related to assessment of the residents and payment of the bond principal and interest using a custodial fund.

-What is the assessment for the second year?

A) $1,350,000
B) $1,000,000
C) $1,315,000
D) $1,295,000

Question 59

Use the following information to answer Questions.
During the current year, businesses in a county collect $2,000,000 in sales taxes from customers. These taxes are remitted to the county. Sales taxes are shared between the county, the towns located within the county, and the state, with 60% retained by the county for general use and reported in the general fund, 30% transmitted to the state, and 10% distributed to the towns. By year-end, the county had distributed $580,000 of sales taxes due to the state and $195,000 of sales taxes due to the towns. The county expects to collect the same amount of sales taxes in the following year.

-What is the year's change in net position for the custodial fund?

A) $(25,000)
B) $25,000
C) $0
D) $800,000

Question 60

Use the following information to answer Questions.
During the current year, businesses in a county collect $2,000,000 in sales taxes from customers. These taxes are remitted to the county. Sales taxes are shared between the county, the towns located within the county, and the state, with 60% retained by the county for general use and reported in the general fund, 30% transmitted to the state, and 10% distributed to the towns. By year-end, the county had distributed $580,000 of sales taxes due to the state and $195,000 of sales taxes due to the towns. The county expects to collect the same amount of sales taxes in the following year.

-On the custodial fund's statement of net position at year-end, what are total assets?

A) $0
B) $ 25,000
C) $825,000
D) $800,000

Question 61

Many governments have extensive investments in debt and equity securities, held for income and not for hedging purposes. Which types of funds must report these investments at fair value and report unrealized gains and losses in their operating statement?

A) Fiduciary only
B) Governmental, proprietary and fiduciary
C) Proprietary only
D) Proprietary and fiduciary

Question 62

The State of California's general fund enters a receive variable/pay fixed interest rate swap that hedges its variable rate debt. If market interest rates fall during the year, where is the change in the value of the swap investment reported in the governmental funds balance sheet?

A) As an asset
B) As a liability
C) As a deferred outflow
D) Not reported

Question 63

The State of California's State College fund (enterprise fund) enters a receive variable/pay fixed interest rate swap that hedges its variable rate debt. If market interest rates fall during the year, where is the change in the value of the swap investment reported in the proprietary funds balance sheet?

A) As an asset
B) As a reduction in net position
C) As a deferred outflow
D) Not reported

Question 64

A state determines that one of its swaps, reported in its enterprise fund, is no longer effective as a hedge of interest rate risk, and therefore hedge accounting is no longer appropriate. The swap was reported as an asset of $2 million. What is one of the effects of reclassifying the swap on the proprietary funds financial statements?

A) Investment income increases by $2 million on the proprietary funds operating statement.
B) Investment loss increases by $2 million on the proprietary funds operating statement.
C) The investment is reclassified from the asset to the net position section of the proprietary funds statement of net position.
D) Deferred outflows is reduced by $2 million on the proprietary funds statement of net position.

Question 65

Local governments often have variable rate debt and hedge the related interest rate risk with an interest rate swap. These governments incur gains on these swaps when:

A) They invest in receive fixed/pay variable interest rate swaps and interest rates go down.
B) They invest in receive variable/pay fixed interest rate swaps and interest rates go up.
C) They invest in receive variable/pay fixed interest rate swaps and interest rates go down.
D) They invest in receive fixed/pay variable interest rate swaps and interest rates go up.

Question 66

On its proprietary funds statement of net position, a state reports deferred outflows of $6 million related to derivatives. Which of the following might explain this amount?

A) The derivatives are classified as assets.
B) The derivatives swap variable rate for fixed rate debt, and interest rates have declined.
C) The derivatives are held as income-earning investments, and their value has increased.
D) The derivatives no longer qualify for hedge accounting.

Question 67

A state university's activities are reported in the state CAFR as a proprietary fund. The university issues variable rate debt and hedges its interest rate risk with a receive variable/pay fixed interest rate swap. If market interest rates increase, how is the derivative investment, reported on the state's proprietary funds statement of net position, affected?

A) Investment value declines
B) Investment value increases
C) Deferred outflows increase
D) Not reported

Question 68

A debt service fund paid $2,000,000 for securities for use as income investments during the year. During the year, $30,000 of investment income is received in cash. At year-end, the fund still holds the securities, and their market value has declined to $1,990,000. How is this reported by the debt service fund?

A) Investments, $2,000,000 on the balance sheet, and investment income of $20,000 on the operating statement.
B) Investments, $1,990,000 and deferred outflows, $10,000 on the balance sheet and investment income of $30,000 on the operating statement.
C) Investments, $1,990,000 on the balance sheet, and investment income of $20,000 on the operating statement.
D) Investments, $2,000,000 on the balance sheet, and investment income of $30,000 on the operating statement.

Question 69

Use the following information to answer Questions.
On April 1, 2020, an enterprise fund issued $2,000,000 in variable rate debt, with interest paid on March 31 of each year, the fiscal year-end. The rate is reset annually. The variable rate for fiscal 2021 is 3.5%. On the same date, the fund entered a receive variable/pay fixed interest rate swap, where the fund pays a 3.6% fixed rate to a counterparty. By the end of fiscal 2021, the variable rate fell to 3.3% and the swap declined in value by $8,000. The swap qualifies for hedge accounting, per SGAS 53.

-How is the enterprise fund's investment in derivatives reported on its statement of net position?

A) Liability of $8,000.
B) Asset of $8,000.
C) Not reported.
D) Restricted category of net position.

Question 70

Use the following information to answer Questions.
On April 1, 2020, an enterprise fund issued $2,000,000 in variable rate debt, with interest paid on March 31 of each year, the fiscal year-end. The rate is reset annually. The variable rate for fiscal 2021 is 3.5%. On the same date, the fund entered a receive variable/pay fixed interest rate swap, where the fund pays a 3.6% fixed rate to a counterparty. By the end of fiscal 2021, the variable rate fell to 3.3% and the swap declined in value by $8,000. The swap qualifies for hedge accounting, per SGAS 53.

-At what amount does the enterprise fund report interest expense on its operating statement?

A) $80,000
B) $70,000
C) $64,000
D) $72,000

Question 71

State and local governments often invest liquid assets on a short-term or long-term basis for income and capital gains. Which statement best describes the reporting for these investments, per SGAS 31?

A) Investments are classified as trading or held to maturity. Trading securities are reported at market value, with changes in value reported in the appropriate operating statement. Held to maturity investments are reported at cost.
B) Investments are reported at market value, with changes in value accumulated in a contra-asset account, and the net balance is reported at cost.
C) Investments are reported at market value, with changes in value reported in the appropriate operating statement.
D) Investments are reported at cost. Any gain or loss is reported when the investments are liquidated.

Question 72

Which statement is true with respect to reporting for compensated absences by state and local governments?

A) Only compensated absences expected to be paid with current financial resources are reported in the proprietary funds operating statement.
B) If the benefit depends on future services provided by the employee, an expense is not reported in the proprietary funds.
C) The compensated absence expense reported in the proprietary funds is generally lower than the compensated absence expenditure reported in the governmental funds.
D) Most sick leave is accrued by governmental funds.

Question 73

A working landfill is reported in a proprietary fund and is 60% filled at year-end. Total estimated closure and postclosure costs are $25,000,000, and the current balance in the liability for landfill closure and postclosure costs is $12,000,000. The operating statement of the landfill will report what amount for closure and postclosure expenses for the current year?

A) $-0-
B) $ 3,000,000
C) $25,000,000
D) $13,000,000

Question 74

Landfill operations may be reported in a governmental fund or in a proprietary fund. Assume an operating landfill is estimated to be 30% filled. Total expected costs of closure and postclosure care are estimated at $15,000,000. Which statement below is false?

A) If the landfill is reported in a proprietary fund, the total liability for future closure and postclosure costs is reported at $15,000,000.
B) If the landfill is reported in a proprietary fund, and previously reported closure and postclosure costs are $4,000,000, the current year's expense for future closure and postclosure costs is reported at $500,000.
C) If the landfill is reported in a governmental fund, the total liability for future closure and postclosure costs is reported at zero.
D) If the landfill is reported in a governmental fund, the current year's expense for future closure and postclosure costs is reported at zero.

Question 75

Use the following information to answer Questions bellow.
At the beginning of the year, a county builds a sewage treatment plant, reported in an enterprise fund. The plant is expected to be in service for 25 years. The county is responsible for the plant's retirement at the end of its life, following all safety and environmental requirements. The estimated present value of the future retirement costs is $10,000,000, to be recognized on a straight-line basis over the plant's estimated life.

-The enterprise fund reports asset retirement expense for the current year of:

A) $ 400,000
B) $10,000,000
C) $ 9,600,000
D) $0

Question 76

Use the following information to answer Questions bellow.
At the beginning of the year, a county builds a sewage treatment plant, reported in an enterprise fund. The plant is expected to be in service for 25 years. The county is responsible for the plant's retirement at the end of its life, following all safety and environmental requirements. The estimated present value of the future retirement costs is $10,000,000, to be recognized on a straight-line basis over the plant's estimated life.

-What amount does the enterprise fund report for deferred outflows of resources, related to its asset retirement obligation, in its year-end statement of net position?

A) $10,000,000
B) $ 9,600,000
C) $ 400,000
D) $0

Question 77

At the beginning of the current year, the general fund enters a 3-year lease with these terms: $100,000 is due at signing, and payments of $100,000 per year are due at the end of each of the next two years. The lease agreement carries an interest rate of 3%. The present value of the lease payments is $291,347. At the start of the lease, the general fund:

A) Records $100,000 in other financing uses at the time of the lease signing.
B) Does not record the present value of the lease, but records $100,000 in expenditures with each payment.
C) Records $291,347 as a long-term asset at the time of the lease signing.
D) Records $291,347 in other financing sources at the time of the lease signing.

Question 78

At the beginning of the current year, an enterprise fund enters a 3-year lease with these terms: $100,000 is due at signing, and payments of $100,000 per year are due at the end of each of the next two years. The lease agreement carries an interest rate of 3%. The present value of the lease payments is $291,347. At the start of the lease, the enterprise fund:

A) Records $100,000 in other financing uses at the time of the lease signing.
B) Does not record the present value of the lease, but records $100,000 in expenses with each payment.
C) Records $291,347 as a long-term asset at the time of the lease signing.
D) Records $291,347 in other financing sources at the time of the lease signing.

Question 79

A governmental fund issues 3% bonds for $15,000,000 and uses this money to refund 5% bonds currently carried at $14,900,000. How is this reported by the governmental fund?

A) Debit expenditures $15,000,000 and credit other financing sources $15,000,000.
B) Debit bonds payable $14,900,000, debit deferred outflows $100,000 and credit bonds payable $15,000,000.
C) Debit other financing uses $14,900,000; debit expenditures $100,000; and credit other financing sources $15,000,000.
D) Debit cash $15,000,000 and credit bonds payable $15,000,000.

Question 80

A proprietary fund issues 3% bonds for $15,000,000 and uses this money to refund 5% bonds currently carried at $14,900,000. How is this reported by the proprietary fund?

A) Debit expenditures $15,000,000 and credit other financing sources $15,000,000.
B) Debit bonds payable $14,900,000, debit deferred outflows $100,000 and credit bonds payable $15,000,000.
C) Debit other financing uses $14,900,000; debit expenditures $100,000; and credit other financing sources $15,000,000.
D) Debit cash $15,000,000 and credit bonds payable $15,000,000.