Deck 16: Accounting for State and Local Governments, Part I

Question 1

What are the basic financial statements that a state or local government now produces

Answer 1

There are only two statements that make up the government-wide statements.These two statements are the Statement of Net Assets and the Statement of Activities.However, due to the amount of fund financial statements, the only two fundamental statements are the Balance Sheet for governmental funds and the Statement of Revenues, Expenditures, and Changes in Fund Balances for the same funds.Examples of these fundamental statements are shown in Exhibits 16.3 and 16.4, respectively.
There are also a number of different funds implemented by the state to monitor all the different areas of spending.There are three categories these funds fall under: governmental, proprietary, and fiduciary.

Question 2

What are the four fund types within the fiduciary funds What types of events does each report

Answer 2

Fiduciary funds account for any assets that are trustee held for external parties.These use the economic resources measurement focus and accrual accounting and are omitted completely from government-wide financial statements.The four are listed below.
1.Investment Trust Funds - This accounts for outside investment pools when the local government accepts monetary resources from other governments to increase its monetary holdings for further investment.
2.Private-Purpose Trust Funds - This holds monies in a trustee like capacity when they are for the benefit of certain external parties.Some of these external parties include specific individuals, private organizations, or other governments.
3.Pension Trust Funds - This fund is for the employee retirement system.This fund has the potential to become quite large as the need to provide financial security for government workers increases.
4.Agency Funds - The fiduciary fund records any governmental resources being held for individuals, private organizations, or other specified governmental areas.An example would be a city government collecting taxes and tolls on behalf of another city or state government.

Question 3

How do governmental funds report capital outlay in fund financial statements How do government-wide financial statements report capital expenditures

Answer 3

In governmental funds, expenditures are the primary focus and are reported when a liability is incurred against the fund.This records all current financial capital assets, such as cash, receivables and investments, as expenditures within the governmental fund.For government-wide financial statements, only the economic resources of expenditures are measured and recorded.These expenses can include the cost of buildings, machines and other capital assets that will become depreciated over their predicted life span.

Question 4

What is an internal exchange transaction, and how is it reported

Question 5

Use the following information for Problems 46-52:
Assume that the City of Coyote has already produced its financial statements for December 31, 2010, and the year then ended.The city's General Fund was only for education and parks.Its Capital Projects Funds worked with each of these functions at times.The city also had established an Enterprise Fund to account for its art museum.
The government-wide financial statements indicated the following figures:
• Education reported net expenses of $600,000.
• Parks reported net expenses of $100,000.
• Art museum reported net revenues of $50,000.
• General government revenues for the year were $800,000 with an overall increase in the city's net assets of $150,000.
The fund-based financial statements indicated the following for the entire year:
• The General Fund reported a $30,000 increase in its fund balance.
• The Capital Projects Fund reported a $40,000 increase in its fund balance.
• The Enterprise Fund reported a $60,000 increase in its net assets.
The CPA firm of Abernethy and Chapman has been asked to review several transactions that occurred during 2010 and indicate how to correct any erroneous reporting and the impact of each error.View each situation as independent.
On December 30, 2010, the City of Coyote borrowed $20,000 for the General Fund on a 60-day note.In that fund, both Cash and Other Financing Sources were recorded.In the general information, a $30,000 overall increase was reported in the General Fund balance.What was the correct change in the General Fund's balance for 2010

Question 6

A government expects to receive revenues of $400.000 but has approved expenditures of $430,000.The anticipated shortage will have an impact on which of the following terms a. Interperiod equity.
B) Modified accrual accounting.
C) Consumption accounting.
D) Account groups.

Question 7

At the end of the current year, a government reports a fund balance-assigned of $9,000 in connection with an encumbrance.What information is being conveyed
a. A donor has given the government $9,000 that must be used in a specified fashion.
b. The government has made $9,000 in commitments in one year that will be honored in the subsequent year.
c. Encumbrances exceeded expenditures by $9,000 during the current year.
d. The government spent $9,000 less than was appropriated.

Question 8

A city constructs a special assessment project (a sidewalk) for which it is secondarily liable.The city issues bonds of $90,000.It authorizes another $10,000 that is transferred out of the General Fund.The sidewalk is built for $100,000.The citizens are billed for $90,000.They pay this amount and the debt is paid off.Where is the $100,000 expenditure for construction recorded
a. It is not recorded by the city.
b. It is recorded in the Agency Fund.
c. It is recorded in the General Fund.
d. It is recorded in the Capital Projects Fund.

Question 9

A city orders a new computer for its General Fund at an anticipated cost of $88,000.Its actual cost when received is $89,400.Payment is subsequently made.Give all required journal entries for fund and government-wide financial statements.What information do the government-wide financial statements present What information do the fund financial statements present

Question 10

Use the following information for Problems 46-52:
Assume that the City of Coyote has already produced its financial statements for December 31, 2010, and the year then ended.The city's General Fund was only for education and parks.Its Capital Projects Funds worked with each of these functions at times.The city also had established an Enterprise Fund to account for its art museum.
The government-wide financial statements indicated the following figures:
• Education reported net expenses of $600,000.
• Parks reported net expenses of $100,000.
• Art museum reported net revenues of $50,000.
• General government revenues for the year were $800,000 with an overall increase in the city's net assets of $150,000.
The fund-based financial statements indicated the following for the entire year:
• The General Fund reported a $30,000 increase in its fund balance.
• The Capital Projects Fund reported a $40,000 increase in its fund balance.
• The Enterprise Fund reported a $60,000 increase in its net assets.
The CPA firm of Abernethy and Chapman has been asked to review several transactions that occurred during 2010 and indicate how to correct any erroneous reporting and the impact of each error.View each situation as independent.
An art display set up for the community was recorded within the General Fund and generated revenues of $9,000 but had expenditures of $45,000 ($15,000 in expenses and $30,000 to buy land for the display).The CPA firm has determined that this program should have been recorded as an Enterprise Fund activity because it was offered in association with the art museum.
a.What was the correct change in the General Fund's balance for 2010
b.What was the correct overall change in the city's net assets on the government-wide financial statements
c.What was the correct change in the net assets of the Enterprise Fund on the fund-based financial statements

Question 11

What measurement focus is used in fund financial statements for governmental funds, and what system is applied to determine the timing of revenue and expenditure recognition

Question 12

What are the two major divisions reported in government-wide financial statements What funds are not reported in these financial statements

Question 13

What are the two different ways that supplies and prepaid items can be recorded on fund financial statements

Question 14

Cash of $90,000 is transferred from a city's General Fund to start construction on a police station.The city issues a bond at its $1.8 million face value.The police station is built for $1.89 million.Prepare all necessary journal entries for these transactions for fund and government-wide financial statements.Assume that the city does not record the commitment.What information do the government-wide financial statements present What information do the fund financial statements present

Question 15

Use the following information for Problems 46-52:
Assume that the City of Coyote has already produced its financial statements for December 31, 2010, and the year then ended.The city's General Fund was only for education and parks.Its Capital Projects Funds worked with each of these functions at times.The city also had established an Enterprise Fund to account for its art museum.
The government-wide financial statements indicated the following figures:
• Education reported net expenses of $600,000.
• Parks reported net expenses of $100,000.
• Art museum reported net revenues of $50,000.
• General government revenues for the year were $800,000 with an overall increase in the city's net assets of $150,000.
The fund-based financial statements indicated the following for the entire year:
• The General Fund reported a $30,000 increase in its fund balance.
• The Capital Projects Fund reported a $40,000 increase in its fund balance.
• The Enterprise Fund reported a $60,000 increase in its net assets.
The CPA firm of Abernethy and Chapman has been asked to review several transactions that occurred during 2010 and indicate how to correct any erroneous reporting and the impact of each error.View each situation as independent.
The City of Coyote mailed property tax bills for 2011 to its citizens during August 2010.Payments could be made early to receive a discount.The levy becomes legally enforceable on February 15, 2011.All money received must be spent during 2011 or later.The total assessment is $300,000; 40 percent of that amount, less a 10 percent discount, is collected in 2010.The city expects to receive all of the remaining money during 2011 with no discount.During 2010, the government increased cash as well as a revenue for the amount received.No change was made in creating the governmentwide financial statements.
a.What was the correct overall change in the city's net assets as shown on the government-wide financial statements
b.What was the correct change for 2010 in the fund balance reported in the General Fund

Question 16

A citizen of the City of Townsend gives it a gift of $22,000 in investments.The citizen requires that the investments be held but any resulting income must be used to help maintain the city's cemetery.In which fund should this asset be reported
a. Special Revenue Funds.
b. Capital Projects Funds.
c. Permanent Funds.
d. General Fund.

Question 17

A government buys equipment for its police department at a cost of $54,000.Which of the following is not true
a. Equipment will increase by $54,000 in the government-wide financial statements.
b. Depreciation in connection with this equipment will be reported in the fund financial statements.
c. The equipment will not appear within the reported assets in the fund financial statements.
d. An expenditure for $54,000 will be reported in the fund financial statements.

Question 18

A city constructs curbing in a new neighborhood and finances it as a special assessment.Under what condition should this activity be recorded in the Agency Fund
a. Never; the work is reported in the Capital Projects Funds.
b. Only if the city is secondarily liable for any debt incurred to finance construction costs.
c. Only if the city is in no way liable for the costs of the construction.
d. In all cases.

Question 19

A local government has the following transactions during the current fiscal period.Prepare journal entries without dollar amounts, first for fund financial statements and then for government-wide financial statements.
a. The budget for the police department, ambulance service, and other ongoing activities is passed.Funding is from property taxes, transfers, and bond proceeds.All monetary outflows will be for expenses and fixed assets.A deficit is projected.
b. A bond is issued at face value to fund the construction of a new municipal building.
c. A computer is ordered for the tax department.
d. The computer is received.
e. The invoice for the computer is paid.
f. The city council agrees to transfer money from the General Fund as partial payment for a special assessments project but has not done so.The city will be secondarily liable for any money borrowed for this work.
g. The city council creates a motor pool to service all government vehicles.Money is transferred from the General Fund to permanently finance this facility.
h. Property taxes are levied.Although officials believe that most of these taxes should be collected during the current period, a small percentage is estimated to be uncollectible.
i. The city collects grant money from the state that must be spent as a supplement to the salaries of the police force.No entry has been recorded.Appropriate payment of the supplement is viewed as an eligibility requirement.
j. A portion of the grant money in ( i ) is properly spent.

Question 20

Use the following information for Problems 46-52:
Assume that the City of Coyote has already produced its financial statements for December 31, 2010, and the year then ended.The city's General Fund was only for education and parks.Its Capital Projects Funds worked with each of these functions at times.The city also had established an Enterprise Fund to account for its art museum.
The government-wide financial statements indicated the following figures:
• Education reported net expenses of $600,000.
• Parks reported net expenses of $100,000.
• Art museum reported net revenues of $50,000.
• General government revenues for the year were $800,000 with an overall increase in the city's net assets of $150,000.
The fund-based financial statements indicated the following for the entire year:
• The General Fund reported a $30,000 increase in its fund balance.
• The Capital Projects Fund reported a $40,000 increase in its fund balance.
• The Enterprise Fund reported a $60,000 increase in its net assets.
The CPA firm of Abernethy and Chapman has been asked to review several transactions that occurred during 2010 and indicate how to correct any erroneous reporting and the impact of each error.View each situation as independent.
The City of Coyote mailed property tax bills for 2011 to its citizens during August 2010.Payments could be made early to receive a discount.The levy becomes legally enforceable on February 15, 2011.All money received must be spent during 2011 or later.The total assessment is $300,000, and 40 percent of that amount is collected in 2010 less a 10 percent discount.The city expects to receive all the rest of the money during 2011 with no discount.During 2010, the government increased cash and a revenue for the amount received.In addition, a receivable account and a deferred revenue account for $180,000 were recognized.
a.In the general information, an overall increase in the city's net assets of $150,000 was found on the government-wide financial statements.What was the correct overall change in the city's net assets as reported on the government-wide financial statements
b.In the general information, an overall increase of $30,000 was reported in the General Fund balance.What was the correct change during 2010 in the General Fund's balance

Question 21

IS IT AN ASSET OR A LIABILITY
During the evolution of government accounting, many scholars have discussed its unique features.In the August 1989 issue of the Journal of Accountancy R.K.Mautz described the reporting needs of governments and not-for-profit organizations (such as charities) in "Not-For-Profit Financial Reporting: Another View."
As an illustration of their accounting problems, Mautz examined the method by which a city should record a newly constructed high school building.Conventional business wisdom would say that such a property represents an asset of the government.Thus, the cost should be capitalized and then depreciated over an estimated useful life.However, in paragraph 26 of FASB Concepts Statements No.6, an essential characteristic of an asset is "a probable future benefit...to contribute directly to future cash inflows."
Mautz reasoned that the school building cannot be considered an asset because it provides no net contribution to cash inflows.In truth, a high school requires the government to make significant cash outflows for maintenance, repairs, utilities, salaries, and the like.Public educational facilities (as well as many of the other properties of a government such as a fire station or municipal building) are acquired with the understanding that net cash outflows will result for years to come.
Consequently, Mautz considered whether the construction of a high school is not actually the incurrence of a liability because the government is taking on an obligation that will necessitate future cash payments.This idea also is rejected, once again based on the guidance of Concepts Statement No.6 (para.36), because the cash outflow is not required at a "specified or determinable date, on occurrence of a specified event, or on demand." Is a high school building an asset or is it a liability If it is neither, how should the cost be recorded How is the high school reported in fund-based financial statements How is the high school reported in government-wide financial statements Which of these two approaches provides the best portrayal of the decision to acquire or construct this building
Can a government possibly be accounted for in the same manner as a for-profit enterprise

Question 22

What measurement focus is used in government-wide financial statements, and what system is applied to determine the timing of revenue and expense recognition

Question 23

Fund financial statements have separate columns for each activity.Which activities are reported in this manner

Question 24

What are the four classifications of nonexchange revenues that a state or local government can recognize In each case, when are revenues normally recognized

Question 25

Prepare journal entries for the Cits of Pudding's governmental funds to record the following transactions, first for fund financial statements and then for government-wide financial statements.
a. A new truck for the sanitation department was ordered at a cost of $94,000.
b. The city print shop did $1.200 worth of work for the school system (but has not yet been paid).
c. An $11 million bond was issued to build a new road.
d. Cash of $ 140,000 is transferred from the General Fund to provide permanent financing for a municipal swimming pool that will be viewed as an Enterprise Fund.
e. The truck ordered in ( a ) is received at an actual cost of $96,000.Payment is not made at this time.
f. Cash of $32,000 is transferred from the General Fund to the Capital Projects Fund.
g. A state grant of $30,000 is received that must be spent to promote recycling.
h. The first $5,000 of the state grant received in ( g ) is appropriately expended.

Question 26

Use the following information for Problems 46-52:
Assume that the City of Coyote has already produced its financial statements for December 31, 2010, and the year then ended.The city's General Fund was only for education and parks.Its Capital Projects Funds worked with each of these functions at times.The city also had established an Enterprise Fund to account for its art museum.
The government-wide financial statements indicated the following figures:
• Education reported net expenses of $600,000.
• Parks reported net expenses of $100,000.
• Art museum reported net revenues of $50,000.
• General government revenues for the year were $800,000 with an overall increase in the city's net assets of $150,000.
The fund-based financial statements indicated the following for the entire year:
• The General Fund reported a $30,000 increase in its fund balance.
• The Capital Projects Fund reported a $40,000 increase in its fund balance.
• The Enterprise Fund reported a $60,000 increase in its net assets.
The CPA firm of Abernethy and Chapman has been asked to review several transactions that occurred during 2010 and indicate how to correct any erroneous reporting and the impact of each error.View each situation as independent.
In 2010, the City of Coyote received a $320,000 cash grant from the state to stop air pollution.Assume that although a special revenue fund could have been set up, the money remained in the General Fund.Cash was received immediately but had to be returned if the city had not lowered air pollution by 25 percent by 2013.On December 31, 2010, Coyote spent $210,000 of this money for a large machine to help begin to reduce pollution.The machine is expected to last for five years and was recorded as an expenditure in the General Fund and as an asset on the government-wide financial statements where it was depreciated based on the straight-line method and the half-year convention.Because the money had been received, all $320,000 was recorded as a revenue on both the fund-based and the government-wide financial statements.
a.What was the correct change for 2010 in the General Fund's balance
b.What was the correct overall change in the net assets reported on the government-wide financial statements

Question 27

Search the Internet for the official website of one or more state or local governments.After reviewing this website, determine whether the latest comprehensive annual financial report (CAFR) is available on the site.For example, the most recent comprehensive annual financial report for the City of Des Moines can be found at https://www.dmgov.org/Departments/Finance/Pages/CAFR.aspx.Use the financial statements that you locate to answer the following questions.
Required
1.How does the audit opinion given to this city by its independent auditors differ from the audit opinion rendered on the financial statements for a for-profit business
2.A reconciliation should be presented to explain the difference between the net changes in fund balances for the governmental funds (fund financial statements) and the change in net position for the governmental activities (government-wide financial statements).What were several of the largest reasons for the difference
3.What were the city's largest sources of general revenues
4.What was the total amount of expenditures recorded by the general fund during the period How were those expenditures classified
5.What assets are reported for the general fund
6.Review the notes to the financial statements and then determine the number of days the government uses to define the end-of-year financial resources that are viewed as currently available.
7.Did the size of the general fund balance increase or decrease during the most recent year and by how much

Question 28

Which of thefollowing statements is correct about the reporting of governmental funds
a. Fund financial statements measure economic resources.
b. Government-wide financial statements measure only current financial resources.
c. Fund financial statements measure both economic resources and current financial resources.
d. Government-wide financial statements measure economic resources.

Question 29

A city acquires supplies for its fire department and uses the consumption method of accounting.Which of the following statements is true tor the fund statements
a. An expenditures account was debited at the time of receipt.
b. An expense is recorded as the supplies are consumed.
c. An inventory account is debited at the time of the acquisition.
d. The supplies are recorded within the General Fixed Assets Account Group.

Question 30

Which of the following is an example of an interactivity transaction
a. Money is transferred from the General Fund to the Debt Service Fund.
b. Money is transferred from the Capital Projects Fund to the General Fund.
c. Money is transferred from the Special Revenue Fund to the Debt Service Fund.
d. Money is transferred from the General Fund to the Enterprise Fund.

Question 31

Prepare journal entries for a local government to record the following transactions, first for fund financial statements and then for government-wide financial statements.
a. The government sells $900,000 in bonds at face value to finance construction of a warehouse.
b. A $1.1 million contract is signed for construction of the warehouse.The commitment is required if allowed.
c. A $130,000 transfer of unrestricted funds was made for the eventual payment of the debt in (a).
d. Equipment for the fire department is received with a cost of $12,000.When it was ordered, an anticipated cost of $11,800 had been recorded.
e. Supplies to be used in the schools are bought for $2,000 cash.The consumption method is used.
f. A state grant of $90,000 is awarded to supplement police salaries.The money will be paid to reimburse the government after the supplements have been paid to the police officers.
g. Property tax assessments are mailed to citizens of the government.The total assessment is $600,000.although officials anticipate that 4 percent will never be collected.There is an enforceable legal claim for this money and the government can use it immediately.

Question 32

Use the following information for Problems 46-52:
Assume that the City of Coyote has already produced its financial statements for December 31, 2010, and the year then ended.The city's General Fund was only for education and parks.Its Capital Projects Funds worked with each of these functions at times.The city also had established an Enterprise Fund to account for its art museum.
The government-wide financial statements indicated the following figures:
• Education reported net expenses of $600,000.
• Parks reported net expenses of $100,000.
• Art museum reported net revenues of $50,000.
• General government revenues for the year were $800,000 with an overall increase in the city's net assets of $150,000.
The fund-based financial statements indicated the following for the entire year:
• The General Fund reported a $30,000 increase in its fund balance.
• The Capital Projects Fund reported a $40,000 increase in its fund balance.
• The Enterprise Fund reported a $60,000 increase in its net assets.
The CPA firm of Abernethy and Chapman has been asked to review several transactions that occurred during 2010 and indicate how to correct any erroneous reporting and the impact of each error.View each situation as independent.
During 2010, the City of Coyote's General Fund received $10,000, which was recorded as a general revenue when it was actually a program revenue earned by its park program.
a.What was the correct overall change for 2010 in the net assets reported on the government-wide financial statements
b.In the general information, the parks reported net expenses for the period of $100,000.What was the correct amount of net expenses reported by the parks

Question 33

Go to the Web site www.gasb.org and click on "Strategic Plan" within the left column.Click on "Full Strategic Plan." Read the vision, mission, core values, and goals of GASB.
Required
Assume that a financial analyst with whom you are working is interested in knowing more about the purpose of GASB.Write a short memo explaining the work of GASB based on its vision, mission, core values, and goals.

Question 34

What assets are viewed as current financial resources

Question 35

The General Fund of a city reports assets of $300,000 and liabilities of $200,000 in the fund financial statements.Explain what is meant by each of the following balances: fund balance-nonspendable of $40,000, fund balance-restricted of $28,000, fund balance-committed of $ 17,000, fund balance- -assigned of $4,000, and fund balance-unassigned of $ 11,000.

Question 36

When is a receivable recognized for property tax assessments When is the revenue recognized

Question 37

Following are descriptions of transactions and other financial events for the City of Tetris for the year ending December 2010.Not all transactions have been included here.Only the General Fund formally records a budget.No encumbrances were carried over from 2009.
The following questions are independent although each is based on the preceding information.Assume that the government is preparing information for its fund-based financial statements.
a.What is the balance in the Budgetary Fund Balance account for the budget for the year Is it a debit or credit
b.Assume that 60 percent of the school supplies are used during the year so that 40 percent remain.
If the consumption method is being applied, how is this recorded
c.The sanitation truck that was ordered was not received before the end of the year.The commitment will be honored in the subsequent year when the truck arrives.What reporting is made at the end of 2010
d.Assume that the ambulance was received on December 31, 2010.Provide all necessary journal entries on that date.
e.Give all journal entries that should have been made when the $33,000 transfer was made to eventually pay off a long-term debt.
f.What amount of revenue would be recognized for the period Explain the composition of this total.
g.What are the total expenditures Explain the makeup of this total.Include ( b ) here.
h.What journal entry or entries were prepared when the bonds were issued

Question 38

Which of the following is not a governmental fund
a. Special Revenue Fund.
b. Internal Service Fund.
c. Capital Projects Fund.
d. Debt Service Fund.

Question 39

Which of the following statements is correct about the reporting of governmental funds a. Fund financial statements measure revenues and expenditures based on modified accrual accounting.
B) Government-wide financial statements measure revenues and expenses based on modified accrual accounting.
C) Fund financial statements measure revenues and expenses based on accrual accounting.
D) Government-wide financial statements measure revenues and expenditures based on accrual accounting.

Question 40

An income tax is an example of which of the following
a. Derived tax revenue.
b. Imposed nonexchange revenue.
c. Government-mandated nonexchange revenue.
d. Voluntary nonexchange transaction.

Question 41

Cash of $60,000 is transferred from the General Fund to the Debt Service Fund.What is reported on the government-wide financial statements
a. No reporting is made.
b. Other Financing Sources increase by $60,000; Other Financing Uses increase by $60,000.
c. Revenues increase by $60,000; Expenditures increase by $60,000.
d. Revenues increase by $60,000; Expenses increase by $60,000.

Question 42

The following trial balance is taken from the General Fund of the City of Jennings for the year ending December 31, 2010.Prepare a condensed statement of revenues, expenditures, and other changes in fund balance and also prepare a condensed balance sheet.

Question 43

How have users' needs impacted the development of accounting principles for state and local government units

Question 44

In applying the current financial resources measurement focus, when are liabilities recognized

Question 45

Why are budgetary entries recorded in the individual funds of a state or local government

Question 46

How is the issuance of a long-term bond reported on fund financial statements How is the issuance of a long-term bond reported on government-wide financial statements

Question 47

A city has only one activity, its school system.The school system is accounted for within the General Fund.For convenience, assume that, at the start of 2010, the school system and the city have no assets.During the year, the city assessed $400,000 in property taxes.Of this amount, it collected $320,000 during the year, received $50,000 within a few weeks after the end of the year, and expected the remainder to be collected about six months later.The city makes the following payments during 2010: salary expense, $100,000; rent expense, $70,000; equipment (received on January 1 with a five-year life and no salvage value), $50,000; land, $30,000; and maintenance expense, $20,000.In addition, on the last day of the year, the city purchased a $200,000 building by signing a long-term liability.The building has a 20-year life and no salvage value, and the liability accrues interest at a 10 percent annual rate.The city also buys two computers on the last day of the year for $4,000 each.One will be paid for in 30 days and the other in 90 days.The computers should last for four years and have no salvage value.During the year, the school system charged students $3,000 for school fees and collected the entire amount.Any depreciation is recorded using the straight-line method.
a.Produce a statement of net assets and a statement of activities for this city's government-wide financial statements.
b.Produce a balance sheet and a statement of revenues, expenditures, and changes in fund balance for the fund-based financial statements.Assume that available is defined by the city as anything to be received within 60 days.

Question 48

Go to the Web site www.gasb.org and scroll down to the topic "Exposure Drafts." Review any exposure drafts currently being considered by the GASB.
Required
Identify the major impacts that the proposed changes would create in government accounting.

Question 49

During the current year, a government buys land for $80,000.Which of the following is not true
a. The land could be reported as an asset by the business-type activities in the government- wide financial statements.
b. The land could be reported as an asset by the governmental activities in the government- wide financial statements.
c. The land could be reported as an asset by the proprietary funds in the fund financial statements.
d. The land could be reported as an asset by the governmental funds in the fund financial statements.

Question 50

How are budget results shown in the financial reporting of a state or local government

Question 51

Cash of $60,000 is transferred from the General Fund to the Debt Service Fund.What is reported on the fund financial statements
a. No reporting is made.
b. Other Financing Sources increase by $60,000; Other Financing Uses increase by $60,000.
c. Revenues increase by $60,000; Expenditures increase by $60,000.
d. Revenues increase by $60,000; Expenses increase by $60,000.

Question 52

The following transactions relate to the General Fund of the city of Lost Angel for the year ending December 31, 2010.Prepare a statement of revenues, expenditures, and other changes in fund balance for the General Fund for the period to be included in the fund-based financial statements.Assume that the fund balance at the beginning of the year was $180,000.Assume also that the purchases method is applied to the supplies and that receipt within 60 days is used as the definition of available resources.
a.Collected property tax revenue of $700,000.A remaining assessment of $100,000 will be collected in the subsequent period.Half of that amount should be collected within 30 days, and the remainder will be received in about five months after the end of the year.
b.Spent $200,000 on four new police cars with 10-year lives.A price of $207,000 had been anticipated when the cars were ordered.The city calculates all depreciation using the straight-line method with no salvage value.The half-year convention is used.
c.Transferred $90,000 to a debt service fund.
d.Issued a long-term bond for $200,000 on July 1.Interest at a 10 percent annual rate will be paid each year starting on June 30, 2011.
e.Ordered a new computer with a five-year life for $40,000.
f.Paid salaries of $30,000.Another $10,000 will be owed at the end of the year but will not be paid for 30 days.
g.Received the new computer but at a cost of $41,000; payment to be made in 45 days.
h.Bought supplies for $10,000 in cash.
i.Used $8,000 of the supplies in ( h ).

Question 53

Obtain a copy of the original version of GASB Statement 34.Read paragraphs 239 through 277.
Required
Write a report describing alternatives that the GASB considered when it created Statement 34.Indicate the alternative that you would have viewed as most appropriate, and describe why the GASB did not choose it.

Question 54

What are the three classifications of funds What funds are included in each of these three

Question 55

The state awards a grant of $50,000 to the Town of Glenville.The state will pay the grant money to the town as a reimbursement for money spent on road repair.At the time of the grant, the state pays $8,000 in advance.During the first year of this program, the town spent $14,000 and applied for reimbursement.What amount of revenue should be recognized
a. $-0-,
b.$8,000.
c. $14,000.
d. $50,000.

Question 56

What is a special assessment project How are special assessment projects reported

Question 57

Use the transactions in problem 40 but prepare a statement of net assets for the government-wide financial statements.Assume that the General Fund had $180,000 in cash on the first day of the year and no other assets or liabilities.No amount was restricted, committed, or assigned.

Question 58

What is the purpose of a Special Revenue Fund
a. To account for revenues legally or externally restricted as an operating expenditure.
b. To account for ongoing activities.
c. To account for gifts when only subsequently earned income can be expended.
d. To account for the cost of long-lived assets bought with designated funds.

Question 59

Which of the following statements is true concerning the recording of a budget
a. At the beginning of the year, debit Appropriations.
b. A debit to the Budgetary Fund Balance account indicates an expected surplus.
c. At the beginning of the year, debit Estimated Revenues.
d. At the end of the year, credit Appropriations.

Question 60

When is an encumbrance recorded What happens to this balance How are encumbrances reported in government-wide financial statements

Question 61

Cash of $20,000 is transferred from the General Fund to the Enterprise Fund to pay for work that was done.What is reported on the government-wide financial statements
a. No reporting is made.
b. Other Financing Sources increase by $20,000; Other Financing Uses increase by $20,000.
c. Revenues increase by $20,000; Expenditures increase by $20,000.
d. Revenues increase by $20,000; Expenses increase by $20,000.

Question 62

Government officials of the City of Jones expect to receive General Fund revenues of $400,000 in 2010 but approve spending only $380,000.Later in the year, as they receive more information, they increase the revenue projection to $420,000.Officials approve the spending of an additional $15,000.For each of the following, indicate whether the statement is true or false and, if false, explain why.
a.In recording this budget, appropriations should be credited initially for $380,000.
b.The city must disclose this budgetary data within the required supplemental information section reported after the notes to the financial statements.
c.When reporting budgetary information for the year, three figures should be reported: amended budget, initial budget, and actual figures.
d.In making the budgetary entry, a debit must be made to some type of Fund Balance account to indicate the projected surplus.
e.The reporting of the budget is reflected in the government-wide financial statements.

Question 63

Why have accountability and control been so important in the traditional accounting for state and local governments units

Question 64

What are the five fund types within the governmental funds What types of events does each of these report

Question 65

A city issues a 60-day tax anticipation note to fund operations.What recording should it make
a. The liability should be reported in the government-wide financial statements; an other financing source should be shown in the fund financial statements.
b. A liability should be reported in the government-wide financial statements and in the fund financial statements.
c. An other financing source should be shown in the government-wide financial statements and in the fund financial statements.
d. An other financing source should be shown in the government-wide financial statements; a liability is reported in the fund financial statements.

Question 66

How are interfund transfers reported in fund financial statements

Question 67

On December 1, 2010, a state government awards a city government a grant of $1 million to be used specifically to provide hot lunches for all schoolchildren.No money is received until June 1, 2011.For each of the following, indicate whether the statement is true or false and, if false, explain why.
a.Because the government received no money until June 1, 2011, no amount of revenue can be recognized in 2010 on the government-wide financial statements.
b.If this grant has no eligibility requirements and the money is properly spent in September 2011 for the hot lunches, the revenue should be recognized during that September.
c.Because the money came from the state government and because the government specified the use, this is a government-mandated nonexchange transaction.
d.If the government had received the money on December 1, 2010, but eligibility requirements had not been met yet, a deferred revenue of $1 million would have been recognized on the governmentwide financial statements.
e.The rules for recognition of this revenue were created by GASB Statement 34.

Question 68

Search the Internet for the official website of one or more state or local governments.On this website, determine whether the latest comprehensive annual financial report (CAFR) is available.For example, a recent comprehensive annual financial report for the City of Minneapolis can be found at https:// www.talgov.com/traffic/accounting-annualrprts.aspx.Read the Management's Discussion and Analysis (MD A) that should be located near the beginning of the annual report.
Required
Write a memo to explain four or five of the most interesting pieces of information that the Management's Discussion and Analysis provides.

Question 69

The General Fund pays rent for two months.Which of the following is not correct a. Rent expense should be reported in the government-wide financial statements.
B) Rent expense should be reported in the General Fund.
C) An expenditure should be reported in the fund financial statements.
D) If one month of rent is in the first year with the other month in the next year, either the purchases method or the consumption method can be used in fund statements.

Question 70

A city issues five-year bonds payable to finance construction of a new school.What recording should be made a. Report the liability in the government-wide financial statements; show an other financing source in the fund financial statements.
B) Report a liability in the government-wide financial statements and in the fund financial statements.
C) Show an other financing source in the government-wide financial statements and in the fund financial statements.
D) Show an other financing source in the government-wide financial statements; report a liability in the fund financial statements.

Question 71

Cash of $20,000 is transferred from the General Fund to the Enterprise Fund to pay for work that was done.What is reported on the fund financial statements a. No reporting is made.
B) Other Financing Sources increase by $20,000; Other Financing Uses increase by $20,000.
C) Revenues increase by $20,000; Expenditures increase by $20,000.
D) Revenues increase by $20,000; Expenses increase by $20,000.

Question 72

Indicate (i) how each of the following transactions impacts the fund balance of the General Fund, and its classifications, for fund financial statements and (ii) what the impact is on the net asset balance of the Government Activities on the government-wide financial statements.
a. Issue a five-year bond for $6 million to finance general operations.
b. Pay cash of $ 149,000 for a truck to be used by the police department.
c. The fire department pays $ 17,000 to a government motor pool that services the vehicles of only the police and fire departments.Work was done on several department vehicles.
d. Levy property taxes of $75,000 for the current year that will not be collected until four months into the subsequent year.
e. Receive a grant for $7,000 that must be returned unless the money is spent according to the stipulations of the conveyance.That is expected to happen in the future.
f. Businesses make sales of $20 million during the current year.The government charges a 5 percent sales tax.Half of this amount is to be collected 10 days after the end of the year with the remainder to be collected 14 weeks after the end of the year."Available" has been defined by this government as 75 days.
g. Order a computer for the school system at an anticipated cost of $23,000.
h. A cash transfer of $18,000 is approved from the General Fund to a Capital Projects Fund.

Question 73

What is the purpose of Enterprise Funds
a. To account for operations that provide services to other departments within a government.
b. To account for asset transfers.
c. To account for ongoing activities such as the police and fire departments.
d. To account for operations financed in whole or in part by outside user charges.

Question 74

What are the two fund types within the proprietary funds What types of events does each report

Question 75

At what point in time does a governmental fund report an expenditure

Question 76

In government-wide financial statements, how do intra-activity and interactivity transactions differ How is each type of transaction reported

Question 77

Fund A transfers $20,000 to Fund B.For each of the following, indicate whether the statement is true or false and, if false, explain why.
a. If Fund A is the General Fund and Fund B is an Enterprise Fund, nothing will be shown for this transfer on the statement of activities within the government-wide financial statements.
b. If Fund A is the General Fund and Fund B is a Debt Service Fund, nothing will be shown for this transfer on the statement of activities within the government-wide financial statements.
c. If Fund A is the General Fund and Fund B is an Enterprise Fund, a $20,000 reduction will be reported on the statement of revenues, expenditures, and other changes for the governmental funds within the fund financial statements.
d. If Fund A is the General Fund and Fund B is a Special Revenue Fund (which is not considered a major fund), no changes will be shown on the statement of revenues, expenditures, and other changes within the fund financial statements.
e. If Fund A is the General Fund and Fund B is an Internal Service Fund and this is for work done, the General Fund will report an expense of $20,000 within the fund financial statements.

Question 78

Which of the following statements is true
a. There are three different types of proprietary funds.
b. There are three different types of fiduciary funds.
c. There are five different types of fiduciary funds.
d. There are five different types of governmental funds.

Question 79

A purchase order for $3,000 is recorded in the General Fund for the purchase of a new computer.The computer is received at an actual cost of $3,020.Which of the following is correct
a. Machinery is increased in the General Fund by $3,020.
b. An encumbrance account is reduced by $3,020.
c. An expenditure is increased by $3,020.
d. An expenditure is recorded for the additional $20.

Question 80

A $110,000 payment is made on a long-term liability.Of this amount, $10,000 represents interest.Which of the following is not true
a. Reduce liabilities by $100,000 in the government-wide financial statements.
b. Record a $110.000 expenditure in the fund financial statements.
c. Reduce liabilities by $100,000 in the fund financial statements.
d. Recognize $10,000 interest expense in the government-wide financial statements.