Deck 19: An Introduction to Accounting for State and Local Governmental Units

Question 1

The modified accrual basis of accounting is used for

A) governmental funds.
B) proprietary funds.
C) internal service funds.
D) both A and C.

Answer 1

A

Question 2

Internal Service Funds differ from Enterprise Funds because Internal Service Funds

A) are a proprietary fund.
B) are intended to show a profit.
C) charge for their services.
D) provide goods and services primarily to other government agencies.

Answer 2

D

Question 3

Government-wide financial statements exclude the

A) general fund.
B) fiduciary funds.
C) proprietary funds.
D) special revenue funds.

Answer 3

B

Question 4

The accounting equation for a governmental fund is

A) Assets = Liabilities + Equity.
B) Current assets + Noncurrent assets - Current liabilities - Noncurrent liabilities = Net position.
C) Current assets - Current liabilities = Fund Balance.
D) Assets = Liabilities + Fund Balance.

Question 5

Centralized data processing, central motor pools and garages, centralized risk-financing activities, and central stores typically would be accounted for using what type of fund?

A) An agency fund
B) An enterprise fund
C) An internal service fund
D) A trust fund

Question 6

The accounting equation for an agency fund is

A) Current assets - Current liabilities = Fund Balance.
B) Assets - Liabilities = Equity.
C) Assets = Equity + Liabilities.
D) Assets = Liabilities.

Question 7

Governmental fund financial statements are prepared on the ________ basis of accounting. Proprietary fund financial statements are prepared on the ________ basis of accounting.

A) modified accrual; modified accrual
B) accrual; fund
C) modified accrual; accrual
D) blended; discrete

Question 8

Approved or authorized expenditures that provide legislative control over the expenditure budget are referred to as

A) appropriations.
B) allotments.
C) allocations.
D) encumbrances.

Question 9

Because a fund is an accounting entity, each fund has I. its own accounting equation.
II) its own journals, ledgers, and other accounting records.
III) its own separate auditor.

A) I only
B) II only
C) I and II
D) I, II and III

Question 10

What funds are reported in Government-wide financial statements?

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

Question 11

Under the modified accrual basis of accounting, revenues are recognized in the period

A) when the relevant service is done.
B) when they are collected.
C) when the paying entity is billed.
D) when they become both measurable and available.

Question 12

Which pronouncements have the highest level of authority for state and local governments?

A) Financial Accounting Standards Board Statements
B) GASB Statements
C) Consensus Positions of GASB Emerging Issues Task Force
D) GASB Technical Bulletins

Question 13

When examining revenue transactions, which of the following transactions is classified as an exchange transaction?

A) When a homeowner pays property taxes
B) When a university receives a federal grant that mandates a certain type of research activity
C) When an aquatic center receives cash for a group swim
D) When an employer deducts money for state tax withholding

Question 14

What basis of accounting is used to prepare Government-wide financial statements?

A) Modified accrual basis
B) Accrual basis
C) Cash basis
D) Fiduciary basis

Question 15

Government-wide financial statements include a

A) balance sheet, an income statement, and a statement of cash flows.
B) statement of net assets, a statement of activities, and a statement of cash flows.
C) statement of net position and a statement of activities.
D) statement of activities and a statement of cash flows.

Question 16

Which type of fund is used to account for a government activity that sells goods or services either solely or almost solely to external customers?

A) A temporary fund
B) A general fund
C) An agency fund
D) An enterprise fund

Question 17

A comprehensive annual financial report has the following three major sections:

A) introductory, financial, and management's discussion and analysis.
B) introductory, financial, and statistical.
C) transmittal, financial, and statistical.
D) transmittal, financial, and management's discussion and analysis.

Question 18

The key focus of government fund accounting concerns

A) capital expenditures.
B) intergovernmental transfers from the general fund.
C) income measurement.
D) the current ability to provide and fund services and goods.

Question 19

Governmental accounting differs from corporate financial accounting primarily because

A) the size of the government and the various levels would make it unreasonable to use corporate GAAP.
B) governments lack a profit motive and must focus on accountability to the public they serve.
C) the government has no stakeholders who require financial reporting.
D) the government has too many types of organizations to use one type of corporate GAAP.

Question 20

Which fund would most likely report depreciation expense?

A) A special revenue fund
B) An enterprise fund
C) A capital projects fund
D) A debt service fund

Question 21

For each of the following events or transactions, identify the fund or funds that will be affected.
1. A city government provides electricity services to residents for a fee.
2. A printing shop was established to handle the printing needs of a county government.
3. A philanthropist donates $1 million for zoo maintenance, only earnings can be used.
4. A city government collects sales taxes on behalf of the state and for some of its counties and municipalities.
5. Interest is paid on a state government's general obligation bonds.

Question 22

The following are transactions for the city of Greenville.
a. Issued $50,000 10-year bonds.
b. Used $30,000 of the cash to buy a truck.
c. Sold the truck that was replaced which had cost $28,000, for $2,000. The old truck was fully depreciated. Residual value is zero.
d. Computed depreciation on the new truck for the year of $6,000.
Required:
Analyze the above transactions by using the accounting equation for a proprietary fund.

Question 23

The following are transactions for the city of Springfield.
a. Borrowed $20,000 by issuing a three-month, 5% note.
b. Paid $4,000 for equipment.
c. Services for $1,000 were billed and collected.
d. Year-end accrual of 3 months interest on note in (a).
Required:
Analyze the above transactions by using the accounting equation for a governmental fund.

Question 24

The following are transactions for the city of Clinton.
a. Borrowed $100,000 by issuing a one-year, 5% note, three months before year-end.
b. Accrued interest at year end, but did not pay the interest at year end.
c. Charges for services rendered of $2,500 were billed and collected immediately.
d. Incurred salary costs of $5,000, unpaid.
Required:
Analyze the above transactions by using the accounting equation for a governmental fund.

Question 25

The following are transactions for the city of Clinton.
a. Borrowed $100,000 by issuing a one-year, 5% note, three months before year-end.
b. Accrued interest at year end, but did not pay the interest at year end.
c. Charges for services rendered of $2,500 were billed and collected immediately.
d. Incurred salary costs of $5,000, unpaid.
Required:
Analyze the above transactions by using the accounting equation for a proprietary fund.

Question 26

Using the revenue types shown below, match each of the revenue sources to a revenue type. Each revenue type may be used more than once.

Question 27

The following are transactions for the city of Salem.
a. Incurred salaries of $44,000 to be paid next month.
b. Tax bills totaling $500,000 mailed to city residents.
c. Paid salaries above.
d. Computer equipment received in the amount of $11,000, to be paid in 30 days.
Required:
Analyze the above transactions by using the accounting equation for a governmental fund.

Question 28

The following are transactions for the city of Greenville.
a. Issued $50,000 10-year bonds.
b. Used $30,000 of the cash to buy a truck.
c. Sold the truck that was replaced which had cost $28,000, for $2,000. The old truck was fully depreciated. Residual value is zero.
d. Computed depreciation on the new truck for the year of $6,000.
Required:
Analyze the above transactions by using the accounting equation for a governmental fund.

Question 29

For each of the following events or transactions, identify the type of fund(s) that will be affected.
1. A central purchasing department was established to handle all the purchasing needs of a county government.
2. A county government levies sales taxes restricted as to use for job creation.
3. A county government receives a large contribution specifying that income from the contribution be distributed each year to the county zoo. The principal is to remain intact indefinitely.
4. A city government paid construction costs of $12,000 on city hall building.
5. A city government paid general operating costs.

Question 30

Identify the fund type of the fund being described.
1. A fund used to account for the external portion of investment pools reported by the sponsoring government.
2. A fund used to account for resources that are legally restricted to use of the earnings only for government programs or activities.
3. A fund used to account for resources used to pay for a new stadium.
4. A fund used to account for local taxes withheld on behalf of another county.
5. A fund used to account for resources used to pay interest on a long-term bond issue.
6. A fund used to account for specific revenues that are restricted in use.
7. A fund used to account for the local swimming pool that is owned by the city and used by residents for a membership fee.
8. A fund used to account for the centralized data processing services of the state government.
9. A fund used to account for all funds except those required to be accounted for in another fund.
10. A fund that accounts for government pension plans if the government is the trustee

Question 31

Match each of the following fund types to one of the following three fund categories as indicated. Each fund category may be used more than once.

Question 32

For each of the following transactions that could be introduced to fund the maintenance of the city park, state the type of fund(s) that would be affected. Assume that a capital project fund will be used to handle any long-term improvements or additions to the park.
1. Resources used to make 60 monthly installments on outstanding long-term debt.
2. Implemented a tax on alcohol purchases specifically designated for the park upkeep.
3. A local sports organization that uses the park raises funds and donates the money, stating that the principal may not be spent, but designating earnings to the park upkeep.
4. City council approves the funds from existing resources for the upkeep required in the upcoming year.
5. Resources used only to pay principal and interest of debt outstanding to finance park maintenance.

Question 33

Match the following definitions to the appropriate government accounting terms (numbered below).

Question 34

The following are transactions for the city of Salem.
a. Incurred salaries of $44,000 to be paid next month.
b. Tax bills totaling $500,000 mailed to city residents.
c. Paid salaries above.
d. Computer equipment received in the amount of $11,000, to be paid in 30 days.
Required:
Analyze the above transactions by using the accounting equation for a proprietary fund.

Question 35

The following are transactions for the city of Springfield.
a. Borrowed $20,000 by issuing a three-month, 5% note.
b. Paid $4,000 for equipment.
c. Services for $1,000 were billed and collected.
d. Year-end accrual of 3 months interest on note in (a).
Required:
Analyze the above transactions by using the accounting equation for a proprietary fund.

Question 36

The following are transactions for the city of Franklin.
a. Borrowed $20,000 by issuing a two-year note.
b. Purchased equipment for $6,000 cash.
c. Licenses for $700 were billed on account.
d. Accrued employee salary costs of $7,000.
e. Depreciation expense on equipment for year, $1,000.
Required:
Analyze the above transactions by using the accounting equation for a proprietary fund.

Question 37

For each of the following events or transactions, identify the fund or funds that will be affected.
1. A city government charges a fee for the use of the municipal golf course.
2. Interest is paid on state government revenue bonds.
3. A motor pool was established to handle the vehicle needs of a county government.
4. Paid salaries for general governmental employees.
5. Accrued salaries for general governmental employees.

Question 38

The following are transactions for the city of Franklin.
a. Borrowed $20,000 by issuing a two-year note.
b. Purchased equipment for $6,000 cash.
c. Licenses for $700 were billed on account.
d. Accrued employee salary costs of $7,000.
e. Depreciation expense on equipment for year, $1,000.
Required:
Analyze the above transactions by using the accounting equation for a governmental fund.