Question 1

Assume a city's General Fund has $75,000 of inventory, $600,000 of long-term loans receivable (not constrained to any particular use), $250,000 long-term loans due from other funds (not constrained to a particular use), and $1,900,000 of investments. Based solely on this information, the city's nonspendable fund balance would be

Accepted Answer

Nonspendable fund balance includes items that cannot be spent, such as inventory or long-term loans receivable. The total of the nonspendable fund balance is the sum of these items. The sum of the inventory, long-term loans receivable, long-term loans due from other funds, and investments is $2,825,000. Therefore, the nonspendable fund balance is $2,825,000 minus $1,900,000 (the investments, which can be sold and the proceeds used for spending) which equals $925,000.

Question 2

Which of the following events could potentially qualify for reporting as an extraordinary item?

Accepted Answer

An extraordinary item is an event that is both unusual in nature and infrequent in occurrence. City Hall being hit by lightning and significantly damaged by fire is an unusual and infrequent event and could be reported as an extraordinary item. A, C, and D are not truly unusual or infrequent events and would not qualify as extraordinary items.

Question 3

The following information pertains to the Richardson County General Fund: 
$\begin{array}{lr}
\text { Expenditures } & \$ 12,800 \
\text { Revenues } & 9,200 \
\text { Long-term bond issue proceeds } & 1,000 \
\text { Short-term note principal retirements } & 250 \
\text { Operating transfers to other funds } & 75
\end{array}$
The change in fund balance for Richardson County's General Fund for the year is a

Accepted Answer

The change in fund balance is calculated by subtracting expenditures and other financing uses from revenues and other financing sources. Here, revenues are $9,200, expenditures are $12,800, operating transfers to other funds are $75, and long-term bond issue proceeds are $1,000. Short-term note principal retirements are not a revenue or an expenditure but a liability payment. Therefore, the change in fund balance is $9,200 (Revenues) + $1,000 (Long-term bond issue proceeds) - $12,800 (Expenditures) - $75 (Operating transfers to other funds) = -$2,675.

Question 4

The following information pertains to the Scott County General Fund: Expenditures $14,800,000
Revenues $14,200,000
The change in fund balance Scott County's General Fund for the year is a

Accepted Answer

The change in fund balance is calculated by subtracting expenditures from revenues. Here, $14,200,000 (Revenues) - $14,800,000 (Expenditures) = -$600,000, indicating a $600,000 decrease in the fund balance.

Question 5

Which of the following could never be considered part of assigned fund balance?

Accepted Answer

Unassigned amounts loaned to another fund for more than one year cannot be considered part of assigned fund balance as they are subject to repayment and cannot be used for other purposes until the loan is repaid. A, C, and D all involve funds being set aside for specific purposes, which would classify them as assigned fund balance.

Question 6

The City of Trixie reports in their General Fund a $505,000 special item (an inflow) and a $1,750,000 extraordinary item (an outflow) in the same year. Which of the following statements would be false?

Accepted Answer

The fund balance would decrease by $1,245,000 due to the net effect of the $505,000 inflow and the $1,750,000 outflow, not increase by $505,000.

Question 7

Which of the following fund balance classifications is not for GAAP financial statement reporting?

Accepted Answer

Budgetary Fund Balance is not a fund balance classification for GAAP financial statement reporting. The other three classifications (Nonspendable, Committed, and Unassigned) are required by GAAP.

Question 8

Which of the following is an appropriate use of a fund balance restriction?

Accepted Answer

Fund balance restrictions are often used to indicate amounts that cannot be spent or used for certain purposes due to external constraints, such as debt covenant restrictions. This information is important for financial statement users in understanding the limitations on the entity's financial resources. Choices A, B, and C do not indicate appropriate uses of fund balance restrictions.

Question 9

For a transaction to be classified as a special item it must be

Accepted Answer

The answer of For a transaction to be classified as...

Question 10

Unassigned fund balance $\textbf{     cannot      }$ be described as

Accepted Answer

Unassigned fund balance is not used to report positive and negative balances in any governmental fund; it is specifically used for the General Fund and only for negative balances in other funds.

Question 11

Hannah County has a total fund balance in the General Fund as of the end of the year of $1,565,000. Assume the following: 
-The budget officer decided to commit $405,000 for new road maintenance. (The county's governing board had previously given her this authority.)
-Unspent restricted drug enforcement grant proceeds of $75,000
-The county's governing board passed a resolution to commit $500,000 to for construction of a fleet maintenance facility
In the year-end financial statements, Hannah County would report committed fund balance in the General Fund as

Accepted Answer

The answer of Hannah County has a total fund balance...

Question 12

Which of the following would $\textbf{     not    }$  result in a portion of fund balance being classified as nonspendable?

Accepted Answer

Advances to other funds, inventory of materials and supplies, and prepaid insurance are all examples of items that would result in a portion of fund balance being classified as nonspendable. However, a city council passing enabling legislation that requires funds to be spent on a specific project does not affect the spendability of the funds.

Question 13

A government levies property taxes of $2,500,000, 1% of which are expected to prove uncollectible. The property taxes should be reported in the General Fund statement of revenues, expenditures, and changes in fund balances as

Accepted Answer

The property taxes should be reported as revenues of $2,475,000 ($2,500,000 - 1% uncollectible) and no expenditures or other financing uses because the taxes are expected to be collected and used for current year operations. The 1% uncollectible portion is accounted for as a loss in the allowance for doubtful accounts.

Question 14

Restricted fund balance in the General Fund can be the result of

Accepted Answer

The answer of Restricted fund balance in the General Fund...

Question 15

Which of the following does not affect the "Excess of Revenues over Expenditures"?

Accepted Answer

The answer of Which of the following does not affect...

Question 16

Hannah County has a total fund balance in the General Fund as of the end of the year of $1,565,000. Assume the following: 
-The budget officer decided to set aside $405,000 for new road maintenance. The county's governing board had previously given her this authority.
-Unspent restricted drug enforcement grant proceeds of $75,000.
-The county's governing board passed a resolution to commit $500,000 to use for construction of a fleet maintenance facility.
In the year-end financial statements, Hannah County would report unassigned fund balance and assigned fund balance, respectively, in the General Fund as

Accepted Answer

The unassigned fund balance is calculated by subtracting the amounts set aside (assigned and committed) from the total fund balance. The assigned fund balance includes the $405,000 for road maintenance. The committed fund balance of $500,000 for the fleet maintenance facility is not part of the assigned fund balance but reduces the unassigned balance. The restricted $75,000 does not affect the calculation between assigned and unassigned but is part of the total fund balance. Therefore, $1,565,000 - $405,000 (assigned for road maintenance) - $500,000 (committed for fleet maintenance) = $660,000, but considering the question's structure and options, the correct calculation for unassigned should consider all designations, leading to $1,565,000 - $405,000 (assigned) - $500,000 (committed) - $75,000 (restricted) = $585,000 unassigned. Assigned remains $405,000 as specified.

Question 17

When total fund balance of a Special Revenue Fund is a negative amount, which fund balance category must be zero?

Accepted Answer

The answer of When total fund balance of a Special...

Question 18

Which fund balance account may contain a negative balance?

Accepted Answer

Unassigned fund balance can contain a negative balance because it represents the portion of fund balance that has not been allocated to any other category and can reflect overspending in governmental funds.

Question 19

Fund balance may be assigned when

Accepted Answer

Management can assign fund balance for specific purposes, such as setting aside funds for future construction projects like a new fire station.

Question 20

A city acquired a dump truck for general government usage. The government paid nothing down and signed a 10%, short-term note payable for the price of the truck, $80,000. The note will mature in the next fiscal year. What items should appear in the statement of revenues, expenditures, and changes in fund balance for the General Fund in the year the truck was purchased?

Accepted Answer

The statement of revenues, expenditures, and changes in fund balance should reflect the capital outlay expenditure of $80,000 for the purchase of the truck and also include the interest expenditures on the note payable. This is because the government has made a commitment to pay the principal and the interest of the note payable. Depreciation expense would not appear in the statement of revenues, expenditures, and changes in fund balance as it is a non-cash expense and does not affect the fund balance directly.

Quiz 4: The General Fund and Special Revenue Funds