Question 1

Assume that the City of Amber maintains its books and records in a manner that facilitates the preparation of fund financial statements. Amber City maintains a general fund, a capital projects fund, and a special revenue fund. During the current fiscal year, the city engaged in the following transactions. Record all transactions. Be sure to indicate clearly the fund in which the entry is made.
a. The city sold bonds, face value $26 million, at par to finance the construction of a new city hall.
b. The city purchased two new police cars at a total cost of $50,000.
c. The city collected $8,000 in taxes dedicated for the eradication of noxious weeds.
d. The city spent $6,000 on pesticides for noxious weeds.
e. The city acquired a new tractor for $80,000. The city paid $20,000 in cash and signed a note that is due in three years.

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Question 2

The basic financial statements for Ammon City contain the following statements. For each statement identify the appropriate measurement focus and basis of accounting.
a.) Government-wide statement of position
b.) Government-wide statement of activities
c.) Balance sheet-governmental funds
d.) Statement of revenues, expenditures, and changes in fund balance-governmental funds
e.) Statement of net assets-proprietary funds
f.) Statement of revenues, expenses, and changes in fund net assets-proprietary funds

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Question 3

Assume that the City of Fort Smith maintains its books and records in a manner that facilitates the preparation of fund financial statements. For each of the following events indicate in which fund(s) of the city the event would be recorded and justify your fund selection.
a. The city collected property taxes levied for the general operations of the city.
b. The city collected property taxes levied to pay principal and interest on bonds issued several years in the past to construct a new fire station.
c. The city collected property taxes levied on a specific area of the city for the purposes of providing more frequent snow removal than is enjoyed by the rest of the city.
d. The city sold bonds to finance the construction of a new city hall.
e. The city sold bonds to finance major renovations at the city-owned electric utility.
f. The city purchased a street sweeping machine.

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Question 4

When a fax machine purchased by a governmental entity is received, it should be recorded in the general fund as a(n)

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Question 5

For what purposes do governmental entities use agency funds? What are the distinguishing characteristics of agency funds?

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Question 6

During the current fiscal year, Mountain View City's water utility, an enterprise fund, rendered billings for water supplied to the general fund. Which of the following accounts should be debited by the general fund?

Accepted Answer

The general fund should debit Due to water utility enterprise fund because it owes money to the water utility enterprise fund for the water supplied.

Question 7

Katerah City maintains the following funds:
-General
-Special revenue
-Capital projects
-Debt service
-Enterprise
-Investment trust
-Permanent
-Agency
For each of the following transactions, indicate which fund would most likely be used to report the transaction:
a. The city collects $1 million of taxes for an independent fire district located within the city.
b. The city spends $1.2 million on street maintenance using the proceeds of a city gas tax dedicated for road and highway maintenance and improvements.
c. The city receives a bequest of $1.5 million. The donor's will, requires that the principal amount be invested in perpetuity and that the earnings on the investment be used to maintain a city park to be renamed for the donor.
d. The city collects water and sewer fees of $4.2 million.
e. The city pays $4 million to a contractor for work on a new bridge.
f. The city receives $1.3 million to invest on behalf of the county.
g. The city pays its police officers wages of $325,000.
h. The city pays $2.2 million in bond interest on its general obligation debt.

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-General
-Special revenue
-Capital...

Question 8

The newly established Environmental Council (a nongovernmental not-for-profit organization) uses two funds for internal reporting purposes. The general fund is used to record day-to-day operating transactions. A building fund is used to accumulate resources for a new building to house the Council's operations. Both funds are reported using the accrual basis of accounting. In its first year, the Council engaged in the following transactions:
-It received cash contributions of $500,000. Donors stipulate that $100,000 of this amount must be used for the new building.
-It incurred operating payroll costs of $200,000, of which $180,000 is paid in cash.
-It earned $1,000 in interest (paid in cash) on investments restricted to the acquisition of the new building.
-It transferred $25,000 from its general fund to the building fund.
-It paid $15,000 in fees (accounted for as expenses) for architectural drawings for the proposed building.
a. Prepare journal entries to record the transactions. Be sure to indicate the fund in which the entry would be made.
b. Prepare a statement of revenues, expenses, and other changes in fund balances and a balance sheet. Use a two-column format, one column for each of the Council's two funds.

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Question 9

Under the GASB Statement No. 34 reporting model, fund financial statements include separate sets of financial statements for:

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Question 10

Assume that Blackfoot County maintains its books and records in a manner that facilitates the preparation of fund financial statements. The county engaged in the following transactions during the current month. Prepare journal entries in the general fund to record these events.
a. Paid salaries to county employees, $100,000.
b. Borrowed $35,000 on a three-year note from a local bank to buy a county car.
c. Purchased the county car for $35,000.
d. Made a $7,000 payment on outstanding accounts payable.
e. Collected $3,500,000 of the current property tax levy.
f. Received a $50,000 grant from the State to support general government activities.

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Question 11

The Geneva Housing Authority, a governmental entity, accounts for its activities on a modified accrual basis of accounting. In the current period, it reports the following transactions:
-The Authority issued $2.5 million in long-term bonds.
-The Authority purchased 4 acres of land for $500,000 in cash.
-It sold one of the 4 acres of land for $125,000 in cash.
-It made a $325,000 payment on the debt, consisting of $75,000 of interest and $250,000 of principal.
-It lost a lawsuit filed by one of its renters and was ordered to pay $1 million in damages over 5 years. It made its first cash payment of $200,000.
a. Prepare journal entries to record each of these transactions in the general fund.
b. Based on your entries, prepare a balance sheet and statement of revenues, expenditures, and changes in fund balance for the general fund.
c. Comment on how these statements capture the Authority's economic resources and obligations.
d. Comment on the extent to which the statement of revenues, expenditures, and changes in fund balances captures the Authority's costs of services.
e. When the Authority prepares GAAP financial statements based on GASB Statement No. 34, what assets and liabilities would be added in the Authority's government-wide Statement of Net Assets? What gains and losses would be added in its government-wide Statement of Activities?

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Question 12

Which of the following funds of Chessie City would be consolidated to form the governmental activities column in the city's government-wide financial statements?

Accepted Answer

The general fund, special revenue fund, and agency fund are all governmental funds and would be consolidated to form the governmental activities column in the city's government-wide financial statements.

Question 13

Governments use the modified accrual basis of accounting and a current financial resources measurement focus when presenting the governmental fund financial statements but they use the accrual basis of accounting and the flow of economic resources for the government-wide financial statements. What is a basis of accounting? What is measurement focus? How does the selection of one affect the selection of the other?

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Question 14

Which fund type would all governments normally include in their fund financial statements?

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Question 15

Lakeside Art Center, a nongovernmental not-for-profit entity, receives a contribution of $5 million. The donor stipulates that the contribution must be used to acquire paintings by local artists. Lakeside should classify the contribution as

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Question 16

The Chessie Foundation, a newly established governmental entity, engaged in the following transactions:
-A donor made a $1,000,000 pledge, giving the foundation a legally enforceable 90-day note for the full amount.
-The same donor paid $500,000 of the amount pledged.
-The foundation purchased a building for $900,000, paying $90,000 in cash and giving a ten-year mortgage for the balance. The building has a 25-year useful life. The foundation charges a half-year's depreciation for all assets in the year they are acquired.
-The foundation hired five employees. By year-end, these employees have earned $10,000 in salaries and wages for which they have not been paid.
The foundation accounts for its activities in a single fund.
a. Prepare journal entries to record the transactions, making the following alternative assumptions as to the fund's measurement focus:
-Cash only
-Cash plus other current financial resources (cash plus short-term receivables less short-term payables)
-All economic resources
b. Based on your entries, prepare appropriate operating statements and balance sheets for the organization.

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Question 17

Wigmore City receives a donation of $10 million from a wealthy citizen who stipulates that the funds be used to acquire and install park benches in the city's Veterans Park. The city should report the donation as an increase in

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Question 18

Which of the following is NOT included in the financial section of a comprehensive annual financial report?

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Question 19

Kayla Township issued the following bonds during the year:  a. The amount of debt reported in the Township's general fund is:
1. $0
2. $9,000,000
3. $11,000,000
4. $15,800,000
b. The township should report depreciation expense on related new capital assets in:
1. General fund
2. Enterprise fund
3. Enterprise and internal service funds
4. Capital projects fund
c. The bonds issued to construct the new police station should be reported as:
1. Debt proceeds in the general fund
2. Long-term debt in a debt service fund
3. Debt proceeds in a capital projects fund
4. None of the above
d. In accordance with bond covenants the township sets aside $1,000,000 to help ensure that it is able to meet its first payment of principal and interest on the police station debt due one year from the date the bonds were issued. The amount of liability that the township should report in its debt service fund is:
1. $0
2. $1,000,000
3. $9,000,000
4. $8,000,000

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Question 20

Why do governments and not-for-profit entities use fund accounting?

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Quiz 2: Fund Accounting