Question 1

Whenever a significant revenue source is restricted for a specific operating purpose, a special revenue fund should be established.

Accepted Answer

This is true according to generally accepted accounting principles (GAAP). Special revenue funds are used to account for and report on the proceeds of specific revenue sources that are legally restricted to specific purposes, such as gas taxes or grants for a particular program. This ensures that the funds are used for their intended purpose and that there is transparency in how they are being utilized.

Question 2

Under the modified accrual basis of accounting applicable to governmental fund types, property tax revenue is accrued and recorded at net realizable value.

Accepted Answer

Under the modified accrual basis of accounting, property tax revenue is recognized when it is both measurable and available, not necessarily at net realizable value.

Question 3

Vehicles used by the police department should be reported in the governmental fund financial statements.

Accepted Answer

False

Question 4

Governments that are temporarily short of cash but that have levied taxes expected to be collectible during the fiscal year are generally able to borrow on short-term notes known as "tax anticipation notes payable."

Accepted Answer

Tax anticipation notes payable are a common way for governments to borrow money to cover temporary cash shortages when they have levied taxes expected to be collected during the fiscal year. These notes are essentially short-term loans that are repaid as tax revenues come in.

Question 5

Property tax revenue is an example of a nonexchange revenue-one in which the government receives value without directly giving equal value in exchange.

Accepted Answer

Property tax revenue is a type of nonexchange revenue because the government receives the revenue without directly providing a specific good or service to the taxpayer in exchange.

Question 6

Estimated uncollectible tax amounts are recorded in the General Fund general journal as a reduction in revenues and in the governmental activities journal as a bad debt expense.

Accepted Answer

Estimated uncollectible tax amounts are recorded in the General Fund general journal as a reduction in revenues, but for governmental activities in the government-wide financial statements, the accrual basis of accounting is used, and uncollectible amounts are directly reduced from the receivables, not recorded as a bad debt expense.

Question 7

A contribution was received by the city for the purchase of playground equipment. The contribution would not be recognized as revenue by the permanent fund until the playground equipment has been purchased.

Accepted Answer

The contribution should be recognized as revenue in the period it is received by the permanent fund, not when the playground equipment is purchased. Revenue recognition does not depend on the timing of the purchase of assets it is intended to fund.

Question 8

If the actual liability for goods received in the current year differs from the estimated liability recorded when the goods were ordered in the prior year, the Encumbrances account should be credited in the amount of the estimated liability.

Accepted Answer

The Encumbrances account is credited in the amount of the estimated liability to reverse the accrual recorded in the prior year.

Question 9

Under GASB standards, Revenues must be credited for the total amount of the property tax levy.

Accepted Answer

Under GASB standards, revenues should be recognized when they are measurable and available, not necessarily for the total amount of the property tax levy.

Question 10

Property taxes due 75 days after the current fiscal year end would be recognized as revenues in the current fiscal year's General Fund general journal.

Accepted Answer

Property taxes due 75 days after the current fiscal year end would not be recognized as revenues in the current fiscal year's General Fund general journal. They would instead be recognized in the following fiscal year's budget.

Question 11

Under current GASB standards the revenue from property taxes should be recorded in the amounts collected during the current period.

Accepted Answer

Under GASB standards, property tax revenue should be recognized in the period for which the taxes are levied, not necessarily when they are collected.

Question 12

Encumbrances Outstanding is shown on the balance sheet as a restriction on fund balance.

Accepted Answer

The answer of Encumbrances Outstanding is shown on the balance...

Question 13

Budgetary entries are not recorded at the government-wide level.

Accepted Answer

Budgetary entries are recorded at the fund level in governmental accounting rather than at the government-wide level. The government-wide financial statements include only the actual results of operations, not the budgeted amounts.

Question 14

A payment made by the General Fund to a debt service fund would not be recorded in the governmental activities journal.

Accepted Answer

Payments between funds, such as from the General Fund to a debt service fund, are considered interfund transactions and are not recorded in the governmental activities journal, which focuses on external transactions.

Question 15

Recording the annual budget is optional in the General Fund.

Accepted Answer

Recording the annual budget is mandatory in the General Fund. It is an important component of financial reporting and helps in the budgetary control of the government's revenues and expenditures.

Question 16

A tourist tax that is restricted for use on maintenance projects in the historic downtown district should always be recorded as general revenues in the governmental activities journal.

Accepted Answer

A tourist tax that is restricted for use on maintenance projects in the historic downtown district is a special revenue and should be recorded in the governmental activities journal as special revenues.

Question 17

The Governmental Activities column of the government-wide statement of net position reports both current and noncurrent assets and liabilities.

Accepted Answer

The Governmental Activities column of the government-wide statement of net position reports both current and noncurrent assets and liabilities.

Question 18

The Governmental Activities column of the statement of net position includes financial information for all funds of a government.

Accepted Answer

The Governmental Activities column of the statement of net position includes only the financial information related to governmental activities at the government-wide level, not for all individual funds.

Question 19

The government-wide statement of net position is prepared using the same measurement focus and basis of accounting as the General Fund balance sheet.

Accepted Answer

The government-wide statement of net position is prepared using the accrual basis of accounting and economic resources measurement focus, whereas the General Fund balance sheet is prepared using the modified accrual basis of accounting and current financial resources measurement focus.

Question 20

Current financial resources include cash and items such as marketable securities and receivables expected to be converted into cash in the current period or soon enough thereafter to pay current period obligations.

Accepted Answer

Current financial resources refer to assets that can be easily converted into cash within a short period to meet current obligations. This includes cash, marketable securities, and receivables expected to be collected within the current period.

Quiz 4: Accounting for Governmental Operating Activities–Illustrative Transactions and Financial Statements

Whenever a significant revenue source is restricted for a specific operating purpose, a special revenue fund should be established.

Under the modified accrual basis of accounting applicable to governmental fund types, property tax revenue is accrued and recorded at net realizable value.

Vehicles used by the police department should be reported in the governmental fund financial statements.

Governments that are temporarily short of cash but that have levied taxes expected to be collectible during the fiscal year are generally able to borrow on short-term notes known as "tax anticipation notes payable."

Property tax revenue is an example of a nonexchange revenue-one in which the government receives value without directly giving equal value in exchange.

Estimated uncollectible tax amounts are recorded in the General Fund general journal as a reduction in revenues and in the governmental activities journal as a bad debt expense.

A contribution was received by the city for the purchase of playground equipment. The contribution would not be recognized as revenue by the permanent fund until the playground equipment has been purchased.

If the actual liability for goods received in the current year differs from the estimated liability recorded when the goods were ordered in the prior year, the Encumbrances account should be credited in the amount of the estimated liability.

Under GASB standards, Revenues must be credited for the total amount of the property tax levy.

Property taxes due 75 days after the current fiscal year end would be recognized as revenues in the current fiscal year's General Fund general journal.

Under current GASB standards the revenue from property taxes should be recorded in the amounts collected during the current period.

Encumbrances Outstanding is shown on the balance sheet as a restriction on fund balance.

Budgetary entries are not recorded at the government-wide level.

A payment made by the General Fund to a debt service fund would not be recorded in the governmental activities journal.

Recording the annual budget is optional in the General Fund.

A tourist tax that is restricted for use on maintenance projects in the historic downtown district should always be recorded as general revenues in the governmental activities journal.

The Governmental Activities column of the government-wide statement of net position reports both current and noncurrent assets and liabilities.

The Governmental Activities column of the statement of net position includes financial information for all funds of a government.

The government-wide statement of net position is prepared using the same measurement focus and basis of accounting as the General Fund balance sheet.

Current financial resources include cash and items such as marketable securities and receivables expected to be converted into cash in the current period or soon enough thereafter to pay current period obligations.