Question 1

An example of a program revenue in the government-wide Statement of Activities would be motor fuel taxes dedicated to street repairs.

Accepted Answer

False

Question 2

An asset may be considered impaired if either the decline in the service utility is unexpected or the amount of the decline in service utility is large.

Accepted Answer

An impairment is deemed to exist if both of the following factors are present: 1) the decline in the service utility is unexpected and 2) the amount of the decline in service utility is large.

Question 3

Internal Service Funds are a category of proprietary funds.

Accepted Answer

Internal Service Funds are a type of proprietary fund that operates like a business within a government entity, providing goods and services to other departments or agencies within the same government.

Question 4

Assume a government reported Proceeds of Bonds in the amount of $1,000,000 in the governmental fund Statement of Revenues, Expenditures and Changes in Fund Balances. When preparing the reconciliation from the changes in fund balances in that statement to the changes in net assets in the governmental funds column in the Statement of Activities, a decrease of $1,000,000 would be entered.

Accepted Answer

Proceeds of Bonds represent an inflow of resources to the governmental fund, and therefore increase the fund balance. However, when preparing the reconciliation from the fund balance to the changes in net assets in the Statement of Activities, the full amount of the bond proceeds is not recognized as revenue. Instead, only the portion that is recognized as revenue in the accrual basis of accounting is included. This means that there will be a decrease in the fund balance equal to the amount of bonds proceeds that are not recognized as revenue in the current period. In this case, if none of the bond proceeds are recognized as revenue in the current period, then the full $1,000,000 would be entered as a decrease in the reconciliation.

Question 5

GASB Statement 37 specifically requires capitalization of interest during construction in governmental funds for government-wide statements.

Accepted Answer

GASB Statement 37 does not require capitalization of interest during construction in governmental funds for government-wide statements. It only requires capitalization of interest during construction for business-type activities in government-wide statements.

Question 6

In preparing the government-wide financial statements, worksheet entries are not posted to the general ledger. Therefore, new worksheet entries for existing fixed assets must be made each year.

Accepted Answer

Worksheet entries are temporary and are not recorded in the general ledger. Therefore, they must be recreated each year when preparing the financial statements. This includes adjustments to existing fixed assets.

Question 7

Assume a government reported $300,000 in capital outlay expenditures in the governmental fund Statement of Revenues, Expenditures and Changes in Fund Balances. Secondly, assume depreciation of capital assets amounted to $250,000, in the governmental activities column in the Statement of Activities. Those adjustments would cause a decrease of $50,000 when preparing the reconciliation between the change in governmental fund balances to the change in net assets of governmental activities in the Statement of Activities.

Accepted Answer

The adjustments would result in an increase of $50,000, not a decrease, when reconciling the change in governmental fund balances to the change in net assets of governmental activities. The capital outlay expenditures of $300,000 would increase the net assets in the governmental activities column by that amount, while the depreciation of $250,000 would decrease it, resulting in a net increase of $50,000.

Question 8

General obligation debt, which has as backing the full faith and credit of the governmental unit is reported in both the government-wide statements and the fund basis statements.

Accepted Answer

The answer of General obligation debt, which has as backing...

Question 9

When converting from governmental fund financial statements to the governmental activities column of the government-wide statements, it is necessary to make a number of adjustments, many of which convert from modified accrual accounting to accrual accounting.

Accepted Answer

Converting from governmental fund financial statements to the governmental activities column of the government-wide statements requires adjustments that convert from modified accrual accounting to accrual accounting, so the statement is true.

Question 10

Debt margin is the difference between the amount of debt limit calculated as prescribed by law and the net amount of outstanding indebtedness subject to limitation.

Accepted Answer

This is the accurate definition of debt margin.

Question 11

When converting from fund financial statements to government-wide statements, it is necessary to eliminate those fund transfers that are between the categories of governmental activities and business-type activities.

Accepted Answer

The answer of When converting from fund financial statements to...

Question 12

Few adjustments to internal service funds are necessary when converting from proprietary funds statements to the government-wide statements as internal service funds are generally reported as business-type activities in the government-wide statements.

Accepted Answer

Governmental funds are adjusted for capital asset related transactions, long-term debt related transactions, converting revenues and expenses to the accrual basis, adding internal service funds and eliminating interfund activities. Most internal service funds serve primarily governmental departments and should therefore be included with the governmental activities in the government-wide statements.

Question 13

GASB does not require that "collections" be capitalized and depreciated.

Accepted Answer

GASB Statement No. 34 allows entities to apply a policy decision to capitalize collection items if they meet certain criteria, but it does not require that collections be capitalized and depreciated.

Question 14

GASB requires that all infrastructure be capitalized and depreciated

Accepted Answer

The answer of GASB requires that all infrastructure be capitalized...

Question 15

When converting from the enterprise funds Statement of Net Assets to the government-wide Statement of Net Assets (government-wide statements), it is necessary to add fixed assets and to deduct long-term debt.

Accepted Answer

The answer of When converting from the enterprise funds Statement...

Question 16

When using the modified approach to record infrastructure, expenditures to widen a 2-lane road to 4-lanes would be charged to an expense, in lieu of depreciation.

Accepted Answer

According to the modified approach to record infrastructure, expenditures to widen a 2-lane road to 4-lanes would be capitalized and depreciated over the useful life of the upgraded roadway.

Question 17

The Statement of Net Assets and Statement of Activities are the only two statements for the government-wide financial statements.

Accepted Answer

The Statement of Net Assets and Statement of Activities are the two required statements for the government-wide financial statements.

Question 18

Internal Service Funds are most commonly included in the business-type activities category of the government-wide statements.

Accepted Answer

Most internal service funds serve primarily governmental departments and should therefore be included with the governmental activities in the government-wide statements.

Question 19

Internal Service funds use the accrual basis of accounting.

Accepted Answer

Internal Service funds are considered to be proprietary funds, and proprietary funds use the accrual basis of accounting.

Question 20

General long-term debt, to be paid out of resources of the government's taxing power is not reflected in the governmental fund Balance Sheet but is reflected in the government-wide Statement of Net Assets.

Accepted Answer

General long-term debt is primarily reported in the government-wide financial statement as it reflects the overall financial position of the government, while governmental fund balance sheet reports only current assets and liabilities.

Quiz 8: Government-Wide Statements, Capital Assets, Long-Term Debt