Question 1

Equipment acquired several years ago by a capital projects fund and reported in the governmental activities statement of net assets at a net book value of $2,000 was sold for $1,000 cash.Journal entries are necessary in the general journals of the

Accepted Answer

The answer of Equipment acquired several years ago by a...

Question 2

When an enterprise fund pays the General Fund an amount in lieu of taxes,the account to be credited in the General Fund is

Accepted Answer

The General Fund should credit "Revenues" when it receives a payment in lieu of taxes from an enterprise fund, as this is considered a revenue source for the General Fund.

Question 3

Which of the following transactions is classified as an exchange transaction rather than a nonexchange transaction?

Accepted Answer

An exchange transaction involves an exchange of goods or services for other goods or services of equivalent value. Fees charged for the use of an athletic field would be considered an exchange transaction as the users are receiving a service in exchange for payment. The other options listed are nonexchange transactions.

Question 4

If a government issues debt to finance capital acquisition,how should the related long-term debt be reported by the governmental fund that receives the proceeds of the debt?

Accepted Answer

The answer of If a government issues debt to finance...

Question 5

In which fund would a government most likely account for the assets confiscated in drug arrests and legally required to be used for drug prevention education?

Accepted Answer

The assets confiscated in drug arrests are considered a special type of revenue that is required by law to be used for a specific purpose - drug prevention education. Therefore, these funds would most likely be accounted for in a special revenue fund, which is used to report and manage revenue from specific sources that are restricted in how they can be used. The general fund is used for general government operations, while permanent funds are used to hold and invest money that is never meant to be spent (such as a trust fund). Enterprise funds are used to account for government-owned businesses.

Question 6

Which of the following are reported in the functions/programs section of the statement of activities at the government-wide level where they reduce the net expense of each function or produce a net revenue?

Accepted Answer

Program revenues are reported in the functions/programs section of the statement of activities at the government-wide level where they reduce the net expense of each function or produce a net revenue. Indirect revenues, general revenues, and nonexchange revenues are not necessarily related to a specific function/program and do not necessarily reduce net expenses or produce net revenues.

Question 7

Which of the following funds are governmental funds?

Accepted Answer

Governmental funds are those used to finance and account for activities primarily supported by taxes, grants, and other government revenue. The general fund, special revenue funds, capital projects funds, debt service funds, and permanent funds are all considered governmental funds. Private-purpose trust funds and internal service funds are not considered governmental funds, and public-purpose trust funds are not listed as an option.

Question 8

The General Fund is used to account for:

Accepted Answer

The General Fund is used to account for the general administration of the government. It includes revenues and expenditures that are not legally restricted to a specific purpose, but rather are used for the day-to-day operations of the government, such as salaries, office supplies, and maintenance costs. Options A, B, and C all refer to specific funds or accounts that are used for restricted purposes, such as paying off debt or constructing capital assets.

Question 9

The following are key terms in Chapter 4 that relate to exchange and nonexchange transactions:
A.Derived tax revenues
B.Exchange-like transactions
C.Nonexchange transactions
D.Nonexchange revenue
E.Voluntary nonexchange transactions
F.Imposed nonexchange revenue
G.Exchange transactions
H.Time restrictions
I.Purpose restrictions
J.Eligibility requirements
For each of the following definitions,indicate the key term from the list above that best matches by placing the appropriate letter in the blank space next to the definition.

Accepted Answer

The answer of The following are key terms in Chapter...

Question 10

Under the modified accrual basis of accounting,revenues should be recognized when

Accepted Answer

Under the modified accrual basis of accounting, revenues are recognized when they are both measurable and available to finance expenditures of the current period.

Question 11

Revenue from nonexchange transactions may be recognized in all of these circumstances,except

Accepted Answer

Revenue from nonexchange transactions is recognized when all eligibility requirements are met, not when a purpose restriction is met. Purpose restrictions affect how resources are used, not when revenue is recognized.

Question 12

Which of the following is properly reported as an other financing source by the General Fund?

Accepted Answer

The answer of Which of the following is properly reported...

Question 13

How many general funds may a government have?

Accepted Answer

Governments are allowed to have only one general fund, which is used to account for all financial resources not accounted for in another fund.

Question 14

Which of the following types of nonexchange transactions recognize revenue when all the eligibility requirements are met?

Accepted Answer

Voluntary nonexchange transactions recognize revenue when all the eligibility requirements are met, as there is no reciprocal transaction or exchange involved. Examples include donations and grants. Imposed nonexchange transactions, derived tax revenues, and property tax revenues are recognized when they are measurable and available, regardless of whether all eligibility requirements have been met.

Question 15

Which of the following journal entries should a government use to record $475,000 for police department salaries and wages during a particular month?

Accepted Answer

The answer of Which of the following journal entries should...

Question 16

Revenues that are legally restricted to be expended for specified operating purposes should be accounted for in special revenue funds,including

Accepted Answer

Gasoline taxes are legally restricted for use in financing road repairs and maintenance. Therefore, they should be accounted for in a special revenue fund. Choices A, B, and C are not applicable as endowment earnings, pension trust fund revenues, and debt service funds have their own respective fund types.

Question 17

Which of the following assets would appropriately be reported on the governmental funds balance sheet?

Accepted Answer

Inventories are current assets that could be sold or used in the normal course of operations and therefore appropriate to report on the governmental funds balance sheet. Capital assets, deferred charges for debt issuance costs, and goodwill are not typically reported on the balance sheet of governmental funds.

Question 18

Which of the following would be reported on the operating statement of a governmental fund?

Accepted Answer

Governmental funds use the modified accrual basis of accounting, which recognizes expenditures when liabilities are incurred. Therefore, the incurrence of a liability for the annual contribution to the employee retirement plan would be reported on the operating statement. Depreciation and amortization expenses are not reported in governmental funds, and revenue related to prior periods would not typically be recognized in the current period's operating statement.

Question 19

The governmental funds operating statement presents all of the following except

Accepted Answer

The governmental funds operating statement typically presents expenditures, revenues, and other financing sources, but not expenses. This is because the term "expenses" is associated with the accrual basis of accounting, while governmental funds report on a modified accrual basis of accounting, where expenditures are reported instead.

Question 20

Proceeds from general obligation bonds for capital construction should generally be recorded in the

Accepted Answer

Proceeds from general obligation bonds for capital construction should be recorded in a capital projects fund. Capital projects funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities. The general fund is used to account for the day-to-day operating activities of the government. Enterprise funds are used to account for services that are provided to the public for a fee, such as utilities or airports. Debt service funds are used to account for the repayment of long-term debt.

Quiz 4: Accounting for Governmental Operating Activitiesillustrative Transactions and Financial Statements