Question 1

Gotham City acquires $25,000 of inventory on November 1, 20X7, having held no inventory previously. On December 31, 20X7, the end of Gotham City's fiscal year, a physical count shows $8,000 still in stock. During 20X8, $6,500 of this inventory is used, resulting in a $1,500 remaining balance of supplies on December 31, 20X8.
-Based on the preceding information,which of the following would be the correct account balances for 20X8 if Gotham City used the consumption method of accounting for inventories?

Accepted Answer

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Question 2

The Town of Pasco has no supplies inventory in its general fund on January 1,20X8.During 20X8,Pasco incurred expenditures of $200,000 for the acquisition of supplies.On December 31,20X8,Pasco's inventory of supplies amounted to $30,000.Assume Pasco uses the purchase method of accounting for supplies in its general fund and that the village reports on the calendar year.On December 31,20X8,the general fund of Pasco should credit:
A) Expenditures for $170,000.
B) Fund Balance-Unassigned for $170,000.
C) Fund Balance-Nonspendable for $30,000.
D) Expenditures for $30,000.

Accepted Answer

The answer of The Town of Pasco has no supplies...

Question 3

The Board of Commissioners of the City of Rockton adopted its budget for the year ending July 31,20X2,which indicated revenues of $1,000,000 and appropriations of $900,000.If the budget is formally integrated into the accounting records,what is the required journal entry?

Accepted Answer

The answer of The Board of Commissioners of the City...

Question 4

What is the correct sequence in the expenditure process in governmental accounting?
A) Appropriation, Encumbrance, Expenditure, and Disbursement.
B) Encumbrance, Expenditure, Disbursement, and Appropriation.
C) Expenditure, Encumbrance, Disbursement, and Appropriation.
D) Appropriation, Expenditure, Encumbrance, and Disbursement.

Accepted Answer

The correct sequence in the expenditure process in governmental accounting is: 
1. Appropriation - the act of authorizing the expenditure in the budget. 
2. Encumbrance - the commitment of funds for a specific purchase or expense. 
3. Expenditure - the actual payment for goods or services purchased. 
4. Disbursement - the transfer of funds to pay for the expenditure.

Therefore, choice A is the correct sequence in the expenditure process in governmental accounting.

Question 5

On July 25,20X8,the city of Pullman,which reports on a calendar-year basis,ordered five police cars at an estimated cost of $200,000.On August 26,20X8,the police cars were received,and the actual cost amounted to $197,000.Pullman encumbered the appropriation for police cars in its general fund when the cars were ordered.When the police cars were received,the general fund of Pullman should:
A) Credit Budgetary Fund Balance Assigned for Encumbrances for $197,000.
B) Debit Encumbrances for $200,000.
C) Debit Expenditures for $197,000.
D) Credit Budgetary Fund Balance Assigned for Expenditures for $200,000.

Accepted Answer

When the police cars were received, the actual cost was $197,000, so Pullman should debit Expenditures for that amount. The initial estimate of $200,000 was used to encumber the appropriation, so there is no need to adjust the encumbrance account. The Budgetary Fund Balance Assigned for Expenditures could be credited for $200,000 once the appropriation has been fully expended, but this is not relevant at this point.

Question 6

Goshen City acquires $36,000 of inventory on November 1, 20X5, having held no inventory previously. On December 31, 20X5, the end of Goshen City's fiscal year, a physical count shows $7,000 still in stock. During 20X6, $5,000 of this inventory is used, resulting in a $2,000 remaining balance of supplies on December 31, 20X6.
-Based on the preceding information,which of the following would be the correct account balances for 20X5 if Goshen City used the purchase method of accounting for inventories?

Accepted Answer

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Question 7

Goshen City acquires $36,000 of inventory on November 1, 20X5, having held no inventory previously. On December 31, 20X5, the end of Goshen City's fiscal year, a physical count shows $7,000 still in stock. During 20X6, $5,000 of this inventory is used, resulting in a $2,000 remaining balance of supplies on December 31, 20X6.
-Based on the preceding information,which of the following would be the correct account balances for 20X5 if Goshen City used the consumption method of accounting for inventories?

Accepted Answer

The answer of Goshen City acquires $36,000 of inventory on...

Question 8

What amount should be reported as expenditures for the current fiscal year when accounting for inventories of supplies under the purchase method and under the consumption method? 
A) Option A
B) Option B
C) Option C
D) Option D

Accepted Answer

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Question 9

Blue Ridge Township uses the consumption method of accounting for its inventory of supplies.On the December 31,20X7 balance sheet for the general fund,the township reported $10,000 of supplies inventory.During 20X8,expenditures for supplies amounted to $40,000,and,at December 31,20X8,unused supplies totaled $7,000.In the adjusting entry for supplies at December 31,20X8,
A) Expenditures should be credited for $3,000.
B) Expenditures should be debited for $3,000.
C) Fund Balance-Nonspendable should be debited for $7,000.
D) Fund Balance-Nonspendable should be credited for $7,000.

Accepted Answer

Under the consumption method, the cost of supplies used during the year is recognized as an expenditure in the period it is used. Therefore, the $40,000 expenditure for supplies during 20X8 should be recognized as an expense for the year. The adjusting entry should decrease the supplies inventory by the amount of supplies used during the year, which is calculated as beginning inventory plus expenditures during the year minus ending inventory. In this case, the calculation is $10,000 + $40,000 - $7,000 = $43,000. Therefore, the adjusting entry should debit supplies expenditures for $43,000 and credit supplies inventory for $43,000. The difference between the beginning balance of supplies of $10,000 and the ending balance of supplies of $7,000 represents supplies that were used during the year, which is recognized as an expenditure in the general fund. Therefore, expenditures should be debited for $3,000.

Question 10

The City of Ames uses the consumption method to report its inventory of supplies on its general fund balance sheet.What account is debited in the general fund when Ames acquires supplies?
A) Expenditures
B) Inventory of Supplies
C) Supplies Expense
D) Fund Balance-Nonspendable

Accepted Answer

When using the consumption method for reporting inventory of supplies in the general fund, the acquisition of supplies is recorded as an expenditure. This method recognizes the cost of supplies as an expense when they are consumed, not when they are purchased.

Question 11

Which of the following observations concerning encumbrances is NOT true?
A) Their purpose is to ensure that the expenditures within a period do not exceed the budgeted appropriations.
B) They provide a control system and safeguard for governmental unit administrators.
C) They are a unique element of governmental accounting.
D) They are recognized only at the time disbursements are made.

Accepted Answer

Encumbrances are recognized at the time a commitment is made, not at the time disbursements are made. Encumbrances provide a mechanism for controlling expenditures and preventing overspending. They are unique to governmental accounting and serve as a control system and safeguard for governmental unit administrators.

Question 12

Goshen City acquires $36,000 of inventory on November 1, 20X5, having held no inventory previously. On December 31, 20X5, the end of Goshen City's fiscal year, a physical count shows $7,000 still in stock. During 20X6, $5,000 of this inventory is used, resulting in a $2,000 remaining balance of supplies on December 31, 20X6.
-Based on the preceding information,which of the following would be the correct account balances for 20X6 if Goshen City used the consumption method of accounting for inventories?

Accepted Answer

The answer of Goshen City acquires $36,000 of inventory on...

Question 13

Works of art and historical treasures purchased by the general fund should be reported as: 
A) I only.
B) II only.
C) Both I and II
D) Neither I nor II.

Accepted Answer

I. As works of art and historical treasures are tangible assets and have long-term economic value, they should be recorded as capital assets and presented in the government-wide statement of net position. Therefore, they should be reported in the governmental activities column of the government-wide financial statements.
II. As these assets are considered non-current assets, they should be reported in the government-wide statement of net position as part of the non-current assets section, and not as expenditures of the current period in the government-wide statement of activities.

Question 14

Gotham City acquires $25,000 of inventory on November 1, 20X7, having held no inventory previously. On December 31, 20X7, the end of Gotham City's fiscal year, a physical count shows $8,000 still in stock. During 20X8, $6,500 of this inventory is used, resulting in a $1,500 remaining balance of supplies on December 31, 20X8.
-Based on the preceding information,which of the following would be the correct account balances for 20X7 if Gotham City used the consumption method of accounting for inventories?

Accepted Answer

The answer of Gotham City acquires $25,000 of inventory on...

Question 15

The general fund of Park City acquired computer equipment at a cost of $50,000 on May 18,20X9.To record acquisition of this equipment,the general fund of Park City should debit:
A) expenditures.
B) encumbrances.
C) equipment.
D) vouchers payable.

Accepted Answer

In governmental accounting, when a general fund acquires a capital asset like computer equipment, the expenditure is recorded by debiting the expenditures account, reflecting the outflow of resources.

Question 16

Gotham City acquires $25,000 of inventory on November 1, 20X7, having held no inventory previously. On December 31, 20X7, the end of Gotham City's fiscal year, a physical count shows $8,000 still in stock. During 20X8, $6,500 of this inventory is used, resulting in a $1,500 remaining balance of supplies on December 31, 20X8.
-Based on the preceding information,which of the following would be the correct account balances for 20X8 if Gotham City used the purchase method of accounting for inventories?

Accepted Answer

The answer of Gotham City acquires $25,000 of inventory on...

Question 17

Gotham City acquires $25,000 of inventory on November 1, 20X7, having held no inventory previously. On December 31, 20X7, the end of Gotham City's fiscal year, a physical count shows $8,000 still in stock. During 20X8, $6,500 of this inventory is used, resulting in a $1,500 remaining balance of supplies on December 31, 20X8.
-Based on the preceding information,which of the following would be the correct account balances for 20X7 if Gotham City used the purchase method of accounting for inventories?

Accepted Answer

The answer of Gotham City acquires $25,000 of inventory on...

Question 18

Goshen City acquires $36,000 of inventory on November 1, 20X5, having held no inventory previously. On December 31, 20X5, the end of Goshen City's fiscal year, a physical count shows $7,000 still in stock. During 20X6, $5,000 of this inventory is used, resulting in a $2,000 remaining balance of supplies on December 31, 20X6.
-Based on the preceding information,which of the following would be the correct account balances for 20X6 if Goshen City used the purchase method of accounting for inventories?

Accepted Answer

The answer of Goshen City acquires $36,000 of inventory on...

Question 19

The general fund of Hatteras acquired a fire truck during the fiscal year ended June 30,20X9.The purchase order for the fire truck was recorded on February 15,20X9.Hatteras' acquisition of the fire truck required which of the following sequences of accounting activities?
I.Appropriation
II.Encumbrance
III.Expenditure
A) II, I, III.
B) I, III, II.
C) III, II, I.
D) I, II, III.

Accepted Answer

The acquisition of the fire truck requires the following accounting activities in the given sequence:
I. Appropriation - This is the process of setting aside funds for a particular purpose. The appropriation for the purchase of the fire truck would have been made before the purchase order was placed.
II. Encumbrance - This is the process of reserving funds for a specific purchase or expense. A purchase order would have been issued to reserve the funds for the fire truck purchase.
III. Expenditure - This is the actual payment for the purchase. The payment for the fire truck would have been made after the appropriation and encumbrance. Therefore, the correct sequence of accounting activities is I, II, III, which is represented by choice D.

Question 20

Identify the legal term that allows the general fund to make expenditures.
A) Exceptions
B) Appropriations
C) Encumbrances
D) Consumption

Accepted Answer

Appropriations refer to the legal authorization given to the general fund to make expenditures. It is a crucial aspect of budgeting and allows the government to allocate funds to various programs and services. This authorization is usually granted through a legislation or budgetary process.

Quiz 17: Governmental Entities: Introduction and General Fund Accounting

The Board of Commissioners of the City of Rockton adopted its budget for the year ending July 31,20X2,which indicated revenues of $1,000,000 and appropriations of $900,000.If the budget is formally integrated into the accounting records,what is the required journal entry?

What is the correct sequence in the expenditure process in governmental accounting?

What amount should be reported as expenditures for the current fiscal year when accounting for inventories of supplies under the purchase method and under the consumption method?

The City of Ames uses the consumption method to report its inventory of supplies on its general fund balance sheet.What account is debited in the general fund when Ames acquires supplies?

Which of the following observations concerning encumbrances is NOT true?

Works of art and historical treasures purchased by the general fund should be reported as:

The general fund of Park City acquired computer equipment at a cost of $50,000 on May 18,20X9.To record acquisition of this equipment,the general fund of Park City should debit:

Identify the legal term that allows the general fund to make expenditures.