Deck 10: Fiduciary Funds and Permanent Funds

Question 1

Use the following information to answer Questions
The City received $200,000 to help maintain a local art museum that is owned and operated by a not-for-profit organization.During the year the City transferred net earnings of $20,000 to the appropriate entity/fund.
The $20,000 transfer would be reported by the fund that made the transfer as a an

A)Transfer out.
B)Expenditure.
C)Deduction from Net Assets-Benefits.
D)Expense.

Answer 1

C

Question 2

What basis of accounting is used to account for transactions of a governmental private-purpose trust fund?

A)Full accrual basis of accounting.
B)Modified accrual basis of accounting.
C)Cash basis of accounting.
D)Budgetary basis of accounting.

Answer 2

A

Question 3

In an agency fund, assets always equal fund balances because there are no liabilities.

Answer 3

False

Question 4

Fiduciary funds focus on current financial resources and use the full accrual basis of accounting.

Question 5

An employer may have a liability to a defined benefit pension plan other than for its annual required contributions, depending on the future financial health of the plan.

Question 6

Per GASB Statement No.34, permanent funds are classified as fiduciary funds.

Question 7

Accounting for the employer's contribution to a defined benefit pension plan is straight forward, because the employer is obligated only to make annual contributions in the amount specified in the plan terms.

Question 8

A governmental entity receives a gift of cash and investments with a fair value of $200,000.The donor specified that the earnings from the gift must be used to beautify city-owned parks and the principal must be re-invested.The $200,000 gift should be accounted for in which of the following funds?

A)General fund.
B)Private-purpose trust fund.
C)Agency fund.
D)Permanent fund.

Question 9

Use the following information to answer Questions
In the current year, the City of Katerah earned $24,000 on the principal of a private-purpose trust fund but disbursed only $20,000.
During the current year the private-purpose trust fund will recognize, related to the cash outflow:

A)$20,000 transfer out.
B)$20,000 expenses.
C)$24,000 deduction from net assets.
D)$20,000 deduction from net assets.

Question 10

In accounting for permanent funds only the income can be spent; the principal must be preserved intact.

Question 11

Which of the following activities of a governmental entity should be accounted for in a fiduciary fund?

A)Funds received from the federal government to support public transportation activities.
B)Funds received from an individual who specified that the principal must be kept intact but the income can be used to support families of police officers killed in the line of duty.
C)Funds received from the state government that must be used to purchase capital assets.
D)Funds received from a contractor to assist with the development of utility infrastructure.

Question 12

Not-for-profits report all investment gains and losses on endowments as additions to temporarily restricted net assets, regardless of donor-imposed restrictions.

Question 13

In previous years, Center City had received a $400,000 gift of cash and investments.The donor had specified that the earnings from the gift must be used to beautify city-owned parks and the principal must be re-invested.During the current year, the earnings from this gift were $24,000.The earnings from this gift should generally be considered revenue to which of the following funds?

A)Special revenue fund.
B)Private-purpose trust fund.
C)Agency fund.
D)Permanent fund.

Question 14

Use the following information to answer Questions
The City received $200,000 to help maintain a local art museum that is owned and operated by a not-for-profit organization.During the year the City transferred net earnings of $20,000 to the appropriate entity/fund.
The $200,000 gift would be reported in a an:

A)Special revenue fund.
B)Private-purpose trust fund.
C)Agency fund.
D)Permanent fund.

Question 15

In which of the following funds would a government report depreciation expense?

A)Private-purpose trust fund.
B)Agency fund.
C)Permanent fund.
D)None of the above

Question 16

The concept of major versus nonmajor funds does not apply to permanent funds, as it does to governmental and proprietary funds.

Question 17

Use the following information to answer Questions
In the current year, the City of Katerah earned $24,000 on the principal of a private-purpose trust fund but disbursed only $20,000.
During the current year the private-purpose trust fund will recognize, related to earnings:

A)$24,000 revenues.
B)$20,000 revenues.
C)$24,000 addition to net assets.
D)$20,000 addition to net assets.

Question 18

Accounting for the employer's contribution to a defined contribution pension plan is straight forward, because the employer is obligated only to make annual contributions in the amount specified in the plan terms.

Question 19

Fiduciary funds are excluded from the government-wide financial statements.

Question 20

Which of the following would NOT be accounted for in a fiduciary fund of a governmental entity?

A)Nonexpendable resources held for the benefit of other governmental units.
B)Nonexpendable resources held for the benefit of the government holding the resources.
C)Expendable resources held for the benefit of other governmental units.
D)Funds held as an agent for other entities.

Question 21

A plan's unfunded actuarially accrued liability is the excess of the:

A)Actuarially determined plan cost over the actual contribution.
B)Actuarially determined plan cost over the plan assets.
C)Actuarially determined pension liability over the plan assets.
D)Actuarially determined pension liability over the total contributions

Question 22

During the fiscal year ended December 31, 2010, the Highland City General Fund contributed $60 million to a defined benefit pension plan for its employees.On February 27, 2011, Highland made an additional $3 million contribution related to the 2010 pension contribution requirements.The actuarially determined contribution requirement for 2010 is $65 million.The amount of pension expenditure recognized by Highland City General Fund for 2010 should be:

A)$ 0
B)$ 60 million
C)$ 63 million
D)$ 65 million

Question 23

Which of the following is NOT a criterion that an employer's annual required contribution must satisfy to be considered acceptable?

A)It must consist of the employer's normal cost plus a provision for amortizing the plan's unfunded actuarially accrued liability.
B)Actual assumptions must be in accordance with standards of the Actuarial Standards Board.
C)Actuarial value of pension plan assets must be based on market values on the financial statement date.
D)Assumptions as to investment earnings should be based on long-term projections.

Question 24

Permanent funds are classified as

A)Governmental funds.
B)Proprietary funds.
C)Fiduciary funds.
D)Trust funds.

Question 25

What basis of accounting is used to account for the transactions of a government's permanent fund?

A)Full accrual basis of accounting.
B)Modified accrual basis of accounting.
C)Cash basis of accounting.
D)Budgetary basis of accounting.

Question 26

The primary financial statements for a government-sponsored pension plan are:

A)Balance Sheet and Statement of Activities.
B)Balance Sheet, Statement of Activities, and Cash Flows Statement.
C)Statement of Fiduciary Net Assets and a Statement of Changes in Fiduciary Net Assets
D)Balance Sheet, Statement of Activities, Cash Flows Statement, and Statement of Funding Progress.

Question 27

Use the following information to answer Questions
Previously a local charity received a $1 million gift, the income from which was restricted to support activities for senior citizens.During the current year the endowment earned $40,000 of interest revenues, of which the charity designated $30,000 to support senior citizen activities.
On its year-end statement of activities, the charity would report interest revenues of:

A)$0
B)$30,000
C)$40,000
D)None of the above.

Question 28

Several years ago, a donor gave $5 million to the City and specified that the principal was to be kept intact but the earnings were to be used to support operations of the city parks.During the current year, the City earned $300,000 on the gift.To what type of fund, should the City transfer the $300,000 earnings?

A)It should not make any transfers.The $300,000 should remain in the City's permanent fund.
B)A special revenue fund.
C)The general fund.
D)An enterprise fund.

Question 29

During the year, a state-owned university received a $5 million gift.The donor specified that the principal of the gift must be held intact for 3 years, but the earnings from the gift can be used to support technology improvements in the College of Business.At the end of the 3 years, the donor together with the University President and the College Dean will decide how the $5 million gift can be used.The University will report the gift in what type of fund?

A)Permanent fund.
B)Private-purpose trust fund.
C)Special revenue fund
C)Plant fund.

Question 30

At the beginning of the year, the permanent fund of Rapid City had an investment portfolio with a historical cost of $300,000 and a fair value of $330,000.There were no purchases or sales of securities during the year.At year end the portfolio had a fair value of $360,000.At the end of the year Rapid City will account for this increase in fair value in which of the following ways?

A)Credit Investment income, $30,000.
B)Credit Investment income, $60,000.
C)Credit Fund Balance, $30,000.
D)No entry is made to recognize increase in fair value.

Question 31

Hill City Light & Water a proprietary fund contributes to a defined benefit plan for its employees.During 2011, Hill City contributed $36 million to its pension plan.The City also made an additional $4 million contribution related to 2010.The actuarially determined contribution requirement for 2011 was $43 million.The amount of pension expense recognized by Hill City Light & Water for 2011 should be:

A)$ 0
B)$ 36 million
C)$ 40 million
D)$ 43 million

Question 32

Use the following information to answer Questions
Previously a local charity received a $1 million gift, the income from which was restricted to support activities for senior citizens.During the current year the endowment earned $40,000 of interest revenues, of which the charity designated $30,000 to support senior citizen activities.
Cedar City has a permanent fund that reported current year investment earnings realized and unrealized of $80,000.The endowment principal is $800,000 and the city council has adopted a policy of considering only the inflation-adjusted rate of return to be available for transfer to the recipient fund.During the current year the Council declared the inflation-adjusted rate of return to be 8%.How much revenue would be recognized in the permanent fund?

A)$ 0.
B)$ 64,000.
C)$ 80,000.
D)Unable to determine.

Question 33

Use the following information to answer Questions
Previously a local charity received a $1 million gift, the income from which was restricted to support activities for senior citizens.During the current year the endowment earned $40,000 of interest revenues, of which the charity designated $30,000 to support senior citizen activities.
On its year-end statement of financial position, the charity would report temporarily restricted net assets of:

A)$40,000.
B)$ 0.
C)$30,000.
D)$1.04 million.

Question 34

The Schedule of Changes in Long-Term Obligations contains an account Net Pension Obligation.Which of the following describes the event that gave rise to this account?

A)The actual contribution by a proprietary fund was less than the actuarially required contribution.
B)The actual contribution by a governmental fund was less than the actuarially required contribution.
C)The actuarially computed pension liability exceeded the pension plan assets.
D)The actuarially computed pension liability exceeded pension plan assets.

Question 35

A wealthy citizen provided in her will for a gift of cash and other assets to the City.Her will specified that the gift was to be kept intact and that the earnings from the gift were to be used to support public parks.At the time of the donation, the gift had a book value in the hands of the donor of $300,000 and a fair value of $500,000.When recording this gift the City would credit

A)Contributions revenues $500,000.
B)Other financing sources-contributions $500,000.
C)Contributions revenues $300,000.
D)Other financing sources-contributions $300,000.

Question 36

A defined contribution pension plan is one in which the employer agrees to which of the following?

A)The employer agrees to make payments to a specified pension plan with no guarantee of a specific pension amount to be paid to the employee.
B)The employer agrees to make actuarially determined payments to a pension plan AND guarantees that the employee will receive a specified pension benefit usually determined by length of service and salary.
C)The employer agrees to make actuarially determined payments to a pension plan that guarantees that the employee will receive a specified pension usually determined by length of service and salary.
C)The employer agrees to pay specified amounts usually determined by length of service and salary to the employee upon retirement.

Question 37

Use the following information to answer Questions
Previously a local charity received a $1 million gift, the income from which was restricted to support activities for senior citizens.During the current year the endowment earned $40,000 of interest revenues, of which the charity designated $30,000 to support senior citizen activities.
On its year-end statement of financial position, the charity would report permanently restricted net assets of:

A)$1 million.
B)$1.04 million.
C)$1.03 million.
D)$1.01 million.

Question 38

In which of the following funds would Net Pension Obligation be most likely to appear?

A)General fund.
B)Enterprise fund.
C)Private-purpose trust fund.
D)Agency fund.

Question 39

Required disclosure by a government General Fund related to its pension plan does NOT include which of the following?

A)The employer's funding policy.
B)The components of the pension cost.
C)The key assumptions used in determining the pension costs.
D)The present value of the future benefits to be paid.

Question 40

Which of the following is NOT a fiduciary fund?

A)Pension trust fund.
B)Investment trust fund.
C)Permanent fund.
D)Private purpose trust fund.

Question 41

Liabilities reported in pension trust funds consist of

A)Liabilities accrued using the accrual basis of accounting, including the actuarial accrued liability for the plan.
B)Liabilities accrued using the modified accrual basis of accounting, excluding the actuarial accrued liability for the plan.
C)Liabilities accrued using the accrual basis of accounting, excluding the actuarial accrued liability for the plan.
D)Liabilities accrued using the modified accrual basis of accounting, including the plan benefits that will be paid with measurable and available financial resources.

Question 42

Citizens within a defined geographic area of Hill City created a special assessment district to facilitate the construction of sidewalks.Hill City was responsible for overseeing the entire construction project.Hill City issued bonds in its own name to pay the contractor for the construction.However, Hill City was not responsible in any manner for the bonds.The bonds were secured by the special assessments that are levied against properties within the special assessment district.Collections of special assessments would be recorded in which of the following funds of Hill City?

A)Special assessment fund.
B)Agency fund.
C)Special revenue fund.
D)Debt service fund.

Question 43

The City of Highland Hills receives a federal grant to assist in nutrition programs for its senior citizens.Senior citizens whose income is below a specified amount the amount was specified by the Federal government are eligible to participate in the program.Monthly checks of $100 this amount was specified by the Federal government will be mailed to eligible senior citizens.The proceeds of this grant should be accounted for in which of the following funds of the City?

A)The general fund.
B)A special revenue fund.
C)An agency fund.
D)Private-purpose trust fund.

Question 44

The fiduciary fund financial statements report contain

A)No separate statements for individual pension plans
B)A separate column for each fund type
C)Three components of net assets
D)Information by major fund

Question 45

Under proposed GASB standards, accounting for other postemployment benefits OPEB would

A)Continue to permit governments to fund OPEB benefits on a pay-as-you-go basis.
B)Require governments to report actuarially required contributions as OPEB expense, regardless of whether these contributions are actually made by the government.
C)Require governments to report OPEB costs based on FASB Statement No.106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
D)Require disclosure only of estimated OPEB liabilities.

Question 46

Assets reported in a government's investment trust fund should include:

A)Only investments owned by external participants in the investment pool.
B)Investments of both the sponsoring government and of external participants in the investment pool.
C)Investments related to the sponsoring government's governmental funds and of external participants in the investment pool.
D)Investments related to the sponsoring government's other fiduciary funds and of external participants in the investment pool.

Question 47

Financial assets reported by most governmental investment trust funds should be reported at

A)Cost
B)Amortized historical cost.
C)Fair value on the date of the financial statements.
D)Fair value computed by a weighted-average approach.

Question 48

The City of Highland Hills receives a federal grant to assist in nutrition programs for its senior citizens.The City will select the contractors that will provide meals and approve the participants in the program.The proceeds of this grant should be accounted for in which of the following funds of the City?

A)A governmental fund.
B)An enterprise fund.
C)An agency fund.
D)A private-purpose trust fund.

Question 49

Financial assets reported by 2a7-like investment pools should be reported at

A)Fair value at the date of the financial statements.
B)Amortized historical cost.
C)Fair value computed using a weighted-average approach.
D)Cost.

Question 50

The following financial statements must be reported for fiduciary funds.

A)Statement of cash flows
B)Statement of changes in fiduciary net assets
C)Statement of fiduciary net assets
D)All of the above
E)b & c only