Deck 4: Accounting for Governmental Operating Activities-Illustrative Transactions and Financial Statements

Question 1

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

Answer 1

True
Explanation: Under the dual-track accounting approach used in the textbook, transactions between two governmental funds that will appear in the Governmental Activities column on the government-wide statements, in this case the General Fund and a debt service fund, are not recorded in the governmental activities journal.

Question 2

Under the dual-track accounting approach used in this text,recording the annual budget for the General Fund requires journal entries in the general journals of both the General Fund and governmental activities at the government-wide level.

Answer 2

False
Explanation: General Fund budgetary information affects only the General Fund. It is not recorded at the government-wide level.

Question 3

A gas tax that is restricted for use on street construction and maintenance projects should be recorded as general revenues in the governmental activities journal.

Answer 3

True
Explanation: In accordance with GASB standards, all tax revenues, even those restricted for a specific use, should be recorded as general revenues.

Question 4

An interim schedule comparing the detail of appropriations,expenditures,and encumbrances should be prepared on an appropriate periodic basis to determine whether appropriations are being expended at the expected rate for the period and for the budget year to date.

Question 5

Generally,encumbrance accounting is not used in the accounting for payroll.

Question 6

Under the modified accrual basis of accounting applicable to governmental fund types,revenue from sources such as fines and forfeits is accrued and recorded at net realizable value.

Question 7

The government-wide statement of net position uses the same measurement focus and basis of accounting used by the General Fund balance sheet.

Question 8

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

Question 9

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

Question 10

Governments,unlike business organizations,generally do not incur expenditures/expenses for the employer's share of FICA taxes and for contributions to other retirement plans established by law.

Question 11

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.

Question 12

The account Budgetary Fund Balance can have either a debit or credit balance.

Question 13

When an activity accounted for by the General Fund results in issuance of purchase orders or contracts for goods or services a record must be kept,but no journal entries in the General Fund are necessary.

Question 14

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."

Question 15

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

Question 16

The Governmental Activities column of the government-wide statement of net position differs from the General Fund balance sheet in that it reports both current and noncurrent assets and liabilities.

Question 17

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

Question 18

Vehicles used by the Parks and Recreation Department should be accounted for in the General Fund.

Question 19

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.

Question 20

To properly account for the receipt of goods or services ordered in a prior fiscal year,it is necessary to know which appropriations were affected when the encumbrance documents were issued.

Question 21

The Town of Ashland levied property taxes in the amount of $800,000.The town estimates that 1 percent will be uncollectible.The journal entry to record the tax levy will include

A) A debit to Cash for $792,000.
B) A credit to Revenues for $792,000.
C) A debit to Estimated Uncollectible Current Taxes for $8,000.
D) A debit to Estimated Revenues for $800,000.

Question 22

The Revenues account of a government is debited when

A) The budget is recorded at the beginning of the year.
B) Property taxes are recorded.
C) The account is closed to fund balance-unassigned at the end of the year.
D) Property taxes are collected.

Question 23

Property taxes due 75 days after the end of the 2014 fiscal year would be recognized in 2014 as revenues in the General Fund general journal.

Question 24

Which of the following would be considered an internal exchange transaction?

A) The General Fund transfers $200,000 to establish a Central Supplies Fund; this amount will not be repaid.
B) The General Fund transfers $125,000 to the Debt Service Fund for payment of currently due bond interest payments.
C) The General Fund transfers $9,000 to the Central Supplies Fund for supplies it received from Central Supplies.
D) The Capital Projects Fund completes a library building project and transfers the remaining cash to the Debt Service Fund.

Question 25

Which of the following should not be reported on the balance sheet of the General Fund?

A) Equipment.
B) Vouchers payable.
C) Tax anticipation notes payable.
D) Due from federal government.

Question 26

A payment made by a city-owned utility to the General Fund of the city in lieu of taxes is an example of an "internal exchange transaction."

Question 27

An interfund transfer occurs when one fund of government pays another fund of the same government for services provided.

Question 28

The General Fund used electricity provided by the city-owned electric utility (an enterprise fund of the city).The General Fund general journal entry to record the transaction will include

A) A debit to Expenses.
B) A debit to Expenditures.
C) A debit to Interfund Transfers Out.
D) A debit to Due to Other Funds.

Question 29

The General Fund gives assets to the internal service fund that the internal service fund is not expected to repay.The transaction would be recorded as an interfund transfer.

Question 30

Using the information below,what amount should be accounted for in a special revenue fund or funds?

A) $1,800,000.
B) $2,100,000.
C) $3,300,000.
D) $5,350,000.

Question 31

Which of the following financial statement(s)reports both current and noncurrent assets and liabilities? Government-wide Statement of Net Position
General Fund Balance Sheet
A)
No
Yes
B)
No
No
C)
Yes
No
D)
Yes
Yes

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 32

Amounts due to or from other funds should be eliminated from government fund financial statements so that the statements show only the receivables from and payables to entities external to the government.

Question 33

The General Fund used electricity provided by the city-owned electric utility (an enterprise fund of the city).The governmental activities journal entry to record the transaction will include

A) A debit to Expenses.
B) A debit to Expenditures.
C) A debit to Internal Balances.
D) No entry would be recorded since the transaction is between two funds of the same government.

Question 34

Fines and forfeits are reported as charges for services on the government-wide statement of activities.

Question 35

An interfund transfer in should be reported in a governmental fund operating statement as a(an)

A) Revenue.
B) Due from other funds.
C) Other financing source.
D) Other financing use.

Question 36

The General Fund has transferred cash to the appropriate fund for eventual retirement of term bonds maturing in 10 years.Which funds would record this transaction?

A)Choice A.
B)Choice B.
C)Choice C.
D)Choice D.

Question 37

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

A) Interest on a tax anticipation note issued and repaid during the period.
B) Amortization expense.
C) Depreciation expense.
D) A grant that is intended to finance activities of the following period.

Question 38

When a computer is ordered by a department of the government,the purchase order should be recorded in the General Fund as a debit to

A) Appropriations.
B) Equipment.
C) Encumbrances.
D) Expenditures.

Question 39

Under the dual-track accounting approach used in the text,which of the following transactions or events would be recorded in the general journal for governmental activities at the government-wide level?

A) Recording the annual budget,property tax levy,and payroll.
B) Recording the property tax levy,issuance of tax anticipation notes,and year-end accrual of interest on long-term debt.
C) Recording the property tax levy,payroll,and encumbrances for purchase orders.
D) Recording the property tax levy,encumbrances for purchase orders,and payment of interest on long-term debt.

Question 40

As a general rule,revenues,expenditures,and expenses should be reported as such only once in the funds of a government.

Question 41

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

A) Property taxes.
B) Fees charged by a municipal airport.
C) Bequest left to the city by a wealthy citizen.
D) State grant to conduct an after school program for children.

Question 42

When a fire truck purchased from General Fund revenues is received,what account,if any,should have been debited in the General Fund?

A) No journal entry should be made in the General Fund.
B) Expenditures.
C) Encumbrances.
D) Equipment.

Question 43

On July 1,the first day of its fiscal year,the Town of Eldon levied a $1,000,000 property tax which is payable in full on December 1 of the same year.On September 15,the town decided to borrow $200,000 in 90-day tax anticipation notes to cover operating expenditures until the tax revenues are collected.The journal entry on September 15 to record the issuance of tax anticipation notes will include

A) A credit to Other Financing Sources-Proceeds of Tax Anticipation Notes.
B) A credit to Tax Anticipation Revenue.
C) A credit to Tax Anticipation Notes Payable.
D) For the General Fund journal choice A,and choice C for the governmental activities journal.

Question 44

The City of Tipton received 100 acres of land located in the city limits as a gift from a local property owner for use as a city park.The debit for the entry to record this event in the General Fund should be to

A) General capital assets.
B) Land.
C) Expenditures.
D) No entry is required in General Fund.

Question 45

If state law requires that local governments prepare General Fund and special revenue fund budgets on a basis that differs from the basis of accounting required by GAAP,then the budgetary comparison schedule or statements should

A) Not be included as part of the basic financial statements.
B) Be included with the actual figures presented on the budget basis and then reconciled to the GAAP basis.
C) Be included with budget figures and actual figures adjusted to the GAAP basis.
D) Be included as part of management's discussion and analysis (MD&A).

Question 46

Which of the following accounts would not be closed at the end of each fiscal year?

A) Fund balance.
B) Estimated revenues.
C) Interfund transfers out.
D) Expenditures.

Question 47

During January 2014 General Fund supplies ordered in the previous fiscal year and encumbered at an estimated amount of $2,000 were received at an actual cost of $2,200.The entry to record this transaction will require a debit to

A) Expenditures-2014 in the amount of $2,200.
B) Expenditures-2013 in the amount of $200.
C) Expenditures-2014 in the amount of $200.
D) Expenditures-2013 in the amount of $2,200.

Question 48

Cartier Village's capital expenditures during the year ended December 31 included: What amounts should have been recorded in the General Fund and enterprise fund for the increase in equipment during the year ended December 31,assuming the electric utility is considered an enterprise fund?

A) General Fund: $0; Enterprise Fund: $0
B) General Fund: $0; Enterprise Fund: $60,000
C) General Fund: $40,000; Enterprise Fund: $60,000
D) General Fund: $100,000; Enterprise Fund: $0

Question 49

The voters of the city passed an ordinance to increase their sales tax by ¼ percent.The proceeds of the sales tax are to be used for culture and recreation.In the governmental activities journal,how would the ¼ percent sales tax revenue be recorded?

A) Program Revenue-Culture and Recreation-Sales Tax.
B) Program Revenue-Culture and Recreation-Operating Grants and Contributions.
C) General Revenue-Sales Tax.
D) General Revenue-Culture and Recreation-Sales Tax.

Question 50

On May 1,Vacca City was notified of approval of a $300,000 federal operating grant,payable on a reimbursement basis as the city expends resources for the intended purpose of the grant.As of May 1,no expenditures had been made for grant purposes.The journal entry to record approval of this grant will include

A) A credit to Revenues in the amount of $300,000.
B) A credit to Deferred Revenues in the amount of $300,000.
C) A debit to Grants Receivable in the amount of $300,000.
D) No journal entry will be made until expenditures for the authorized purpose occurs.

Question 51

Which of the following journal entries should a government use to record $475,000 for police department salaries and wages during a particular month? A.Choice A.
B)Choice B.
C)Choice C.
D)Choice D.

Question 52

In fiscal year 2014 the "Expenditures-2013" account represents

A) Excess expenditures in 2013 that will be offset against appropriations for 2014.
B) Goods or services received in 2013 which the government has no record of ordering.
C) Amount of expenditures for goods ordered in 2013 that were received in 2014 and chargeable to appropriations of 2013.
D) The amounts of purchase orders issued in 2013 that were intended to be paid in full from appropriations for 2014.

Question 53

The Encumbrances Outstanding account is properly termed a

A) Long-term liability.
B) Reservation of unassigned fund balance.
C) Budgetary account.
D) Current liability if paid within a year; otherwise,long-term debt.

Question 54

The liabilities for accrued payroll (pay owed employees but not paid at year-end)would be recorded in which journal? A.Choice A.
B)Choice B.
C)Choice C.
D)Choice D.

Question 55

Property taxes due and collectible 90 days after the 2014 fiscal year end would be recorded as revenues in 2014 in which journal? A.Choice A.
B)Choice B.
C)Choice C.
D)Choice D.

Question 56

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

A) General Fund,capital projects fund,and governmental activities.
B) General Fund and governmental activities.
C) General Fund,capital projects fund,and enterprise fund.
D) Capital projects fund and governmental activities.

Question 57

Which of the following will require a debit to Fund Balance--Unassigned of a governmental fund when operating statement accounts are closed at the end of the year,assuming there are no other financing sources or uses?

A) Revenues are less than expenditures.
B) Revenues are more than expenditures.
C) Revenues are more than expenditures and encumbrances.
D) Revenues are less than expenditures and encumbrances.

Question 58

The City of Grand Marais' fiscal year ends on June 30.Grand Marais uses encumbrance accounting.On May 6,a purchase order was approved and issued for supplies in the amount of $6,000.Grand Marais received these supplies on June 2,and the $6,000 invoice was approved for payment.What General Fund journal entry should Grand Marais make on May 6,to record the approved purchase order? A.Choice A
B)Choice B
C)Choice C
D)Choice D

Question 59

Which of the following best describes the proper treatment for uncollectible amounts of tax revenue?

A) Report as bad debt expense.
B) Report revenues net of uncollectible amounts.
C) Report as bad debt expenditures.
D) Report as deferred revenue.

Question 60

The General Fund received $200,000 in lieu of taxes from the city owned water utility,an enterprise fund.This is an example of a(an)

A) Interfund transfer.
B) Interfund loan.
C) Internal exchange transaction.
D) Reimbursement.

Question 61

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

A) The liability for the annual obligation to the employee retirement plan.
B) Depreciation expense.
C) Resources received for services to be provided in future periods.
D) Revenue related to prior periods.

Question 62

Which of the following is not a program revenues classification used in the governmental activities journal and reported in the government-wide statement of activities?

A) User fees.
B) Operating grants and contributions.
C) Charges for services.
D) Capital grants and contributions.

Question 63

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

A) Endowment where the investment earnings are to be used for public purposes.
B) Pension trust fund revenues.
C) Accumulation of resources for payment of general long-term debt principal and interest.
D) Gasoline taxes to finance road repairs.

Question 64

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.

Question 65

All revenue and interfund transfers of the City of Fenton are accounted for on the modified accrual basis.Below is shown a list of Fenton's General Fund transactions of a revenue or transfer nature.State which ones should be recognized by the General Fund as a revenue or interfund transfer in the year of occurrence.If any item is neither a current revenue nor interfund transfer,state the proper treatment for that item.
1)Receipt of money from issue of tax anticipation notes.
2)Charge to a special revenue fund for supplies transferred to it at cost.
3)Collection of current-year property taxes.
4)Collection of prior years' taxes.
5)Receipt of money in prepayment of a property owner's next-year taxes.
6)Collection of taxes applicable to prior year that,due to an assessor's error,had not been recorded as receivable in that year.
7)Receipt of refund on prior year's expenditures.
8)Refund of current year's expenditures.
9)Collection of accounts receivable for charges for services.
10)Collection of taxes that had been written off in prior year.

Question 66

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

A) Sales taxes.
B) Interfund transfers in.
C) Parking fines.
D) Sale of zoning maps.

Question 67

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

A) Realizable.
B) Earned.
C) Available.
D) Spent.

Question 68

Distinguish between interfund loans and interfund transactions that recognize a flow of financial resources in governmental fund operating statements.

Question 69

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

A) Voluntary nonexchange transactions.
B) Imposed nonexchange transactions.
C) Derived tax revenues.
D) Property tax revenues.

Question 70

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

A) Cash.
B) Operating Transfer in.
C) Revenues.
D) Fund Balance--Unassigned.

Question 71

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?

A) Long-term liability.
B) Revenue.
C) Other financing source.
D) Not reported by the governmental fund; only reported at the government-wide level.

Question 72

The General Fund is used to account for:

A) Revenues and expenditures legally restricted to a specific purpose.
B) The accumulation of resources to pay for principal and interest on the current portion of long-term debt.
C) Construction of major capital assets.
D) General administration of the government.

Question 73

Under the consumption method for recording supplies that are maintained on a perpetual inventory system,the adjusting entry made at year end would affect which of the following accounts?

A) Fund Balance-Nonspendable-Inventory of Supplies.
B) Fund Balance-Restricted-Inventory of Supplies.
C) Expenditures.
D) Inventory of Supplies.

Question 74

The following are key terms in Chapter 4 that relate to governmental operating activities and transfers:
A.Inter-activity transactions
B.Internal exchange transactions
C.Interfund loans
D.Intra-entity transactions
E.Interfund transfers
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.

Question 75

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

A) Capital assets.
B) Inventories.
C) Deferred charges for debt issuance costs.
D) Goodwill.

Question 76

The city's electric utility fund sent $700,000 to the General Fund to help cover the city's operating costs.This transaction would be recorded in the governmental activities journal as

A) Interfund transfer in.
B) Internal balance.
C) Revenue.
D) It would not be recorded since the transaction involves two funds of the same government.

Question 77

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?

A) General Fund.
B) Permanent fund.
C) Special revenue fund.
D) Enterprise fund.

Question 78

The governmental funds operating statement presents all of the following except

A) Expenditures.
B) Other financing sources.
C) Revenues.
D) Encumbrances.

Question 79

At the end of the 2014 fiscal year the General Fund had $500 in encumbrances that remained opened into fiscal year 2015.In 2015 the encumbered goods were received at an invoiced cost of $520.How much would be recorded as the 2015 expenditure?

A) $0.
B) $20.
C) $500.
D) $520.

Question 80

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

A) Fees charged for use of an athletic field at a city park.
B) State grant to conduct a smoking cessation program for middle school-aged youth.
C) Bequest left to the city by a former mayor.
D) Personal property taxes.