Deck 17: Financial Reporting Issues

Question 1

One of the purposes of the financial audit that accompanies statements is to show that the statements have been prepared in accordance with GAAP, GASB, and state, municipal, and federal laws.​

Answer 1

True

Question 2

GASB Statement No.34 requires the reporting for internal service funds by

A)​combining income statement results with general fund activities
B)​requiring internal service funds to be reported separately as major funds
C)​classifying internal service funds as proprietary funds, labeled as government activities
D)​All of the above

Answer 2

C

Question 3

The purpose of the Management Discussion and Analysis section is

A)​to give a concise overview and analysis of the financial statements
B)​to provide detailed cost information relating to providing services to citizens
C)​pension cost calculations for the governmental unit
D)​detailed information about short term spending and fiscal compliance

Answer 3

A

Question 4

When operations of component units of government are blended with the primary government unit, they are reported by

A)​a separate column on the General Purpose Financial Statements of the primary governmental unit
B)​a disclosure in a footnote to the primary government unit General Purpose Financial Statements
C)​Not reported or disclosed separately from the primary governmental unit
D)​a separate set of general purpose financial statements

Question 5

Major funds are described as

A)​the general fund and enterprise funds
B)​at least 5% of all government and enterprise funds combined
C)​those in which assets, liabilities, revenues, or expenditures are at least 10% of all funds in that type.
D)​all of the above

Question 6

The GASB Statement No.34 reporting model includes, but is not limited to which of the following reports?

A)​Government-wide financial statements
B)​a management discussion and analysis section
C)​funds based financial statements
D)​all of the above

Question 7

Which of the following were innovations in financial reporting introduced by GASB Statement No.34?

A)An introductory narrative section
B)An overall view of the government in government wide statements
C)​Comprehensive information about the cost of delivering services to citizens
D)​all of the above

Question 8

The Single Audit Act requires that a governmental unit have a single audit if they programs receiving more than $300,000 annually, or 3% of all federal assistance expenditures, must be audited unless they are considered low risk.

Question 9

Required supplementary information includes all of the following except for:

A)​A budgetary comparison statement or schedule
B)​Management discussion and analysis
C)​pension related information
D)​information about the condition of infrastructure assets

Question 10

General purpose financial statements are part of the financial section of a comprehensive annual financial report

Question 11

General fixed assets, including infrastructure assets, and general long-term debt are included only in the government-wide financial statements.

Question 12

Which of the following is not a classification of the net asset accounts of a proprietary fund?

A)​Invested in capital assets, net of related debt
B)​Restricted both externally and internally
C)​Encumbrances
D)​Unrestricted

Question 13

The statement of Cash Flows includes only a section for operating cash flows, and investing cash flows.

Question 14

General purpose financial statements are part of required supplementary information.

Question 15

The Management Discussion and Analysis gives a detailed overview of pension cost calculations for governmental units.

Question 16

Which of the following is/are reporting requirements in funds-based statements under GASB Statement No.34?

A)​the statements highlight major funds and aggregate non major funds into one column
B)​provide detailed information about short term spending and fiscal compliance
C)​separate funds based statements are required for governmental, proprietary, and fiduciary funds
D)​All of the above

Question 17

Reciprocal interfund activities include interfund services between government and proprietary funds.

Question 18

Which of the following could be considered a component unit of a primary government unit?

A)​water utility enterprise
B)​chamber of commerce
C)​pension plan
D)​affiliated booster club

Question 19

The statement of net assets also includes general long-term liabilities accounted for at face value.

Question 20

Required supplementary information includes pension-related information, but not a budgetary comparison or schedule.

Question 21

The Single Audit Act requires that a governmental unit have a single audit if they

A)​receive any Federal Funds even on a pass-through basis.
B)​are not in compliance with the Federal grant conditions.
C)​receive more than $300,000 in Federal funds annually.
D)​only receive one Federal grant.

Question 22

GASB Statement No.34 requires a separate set of financial statements for each of the three categories of funds.Prepare an analysis of the basic types of fund categories, what the measurement focus is and the basis of accounting, and which basic financial statements are needed.

Question 23

In order to convert the governmental fund statement of revenues, expenditures, and changes in fund balances to a government wide statement of activities, which of the following activities is necessary?
1) Eliminate capital outlay expenditures
2) Reclassify revenues between program revenues and general revenues
3) Record bad debt expenses
4) Convert revenues from the economic flow of resources accrual basis to the current financial resources modified accrual basis

A)1, 3, 4
B)1, 2, 3
C)1, 2, 3, 4
D)1, 2, 4

Question 24

From the following information, prepare a statement of net assets for the city of Franklin as of June 30, 2016:
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$\begin{array}{lr}\text { Cash and Cash equivalents, Governmental } & \$ 500,000 \\\text { Cash and Cash equivalents, Business Activities } & 300,000 \\\text { Receivables, net, Governmental } & 280,000 \\\text { Inventories, Business Activities } & 135,000 \\\text { Capital Assets, net, Governmental } & 1,330,000 \\\text { Capital Assets, net, Business Activities } & 750,000 \\\text { Accounts Payable, Governmental } & 158,000 \\\text { Accounts Payable, Business Activities } & 96,000\\\text { Noncurrent liabilities, Governmental } & 1,005,000 \\\text { Noncurrent liabilities, Business Activities } & 585,000 \\\text { Net Assets invested in Capital Assets (net of Debt) } & \\\text { Governmental } & 733,000\\\text { Business activities }&465,000\\\text { Net Assets Restricted: } & \\\text { Governmental } &132,000 \\\text { Business Activities } & 93,000\\\text { Net Assets Unrestricted: } & \\\text { Governmental } &82,000\\\text { Business activities }& (54,000) \end{array}$

Question 25

The most common difference between funds-based and government-wide financial statements is

A)​government-wide statements of activities show operating data by function
B)​government-wide statements of activities use a format that differs from proprietary funds statements of revenues
C)​interfund payables and receivables must be eliminated in the preparation of the statement of activities
D)​all of the above

Question 26

Governmental entities are required to present fund financial statements for the governmental funds based on the modified accrual basis of accounting and government-wide financial statements where all funds, included the governmental funds, are presented using the accrual basis of accounting.Explain the required reconciliations and describe the major reconciling items.

Question 27

Which of the following combination of items reported is included on the statement of activities? ?
$\begin{array}{llll}&&\text { Revenue }\\\text { Direct } & \text { Allocated } & \text { specifically } & \text { Program } \\\text { expenses by } & \text { indirect } & \text { connected to } & \text { general } \\\text { program } & \text { expenses } & \text { programs } & \text { fixed assets } \\\hline\end{array}$

A) $\begin{array}{llll}\text { yes } & &&&&\text { yes } &&&& \text { no } &&&&& \text { no } \\\end{array}$
B) $\begin{array}{llll}\text { yes } &&&&& \text { no } &&&& \text { yes } &&&&& \text { no } \\\end{array}$
C) $\begin{array}{llll}\text { yes } &&&&& \text { yes } &&&& \text { yes } &&&&& \text { no } \\\end{array}$
D) $\begin{array}{llll}\text {yes } &&&&& \text { yes }&&& & \text { no } &&&&& \text { no }\end{array}$

Question 28

Audit reports prepared under the Single Audit Act include which of the following?

A)​a report on compliance with laws and regulations
B)​a report on the study of the internal control systems
C)​an opinion on the fairness of financial statement presentation
D)​all of the above

Question 29

The City of Terrytown reports the following information:
?
?
$$\begin{array} { l r } \text { Government Activities: } & \\\text { General-Direct Expenses } & 85,000 \\\text { Police-Direct Expenses } & 115,000 \\\text { Fire Safety-Direct Expenses } & 95,000 \\\text { Public Works-Direct Expenses } & 185,000 \\\text { Recreation-Direct Expenses } & 75,000 \\\text { Library-Direct Expenses } & 140,000 \\\text { Interest on Long term Debt-Direct } & 30,000 \\\text { Police-Indirect Allocation } & 20,000 \\\text { Fire Safety-Indirect Allocation } & 25,000 \\\text { Public Works-Indirect Allocation } & 25,000 \\\text { Recreation-Indirect Allocation } & 10,000 \\\text { Library-Indirect Allocation } & 20,000 \\\text { Charges for Police service } & 90,000 \\\text { Charges for Fire Safety } & 50,000 \\\text { Charges for Public Works } & 105,000 \\\text { Charges for Recreation } & 45,000 \\\text { Charges for Library } & 25,000 \\\text { Operating Grants for Fire Safety } & 15,000 \\\text { Capital Grants for Library } & 75,000\end{array}$$ There are no business type activities for this city or other component units.Taxes raised for general revenues equal $200,000 and taxes raised for debt service equal $25,000.Other general revenues were generated through fines, fees, and permits that total $100,000.The city also sold a plot of land for a gain of $10,000.The beginning of the year net assets totaled $155,000.
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Required:
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Prepare a statement of activities schedule for the city.

Question 30

Under the requirements for a Statement of Cash Flow, what sections must be included in the statement?
1) Operating cash flows
2) Cash Flows from noncapital financing
3) Capital and related financing cash flows
4) Investing cash flows

A)1, 2, 4, and interfund transfers in
B)1, 2, 3, 4
C)-2, 3, 4, and cash receipts from taxes
D)1, 2, 3, and cash receipts from taxes

Question 31

Briefly discuss the minimum requirements of the Management Discussion and Analysis section in the comprehensive annual financial report.

Question 32

Converting the governmental fund balance sheet to a government-wide statement of net assets requires which of the following activities? ?
?
1) Add general fixed assets, net of accumulated depreciation
2) Add general long-term debt, using the effective interest method
3) Eliminate the assets and liabilities of most internal service funds (those whose primary customer is the general government)
4) Eliminate the fund balance and classify the net assets into invested in capital assets, restricted net assets, and unrestricted net assets

A)1, 2, 3, 4
B)1, 3
C)1, 2, 4
D)3, 4

Question 33

Reciprocal interfund activities include all but which of the following?

A)​interfund loans
B)​interfund services between government and proprietary funds
C)​advances to/from other funds
D)​interfund reimbursements

Question 34

Which of the following is not a category included in the statistical section of government's audit report?

A)​Revenue capacity information.
B)​Asset capacity information.
C)​Demographic and economic information.
D)​Financial trends information.

Question 35

GASB Statement No.34 requires the reporting for infrastructure assets.Special provisions for reporting include

A)mandatory straight line depreciation on all infrastructure assets
B)​depreciation should not be recorded on any infrastructure assets
C)​small government units do not have to report on infrastructure assets now or in the future
D)​allowing various approaches to estimating infrastructure costs

Question 36

GASB Statement No.34 requirements for the reporting for general fixed assets include

A)​the use of account groups
B)​reporting general fixed assets as a major fund
C)​general fixed assets will be included only in the government wide financial statements
D)​report general fixed assets as a component unit

Question 37

Which of the following is not a purpose of the financial audit that accompanies statements?

A)​ensuring compliance with fiscal requirements
B)​render an opinion about whether the statements present fairly the financial position, results of operation, and cash flows of the government
C)​to comment on the economy, efficiency or program results of a governmental unit
D)​statements have been prepared in accordance with GAAP, GASB, and state, municipal, and federal laws