Deck 10: Permanent Funds and Fiduciary Funds

Question 1

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

Answer 1

True

Question 2

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

A)Full accrual basis of accounting.
B)Modified accrual basis of accounting.
C)Cash basis of accounting.
D)Budgetary basis of accounting.
Use the following information to answer #9-#12
Previously a city received a $1 million gift, the income from which was restricted to support maintenance of city-owned parks.During the current year the endowment earned $70,000 of which $50,000 was transferred to the City Park Special Revenue Fund.

Answer 2

B

Question 3

In an agency fund, assets always equals fund balance because there are no liabilities.

Answer 3

False

Question 4

On the year-end fund financial statement, the endowment fund would report the $50,000 transferred to the Special Revenue Fund as:

A)A reduction of revenues.
B)A nonreciprocal transfer out.
C)A reduction of equity.
D)An expenditure.

Question 5

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

Question 6

On the year-end fund financial statement, the endowment fund would report revenues of:

A)$0.
B)$50,000.
C)$70,000.
D)None of the above.

Question 7

Which of the following is NOT a fiduciary fund?

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

Question 8

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

Question 9

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

Question 10

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

Question 11

Permanent funds are classified as

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

Question 12

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.

Question 13

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

Question 14

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 15

Fiduciary funds are excluded from the government-wide statements.

Question 16

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 17

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 18

Most public pension plans are defined benefit plans.

Question 19

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

Question 20

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

Question 21

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 which would be levied against the property 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 22

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 23

On the year-end financial statements, the endowment fund would report, as a result of these transactions, a fund balance (net assets)of:

A)$1,000,000
B)$1,070,000
C)$1,050,000
D)$1,020,000

Question 24

On the year-end financial statements, the special revenue fund will report

A)$50,000 Nonreciprocal Transfer In
B)$70,000 Nonreciprocal Transfer In
C)$50,000 Revenue
D)$70,000 Revenue

Question 25

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 pension plan assets exceeded the actuarially computed pension liability.

Question 26

During the fiscal year ended December 31, 2001, the Highland City General Fund contributed $48 million to a defined benefit pension plan for its employees.On February 27, 2002, Highland made an additional $2 million contribution related to the 2001 pension contribution requirements.The actuarially determined contribution amount for 2001 is $52 million.The amount of pension expenditure recognized by Highland City General Fund for 2001 should be:

A)$ 0
B)$ 48 million
C)$ 50 million
D)$ 52 million

Question 27

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 accountability for the $300,000 earnings.

A)It should not transfer accountability.The $300,000 should remain in the Permanent Fund.
B)A special revenue fund.
C)The General Fund.
D)An enterprise fund.

Question 28

The City of Highland Hills receives a federal grant to assist in nutrition (feeding)programs for 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)General Fund.
B)Special Revenue Fund.
C)Agency Fund.
D)Expendable Trust Fund.

Question 29

The City of Highland Hills receives a federal grant to assist in nutrition (feeding)programs for senior citizens.The City will select the contractors to provide the feeding 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)General Fund.
B)Special Revenue Fund.
C)Agency Fund.
D)Expendable Trust Fund.

Question 30

At the beginning of the year, the permanent fund of Rapid City had an investment portfolio with a historical cost of $200,000 and a fair value of $220,000.There were no purchases or sales of securities during the year.At year end the portfolio had a fair value of $240,000.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, $20,000.
B)Credit Investment Income, $40,000.
C)Credit Fund Balance, $20,000.
D)No entry is made to recognize increase in fair value.

Question 31

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

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

Question 32

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

A)The employer agrees to make specific 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 specific payments to a specified pension plan AND guarantees that the employee will receive a specified pension (usually determined by length of service and salary).
C)The employer agrees to make necessary payments to a specified pension plan that guarantees that the employee will receive a specified pension (usually determined by length of service and salary).
D)The employer agrees to pay a specified amount (usually determined by length of service and salary)to the employee, but the employer makes no specific guarantee to make payments to the specified pension plan.

Question 33

Hill City Light & Water (a proprietary fund)contributes to a defined benefit plan for its employees.During 1999 Hill City contributed $27 million to its pension plan.On February 15, 2000, Hill City made an additional $3 million contribution related to 1999.The actuarially determined contribution amount was $32 million.The amount of pension expense recognized by Hill City Light & Water for 1999 should be:

A)$ 0
B)$ 27 million
C)$ 30 million
D)$ 32 million

Question 34

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.