Question 1

Capital projects expected to take several years to complete and involve large amounts of money

Accepted Answer

Capital projects that are expected to take several years to complete and involve large amounts of money typically operate under an annual budget. This budget includes expected revenues and estimated expenditures for the current fiscal year, allowing for regular review and adjustments as the project progresses.

Question 2

The activities of a central motor pool that supplies and services vehicles for the use of municipal employees on official business should be accounted for in a(n)?

Accepted Answer

The activities of supplying and servicing vehicles for the use of municipal employees on official business is an example of an Internal Service Fund in government accounting. These funds are used to account for services provided to other departments, and are accounted for using full accrual accounting principles.

Question 3

If general obligation debt is refunded to lower the interest rate and the proceeds are irrevocably placed with an escrow agent or trustee to pay off the old debt as it comes due, the government must

Accepted Answer

C

Question 4

Interfund transactions include all of the following except for:

Accepted Answer

The answer of Interfund transactions include all of the following...

Question 5

Which of the following activities would NOT be accounted for in a Special Revenue Fund?

Accepted Answer

The interest earned on temporary investments of long term bond proceeds would not be accounted for in a Special Revenue Fund as it is related to the bond proceeds which are typically accounted for in a Debt Service Fund. The other three options all involve revenue sources that are restricted for specific purposes and would typically be accounted for in a Special Revenue Fund.

Question 6

The basis of accounting for the Public Purpose Trust is the

Accepted Answer

The Public Purpose Trust is a governmental entity, and the generally accepted accounting principles require governmental funds, including trust funds, to use the modified accrual basis of accounting. This basis of accounting recognizes revenues when they become both measurable and available and recognizes expenditures when the fund liability is incurred. This differs from the accrual basis because it only recognizes revenues when they can be spent and expenditures when they are obligated. The cash basis and modified cash basis are not acceptable for governmental entities.

Question 7

On December 1, $125,000 was deposited with a fiscal agent for payment on bonds payable in the amount of $90,000 and interest payable for $35,000 due maturing on the last day of December. This will require a debit of

Accepted Answer

The deposit with the fiscal agent is a transfer out of the General Fund.

Question 8

Debt Service funds account for

Accepted Answer

Debt Service funds are used specifically for the payment of principal and interest on general obligation debt. Revenue bonds are typically backed by specific revenue sources and are not paid from the general fund. Arbitrage is the practice of borrowing money at a lower interest rate and investing it at a higher rate, which is not directly related to Debt Service funds. Monies irrevocably set aside for an in-substance defeasance may be held in a Debt Service fund, but not all Debt Service funds would necessarily have these funds set aside.

Question 9

A redemption of the final serial of general obligation bonds, including a deficiency covered by the general fund, would affect which funds and/or account groups?

Accepted Answer

Redemption of general obligation bonds would affect the General Fund and the Debt Service Fund, as well as the General Long Term Debt Account Group, as this is where the bonds are tracked. It would not affect an Agency Fund or Capital Projects, which are not directly related to the redemption of debt.

Question 10

Which of the following fund types have accounting principles most closely related to those of the General Fund?

Accepted Answer

The General Fund and Special Revenue Funds are both reserved for specific purposes and are accounted for using the modified accrual basis of accounting. The Pension Trust Fund is accounted for using the full accrual basis, while the Enterprise Fund and Agency Fund are both accounted for using the accrual basis of accounting.

Question 11

Capital improvements which are financed by special assessment debt for which the government is obligated in some manner would be recorded in the General Fixed Assets Account Group as a(n)

Accepted Answer

Capital improvements financed by special assessment debt for which the government is obligated should be recorded in the General Fixed Assets Account Group as an Asset for the portion owned by the government. This is because the government is obligated to pay the debt and therefore has an ownership interest in the capital improvements. The debt incurred would be recorded separately as Bonds Payable.

Question 12

If a county collects taxes on behalf of the city and school district, it would record the taxes in the

Accepted Answer

The county collecting taxes on behalf of other entities (i.e., city and school district) is acting as an agent for those entities. Therefore, the taxes collected should be recorded in an Agency Fund, which is used to account for assets held by a government in a purely custodial capacity. The General Fund (A) is used to account for the government's general operations, while a Special Revenue Fund (B) is used to account for specific government programs and revenues restricted for particular purposes. Trust Funds (D) are used to record assets held by the government in a fiduciary capacity, such as pension plans or trust funds for beneficiaries.

Question 13

Permanent Funds are established to

Accepted Answer

Permanent Funds are established for public purpose trusts for which only the earnings are expendable for a specific purpose. The principal of the fund is not expendable and is intended to be maintained for perpetuity.

Question 14

The main difference between an agency fund and a trust fund is:

Accepted Answer

An agency fund is designed to account for assets held by a government or organization in a trustee capacity for a designated purpose, but without direct financial interest in the assets themselves. Meanwhile, a trust fund accounts for assets held by a government or organization in a trustee capacity where the government or organization has a financial interest in the assets. Therefore, choice B is the correct option as it accurately describes an agency fund.

Question 15

An enterprise fund should be used to account for

Accepted Answer

Choice B is correct because a city-run water utility serves the general public and charges for its services, which generates revenue that can be used to cover the costs of the utility. Choice C is also correct because any activity that the city plans to sell to external users for a fee is considered a revenue-generating activity and should be accounted for in an enterprise fund. Choice A is incorrect because a free city-run swimming pool is not a revenue-generating activity and should not be accounted for in an enterprise fund.

Question 16

Which of the following terms best describes the accounting methods used to account for a city's Pension Trust Fund?

Accepted Answer

The Pension Trust Fund is a Fiduciary Fund, which will be accounted for using the accrual basis of accounting.

Question 17

Which of the following is an expenditure in the Debt Service Fund?

Accepted Answer

All of these choices are expenditures that would be accounted for in the Debt Service Fund. Choice A involves paying principal on long-term debt, Choice B involves paying special assessment debt, and Choice C involves paying bond interest through a fiscal agent.

Question 18

The best fund in which to account for the interest and dividends from an endowment to purchase library books for a city would be a(n)

Accepted Answer

The answer of The best fund in which to account...

Question 19

Which of the following is not a typical year-end statement for an Enterprise Fund?

Accepted Answer

All of these financial statements would be used at year end by an Enterprise Fund.

Question 20

Utilizing serial bonds to raise long term resources is preferred in debt service funds because:

Accepted Answer

The answer of Utilizing serial bonds to raise long term...

Quiz 16: Governmental Accounting: Other Governmental Funds, Proprietary Funds, and Fiduciary Funds