Question 1

When accounting for inventory items in a governmental fund, GASB standards permit the use of the consumption method only.

Accepted Answer

GASB standards allow for both the consumption method and the purchases method when accounting for inventory items in a governmental fund.

Question 2

Assume that the City of Juneau maintains its books and records to facilitate the preparation of its government-wide financial statements.The City pays its employees bi-weekly on Friday.The fiscal year ended on Wednesday, June 30.Employees had been paid on Friday, June 25.The employees paid from the General Fund had earned $120,000 on Monday, Tuesday, and Wednesday (June 28, 29, and 30).They will earn $80,000 on Thursday and Friday (July 1 and 2).What entry, if any, should be made on June 30?

Accepted Answer

The entry that should be made on June 30 is to debit the Expenses account for $120,000 and credit the Wages and Salaries Payable account for $120,000. This reflects the amount that the employees had earned but had not yet been paid as of June 30. No entry should be made for the $80,000 that the employees will earn on July 1 and 2, since those amounts relate to the next fiscal year.

Question 3

Which of the following funds would use the modified accrual basis of accounting in preparing its fund financial statements?

Accepted Answer

B

Question 4

Employees of the City of Orleans earn ten days paid leave for each 12 months of employment.The City has a policy that employed must take their vacation days during the year following the year in which it is earned.If they do not take vacation in the allotted period, they forfeit the vacation pay benefit.Traditionally, employees have taken 80% of the vacation days earned.During the current year, employees of the City of Orleans earned $400,000 in vacation pay.Assuming the city maintains its books and records in a manner to facilitate the preparation of the government-wide financial statements, which of the following entries is the correct entry in the General Fund to record the vacation pay earned during the current period?

Accepted Answer

The answer of Employees of the City of Orleans earn...

Question 5

In a governmental fund, expenditures for wages and salaries should be recognized in the period in which the employees earn them.

Accepted Answer

According to GAAP (Generally Accepted Accounting Principles), expenditures for wages and salaries should be recognized in the period in which the employees earn them, which is known as the accrual basis of accounting. This ensures that expenses are matched with the period in which they helped generate revenue, providing a more accurate picture of the government's financial position.

Question 6

Most governments budget (appropriate)resources for principal and interest only for the period in which a payment is due-not for future payments.

Accepted Answer

This statement is true. Most governments budget for principal and interest payments only for the period in which they are due, rather than budgeting for future payments.

Question 7

Assume that the City of Juneau maintains its books and records to facilitate the preparation of its fund financial statements.The City pays its employees bi-weekly on Friday.The fiscal year ended on Wednesday, June 30.Employees had been paid on Friday, June 25.The employees paid from the General Fund had earned $120,000 on Monday, Tuesday, and Wednesday (June 28, 29, and 30).They will earn $80,000 on Thursday and Friday (July 1 and 2).What entry, if any, should be made on June 30?

Accepted Answer

An entry should be made to record the amount earned by employees from June 28-30, which is $120,000. This entry will increase the Expenditure account and the Wages and Salaries Payable account. Option B is incorrect because it includes the amount that will only be paid after June 30. Option C is incorrect because it inaccurately labels the account as "Expenses" instead of "Expenditures." Option D is incorrect because an entry is necessary to accurately report the financial transactions of the City for the period.

Question 8

When accounting for inventory items in a governmental fund, a reservation of fund balance is always required when the consumption method is used.

Accepted Answer

A reservation of fund balance is not always required when the consumption method is used to account for inventory items in a governmental fund. It may be required if it is determined that the inventory items are a significant portion of the fund's assets and there is a risk of overspending or if there is a requirement by law or policy. However, each situation should be evaluated on a case-by-case basis.

Question 9

Which of the following funds would use the accrual basis of accounting in preparing its fund financial statements?

Accepted Answer

The answer of Which of the following funds would use...

Question 10

Per GASB standards, governments do not report general capital assets or depreciation in governmental funds.

Accepted Answer

According to GASB standards, general capital assets or depreciation should be reported only in the government-wide financial statements and not in governmental funds.

Question 11

Government-wide statements present revenues and expenses from the perspective of the government, not of individual funds.

Accepted Answer

Government-wide statements consolidate financial information from all of the government's funds and present it as a whole. Therefore, they provide an overall view of the government's revenues and expenses, rather than looking at individual funds separately.

Question 12

Employees of the General Fund of Scott City earn ten days paid leave for each 12 months of employment.The City permits employees to carry the vacation days forward as long as they wish.During the current year employees earned $800,000 of vacation benefits of which the City estimates that $500,000 will be taken in the next year and the balance will be carried forward.Assuming that the City maintains its books and records in a manner that facilitates the preparation of their government-wide financial statements, which of the following entries is the correct entry in the General Fund to record the vacation pay earned during the current period?

Accepted Answer

The correct entry in the General Fund to record the vacation pay earned during the current period is to debit Vacation Expense for $800,000 and credit Vacation Pay Payable for $800,000. This entry recognizes the expense incurred during the current period and creates a liability for the amount of vacation pay that employees have earned but have not yet taken. Option A is incorrect because it debits Expenditures instead of Vacation Expense, which does not accurately reflect the nature of the transaction. Option B is incorrect because it only records the estimated amount that will be taken in the next year, but does not account for the entire amount earned during the current period. Option D is incorrect because an entry is required to properly record the vacation pay earned during the current period.

Question 13

Assume that the City of Juneau maintains its books and records to facilitate the preparation of its fund financial statement.The City pays its employees bi-weekly on Friday.The fiscal year ended on Wednesday, June 30.Employees had been paid on Friday, June 25.The employees paid from the General Fund had earned $120,000 on Monday, Tuesday, and Wednesday (June 28, 29, and 30).What entry, if any, should be made on June 30?

Accepted Answer

An entry should be made to reflect the expenses of paying the employees for their work from June 28-30. The entry should be a debit to Expenditures (or Wages and Salaries Expense) and a credit to Wages and Salaries Payable. Therefore, choice A is the correct answer. Choice B is incorrect because the city is not paying a bill for services already rendered, but rather recognizing the expense of paying their employees. Choice C is incorrect because encumbrances are used to set aside funds for anticipated expenses, so it would not be appropriate in this situation. Choice D is also incorrect because an entry is needed to reflect the expenses incurred.

Question 14

When recording a general long-term liability in a governmental fund upon issuing a bond, the credit should be to a bonds payable account.

Accepted Answer

In governmental funds, long-term liabilities like bonds are not recorded in the fund's accounts; instead, they are reported in the government-wide financial statements.

Question 15

Employees of the City of Orleans earn ten days paid leave for each 12 months of employment.The City has a policy that employees must take their vacation days during the year following the year in which it is earned.If they do not take vacation in the allotted period, they forfeit the vacation pay benefit.Traditionally, employees have taken 80% of the vacation days earned.During the current year, employees of the City of Orleans earned $400,000 in vacation pay.Assuming the city maintains its books and records in a manner to facilitate the preparation of the fund financial statements, which of the following entries is the correct entry in the General Fund to record the vacation pay earned during the current period?

Accepted Answer

The answer of Employees of the City of Orleans earn...

Question 16

In budgeting for a governmental fund, the government should appropriate the resources for general capital assets in the periods when they are to be purchased, not those in which they will be used.

Accepted Answer

This is known as the capital projects fund and follows the modified accrual basis of accounting. The resources should be appropriated in the period when they will be used to acquire the capital assets, not when they will be used. This ensures that the accounting reflects the true cost of the project and helps in planning for future capital expenditures.

Question 17

Employees of the General Fund of Scott City earn ten days paid leave for each 12 months of employment.The City permits employees to carry the vacation days forward as long as they wish.During the current year employees earned $800,000 of vacation benefits of which the City estimates that $500,000 will be taken in the next year and the balance will be carried forward.Assuming that the City maintains its books and records in a manner that facilitates the preparation of their fund financial statements, which of the following entries is the correct entry in the General Fund to record the vacation pay earned during the current period?

Accepted Answer

The answer of Employees of the General Fund of Scott...

Question 18

Governmental fund liabilities are considered current only when they must be liquidated with expendable available financial resources-not, as in businesses and in the government-wide statements, when they must be paid within a year.

Accepted Answer

Governmental fund liabilities are considered current only when they must be liquidated with expendable available financial resources, which means that they are due when the resources are available to pay them, regardless of whether that happens within a year or not. This is different from businesses and government-wide statements, which generally consider liabilities to be current if they are due within a year.

Question 19

Expenditures are generally recognized when resources are acquired; expenses when resources are consumed.

Accepted Answer

This statement is true. Expenditures are recognized when resources are acquired, regardless of when they are used or consumed. Expenses, on the other hand, are recognized when resources are used or consumed, regardless of when they were acquired.

Question 20

As used in governmental accounting, expenditures are decreases in

Accepted Answer

In governmental accounting, expenditures are recorded as decreases in Net Financial Resources. This is because governmental entities use the modified accrual basis of accounting, which recognizes expenditures when they result in a decrease in current financial resources that are available to be spent. Expenditures do not affect Net Assets or Net Economic Resources, and may not always result in a decrease in Net Cash.

Quiz 5: Governmental Activities - Recognizing Expenditures and Expenses