Question 1

Ashley Woods Village paid $1,000,000 principal and $200,000 interest on its general obligation bonds that it issued in a prior year to finance widening of a local thoroughfare. This transaction will most likely

Accepted Answer

The correct answer is D because the payment of both principal ($1,000,000) and interest ($200,000) on general obligation bonds would typically be made from the Debt Service Fund, and the total payment of $1,200,000 would decrease the fund balance in that fund.

Question 2

The City of Ruth owns and operates an electric utility. The utility purchases new electric transmission lines for $6,000,000 so that it can provide electricity to new customers. This purchase will most likely

Accepted Answer

The purchase of electric transmission lines by a city-owned electric utility is typically accounted for in the Enterprise Fund, as this fund is used for activities operated in a manner similar to private businesses where services are provided for a fee. Therefore, the purchase will increase capital assets in the Enterprise Fund.

Question 3

A computer was purchased from unrestricted resources for a general government department. The government paid cash for the computer at the purchase date. Which of the following is not an effect of this transaction in the General Fund?

Accepted Answer

The purchase of the computer results in an increase in a capital asset, which is recorded in the government-wide financial statements. However, there is no effect on the General Fund since this fund only records current assets, liabilities, and fund balance. Therefore, choice B is not an effect of the transaction in the General Fund. Choices A, C, and D are all correct effects in the General Fund.

Question 4

A transaction in which a government issues general obligation bonds to finance the construction of a new police station would

Accepted Answer

The answer of A transaction in which a government issues...

Question 5

The fund used to account for the acquisition or construction of major capital facilities and other capital assets is the

Accepted Answer

The Capital Projects Fund is specifically designed to account for the acquisition or construction of major capital facilities and other capital assets. The General Fund is used for general operations, the Special Revenue Fund is used for specific revenue sources, and the General Capital Assets accounts are a part of the government's overall financial accounting system and not a specific fund.

Question 6

All of the following transactions decrease the fund balance of a governmental fund except

Accepted Answer

Retirement of the principal of a short-term note does not decrease the fund balance since it represents a reduction in liabilities of the fund. The other choices all represent expenditures that decrease the fund balance.

Question 7

The police department of the city of Newport purchased 10 new patrol cars at the beginning of the new budget year at a total cash price of $250,000. This purchase will

Accepted Answer

Capital assets are not reported in the General Fund but in governmental activities at the government-wide level. The purchase decreases the fund balance in the General Fund by $250,000, reflecting the outflow of resources.

Question 8

In which accounting entity may a government report capital assets?

Accepted Answer

Enterprise Funds are used by governments to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent is that the costs of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges. Capital assets are commonly reported in Enterprise Funds because these funds are used to account for activities that are business-like in nature, and capital assets are a significant part of the operations for such activities.

Question 9

Capital outlay expenditures would be least likely in a

Accepted Answer

Capital outlay expenditures, which are expenditures for acquiring capital assets or making significant improvements to them, are least likely in a Debt Service Fund. The primary purpose of a Debt Service Fund is to account for the accumulation of resources for, and the payment of, general long-term debt principal and interest. It does not typically involve capital outlay expenditures, which are more associated with Capital Projects Funds or sometimes General and Special Revenue Funds for their specific capital projects or asset acquisitions.

Question 10

Assume that Kelly County issues $3,000,000 in general obligation bonds to build a new fire station and $7,000,000 in revenue bonds to finance the upgrade of their Water Department's water treatment facility. How will these transactions affect the funds of the county?

Accepted Answer

The answer of Assume that Kelly County issues $3,000,000 in...

Question 11

All of the following financial statements should be presented for a General Fund except a

Accepted Answer

The General Fund is a governmental fund and does not require a statement of cash flows as it is not an enterprise fund. Therefore, option C is incorrect. The other three options are necessary financial statements for a General Fund, as they provide information on the financial position and performance of the fund.

Question 12

General government financial resources to be used to finance construction of a general government construction project typically should be accounted for in

Accepted Answer

General government financial resources used to finance construction of a general government construction project should be accounted for in a Capital Projects Fund. This fund is used to account for financial resources to be used to construct major and long-term capital assets.

Question 13

Ashley Woods Village issued $4,000,000 in general obligation bonds to finance the widening of a local thoroughfare. This transaction will most likely

Accepted Answer

General obligation bonds are typically issued by governments in order to finance capital projects, such as the widening of a local thoroughfare. These bonds are typically repaid from the government's general fund over a period of years. Therefore, the issuance of the $4,000,000 in bonds would increase the fund balance in the Capital Projects Fund by $4,000,000, as this fund is typically used to account for the finances related to capital projects. It would not affect the General Fund balance.

Question 14

General government financial resources that are required to be used to pay principal and interest on general government long-term debt are accounted for in

Accepted Answer

Financial resources required to pay principal and interest on general government long-term debt are accounted for in a Debt Service Fund. This fund accounts for the accumulation of financial resources and payment of principle and interest on general long-term debt, including general obligation bonds, revenue bonds, and special assessment bonds. The capital projects fund accounts for financial resources used for the acquisition or construction of major capital facilities and is not related to debt service. The general fund accounts for regular operating expenses, and the special revenue fund accounts for specific revenue sources designated for particular purposes.

Question 15

A city adds a new door to its downtown fire station. This is considered a relatively minor addition. Which fund would most likely be used to account for the construction expenditures associated with the door?

Accepted Answer

The General Fund is typically used to account for minor additions or improvements to government-owned facilities. The Enterprise Fund is used for self-supporting government services such as utilities or transportation. The Capital Projects Fund is used for major capital projects such as building a new fire station or a major renovation. General Capital Assets accounts are used to record the acquisition and depreciation of capital assets, but not construction expenditures.

Question 16

Which one of the following accounts is not found in the General Capital Assets and General Long-Term Liabilities accounts?

Accepted Answer

The General Capital Assets and General Long-Term Liabilities accounts deal with assets and liabilities related to the government's operations and are expected to last for more than one year. Bonds payable and Long-term Claims and Judgments Payable are examples of long-term liabilities, while Land is an example of a capital asset. Investments, on the other hand, are not part of these accounts, as they can be either short-term or long-term and may not be directly related to government operations.

Question 17

Incurring construction costs on a major general government capital project would

Accepted Answer

Incurring construction costs on a major general government capital project would decrease the fund balance in a Capital Projects Fund because these costs are expenditures that reduce the resources available in the fund.

Question 18

Which of the following would not be classified as an expenditure?

Accepted Answer

Depreciation is a non-cash expense and does not involve any outgoing or expenditure of cash. It is the allocation of the cost of an asset over its useful life.

Question 19

Assume that the City of Wakefield purchased a tract of land to be used as a public park. The purchase was financed with proceeds from a five-year note issued by a local lending institution. Because of the time required for facilities construction and land improvements, the park itself will not be ready for public use for at least two years. At the date of purchase, the city would most likely account for the transaction in

Accepted Answer

The answer of Assume that the City of Wakefield purchased...

Question 20

Government-wide financial statements include

Accepted Answer

The answer of Government-wide financial statements include
...

Quiz 2: State and Local Government Accounting and Financial Reporting Modelthe Foundation