Question 1

A government's Statement of Revenues,Expenditures,and Changes in Fund Balances reflected proceeds of bonds in the amount of $1,000,000.That statement also reflected expenditures for debt service in the amount of $3,000,000,including $2,600,000 for principal payments.Assuming no other changes,the effect,when moving from the change in fund balances in the governmental funds Statement of Revenues,Expenditures,and Changes in Fund Balances to the change in Net Position for governmental activities in the Statement of Activities would be a:

Accepted Answer

Bond proceeds of $1,000,000 would be a decrease and principle payments would be an increase $2,600,000 resulting in a net increase of $1,600,000

Question 2

Which of the following statements is not correct with respect to the preparation of government-wide statements?

Accepted Answer

Worksheet entries are not required to eliminate operating profits earned by enterprise funds in the preparation of government-wide statements. These profits are typically included in the business-type activities column.

Question 3

Which of the following is true regarding the reporting of general capital assets by state and local governments?

Accepted Answer

General capital assets are reported in the government-wide Statement of Net Position. They are not reported in the governmental funds Balance Sheet as these funds focus on short-term assets and liabilities.

Question 4

A local government recorded the payment of bond principal by debiting Expenditure: bond principal and crediting Cash. What is the worksheet entry when preparing the government-wide statements?

Accepted Answer

The worksheet entry to record the payment of bond principal is a debit to Bonds Payable and a credit to Expenditures - Bond Principal.

Question 5

In its Statement of Net Position,a government reported:
•assets of $100 million,including $30 million in capital assets (net),and
•liabilities of $40 million,including long-term debt of $15 million,all related to capital asset acquisition.
The government also reported $10 million of net assets were restricted for payment of debt service.The government's Unrestricted Net Position would be reported as:

Accepted Answer

The answer of In its Statement of Net Position,a government...

Question 6

A government incurred expenditures for its infrastructure as follows: $20 million for general repairs; $22 million to extend the life of existing infrastructure; $21 million for improvements and additions. If depreciation is to be charged,the amount would be $23 million. Which of the following would be true?

Accepted Answer

The expense using the modified approach is $22,000,000 to extend the life of existing infrastructure + repairs of $20,000,000 = $42,000,000
The expense using the depreciation approach is; depreciation expense of $23,000,000 + Repairs of $20,000,000 = $43,000,000.

Question 7

Which of the following is true regarding the government-wide statements?

Accepted Answer

Both A and B are true regarding the government-wide statements. Balances from enterprise funds' statements are entered in the business-type activities sections of the government-wide statements without adjustment, and government-wide statements eliminate interfund transactions within columns.

Question 8

A local government purchased a building and recorded the event by debiting Expenditures - Capital Outlay and crediting Cash. What would be the worksheet entry to prepare the government-wide statements?

Accepted Answer

The purchase of a capital asset is recorded as a debit to Capital Assets and a credit to Cash. The worksheet entry to prepare the government-wide statements would be to debit Capital Assets and credit Expenditures - Capital Outlay.

Question 9

A government recorded transfers out of the General Fund to the debt service fund in the amount of $ 600,000 and to the enterprise fund in the amount of $ 300,000. The amount that would be shown as a transfer in the governmental activities column of the Statement of Activities would be:

Accepted Answer

The amount transferred to the enterprise fund of $300,000 would be shown as a transfer in the governmental activities column of the Statement of Activities.

Question 10

A government had the following transfers reported in its governmental funds Statement of Revenues,Expenditures,and Changes in Fund Balances: (1)a transfer from the General Fund to a debt service fund in the amount of $l,100,000; (2)a transfer from the General Fund to an internal service fund in the amount of $1,300,000; and (3)a transfer from the General Fund to a special revenue fund in the amount of $500,000.The amount that would be shown as a transfer out in the governmental activities column in the Statement of Activities would be:

Accepted Answer

These are all interfund transactions, and would not be shown as transfers out in the governmental activities column in the Statement of Activities.

Question 11

When preparing government-wide financial statements,the modified accrual basis governmental funds are adjusted for which of the following events?

Accepted Answer

When preparing government-wide financial statements, the modified accrual basis governmental funds are adjusted for all of the following events:

A) Capital asset related events - This adjustment involves recognizing capital assets as assets and recognizing depreciation expense over their estimated useful lives. This adjustment is necessary because capital assets are not recognized in governmental fund financial statements under the modified accrual basis.

B) Long-term debt related events - This adjustment involves recognizing long-term debt and related interest and principal payments as liabilities and expenses in the period in which they are incurred. This adjustment is required because under the modified accrual basis, only current liabilities are recognized in governmental fund financial statements.

C) Internal service fund activities - This adjustment involves consolidating and eliminating the inter-fund transactions and balances related to internal service funds. Internal service funds are used to provide goods and services to other funds and departments within the government, and the financial transactions related to these activities need to be adjusted to properly reflect the government's financial position and activity.

Therefore, the best choice is D (All of the above).

Question 12

Which of the following would not be an adjustment for long-term debt when preparing government-wide financial statements?

Accepted Answer

Recording the cash received from a debt issue is not an adjustment for long-term debt when preparing government-wide financial statements as it is simply a cash transaction that does not impact the recognition or measurement of the long-term debt on the financial statements. Adjustments for long-term debt include changing Other Financing Sources - Proceeds of Bonds to Bonds Payable, changing Expenditures - Bonds Principle to Bonds Payable, and amortizing bond premiums.

Question 13

A government reported an "other financing source" in the amount of $750,000,related to the sale of land in its governmental funds Statement of Revenues,Expenditures,and Changes in Fund Balances.The land had a cost of $300,000.The adjustment in the reconciliation,when moving from the governmental Funds Statement of Revenues,Expenditures,and Changes in Fund Balances to the change in net position for governmental activities in the Statement of Activities would be a(an):

Accepted Answer

The answer of A government reported an "other financing source"...

Question 14

A governmental fund Statement of Revenues,Expenditures,and Changes in Fund Balances reported expenditures of $30 million,including capital outlay expenditures of $9 million.Capital assets for that government cost $90 million,including land of $10 million.Depreciable assets are amortized over 20 years,on average.The reconciliation from governmental changes in fund balances to governmental activities changes in would reflect a(an):

Accepted Answer

The reconciliation from governmental changes in fund balances to governmental activities changes in would reflect an increase of $5 million. This is because capital outlay expenditures are not considered expenses in governmental activities, but are instead capitalized and depreciated over time. Therefore, the $9 million of capital outlay expenditures would be added back to the $30 million of expenditures reported in the Statement of Revenues, Expenditures, and Changes in Fund Balances to arrive at the $39 million of expenses that would be reported in the Statement of Activities.

Question 15

The City of Charlotte reported property tax revenues in 2015 in the amount of $10 million.The deferred inflow - property taxes reported in the General Fund's balance sheet was $ 300,000 on December 31,2014 and was $ 375,000 on December 31,2015. During 2015,$9,000,000 was collected. What amount should the city report for Property Tax Revenue in its year ended December 31,2015 government-wide Statement of Activities?

Accepted Answer

The formula to calculate property tax revenue is:

Property Tax Revenue = Deferred Inflow - Beginning + Property Taxes Collected in the year

So, in this case:

Property Tax Revenue = $375,000 - $300,000 + $9,000,000
Property Tax Revenue = $9,075,000

Therefore, the answer is (C) $10,075,000.

Question 16

A local government recorded the sale of a capital asset at a gain by recording a debit to cash and credit to proceeds of sale of capital asset. What is the worksheet entry when preparing the government-wide statements?

Accepted Answer

When preparing the government-wide statements, the sale of a capital asset should be recorded by debiting Proceeds of sale of capital asset and crediting Capital asset (net) to remove the asset from the statement of Net Position. Additionally, a credit to Gain on sale of capital asset is necessary to properly recognize the gain on the sale. Therefore, choice C is the best option.

Question 17

A local government issued bonds and recorded the event by debiting Cash and crediting Other Financing Source - Proceeds of Bonds and Other Financing Source - Premium on Bonds. What is the worksheet entry when preparing the government-wide statements?

Accepted Answer

In government-wide financial statements, the issuance of bonds is recorded by debiting Other Financing Sources and crediting Bonds Payable and Premium on Bonds to reflect the liability.

Question 18

The total amount of indebtedness of specified kinds that is allowed by law to be outstanding at any time is known as:

Accepted Answer

The total amount of indebtedness allowed by law is known as the debt limit. It sets a maximum level of borrowing that the government or other entities can take on. The debt limit is often used as a tool for fiscal policy and to control government spending.

Question 19

A government reported an other financing source in the amount of $900,000 related to the sale of land in its governmental funds Statement of Revenues,Expenditures,and Changes in Fund Balances. The land had a cost of $400,000. The amount that would be reported in the government-wide Statement of Activities would be:

Accepted Answer

Proceeds of $900,000 - cost of $400,000 = gain of $500,000

Question 20

A government incurred expenses for its infrastructure as follows: $20 million for general repairs; $15 million to extend the life for existing infrastructure; and $18 million for additions and betterments.The government chooses to use the modified approach to record infrastructure.The infrastructure has a basis of $400 million and would be depreciated over a 40 year life,if depreciation were charged.The amount that would be shown as expense in the Statement of Activities would be:

Accepted Answer

Under the modified approach, only the amount spent on general repairs and maintenance is recognized as an expense. Therefore, the expense for the current year would be $20 million. The $15 million spent on extending the life of existing infrastructure and the $18 million spent on additions and betterments are capitalized and added to the infrastructure's basis. As a result, the adjusted basis of the infrastructure would be $433 million. Depreciation for the year would be calculated on this adjusted basis and would be $12.25 million ($433 million/40 years). Adding the recognized expense of $20 million to the depreciation of $12.25 million gives a total amount of $32.25 million. Rounding this amount to the nearest million gives an expense of $35 million shown in the Statement of Activities. Therefore, the correct answer is B.

Quiz 8: Government-Wide Statements: Capital Assets; Long-Term Debt