Question 1

If special assessment receivables are recorded in the accounts of an agency fund,the appropriate account(s)to credit upon receipt of assessments from property owners will include:

Accepted Answer

Agency funds are used to account for resources held by a government in a purely custodial capacity. When special assessment receivables are collected, the agency fund would credit "Due to Special Assessment Bondholders" as it reflects the liability to pass the collected amounts to the bondholders.

Question 2

Which of the following is the most reliable means of distinguishing a trust relationship from an agency relationship for purposes of deciding which type of fiduciary fund should be used?

Accepted Answer

Examining the aggregate of factors, such as the enactment that brought the relationship into existence and regulations under which it operates, is the most reliable means of distinguishing a trust relationship from an agency relationship. This approach takes into account the legal and regulatory framework surrounding the relationship, rather than relying solely on the wording of agreements or the duration of the relationship. Contacting the GASB or examining the wording of agreements may provide useful information, but may not be the most reliable or comprehensive means of making this determination.

Question 3

The cash and investment pool of Lake City allocates dividends,interest,and capital gains and losses on a periodic basis.When the cash and investment pool accrues interest earned on investments in debt securities,pending allocation to participating funds,it would credit which of the following accounts?

Accepted Answer

The interest earned on investments in debt securities is considered a part of the earnings of the cash and investment pool, but it is yet to be allocated to participating funds. Hence, it is credited to the account "Undistributed Earnings on Pooled Investments." This account reflects the portion of earnings that has not been allocated to each participating fund.

Question 4

Which of the following activities would most appropriately be recorded by an agency fund?

Accepted Answer

Taxes collected by a county government on behalf of cities within the county are an appropriate activity for an agency fund because they are being collected on behalf of another entity and are being held temporarily until they are distributed to the appropriate city.

Question 5

Defined benefit pension plans are classified as either single-employer pension plans or multiple-employer pension plans.

Accepted Answer

Defined benefit pension plans can be classified as either single-employer pension plans or multiple-employer pension plans, depending on whether the plan covers employees of a single employer or multiple employers.

Question 6

Other postemployment benefits (OPEB)include benefits other than pensions,such as health care,life insurance,and long-term care.

Accepted Answer

OPEB stands for Other Postemployment Benefits and includes benefits other than pensions, such as health care, life insurance, and long-term care.

Question 7

When one participant in an investment pool withdraws part of its equity from the pool,that participant's proportionate interest is decreased and all other participants' proportionate interest is increased.

Accepted Answer

This is true because if one participant withdraws part of their equity, the pool's total equity remains the same but now it is split among fewer participants, resulting in an increase in proportionate interest for the remaining participants.

Question 8

Billing and collection of special assessments and payment of debt principal and interest on special assessment debt for which the city is not obligated in any manner should be recorded in a(an):

Accepted Answer

An agency fund is used to account for resources held by a government in a purely custodial capacity, which is appropriate when the city is not obligated for the debt.

Question 9

When a cash and investment pool of a certain city was established,the debt service fund transferred investments to the pool having a cost of $3,000,000 but a current fair market value of $2,900,000.To record this transaction,the journal entry made by the debt service fund will include:

Accepted Answer

Since the investments were transferred at a lower fair market value than their cost, there is a loss in value. This loss needs to be recognized as a revenue in the debt service fund's financial statements. Therefore, the journal entry made by the debt service fund will include a debit to Revenues-Change in Fair Value of Investments in the amount of $100,000. The cost of the investments is not relevant for this entry, so options A and C can be eliminated. Also, there is no credit to investments in this transaction, so option D can be eliminated.

Question 10

A defined benefit plan specifies the amount or rate of contribution that the employer and employees must contribute to benefit the members' accounts in the pension plan.

Accepted Answer

The answer of A defined benefit plan specifies the amount...

Question 11

Which of the following statements regarding the financial reporting of agency funds is not ?

Accepted Answer

The financial information of agency funds is not reported in a separate column of the government-wide statement of activities. Instead, it is only reported in the fiduciary fund financial statements. Trust funds are included in the statement of changes in fiduciary net position, and GASB standards allow disclosure of the assets and liabilities of agency funds in a separate column of the statement of fiduciary net position.

Question 12

Which of the following activities would most appropriately be recorded by a trust fund?

Accepted Answer

Trust funds are typically used to account for assets held by a government under a trust agreement where the principal and interest are for the benefit of individuals, private organizations, or other governments. The scenario described in option D, where assets are held for college scholarships to be awarded to the children of police officers, fits the definition of a trust fund activity, as it involves holding and managing assets for the benefit of a specific group (children of police officers) according to a specific purpose (college scholarships).

Question 13

Which of the statements concerning agency funds is ?

Accepted Answer

Agency funds are reported only on the statement of fiduciary net position. They do not use the same basis of accounting as permanent funds, as they use the temporary accounts Receipts and Disbursements, and they can receive cash.

Question 14

Which of the following financial statements is prepared by fiduciary funds?

Accepted Answer

Fiduciary funds prepare a statement of net position to report the assets, liabilities, and net position of the funds they manage.

Question 15

When a cash and investment pool of a certain city was established,the debt service fund transferred investments to the pool having a cost of $3,000,000 but a current fair market value of $3,100,000.To record this transaction,the journal entry made by the debt service fund will include:

Accepted Answer

The answer of When a cash and investment pool of...

Question 16

Which of these fiduciary fund types always has zero net position?

Accepted Answer

The net position of agency funds is always zero because they hold and manage resources that are not owned by the government and do not have any ongoing administrative or operating activities. They merely pass through the funds from one party to another on their behalf. Therefore, there is no measurement of the net position required for agency funds. On the other hand, pension trust funds, investment trust funds, and private-purpose trust funds have net positions that modify based on changes in the fair value of investments and other factors affecting the fund's assets and liabilities.

Question 17

Which of the following accounts is least likely to be used by a tax agency fund?

Accepted Answer

Tax agency funds typically do not have revenues as they are custodial in nature, collecting and disbursing funds on behalf of other entities.

Question 18

Each of the following are reported as fiduciary funds except:

Accepted Answer

All of the choices listed are examples of fiduciary funds except for a permanent fund, which is a type of governmental fund.

Question 19

A city will serve as a conduit for federal grant money which is sent to the city by the state government and must be remitted to various not-for-profit organizations who will use the money.The ultimate allocation of the money is decided by the state government.Which of the following terms describes the nature of this grant?

Accepted Answer

This is a pass-through grant, as the city is merely acting as a conduit for the money, which is ultimately allocated by the state government to specific not-for-profit organizations.

Question 20

GASB standards provide comprehensive guidance on pension accounting and financial reporting for defined benefit pension plan employers,but the FASB provides guidance for plan sponsors.

Accepted Answer

The statement is incorrect. The FASB provides guidance on pension accounting and financial reporting for both plan sponsors and plan employers.

Quiz 8: Accounting for Fiduciary Activitiesagency and Trust Funds

If special assessment receivables are recorded in the accounts of an agency fund,the appropriate account(s) to credit upon receipt of assessments from property owners will include: