Question 1

When should property tax revenues be recognized in government-wide financial statements?

Accepted Answer

B

Question 2

An Internal Service Fund (ISF)provided services to two agencies financed by the General Fund -- the Tax Department (which it billed $200,000)and the Comptroller's Office (which it billed $100,000).In the fund financial statements,the ISF reported a loss of $30,000.How should this information be reported in the government-wide statement of activities?

Accepted Answer

In the government-wide statement of activities, internal service fund activities are typically not reported separately. Instead, the expenses of the benefiting governmental activities (such as the Tax Department and the Comptroller's Office) are adjusted to reflect the net cost of the services provided by the ISF.

Question 3

Describe the adjustment or adjustments needed to prepare government-wide financial statements from the city's calendar year 2012 fund-level financial statements

Accepted Answer

The correct adjustment needed to prepare government-wide financial statements from the city's calendar year 2012 fund-level financial statements is to record capital assets, reduce capital outlay expenditures, and record six months' depreciation ($10,000). This is because government-wide financial statements require the inclusion of all capital assets and the depreciation expense for the year. The reduction in capital outlay expenditures is necessary to adjust the reported amount of expenditures to their capitalized amount. The depreciation recorded will be for six months as the financial statements are for the full year.

Question 4

How should the difference between assets,deferred outflows,deferred inflows,and liabilities be characterized in government-wide financial statements?

Accepted Answer

Government-wide financial statements are prepared using the economic resources measurement focus and accrual basis of accounting. In this context, assets, deferred outflows, deferred inflows, and liabilities are categorized as net position. This reflects the government's total economic resources less its total liabilities. Fund balances and fund equity are categories used in fund financial statements, which have a different focus and basis of accounting. "Available for spending" is not a recognized category in financial statement reporting.

Question 5

Just before the close of its fiscal year,a city government issues $2 million of bonds to finance the acquisition of capital assets.However,no part of the debt is repaid by year-end and no part of the debt is used to purchase capital assets.What adjusting entry is needed to prepare the city's government-wide financial statements from its fund-level financial statements?

Accepted Answer

The answer of Just before the close of its fiscal...

Question 6

Which measurement focus should be used in government-wide financial statements?

Accepted Answer

The economic resources measurement focus provides information on the total resources available to the government, including assets, liabilities, and deferred inflows and outflows of resources. This measurement focus is more comprehensive than the current financial resources measurement focus, which only reports on current assets and liabilities. The economic resources measurement focus is appropriate for government-wide financial statements, which are intended to provide a comprehensive view of a government's financial position and activities. The other options are not as appropriate, as they either focus only on certain types of funds or are not as comprehensive in their coverage of a government's financial resources.

Question 7

A city experienced several auto damage claims during its year ended December 31,2012.The total amount claimed was $600,000.No cash was paid out in 2012.However,claims totaling $200,000 were settled by December 31,2012.These claims were settled for $80,000,and were scheduled for payment on January 15,2013.City attorneys felt that the remaining $400,000 of claims could be settled during 2013 for about $160,000.How much should the city recognize as claims expenses in its government-wide financial statements for 2012?

Accepted Answer

According to the accrual basis of accounting, expenses should be recognized when they are incurred, regardless of when they are paid. In this case, the city experienced auto damage claims totaling $600,000 during the year ended December 31, 2012. However, only $200,000 of claims were settled by the end of the year, and the remaining $400,000 of claims were expected to be settled in 2013 for about $160,000. Therefore, the city should recognize the portion of the claims that were incurred but not settled as an expense in its government-wide financial statements for 2012.

The amount to be recognized as claims expenses is calculated as follows: 
Total claims incurred during the year = $600,000 
Less: Claims settled by December 31, 2012 = $80,000 
Remaining claims to be recognized as expenses = $520,000 ($600,000 - $80,000) 
Expected settlement cost of remaining claims = $160,000 
Therefore, the city should recognize $240,000 ($520,000 x $160,000/$400,000) as claims expenses in its government-wide financial statements for 2012.

Question 8

Identify the adjustment entries,if any,necessary to prepare government-wide financial statements from the city's calendar year 2012 fund-level statements

Accepted Answer

The answer of Identify the adjustment entries,if any,necessary to prepare...

Question 9

How should Internal Service Fund (ISF)activities be reported in the government-wide statement of activities?

Accepted Answer

ISF activities (revenues and expenses) should be eliminated and interfund profits or losses should be eliminated by decreasing or increasing the costs of the activities that were billed.

Question 10

A small village (which keeps its records on a calendar-year basis)issued $1 million of bonds on April 1,2012.The first payment of principal was due April 1,2013,but interest at 6 percent per annum on the outstanding debt was due on October 1,2012 and April 1,2013.How much interest expenditure (expense)should the village recognize in its governmental fund and government-wide financial statements for the calendar year 2012? $\begin{array}{lll}&\text { Fund } & \text { Government-wide } \
&\text { Statements } & \text { Statement }\
\text { a. } & \$ 30,000 & \$ 30,000 \
\text { b. } & \$ 30,000 & \$ 45,000 \
\text { c. } & \$ 30,000 & \$ 60,000 \
\text { d. } & \$ 45,000 & \$ 45,000
\end{array}$

Accepted Answer

The answer of A small village (which keeps its records...

Question 11

How much should the city report in its December 31,2012,government-wide financial statements as net position invested in capital assets,net of related debt?

Accepted Answer

The answer of How much should the city report in...

Question 12

A city government levies property taxes that are recorded directly into a Debt Service Fund,rather than the General Fund.How should those property taxes be reported in the government-wide statement of activities?

Accepted Answer

Property taxes levied specifically for debt service are reported as general revenues in the government-wide statement of activities, reflecting their nature as non-program specific revenues that support the overall financial requirements of the government, including debt service obligations.

Question 13

Merchants remit $800,000 to a county government in calendar year 2013 for sales taxes collected in 2013.In January,2014,they send the county an additional $25,000 applicable to the year 2014.Based on past experience,the county expects to receive an additional $15,000 later in 2014,but applicable to 2013.How much should the county recognize as sales tax revenues when it prepares its fund and government-wide financial statements? $\begin{array}{lll}&\text { Fund } & \text { Government-wide } \
&\text { Statements } & \text { Statement }\
\text { a. } & \$ 800,000 & \$ 800,000 \
\text { b. } & \$ 800,000 & \$ 840,000 \
\text { c. } & \$ 825,000 & \$ 825,000 \
\text { d. } & \$ 825,000 & \$ 840,000
\end{array}$

Accepted Answer

The answer of Merchants remit $800,000 to a county government...

Question 14

To what extent should fund or fund type data be displayed on the face of government-wide financial statements?

Accepted Answer

Government-wide financial statements are designed to provide a broad overview of the government's finances as a whole, rather than focusing on individual funds or fund types.

Question 15

How should bonds payable be reported on government-wide financial statements?

Accepted Answer

Bonds payable in government-wide financial statements should be separated between current (due within one year) and non-current (due in more than one year) liabilities to provide a clearer picture of the government's debt obligations.

Question 16

How should component units be displayed in government-wide financial statements?

Accepted Answer

Component units that are closely related to the primary government should be blended with the primary government's financial statements where appropriate. Discretely presented component units should be presented in a separate column on the government-wide financial statements to provide transparency and distinguish their financial activity from that of the primary government. Therefore, Option C is the best choice. Option A is not correct because component units often have a significant impact on the financial statements, so they should be included. Option B is incorrect because some component units may not fit clearly in either the governmental activities column or the business-type activities column. Option D is incorrect because not all component units are business-type activities.

Question 17

A county,that did not previously have a property tax levies a property tax for $900,000 in December 2012.The tax is for the budget year January 1 - December 31,2013.Because it sends out the bills on December 1,it actually collects $500,000 in cash before December 31,2012.It collects an additional $375,000 of 2013 property taxes during calendar year 2013,$20,000 during January 1 - February 28,2014,and the remaining $5,000 in June 2014.How much property tax revenue should the county report in its 2013 fund and government-wide financial statements? $\begin{array}{lll}&\text { Fund } & \text { Government-wide } \
&\text { Statements } & \text { Statement }\
\text { a. } & \$ 375,000 & \$ 100,000 \
\text { b. } & \$ 875,000 & \$ 900,000 \
\text { c. } & \$ 875,000 & \$ 895,000 \
\text { d. } & \$ 895,000 & \$ 900,000
\end{array}$

Accepted Answer

The answer of A county,that did not previously have a...

Question 18

A city health department charges fees for copies of birth certificates provided to its citizens.How should those fees be reported in the government-wide statement of activities?

Accepted Answer

The fees for copies of birth certificates provided by the city health department are program revenues, which reduce the gross expenses of the health department. These fees are earned by the health department as a result of providing a program or service to its citizens, and should be reported as program revenues in the government-wide statement of activities. This method follows the full accrual basis of accounting, where expenses are matched with the program or service that generates them.

Question 19

In accordance with a bond agreement,assets are being accumulated in a sinking fund to pay bonds due in 20 years.The assets are reported as Investments.What other information should be reported about that item on the face of the government-wide financial statements?

Accepted Answer

The assets accumulated in the sinking fund should be reported as part of net position restricted for debt service, as they are set aside for the specific purpose of paying off the bonds due in 20 years. The other options do not accurately reflect the purpose or restrictions of the sinking fund.

Question 20

Pursuant to law,a state agrees to reimburse a county 50 percent of the costs incurred by the county to maintain county roads,provided the county incurs no more than $800,000 in allowable costs.Allowable costs include accrued but unpaid salaries,but do not include encumbrances.For its calendar year 2012,the county's records show the following for its road maintenance program: cash disbursements - $780,000;accrued salaries payable -$15,000;encumbrances - $10,000.How much intergovernmental revenue should the county recognize in its government-wide financial statements?

Accepted Answer

The county should recognize $397,500 in intergovernmental revenue. This is calculated by adding the cash disbursements ($780,000) and accrued salaries payable ($15,000), which totals $795,000 in allowable costs. Since encumbrances are not considered allowable costs, they are not included in the calculation. The state agrees to reimburse 50 percent of these costs, so the county should recognize 50% of $795,000, which equals $397,500.

Quiz 10: Government-Wide Financial Statements