1. (TCOs A and B) Fiduciary funds are to use which of the following measurement and basis of
accounting? (Points : 5)
Economic resource measurement focus and accrual basis of accounting.
Current financial resources measurement focus and accrual basis of accounting.
Economic resources measurement focus and modified accrual basis of accounting.
None of the above, the fiduciary funds have no revenues.
2. (TCOs A and B) Funds other than the General Fund are required to be considered to be a major fund
when (Points : 5)
(A) total assets, liabilities, revenues, or expenditures/expenses of that fund constitute 10 percent
of either the governmental or enterprise category.
(B) total assets, liabilities, revenues, or expenditures/expenses of that fund are at least 5 percent
of the total of the governmental and enterprise category.
The conditions of either A or B exist.
The conditions of both A and B exist.
3. (TCOs A and B) Which of the following is most correct with regard to Management’s Discussion and
Analysis? (Points : 5)
Both state and local governments and federal agencies are required to provide a MD&A.
Federal agency financial reports are required to provide a MD&A.
State and local government agencies are required to provide a MD&A.
Both state and local government and federal agencies are encouraged, but not required to
provide a MD&A.
4. (TCOs B and C) With regards to budgetary reporting by governmental entities, which of the following
is not a true statement? (Points : 5)
While GASB standards guide the format of the comparison, it does not require governments to
maintain budgetary accounts.
GASB standards require governmental entities to present a comparison of budgeted and actual
results for the General Fund and special revenue funds with legally adopted budgets.
Budgetary accounts are required to appear in the general purpose financial statements.
The basis of accounting used to report the actual column in the budgetary comparison schedule
is prepared according to legal requirements for budget preparation even if it departs from GASB
Statements.
5. (TCOs B and C) The proper journal entry to record an encumbrance would include which of the
following? (Points : 5)
(A) A debit to the Encumbrance Account.
(B) A debit to the Reserve for Encumbrances Account.
(C) A credit to the Reserve for Encumbrances Account.
A and C would both be included in the journal entry.
6. (TCOs B and C)) Capital assets that are used by an enterprise fund should be accounted for in the
following fund? (Points : 5)
Enterprise fund but no depreciation on the capital assets should be recorded.
Enterprise fund and depreciation on the capital assets should be recorded.
Business-type activities journal but no depreciation on the capital assets should be recorded.
Governmental activities journal and depreciation on the capital assets should be recorded.
7. (TCO E) When a government acquires general fixed assets under a capital lease agreement, how
should the asset be recorded in the government-wide financial statements? (Points : 5)
As an expense when payments are made.
At the inception of the lease agreement at the lesser of the present value of the minimum lease
payments of the fair market value of the property.
As an expenditure when payments are made.
None of the above
8. (TCO E) Which of the following projects would usually be accounted for in a capital projects
fund? (Points : 5)
(A) Payment of interest on bonds that are issued to finance the construction of a new city hall.
(B) The construction of a parking garage that is operated as an enterprise fund.
(C) The construction of a fire station addition.
Both A and B would be accounted for in a capital projects fund.
9. (TCO E) Which of the following statements is a true statement regarding the reporting of debt service
funds? (Points : 5)
Debt service funds are reported in a separate column in the governmental fund financial
statements.
Debt service funds are reported in the other governmental funds column in the governmental
fund financial statements.
Debt service funds are reported in a separate column in the government-wide financial
statements.
Debt service funds are reported in the governmental activities column in the government-wide
financial statements.
10. (TCO D) Under GASB Statement No. 33, when would a special revenue fund be considered to have
satisfied the eligibility requirement of a reimbursement type federal grant? (Points : 5)
Only as the work is completed for a project.
When the work has started for the project.
Only after the work is completely finished for the project.
When a plan for the use of the funds has been developed and approved by the appropriate
personnel
1. (TCO E) You are in a staff meeting with the city controller and one of your colleagues was quoted as
follows: “Capital projects funds are established by a government to account for all plant or equipment
acquired by construction.” Do you agree with this statement? Why or why not? (Points : 30)
No, I don’t agree with this statement because fixed assets, such as plant equipment, are not
funded by the capital projects fund. In particular, the capital projects fund is used for the
accounting of resources that are used for the acquisition or construction of the capital assets that
are designated by a government. However, it does not include the assets that are financed by
fiduciary or proprietary funds.
(Wilson)
2. (TCOs A and B) How are the major funds of a state or local government determined by a governmental
entity? (Points : 30)
fund. Similarly, any fund that the government considers to be of great importance can be
recognized as a major fund. Aside from these, though, GASBS 34 has the following
requirements for when a fund can be considered as major:
•
Total assets, liabilities, revenues, or expenditures/expenses of that governmental or
enterprise fund are at least 10% of the corresponding element total (assets, liabilities, and so
forth) for all funds of that category or type (that is, total governmental or total enterprise funds).
•
The same element that met the 10% criterion above is at least 5% of the corresponding
element total for all governmental and enterprise funds combined.
To be considered a major fund, it is important that the same element of a fund meet both of the
criteria mentioned above. In the event that a fund meets both criteria in the last fiscal year but
meets only one or none of the criteria during the present fiscal year, the government can opt to
continue reporting the fund as major for the present year, subject to a pending determination in
the succeeding year.
To determine whether a fund meets the 10% and 5% criteria, the threshold amounts must be
calculated for each element of the total governmental funds and the total governmental and
enterprise funds. Next, each fund’s assets, liabilities, etc., should be compared to the calculated
threshold amounts.
(Wilson)
1. (TCO E) You are in a staff meeting with the city controller and one of your colleagues was quoted as
follows: “Capital projects funds are established by a government to account for all plant or equipment
acquired by construction.” Do you agree with this statement? Why or why not? (Points : 30)
No, I don’t agree w ith this statement because fixed assets, such as plant
equipment, are not funded by the capital projects fund. In particular, the capital
projects fund is used for the accounting of resources that are used for the
acquisition or construction of the capital assets that are designated by a
government. How ever, it does not include the assets that are financed by
fiduciary or proprietary funds.
(Wilson)
2. (TCOs A and B) How are the major funds of a state or local government determined by a
governmental entity? (Points : 30)
Due to its nature, the government’s General Fund is alw ays considered a major
fund. Similarly, any fund that the government considers to be of great importance
can be recognized as a major fund. Aside from these, though, GASBS 34 has the
follow ing requirements for w hen a fund can be considered as major:
•
Total assets, liabilities, revenues, or expenditures/expenses of that
governmental or enterprise fund are at least 10% of the corresponding element
total (assets, liabilities, and so forth) for all funds of that category or type (that is,
total governmental or total enterprise funds).
•
The same element that met the 10% criterion above is at least 5% of the
corresponding element total for all governmental and enterprise funds combined.
To be considered a major fund, it is important that the same element of a fund meet
both of the criteria mentioned above. In the event that a fund meets both criteria in
the last fiscal year but meets only one or none of the criteria during the present
fiscal year, the government can opt to continue reporting the fund as major for the
present year, subject to a pending determination in the succeeding year.
To determine w hether a fund meets the 10% and 5% criteria, the threshold
amounts must be calculated for each element of the total governmental funds and
the total governmental and enterprise funds. Next, each fund’s assets, liabilities,
etc., should be compared to the calculated threshold amounts.
(Wilson)
3. (TCO D) The City of Norton received a gift of $3,500,000 from a group of local residents on April 1,
2012 and signed an agreement that the funds would be invested on a permanent basis and the income
would be used to purchase artifacts for the city museum. The following transactions took place during
the fiscal year ended Dec 31, 2012.
a. The gift was recorded on the books on April 1.
b. On April 1, 2012, the Calvin Co. bonds were purchased in the amount of $3,000,000, at par. The
bonds carry an annual interest rate of 5 percent, payable semiannually on October 1 and April 1. The
city also purchased a certificate with a face value of $250,000 pays interest of 4 percent on semiannually
on October 1 and April 1.
c. On October 1, the semiannual interest was received on the bonds and certificate of deposit.
d. From October 1 through December 1, payments were made totaling $85,000 to purchase artifacts for
the city museum.
e. On December 31, an accrual was made for interest for the bonds and the certificate of deposit.
f. After a review of the bond market on December 31, 2012, the bonds had a market value of
$2,979,000, exclusive of accrued interest.
g. The books were closed on December 31.
Required
Enter the following template in the answer box and complete the journal entries to record the
transactions on the books for the Calvin Co. Museum Endowment Fund.
........................................................................................Debit............................Credit
a. Cash
Revenues-Contributions for Endowment
b. Investments in Bonds
Certificate of Deposit
Cash
c. Cash
Revenues-Bond Interest
Revenues-Certificate of Deposit
d. Expenditures-Museum Artifacts
Cash
e. Accrued Interest Receivable
Revenues- Bond Interest
Revenues- Certificate of Deposit
f. Revenues-Changes in Fair Value of Investments
Investment in Bonds
g. Revenues-Contributions for Endowment
Revenues-Bond Interest
Revenues-Certificate of Deposit
Revenues-Changes in Fair Value of Investments
Expenditures- Library Books
Fund Balance- Reserved for Endowment
Debit
a. Cash
Credit
3,500,000
Revenues-Contributions for Endowment
b. Investments in Bonds
Certificate of Deposit
3,500,000
3,000,000
250,000
Cash
c. Cash
3,250,000
80,000
Revenues-Bond Interest
75,000
Revenues-Certificate of Deposit
d. Expenditures-Museum Artifacts
Cash
5,000
85,000
85,000
e. Accrued Interest Receivable
40,000
Revenues- Bond Interest
37,500
Revenues- Certificate of Deposit
2,500
f. Revenues-Changes in Fair Value of Investments
21,000
Investment in Bonds
g. Revenues-Contributions for Endowment
Revenues-Bond Interest
Revenues-Certificate of Deposit
Revenues-Changes in Fair Value of Investments
Expenditures- Library Books
Fund Balance- Reserved for Endowment
21,000
3,500,000
112,500
7,500
21,000
85,000
3,514,000