Test bank advanced accounting 10e by beams chapter 18

statement of revenues, expenditures, and changes in fund balance.. LO4 Exercise 5 For each of the following funds and entities: Internal Service Fund Investment Trust Fund Debt Service F

Chapter 18 Test Bank

AN INTRODUCTION TO ACCOUNTING FOR STATE AND

LOCAL GOVERNMENTAL UNITS

Multiple Choice Questions

LO1

1 Before the establishment of the Governmental Accounting

Standards Board, which organization developed GAAP for governments?

a The Financial Accounting Standards Board

b The Financial Accounting Foundation

c The National Council on Governmental Accounting

d There was no structured organization for governmental GAAP before the GASB

LO1

2 What GAAP pronouncements take precedence for an auditor under

SAS 69?

a Financial Accounting Standards Board statements

b GASB statements

c EITF

d Accountants must exercise judgment because there was no

structured organization for governmental GAAP

LO2

3 The key focus of government fund accounting concerns

a capital expenditures

b intergovernmental transfers from the general fund

c income measurement

d the flow of current financial resources

LO2

4 When vehicles impounded by the city police are sold, the cash

goes into which fund?

a The general fund

b The debt service fund

c The fiduciary fund

d The proprietary fund

LO2

5 Budgeted authority for expenditures that provide legislative

control over expenditures are referred to as

a appropriations

b allotments

c allocations

d encumbrances

LO2

6 Because a fund is an accounting entity, each fund has

I its own accounting equation

II its own journals, ledgers, and other accounting records III its own separate auditor

a I only

b II only

c I and II

d I, II and III

LO3

7 One of the required proprietary fund financial statements is

a

a statement of cash flows

b statement of revenues, expenses, and changes in retained earnings

c statement of activity changes

d statement of revenues, expenditures, and changes in fund balance

LO3

8 Under the modified accrual basis of accounting, revenues are

recognized in the period

a when the relevant service is done

b when they are collected

c when the enterprise customer is billed

d when become both measurable and available

LO4

9 Under GASB 33, which of the following is an exchange

transaction?

a When the home owner pays property taxes

b When a university receives a federal grant for managing research

c When an aquatic center receives cash for a group swim

LO4

10 Which fund would most likely report depreciation expense?

a An intergovernmental service fund

b An enterprise fund

c A capital projects fund

d A debt service fund

LO4

11 Which type of fund is used to account for a government activity

that sells goods or services either solely or almost solely to external customers?

a A temporary fund

b A general fund

c An agency fund

d An enterprise fund

LO4

12 Centralized data processing, central motor pools and garages,

centralized risk-financing activities, and central stores

typically would be accounted for using what type of fund?

a An agency fund

b An enterprise fund

c An internal service fund

d A trust fund

LO4

13 The modified accrual basis of accounting is used for

a governmental funds

b proprietary funds

c internal service funds

d both a and c

LO4

14 Goodtime City makes a levy on its seafront businesses for a

retaining wall Which of the following funds will have

transactions?

a A general fund

b A capital projects and general fund

c A special revenue fund

d A capital projects and special revenue fund

LO5

15 Motor fuel taxes are

a derived tax revenues

b imposed non exchange revenues

c government-mandated nonexchange transactions

d voluntary nonexchange transactions

LO5

16 A budget in government accounting

a only applies to the general fund

b is a guideline for government management

c has the force of law

d only applies to proprietary funds

LO5

17 A component unit

a requires discrete CAFR presentation of the primary

government

b does not appear in CAFR unless it is a proprietary fund of

a primary government

c activities are held responsible to a primary government

d activities will be financially accountable to a primary government even though it is a legally separate

organization

LO6

18 Government-wide financial statements include a

a balance sheet, an income statement, and a statement of cash flows

b statement of net assets, a statement of activities, and a statement of cash flows

c statement of net assets and a statement of activities

d statement of activities and a statement of cash flows

LO6

19 A comprehensive annual financial report has the following three

major sections

a introductory, financial, and management's discussion and analysis

b introductory, financial, and statistical

c transmittal, financial, and statistical

d transmittal, financial, and management's discussion and analysis

LO6

20 Government-wide financial statements exclude the

a general fund

b fiduciary funds

c proprietary funds

d special revenue funds

LO3

Exercise 1

The following are transactions for the city of Novo

a Borrowed $10,000 by issuing a three-month note

b Paid $2,000 for equipment

c Services for $250 were billed and collected

d Issued general obligation bonds, par value of $5,000, at 101 (101%

of par value) to finance construction of a building

e Incurred and paid construction costs of $2,500 on the building

Required:

1 Analyze the above transactions by using the accounting equation

for a governmental fund

LO3

Exercise 2

The following are transactions for the city of Novo

a Borrowed $10,000 by issuing a three-month note

b Paid $2,000 for equipment

c Services for $250 were billed and collected

d Issued general obligation bonds, par value of $5,000, at 101 (101%

of par value) to finance construction of a building

e Incurred and paid construction costs of $2,500 on the building

Required:

1 Analyze the above transactions by using the accounting equation

for a proprietary fund

LO3

Exercise 3

The following are transactions for the city of Oz

a Borrowed $10,000 by issuing a two-year note

b Issued a purchase order to a vendor for equipment worth $3,000

c Licenses for $350 were billed on account

d Received a $5,000 capital grant from another governmental fund

e Accrued employee salary costs of $3,500

Required:

1 Analyze the above transactions by using the accounting equation

for a governmental fund

LO3

Exercise 4

The following are transactions for the city of Oz

a Borrowed $10,000 by issuing a two-year note

b Issued a purchase order to a vendor for equipment worth $3,000

c Licenses for $350 were billed on account

d Received a $5,000 capital grant from another governmental fund

e Accrued employee salary costs of $3,500

Required:

1 Analyze the above transactions by using the accounting equation

for a proprietary fund

LO4

Exercise 5

For each of the following funds and entities:

Internal Service Fund

Investment Trust Fund

Debt Service Fund

Special Revenue Fund

Required:

1 Identify the financial statements and/or schedules required to be presented

2 State the required basis of accounting

LO4

Exercise 6

For each of the following funds and entities:

Capital Projects Fund

Pension Trust Fund

Permanent Fund

Proprietary Fund

Required:

1 Identify the financial statements and/or schedules required to be presented

2 State the required basis of accounting

LO4

Exercise 7

For each of the following events or transactions, identify the fund

or funds that will be affected

1 A city government provides electricity services to residents for a fee

2 A printing shop was established to handle the printing needs of a county government

3 A philanthropist donates $1 million for a memorial

4 A state government collects sales taxes on behalf of the state and

for some of its counties and municipalities

LO4

Exercise 8

For each of the following events or transactions, identify the fund

or funds that will be affected

1 A city government charges a fee for the use of the municipal golf course

2 Interest is paid on state government revenue bonds

3 A motor pool was established to handle the vehicle needs of a county government

4 A county government receives a large contribution specifying that income from the contribution be distributed each year to three city libraries within the county The principal is to remain intact

indefinitely

5 A state government acquires the use of general fixed assets by entering into a capital lease contract

LO4

Exercise 9

For each of the following events or transactions, identify the fund

or funds that will be affected

1 A central purchasing department was established to handle all the purchasing needs of a county government

2 A county government levies real property taxes on behalf of the county and its municipalities

3 A county government receives a large contribution specifying that income from the contribution be distributed each year to the county zoo The principal is to remain intact indefinitely

4 A county government establishes an investment pool to manage the cash and marketable securities of the county and participating municipalities

5 A city government pays the final contract retained percentage for

a new fire station

LO6

Exercise 10

List the financial statements and/or schedules required to be

presented for each of the following funds and entities as well as the required basis of accounting

1 Agency Fund

2 General Fund

3 Private-purpose Trust Fund

4 Government-wide Financial Statements

SOLUTIONS

Multiple Choice Questions

1 c

2 b

3 d

4 a

5 a

6 c

7 a

8 d

9 c

10 b

11 d

12 c

13 a

14 d

15 a

16 c

17 d

18 c

19 b

20 b

Exercise 1

Governmental fund

Current assets +10,000 -2,000 +250 +5,050 -2,500 Current

liabilities +10,000

Fund balance -2,000 +250 +5,050 -2,500

Exercise 2

Proprietary fund

Current assets +10,000 -2,000 +250 +5,050 -2,500

Current

liabilities +10,000

Noncurrent

Exercise 3

Governmental fund

Current assets +10,000 0 +350 +5,000

Current

liabilities

Fund balance +10,000 0 +350 +5,000 -3,500

Exercise 4

Proprietary fund

Current assets +10,000 0 +350 +5,000

Current

liabilities

Noncurrent

liabilities +10,000 0

Exercise 5

1 Balance Sheet and Statement of Revenues, Expenditures, and Changes

in Fund Balances All statements are prepared on the modified

accrual basis

2 Balance Sheet and Statement of Revenues, Expenditures, and Changes

in Fund Balances All statements are prepared on the modified

accrual basis

3 Statement of Fiduciary (Plan) Net Assets and Statement of Changes

in Fiduciary (Plan) Net Assets All statements are prepared on the accrual basis

4 Statement of Net Assets, Statement of Revenues, Expenses, and

Changes in Net Assets and a Statement of Cash Flows (direct method only) All statements are prepared on the accrual basis

Exercise 6

1 Balance Sheet and Statement of Revenues, Expenditures, and Changes

in Fund Balances All statements are prepared on the modified

accrual basis

2 Balance Sheet and Statement of Revenues, Expenditures, and Changes

in Fund Balances All statements are prepared on the modified

accrual basis

3 Statement of Fiduciary (Investment) Net Assets and Statement of Changes in Fiduciary (Investment) Net Assets All statements are prepared on the accrual basis

4 Statement of Net Assets, Statement of Revenues, Expenses, and

Changes in Net Assets and a Statement of Cash Flows (direct method only) All statements are prepared on the accrual basis

Exercise 7

1 Enterprise Fund

2 Internal Service Fund

3 Permanent Fund

4 General Fund and Agency Fund

5 Debt Service Fund

Exercise 8

1 Enterprise Fund

2 Debt Service Fund

3 Internal Service Fund

4 Fiduciary (Private-purpose) Trust Fund

5 General Fund

Exercise 9

1 Internal Service Fund

2 General Fund and Agency Fund

3 Permanent Fund

4 Fiduciary (Investment) Trust Fund

5 Capital Projects Fund

Exercise 10

1 Statement of Fiduciary Net Assets and Statement of Changes in

Fiduciary Net Assets All statements are prepared on the accrual basis

2 Balance Sheet, Statement of Revenues, Expenditures, and Changes

in Fund Balances and a Budgetary Comparison Schedule All

statements are prepared on the modified accrual basis

3 Statement of Fiduciary Net Assets and Statement of Changes in

Fiduciary Net Assets All statements are prepared on the accrual

basis

4 Statement of Net Assets and Statement of Activities All statements are prepared on the accrual basis