Chapter 18: Governmental Accounting - Funding and Tranasctions

Question 1

When is depreciation recognized for governmental funds?

Answer 1

• Government-wide
• Proprietary fund
• Fiduciary fund

Question 2

If a lease is accounted for in a governmental fund, what is the initial JE and the recognition of the first payment at the end of year 1?

Answer 2

Because it is accounting for under a governmental fund, this will be accounted for under modified accrual basis.
Initial entry:
(DB) Expenditures - right-to-use asset
(CR) Other financing source - lease liability

Year 1:
(DB) Expenditures - lease liability
(DB) Expenditures - interest
(CR) Cash

Year 2
(DB) Other financing source - lease liability
(DB) Expenditures - interest
(CR) Cash

Question 3

What happens in a nonexchange transaction in a governmental entity?

Answer 3

A government gives or receives value without directly receiving or giving equal value in return.

Question 4

When are property tax revenues recognized? If received before levied then how are they reported?

Answer 4

In the period they were levied. If received before then, they are reported as deferred inflows of resources.

Question 5

What is a reciprocal interfund activity?

Answer 5

Comparable to exchange transactions, including interfund loans and interfund services. They create interfund receivables and payables.

Question 6

How are general-fund transfers reported in the government-wide statement of activities?

Answer 6

Transfers within governmental activities section are eliminated and therefore not reported on the government-wide statement of activities.

Question 7

What does other financing sources and uses include for governmental funds?

Answer 7

(1) the face amount of long-term debt, (2) issuance premium or discount, (3) some payments to escrow agents for bond refundings, (4) interfund transfers, (5) sales of capital assets (unless the sale is a special item), and (6) debt refundings.