FAR: Gov't Accounting: 3/9/2018 Flashcards Preview

CPA: Tiffany's Notes > FAR: Gov't Accounting: 3/9/2018 > Flashcards

Flashcards in FAR: Gov't Accounting: 3/9/2018 Deck (12):
1

According to GASB 34, Basic Financial Statements-and Management's Discussion and Analysis-for State and Local Governments, certain budgetary schedules require supplementary information.

What is the minimum budgetary information required to be reported in those schedules?

1) A schedule of unfavorable variances at the functional level.
2) A schedule showing the final appropriations budget and actual expenditures on a budgetary basis.
3) A schedule showing the original budget, the final appropriations budget, and actual inflows, outflows, and balances on a budgetary basis.
4) A schedule showing the proposed budget, the approved budget, the final amended budget, actual inflows and outflows on a budgetary basis, and variances between budget and actual.

A schedule showing the original budget, the final appropriations budget, and actual inflows, outflows, and balances on a budgetary basis.

The final appropriations budget and actual expenditures are required; they are not sufficient. The original budget, amended/final budget, and actual revenues and expenditures must be reported.

The revenues and expenditures must be reported using the same basis used to prepare the budget: governmental budgets are frequently prepared on a cash or near-cash basis.

2

Nox City reported a $25,000 net increase in the fund balances for total Governmental Funds. Nox also reported an increase in Net Position for the following funds:

Motor pool Internal Service Fund $ 9,000
Water Enterprise Fund 12,000
Employee pension fund 7,000
The motor pool Internal Service Fund provides service to the General Fund departments. What amount should Nox report as the Change in Net Position for governmental activities?

1) $25,000
2) $34,000
3) $41,000
4) $46,000

$34,000

GASB Stmt. #34 requires that Internal Service Funds be included in the Governmental Activities totals on the Government-Wide Statements since Internal Service Funds supply goods or services only to the government entity.

Therefore, the total fund balance for the Governmental Funds in the fund-based statements ($25,000) must be increased by the Net Position of the motor pool ($9,000) when the preparing the Governmental Activities column of the Government-Wide Statement of Net Position ($25,000 + 9,000 = $34,000). Fiduciary Funds are not included in any part of the Government-Wide statements.

3

The City of Curtain had the following interfund transactions during the month of May:

Billing by the internal service fund to a department financed by the general fund, for services rendered in the amount of $5,000.

Transfer of $200,000 from the general fund to establish a new enterprise fund.

Routine transfer of $50,000 from the general fund to the debt service fund.

What was the total reciprocal interfund activity for Curtain during May?

1) $ 5,000
2) $ 55,000
3) $200,000
4) $255,000

$5,000


There for five types of interfund transactions: (1) loans, (2) reciprocal quasi-external transactions, (3) reimbursements, (4) residual transfers, and (5) operating transfers. A reciprocal transaction occurs from doing business with one another, such as the billing of services by an internal service fund to other funds/departments in the government. This answer is incorrect because in includes an operating transfer ($50,000) and a residual equity transfer ($200,000).

4

A city's General Fund contributes $150,000 to its Debt Service Fund to meet upcoming debt service requirements for a general obligation serial bond. The General Fund should report this as a(n):

1) Expenditure of $150,000.
2) Capital Contribution of $150,000.
3) Operating Transfer of $150,000.
4) Interfund Loan of $150,000.

Operating Transfer of $150,000

General Fund Transfers to the Debt Service Fund to provide for the servicing of debt is an example of a regular, routine, reoccurring transfer of resources between funds to subsidize current activities that are classified as Operating Transfers.

5

Which of the following capital assets are least likely to be considered infrastructure assets of a local government?

1) Roads.
2) Buildings.
3) Sewer system.
4) Lighting system.

Buildings

Infrastructure assets are capital assets that are normally stationary and can be preserved for a longer time than most capital assets. Common infrastructure assets include roads, bridges, sewer systems, lighting systems, and drainage.

6

In 2011, Kameron City received $4,000,000 from the sale of general obligation bonds to be used for major street and bridge renovations. $3,000,000 is expected to be spent in 2011, and the remainder will be spent in 2012. When will Kameron report bond proceeds as an other financing source in its Capital Projects Fund?

1) $4,000,000 in 2011.
2) $4,000,000 in 2012.
3) $3,000,000 in 2011 and $1,000,000 in 2012.
4) $0, the bond proceeds are not considered to be an other financing source.

$4,000,000 in 2011

The Capital Project Fund records the entire amount of the bond proceeds as an Other Financing Source in the year that the proceeds are received. Even though the expenditures are to occur over two years, under modified accrual accounting, the entire amount of the proceeds are recorded as a resource of the fund when received. Answer A is correct.

7

Excel City's Water Utility Enterprise Fund issues $10,000,000 in 20-year serial revenue bonds to finance a major expansion of one of its water treatment plants. $500,000 in bonds mature each year. As a result of this transaction, the year-end long-term liability in the governmental activities section of the government-wide financial statements accounts will reflect:

1) $0
2) An increase of $9,500,000.
3) An increase of $10,000,000.
4) A decrease of $500,000.

$0

The Water Utility Enterprise Fund uses full accrual accounting and will account for and report on the bonds in the Enterprise Fund. Therefore, this liability appears in the business-type activity section of the government-wide financial statements and not in the governmental activity section.

8

Big City recently lost a lawsuit relating to an incident involving one of their police officers. A judgment was rendered against the city, and, immediately prior to the current fiscal year end, the city was ordered to pay a total of $500,000. $100,000 is due immediately and the remaining is to be paid in installments of $100,000 per year for an additional four years. How will the external financial statements of the city be affected in the year the court case was settled?

1) The General Fund statements should report both expenditures and a claims and judgments liability of $500,000.

2) The General Long-Term Liabilities accounts should report a $500,000 liability.

3) The General Fund statements should report expenditures and a current liability of $100,000, and the Agency Fund should report a liability of $400,000.

4) The General Fund statements should report expenditures and a current liability of $100,000, and the government-wide statements should report a long-term liability of the present value of the $400,000.

The General Fund statements should report expenditures and a current liability of $100,000, and the government-wide statements should report a long-term liability of the present value of the $400,000.




The $100,000 portion of the judgment due in the current year is reported in the General Fund and will appear as expenditures in the fund-level statements. The unmatured $400,000 portion is reported in the Government-Wide Statements as a liability at present value.

9

A government has the following debt:

Capital lease liabilities that mature in more than one year (General Fund department leases)-$2,000,000.

Net pension liability associated with general government employees-$4,000,000.

General government bonds that mature in the next fiscal year-$14,000,000.
What amount of debt should be reported in the long-term liabilities in the government-wide financial positions?

1) $2,000,000
2) $6,000,000
3) $18,000,000
4) $20,000,000

$20,000,000

All of the items listed are Unmatured Long-Term Liabilities of the general government that will not be recorded in any of the Governmental Funds but will appear as liabilities in the Government-Wide Statement of Net Position.

10

Which account should Excel City credit when it issues a purchase order for supplies?

1) Appropriations control.
2) Encumbrance Control.
3) Vouchers Payable.
4) Budgetary Fund Balance.

DR Encumbrance
CR Budgetary Fund Balance

The entry to record a purchase order is a debit to Encumbrances and a credit to Budgetary Fund Balance. Appropriation Control is used to record the original legally adopted budget, any subsequent revisions to the budget, and to close out the budget at year-end.

11

"Supplies" is an expenditure classified at the _________ level.

1) Fund.
2) Function.
3) Character.
4) Object.

Object

"Supplies" is one of the object class of expenditures, which describes the type of item purchased or service obtained. Functional classes of Expenditure describe the department or organization unit associated with the expenditure (e.g., Public Safety).

12

A government has an investment derivative instrument that is considered effective. The fair value of this derivative instrument has increased by $100,000 in the current period. The change in fair value should be reported as:

1) Investment Revenue in the Statement of Activities.
2) Deferred Credit in the Statement of Net Position.
3) Holding Gain in Fund Balance.
4) Should not be reported.

Investment Revenue in the Statement of Activities.

The purpose of the Derivative Instrument is for investment, rather than hedging of risk. GASB Statement No. 53 requires changes in the fair value of Derivative Instruments used for investment purposes to be reported within the Investment Income classification of the Statement of Activities. Changes in the fair value of Hedging Derivative Instruments are reported as Deferred Outflow or Deferred Inflow of Resources in the Statement of Net Position.