Flashcards in FAR: Gov't Accounting: Post Assessment IV.1 Results: 3/1/2018 Deck (10):
Sig City used the following funds for financial reporting purposes:
Capital Projects Fund
Internal Service Fund
Special Revenue Fund
Airport Enterprise Fund
Debt Service Fund
Pension Trust Fund
How many of Sig's funds use the accrual basis of accounting?
Three of the funds use full accrual basis (Internal Service Fund, Airport Enterprise Fund, and Pension Trust Fund) and four of the funds use modified accrual basis (General Fund, Capital Projects Fund, Special Revenue Fund, and Debt Service Fund).
With regard to the statement of cash flows for a governmental unit's Enterprise Fund, items generally presented as cash equivalents are:
2-month treasury bills, 3-month certificates of deposit
1) No, No
2) No, Yes
3) Yes, Yes
4) Yes, No
Both the 2-month treasury bill and the 3-month certificates of deposits should be presented as cash equivalents in the statement of cash flows. A government entity normally considers an investment a cash equivalent if it matures within three months of the date it was purchased and it is readily convertible to known amounts of cash. Both the 2-month treasury bill and the 3-month certificates of deposit qualify as cash equivalents under these terms.
Rock County has acquired equipment through a noncancelable lease-purchase agreement dated December 31, Year 1.
This agreement requires no down payment and the following minimum lease payments:
December 31 Principal Interest Total
Year 2 $50,000 $15,000 $65,000
Year 3 50,000 10,000 60,000
Year 4 50,000 5,000 55,000
If the equipment is used in internal service fund operations and the lease payments are financed with internal service fund revenues, what account or accounts should be debited in the internal service fund for the December 31, Year 2 lease payment of $65,000?
1) Expenditures control $65,000
2) Expenses control $65,000
3) Capital lease payable $50,000
Expenses control 15,000
4) Expenditures control $50,000
Expenses control 15,000
(DR) Capital lease payable $50,000
(DR) Expenses control 15,000
(CR) Cash $65,000
$50,000 of the payment reduces the Capital lease payable account.
DR Capital lease payable 50,000
DR Expenses control 15,000
CR Cash 65,000
Hill City's Water Utility Fund held the following investments in U.S. Treasury securities at June 30, 20X5:
Investment Date purchased Maturity date Carrying amount
3-month T-bill 5/31/X5 7/31/X5 $ 30,000
3-year T-note 6/15/X5 8/31/X5 50,000
5-year T-note 10/1/X1 9/30/X6 100,000
In the fund's balance sheet, what amount of these investments should be reported as cash and cash equivalents at June 30, 20X5?
A government entity considers an investment a cash equivalent if it matures within three months of the date it was purchased.
Both the 3-month T-bill and the 3-year T-note meet this criterion; therefore, $80,000 of the investments should be reported as Cash and Cash Equivalents.
Elm City contributes to and administers a single-employer defined benefit pension plan on behalf of its covered employees.
The plan is accounted for in a Pension Trust Fund.
Actuarially determined employer contribution requirements and contributions actually made for the past three years, along with the percentage of annual covered payroll, were as follows:
Contribution made Actuarial requirement
Amount Percent Amount Percent
2005 $11,000 26 $11,000 26
2004 5,000 12 10,000 24
2003 None None 8,000 20
What account should be credited in the Pension Trust Fund to record the 2005 employer contribution of $11,000?
1) Revenues Additions.
2) Other Financing Sources Control.
3) Due from Special Revenue Fund.
4) Pension Benefit Obligation.
No entry is made for Pension Benefit Obligation. In fact, GASB Statement No. 25 eliminated the requirement to report the standardized pension benefit obligation.
Annual contributions made by employers are viewed as Revenues by the Pension Trust Fund. The following entry should be made when the Pension Trust Fund recognizes the $11,000 as Revenues.
Due from Governmental Fund 11,000
Revenues-employer contributions 11,000
The City of Scarmont manages $200,000 in securities given to it in trust by the Citizens for City Beautification (CCB), a not-for-profit organization. Each year, the CCB receives proposals for beautification projects from various individuals and groups and selects two to three projects for funding. The City is responsible for managing the investment and disbursing the funds in accordance with the CCB request. The City accounts for the securities in a separate fund.
During the year, the City received $10,000 in investment earnings on the securities, $1,000 of which was related to earnings from the previous year, which were not received 60 days after the fiscal year end. At the end of the year, the market value of the securities was $208,000. How much revenue should be recognized in the fund in conjunction with these activities?
The securities should be maintained in a Private-Purpose Trust Fund and would therefore be measured on the full accrual basis.
Under the full accrual basis, only the $9,000 in investment earnings earned this year would be recognized in the current period (the $1,000 from the previous year would have been accrued and recognized in the prior year).
GASB also requires that the $8,000 appreciation in the endowment investment be recognized as income during the period of the appreciation.
Maple City has cash available for investments in several different accounting funds. Maple's policy is to maximize its financial resources.
How may Maple pool its investments?
1) Maple may not pool its investments.
2) Maple may pool all investments, but it must equitably allocate realized and unrealized gains and losses among participating funds.
3) Maple may pool only unrestricted investments, but it must equitably allocate realized and unrealized gains and losses among participating funds.
4) Maple may pool only restricted investments, but it must equitably allocate realized and unrealized gains and losses among participating funds.
Maple may pool all investments, but it must equitably allocate realized and unrealized gains and losses among participating funds.
Maple may pool all the cash available from all the different accounting funds, irrespective of whether or not they are restricted or unrestricted funds. Realized and unrealized gains and losses must be equitably allocated among the participating funds.
McCallum County pools any excess cash from its governmental and Proprietary Funds and invests the monies in marketable securities. The County also permits other governmental entities within the county limits to invest their resources in the pool.
The market value of its investments at the beginning of the year was $2,000,000; with $1,500,000 of the investment attributable to County funds and the $500,000 balance attributable to other governmental entities. The market value at the end of the year was $2,200,000.
During the year, the county had received $100,000 in earnings on these investments. None of the earnings had been distributed, and no additions or withdrawals occurred during the year.
What amount should McCallum report as total assets in its Investment Trust Fund?
The County only includes resources contributed and earned by external entities in its Investment Trust Fund.
[BOY (2,000,000 + $200,000 (Appreciation on Investment) + $100,000 earnings on investment) = $2,300,000
$500,000 (Other Gov't Entities)/$2,000,000 investment = 25%
$2,300,000 Ending Investment X 25% = $575,000, Investment Trust Fund (external entities)
The principal of a Private-Purpose Trust Fund:
1) Must be nonexpendable in nature.
2) Must be expendable in nature.
3) Must never fall below a pre-determined threshold that is determined by generally accepted accounting principles.
4) May be expendable or nonexpendable in nature.
May be expendable or nonexpendable in nature
A Private-Purpose Trust Fund may be either expendable or nonexpendable. It is expendable if the principal of the trust gift, as well as the earnings, is expendable. A nonexpendable Private-Purpose Trust occurs when the principal must be maintained intact and only the earnings are expendable, or neither the principal nor the earnings are expendable (e.g., loan funds).