Flashcards in FAR: Gov't Accounting: Practice Questions: 3/2/2018 Deck (11):
On the government-wide Statement of Net Position, prepared in accordance with GASB 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, internal service fund activities are normally reported in
1) Business-type activities.
2) Governmental activities.
3) Either business-type or governmental activities.
4) Neither business-type nor governmental activities.
According to GASB 34, internal service fund activities are normally reported in governmental activities on the government-wide Statement of Net Assets.
What is the major difference between an Exchange Transaction and a non-Exchange Transaction for governmental units?
1) The relationship between the amount of value given and received.
2) Time requirements and whether the transaction is required by law.
3) Purpose restrictions placed upon fund balances.
4) Whether resources acquired can be further exchanged.
The relationship between the amount of value given and received.
Exchange Transactions involve a direct relationship between the charge and the service. Nonexchange Transactions, which are frequent in governments, do not have this relationship (e.g., taxes and fines).
Excel City's store supply internal service fund provides services only to general government departments. During 20X1, the internal service fund reported operating revenue of $50,000 and operating expenses of $35,000. What amount of adjustment is needed to convert the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balance to governmental activities in Excel City's government-wide Statement of Activities?
1) Increase revenue by $50,000.
2) Increase expenses by $35,000.
3) Decrease revenue by $15,000.
4) Decrease expenses by $15,000.
Decrease expenses by $15,000
The general government departments have recorded a total of $50,000 in expenditures related to billings from the internal service fund. The conversion to government-wide financial statements requires the elimination of the $15,000 "profit" by decreasing the $50,000 expenditure to $35,000 and reclassifying it as "expense."
Todd City formally integrates budgetary accounts into its General Fund. Todd uses an Internal Service Fund to account for the operations of its data processing center, which provides services to Todd's other governmental units.
During the year ended December 31, Year 1, Todd received a state grant to buy a bus and an additional grant for bus operation in Year 1. In Year 1, only 90% of the capital grant was used for the bus purchase, but 100% of the operating grant was disbursed.
Todd has incurred the following long-term obligations:
General obligation bonds issued for the Water and Sewer Fund, which will service the debt.
Revenue bonds to be repaid from admission fees collected from users of the municipal recreation center.
These bonds are expected to be paid from Enterprise Funds, and secured by Todd's full faith, credit, and taxing power as further assurance that the obligations will be paid.
Todd's Year 1 expenditures from the General Fund include payments for structural alterations to a firehouse and furniture for the mayor's office.
Which of Todd's long-term obligations should be accounted for in the general fund?
General obligation bonds, Revenue bonds
Neither of the long-term obligations should be accounted for in Todd City's general fund. Bonds directly related to and expected to be paid from Proprietary Funds (Water and Sewer Fund and Municipal Recreation Fund) should be included in the accounts of such funds. These are specific fund liabilities, even though the full faith and credit of Todd City has been pledged as further assurance that the obligations will be paid.
Palm City uses the modified approach for reporting eligible infrastructure assets. In which of the following components of its basic financial statements, if any, would Palm report this information?
1) Letter of transmittal.
2) Statement of activities.
3) Notes to the financial statements.
4) Not required to report.
Notes to the financial statements
GASB requires, as “required supplemental information,” information about the use of the modified approach for reporting infrastructure in the notes to the financial statements.
The Comprehensive Annual Financial Report (CAFR) of a state or local governmental unit should include fund-level statements for which of the following fund categories:
Governmental Funds Proprietary Funds Fiduciary Funds
No No No
Yes Yes No
Yes No No
Yes Yes Yes
Yes, Yes, Yes
the CAFR includes fund statements for the Fiduciary Funds as well as the Governmental and Proprietary Funds.
The Fiduciary Funds are excluded from the government-wide statements, which include data from only the Government and Proprietary Funds.
The introductory section of a CAFR typically includes all of the following except:
1) The letter of transmittal.
2) An organizational chart.
3) The independent auditor's opinion.
4) The table of contents.
The auditor's report is not part of the introductory section of the CAFR. It is part of the financial section of the CAFR.
Nack City received a donation of a valuable painting. Nack planned to add the painting to its collection and display it in the protected exhibition area of city hall. Nack had a policy that if such donated art works were sold, the proceeds would be used to acquire other items for its collections. Which of the following would be correct regarding the donated painting?
1) It must be capitalized and depreciated.
2) It must be capitalized but not depreciated.
3) It may be capitalized, but it is not required, and it must be depreciated.
4) It may be capitalized, but it is not required, and depreciation is not required.
It may be capitalized, but it is not required, and depreciation is not required.
GASB Statement no. 34 para. 27-29, provides not-for-profit organizations with an option to not recognize contributions of donated works or art, historical treasures, or similar assets that are added to collections if the following conditions are met:
1) they are held for public exhibition, education, or research in furtherance of public service rather than financial gain;
2) are protected, kept unencumbered, cared for, and preserved;
3) or are subject to a policy that requires the proceeds of items that are sold to be used to acquire other items for the collection.
Capitalized collections or individual items that are exhaustible, such as exhibits whose useful lives are diminished by display or educational or research applications, should be depreciated over their estimated useful lives. Depreciation is not required for collections or individual items that are inexhaustible. In this question, neither capitalization nor depreciation is required.
For general purpose external financial reporting, discrete component unit information:
1) Is not presented.
2) Is included in the government-wide statements only.
3) Is included in the fund financial statements only.
4) Is included in both the government-wide and the fund financial statements.
Is included in the government-wide statements only.
Discretely presented component units are presented in the Government-Wide Financial Statements only and not in the fund-level statements.
The Excel City School District has a separate elected governing body that administers the public school system. The district's budget must be approved by the city council of Excel City. The school district's financial activity should be reported in the City's financial statements by:
1) Discrete presentation.
4) Not at all.
Not at all.
According to GASB Statement No. 61 (para 6), Excel City would have to appoint a voting majority of Excel ISD's governing body. The criteria for financial accountability require that, in addition to the primary government being able to impose its will on the component unit (e.g. approve the budget), at least 50% of the governing body of the component unit be appointed by the primary government. In this case, the governing body is independently elected and so does not meet the criteria for inclusion as a component unit.