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1

In which fund would "Supplies Expenditure" appear?

A. Agency Fund.
B. General Fund.
C. Internal Service Fund.
D. Enterprise Fund.

B. General Fund.
"Expenditure" is a term reserved for funds using the modified accrual basis of accounting. Governmental Fund types, including the General Fund, use the modified accrual basis of accounting.

2

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

A. Fund.
B. Function.
C. Character.
D. Object.

D. 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).

3

What is the major difference between an Exchange Transaction and a non-Exchange Transaction for governmental units?
A. The relationship between the amount of value given and received.
B. Time requirements and whether the transaction is required by law.
C. Purpose restrictions placed upon fund balances.
D. Whether resources acquired can be further exchanged.

A. The relationship between the amount of value given and received.

4

rather than when they are actually received?

A. Property taxes.
B. Licenses and Permits.
C. Fines and Forfeits.
D. Service Charges.

A. Property taxes.

5

Fixed assets donated to a governmental unit should be recorded:
A. As a memorandum entry only.
B. At the donor's carrying amount.
C. At estimated fair value when received.
D. At the lower of donor's carrying amount or estimated fair value when received.

C. At estimated fair value when received.

6

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

A. Appropriations control.
B. Encumbrance Control.
C. Vouchers Payable.
D. Budgetary Fund Balance.

D. Budgetary Fund Balance.

7

Which of the following is not one of the five information classification sections that must be included in the Statistical Section of the CAFR?
A. Operating information.
B. Demographics information.
C. Revenue Capacity information.
D. Fund Balance information.

D. Fund Balance information.

8

In January 2010, Blue County acquired the right to draw water from a lake on the property of a privately owned ranch in exchange for a cash payment of $20 million. The annual volume of water that can be drawn is unlimited. The county's rights under the contract expire in 10 years; however, the contact provides the opportunity to renew the water rights for an additional 10 years for an additional payment of $10 million, if the county chooses . The county believes that it will request the renewal. The county expects the other party to agree to the renewal since the ranch is a significant user of the county's water supply and is a major employer of Blue County residents. The county operates on a calendar fiscal year. The county should recognize in its 2010 Government-Wide Financial Statements an annual amortization rate of:
A. $20 million in its Statement of Activities.
B. $2 million in its Statement of Activities.
C. $1.5 million in its Statement of Activities.
D. $30 million in its Statement of Activities.

B. $2 million in its Statement of Activities.

Because the county would be required to make an additional payment to execute the 10-year renewal period, this period is not considered as part of the useful life acquired in exchange for the $20 million payment.of Activities.

9

Lily City uses a pay-as-you-go approach for funding postemployment benefits other than pensions. The city reports no other postemployment benefits (OPEB) liability at the beginning of the year. At the end of the year, Lily City reported the following information related to OPEB for the water enterprise fund:
Benefits paid $100,000
Annual required contribution 500,000
Unfunded actuarial accrued liability 800,000
What amount of expense for OPEB should Lily City's water enterprise fund report in its fund level statements?

A. $100,000
B. $500,000
C. $600,000
D. $1,400,000

B. $500,000

GASB 45 states that the OPEB liability equals the annual required contribution (ARC).

10

Gem City's Internal Service Fund received a residual equity transfer of $50,000 cash from the General Fund.
This $50,000 transfer should be reported in Gem's Internal Service Fund as a credit to:

A. Revenues.
B. Other Financing Sources.
C. Accounts Payable.
D. Transfers.

D. Transfers.

11

The General Fund pays an invoice for telecommunications that includes charges owed by the Water Utility Enterprise Fund. The Enterprise Fund subsequently remits its share of the telecommunications charges to the General Fund. The General Fund records the amount received from the Enterprise Fund as:

A. An increase to revenue.
B. An increase to Operating Transfers In.
C. A decrease in expenses.
D. A decrease in Expenditures.

D. A decrease in Expenditures.

12

The General Fund makes a short-term loan to an Enterprise Fund. The General Fund should record the loan as a(n):

A. Operating Transfer.
B. Due from Enterprise Fund.
C. Advance to Enterprise Fund.
D. Accounts Receivable.

B. Due from Enterprise Fund.

Short-term interfund loans are recorded in accounts titled "Due from" (receivable) and "Due to" (payable).

General Fund journal entry: dr. Due from Enterprise Fund, cr. Cash, and Enterprise Fund, dr. Cash, cr. Due to General Fund

13

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?
A. $4,000,000 in 2011.
B. $4,000,000 in 2012.
C. $3,000,000 in 2011 and $1,000,000 in 2012.
D. $0, the bond proceeds are not considered to be an other financing source.

A. $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.

14

Which format must an Enterprise Fund use to report cash flow operating activities in the Statement of Cash Flows?
A. Indirect method, beginning with operating income.
B. Indirect method, beginning with Change in Net Position.
C. Direct method.
D. Either direct or indirect method.

C. Direct method.

15

Rock County has acquired equipment through a noncancelable lease-purchase agreement dated December 31, 2005.
This agreement requires no down payment and the following minimum lease payments:
December 31 Principal Interest Total
2006 $50,000 $15,000 $65,000
2007 50,000 10,000 60,000
2008 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, 2006 lease payment of $65,000?

A. Expenditures control $65,000
B. Expenses control $65,000
C. Capital lease payable $50,000
D. Expenditures control $50,000
Expenses control 15,000

C. Capital lease payable $50,000
Expenses control 15,000

16

Hill City's Water Utility Fund held the following investments in U.S. Treasury securities at June 30, 2005:

Investment Date purchased Maturity date Carrying amount
3-month T-bill 5/31/05 7/31/05 $ 30,000
3-year T-note 6/15/05 8/31/05 50,000
5-year T-note 10/1/01 9/30/06 100,000
In the fund's balance sheet, what amount of these investments should be reported as cash and cash equivalents at June 30, 2005?

A. $0
B. $30,000
C. $80,000
D. $180,000

C. $80,000

A government entity considers an investment a cash equivalent if it matures within three months of the date it was purchased.

17

At the beginning of the current year, Paxx County's enterprise fund had a $125,000 balance for accrued compensated absences. At the end of the year, the balance was $150,000. During the year, Paxx paid $400,000 for compensated absences. What amount of compensated absences expense should Paxx County's enterprise fund report for the year?
A. $375,000
B. $400,000
C. $425,000
D. $550,000

C. $425,000
Enterprise funds use accrual accounting. The amount of compensated absences expense for the current year can be computed as: ending accrued compensated absences ($150,000) plus compensated absences paid ($400,000) less beginning compensated absences ($125,000), which amounts to $425,000.

18

Through an Internal Service Fund, Wood County operates a centralized data processing center to provide services to Wood's other governmental units.
In 2005, this Internal Service Fund billed Wood's Parks and Recreation Fund $75,000 for data processing services.
What account should Wood's Internal Service Fund credit to record this $75,000 billing to the Parks and Recreation Fund?

A. Operating Revenues control.
B. Interfund Exchanges.
C. Intergovernmental Transfers.
D. Data processing department expenses.

A. Operating Revenues control.

An Internal Service Fund is used to account for goods and services provided by one department or agency to other units of the governmental unit, or other governmental units, on a cost-reimbursement basis.
When a future value is multiplied by a present value factor, the result is the present value of that future value.

Wood's Internal Service Fund should credit Operating Revenues control for $75,000.

19

Maple Township issued the following bonds during the year ended June 30, 2005:
Bond issued for the Garbage Collection Enterprise Fund that will service the debt $500,000
Revenue bonds to be repaid from admission fees collected by the Township Zoo Enterprise Fund 350,000
What amount of these bonds should be accounted for in Maple's Proprietary Funds?

A. $0
B. $350,000
C. $500,000
D. $850,000

D. $850,000

All of the long-term liabilities of these Enterprise Funds should be accounted for in the proprietary fund financial statements.

20

Shared revenues received by an Enterprise Fund of a local government for operating purposes should be recorded as:
A. Operating Revenues.
B. Nonoperating Revenues.
C. Other Financing Sources.
D. Interfund Transfers.

B. Nonoperating Revenues.
An Enterprise Fund is a type of Proprietary Fund.
Shared Revenues received by a Proprietary Fund for operating purposes should be recorded as Non-Operating Revenues in the period in which they are earned and become measurable.

21

Arlen City's Fiduciary Funds contained the following cash balances at December 31, 2004:

Under the Forfeiture Act-cash confiscated from illegal activities; disbursements can be used only for law enforcement activities
$300,000
Sales taxes collected by Arlen to be distributed to other governmental units
500,000
What amount of cash should Arlen report in its Agency Funds at December 31, 2004?

A. $0
B. $300,000
C. $500,000
D. $800,000

C. $500,000

Arlen should report the $500,000 of sales taxes that it has collected on behalf of others in an Agency Fund. The $300,000 cash confiscated from illegal acts, which must be used to support law enforcement activities, a general government function, should be reported in a Special Revenue Fund.

22

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?

A. Maple may not pool its investments.
B. Maple may pool all investments, but it must equitably allocate realized and unrealized gains and losses among participating funds.
C. Maple may pool only unrestricted investments, but it must equitably allocate realized and unrealized gains and losses among participating funds.
D. Maple may pool only restricted investments, but it must equitably allocate realized and unrealized gains and losses among participating funds.

B. Maple may pool all investments, but it must equitably allocate realized and unrealized gains and losses among participating funds.

23

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?

A. $18,000
B. $17,000
C. $10,000
D. $9,000

B. $17,000

GASB also requires that the $8,000 appreciation in the endowment investment be recognized as income during the period of the appreciation.

24

The funded ratio of a pension plan compares:
A. Actual employer contributions to the unfunded actuarial accrued pension liability.
B. The fair value of plan assets to the actuarial value of plan assets.
C. Actual employer contributions to the accumulated required employer contributions.
D. The actuarial value of plan assets to the actuarial accrued pension liability.

D. The actuarial value of plan assets to the actuarial accrued pension liability.

25

The City of Macon maintains a defined contribution pension plan for its employees. During the year, the city contributed $5,000,000 to the plan, which represented 100% of its required contribution for the year. City employees contributed $1,800,000 to the plan. In addition, plan assets earned $4,500,000.
What amount should the City report as Additions in its Pension Trust Fund?

A. $11,300,000
B. $9,500,000
C. $6,800,000
D. $4,500,000

A. $11,300,000

In addition to the actual earnings on plan assets, both employer and employee contributions are recognized as Additions in the Pension Trust Fund.

26

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?

A. $2,300,000
B. $2,100,000
C. $575,000
D. $525,000

C. $575,000
The County reports the $500,000 in resources contributed by external entities plus both the $50,000 in unrealized appreciation on the investments ($200,000 total increase x 25% of the total assets invested in the pool, which are attributable to external entities) and the $25,000 in investment earnings ($100,000 total increase x 25% of total assets invested in the pool, which are attributable to external entities) in its Investment Trust Fund.

27

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
To record the 2005 pension contribution of $11,000, what debit is required in the governmental-type fund used in connection with employer pension contributions?
A. Other financing uses control.
B. Expenditures Control.
C. Expenses Control.
D. Due to Pension Trust Fund

B. Expenditures Control.
Governmental-Type Funds view contributions to Retirement Funds as regular, on-going expenditures of the fund. The $11,000 should be debited to Expenditures Control.

28

Which of the following are reported for a Private-Purpose Trust Fund?

A. Expenditures.
B. Expenses.
C. Deductions.
D. Both A and C.

C. Deductions.
Private-Purpose Trust Funds report all changes in Net Position, as either additions or deductions.

29

A government makes a contribution to its pension plan in the amount of $10,000 for year 1. The actuarially-determined annual required contribution for year 1 was $13,500. The pension plan paid benefits of $8,200 and refunded employee contributions of $800 for year 1. What is the pension expenditure for the general fund for year 1?
A. $8,200
B. $9,000
C. $10,000
D. $13,500

C. $10,000
Because the question is about the General Fund, which uses the modified accrual basis of accounting, only the $10,000 contribution to the pension plan, which is a use of financial resources in year 1, is recognized as pension expenditure. The Pension Trust Fund would report the $10,000 received from the General Fund as an "Addition" and not as revenue.

30

In a Tax Agency Fund, revenues must be recognized:

A. When measurable and available.
Agency Funds act as intermediaries in the process of disbursing monies from one governmental entity to another. The government has no claim on the resources in the Agency Fund and does not recognize revenues when it receives the monies or recognize expenses when the monies are disbursed.

B. On the cash basis.
C. To extent fund expenditures.
D. None of the above. Revenues are not reported in Agency Funds.

D. None of the above. Revenues are not reported in Agency Funds.
Agency Funds act as intermediaries in the process of disbursing monies from one governmental entity to another. The government has no claim on the resources in the Agency Fund and does not recognize revenues when it receives the monies or recognize expenses when the monies are disbursed.

31

An Enterprise Fund transfers employer contributions to the Pension Trust Fund. Which of the following best describes the effect of the transaction on each fund?

A. The Enterprise Fund will report deductions, and the Pension Trust Fund will report additions.
B. The Enterprise Fund will report transfers out, and the Pension Trust Fund will report transfers in.
C. The Enterprise Fund will report expenses, and the Pension Trust Fund will report revenues.
D. The Enterprise Fund will report expenses, and the Pension Trust Fund will report additions.

D. The Enterprise Fund will report expenses, and the Pension Trust Fund will report additions.

32

Which of the following funds should be reported as part of the local government's governmental activities column in its government-wide statements?
A. Debt Service.
B. Agency.
C. Private-Purpose Trust.
D. Pension Trust.

A. Debt Service.

Governmental activities reported in the Government-Wide Financial Statements pertain to the Governmental Fund types: General Fund, Special Revenue Funds, Capital Projects Funds, Debt Service Funds, and Permanent Funds.

The other three choices in this question are all Fiduciary Fund Types that are not reported in the Government-Wide Financial Statements since the government acts as a fiduciary and has no ownership interest.

Fiduciary Funds are reported in the fund-level financial statements of the Comprehensive Annual Financial Report (CAFR).

33

In Soan County's General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances, which of the following has an effect on the excess of revenues over expenditures?
A. Purchase of fixed assets.
B. Payment to a Debt-Service Fund.
C. Special items.
D. Proceeds from the sale of capital assets.

A. Purchase of fixed assets.

34

Tott City's serial bonds are serviced through a Debt Service Fund with cash provided by the General Fund. In a Debt Service Fund's statements, how are cash receipts and cash payments reported?
Cash receipts Cash payments
Revenues Expenditures
Revenues Operating Transfers
Operating Transfers Expenditures
Operating Transfers Operating Transfers

Cash receipts: Operating transfers
Cash payments: Expenditures

35

Excel City received a donation of $400,000. The donor stipulated that the money be permanently invested with the investment proceeds being used to provide funding for the community swimming pools. Which of the following best describes the reporting options for this transaction?

A. The city should record $400,000 as a capital contribution in a Permanent Fund.
B. The city should record $400,000 as revenue in a Permanent Fund.
C. The city should record $400,000 as another financing source in a Permanent Fund.
D. The city should record $400,000 as revenue in the General Fund.

B. The city should record $400,000 as revenue in a Permanent Fund.

36

Excel City has $1,000,000 of 8%, 10 year general obligation bonds outstanding. The bonds were issue on October 1, 20x8 to finance construction of city park improvements. Interest is payable semiannually on October 1 and April 1. The bonds also require an annual principal payment of $100,000 each April 1. What amount of debt service expenditures should the government report in its Debt Service Fund for the year ended December 31, 20x9?

A. $76,000
B. $80,000
C. $174,000
D. $176,000

D. $176,000
Both Interest Expenditures and Principal Expenditures are recognized in the Debt Service Fund. Debt Service Expenditures are usually not accrued at year-end but are recorded as Expenditures when due and payable. In 20x9 the Debt Service Fund paid a total of $176,000-$ $40,000 interest and $100,000 principal on April 1 (both Expenditures of the fund) and $36,000 interest on October 1.

37

Sig City used the following funds for financial reporting purposes:
General Fund 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?

A. Two.
B. Three.
C. Four.
D. Five.

B. Three.

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).

38

Brandon County's General Fund had the following transactions during the year:
Transfer to a Debt Service Fund $100,000
Payment to a Pension Trust Fund 500,000
Purchase of equipment 300,000
What amount should Brandon County report for the General Fund as other financing uses in its Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances?

A. $100,000
B. $400,000
C. $800,000
D. $900,000

A. $100,000
Transfers between funds are classified as Other Financing Sources and Uses. The payment to the Pension Trust Fund pertains to employee and employer contributions to the pension plan and is part expenditure (employer share) and liability reduction (employee share that was due to the Pension Trust Fund). Under the modified accrual basis of accounting used by the General Fund, the purchase of the equipment is an expenditure.

39

Rock County has acquired equipment through a noncancelable lease-purchase agreement dated December 31, 2004.
This agreement requires no down payment and the following minimum lease payments:
December 31 Principal Interest Total
2005 $50,000 $15,000 $65,000
2006 50,000 10,000 60,000
2007 50,000 5,000 55,000
If the lease payments are required to be made from a Debt Service Fund, what account or accounts should be debited in the Debt Service Fund for the December 31, 2005 lease payment of $65,000?

A. Expenditures Control $65,000.
B. Other Financing Sources Control $50,000
Expenditures Control 15,000
C. Amount to be Provided for Lease Payments $50,000
Expenditures Control 15,000
D. Expenditures Control $50,000
Amount to be provided for lease payments 15,000.

A. Expenditures Control $65,000.