To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 19 Test Bank ACCOUNTING FOR STATE AND LOCAL GOVERNMENTAL UNITS GOVERNMENTAL FUNDS Multiple Choice Questions LO1 When a capital lease is used to acquire general fixed assets, the governmental fund acquiring the fixed assets records a(n) at the _ a b c d LO1 lease payment lease payment present value present value cost cost of the minimum lease payments of the minimum lease payments The estimated revenues control account of Star City general fund is eliminated when a b c d LO1 expenditure, fixed asset, expenditure, fixed asset, the city’s tax receipts are measurable and available the budget is recorded appropriations are made budgetary accounts are closed When recording an approved budget into the general fund, which of the following accounts would be credited? a b c d Appropriations Transfers in Estimated revenues Deferred revenues ©2009 Pearson Education, Inc publishing as Prentice Hall 19-1 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO1 A fund balance increase resulting from an operating transfer to a governmental fund would have a a b c d LO2 The proceeds from a bond issuance for the building of a new public school should be recorded in the fund at the time the bonds are sold The fund balance increase is classified as a b c d LO2 credit to other financing sources debit to other financing sources credit to revenues debit to revenues capital projects, revenues general, revenues general, other financing sources capital projects, other financing sources A fire station that the city of Plenty constructed many years ago is sold and is accounted for as an other financing source Where should entries be made? a In the general fund only b In the general fund and capital projects fund c In the general fund, capital projects fund and general fixed asset group d In the special revenue fund LO2 Capital improvement costs incurred for general government special assessments projects require recognition in the a b c d LO3 general fund capital projects fund trust fund special revenue fund The purpose of encumbrance accounting is to prevent a b c d spending more than an appropriation making unreasonable appropriations spending more than deferred revenue wasteful spending ©2009 Pearson Education, Inc publishing as Prentice Hall 19-2 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO3 The proper sequence of events is a b c d LO3 10 According to the GASB Codification, the "collected soon enough after year-end to pay liabilities for current expenditures" criterion for revenue recognition means collected within a period not exceeding a b c d LO3 11 The The The The gross amounts earned approach gross amounts levied approach net of estimated uncollectible accounts approach net of related expenditures approach At any point in time, a government will be able to spend an amount equal to a b c d LO4 13 30 days after the fiscal year end 60 days after the fiscal year end 90 days after the fiscal year end 120 days after the fiscal year end Which of the following approaches is used to recognize governmental fund revenues? a b c d LO3 12 order, appropriation, encumbrance, expenditure order, encumbrance, expenditure, appropriation appropriation, encumbrance, order, expenditure appropriation, order, encumbrance, expenditure appropriations minus expenditures appropriations minus expenditures minus encumbrances appropriations minus encumbrances expenditures minus encumbrances Which of the following items would be presented in a Statement of Revenues, Expenditures, and Changes in Fund Balance? a b c d Appropriations Encumbrances Other financing sources Unreserved fund balance ©2009 Pearson Education, Inc publishing as Prentice Hall 19-3 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO4 14 Which of the following funds has similar accounting and reporting to the special revenue fund? a b c d LO4 15 The The The The proprietary fund trust fund general fund agency fund Which financial statement(s) is (are) required for governmental funds with legally adopted annual budgets? I The statement of cash flows II The statement of revenues, expenditures and changes in fund balance-budget and actual a b c d LO4 16 Which statement below is correct with respect to the general fund financial statements? a b c d LO4 17 A budgetary comparison must be presented Encumbrances must be included on the statements Capital leases must be included on the statements All governmental fixed assets and long-term debt must be included on the statements General fund operating lease payments are typically reported as a b c d LO5 18 I only II only I and II Neither I nor II overhead expenditures rental expenditures general government expenses capital outlay expenditures Infrastructure costs in government-wide financial statements a must be recorded and depreciated by government b may be recorded and depreciated at the option of government as long as footnote disclosures are made c must be recorded and depreciated by a government unless a modified approach is used, in which case, depreciation is optional d must be expended in the year that they are incurred ©2009 Pearson Education, Inc publishing as Prentice Hall 19-4 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO5 19 All of the following government fund items must be reconciled in government-wide financial statements except a b c d LO5 20 deferred revenue long-term liabilities construction expenditures encumbrances Which statement below is incorrect with respect to the government wide financial statements? a All fund categories must convert to the modified accrual basis of accounting b Internal service fund transactions with other governmental funds must be excluded from the statements c Capital leases must be included on the statements d All governmental fixed assets and long-term debt must be included on the statements ©2009 Pearson Education, Inc publishing as Prentice Hall 19-5 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO1 Exercise The City of Sharpesburg entered the following transactions during 2006: The city authorized a bond issue of $2,500,000 par to finance construction of a fountain in the city square The bonds were issued for $2,560,000 The premium was transferred to the fund for which the debt will be serviced The city entered into a contract for construction of the fountain at an estimated cost of $2,425,000 The city received and paid a bill for $2,445,000 from the contractor upon completion of and approval of the fountain The unused bond proceeds were set aside for debt service on the bonds Accordingly, those resources were paid to the appropriate fund Required: Prepare journal entries for each of the above transactions Identify the appropriate fund or funds used by Sharpesburg ©2009 Pearson Education, Inc publishing as Prentice Hall 19-6 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO1 Exercise The city issued $6 million of refunding bonds at par The city transferred $3,700,000 from its General Fund to its Debt Service Fund to provide the additional resources needed to defease the bonds in substance The city paid $9,700,000 into an irrevocable trust established at the First Seaside Bank to defease the bonds in substance Required: Prepare journal entries for each of the above transactions Identify the appropriate fund or funds used by the city of Plaza Royal LO1 Exercise Prepare journal entries to record the following grant-related transactions for a municipality special revenue fund Awarded an operating grant from the state, $2,500,000 (cash will be received after qualified expenditures are made) Incurred and paid qualifying expenditures on the grant program, $1,600,000 Received a federal grant to finance construction of a new school, $4,500,000 (cash received in advance) Incurred and paid construction cost on the school building, $3,000,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 19-7 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO1 Exercise The general fund trial balance for Overland City held the following balances at September 30, 2006, just before closing entries were made: Due from other funds Unreserved fund balance Estimated revenues Revenues Appropriations Expenditures - current year Expenditures - prior year Encumbrances Operating transfers in Reserve for encumbrances Reserve for encumbrances - prior year $ 750 5,000 20,000 18,950 19,000 16,800 2,500 1,200 4,000 1,200 2,500 Required Prepare the necessary closing entries LO1 Exercise The general fund trial balance for Owens Creek City held the following balances at June 30, 2006, just before closing entries were made: Due from other funds Unreserved fund balance Estimated revenues Revenues Appropriations Expenditures - current year Expenditures - prior year Encumbrances Operating transfers in Reserve for encumbrances Reserve for encumbrances - prior year $ Required Prepare the necessary closing entries ©2009 Pearson Education, Inc publishing as Prentice Hall 19-8 2,700 51,000 208,000 198,900 196,500 193,800 4,500 3,200 6,000 3,200 4,500 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO1&2 Exercise El Dorado County incurred the following transactions during 2006: Marketable securities were donated to support the county's bike and nature trails The donor acquired the securities for $35,000 ten years earlier; however, their current market value was $200,000 The donor specified that all income from the securities be used for the trails The principal is to be held intact for an indefinite period of time Computer equipment was ordered for general fund departments estimated cost was $48,000 The The county received the computer equipment The actual cost was $47,750, of which $42,000 was paid to the vendor before yearend The county sold a (general government) dump truck that originally cost $55,000 The county sold the truck at auction for $3,300 The government leased equipment under a capital lease agreement The capitalized cost was $120,000 The county made an initial down payment of $10,000 Required: Prepare journal entries for each of the above transactions Identify the appropriate fund or funds used by El Dorado County ©2009 Pearson Education, Inc publishing as Prentice Hall 19-9 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO1&2 Exercise Johnson County incurred the following transactions during 2006: The county authorized a new general obligation bond issue of $5 million par to purchase an office building with a contract price of $4,975,000 The bonds were issued for $4,960,000 The county levied real property taxes of $10,000,000 Sixty per cent of the taxes levied were for local municipal governments By fiscal year-end, 85% of the taxes were collected and remitted to the municipalities Two per cent of the total levy was estimated to be uncollectible The escrow for the office building closed and the county paid the contract price The county paid $200,000 for interest on the bonds Required: Prepare journal entries for each of the above transactions Identify the appropriate fund or funds used by Johnson County ©2009 Pearson Education, Inc publishing as Prentice Hall 19-10 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO3 Exercise Address the following situations separately 1.For the budgetary year beginning July 1, 2006, Center Township expected the following cash flow resources: Property taxes, licenses, and fees $3,000,000 Proceeds of debt issue 1,000,000 Interfund transfers from debt service 750,000 In the budgetary entry, what amount did Center Township record for estimated revenues? During the fiscal year ended June 30, 2006, Pacific City issued purchase orders totaling $7,000,000 Pacific City received $6,500,000 of invoiced goods at the encumbered amounts and paid $6,100,000 toward them before year-end How much were Pacific City's encumbrances on July 1, 2006? 3.The following information pertains to property taxes levied ($1,035,000 total) by Palm Lake City for the calendar year 2006: Expected collections during 2006 $750,000 Expected collections in first 60 days of 2007 200,000 Expected collections during the remainder of 2007 50,000 Expected collections during January 2008 30,000 Estimated to be uncollectible 5,000 What amount did Palm Lake City report for property tax revenues in 2006? 4.The following information pertains to Dodge City's general fund for 2006: Appropriations $7,000,000 Expenditures 5,500,000 Other financing sources 1,000,000 Other financing uses 3,000,000 Revenues 9,000,000 At what amount will Dodge City's total fund balance increase (decrease) in 2006? ©2009 Pearson Education, Inc publishing as Prentice Hall 19-11 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO4 Exercise The following information regarding the fiscal year ended September 30, 2006, was drawn from the accounts and records of the Jasper County general fund: Revenues and other asset inflows: Taxes Licenses and permits Intergovernmental grants Proceeds of short-term note issuances Collection of interfund advance to other fund Receipt of net assets of terminated fund Expenditures and other asset outflows: General government expenditures Public safety expenditures Judicial system expenditures Health and welfare expenditures Equipment purchases Payment to debt service fund to cover future debt service on general government bonds Total fund balance, October 1, 2005 $ 12,000,000 2,500,000 1,000,000 1,200,000 800,000 1,800,000 7,500,000 2,000,000 1,200,000 1,750,000 750,000 $ 500,000 3,000,000 Required Prepare a statement of revenues, expenditures, and changes in fund balance for the Jaspar County general fund for the year ended September 30, 2006 ©2009 Pearson Education, Inc publishing as Prentice Hall 19-12 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO4 Exercise 10 The unadjusted trial balance for the general fund of the City of Pegasus at June 30, 2006 is as follows: Debits Accounts receivable Cash Due from agency fund Encumbrances Estimated revenues Expenditures Taxes receivable $ Credits Allowance for doubtful accounts Allowance for uncollectible taxes Appropriations Due to utility fund Unreserved fund balance Reserve for encumbrances Revenues Taxes received in advance Vouchers payable Supplies on hand at June 30, 2006 totaled $8,000 The $60,000 encumbrance relates to equipment ordered but not received by fiscal year-end Required Prepare a balance sheet for the general fund of the City of Pegasus at June 30, 2006 ©2009 Pearson Education, Inc publishing as Prentice Hall 19-13 40,000 75,000 25,000 60,000 975,000 750,000 250,000 5,000 50,000 785,000 40,000 30,000 60,000 990,000 15,000 200,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Multiple Choice Questions c d a b d a b a d 10 b 11 c 12 b 13 c 14 c 15 b 16 a 17 b 18 a 19 d 20 a ©2009 Pearson Education, Inc publishing as Prentice Hall 19-14 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise 1 CPF Cash Other financing sources-bond proceeds Other financing uses-operating transfers out Cash DSF Cash Other financing sources-operating transfers in CPF Encumbrances Reserve for encumbrances CPF Reserve for encumbrances Encumbrances Expenditures-capital outlay Cash CPF Residual equity transfers out Cash DSF Cash Residual equity transfers in 2,560,000 2,560,000 60,000 60,000 60,000 60,000 2,425,000 2,425,000 2,425,000 2,425,000 2,445,000 2,445,000 55,000 55,000 55,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 19-15 55,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise DSF Cash Other financing sources-refunding bond proceeds GF Other financing uses-operating transfers out Cash DSF Cash Other financing sources-operating transfers in DSF Expenditures-payment to refunded bond escrow agent Other financing uses-payment to refunded bond escrow agent Cash 6,000,000 6,000,000 3,700,000 3,700,000 3,700,000 3,700,000 3,700,000 6,000,000 9,700,000 Exercise No entry Expenditures Cash 1,600,000 1,600,000 Cash Other financing sourcesreciprocal transfer from GF 1,600,000 Accounts receivable-grant Grant revenue 1,600,000 1,600,000 Cash Deferred grant revenue 4,500,000 4,500,000 Expenditures Cash 3,000,000 3,000,000 Deferred grant revenue Grant revenue 3,000,000 3,000,000 1,600,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 19-16 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise Appropriations Unreserved fund balance Estimated revenues 19,000 1,000 Revenues Operating transfers in Expenditures Encumbrances Unreserved fund balance 18,950 4,000 Reserve for encumbrances-prior year Expenditures-prior year 2,500 20,000 16,800 1,200 4,950 2,500 Exercise Appropriations Unreserved fund balance Estimated revenues 196,500 11,500 Revenues Operating transfers in Expenditures Encumbrances Unreserved fund balance 198,900 6,000 Reserve for encumbrances-prior year Expenditures-prior year 4,500 208,000 193,800 3,200 7,900 4,500 Exercise PF Investments-marketable securities Revenues-additions to permanent endowments GF Encumbrances Reserve for encumbrances GF Reserve for encumbrances Encumbrances Expenditures-capital outlay Cash 200,000 200,000 48,000 48,000 48,000 48,000 47,750 ©2009 Pearson Education, Inc publishing as Prentice Hall 19-17 42,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Vouchers payable GF Cash Other financing sources-proceeds from sale of general fixed assets GF Expenditures-capital outlay Cash Other financing sources-increase in capital lease liabilities 5,750 3,300 3,300 120,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 19-18 10,000 110,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise GF Cash Other financing sources-bond proceeds Encumbrances Reserve for encumbrances AF Taxes receivable Liability to municipalities Liability to county 4,960,000 4,960,000 4,975,000 4,975,000 10,000,000 6,000,000 4,000,000 Cash Taxes receivable 8,500,000 Liability to county Liability to municipalities Cash 3,400,000 5,100,000 GF Taxes receivable Allowance for uncollectible taxes Property tax revenue Cash Taxes receivable GF Reserve for encumbrances Encumbrances Expenditures-capital outlay Cash DSF Expenditures Cash 8,500,000 8,500,000 4,000,000 80,000 3,920,000 3,400,000 3,400,000 4,975,000 4,975,000 4,975,000 4,975,000 200,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 19-19 200,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise 1.Center Township $ 3,000,000 2.Pacific City $ 500,000 $ 750,000 200,000 950,000 3.Palm Lake City Collections during 2006 Expected collections in first 60 days of 2007 2006 property tax revenue 4.Dodge City Revenues Long-term debt proceeds Expenditures Operating transfer out Fund balance increase $ $ $ 9,000,000 1,000,000 (5,500,000) (3,000,000) 1,500,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 19-20 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise Jasper County General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance For the Year Ended September 30, 2006 Revenues: Taxes Licenses and permits Intergovernmental grants Total revenues $12,000,000 2,500,000 1,000,000 15,500,000 Expenditures: Current operating expenditures: General government Public safety Judicial Health and welfare Total current operating Capital Outlay Total expenditures 7,500,000 2,000,000 1,200,000 1,750,000 12,450,000 750,000 13,200,000 Excess of revenues over expenditures 2,300,000 Other financing sources (uses): Operating transfer to debt service fund (500,000) Excess of revenues and other financing sources over (under) expenditures and other financing uses 1,800,000 Fund Balance, October 1, 2005 3,000,000 Residual equity transfer in 1,800,000 Fund Balance, September 30, 2006 $6,600,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 19-21 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise 10 City of Pegasus General Fund Balance Sheet June 30, 2006 Assets: Cash Taxes receivable (net of estimated uncollectible of $50,000) Accounts receivable (net of estimated uncollectible of $5,000) Due from other funds Supplies Total assets $75,000 200,000 35,000 25,000 8,000 $343,000 Liabilities and Fund Balance: Liabilities: Vouchers payable Due to enterprise fund Taxes received in advance Total liabilities 200,000 40,000 15,000 255,000 Fund Balance: Reserved for encumbrances Reserved for inventory Unreserved Total fund balance Total liabilities and fund balance 60,000 8,000 20,000 88,000 $343,000 Computation of Unreserved Fund Balance: Pre-closing balance Add: Revenues Appropriations Deduct: Expenditures Encumbrances Estimated revenues Post-closing balance $ 30,000 $990,000 785,000 1,775,000 $750,000 60,000 975,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 19-22 $ 1,785,000 20,000 ... Inc publishing as Prentice Hall 19- 8 2,700 51,000 208,000 198 ,900 196 ,500 193 ,800 4,500 3,200 6,000 3,200 4,500 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com... Education, Inc publishing as Prentice Hall 19- 4 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO5 19 All of the following government fund items... appropriate fund or funds used by Sharpesburg ©2009 Pearson Education, Inc publishing as Prentice Hall 19- 6 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com