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Chapter 4

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State & Local Govt - Operating Activities

Question 1 of 25

1

A General Fund balance sheet differs from a government-wide statement of net position in that:

Select one of the following:

  • A General Fund balance sheet reports only current assets and liabilities; a government-wide statement of net position reports current and noncurrent assets as well as current and noncurrent liabilities.

  • A General Fund balance sheet reports material amounts of inventories of supplies; a government-wide statement of net position does not report inventories of supplies.

  • A General Fund balance sheet reports fund balances as restricted or unrestricted; a government-wide statement of net position segregates amounts of net position as net investment in capital assets, restricted, and unrestricted.

  • All of the answers are correct.

Explanation

Question 2 of 25

1

The net position section of the government-wide statement of net position reports the three categories:

Select one of the following:

  • Restricted, committed, and unrestricted.

  • Net investment in capital assets, restricted, designated, and unassigned.

  • Net investment in capital assets, restricted, and unrestricted.

  • Restricted, designated, and nondesignated.

Explanation

Question 3 of 25

1

The dual-track approach to governmental accounting used in this text is most useful because:

Select one of the following:

  • It parallels the approach used by most governments that have adopted GASB'S reporting model.

  • It is the only way that a government can meet the requirements of GASB'S reporting model.

  • Most governments do not possess the computer capabilities to classify and aggregate accounting information in the ways required to prepare both governmental and fund financial statements.

  • It helps the student learn the different ways in which accounting transactions and events affect the government-wide and fund financial statements, as well as providing a manual accounting system that aids in preparing both kinds of statements.

Explanation

Question 4 of 25

1

Which of the following is properly reported as a liability of the General Fund?

Select one of the following:

  • General Obligation Bonds Payable.

  • Vouchers Payable.

  • Capital Lease Obligations.

  • All of the answers are correct.

Explanation

Question 5 of 25

1

When the annual budget is recorded, the legislative authorization to expend resources is:

Select one of the following:

  • Credited to Appropriations.

  • Debited to Expenditures.

  • Credited to Expenditures.

  • Debited to Appropriations.

Explanation

Question 6 of 25

1

The Parks and Recreation Department ordered equipment estimated to cost $5,200 and an encumbrance was recorded in that amount. When the equipment was received at an actual cost of $5,100, the required General Fund journal entry should include:

Select one of the following:

  • A debit to Expenditures in the amount of $5,200.

  • A debit to Appropriations in the amount of $5,100.

  • A credit to Encumbrances in the amount of $5,200.

  • A debit to Encumbrances in the amount of $5,100.

Explanation

Question 7 of 25

1

Which of the following would be recorded as a program revenue in the governmental activities journal?

Select one of the following:

  • Property taxes.

  • Motor fuel taxes.

  • Sales taxes.

  • None of the other answers are correct.

Explanation

Question 8 of 25

1

Which of the following represents the typical sequence of expenditure-related transactions?

Select one of the following:

  • Appropriation, Encumbrance, Disbursement, Expenditure.

  • Appropriation, Encumbrance, Expenditure, Disbursement.

  • Encumbrance, Appropriation, Expenditure, Disbursement.

  • Encumbrance, Appropriation, Disbursement, Expenditure.

Explanation

Question 9 of 25

1

Stone Township's nonexempt taxable property has assessed valuation of $500,000,000. For the current fiscal year, Stone Township's Council has set a property tax rate of $4 per $100 of assessed valuation. For the past 10 years, property tax collections have averaged 96 percent of taxes levied. Based on this information, the journal entry in Stone Township's General Fund to record its tax levy will include a:

Select one of the following:

  • Debit to Taxes Receivable—Current in the amount of $19,200,000.

  • Debit to Taxes Receivable—Current in the amount of $20,000,000.

  • Credit to Revenues in the amount of $19,200,000.

  • Both Debit to Taxes Receivable—Current in the amount of $20,000,000, and Credit to Revenues in the amount of $19,200,000.

Explanation

Question 10 of 25

1

On June 30, the end of the City of Dalton's current fiscal year, uncollected property taxes of $900,000 became delinquent. The related estimated uncollectible account balance on these taxes was $90,000. On the same date, penalties on the delinquent taxes were assessed in the amount of $45,000. The city estimated that 10 percent of the penalties would not be collected. The journal entry in the General Fund to record the reclassification of current taxes to delinquent status will include a:

Select one of the following:

  • Debit to Estimated Uncollectible Current Taxes for $90,000.

  • Debit to Estimated Uncollectible Delinquent Taxes for $90,000.

  • Credit to Deferred Revenues for $900,000.

  • Credit to Revenues for $45,000.

Explanation

Question 11 of 25

1

On June 30, the end of the City of Dalton's current fiscal year, uncollected property taxes of $900,000 became delinquent. The related estimated uncollectible account balance on these taxes was $90,000. On the same date, penalties on the delinquent taxes were assessed in the amount of $45,000. The city estimated that 10 percent of the penalties would not be collected. The journal entry in the General Fund to record the penalties on delinquent taxes will include a:

Select one of the following:

  • Debit to Estimated Uncollectible Delinquent Taxes for $90,000.

  • Credit to Deferred Revenues for $900,000.

  • Credit to Revenues for $40,500.

  • Debit to Interest and Penalties Receivable for $90,000.

Explanation

Question 12 of 25

1

Late in its fiscal year, a federal agency approved Hilton Village's application for a $400,000 operating grant to provide recreational activities for at-risk youth. The program will begin in the following fiscal year. The grant provides for reimbursement of expenditures for services to eligible recipients rendered during the following fiscal year. On the notification date, the village's journal entry in the General Fund should include a:

Select one of the following:

  • Debit to Due from Federal Government.

  • Credit to Deferred Revenues.

  • Both Debit to Due from Federal Government and Credit to Deferred Revenues are correct.

  • No entry should be made until all eligibility requirements have been met.

Explanation

Question 13 of 25

1

The governing body of the City of Taunton approved additional appropriations of $3,000 to cover unexpected overtime costs of the fire department. Approval of the additional appropriations will require a:

Select one of the following:

  • Debit to Encumbrances.

  • Debit to Appropriations.

  • Debit to Budgetary Fund Balance.

  • Debit to Supplemental Appropriations.

Explanation

Question 14 of 25

1

The General Fund received $100,000 in lieu of taxes from the city owned water utility, an enterprise fund. This amount approximates the value of services provided to the utility by departments accounted for by the General Fund. This is an example of a (an):

Select one of the following:

  • Interfund transfer.

  • Interfund loan.

  • Internal exchange transaction for interfund services provided and used.

  • Reimbursement.

Explanation

Question 15 of 25

1

The General Fund recorded a liability to the city owned electric utility (an enterprise fund of the city) for electric power used during the prior month. The journal entry for the General Fund will include:

Select one of the following:

  • A debit to Expenditures.

  • A debit to Interfund Transfers Out.

  • A debit to Encumbrances.

  • None of the other answers are correct.

Explanation

Question 16 of 25

1

An interfund transfer out should be reported in a governmental fund operating statement as a (an):

Select one of the following:

  • Due to other funds.

  • Other financing use.

  • Expenditure.

  • Change in fund balance.

Explanation

Question 17 of 25

1

On July 1, the first day of its fiscal year, Claret City levied a $2,000,000 property tax which is payable in full on December 1 of the same year. On September 15, the city decided to borrow $100,000 in 90-day, 5 percent tax anticipation notes to cover operating expenditures until the tax revenues are collected. The journal entry in the General Fund on September 15 to record the issuance of tax anticipation notes will include:

Select one of the following:

  • A credit to Other Financing Sources—Proceeds of Tax Anticipation Notes.

  • A credit to Tax Anticipation Revenue.

  • A credit to Tax Anticipation Notes Payable.

  • Either a credit to Tax Anticipation Revenue or a credit to Tax Anticipation Notes Payable is acceptable if consistently applied.

Explanation

Question 18 of 25

1

The Revenues account of a state or local government is debited when:

Select one of the following:

  • Property taxes are recorded.

  • Property taxes are collected.

  • The budget is recorded at the beginning of the year.

  • The account is closed at the end of the year.

Explanation

Question 19 of 25

1

The City of Ashland uses a periodic inventory system in which the amount of inventory at year-end is unknown until a physical count is completed. The town uses the purchases method of accounting for its inventory of consumable supplies in the General Fund. Assume that the inventory of supplies reported on the General Fund balance sheet at the end of the previous fiscal year, December 31, 2013, was $44,000 and a physical count as of December 31, 2014, reveals that the inventory is only $40,000. During the year, the town records all purchases of supplies as debits to Expenditures. The adjusting journal entry in the General Fund at December 31, 2014, will include a:

Select one of the following:

  • Debit to Fund Balance--Unassigned in the amount of $4,000.

  • Credit to Expenditures—2014 in the amount of $4,000.

  • Credit to Inventory of Supplies in the amount of $4,000.

  • Credit to Inventory of Supplies in the amount of $44,000.

Explanation

Question 20 of 25

1

During January 2014 General Fund supplies ordered in the previous fiscal year and encumbered at an estimated amount of $1,000 were received at an actual cost of $1,100. The entry to record this transaction will require a debit to:

Select one of the following:

  • Expenditures—2014 in the amount of $1,100.

  • Expenditures—2014 in the amount of $100.

  • Expenditures—2013 in the amount of $1,100.

  • Encumbrances—2013 in the amount of 1,000.

Explanation

Question 21 of 25

1

Which of the following is a correct statement regarding the schedule of revenues, expenditures, and changes in fund balance—budget and actual prepared for the General Fund?

Select one of the following:

  • Both the original and final budgeted amounts must be reported.

  • Actual amounts should be reported using the budgetary basis.

  • Only expenditures charged to the current period appropriations should be reported in this schedule.

  • All of the answers are correct.

Explanation

Question 22 of 25

1

Permanent funds differ from endowed private-purpose trust funds in that:

Select one of the following:

  • Permanent funds use the modified accrual basis of accounting.

  • They consist of donated amounts for which the principal must be preserved (i.e., endowments) and only the earnings thereon can be used for the specified purpose of the trust.

  • Their investments in stock and in bonds maturing more than one year from receipt must be reported at fair value as of the balance sheet date.

  • All of the answers are correct.

Explanation

Question 23 of 25

1

The Town of Waynesville received a gift of $500,000 that is to be invested by the town and the earnings thereon are to be used for maintenance of the Waynesville Community Cemetery. The town has determined that a permanent fund will be established to account for this gift. The journal entry in the permanent fund to record receipt of the cash gift will include a:

Select one of the following:

  • Credit to Revenues—Contributions for Endowment.

  • Credit to Net position—Restricted for Endowment.

  • Credit to Fund Balance—Nonspendable—Principal of Permanent Fund.

  • Any of these is appropriate, if applied consistently.

Explanation

Question 24 of 25

1

In which class of nonexchange transactions are revenues recognized when the underlying exchange has occurred?

Select one of the following:

  • Imposed nonexchange revenues.

  • Derived tax revenues.

  • Voluntary nonexchange transactions.

  • Government-mandated nonexchange transactions.

Explanation

Question 25 of 25

1

Which of the following is a correct statement regarding interim financial reporting for state and local governments?

Select one of the following:

  • Interim financial reporting to bondholders and other creditors is required on a quarterly basis.

  • Currently, interim financial reporting is not required to parties outside the government.

  • At a minimum, interim financial information, such as actual and budgeted revenues and expenditures for the year to date, should be prepared for use by internal managers on a quarterly, monthly, weekly, or other periodic basis, as needed.

  • Both not required to parties outside the government and should be prepared for use by internal managers on a quarterly, monthly, weekly or other periodic basis, as needed.

Explanation

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