Question 1

The city's electric utility fund sent $700,000 to the General Fund to help cover the city's operating costs. This transaction would be recorded in the governmental activities journal as

Accepted Answer

The transfer of $700,000 from the electric utility fund to the General Fund represents an Interfund transfer in, which is a transaction recorded in the governmental activities journal. Interfund transfers involve the movement of resources between funds within the same government entity and are recorded in the accounting system to maintain accurate records of cash movements among funds. Therefore, option A is the correct choice.

Question 2

The earnings on the assets of a permanent fund are to be used to support the city's library (special revenue fund). How would the earnings be recorded?

Accepted Answer

The earnings on the assets of a permanent fund are recorded as revenues by the permanent fund itself, not directly by the fund or program that benefits from those earnings. The library, in this case, would receive transfers or other financing sources from the permanent fund, not directly record the earnings as revenue.

Question 3

Which of the following types of nonexchange transactions recognize revenue when all the eligibility requirements are met?

Accepted Answer

Voluntary nonexchange transactions recognize revenue when all eligibility requirements are met. This is because there is no direct exchange involved between the parties, making it easier to determine when revenue can be recognized. Imposed nonexchange transactions, on the other hand, recognize revenue when the resources are provided or when there is an enforceable claim, regardless of eligibility requirements. Derived tax revenues and property tax revenues are exchange transactions and therefore do not apply to this question.

Question 4

The account Deferred Inflows of Resources-Unavailable Revenues is used in governmental funds to record

Accepted Answer

Deferred Inflows of Resources-Unavailable Revenues is used to record property taxes that will not be collected within 60 days of fiscal year end. Therefore, option C is the correct answer. Option A refers to uncollectible property taxes which are recorded in Allowance for Uncollectible Current Taxes, while option B refers to property taxes that have been collected but not yet earned, which are recorded in the account Deferred Revenue. Option D is incorrect because it includes all options, while only option C is the correct one.

Question 5

The governmental funds operating statement presents all of the following except

Accepted Answer

The governmental funds operating statement presents expenditures, revenues, and other financing sources, but it does not present encumbrances. Encumbrances are recorded in a separate record known as the encumbrance ledger.

Question 6

At the end of the 2020 fiscal year the General Fund had $500 in encumbrances that remained opened into fiscal year 2021. In 2021 the encumbered goods were received at an invoiced cost of $520. How much would be recorded as the 2021 expenditure?

Accepted Answer

The answer of At the end of the 2020 fiscal...

Question 7

Which of the following transactions is classified as an exchange transaction?

Accepted Answer

Fees charged by a municipal airport are an example of an exchange transaction because the users of the airport are paying for the service provided by the city. The other options are not exchange transactions: property taxes are a form of taxation, bequests are gifts, and state grants are a form of government funding.

Question 8

If a governmental fund issues debt to finance a capital acquisition, how should the proceeds of the debt be recorded?

Accepted Answer

The proceeds of the debt should be recorded as an other financing source in the governmental fund. This indicates that the fund has received money from borrowing, which will be used for capital acquisition. The long-term liability option is incorrect because it reflects how the debt will be paid back rather than how the money was received. Revenue is also incorrect because the proceeds of the debt are not considered revenue. The option stating that it would not be reported by the governmental fund is incorrect as it should be recorded as an other financing source.

Question 9

Which of the following would be reported on the operating statement of a governmental fund?

Accepted Answer

The answer of Which of the following would be reported...

Question 10

Revenues that are legally restricted for expenditure on specified operating purposes should be accounted for in special revenue funds, including

Accepted Answer

Gasoline taxes to finance road repairs are specifically designated for a certain purpose and legally restricted for expenditure on that purpose, which makes it appropriate to account for them in a special revenue fund. Endowment funds, pension trust fund revenues, and debt service funds are also separate funds, but they are not legally restricted for expenditure on a specific operating purpose.

Question 11

Which of the following is not a program revenues classification used in the governmental activities journal and reported in the government-wide statement of activities?

Accepted Answer

User fees are considered a type of charge for services, so they are not a separate classification of program revenues in the context of governmental accounting and reporting. Charges for services (C) is the correct term used to encompass user fees and similar revenues.

Question 12

The county received a $10,000,000 endowment, the terms of which indicate that earnings on the endowment are to be used by health and welfare to provide medical services to low-income children. Where would the $10,000,000 be recorded?

Accepted Answer

The $10,000,000 endowment would be recorded in a permanent fund as it is a long-term investment intended to generate income for a specific purpose (providing medical services to low-income children). The earnings on this fund would then be transferred to a special revenue fund for use by health and welfare to provide the medical services.

Question 13

In fiscal year 2020 the "Expenditures-2019" account represents

Accepted Answer

The "Expenditures-2019" account represents the amount of expenditures for goods ordered in 2019 that were received in 2020 and chargeable to appropriations of 2019. This means that the government ordered goods or services in 2019 that were not received until 2020 but the expenses are still charged to the appropriations of 2019.

Question 14

If state law requires that local governments prepare General Fund and special revenue fund budgets on a basis that differs from the basis of accounting required by GAAP, then the budgetary comparison schedule or statements should

Accepted Answer

The budgetary comparison schedule should be included with the actual figures presented on the budget basis and then reconciled to the GAAP basis. This allows the reader to understand the differences between the two accounting methods and the impact on the financial statements. The budgetary comparison schedule should be presented as required supplementary information (RSI) to the basic financial statements.

Question 15

Under the consumption method for recording supplies that are maintained on a perpetual inventory system, the adjusting entry made at year end would affect which of the following accounts?

Accepted Answer

The adjusting entry under the consumption method would affect the Fund Balance-Nonspendable-Inventory of Supplies to reflect the amount of supplies on hand that are not available for spending.

Question 16

Which of the following assets would appropriately be reported on the governmental funds balance sheet?

Accepted Answer

Inventories are reported on the governmental funds balance sheet. Capital assets, unamortized debt issuance costs, and goodwill are reported on the government-wide statement of net position.

Question 17

Supplies recorded in the General Fund under the purchases method will initially include a

Accepted Answer

Under the purchases method, supplies are recorded as expenditures in the General Fund. Therefore, the initial entry would be a debit to Expenditures. Options A and D are incorrect because Fund Balance-Restricted is not impacted by the recording of supplies. Option B is also incorrect as it implies that the supplies are restricted, which is not necessarily the case.

Question 18

Which of the following transactions is classified as an exchange transaction?

Accepted Answer

An exchange transaction involves a buyer and seller where goods, services or money are exchanged. In this case, the fees charged for use of an athletic field can be considered as an exchange transaction as the city is providing a service (use of the field) in return for the fees paid by the users.

B) can be classified as a non-exchange transaction as the state grant is intended to fund a public health program without an expectation of direct benefit to the state.

C) can be classified as a non-exchange transaction as the bequest left by the former mayor is a gift or donation to the city without an expectation of direct benefit to the donor.

D) can be classified as a tax revenue, which is a type of non-exchange transaction where the government levies taxes to fund public services without an individual receiving a direct benefit in return for the tax paid.

Question 19

The City of Burlington borrowed $350,000 via a tax anticipation note.  If the city repaid the note three months later, the General Fund entry to record the repayment and interest of $2,750 will include

Accepted Answer

The repayment of the tax anticipation note involves two parts: repaying the principal amount borrowed and paying the interest. The city needs to debit the Tax Anticipation Notes Payable account for the full amount borrowed ($350,000) and debit the Expenditures account for the interest paid ($2,750). Therefore, the correct entry would be a debit to Tax Anticipation Notes Payable for $350,000 and a debit to Expenditures for $2,750. Choice D is the only one that includes both required debits.

Question 20

Under the modified accrual basis of accounting, revenues should be recognized when

Accepted Answer

Under the modified accrual basis of accounting, revenues are recognized when they are both measurable and available to finance expenditures of the current period.

Quiz 4: Accounting for Governmental Operating Activities–Illustrative Transactions and Financial Statements

The city's electric utility fund sent $700,000 to the General Fund to help cover the city's operating costs. This transaction would be recorded in the governmental activities journal as

The earnings on the assets of a permanent fund are to be used to support the city's library (special revenue fund) . How would the earnings be recorded?

Which of the following types of nonexchange transactions recognize revenue when all the eligibility requirements are met?

The account Deferred Inflows of Resources-Unavailable Revenues is used in governmental funds to record

The governmental funds operating statement presents all of the following except

At the end of the 2020 fiscal year the General Fund had $500 in encumbrances that remained opened into fiscal year 2021. In 2021 the encumbered goods were received at an invoiced cost of $520. How much would be recorded as the 2021 expenditure?

Which of the following transactions is classified as an exchange transaction?

If a governmental fund issues debt to finance a capital acquisition, how should the proceeds of the debt be recorded?

Which of the following would be reported on the operating statement of a governmental fund?

Revenues that are legally restricted for expenditure on specified operating purposes should be accounted for in special revenue funds, including

Which of the following is not a program revenues classification used in the governmental activities journal and reported in the government-wide statement of activities?

The county received a $10,000,000 endowment, the terms of which indicate that earnings on the endowment are to be used by health and welfare to provide medical services to low-income children. Where would the $10,000,000 be recorded?

In fiscal year 2020 the "Expenditures-2019" account represents

If state law requires that local governments prepare General Fund and special revenue fund budgets on a basis that differs from the basis of accounting required by GAAP, then the budgetary comparison schedule or statements should

Under the consumption method for recording supplies that are maintained on a perpetual inventory system, the adjusting entry made at year end would affect which of the following accounts?

Which of the following assets would appropriately be reported on the governmental funds balance sheet?

Supplies recorded in the General Fund under the purchases method will initially include a

Which of the following transactions is classified as an exchange transaction?

The City of Burlington borrowed $350,000 via a tax anticipation note. If the city repaid the note three months later, the General Fund entry to record the repayment and interest of $2,750 will include

Under the modified accrual basis of accounting, revenues should be recognized when