Question 1

The General Fund recorded a liability to the city-owned electric utility (an enterprise fund of the city)for electricity used during the prior month.The journal entry for the General Fund will include
A)A debit to Encumbrances.
B)A debit to Expenditures.
C)A debit to Interfund Transfers Out.
D)A debit to Due to Other Funds.

Accepted Answer

The recording of a liability for electricity used would result in an expenditure for the General Fund, therefore requiring a debit to Expenditures. Encumbrances, Interfund Transfers Out, and Due to Other Funds would not be relevant for this transaction.

Question 2

Which of the following would properly be reported in the operating statement of a governmental fund?
A)Interest on a tax anticipation note issued and repaid during the period.
B)Amortization expense.
C)Depreciation expense.
D)A grant that is intended to finance activities of the following period.

Accepted Answer

Interest on a tax anticipation note issued and repaid during the period would be properly reported in the operating statement of a governmental fund because it represents a current period revenue or expenditure. Amortization expense and depreciation expense are reported on the statement of activities, not the operating statement of a governmental fund. A grant that is intended to finance activities of the following period would be reported in the statement of revenue and expenditures or the statement of activities, depending on the accounting basis used.

Question 3

A transfer of General Fund assets to create an internal service fund that is not expected to repay the assets is an example of an interfund transfer.

Accepted Answer

This statement accurately describes an interfund transfer, which is the movement of financial resources from one fund to another within a governmental entity. In this case, the transfer of General Fund assets to create an internal service fund is an example of an interfund transfer because it involves two different funds (General Fund and internal service fund) and results in a change in their financial resources. However, if the internal service fund is not expected to repay the assets, it may be considered a non-reimbursable interfund transfer.

Question 4

Under the dual-track accounting approach used in the text,which of the following transactions or events would be recorded in the general journal for governmental activities at the government-wide level?
A)Recording the annual budget,property tax levy,and payroll.
B)Recording the property tax levy,issuance of tax anticipation notes,and accrual of interest on long-term debt at year-end.
C)Recording the property tax levy,payroll,and encumbrances for purchase orders.
D)Recording the property tax levy,encumbrances for purchase orders,and payment of interest on long-term debt.

Accepted Answer

The dual-track accounting approach separates transactions/ events into either governmental or business-type activities. At the government-wide level, transactions/ events related to governmental activities would be recorded in the general journal. Choice (B) includes transactions related to property tax levy, tax anticipation notes issuance, and accrual of interest on long-term debt, which are all government activities and would be recorded in the general journal. Choices (A), (C), and (D) include transactions that may be related to either governmental or business-type activities or business-type activities only, which would not be recorded in the general journal for governmental activities at the government-wide level.

Question 5

Interfund loans and amounts due to or from other funds should be eliminated from the accounts of the affected funds so that the annual financial statements of the government will show only receivables from and payables to external individuals or organizations.

Accepted Answer

GASB standards regard funds as separate fiscal and accounting entities; therefore, interfund receivables and payables should not be eliminated.

Question 6

Although a governmentally owned utility may receive police and fire protection and other services from governmental departments financed by "governmental" funds,such a utility is exempt from taxes and should not pay the General Fund anything for services received.

Accepted Answer

In fact, it is a common practice for the utilities to pay the General Fund a "payment in lieu of taxes (PILOT)," as illustrated in Chapter 4.

Question 7

A payment made by a city-owned utility to the General Fund of the city in lieu of taxes is an example of an "internal exchange transaction."

Accepted Answer

This is a common example of an internal exchange transaction. However, if the amount paid by the utility is significantly greater than the value of services received from the city's departments, the General Fund should report the excess amount as an other financing source (interfund transfers in).

Question 8

Which of the following would be considered an internal exchange transaction?
A)The General Fund transfers $200,000 to establish a Central Supplies Fund; this amount will not be repaid.
B)The General Fund transfers $125,000 to the Debt Service Fund for payment of currently due bond interest payments.
C)The General Fund orders and receives supplies from the Central Supplies Fund in the amount of $9,000.
D)The Capital Projects Fund completes a library building project and transfers the remaining cash to the Debt Service Fund.

Accepted Answer

An internal exchange transaction involves an exchange of goods or services between two funds or departments within the same government entity. Option C involves the General Fund ordering and receiving supplies from its own internal Central Supplies Fund, making it an internal exchange transaction. Options A, B, and D involve transfers of funds between different funds or departments, and do not involve an exchange of goods or services.

Question 9

Regular periodic transfers of resources raised by one fund to another fund that is to use the resources are classified as "interfund transfers."

Accepted Answer

The regular recurring transfer does not result in an expenditure to the transferor fund nor a revenue to the transferee fund. Rather these items are reported as other financing uses and sources.

Question 10

As a general rule,revenues,expenditures,and expenses should be reported as such only once in the funds of a government.

Accepted Answer

This is the position taken by GASB and it serves as the rationale for recording the transactions illustrated in Chapter 4 under the caption "nonreciprocal interfund activity."

Question 11

Using the information below,what amount should be accounted for in a special revenue fund or funds? 
A)$1,800,000.
B)$2,100,000.
C)$3,300,000.
D)$5,350,000.

Accepted Answer

The answer of Using the information below,what amount should be...

Question 12

Which of the following should not be reported as a liability of the General Fund?
A)General obligation bonds payable (due in 10 years).
B)Vouchers payable.
C)Tax anticipation notes payable.
D)Due to federal government.

Accepted Answer

General obligation bonds payable are long-term liabilities and are not reported in the General Fund, which accounts for current financial resources and liabilities.

Question 13

The General Fund has transferred cash to the appropriate fund for eventual retirement of term bonds maturing in 10 years.Which funds would record this transaction?
A)General Fund: Yes; Capital Projects Fund: No; Debt Service Fund: Yes
B)General Fund: No; Capital Projects Fund: No; Debt Service Fund: Yes
C)General Fund: Yes; Capital Projects Fund: No; Debt Service Fund: No
D)General Fund: Yes; Capital Projects Fund: Yes; Debt Service Fund: Yes

Accepted Answer

The General Fund would record the transfer because it is the source of the cash being transferred. The Debt Service Fund would record the transaction because it is responsible for retiring the term bonds. The Capital Projects Fund would not record the transaction because it is not directly involved in the retirement of the term bonds.

Question 14

Which of the following financial statement(s)reports both current and noncurrent assets and liabilities? 
A)Choice A
B)Choice B
C)Choice C
D)Choice D

Accepted Answer

The answer of Which of the following financial statement(s)reports both...

Question 15

When a computer is ordered by a department of the government,the purchase order should be recorded in the General Fund as a debit to
A)Appropriations.
B)Equipment.
C)Encumbrances.
D)Expenditures.

Accepted Answer

The answer of When a computer is ordered by a...

Question 16

The Revenues account of a government is debited when
A)The budget is recorded at the beginning of the year.
B)Property taxes are recorded.
C)The account is closed to fund balance at the end of the year.
D)Property taxes are collected.

Accepted Answer

The Revenues account is debited when it is closed to the fund balance at the end of the year to transfer the balance to the fund balance account.

Question 17

The Town of Ashland levied property taxes in the amount of $800,000.The town estimates that 1 percent will be uncollectible.The journal entry to record the tax levy will include
A)A debit to cash for $792,000.
B)A credit to revenues for $792,000.
C)A debit to estimated uncollectible current taxes for $8,000.
D)A debit to estimated revenues for $800,000.

Accepted Answer

The answer of The Town of Ashland levied property taxes...

Question 18

The City of Newton purchased a vehicle for the police department.If the operations of the police department are financed by general revenues,the purchase would be recorded in which funds and/or activities?
A)General Fund: Yes; Governmental Activities: No
B)General Fund: No; Governmental Activities: No
C)General Fund: No,Governmental Activities: Yes
D)General Fund: Yes; Governmental Activities: Yes

Accepted Answer

The purchase of a vehicle for the police department, which is financed by general revenues, would be recorded in the General Fund as it is a governmental activity. Additionally, it would also be recorded in Governmental Activities in the government-wide financial statements.

Question 19

If one fund is both a debtor and creditor of a second fund,both funds must report the full amounts receivable and payable in their year-end balance sheets.

Accepted Answer

GASB standards provide that in the situation described, the fund interfund receivables/payables may be offset for reporting purposes only, and the net amount reported in the financial statements. However, these amounts should not be offset in the accounts.

Question 20

An interfund transfer should be reported in a governmental fund operating statement as a(an)
A)Revenue or expenditure.
B)Due from or due to other funds.
C)Change in fund balance.
D)Other financing source or use.

Accepted Answer

An interfund transfer is not a revenue or expenditure, nor is it a change in fund balance. It represents a transfer of resources between two different funds, and as such, it should be reported as an other financing source or use.

Quiz 4: Accounting for Governmental Operating Activitiesillustrative Transactions and Financial Statements

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

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

A transfer of General Fund assets to create an internal service fund that is not expected to repay the assets is an example of an interfund transfer.

Under the dual-track accounting approach used in the text,which of the following transactions or events would be recorded in the general journal for governmental activities at the government-wide level?

Interfund loans and amounts due to or from other funds should be eliminated from the accounts of the affected funds so that the annual financial statements of the government will show only receivables from and payables to external individuals or organizations.

Although a governmentally owned utility may receive police and fire protection and other services from governmental departments financed by "governmental" funds,such a utility is exempt from taxes and should not pay the General Fund anything for services received.

A payment made by a city-owned utility to the General Fund of the city in lieu of taxes is an example of an "internal exchange transaction."

Which of the following would be considered an internal exchange transaction?

Regular periodic transfers of resources raised by one fund to another fund that is to use the resources are classified as "interfund transfers."

As a general rule,revenues,expenditures,and expenses should be reported as such only once in the funds of a government.

Using the information below,what amount should be accounted for in a special revenue fund or funds?

Which of the following should not be reported as a liability of the General Fund?

The General Fund has transferred cash to the appropriate fund for eventual retirement of term bonds maturing in 10 years.Which funds would record this transaction?

Which of the following financial statement(s) reports both current and noncurrent assets and liabilities?

When a computer is ordered by a department of the government,the purchase order should be recorded in the General Fund as a debit to

The Revenues account of a government is debited when

The Town of Ashland levied property taxes in the amount of $800,000.The town estimates that 1 percent will be uncollectible.The journal entry to record the tax levy will include

The City of Newton purchased a vehicle for the police department.If the operations of the police department are financed by general revenues,the purchase would be recorded in which funds and/or activities?

If one fund is both a debtor and creditor of a second fund,both funds must report the full amounts receivable and payable in their year-end balance sheets.

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