Question 1

Gotham City acquires $25,000 of inventory on November 1,20X7,having held no inventory previously.On December 31,20X7,the end of Gotham City's fiscal year,a physical count shows $8,000 still in stock.During 20X8,$6,500 of this inventory is used,resulting in a $1,500 remaining balance of supplies on December 31,20X8.
-Based on the preceding information,which of the following would be the correct account balances for 20X8 if Gotham City used the consumption method of accounting for inventories?

A)Option A
B)Option B
C)Option C
D)Option D

Accepted Answer

The answer of Gotham City acquires $25,000 of inventory on...

Question 2

Gotham City acquires $25,000 of inventory on November 1,20X7,having held no inventory previously.On December 31,20X7,the end of Gotham City's fiscal year,a physical count shows $8,000 still in stock.During 20X8,$6,500 of this inventory is used,resulting in a $1,500 remaining balance of supplies on December 31,20X8.
-Based on the preceding information,which of the following would be the correct account balances for 20X8 if Gotham City used the purchase method of accounting for inventories?

A)Option A
B)Option B
C)Option C
D)Option D

Accepted Answer

Under the purchase method of accounting for inventories, inventory is valued at the cost of acquiring or producing it. In this case, the cost of inventory acquired is $25,000, and the cost of inventory on hand at the end of the year is $1,500. Therefore, the cost of goods sold for the year is $23,500 ($25,000 - $1,500).

Option A: This option shows the cost of goods sold as $6,500, which is incorrect because the ending inventory balance is $1,500, not $6,500.

Option B: This option correctly shows the cost of goods sold as $23,500, and the ending inventory balance as $1,500, based on the information provided.

Option C: This option shows the ending inventory balance as $23,500, which is incorrect because the ending inventory balance is only $1,500.

Option D: This option shows the cost of goods sold as $0, which is incorrect because inventory was used during the year, as indicated by the $1,500 remaining balance on December 31, 20X8.

Question 3

Works of art and historical treasures purchased by the general fund should be reported as:
I.an expenditure in the general fund.
II.assets in the government-wide financial statements.
A)I only.
B)II only.
C)Both I and II.
D)Neither I nor II.

Accepted Answer

Works of art and historical treasures purchased by the general fund are reported as an expenditure in the general fund and as assets in the government-wide financial statements, reflecting both the immediate financial outlay and the long-term asset acquisition.

Question 4

The general fund of Hatteras acquired a fire truck during the fiscal year ended June 30,20X9.The purchase order for the fire truck was recorded on February 15,20X9.Hatteras' acquisition of the fire truck required which of the following sequences of accounting activities?
I.Appropriation
II.Encumbrance
III.Expenditure
A)II,I,III.
B)I,III,II.
C)III,II,I.
D)I,II,III.

Accepted Answer

The acquisition of the fire truck requires the following accounting activities in the given sequence:
I. Appropriation - This is the process of setting aside funds for a particular purpose. The appropriation for the purchase of the fire truck would have been made before the purchase order was placed.
II. Encumbrance - This is the process of reserving funds for a specific purchase or expense. A purchase order would have been issued to reserve the funds for the fire truck purchase.
III. Expenditure - This is the actual payment for the purchase. The payment for the fire truck would have been made after the appropriation and encumbrance. Therefore, the correct sequence of accounting activities is I, II, III, which is represented by choice D.

Question 5

Goshen City acquires $36,000 of inventory on November 1,20X5,having held no inventory previously.On December 31,20X5,the end of Goshen City's fiscal year,a physical count shows $7,000 still in stock.During 20X6,$5,000 of this inventory is used,resulting in a $2,000 remaining balance of supplies on December 31,20X6.
-Based on the preceding information,which of the following would be the correct account balances for 20X6 if Goshen City used the consumption method of accounting for inventories?

A)Option A
B)Option B
C)Option C
D)Option D

Accepted Answer

The answer of Goshen City acquires $36,000 of inventory on...

Question 6

GASB 31 "Accounting for Financial Reporting for Certain Investments and for External Reporting Investment Pools," establishes a general rule that government entities value investments in option contracts,open-ended mutual funds,and debt securities for balance sheet presentation at:
A)lower of cost or market.
B)fair value.
C)cost.
D)amortized cost.

Accepted Answer

GASB 31 requires government entities to value investments in option contracts, open-ended mutual funds, and debt securities at fair value for balance sheet presentation. This means that the investments are reported on the balance sheet at their current market value, rather than at cost or amortized cost. This provides users of the financial statements with more relevant and timely information about the value of the investments.

Question 7

Gotham City acquires $25,000 of inventory on November 1,20X7,having held no inventory previously.On December 31,20X7,the end of Gotham City's fiscal year,a physical count shows $8,000 still in stock.During 20X8,$6,500 of this inventory is used,resulting in a $1,500 remaining balance of supplies on December 31,20X8.
-Based on the preceding information,which of the following would be the correct account balances for 20X7 if Gotham City used the purchase method of accounting for inventories?

A)Option A
B)Option B
C)Option C
D)Option D

Accepted Answer

The answer of Gotham City acquires $25,000 of inventory on...

Question 8

Due to an error,the general fund of Pueblo did not record an encumbrance for police equipment that had been ordered but not received on June 30,20X9,the end of its fiscal year.Pueblo's outstanding encumbrances at year-end are nonlapsing.What was the effect of this error on the balance sheet of Pueblo's general fund?
A)Assets are overstated.
B)Liabilities are understated.
C)Total fund balance is overstated.
D)Unassigned fund balance is overstated.

Accepted Answer

Unassigned fund balance is overstated because the encumbrance should have been recorded, reducing the available balance. Since it was not recorded, the unassigned fund balance appears higher than it should be.

Question 9

Which of the following accounts are debited when closing entries are made for the general fund (assume outstanding encumbrances lapse at year-end)?
I.Appropriations Control.
II.Estimated Revenues Control.
III.Encumbrances.
IV.Budgetary Fund Balance-Reserved for Encumbrances.
V.Estimated Other Financing Uses-Transfer Out.
VI.Revenue-Property Tax.
A)I,II,III,VI.
B)I,II,IV.
C)I,IV,V,VI.
D)III,IV,V.

Accepted Answer

The answer of Which of the following accounts are debited...

Question 10

The general fund of Wold Township ordered office furniture for the mayor's office on August 1,20X8.The office furniture was estimated to cost $12,000.The office furniture was received on September 1,20X8,with the actual cost being $11,800.Which of the following accounts decreased on September 1,20X8?
A)Encumbrances only.
B)Expenditures only.
C)Encumbrances and Budgetary Fund Balance-Assigned for Encumbrances.
D)Expenditures and Budgetary Fund Balance-Assigned for Encumbrances.

Accepted Answer

Encumbrances account decreases when the goods are received because the encumbrance (commitment to spend) is relieved. Budgetary Fund Balance-Assigned for Encumbrances also decreases as the funds reserved for the encumbrance are no longer needed for that specific commitment.

Question 11

Gotham City acquires $25,000 of inventory on November 1,20X7,having held no inventory previously.On December 31,20X7,the end of Gotham City's fiscal year,a physical count shows $8,000 still in stock.During 20X8,$6,500 of this inventory is used,resulting in a $1,500 remaining balance of supplies on December 31,20X8.
-Based on the preceding information,which of the following would be the correct account balances for 20X7 if Gotham City used the consumption method of accounting for inventories?

A)Option A
B)Option B
C)Option C
D)Option D

Accepted Answer

The answer of Gotham City acquires $25,000 of inventory on...

Question 12

The general ledger of Broadway contains the following selected account balances:

Broadway wants to order additional goods and services before the fiscal year end.What is the unencumbered balance of the budget that may be expended by Broadway?
A)$850,000
B)$760,000
C)$180,000
D)$130,000

Accepted Answer

The answer of The general ledger of Broadway contains the...

Question 13

Goshen City acquires $36,000 of inventory on November 1,20X5,having held no inventory previously.On December 31,20X5,the end of Goshen City's fiscal year,a physical count shows $7,000 still in stock.During 20X6,$5,000 of this inventory is used,resulting in a $2,000 remaining balance of supplies on December 31,20X6.
-Based on the preceding information,which of the following would be the correct account balances for 20X6 if Goshen City used the purchase method of accounting for inventories?

A)Option A
B)Option B
C)Option C
D)Option D

Accepted Answer

The answer of Goshen City acquires $36,000 of inventory on...

Question 14

Blue Ridge Township uses the consumption method of accounting for its inventory of supplies.On the December 31,20X7 balance sheet for the general fund,the township reported $10,000 of supplies inventory.During 20X8,expenditures for supplies amounted to $40,000,and,at December 31,20X8,unused supplies totaled $7,000.In the adjusting entry for supplies at December 31,20X8,
A)Expenditures should be credited for $3,000.
B)Expenditures should be debited for $3,000.
C)Fund Balance-Nonspendable should be debited for $7,000.
D)Fund Balance-Nonspendable should be credited for $7,000.

Accepted Answer

Since the consumption method of accounting is used, the adjusting entry for supplies at December 31,20X8 should record the amount of supplies used during the year, which can be calculated as:

Supplies used = Beginning inventory + Expenditures - Ending inventory
Supplies used = $10,000 + $40,000 - $7,000
Supplies used = $43,000

Therefore, the adjusting entry should debit Supplies Expense for $43,000 and credit Supplies Inventory for $43,000. However, since the question only asks for the amount to be debited or credited to Expenditures, we can simplify the entry by recognizing that Expenditures is the account credited or debited for the difference between the beginning and ending inventory:

Expenditures = Beginning inventory + Additional purchases - Ending inventory
Expenditures = $10,000 + $40,000 - $7,000
Expenditures = $43,000

Thus, the amount to be debited or credited to Expenditures is the difference between the actual Expenditures and the calculated Expenditures based on beginning and ending inventory:

Expenditures adjustment = Actual Expenditures - Calculated Expenditures
Expenditures adjustment = $40,000 - $43,000
Expenditures adjustment = -$3,000

Since the expenditure amount is lower than the calculated amount, Expenditures should be debited for $3,000 to adjust for the decrease in supplies used. Therefore, the correct answer is B.

Question 15

Identify the legal term that allows the general fund to make expenditures.
A)Exceptions
B)Appropriations
C)Encumbrances
D)Consumption

Accepted Answer

Appropriations refer to the legal authorization given to the general fund to make expenditures. It is a crucial aspect of budgeting and allows the government to allocate funds to various programs and services. This authorization is usually granted through a legislation or budgetary process.

Question 16

Goshen City acquires $36,000 of inventory on November 1,20X5,having held no inventory previously.On December 31,20X5,the end of Goshen City's fiscal year,a physical count shows $7,000 still in stock.During 20X6,$5,000 of this inventory is used,resulting in a $2,000 remaining balance of supplies on December 31,20X6.
-Based on the preceding information,which of the following would be the correct account balances for 20X5 if Goshen City used the consumption method of accounting for inventories?

A)Option A
B)Option B
C)Option C
D)Option D

Accepted Answer

The answer of Goshen City acquires $36,000 of inventory on...

Question 17

The general fund of Athens ordered computer equipment on December 1,20X8,for $32,000.The order was appropriately encumbered on this date.Athens received the computer equipment on January 25,20X9,and issued a voucher to pay the vendor $32,400.Athens uses the calendar year for reporting,and all outstanding encumbrances lapse at year-end.Athens' governing board honors all outstanding encumbrances by including them in the following year's appropriations.On January 25,20X9,the general fund of Athens should debit:
A)Encumbrances for $32,000.
B)Fund Balance-assigned for Encumbrances for $32,400.
C)Expenditures-20X8 for $32,400.
D)Expenditures for $32,400.

Accepted Answer

The general fund of Athens should debit Expenditures for $32,400 on January 25,20X9 because the computer equipment has been received and the voucher has been issued to pay the vendor. This represents the actual expense incurred by Athens during the year. Encumbrances were appropriately recorded on December 1,20X8, but they expire at year-end without any effect on the financial statements. Fund Balance-assigned for Encumbrances is not applicable to this transaction.

Question 18

The general fund of Park City acquired computer equipment at a cost of $50,000 on May 18,20X9.To record acquisition of this equipment,the general fund of Park City should debit:
A)expenditures.
B)encumbrances.
C)equipment.
D)vouchers payable.

Accepted Answer

In governmental accounting, when a general fund acquires a capital asset like computer equipment, the expenditure is recorded by debiting the expenditures account, reflecting the outflow of resources.

Question 19

Goshen City acquires $36,000 of inventory on November 1,20X5,having held no inventory previously.On December 31,20X5,the end of Goshen City's fiscal year,a physical count shows $7,000 still in stock.During 20X6,$5,000 of this inventory is used,resulting in a $2,000 remaining balance of supplies on December 31,20X6.
-Based on the preceding information,which of the following would be the correct account balances for 20X5 if Goshen City used the purchase method of accounting for inventories?

A)Option A
B)Option B
C)Option C
D)Option D

Accepted Answer

The answer of Goshen City acquires $36,000 of inventory on...

Question 20

The general fund of Loveland ordered a new fire truck on November 12,20X8,for $150,000.The order was appropriately encumbered on this date.Loveland received the fire truck on January 15,20X9,and issued a voucher to the manufacturer for $148,600.Loveland uses the calendar year for reporting,and outstanding encumbrances at December 31,20X8,are lapsing.On January 15,20X9,the general fund of Loveland should debit:
A)Fund Balance-assigned for Encumbrances for $148,600.
B)Expenditures for $148,600.
C)Expenditures-20X8 for $148,600.
D)Encumbrances for $148,600.

Accepted Answer

The fire truck was received and a voucher was issued, which means the expenditure has been incurred. Thus, the general fund of Loveland should debit Expenditures for $148,600. Option A is incorrect as Fund Balance-assigned for Encumbrances is used to track encumbered funds, and the encumbrance has already been lapsed. Option C is incorrect as all transactions should be recorded in the year in which they occur. Option D is incorrect as the encumbrance has already been lapsed, and the journal entry should be for the actual expenditure.

Quiz 17: Governmental Entities: Introduction and General Fund Accounting

Works of art and historical treasures purchased by the general fund should be reported as: I.an expenditure in the general fund. II.assets in the government-wide financial statements.

GASB 31 "Accounting for Financial Reporting for Certain Investments and for External Reporting Investment Pools," establishes a general rule that government entities value investments in option contracts,open-ended mutual funds,and debt securities for balance sheet presentation at:

The general ledger of Broadway contains the following selected account balances: Broadway wants to order additional goods and services before the fiscal year end.What is the unencumbered balance of the budget that may be expended by Broadway?

Identify the legal term that allows the general fund to make expenditures.

The general fund of Park City acquired computer equipment at a cost of $50,000 on May 18,20X9.To record acquisition of this equipment,the general fund of Park City should debit: