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| 1.
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GASB classifies which of the following as governmental funds? |
| | A) | Permanent |
| | B) | Special revenue |
| | C) | Debt service |
| | D) | All of the above |
| | E) | None of the above |
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| 2.
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Which of the following is NOT true of a capital projects fund? |
| | A) | It may receive gifts from individuals or organizations |
| | B) | It may NOT be used to account for the acquisition by a governmental unit of general fixed assets under capital lease agreements |
| | C) | A major source of funding is the issuance of long-term debt. |
| | D) | It may receive grants from other governmental units |
| | E) | None of the above |
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| 3.
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Which of the following statements about capital projects funds is true? |
| | A) | Capital projects funds typically use encumbrance accounting and do not record the budget in the accounts. |
| | B) | Capital projects funds do not use encumbrance accounting and generally do not record the budget in the accounts. |
| | C) | To demonstrate fiscal accountability, capital projects funds use encumbrance accounting and generally record the budget in the accounts. |
| | D) | Capital projects typically record the budget in the accounts but do not use encumbrance accounting. |
| | E) | Capital projects funds use full accrual accounting and the economic resources measurement focus. |
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| 4.
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Which of the following statements about debt service funds and permanent funds is true? |
| | A) | Debt service funds generally record the budget in the accounts, but permanent funds do not. |
| | B) | Permanent funds generally use encumbrance accounting, but debt service funds do not. |
| | C) | Neither permanent funds nor debt service funds record the budget in the accounts. |
| | D) | Debt service funds record the budget in the accounts and use encumbrance accounting. |
| | E) | None of the above |
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| 5.
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Under modified accrual accounting, which of the following is NOT true of a Capital Projects Fund? |
| | A) | Proceeds of debt issues should be recognized at the time the debt is authorized |
| | B) | Proceeds of debt issues are reported as Other Financing Sources |
| | C) | Expenditures are generally reported in the Capital Outlay character classification |
| | D) | Budgetary accounting is not required but encumbrance accounting is used |
| | E) | None of the above |
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| 6.
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Which of the following statements about capital projects funds is true? |
| | A) | A capital projects fund exists for the duration of the project for which it is created. |
| | B) | Some governments account for all their capital projects in a single capital projects fund. |
| | C) | Some governments are required to use a separate capital projects fund for each construction project. |
| | D) | Sometimes, construction of general fixed assets is accounted for in the General Fund of a state or local government. |
| | E) | All of the above |
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| 7.
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In 2007, the governing board of the City of G authorized construction of an addition to the police station. The total cost was expected to be $2,500,000, with $700,000 to be financed by a grant from the state government and $300,000 to be transferred from an enterprise fund of the City of G. The entry to record the receivables from the enterprise fund and the grant from the state would be: |
| | A) | Debit Accounts Receivable $1,000,000 Credit: Revenues Control $1,000,000 |
| | B) | Debit Accounts Receivable $1,000,000 Credit: Other Financing Sources - Transfers In $300,000 |
| | C) | Debit Due from Other Funds $300,000 Debit Due from Other Governments $700,000 Credit: Other Financing Sources - Transfers In $300,000 Credit: Revenues Control $700,000 |
| | D) | Debit Due from Other Funds $1,000,000 Credit: Other Financing Sources - Transfers In $1,000,000 |
| | E) | None of the above |
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| 8.
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In 2007, the governing board of the City of G authorized construction of an addition to a police station addition. The total cost was expected to be $2,500,000. The entry to record the issuance of a contract in the amount of $2,000,000 for construction work to be done by a private contractor would be: |
| | A) | Debit: Expenditures Control $2,000,000 Credit: Accounts Payable $2,000,000 |
| | B) | Debit: Expenditures Control $2,000,000 Credit: Cash $2,000,000 |
| | C) | Debit: Encumbrances Control $2,000,000 Credit: Accounts Payable $2,000,000 |
| | D) | Debit: Encumbrances Control $2,000,000 Credit: Fund Balance - Reserved for Encumbrances $2,000,000 |
| | E) | None of the above |
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| 9.
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In 2007, the governing board of City of G authorized construction of an addition to a police station. The total cost of the project was expected to be $2,500,000. When the project was approximately half finished, the contractor submitted a billing for a payment for $1,000,000. The entry to record this transaction would be: |
| | A) | Debit: Fund Balance - Reserved for Encumbrances $1,000,000 Credit: Encumbrances Control $1,000,000 Debit: Construction Expenditures $1,000,000 Credit: Contracts Payable $1,000,000 |
| | B) | Debit: Encumbrances Control $1,000,000 Credit: Fund Balance - Reserved for Encumbrances $1,000,000 |
| | C) | Debit: Other Financing Uses - Transfers Out $1,000,000 Credit: Contracts Payable $1,000,000 |
| | D) | Debit: Encumbrances Control $1,000,000 Credit: Fund Balance - Reserved for Encumbrances $1,000,000 Debit: Construction Expenditures $1,000,000 Credit: Contracts Payable $1,000,000 |
| | E) | None of the above |
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| 10.
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In 2007, the governing board of City of G authorized construction of an addition to a police station addition. The total cost was expected to be $2,500,000, with $700,000 to be financed by a grant from State of A and $300,000 to be transferred from an enterprise fund of City of G. The entry to record the receipt of the transfer from the enterprise fund and $350,000 of the grant from State of A would be: |
| | A) | Debit: Cash $650,000 Credit: Due from Other Funds $650,000 |
| | B) | Debit: Cash $650,000 Credit: Due from Other Funds $300,000 Credit: Due from Other Governments $350,000 |
| | C) | Debit: Cash $650,000 Credit: Revenues Control $650,000 |
| | D) | Debit: Cash $650,000 Credit: Revenues Control $300,000 Credit: Other Financing Sources - Transfers In $350,000 |
| | E) | None of the above |
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| 11.
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In 2007, the governing board of City of G authorized an issue of $1,500,000 of 8% 10-year regular serial tax-supported bonds to finance construction of a police station addition. City of G issued the $1,500,000 in bonds, dated January 2, 2007, at a premium of $15,000. Interest payments are due on January 1 and July 1, with the first payment due July 1, 2007. The entry to record the issuance of the bonds would be: |
| | A) | Debit: Accounts Receivable $1,515,000 Credit: Other Financing Sources - Proceeds of Bonds $1,515,000 |
| | B) | Debit: Cash $1,515,000 Credit: Other Financing Sources - Proceeds of Bonds $1,515,000 |
| | C) | Debit: Cash $1,500,000 Credit: Other Financing Sources - Proceeds of Bonds $1,500,000 |
| | D) | Debit: Cash $1,515,000 Credit: Other Financing Sources - Proceeds of Bonds $1,500,000 Credit: Other Financing Sources - Premium on Bonds $15,000 |
| | E) | None of the above |
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| 12.
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In 2007, the governing board of City of G authorized an issue of $1,500,000 of 8% 10-year regular serial tax-supported bonds to finance construction of a police station addition. The bonds were issued at a premium of $15,000. The governing board of City of G directed that the premium received on the bonds be transferred to the Debt Service Fund to be used toward future debt service payments on the bonds. The cash was transferred immediately. The entry to record this transaction would be: |
| | A) | Debit: Expenditures Control $15,000 Credit: Cash $15,000 |
| | B) | Debit: Expenditures Control $15,000 Credit: Due to Other Funds $15,000 |
| | C) | Debit: Other Financing Uses - Transfers Out $15,000 Credit: Cash $15,000 |
| | D) | Debit: Other Financing Uses - Transfers Out $15,000 Credit: Due to Other Funds $15,000 |
| | E) | None of the above |
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| 13.
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In 2007, the governing board of City of G authorized construction of an addition to a police station. The total cost was expected to be $2,500,000. The work on the police station addition had been completed satisfactorily by the contractor, and the contractor's final billing of $500,000 had been vouchered. This amount plus an amount retained of $50,000 from a previous billing was paid. The entry to record this payment would be: |
| | A) | Debit: Accounts Payable $550,000 Credit: Cash $550,000 |
| | B) | Debit: Contracts Payable $500,000 Debit: Contracts Payable - Retained Percentage $50,000 Credit: Cash $550,000 |
| | C) | Debit: Accounts Payable $500,000 Credit: Cash $500,000 |
| | D) | Debit: Contracts Payable $500,000 Credit: Cash $500,000 |
| | E) | None of the above |
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| 14.
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In 2007, the governing board of City of G authorized construction of an addition to a police station. When all work on the police station addition was complete, the Capital Projects Fund had $25,000 in cash remaining. The governing board of City of G directed that the cash be transferred to the Debt Service Fund for use in making future debt service payments on the bonds that had been issued. Assume the cash was transferred immediately. The entry to record this transaction would be: |
| | A) | Debit Other Financing Uses - Transfers Out, credit Cash for $25,000 |
| | B) | Debit Expenditures Control, credit Cash for $25,000 |
| | C) | Debit Expenditures Control, credit Due to Other Funds for $25,000 |
| | D) | Debit Other Financing Uses - Transfers Out, credit Due to Other Funds for $25,000 |
| | E) | None of the above |
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| 15.
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Which of the following is NOT one of the criteria for determining a capital lease according FASB SFAS No. 13? |
| | A) | The lease transfers ownership of the property to the lessee by the end of the lease term |
| | B) | The lease term is equal to or greater than 75 percent of the estimated economic life of the leased property |
| | C) | The lease contains an option to purchase the leased property at a bargain price |
| | D) | The present value of rental or other minimum lease payments equals or exceeds 90 percent of the fair value of the leased property less any investment tax credit retained by the lessor |
| | E) | All of these are criteria for identifying a lease as a capital lease |
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| 16.
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The city of H leased some equipment. Which of the following lease terms would cause the lease to be classified as a capital lease? |
| | A) | The lease does not transfer ownership of the property to the lessee by the end of the lease term. |
| | B) | The lease contains a purchase option that is not considered to be a bargain purchase. |
| | C) | The lease term is 70% of the estimated economic life of the equipment. |
| | D) | The present value of the rental is 80% of the fair value of the leased property. |
| | E) | None of the above. The lease should be classified as an operating lease. |
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| 17.
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What character classification is generally assigned to expenditures of capital projects funds on the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance? |
| | A) | Current: General Government |
| | B) | Current: Public Works |
| | C) | Capital Outlay |
| | D) | Public Safety |
| | E) | None of the above |
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| 18.
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If a state or local government acquires a general fixed asset under a capital lease agreement, at what amount should the asset be recorded in the government-wide financial statements? |
| | A) | At the present value of the rental and other minimum lease payments |
| | B) | At the fair value of the leased property |
| | C) | At the greater of A) or B) |
| | D) | At the lesser of A) or B) |
| | E) | Fixed assets leased under a capital lease agreement are not reported on the government-wide financial statements. |
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| 19.
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The entry to record an acquisition of equipment under a capital lease that, at its inception required a $5,000 down payment and had a present value of the remaining payments of $28,795, would be: |
| | A) | Debit Expenditures - Capital Outlay $33,795 Credit: Cash $33,795 |
| | B) | Debit Other Financing Uses - Transfers Out $33,795 Credit: Cash $33,795 |
| | C) | Debit Expenditures - Debt Service $33,795 Credit: Accounts Payable $33,795 |
| | D) | Debit Expenditures - Capital Outlay $33,795 Credit: Other Financing Sources - Capital Leases $28,795 Credit: Cash 5,000 |
| | E) | None of the above |
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| 20.
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Which of the following is a type of special assessment? |
| | A) | Construction type |
| | B) | Non-construction type |
| | C) | Development type |
| | D) | All of the above |
| | E) | None of the above |
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| 21.
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A government issued $250,000 in debt to install sewers in a newly annexed subdivision. The debt will be repaid by a special assessment of the property owners who will benefit, but the government is secondarily liable for the payment of principal and interest. Which of the following is NOT true about this situation? |
| | A) | The proceeds of the debt and the construction expenditures should be accounted for in a Capital Projects Fund |
| | B) | The special assessment should be accounted for in an agency fund |
| | C) | The debt service expenditures should be recorded in a debt service fund |
| | D) | The debt should be reported in the government-wide statements |
| | E) | None of the above |
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| 22.
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Which of the following is a typical source of funding for a debt service fund? |
| | A) | Special assessments |
| | B) | A tax levy specifically designated for debt service |
| | C) | General taxes levied by the General Fund and transferred to the Debt Service Fund for that purpose |
| | D) | All of the above |
| | E) | None of the above |
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| 23.
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Which of the following statements about debt service funds is NOT true? |
| | A) | Debt service funds are used to account for resources that are intended to service debt incurred for major capital additions. |
| | B) | Debt service funds are used for debt when the activities of enterprise funds are intended to generate the cash flows needed to service the debt. |
| | C) | A debt service fund sometimes is used to account for servicing debt related to special assessments. |
| | D) | A debt service fund may be used to account for servicing the debt associated with a capital lease agreement. |
| | E) | All of these statements are true. |
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| 24.
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Which of the following statements is NOT true about the flow of resources into a debt service fund? |
| | A) | Special assessments levied specifically for payment of principal or interest on long-term debt are recognized as revenues of the debt service fund. |
| | B) | Taxes levied and collected by the General Fund and then transferred to a debt service fund are recognized as revenues of the debt service fund. |
| | C) | Taxes levied for payment of principal and interest on long-term debt are recorded in the debt service fund as revenues. |
| | D) | Premium on bonds, issued to finance acquisition of a capital asset, would not be recorded as a revenue in a debt service fund. |
| | E) | All of the above statements are true. |
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| 25.
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Assume a government has bonds outstanding with interest payment dates of May 1 and November 1. If the government's fiscal year ends on December 31, 2006, under modified accrual accounting, which of the following is the earliest date a liability for interest payable needs to be recorded? |
| | A) | December 31, 2006 |
| | B) | January 1, 2007 |
| | C) | May 1, 2007 |
| | D) | November 1, 2007 |
| | E) | December 31, 2007 |
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| 26.
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Which of the following is NOT a type of serial bond? |
| | A) | Deferred |
| | B) | Sinking fund term |
| | C) | Annuity |
| | D) | Irregular |
| | E) | None of the above |
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| 27.
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In 2007, the governing board of City of G authorized an issue of $1,500,000 of 8% 10-year serial tax-supported bonds to finance construction of a police station addition. City of G issued the bonds on January 2, 2007 at a premium of $15,000. Interest payments are due on January 1 and July 1, with the first interest payment due July 1, 2007. The first of ten equal annual principal payments is also due on July 1, 2007. What type of serial bond issue is this? |
| | A) | Annuity |
| | B) | Deferred |
| | C) | Regular |
| | D) | Irregular |
| | E) | None of the above |
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| 28.
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In 2007, the governing board of City of G authorized an issue of $1,500,000 of 8% 10-year serial tax-supported bonds to finance construction of a police station addition. City of G issued the bonds on January 2, 2007 at a premium of $15,000. Assuming the cash is transferred immediately, the entry to record the receipt of cash for the bond premium by the Debt Service Fund from the Capital Projects Fund would be: |
| | A) | Debit Cash, credit Other Financing Sources - Transfers In for $15,000 |
| | B) | Debit Due from Other Funds, credit Other Financing Sources - Transfers In for $15,000 |
| | C) | Debit Cash, credit Revenues for $15,000 |
| | D) | Debit Accounts Receivable, credit Revenues for $15,000 |
| | E) | None of the above |
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| 29.
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In 2007, the governing board of City of G issued $1,500,000 of 8% 10-year serial tax-supported bonds to finance construction of a police station addition. City of G issued the bonds on January 2, 2007 at a premium of $15,000. Interest payments are due on January 1 and July 1, with the first interest payment due July 1, 2007. The first of ten equal annual principal payments is also due on July 1, 2007. On July 1, 2007, the first payment on the bonds was made. The government uses a local bank as its fiscal/paying agent. The entry to record the payment to the fiscal agent would be: |
| | A) | Debit: Cash with Fiscal Agent $210,000 Credit: Accounts Payable $210,000 |
| | B) | Debit: Expenditures - Bond Principal $150,000 Debit: Expenditures - Bond Interest 60,000 Credit: Cash $210,000 |
| | C) | Debit: Expenditures - Bond Principal $150,000 Debit: Expenditures - Bond Interest 60,000 Credit: Accounts Payable $210,000 |
| | D) | Debit: Cash with Fiscal Agent $210,000 Credit: Cash $210,000 |
| | E) | None of the above |
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| 30.
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In 2007, the governing board of City of G issued $1,500,000 of 8% 10-year serial tax-supported bonds to finance construction of a police station addition. City of G issued the bonds on January 2, 2007 at a premium of $15,000. Interest payments are due on January 1 and July 1, with the first interest payment due July 1, 2007. The first of ten equal annual principal payments is also due on July 1, 2007. The entry to record the expenditures for the July 1, 2007 payment would be: |
| | A) | Debit: Expenditures - Bond Principal $150,000 Debit: Expenditures - Bond Interest $120,000 Credit: Cash $270,000 |
| | B) | Debit: Expenditures - Bond Principal $150,000 Debit: Expenditures - Bond Interest $60,000 Credit: Matured Bonds Payable $150,000 Credit: Matured Interest Payable $60,000 |
| | C) | Debit: Expenditures - Debt Service $270,000 Credit: Cash $270,000 |
| | D) | Debit: Expenditures - Debt Service $210,000 Credit: Cash $210,000 |
| | E) | None of the above |
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| 31.
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The Debt Service Fund of the City of G received a cash transfer of $25,000 from the Capital Projects Fund after the addition to the police station was completed. The entry to record this transaction in the Debt Service Fund would be: |
| | A) | Debit Accounts Receivable, credit Other Financing Sources - Transfers In for $25,000 |
| | B) | Debit Cash, credit Other Financing Sources - Transfers In for $25,000 |
| | C) | Debit Due from Other Funds, credit Other Financing Sources - Transfers In for $25,000 |
| | D) | Debit Cash, credit Revenues Control for $25,000 |
| | E) | None of the above |
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| 32.
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The Debt Service Fund made an annual payment on a capital lease. The present value of the minimum lease payments was $28,795 before the payment was made. The interest rate is 10%, and the annual payment amount is $5,000. The entry to record the payment would be: |
| | A) | Debit: Expenditures - Debt Service $5,000 Credit: Cash $5,000 |
| | B) | Debit: Expenditures - Debt Service $5,000 Credit: Accounts Payable $5,000 |
| | C) | Debit: Expenditures - Interest $2,880 Debit: Expenditures - Principal $2,120 Credit: Cash $5,000 |
| | D) | Debit: Expenditures - Interest $2,880 Debit: Expenditures - Principal $2,120 Credit: Accounts Payable $5,000 |
| | E) | None of the above |
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| 33.
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Which of the following statements is NOT true? |
| | A) | GASB standards require debt service accounting to be done on the modified accrual basis. |
| | B) | Interest on long-term debt generally is not accrued; it is recorded as an expenditure in the fiscal year that the interest becomes legally due. |
| | C) | Payment due on debt principal should be accrued in a debt service fund if the payment is due within 90 days after the end of the fiscal year. |
| | D) | GASB allows interest or principal on long-term debt to be accrued at the end of the fiscal year if the government has the resources available and the principal or interest is due not more than one month after the end of the fiscal year. |
| | E) | All of these statements are true. |
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| 34.
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Which of the following occurs when the proceeds of new debt are placed in an escrow account pending the call date or the maturity date of existing debt? |
| | A) | Current refunding |
| | B) | Advance refunding |
| | C) | Future refunding |
| | D) | Deferred refunding |
| | E) | None of the above |
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| 35.
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Which of the following is NOT true of a permanent fund? |
| | A) | Earnings from investments are to be expended for purposes that benefit the government and its citizens |
| | B) | It is classified as a governmental fund |
| | C) | It reports resources that are legally restricted so that principal cannot be expended |
| | D) | An example is a cemetery perpetual care fund, which provides resources for the ongoing maintenance of a public cemetery |
| | E) | All of the above are true |
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| 36.
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With regard to determination of major funds for financial reporting, which of the following is true? |
| | A) | The General Fund may be a major fund |
| | B) | A governmental fund is considered major if total assets, liabilities, revenues OR expenditures of that fund are at least 10% of the corresponding total for all governmental funds |
| | C) | A governmental fund is considered major if total assets, liabilities, revenues OR expenditures of that fund are at least 5% of the corresponding total for all governmental and enterprise funds combined |
| | D) | Both B and C must be satisfied in order for a governmental fund to be considered major |
| | E) | None of the above |
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| 37.
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The city of N just received a gift from a resident. The gift is to be used to maintain several city parks. Both the principal and an income earned on the gift may be used. If a separate fund is set up to account for the gift, what kind of fund should be used? |
| | A) | Internal service fund |
| | B) | Permanent fund |
| | C) | Special revenue fund |
| | D) | Private purpose trust fund |
| | E) | None of the above |
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