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| 1.
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Which of the following statements is NOT true about the preparation of government-wide financial statements? |
| | A) | Most governments initially record transactions at the fund level, using the measurement focus and basis of accounting appropriate to the fund. |
| | B) | At the end of the accounting period, governmental funds records are adjusted to the economic resources measurement focus and the accrual basis. |
| | C) | The required adjustments are accomplished through journal entries posted to the accounts. |
| | D) | The government-wide financial statements are prepared on the accrual basis and with the economic resources measurement focus. |
| | E) | All of the above are true |
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| 2.
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Which of the following statements is true about the preparation of the government-wide financial statements? |
| | A) | Government-wide financial statements are separated into governmental, business-type, and fiduciary activities. |
| | B) | The activities of all component units are presented in a separate column in the Statement of Net Assets. |
| | C) | Information for governmental fund financial statements and enterprise fund financial statements serve as inputs to the government-wide financial statements; both require adjustment to the accrual basis. |
| | D) | Internal service funds typically are reported in the governmental activities sections of the government-wide financial statements. |
| | E) | none of the above |
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| 3.
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Which of the following does NOT require a worksheet entry in the process of preparing government-wide financial statements? |
| | A) | Expenditures for capital assets |
| | B) | Expenditures for principal repayments |
| | C) | General Fund revenues such as fines and penalties, which are recognized by the Fund when cash is received |
| | D) | Interfund transfers and balances |
| | E) | All of these require worksheet entries for preparation of government-wide financial statements |
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| 4.
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Which of the following is NOT true about component units? |
| | A) | Some component units are fiduciary in nature, and these units are not included in government-wide financial statements |
| | B) | Discretely presented component units are displayed as a separate row in the Statement of Activities |
| | C) | Some component units use the accrual basis of accounting. Their assets, liabilities, and net assets may be entered into the Statement of Net Assets without adjusting |
| | D) | Some component units use the modified accrual basis of accounting and must be converted to the accrual basis for reporting in the government-wide statements. |
| | E) | All of the above statements are true |
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| 5.
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Which of the following is NOT an adjustment required to convert from fund financial statements to government-wide statements? |
| | A) | Recording capital assets |
| | B) | Converting the sales of capital assets to the accrual basis |
| | C) | Eliminating internal service funds |
| | D) | Changing expenditures for debt service principal to reductions of liabilities |
| | E) | All of the above are required. |
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| 6.
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Which of the following statements about general fixed assets is true? |
| | A) | General fixed assets must be included in the government-wide financial statements. |
| | B) | General fixed assets may be acquired through the activities of governmental funds or enterprise funds |
| | C) | General fixed assets include buildings, infrastructure, and equipment, but not land |
| | D) | To prepare government-wide financial statements, a worksheet entry is required to record beginning balances in general fixed assets and related accumulated depreciation accounts. |
| | E) | Both A and D are true |
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| 7.
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Lee County acquired $15 million of depreciable general fixed assets during 2007. They were appropriately recorded as expenditures of its Capital Project Fund. For year end government-wide reporting in 2007, which of the following adjustments would be necessary? |
| | A) | To remove expenditures of $15 million from governmental activities |
| | B) | To record depreciation expense on the assets |
| | C) | To capitalize $15 million of general fixed assets |
| | D) | all of the above |
| | E) | none of the above |
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| 8.
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Hurst Township made the following worksheet entry at its year end:
| | Debit | Credit | | Equipment | 2,000,000 | | | Accumulated Depreciation | | 500,000 | | Net Assets | | 1,500,000 |
Which of the following descriptions would be appropriate for this entry? |
| | A) | to record fixed assets acquired through a proprietary fund for government-wide reporting |
| | B) | to record general fixed assets for government-wide reporting |
| | C) | to record fixed assets acquired through a fiduciary fund for government-wide reporting |
| | D) | all of the above |
| | E) | none of the above |
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| 9.
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Interest incurred during construction of general fixed assets recorded by a capital project fund should be: |
| | A) | recorded as a component of the fixed asset for government-wide reporting |
| | B) | recorded as an expense for reporting on the governmental fund financial statements |
| | C) | recorded as an expense for government-wide reporting |
| | D) | recorded as an expenditure for governmental fund reporting |
| | E) | both C and D |
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| 10.
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Which of the following statements is true about treatment of debt in preparing government-wide financial statements? |
| | A) | A worksheet entry is required to record debt principal as a liability |
| | B) | Premium or discount on bonds must be recorded in a worksheet entry |
| | C) | Premium or discount must be amortized over the life of the bonds |
| | D) | A worksheet entry is required to change expenditures for payment on debt principal during the fiscal year to a reduction of the liability |
| | E) | All of these statements are true |
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| 11.
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The City of Matson issued general obligation bonds at a premium. Which of the following is correct? |
| | A) | The premium should be amortized for government-wide reporting. |
| | B) | The premium should be amortized in the Debt Service Fund. |
| | C) | The premium constitutes a revenue to the Debt Service Fund. |
| | D) | A worksheet adjustment will not be required to convert the effect of the premium from modified accrual to accrual basis accounting. |
| | E) | None of the above |
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| 12.
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Alex City prepared the following worksheet entry for government-wide reporting.
| | Debit | Credit | | Interest Expense | 2,000 | | | Interest Payable | | 2,000 |
Which of the following is true about this entry? |
| | A) | It may be necessary because interest payable is typically not accrued in governmental funds. |
| | B) | It may be necessary because interest payable is typically not accrued in enterprise funds. |
| | C) | It may be necessary to incorporate the results of interest incurred in fiduciary funds. |
| | D) | It is most likely an erroneous entry because interest payable should have been accrued already in each of the funds. |
| | E) | A, B, and C are all true |
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| 13.
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Property tax revenues for Rose County were reported at $770,000 on its governmental funds statement, but property tax revenues for governmental activities on the County's government-wide statement of activities were reported at $800,000. This difference likely arose because: |
| | A) | an accounting error was made; property tax revenues should be reflected at the same amount on both statements |
| | B) | some revenues were deferred on the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balance because the availability criterion was not met; however, those revenues should be recognized under the accrual basis on the government-wide statements. |
| | C) | property tax revenues are recognized in the period the bills are sent out for government-wide reporting but they are recognized when the cash is collected for fund reporting |
| | D) | when reporting on a fund basis, an allowance for uncollectibles reduces revenues; this allowance is not necessary for government-wide reporting |
| | E) | all of the above are likely explanations for the difference |
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| 14.
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Which of the following would necessitate an adjustment to convert from modified accrual basis (governmental fund) to accrual basis (government-wide) financial reporting? |
| | A) | tax anticipation notes payable |
| | B) | wages payable |
| | C) | compensated absences payable |
| | D) | all of the above |
| | E) | none of the above |
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| 15.
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Hummel City sold an asset for $25,000 at the end of 2006. The asset had been purchased at the beginning of 2003 for $80,000. The City had estimated its life at 5 years with residual value of $5,000. Which of the following is true? |
| | A) | For 2006, the City should report "Special Item-Gain on Sale" in the amount of $5,000 in its governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balance |
| | B) | For 2006, the City should report "Special Item-Gain on Sale" in the amount of $5,000 in the government-wide statements |
| | C) | For 2006, the City should report "Special Item-Proceeds from Sale" in the amount of $5,000 in its governmental fund statements |
| | D) | For 2006, the City should report "Special Item-Proceeds from the Sale" in the amount of $25,000 in its government-wide statements |
| | E) | none of the above |
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| 16.
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Which of the following is true about internal service funds? |
| | A) | Internal service funds are considered business-type activities on the government-wide statements |
| | B) | A worksheet entry is required to bring in the balance sheet accounts of internal service funds for government-wide financial reporting |
| | C) | Internal service funds are classified as governmental funds |
| | D) | Many transactions of internal service funds are eliminated in preparation of the government-wide financial statements |
| | E) | Both B and D are correct |
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| 17.
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Which of the following statements about internal service funds and the preparation of government-wide financial statements is NOT true? |
| | A) | Internal service funds are not included in the governmental fund financial statements |
| | B) | Internal service funds often serve primarily governmental departments |
| | C) | In preparing government-wide financial statements, the effect of all transactions between internal service funds and enterprise funds must be eliminated |
| | D) | Any transactions of internal service funds with entities external to the government are included in the governmental activities |
| | E) | None of these statements is true |
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| 18.
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Which of the following would NOT appear on the government-wide statement of activities? |
| | A) | transfer between the General Fund and a capital projects fund |
| | B) | transfer between the General Fund and an enterprise fund |
| | C) | gain on sale of equipment |
| | D) | none of the above would appear on the government-wide Statement of Activities |
| | E) | all of the above would appear on the Statement of Activities |
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| 19.
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Which of the following is true about the government-wide Statement of Net Assets? |
| | A) | A traditional balance sheet format is prohibited |
| | B) | Assets and liabilities may be presented in order of liquidity or in a classified format |
| | C) | The net assets section is divided into two categories: restricted and unrestricted |
| | D) | The assets and liabilities of all component units should be included in the total results for the primary government |
| | E) | all of the above |
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| 20.
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Penn County included the following for governmental activities in its government wide statement of net assets: Buildings and Equipment.................$4,000,000.
Accumulated Depreciation............... 1,800,000.
Total long term debt........................ 2,000,000.
Debt used to acquire capital assets... 1,400,000. What amount would appear as "Invested in Capital Assets, Net of Related Debt" for governmental activities? |
| | A) | ($1,800,000) |
| | B) | -0- |
| | C) | $ 800,000 |
| | D) | $2,600,000 |
| | E) | $4,400,000 |
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| 21.
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Which of the following is true about the government-wide Statement of Activities? |
| | A) | Business-type activities should be shown before governmental activities |
| | B) | A tax levied for a particular program is considered a program revenue. |
| | C) | The results for all component units should be included in the total results for the primary government. |
| | D) | A grant received for a particular program is considered a program revenue |
| | E) | none of the above |
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| 22.
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Which of the following would likely be part of the reconciliation between fund financial statements and government-wide financial statements? |
| | A) | Bond proceeds |
| | B) | Depreciation |
| | C) | Purchase of capital assets |
| | D) | Bond premium |
| | E) | all of the above |
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| 23.
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Which of the following statements is true? |
| | A) | GASB requires a reconciliation from fund financial statements to government-wide financial statements |
| | B) | Normally, no reconciliation is required for enterprise funds' activities |
| | C) | Reconciliations are presented on the face of governmental fund financial statements or in separate schedules following the fund financial statements |
| | D) | Reconciliations are prepared for the balance sheet of governmental funds and the statement of revenues, expenditures, and changes in fund balances for the governmental funds |
| | E) | All of these statements are true |
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| 24.
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Osborne City, which records annual revenues in excess of $100 million, has elected to use the modified approach to account for its infrastructure. Which of the following is NOT true? |
| | A) | The City must capitalize infrastructure acquired or significantly improved after June 30, 1980 |
| | B) | The City must maintain an up-to-date inventory of its infrastructure assets |
| | C) | The City may charge the cost of new infrastructure to an expense account |
| | D) | The City must perform condition assessments of the related assets at least every three years |
| | E) | all of the above are true |
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| 25.
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Which of the following would be general fixed assets for the city of Morton? |
| | A) | The city hall for Morton |
| | B) | Fire trucks acquired using a grant from the state government |
| | C) | The water treatment facility accounted for through an enterprise fund |
| | D) | A, B, and C |
| | E) | A and B |
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| 26.
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Which of the following statements about depreciation of general fixed assets is true? |
| | A) | Prior to adoption of GASB 34, governments were not required to depreciate general fixed assets. |
| | B) | Governments must now estimate the amount of depreciation that would have been charged on currently existing assets, had depreciation on these assets been required in the past. |
| | C) | Depreciation on fixed assets must be calculated by the straight-line method. |
| | D) | Both A and B are true |
| | E) | A, B, and C are true |
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| 27.
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What disclosures does GASB 34 require for capital assets? |
| | A) | Beginning balances for capital assets |
| | B) | Capital acquisitions and sales and other dispositions |
| | C) | Ending balances for capital assets |
| | D) | Depreciation expense for the current period |
| | E) | All of the above |
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| 28.
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What are the distinguishing characteristics of infrastructure assets? |
| | A) | Infrastructure assets normally are long lived |
| | B) | Infrastructure assets generally are stationary in nature |
| | C) | Infrastructure assets can often be preserved longer than most capital assets |
| | D) | both A and C |
| | E) | A, B, and C are all true |
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| 29.
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Waverly is a small town with annual revenues of approximately $3 million. Which of its infrastructure assets must Waverly report in its government-wide financial statements? |
| | A) | infrastructure assets acquired after adoption of GASB 34 |
| | B) | infrastructure assets acquired or significantly improved after June 30, 1980 |
| | C) | infrastructure assets acquired before June 30, 1980 |
| | D) | A, B, and C |
| | E) | A and B |
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| 30.
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One wing of Miller Township's municipal building is used to house a museum of historical artifacts. These artifacts are priceless in nature, so the Township decided to put them on permanent display to residents. A local historian and preservation expert oversees the collection to ensure that the relics are properly cared for. The Township trustees have enacted a policy that states that the sale of any of the items is prohibited unless the proceeds are used to replace them with similar relics. In this situation, |
| | A) | The Township must capitalize and depreciate these relics. |
| | B) | The Township may choose to neither capitalize nor depreciate the relics |
| | C) | The decision to capitalize and depreciate these relics is determined by whether they were purchased or donated. |
| | D) | Information about the collection need not be disclosed in the footnotes. |
| | E) | both B and D are correct |
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| 31.
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Which of the following represents the amount of additional debt that a governmental entity may legally borrow? |
| | A) | debt limit |
| | B) | debt margin |
| | C) | overlapping debt |
| | D) | general obligation bonds |
| | E) | revenue bonds |
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| 32.
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Rose City prepared the following worksheet entry when converting its governmental funds to the accrual basis:
| | Debit | Credit | | Revenues — Property Taxes | 10,000 | | | Net Assets | | 10,000 |
The likely explanation for this entry is: |
| | A) | to increase current period revenue for taxes deferred under modified accrual |
| | B) | to decrease revenues for the amount that will not be collected within 60 days of the current year end |
| | C) | to remove from revenues amounts that were recognized under modified accrual this year but appropriately recognized on the accrual basis the previous year |
| | D) | to remove from revenues amounts that were recognized under modified accrual this year but should be recognized on the accrual basis the following year |
| | E) | none of the above |
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| 33.
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Which of the following would NOT be found in the lower section (in the General Revenues section or below) of the government-wide statement of activities? |
| | A) | special item-gain on sale of land |
| | B) | charges for entrance to public parks |
| | C) | transfers between the General Fund and an enterprise fund |
| | D) | school tax revenues |
| | E) | all of the above would be found in the lower portion of the statement of activities |
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| 34.
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Results of which of the following funds would NOT appear in the government-wide statements? |
| | A) | permanent funds |
| | B) | debt service fund |
| | C) | enterprise fund |
| | D) | pension trust fund |
| | E) | special revenue fund |
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| 35.
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Under the modified approach for infrastructure, a government may choose not to depreciate infrastructure if |
| | A) | it keeps an up-to-date inventory of eligible infrastructure assets |
| | B) | it performs condition assessments on these assets |
| | C) | it estimates each year the amount needed to maintain and preserve those assets at the condition level established by the government |
| | D) | it documents that the infrastructure assets are being maintained at or above the condition level established by the government |
| | E) | all of the above must be true |
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| 36.
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Which of the following statements about expenditures to extend the life of infrastructure assets is true? |
| | A) | If the government uses the modified approach for infrastructure, these expenditures are recorded as assets. |
| | B) | If the government uses the modified approach for infrastructure, these expenditures are recorded as expenses. |
| | C) | If the government depreciates its infrastructure, these expenditures are recorded as assets. |
| | D) | Both B and C |
| | E) | If the government uses the modified approach for infrastructure, these expenditures are recorded as a reduction of fund balance. |
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