18.4 Flashcards
Which of the following items is recognized for governmental activities in the government-wide statement of activities and not the statement of revenues, expenditures, and changes in fund balances for governmental funds?
Property tax revenue for an amount deferred because it was not available.
In the governmental funds, revenue is recognized under the modified accrual basis when it is susceptible to accrual. It is accrued (net of estimated uncollectible amounts) when it is measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay current liabilities. Property tax revenues (net of estimated refunds and uncollectibles) are recognized in the period for which they were levied. The extension of time ordinarily is not more than 60 days after the end of the year. Resources received or reported as received before the period for which property taxes were levied are reported as deferred inflows of resources.
Which of the following accounts of a governmental unit is credited when the government has a legally enforceable right to property taxes?
Deferred inflows of resources.
Deferred inflows of resources is increased (credited) when the government has a legally enforceable right to the levy. Deferred inflows of resources is debited and revenues credited when the period begins for which the property taxes were levied.
A transaction that is unusual in nature and infrequent in occurrence most likely is reported in the governmental funds statement of revenues, expenditures, and changes in fund balances
After other financing sources and uses.
Extraordinary items are transactions or other events that are unusual in nature and infrequent in occurrence. Extraordinary items are reported separately after other financing sources and uses.
A capital projects fund for a new city courthouse recorded a receivable of $300,000 for a state grant and a $450,000 transfer from the general fund. What amount should be reported as revenue by the capital projects fund?
$300,000
Governmental fund revenues are increases in fund financial resources other than from interfund transfers, debt issue proceeds, and redemptions of demand bonds. Thus, revenues of a capital projects fund include grants. The grant (a voluntary nonexchange transaction) is recognized when all eligibility requirements, including time requirements, have been met. When modified accrual accounting is used, as in a capital projects fund, the grant also must be available. Other financing sources include proceeds from bonds and interfund transfers.
How should a governmental unit classify the fines it assesses?
Imposed nonexchange revenues.
Imposed nonexchange revenues result from assessments imposed on nongovernmental entities, including individuals, other than assessments on exchange transactions. Examples are property taxes, fines, and forfeitures.
What is the major difference between an exchange transaction and a nonexchange transaction for governmental units?
The relationship between the amount of value given and received.
In a nonexchange transaction, a government either gives or receives value without directly receiving or giving equal value in return.
In state and local governmental accounting, the notes to the financial statements should focus on the primary government’s
I. Business-type activities.
II. Governmental activities.
III. Individual major funds.
IV. Individual nonmajor funds.
I, II, III.
Notes to the financial statements are an integral part of the basic financial statements. The focus is on the primary government’s (1) governmental activities, (2) business-type activities, (3) major funds, and (4) nonmajor funds in the aggregate.
The Town of Nema prepaid an $18,000,000 insurance premium on October 10, 2017. The coverage period was 12 months beginning November 1, 2017. The amount of the premium included in the committed fund balance as of June 30, 2018, is
$0.
Amounts in committed fund balance may be spent only for specific purposes established by a formal act of the entity’s highest decision maker (e.g., a county commission). Nonspendable fund balance includes amounts that either (1) are in a form (e.g., inventory, prepayments, or long-term loans) that is not spendable or (2) must be kept intact (e.g., the principal of a permanent fund). Because a prepayment is nonspendable, the amount reported in committed fund balance for prepaid insurance is $0.
Which of the following journal entries should be made in the general fund of a city to record $250,000 for salaries and wages incurred during the month of May?
Expenditures - Salaries & Wages $250,000
Salaries Payable $250,000
An expenditure is recorded when a current liability is to be liquidated with expendable available current resources. Because wages and salaries have been earned by employees, a liability should be recognized, not an encumbrance. The controls in place for such routine outlays as wages and payroll taxes mean that such liabilities are rarely encumbered.
On what accounting basis does GASB recommend that governmental fund budgets be prepared?
Modified Accrual.
The basis of accounting for a budget preferably should be the same as that used by the fund for which the budget is being prepared. The modified accrual basis of accounting is used to prepare the fund financial statements for all governmental fund types.
Fact Pattern:
Ridge Township’s governing body adopted its general fund budget for the year ended July 31, Year 1, composed of estimated revenues of $100,000 and appropriations of $80,000. Ridge formally integrates its budget into the accounting records.
To record the appropriations of $80,000, Ridge should
Credit appropriations control.
Appropriations is a budgetary account that includes all individual appropriations. It is an anticipatory liability account.
What is the basic criterion used to determine the reporting entity for a governmental unit?
Financial accountability.
The financial reporting entity is (1) the primary government, (2) organizations for which the primary government is financially accountable, and (3) other organizations whose exclusion would cause the reporting entity’s statements to be misleading or incomplete. A separate entity must be included in the reporting entity if (1) it is fiscally dependent on the primary government, and (2) the two entities have a financial benefit or burden relationship.
Fact Pattern:
On December 31, the city of Vane paid a contractor $3 million for the total cost of a new municipal annex built during the year on city-owned land. Financing was provided by a $2 million general obligation bond issue sold at face amount on December 31, with the remaining $1 million transferred from the general fund.
What account and amount should be reported in Vane’s current-year financial statements for the general fund?
Other financing uses control, $1,000,000.
Assuming that this major capital project was accounted for in a capital projects fund, the only transaction affecting the general fund is the interfund transfer to the capital projects fund. Interfund transfers are reportable as other financing uses by the transferor fund. The governmental fund statements therefore should include an other financing use of $1 million for the year by the general fund.
The modified accrual basis of accounting is appropriate for preparing the fund financial statements for which of the following fund categories of a county government?
Governmental:
Proprietary:
Yes
No
The modified accrual basis is required for the statements of all governmental funds. The accrual basis is used for the statements of proprietary and fiduciary funds.
Which of the following is a required part of a local government’s management’s discussion and analysis (MD&A) as part of its financial statements?
The MD&A should compare current-year results to the prior year with emphasis on the current year.
MD&A is required supplementary information. It is analysis of financial activities based on (1) currently known facts, (2) decisions, or (3) conditions expected to affect significantly financial position or results of operations. MD&A compares the current and prior years, with an emphasis on the current year, based on government-wide information. The focus is on the primary government.
