EXAM 1

Question 1

Environment of Governmental Entities

1) La__ of a p__it m___e: A major source of revenues is t___s. No di___t r___ip
exists between ta___ p__ and se___s re___ed to individual taxpayers.

2) Businesses attempting to make a p___t will s___d m__ to m___e m___.

3) Governments are just the
op___e - they o___n money in order to sp___ it to provide se__s to the p__c.

Answer 1

1) Lack of a profit motive: A major source of revenues is taxes. No direct relationship
exists between taxes paid and services rendered to individual taxpayers.

2) Businesses attempting to make a profit will spend money to make money.

3) Governments are just the
opposite - they obtain money in order to spend it to provide services to the public.

Question 2

Environment of Governmental Entities

Define Fund accounting
-is used to fa___e c__l over sp___g

1) Each fund is a s__e
acc___g entity, recording the i___s and o___s of financial resources designated
for various governmental functions.

Answer 2

-is used to facilitate control over spending

1) Each fund is a separate
accounting entity, recording the inflows and outflows of financial resources designated for various governmental functions.

Question 3

Environment of Governmental Entities

Spending plans are approved by 1) le___e a__n.

The budget communicates amounts that have been appropriated for 2) ex___re and is le___y bi__ng.

Budgetary accounts are 3) inc___ed into the ac___ng system

Answer 3

1) legislative action
2) expenditure and is legally binding
3) incorporated into the accounting system

Question 4

Environment of Governmental Entities

In the absence of a profit motive, two important objectives of governmental entities are 1) ef___cy and ef___ss.

Answer 4

1) efficiency and effectiveness

Question 5

Environment of Governmental Entities

Two important responsibilities of governmental entities are

1. Ac___y - (i.e., budget
   the use of re___es for appropriate p___es and comply with the l__ly established b___et)
2. In__d eq__y - (i.e., have a b___d b___t; don’t require fu___e generations to pay for cu___t services)

Answer 5

1. Accountability - (i.e., budget
   the use of resources for appropriate purposes and comply with the legally established budget)
2. Interperiod equity - (i.e., have a balanced budget; don’t require future generations to pay for current services)

Question 6

What is the balance sheet called for Government Wide Financial Statements:

Statement of N__ P___

Answer 6

Statement of Net Position

Question 7

What is the operating statement called for Government Wide Financial Statements:

Statement of A___

Answer 7

Statement of Activities

Question 8

b. Fund Financial Statements: Three categories of funds and required financial
statements for each category are as follows:

(1) Governmental Funds
-B___e S__t
-Statement of Re___es, Ex___es, and Changes in F__ B___e

(2) Proprietary Funds
-Statement of N__ P__n (i.e., balance sheet)
-Statement of Re___s, Ex___s, and Changes in F___ N__ Po__n
-Statement of C__ Fl___ (direct method required for operating section)

(3) Fiduciary Funds
-Statement of Fi___y N__t P__n
-Statement of Changes in Fi___ N__t P__

Answer 8

(1) Governmental Funds
-Balance Sheet
-Statement of Revenues, Expenditures, and Changes in Fund Balance

(2) Proprietary Funds
-Statement of Net Position (i.e., balance sheet)
-Statement of Revenues, Expenses, and Changes in Fund Net Position
-Statement of Cash Flows (direct method required for operating
section)

(3) Fiduciary Funds
-Statement of Fiduciary Net Position
-Statement of Changes in Fiduciary Net Position

Question 9

Fund Accounting

A governmental entity (e.g., a city) is a 1) si__e re___g entity having its o__ s__ of financial statements. These statements are based on 2) ac__s which are classified into 3) f__s.

Define a Fund
-4) is a se___e fiscal and accounting en__y having its own se___e accounting equation

The accounting equation for each fund is determined by the accounting basis used

Answer 9

1) single reporting entity having its own set
2) activities
3) funds
4) is a separate fiscal and accounting entity having its own separate accounting equation

Question 10

Fund Financial Statements: Three categories of funds and required financial statements for each category are as follows:

(1) Governmental Funds
a) B_____e S___t
b) Statement of R__es, E___res, and C__s in Fund Balance

(2) Proprietary Funds
a) Statement of N__ P___n (i.e., balance sheet)
b) Statement of Re___s, Ex___s, and Changes in Fund N__ P___n
c) Statement of C__ F___s (direct method required for operating
section)

(3) Fiduciary Funds
a) Statement of Fiduciary N__ P___n
b) Statement of Changes in Fi__y N__ P___n

Answer 10

(1) Governmental Funds
a) Balance Sheet
b) Statement of Revenues, Expenditures, and Changes in Fund Balance

(2) Proprietary Funds
a) Statement of Net Position (i.e., balance sheet)
b) Statement of Revenues, Expenses, and Changes in Fund Net Position
c) Statement of Cash Flows (direct method required for operating
section)

(3) Fiduciary Funds
a) Statement of Fiduciary Net Position
b) Statement of Changes in Fiduciary Net Position

Question 11

What’s the equation for the Accrual Basis?

C___t A__s + N___nt Assets = Cu__t Li__es + No___nt Li___s + Net P___n

Answer 11

Current Assets + Noncurrent Assets = Current Liabilities + Noncurrent Liabilities + Net Position

Question 12

What basis do for-profit businesses use?

this is the basis most familiar to accounting students since it’s used for-profit business

Answer 12

accural basis

Question 13

Accural Basis focus on the determination of income and measuring e___ic re____s

Answer 13

economic resources

Question 14

What’s the equation for the Modified Accrual Basis?

CA= (CL) + (FB)

Answer 14

Current Assets (CA) = Current Liabilities (CL) + Fund Balance (FB)

Question 15

What basis do governmental type funds use?

Answer 15

modified accural basis

Question 16

Modified Accrual Basis

the focus of the funds using the modified accrual basis is the 1) f__ of cu___t fi__l re___s

Answer 16

1) flow of current financial resources

Question 17

Modified Accural Basis

Expenditures are 1) d___d even for 2) as__ p___es and d___ re___t, since these transactions represent an 3) o___w of financial resources.

Answer 17

1) debited
2) asset purchases and debt retirement
3) outflow

Question 18

What are the 5 types of fund for governmental fund category (for modified accrual basis)

1. G___l F___ (GF)
2. S___l R___e F__s (SRF)
3. C___l P___t F__s (CPF)
4. D__t S__e F__s (DSF)
5. P__t F___s (PF)

Answer 18

1. General Fund (GF)
2. Special Revenue Funds (SRF)
3. Capital Project Funds (CPF)
4. Debt Service Funds (DSF)
5. Permanent Funds (PF)

Question 19

Name 2 types of funds that use accrual basis ?

En____e F___s (EF)
In__l S___e F___s (ISF)

Answer 19

Enterprise Funds (EF)
Internal Service Funds (ISF)

Question 20

Define General Fund

is required to account for 1) g___al act____s of the go___nt.
Other funds will be used to account for other significant activities, if needed.

This fund records the 2) collection of re___s (e.g., tax r___s) and ex___res made for go___al functions that are n___t accounted for in other funds

Answer 20

1) general activities of the government
2) collection of resources (e.g., tax revenues) and expenditures made for governmental functions that are not accounted for in other funds

Question 21

When the budget is adopted, the following entry is made

dr-E____d R____s
cr-A____ns (for bu___d ex___s)
dr-B___y F___d B___ce
or cr-Bu___y F___d B___e (to balance)

At the end of the year, the above entry is 1) re___d; therefore, the entry to record the budget has 2) n__ i___ct on final balances

Answer 21

dr-Estimated Revenues
cr-Appropriations (for budgeted expenditures)
dr-Budgetary Fund Balance
or cr-Budgetary Fund Balance (to balance)

1) reversed
2) no impact

Question 22

Under the modified accrual basis, revenues are recognized when m___e and av___le.

Answer 22

measurable and
available.

Question 23

Revenue

Available is defined as collectible within about 1) __ days after the fiscal year-end.

Amounts that will not be available until past the 60-day limit are credited to 2) De___d Re__e.

Revenues are only recorded for amounts that are deemed collectible

Answer 23

1) 60 days
2) Deferred Revenue.

Question 24

When cash is received before requirements are met:
1) dr-____
cr-____ ____

When requirements are met:
2) dr-____ ___
cr-____

Answer 24

1) dr-Cash
cr-Deferred Revenue

2) dr-Deferred Revenue
cr-Revenue

Question 25

What are the 5 classes of fund balance representing the level of constraint placed upon fund resources?

1. N____e - n__t in s____le form (ex. pr___s, inv___s, su___s, etc.)
2. R____d - e____ly (o___e source)
3. C____ed - in____y by h___st le__l of a___y
4. As___d - in___al in___t (designated for a p___r p__ose)
5. Un____d - r___al (whatever d___n’t fit into the other c____s)
   -positive unassigned FB is on the ge___l f___d
   -negative unassigned FB is on other fu___

Answer 25

1. Nonspendable - not in spendable form (ex. prepaids, inventories, supplies, etc.)
2. Restricted - externally (outside source)
3. Committed - internally by highest level of authority
4. Assigned - informal intent (designated for a particular purpose)
5. Unassigned - residual (whatever doesn’t fit into the other categories)
   -positive unassigned FB is on the general fund
   -negative unassigned FB is on other funds

Question 26

Inventories may be accounted for using one of two methods

1. When p___d method
2. When c____d method

Answer 26

1. When purchased method
2. When consumed method

Question 27

Define “when purchased method”

recognizes an 1) ex____e when the s___s are pu___d

-A year-end adjustment is made to record the e___g in___y on hand

Answer 27

1) expenditure when the supplies are purchased

-A year-end adjustment is made to record the ending inventory on hand

Question 28

Define “when consumed method”

debits 1) pu____es to an inventory account and recognizes an 2) ex____re only for the amounts 3) con____d d___g the period (the same as a business using the accrual basis).

Answer 28

1) purchases
2) expenditure
3) consumed during the period

Question 29

Inventories
Example of accounting for inventory and nonspendable fund balance:

EX.
During the first year of its existence, the Smalltown general fund purchased supplies for $20,000, and used $16,000, by year-end.

When purchased method:
To record purchases:
dr-_______
cr-_____

Year-end Adjustment:
dr-______
cr- _____

When consumed method:
dr-______
cr-______

dr-_____
cr-______

Reclassify Fund Balance
dr-_______
cr-______

Answer 29

When purchased method:
To record purchases:
dr-Expenditures 20,000
cr-Accounts Payable 20,000

Year-end Adjustment:
dr-Inventory 4,000
cr- FB-Nonspendable 4,000

When consumed method:
dr-Inventory 20,000
cr-Accounts Payable 20,000

dr-Expenditures 16,000
cr-Inventory 16,000

Reclassify Fund Balance
dr-FB Unassigned 4,000
cr-FB- Nonspendable 4,000

Question 30

Transfers between funds

Amounts transferred between funds are generally 1) n__ co____d
re____s to the r____t fund or expenditures to the p___g fund.

Transfers are classified as
2) “O____ Fi____l S____s (or U___)” on the o____ statement.

Answer 30

1) not considered revenues to the recipient fund or expenditures to the paying fund
2) “Other Financial Sources (or Uses)” on the operating statement

Question 31

If one fund is simply reimbursing another fund for expenditures paid on its behalf, the reimbursement is recorded as an adjustment to the expenditure account in both funds. For
example, suppose the GF paid some utilities for a proprietary fund.

When the proprietary fund
reimburses the GF, the following pair of entries is made:
General Fund:
dr-___
cr-____
Proprietary Fund:
dr-_______
cr-______

Answer 31

General Fund:
dr-Cash
cr-Expenditures

Proprietary Fund:
dr-Expenses
cr-Cash

Question 32

Another type of payment from one fund to another is for 1) in__ se___s, formerly called a 2) q__-ex___ tr____n.

For example, when a proprietary fund pays the general fund an amount equivalent to a tax, the GF recognizes tax revenue and the proprietary fund recognizes an expense called 3) P____s in L___ of T__s

Answer 32

1) interfund services
2) quasi-external transaction
3) Payments in Lieu of Taxes

Question 33

Interfund receivables and payables:
Amounts owed from one fund to another appear on the balance sheets as follows:

Receivable:
D___ ___ other funds (___)
A_____ ___ other funds* (__)

Payable:
D____ ___ other funds (__)
A____ ___ other funds (__)

*FB-Nonspendable should be reported since amount advanced to another fund is no longer available for expenditure

Answer 33

Receivable:
Due from other funds (ST)
Advances to other funds* (LT)

Payable:
Due to other funds (ST)
Advances from other funds (LT)

Question 34

The statement defines 4 classes of
nonexchange transactions:

1. Imposed Nonexchange Revenues: These are revenues from 1) t__, f__, fi__, etc. that are simply imposed without some underlying transaction taking place (e.g., p__ t___s, s__l as___ts, fo__s, f__s, etc.).

Assets and revenues are generally
recognized when an 2) en___le l___l cl___ exists. In the case of property taxes, revenue is recognized in the period in which the tax is 3) le__d or as____d.

[At the fund level, revenues are recognized in the period in which they are deemed 4) av___e. Taxes collected within 60 days after year-end are considered ‘available’ for recognition].

Answer 34

1) taxes, fees, fines, etc. that are simply imposed without some underlying transaction taking place (e.g., property
taxes, special assessments, forfeitures, fines, etc.)

2) enforceable legal claim
3) levied or assessed
4) available

Question 35

The statement defines 4 classes of
nonexchange transactions

2. Derived Tax Revenues: These are taxes that are derived from 1) a___er un___g tr____n (e.g., sa___ ta__s derived from a s___; in__ t___s derived from the earning of in___; m___ f__l taxes derived from the sale of f__l).

Revenue is recognized when the tax is 2) im___d (when the u___ng tr___on takes place).

A receivable is recognized for 3) t___s im___d but not c___d; d___d rev___e is recognized if tax is collected in a___e

Answer 35

1) another underlying transaction (e.g., sales taxes derived from a sale; income taxes derived from the earning
of income; motor fuel taxes derived from the sale of fuel)

2) imposed (when the underlying transaction takes place)

3) taxes imposed but not collected; deferred revenue is recognized if tax is collected in advance

Question 36

The statement defines 4 classes of
nonexchange transactions

3. Government-mandated Nonexchange Transactions: Applies to funds received from some other 1) go___nt (i.e., f___l or s___e) which must be expended for sp___ic p___s.

Revenue is recognized when 2) ma___d requirements and el___ty requirements are met.

For example, if the receiving government is not allowed to expend
the funds until a specific time period, revenue is not recognized until that time period occurs. Or, if the money is to reimburse expenditures, the expenditure must occur before
the revenue is recognized

Answer 36

1) government (i.e., federal or state) which must be expended for specific
purposes
2) mandated requirements and eligibility requirements are met.

Question 37

The statement defines 4 classes of
nonexchange transactions

4. Voluntary Nonexchange Transactions: 1) Gr__s and en___ts from another go___t that d__ n___ carry certain re___s, and vo___y contributions from in___ls, other no___tal entities, etc. Funds may be restricted to s__ic pu___

Answer 37

1) Grants and entitlements from another government that do not carry certain requirements, and voluntary contributions from individuals, other nongovernmental entities, etc. Funds may be restricted to specific purpose

Question 38

Journal entries to implement the above guidelines:

When funds are received before revenue may be recognized:
dr-___
cr-_____

When recognition of revenue is
appropriate:
dr-____
cr-____

When funds are received at the time of revenue recognition:
dr-____
cr-_____

When revenue is to be recognized before funds are received:
dr-____
cr-____

Answer 38

When funds are received before revenue may be recognized:
dr-Cash
cr-Deferred Revenue

When recognition of revenue is
appropriate:
dr-Deferred Revenue
cr-Revenue

When funds are received at the time of revenue recognition:
dr-Cash
cr-Revenue

When revenue is to be recognized before funds are received:
dr-Receivable
cr-Revenue

Question 39

A capital projects fund is used to keep track of 1) wo___g ca___l av___e for the 2) con___n or acq___n of significant no___t a___s.

A government unit may have none, one, or several CPFs, depending on the number and materiality of the projects. Projects accounted for in the GF
are included in the annual budget of that fund.

Answer 39

1) working capital available
2) construction or acquisition of significant noncurrent assets.

Question 40

If accounted for in a CPF, the budget is generally approved for the entire project, which may extend over more than one accounting period.

The entry to record the budget (optional) in CPF is:
dr – ______ (e.g., federal grants)
dr – ________ (e.g., transfers &/or bond proceeds)
cr- _________ (amount approved for construction)

Answer 40

dr – Estimated Revenues (e.g., federal grants)
dr – Estimated Other Financial Sources (e.g., transfers &/or bond proceeds)
cr- Appropriations (amount approved for construction)

Question 41

Sources of Funding

Major construction contracts are typically financed with a 1) b__ issue.
The proceeds are classified as 2) O___ Fi__ So___ on the o____g statement.

The 3) d__ is n__ re___d in the CPF. Any accrued 4) in__t received at the time of the bond issue is transferred to the 5) ___ since the payment of interest is the responsibility of the 6) ___. Likewise, if
the bonds are issued at a 7) pr__m, the premium is usually transferred to a DSF to repay the debt when it matures.

Answer 41

1) bond issue.
2) Other Financial Sources on the operating statement
3) debt is not recorded
4) interest
5) DSF
6) DSF
7) premium,

Question 42

As an example, suppose bonds with a face value of $1,000,000, were issued at
102, and the premium is to be transferred to the DSF. The CPF will record the following:

dr – ________
cr – _______
cr – _______

Answer 42

dr – Cash 1,020,000
cr – OFS, Bond Proceeds 1,000,000
cr – Due to DSF 20,000

Question 42

Accounting for Construction Costs: When a contract is signed or orders are placed, an 1) e____ is recorded for the total:

dr – _____
cr – _____

Answer 42

1) encumbrance

dr – Encumbrances
cr – FB, Reserve for Encumbrances

Question 42

Alternatively, if the total bond proceeds are available to the project, an adjustment will be made
to the budgetary accounts. If the bonds are issued at a discount (often prohibited by state law), and the amount is to be subsidized from the general fund, a transfer will be recorded in each fund

In the GF:
dr – _____
cr – _____

In the CPF:
dr – ____
cr – ______

Answer 42

In the GF:
dr – Transfer Out
cr – Due to CPF

In the CPF:
dr – Due from GF
cr – Transfer In

Question 42

As construction progresses, actual amounts are recorded:
dr – FB, Reserve for Encumbrances
cr – Encumbrances
and

dr – Expenditures-Capital
cr – Contracts Payable
cr – Cont. Pay. – Ret. %

Question 42

Define Bond Anticipation Notes (BAN)

Prior to the issuance of l___-t___ bonds, s___t-t___ d__

-may be issued to provide t___y fi___g

Answer 42

Prior to the issuance of long-term bonds, short-term debt
-may be issued to provide temporary financing

Question 42

On the due date: As principal and interest comes due, the following entry is made in the DSF:

dr – ______
cr – ______
cr – ______

Answer 42

dr – Expenditures-Debt Service
cr – Matured Interest Payable
cr – Matured Bonds Payable

Question 42

Refunding:

Since the DSF recognizes the entire 1) d__ payment as an e___re, 2) g__ and l__ from the ret___t of d__t are not re___

Answer 42

1) debt payment as an expenditure
2) gains and losses from the retirement of debt are not recognized

Question 42

Under the modified accrual basis, 1) i___t is n__ ac___; instead, the entire payment is 2) ex___d when it comes due

Answer 42

1) interest is not accrued
2) expenditured

Question 42

Refunding:

If the proceeds of the new debt are invested until the old debt is
retired, care must be taken to avoid violating the 1) ar___ge rules of the IRS

Answer 42

1) arbitrage

Question 42

Investments

investments are reported at 1) f__ ma___ va___.

Changes in fair value are
recognized as 1) in___ in___. Interest on investments is accrued as earned

Answer 42

1) fair market value
1) investment income.

Question 43

Define Debt Limit

This refers to the 1) m___m amount of d___ a go___ en__ may have
ou___g.

It is typically based on a 2) p___e of the assessed value of t___e p____y

Answer 43

1) maximum amount of debt a government entity may have
outstanding
2) percentage
3) taxable property

Question 44

Define Debt Margin

The 1) un___ po___ of the d__ li__.

Answer 44

1) unused portion of the debt limit.

Question 45

Serial Bonds

Regular Serial Bond - principal matures in e____ in__s over the l__ of the bond

Answer 45

principal matures in equal installments over the life of the bond

Question 46

Serial Bonds

Deferred Serial Bond - Maturity of the f___ p___l in____t is delayed for m__ than a y___ a__ the date of is___.

Answer 46

Maturity of the first principal installment is delayed for more than a year after the date of issuance.

Question 47

Serial Bonds

Annuity - re___t of p____l and in___t is made in e___l in____s over the l__ of the bond

Answer 47

repayment of principal and interest is made in equal installments over the life of the bond

Question 48

Serial Bonds

Irregular - Pa__n of re___t d__ n__ fit one of the above (regular, deferred, annuity)

Answer 48

Pattern of repayment does not fit one of the above

Question 49

Term Bonds - e___ pr___ matures on a g__ d___ (i.e., the ma____ d___)

Answer 49

entire principal matures on a given date (i.e., the maturity date)

Question 50

Permanent funds account for resources that are 1) l___ly re___d so that the 2) pr___l must be m___ed in perpetuity (i.e., it can not be 3) e___d).

Answer 50

1) legally restricted
2) principal must be matured
3) expended

Question 51

Earnings from permanent funds are to be used to 1) be___t the go__t and its c__ns.

Answer 51

1) benefit the government and its citizens.

Question 52

Proprietary funds (Business-Type)

Proprietary funds may be used to account for 1) go___ or ser___ provided to u___ for a f__.

The fee is typically set at a level that will at least cover all 2) co___ of o__g, including de___n.

Answer 52

1) goods or services provided to users for a fee
2) costs of operating, including depreciation.

Question 53

In other words, fees should provide the ability to 1) r___e a__s as needed.

When this objective, called 2) c__l m___e, is accomplished the operation is self-sufficient. Fees also help control the tendency to over-use free services.

Answer 53

1) replace assets
2) capital maintenance

Question 54

Proprietary funds use the 1) f__-a___ basis of accounting with very little differences from 2) f__-p__ businesses.

Answer 54

1) full-accrual
2) for-profit

Question 55

Proprietary funds fall into two categories, i___ s___ funds and e___se funds

Answer 55

internal service funds and enterprise funds

Question 56

An internal service fund is used to account for services provided primarily to other 1) go___l f__ or ag___s on a cost rei___t basis.

Examples: 2) centralized c__ c___r,
centralized p___ng, centralized inv___t po___l, s__f-ins__e plan (i.e., r__k-m___t)

Answer 56

1) governmental funds or agencies on a cost reimbursement basis
2) centralized copy center,
centralized purchasing, centralized investment pool, self-insurance plan (i.e., risk-management)

Question 57

If a government entity chooses to be self-insured, it may account for the 1) ri__-m___nt activities in an in__al s___ce f__ (ISF).

Transactions between the ISF and other funds are considered reciprocal interfund activities, formerly called 2) q___i-e___al tr___s.

Answer 57

1) risk-management activities in an internal service fund (ISF)
2) quasi-external transactions.

Question 58

The primary type of proprietary fund is called an 1) en___e fund.

though some business type
activities may be included in governmental funds, use of an enterprise fund is allowed for any
activities for which a 2) f__ is charged to e___al u__s.

Answer 58

1) enterprise fund
2) fee is charged to external users.

Question 59

An enterprise fund (EF) is required if one of the following three criteria is met:

(1) laws or regulations require that cost be recovered with fees and charges

(2) pricing policies set fees and charges to recover costs

(3) the activity is financed with debt that is secured solely by a pledge of the net revenues from fees and charges

Question 60

Debt instruments that are backed by the revenues from an identifiable activity are called revenue bonds.

If these activities are accounted for along with other activities in the same
enterprise fund, segment disclosures regarding this separate activity are required

Question 61

What are examples of enterpise funds?

c___ p___g ga__, g___e col___n and di____al, go___t-run ut___s (gas, water, electric).

Answer 61

city parking garage, garbage collection and disposal, government-run utilities (gas, water, electric).

Question 62

Enterprise Funds

a 1) se___e fund should be used for each service; otherwise, the advantages of monitoring with a separate fund are lost.

Enterprise funds may transfer to the 2) g___ fund p___s in li___ of t__ to cover the cost of general governmental services provided to the EF and to make its operations more comparable to competing for-profit businesses

Answer 62

1) separate
2) general fund payments in lieu of taxes

Question 63

Define Asset Retirement Obligations (ARO)

An ARO is a 1) le__y enforceable li___ty associated with the r___nt of a tangible c__l a___t.

A government that has legal obligations to perform 2) fu___ as___t re___nt activities related to its tangible capital assets should recognize a 2.1) li___y
for those future activities. An example of this is 3) la___l o___s (i.e., the city dump).

Answer 63

1) legally enforceable liability associated with the retirement of a tangible capital asset
2) future asset retirement
2.1) liability
3) landfill operations

Question 64

ARO example - Municipal Solid Waste Landfills (MSWLF): Local governments often operate landfill operations to dispose of waste. When the landfill is at capacity, it will be covered over.

The EPA has established 1) cl___e and p___t-cl__e requirements that must be
accounted for in the 2) cu___t period.

Answer 64

1) closure and post-closure
2) current period.

Question 65

(A) Statement of Net Position (i.e., balance sheet): Since the measurement focus is on economic resources, proprietary funds record fixed assets and long-term liabilities.

The equity section of proprietary funds is called 1) N__ Po___n and consists of three categories:

(1) N__ in____nt in ca__l as___s: the total in this category is equal to the total cost of f__ as__ less ac___d de___on less the b__k v___e of related d___ o____g.

(2) R____d N___ P__on: for restrictions imposed e___y by c___s, gr___s, co___s, or l__s and re__ns.

(3) Un___d N__t Po___n: this represents the residual amount of net a__ that is ex___

Answer 65

1) Net Position

(1) Net investment in capital assets: the total in this category is equal to the total cost of fixed assets less accumulated depreciation less the book value of related debt outstanding.

(2) Restricted Net Position: for restrictions imposed externally by creditors, grantors, contributors, or laws and regulations.

(3) Unrestricted Net Position: this represents the residual amount of net assets that is expendable

Question 66

Define Charges for Services

1) f___ charged for s___s (called this rather than sales)

Answer 66

1) Fees charged for services

Question 67

What are the 4 categories of statement of cash flows?

1) o___ activities: the d___ m__d is required;

(2) no____ fi____g activities: includes payment of related in___.

(3) ca___l and r___d fi___g activities: includes the ac___n and dis___n of capital a___s as well as the related proceeds and r____t of funds used for capital acquisitions (and payment of related interest).

(4) in____ activities: includes receipt of income from investments.

Answer 67

1) operating activities: the direct method is required;

(2) noncapital financing activities: includes payment of related interest.

(3) capital and related financing activities: includes the acquisition and disposition of capital assets as well as the related proceeds and repayment of funds used for capital acquisitions (and payment of related interest).

(4) investing activities: includes receipt of income from investments.

Question 68

Fiduciary funds are used to account for 1) as__s held in a tr___e or a___y relationship for others– n__ the government’s own programs.

Funds held in 2) tr__ for the support of the government’s 3) o__ programs are accounted for in the governmental fund category in a 4) sp___l re__e fund (if ex___e) or a pe___t fund (if not ex___le)

Answer 68

1) assets held in a trustee or agency relationship for others– not the government’s own programs
2) trust
3) own
4) special revenue fund (if expendable) or a permanent fund (if not expendable)

Question 69

There are four types of fiduciary funds:

(1) C____ funds (formerly called, agency fund)
(2) P___-pu___e trust funds
(3) In___nt trust funds
(4) P____n trust funds

Answer 69

1) Custodial funds (formerly called, agency fund)
(2) Private-purpose trust funds
(3) Investment trust funds
(4) Pension trust funds

Question 70

Required financial statements for fiduciary funds:

Statement of 1) F___y Net Po__n (i.e., a b___e sh__t)
Statement of 2) C____s in Fiduciary N__ Po___n (i.e., o__g statement)

Note: Fiduciary funds are 3) n__ in__d in the entity-wide financial statements

Answer 70

1) Fiduciary Net Position (i.e., a balance sheet)
2) Changes in Fiduciary Net Position (i.e., operating statement)
3) not included

Question 71

Custodial Funds

Custodial funds are used to account for resources held 1) te___rily for o___(e.g., other go___). The equation is:

Current Assets = Current Liabilities [+ Net Position]*

*The forerunner of custodial funds were agency funds. These funds had equal/offsetting assets and liabilities, therefore no operating accounts or
net position (no temporary accounts)

Answer 71

1) temporarily for others (e.g., other governments)

Question 72

Custodial funds are commonly used to account for 1) t___s collected by one go___t entity on b__f of an___r.

Answer 72

1) taxes collected by one government entity on behalf of another.

Question 73

(2) Private-Purpose Trust Funds:

Private purpose trust funds are used to account for 1) t___t ar____nts under which pr___l and i___e b__it others o___e of the government.

Answer 73

1) trust arrangements under which principal and income benefit others outside of the government.

Question 74

3) Investment Trust Funds:

This is a fiduciary fund to account for the 1) e____ po___n (i.e., the portion contributed by other governments) of an inv___nt p____used by multiple
governments to maximize e___gs and minimize a____e costs

Answer 74

1) external portion (i.e., the portion contributed by other governments) of an investment pool used by multiple
governments to maximize earnings and minimize administrative costs

Question 75

(4) Pension Trust Funds: A trust fund used to account for the employer and employee contributions to a pension plan, the investments and earnings of the plan, and the payment of
pension benefits to retired employee

Question 76

To qualify for the modified approach, the government must have an 1) a__ ma___ sy___ that includes
(a) an u___-to-d__in___y of in___re as__s
(b) an as___nt of the condition of in__e as__s at least once every th__ years using a consistent me___t scale
(c) an est___e of the costs to pr___e the assets at the con__n disc__d

The government must also document that the 2) a___s have been pr___ed as pr___d by the government. If the modified approach is adopted, related disclosures are included in RSI (required supplementary information).

Answer 76

1) asset management system

(a) an up-to-date inventory of infrastructure assets
(b) an assessment of the condition of infrastructure assets at least once every three years using a consistent measurement scale
(c) an estimate of the costs to preserve the assets at the condition disclosed

2) assets have been preserved as prescribed