FAR 14 Flashcards
If a city government is the primary reporting entity, which of the following is an acceptable method to present component units in its combined financial statements?
If a city government is the primary reporting entity, which of the following is an acceptable method to present component units in its combined financial statements?
Tree City reported a $1,500 net increase in the fund balance for Governmental Funds. During the year, Tree purchased general capital assets totaling $9,000 and recorded a depreciation expense of $3,000.
What amount should Tree report as the Change in Net Position for governmental activities in Tree’s Statement of Activities?
The increase in the fund balance for Governmental Funds is measured on the modified accrual basis, while the Change in Net Position for governmental activities is measure on the full accrual basis. To convert the increase in fund balance to full accrual:
Increase in Fund Balance + $1,500
Add back the Expenditures related to the purchase of capital assets + 9,000
Deduct the depreciation expense not included in Fund Balance - 3,000
Change in Net Position $7,500
A local citizen donated land and an office complex to a city with the stipulation that net income from the office complex be used help finance the operations of a teenage alcohol and drug treatment center. At the time of donation, the property’s fair market value was $800,000. The donor paid $500,000 for the land and house twenty years ago. The city spent $125,000 to upgrade the office complex. The city would capitalize the land and office complex in its permanent fund at:
Permanent Funds account for the receipt of the endowment principal that is donated to a government and is to be held in trust for the benefit of the government (or of its citizenry as a whole) as revenue. The property should be capitalized at $925,000-fair market value at the time of donation ($800,000) plus the cost of improvements ($125,000) made by the city. Earnings from the office complex would usually be transferred to and expended through a Special Revenue Fund.
Which of the following funds should be reported as part of the local government’s governmental activities column in its government-wide statements?
Governmental activities reported in the Government-Wide Financial Statements pertain to the Governmental Fund types: General Fund, Special Revenue Funds, Capital Projects Funds, Debt Service Funds, and Permanent Funds. The other three choices in this question are all Fiduciary Fund Types that are not reported in the Government-Wide Financial Statements since the government acts as a fiduciary and has no ownership interest. Fiduciary Funds are reported in the fund-level financial statements of the Comprehensive Annual Financial Report (CAFR).
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?
The $450,000 transfer from the General Fund is classified as an Other Financing Source-Transfer In, but the $300,000 state grant is recognized as Revenue. Though the grant has not yet been received in Cash, GASB #33 requires that it be recognized as Revenue in the Government-Wide Statements when the receivable is recognized, as long as there are no eligibility restrictions. It would also be recognized as Revenue in the fund statements as long as the cash was received within 60 days of the year end.
Which funds use accrual and which use modified accrual in governmental accounting?
Three of the funds use full accrual basis (Internal Service Fund, Airport Enterprise Fund, and Pension Trust Fund) and four of the funds use modified accrual basis (General Fund, Capital Projects Fund, Special Revenue Fund, and Debt Service Fund).
If the lease payments are required to be made from a Debt Service Fund, what account or accounts should be debited in the Debt Service Fund for the December 31, 2005 lease payment of $65,000?
A Debt Service Fund accounts for the accumulation of resources for, and the payment of, general long-term debt principal and interest.
The entire $65,000 of principal ($50,000) and interest ($15,000) should be debited to Expenditures Control when the payment is made.
Shared revenues received by an Enterprise Fund of a local government for operating purposes should be recorded as:
An Enterprise Fund is a type of Proprietary Fund.
Shared Revenues received by a Proprietary Fund for operating purposes should be recorded as Non-Operating Revenues in the period in which they are earned and become measurable.
Which format must an Enterprise Fund use to report cash flow operating activities in the Statement of Cash Flows?
According to GASB Codification Section 2450.128, governments are required to use the direct method to report cash flow from operating activities in the Statement of Cash Flows. The government should also report, in an accompanying schedule, the reconciliation between Operating Income and Cash Flow from Operating Activities [GASB Codification Section 2450.129].
An Enterprise Fund transfers employer contributions to the Pension Trust Fund. Which of the following best describes the effect of the transaction on each fund?
The Enterprise Fund reports expenses related to its contribution toward the employee pension plan. The Pension Trust Fund is a Fiduciary Fund and reports the amounts received from the Enterprise Fund as additions to the fund.
Which of the following financial statements are required for a Tax Agency Fund?
Agency Funds prepare a Statement of Net Position and a Statement of Changes in Net Position. Since Agency Fund assets are always completely offset by liabilities, they do not report Net Position (assets - liabilities = 0). Agency Funds collect and distribute funds (e.g., property taxes) and do not recognize either revenues or expenditures.
The City of New Hope Rotary Club, a private, not-for-profit organization, recently ended a fund drive that raised $500,000 to be used as a scholarship fund.
The $500,000 is to be used to create an endowment that will be invested and retained in perpetuity and the earnings used to provide college scholarships to outstanding local high school graduates selected by the Rotary Club. The City has agreed to manage the investment and disbursement of these monies on behalf of the Rotary Club.
The City should account for the $500,000 corpus of the endowment in a(n):
A Private-Purpose Trust Fund is used to account for resources, both expendable and non-expendable, which either must be used for a non-governmental purpose or the earnings from which have to be used for a non-governmental purpose.
As in this case, Private-Purpose Trust Funds usually disburse monies to individuals or organizations outside the governmental entity.
Which of the following are reported for a Private-Purpose Trust Fund?
Private-Purpose Trust Funds report all changes in Net Position, as either additions or deductions.
What are the 5 types of interfund transactions?
There for five types of interfund transactions: (1) loans, (2) reciprocal quasi-external transactions, (3) reimbursements, (4) residual transfers, and (5) operating transfers. A reciprocal transaction occurs from doing business with one another, such as the billing of services by an internal service fund to other funds/departments in the government.
The General Fund pays an invoice for telecommunications that includes charges owed by the Water Utility Enterprise Fund. The Enterprise Fund subsequently remits its share of the telecommunications charges to the General Fund. The General Fund records the amount received from the Enterprise Fund as:
Interfund Reimbursements are Nonreciprocal Transactions in which a government determines that an expenditure or expense was initially recorded in one fund and should be accounted for and reported as an expenditure or expense in another fund. In this example, the General Fund paid and recorded as an expenditure all of an invoice that included a portion that pertained to another fund. The reimbursement from the Enterprise Fund should be recorded as a decrease in expenditures in the General Fund, to offset that portion previously recognized as an expenditure in the General Fund that was attributable to the Enterprise Fund. The Enterprise Fund should record an increase in expense at the time the reimbursement is made.
