FAR 15

Question 1

Proprietary funds use the same J/E as Commercial business’s - Full Accrual

What is the J/E for an internal service fund that sells two vehicles for $5,000. That had a cost of $6,000 and Carrying value of $4,000?

Answer 1

Dr Cash 5,000
Dr A/D 2,000
Cr Vehicles 6,000
Cr Gain 1,000

Question 2

Which type of school public or private NFP recognized depreciation expense?

Answer 2

Private - Yes

Public - no

Question 3

What portion of expenses are included in the Year 1 expenses for a Municipal Solid Waste Landfill (MSWLF) for the portion of money that will be disbursed at the end of the landfills useful life?

Answer 3

Cost of equipment to be installed to monitor methane gas buildup

Cost of final cover (capping) expected to be applied on the landfill near or after the MSWLF stops accepting solid waste

Question 4

What is the J/E for an internal service fund rendering services to another governmental unit? Ex: Billed governmental unit $150,000 for data processing services.

Answer 4

Dr Due from Other Funds 150,000
Cr Operating Revenues Control 150,000

Question 5

Are Cash flow statements required for Governmental utilities and Public benefit corporations?

Answer 5

Yes both fall under Proprietary funds

Question 6

What is the equation for Accrued compensation balances?

Answer 6

Beg balance of Liability + Accrued compensation absence expense - Payments = Ending balance of liability

Question 7

What affects an internal service funds net position? What would appear on the Balance Sheet?

Answer 7

Interfund transfers out

Depreciation expense on its fixed assets

Interfund transfers in

Balance Sheet: Due from other funds

Question 8

How are shared revenues received recorded by a proprietary fund from another governmental unit?

Answer 8

Non-Operating Revenues

Question 9

How is a non-reciprocal transfer (cash received from the general fund to the Internal service fund) credited?

Answer 9

Non-reciprocal transfer would be recorded as a $50,000 credit to transfers

Question 10

How are operating grants and subsidies such as state appropriations treated and what do they represent?

Answer 10

represent non-exchange transactions since the revenue is not from the day to day operations

Reported in the statement of revenues, expenses and change in net position as Non-operating revenues.

Question 11

What budget is a pass through grant recorded?

Answer 11

Fiduciary fund - Custodial Fund

Question 12

The debt service transactions of a special assessment bond issue for which the government is NOT obligated in any manner should be reported in the:

Answer 12

Custodial fund

Governmental unit has no direct responsibility but simply acting as a custodian in a fiduciary capacity for a third party

No responsibility regarding debt service if payers default

Question 13

What transaction would be classified as an expenditure of a governmental units GENERAL fund?

Answer 13

Routine employer contributions from the general fund to a pension TRUST fund

Question 14

What are the F/S required for an Investment Trust fund?

Answer 14

Statement of Fiduciary Net Position (Balance Sheet)

Statement of change in net position (Income Statement)

Question 15

What is the J/E for a State government Custodial fund that collects income taxes for the benefit of one of its cities on income tax collection of residents? What is the initial and subsequent J/E’s?

Answer 15

Initial Recording: Dr Cash
Cr Additions: Tax collections for other Governments

Subsequent Disbursement: Dr Deduction: Payment of tax collections to other Governments
Cr Cash

Question 16

What activity is excluded when Gov’t fund statements are converted into Gov’t wide F/S?

Answer 16

Fiduciary funds - cannot be used to support Gov’t programs or other services

Held for a 3rd party

Question 17

What is true about the statistical section of the Annual Comprehensive Financial report (ACFR) of a Gov’t unit is true?

What are the 3 sections?

Answer 17

The statistical section is not part of the basic F/S

Introductory section, basic F/S & supplementary information as mandated by GASB 34, and the statistical section

Question 18

Does the ACFR require a statistical section? is the introductory and statistical section audited?

Answer 18

Yes its the 3rd requirement

No both section are not audited

Question 19

Does the MD&A Introduce (precede) the basic F/S and provide analytical overview in a Gov’t F/S?

Answer 19

Yes, MD&A is part of the city’s required supplementary information BEFORE basic F/S.

Question 20

What is the focus of Gov’t wide F/S designed to do when providing information regarding the statement of activities? Fiscal accountability is not a focus of Gov’t wide F/S. - short term view

Answer 20

Operational Accountability - demonstrates it has met its operating objectives and its ability to meet future obligations

economic view that reports on the L/T efficient and effective use of resources

Question 21

What are the two acceptable methods when a City Gov’t is the primary reporting entity representing its component units in its combined F/S?

Answer 21

Either Discrete presentation or blended method

Question 22

What is the measurement focus & basis of accounting for Gov’t wide F/S?

Answer 22

Economic resources & Accrual method - similar to commercial enterprises

Question 23

What is included in the Intro section of a local Gov’t annual comprehensive financial report?

Answer 23

Letter of transmittal

Question 24

What is a minimum requirement for the basic F/S of a Gov’t entity?

Answer 24

Fund Financials statements

Question 25

What are the 2 F/S and 1 supplementary information by GASB 34 regarding the basic F/S that are reported?

Answer 25

Gov’t Wide F/S

Fund F/S

Notes to the F/S

Question 26

What would classify a component unit to be reported in a blended manner?

Answer 26

Rule: When component unit is so intertwined with the primary Gov’t that it is in substance the same as the primary Gov’t.

One indication is that it fails to be a “legal entity” test.

Entities that are not legally separate entities are blended with the primary Gov’t.

Question 27

What makes up a discrete component unit?

Answer 27

Always assume this unless stated otherwise

Legally separate entity

Not substantially the same at the reporting Gov’t and the reporting unit does not exclusively service or benefit the Gov’t entity itself

Question 28

Where is NCI reported in a consolidation?

Answer 28

Recognized in the equity section of the Consolidated Balance Sheet

Question 29

What is the correct accounting treatment when compensatory stock options expire because the employee did not exercise? What is the J/E?

Answer 29

Reclassify the APIC accounts to reflect the expired stock options

Dr APIC - Stock Options
Cr APIC - expired stock options

Question 30

What are identifiable intangible assets in an acquisition that could lower goodwill? What are they measured at?

Answer 30

Update customer lists, active issued patents, un-patented technology - valued at Fair Value

More than can be allocated to Identifiable intangible assets the less that can go to goodwill

Question 31

What would increase goodwill?

Answer 31

Technical expertise

Question 32

How are Equity securities reported?

Answer 32

Unrealized G or L at Fair value through net income

Question 33

What Future value or present value amount do you use when annuity payments are made at the beginning of the month? What is the equation for accumulating a million dollars in 4 periods?

Answer 33

Future amount of annuity in advance due

Four annual deposits = $1,000,000/ Future amount of annuity in advance due: 5.11

Question 34

When a deferred Tax Asset is more likely than not to be realized in the future, what is the Journal Entry to write down the DTA?

Answer 34

Dr Interest Expense
Cr Deferred Tax Valuation allowance account

Question 35

What is the formula for total Accretion Expense? What is the original J/E & what method of depreciation is used?

Answer 35

Total ARO expense = S/L Dep. + Accretion

Dr Asset Retirement Cost
Cr ARO