FAR Government Flashcards
What type of non exchange transaction is a 2% tax on hotel charges
It is a non exchange transaction because you exchange hotel use for cash
- It is a derived tax revenue (non exchange transaction) ) because it is an assessment imposed on an exchange transaction
- exchange - because you trade a hotel stay for cash
- derived - because the tax results from the exchange
When you have an internal service fund - and have a net increase in net assets - how does this impact the governmental activities
- internal service funds are classified as gov activities on gov. wide statements
- So if you have an increase in an internal service fund (9,000) you will add that to the the 25k increase in fund balance for total gov. funds
- 25K + 9k = 34 net change in assets for governmental activities
What is included in the first section of the CAFR introductory section
- Letter of Transmittal
This is followed by the financial section:
- Auditor's report - MD&A - gov wide and fund financial statement - Notes to F/S - Required Supplementary Info
Lastly is statistical section - which is not required
When reconciling the Statement of Revenues, expenditures, and changes to fund balance to Gove-Wide statement of activities - what do you need to subtract from changes in fund balance
- Book Value of capital Assets sold during the year
You do this because Government -wide statements of activities would only report the GAIN while fund statement would report total proceeds from the sale
For the general fund - what are considered revenues
- these are funds that are derived from taxes, assessments, fines and activities of the gov.
- $ from debt and money from other funds are called: Other Financing Sources
What funds prepare a statement of cashflows
Enterprise funds including utilities use accrual methods and have a statement of cash flows
Cash outflows from a city utility representing payments in lieu of property taxes appear on what statement and for what type of fund
Enterprise fund - statement of cashflows
When is an enterprise fund used
- for activities where you provide goods and services in exchange for VOLUNTARY payments
- it used when Net income info is required
- it is used for an entity that eater partially or wholly is supported by voluntary payments or customer fees - example municipal landfill where the loss are to be recovered with charges to customers
What kind of fund is used when the accounting for the financing of an agency’s services to other government departments be on a cost - reimbursement basis
The is an internal fund
How does the general fund report transfers to other funds
- These are Other financing Uses as a form of expenditure under modified accounting
How do Enterprise, Internal, and pension trusts transfer funds to other funds
The are Receivables
What do you do with Interest expense and interest accrued on Government wide statements
- Government wide are accrual based so -
interested is expensed when paid and is accrued as interest payable
What is included in the MD&A section
It include comparative info to last year with emphasis on current year
- Overall and individual fund financial statements
- variance analysis information
- info about long term activities and expected events
What is it called when an Enterprise fund or Internal Fund receives an Unrestricted Grant from another government
If they are Unrestricted to either operating or capital functions they are considered “Nonoperating Revenue” on the Statement of Revenues, Expenses, and Changes in Fund Net Assets
An increase to PBO is what
A PBO Loss
A decrease in PBO is what
A PBO Gain
What is the pension equation for PBO
Beginning PBO \+ Service cost \+ Interest Cost \+ Prior year service cost - Prior year service credit \+/- Liability Gain/Loss = ending PBO
Where does annual pension expense go and where does excess amortization of PBO and Plan Asset so
Pension expense - is an I/S Item
Excess amortization PBO and Plan Asset - OCI
The PBO is a balance sheet item - Non current Liability (deferred liability)
what does the balance sheet reflect regarding the funded status of a defined-benefit pension plan
Funded status = PBO - Plan Assets
If PBO is greater than Plan Assets - liability
If Plan Assets is greater than PBO - net asset
example: Plan Asset - 62K
PBO 68,100
68,100 - 62,000 = 61,00 liability on the balance Sheet
What is the service cost and how is it calculated
Service cost is the increase in PBO that results from services performed by the employees during the current year
- they are the benefits earned
Property tax is an example of what kind of revenue source
imposed nonexchange revenue
these are defined as assessments imposed on non governmental entities, including individuals, other than assessment on exchange transactions
Personal income tax is an example of what kind of derived revenue
derived tax revenue
“resulting from assessments imposed on exchange transactions - general from earnings or consumption - such as sales tax and income tax”
Under modified accrual - revenues can only be accrued if considered available which means
collectible within 60 days
anything called “not available” means that it is outside of the 60 day window and therefore would not be included on the modified accrual statements for governmental funds
Are salaries payable, revenue receivable, or liabilities payable within 60 days accrued on the modified accrual based statement?
YES! as long as they are in the 60 day window that will appear on the modified accrual statement
Dayne County’s general fund had the following disbursements during the year:
Payment of principal on long-term debt $100,000
Payments to vendors $500,000
Purchase of a computer $300,000
What amount should Dayne County report as expenditures in its governmental funds statement of revenues, expenditures, and changes in fund balances?
900,000
A governmental fund financial statement is prepared on the modified accrual basis and therefore utilizes the expenditure principle, which requires that virtually all outflows be recorded as expenditures. The GAAP principles of matching and amortizing costs do not apply. Therefore, all the costs given are reported as expenditures, for a total of $900,000 (100,000 + 500,000 + 300,000 = 900,000).
Carlson City’s fiscal year ends December 31. On August 1, the city issued a purchase order for new vehicles to be delivered at the rate of two per month beginning October 15. Twelve vehicles were delivered as scheduled and payments of $264,000 were made upon delivery. If these were the only transactions made by the city, which of the following balances would appear on the balance sheet as of December 31?
dr Fund balances $132,000
cr Reserved for encumbrances $132,000
Because the vehicles were delivered at a rate of two per month starting in October, and twelve vehicles were delivered in all, only six vehicles were actually delivered and paid for during the fiscal year ending December 31. Therefore, half of the funds (1/2 X $264,000 = $132,000) for the vehicles would still be encumbered as of December 31. The balance sheet would therefore show both a fund balance of $132,000 and a Reserved for encumbrances balance of $132,000.
How should state appropriations to a state university choosing to report as engaged only in business-type activities be reported in its statement of revenues, expenses, and changes in net position?
Nonoperating revenues.
State appropriations to a state university would be reported as nonoperating revenues in its statement of revenues, expenses, and changes in net assets, because they are revenues which do not arise directly from the university’s operations.
Harland County received a $2,000,000 capital grant to be equally distributed among its five municipalities. The grant is to finance the construction of capital assets. Harland had no administrative or direct financial involvement in the construction. In which fund should Harland record the receipt of cash?
agency fund
Because Harland County will have no administrative or direct financial involvement in the construction of the capital assets, but will rather be acting as an agent for other entities by distributing the funds, the cash should be recorded in an agency fund.
What is the modified approach regarding assets
the modified approach is when infrastructure assets are not required to be depreciated if certain requirements are met
- Instead expenditures for assets that meet the requirements are EXPENSED as incurred.
Must disclose when the modified approach is used information about the condition of the assets and the cost to maintain and preserve them
They would NOT be depreciated on the government wide statement of activities
What do you do in a debt service fund
You make principle and interest payments on debt service fund
A debt service fund is used to make principal and interest payments on the tax supported debts of the government and collect funds for that purpose. Funds accumulated for both principal and interest are accounted for in the debt service fund. Related items that may be accounted for in the general fund include transfers made to the debt service fund for the payment of principal or interest.
Edgerton Township ordered a machine at an estimated cost of $3,500, which had not been delivered as of the end of its fiscal year. The machine was delivered early in the next period at an actual cost of $3,800. Which of the following entries will be made when the machine is delivered?
dr expenditure - prior year 3500
dr expenditure 300
cr vouchers payable 3800
When the machine is delivered at an actual cost of $3,800, a voucher payable will be recognized with a credit in that amount. Since the machine had been ordered in the previous year, the budgeted amount of $3,500 will be recognized as an expenditure related to the prior period and the excess of $300 will be recognized as an expenditure in the current period.
A city taxes merchants for various central district improvements. Which of the following accounting methods assist(s) in assuring that these revenues are expended legally?
fund accounting, budgetary accounting?
Both find accounting and budgetary accounting
Both fund accounting and budgetary accounting assist in assuring that government revenues are expended legally. Fund accounting segregates financial resources into sets of self-balancing accounts with each set controlled by a government entity with a specific mission and legal restrictions on the use of the resources. Budgetary accounting is based on forecasts and estimates, and enables the planning, preparation and tracking of a balanced budget wherein estimated expenditures equal estimated revenues and legal restrictions on use of funds are followed.
The statement of activities of the government-wide financial statements is designed primarily to provide information to assess which of the following?
Operational accountability
GASB 34 specifically identifies the provision of “operational accountability information for the government as a whole” as a primary purpose of government-wide financial statements.
what is a private trust for
these r to benefit individuals, organizations aor other governments
What are special revenue funds for
- these are resources that are restricted as to use but There is NO untouchable principle
what is the key distinguishment with an enterprise fund
they are partially or wholly supported by voluntary payments - like customer fees
On December 31, year 1, Andover Co. acquired Barrelman, Inc. Before the acquisition, a product lawsuit seeking $10 million in damages was filed against Barrelman. As of the acquisition date, Andover believed that it was probable that a liability existed and that the fair value of the liability was $5 million. What amount should Andover record as a liability as of December 31, year 1?
It was both probably and estimable and therefore should be accrued for 5M
n a compensatory stock option plan for which the grant, measurement, and exercise date are all different, the stock options outstanding account should be reduced at the
The exercise date
In a compensatory stock option plan, stock options outstanding, an additional paid-in capital account, is increased for the amount of compensation expense. At the time the options are exercised, common stock and additional paid-in capital are increased while cash is increased for the amount received and the stock options outstanding account is decreased for the amount that relates to the options being exercised.
During the current year, Wythe County levied $2,000,000 property taxes, 1% of which is expected to be uncollectible. During the year, the county collected $1,800,000 and wrote off $15,000 as uncollectible. What amount should Wythe County report as property tax revenue in its government-wide statement of activities for the current year?
1980,000
Government-wide financial statements are prepared on the accrual basis. Therefore, tax revenue is reported as taxes levied net of any expected uncollectible amounts. In this case, the calculation is $2,000,000 (taxes levied) - $20,000 (1% expected uncollectible amount) = $1,980,000.
Quasi reorg -
Common stock, $30 par, 10,000 shares $300,000
Additional paid-in capital $150,000
Retained earnings (deficit) $(210,000)
On January 2, 20X5, Brown put into effect a stockholder-approved quasi-reorganization by reducing the par value of the stock to $5 and eliminating the deficit against additional paid-in capital. Immediately after the quasi-reorganization, what amount should Brown report as additional paid-in capital?
RE = 0
C/S = 5 *10,000 = 30,000
This is a reduction of 250,000
RE was decreased by 210,000 which you remove from the par value so
250,000 - 210,000 = 40,000 still remaining
the 40 still remains so it is added to APIC that already exists:
150,000 + 40,000 = 190,000
How are these things reported on the government wide statement of net position
inventory with a short term loan
road construction with A/D
equipment with A/D
Bonds payable
reported as the net investment in capital assets
The net investment in capital assets is the total of capital assets reduced by accumulated depreciation and obligations, including bonds, mortgages, notes, and other borrowings, that are associated with the acquisition, construction, or improvement of capital assets.
so inventory reduced by note
Road construction minus A/D
Bonds Payable - subtract
Equipment minus A/D
What is “Total Revenues/ Gains and other support on the Statement of Operations
This is Net Patient service revenue
P Patient service Revenue ( gross amount (no charity here)
P (-) Insurance reimbursement
N = Net patient Service revenue
O (+) Other operating Revenue (Earned)
(parking lots and cafeteria, Donated medicine , RESTRICTED GRANTS, Net assets RELEASED from restrictions
O (-) Operating Expenses ( bad debt, drugs, Salaries G & A)
= Results from Operations
N ( Non operating Revenues (unearned) ( UNRESTRICTED donations, UNRESTRICTED Interest and Dividend income
Donated Services)
E - Performance indicator - excess of Rev and Gain over Exp and Losses
Whats included in estimated revenues and estimated other financial sources
Revenues = property Tax, License and permits, AND intergovernmental grants/revenues
Estimated other financial sources - these are operating transfers
How do you record the collections of revenue
It is recorded as all taxes levied during the year net of allowances for uncollectability
A Government billed 120K in property taxes
15% was expected to be uncollectible
Actual collected amounts were $106
What is the amount recognized as revenue
Revenue is the amount you collected
What are special revenue funds used for and examples
They are used to account for revenues that are restricted or committed for things other than capital projects or debt services
gasoline tax for road repairs
How do you classify funds that are levies on affected property owners to install sidewalks
This is an agency fund if the government is simply acting as a facilitator be collecting and disbursing the funds
It could also be accounted for in a debt service fund if the levies are used to repay a bond that was issued to install the sidewalks
What are the objectives of financial reporting of state and local governmental entities
- to be publicly accountable
- to assist users in evaluating the operating results of the entity of the year
- for users to assess the government’s ability to meet its obligations as they come due
What kind of revenue is property tax
imposed nonexchange revenue
What kind of revenue is personal income tax
derived tax revenue
What kind of revenue is a 2% hotel surcharge
derived tax revenue
What kind of revenue is retail sales tax
derived tax revenue
What kind of revenue is federal grant money
government mandated nonexchainge revenue
this is when one part of the gov gives to anoretic part of the gov and specifies that it is for a specific purpose
What is a private purpose trust
these are intended for the benefit of individuals, organizations , or other governments - do not have to be in perpetuity
What is the big distinction with the permanent fund
The principle must be invested in perpetuity
What is in the MD&A section
MD&A for a local government is an integral component of its basic financial statements
It is required to include information on a comparative basis with the prior year, overall and individual fund financial statements, variance analysis information, and information about long-term activities and expected events.
.
What are reciprocal inter fund activities
these are inter fund loans, and inter fund services provided and used
What are nonreciprocal transfer
These are transfer to establish a new fund and routine inter fund reimbursements
Using the modified approach
This is like bridges etc.
Expenditures for assets are expense as occurred
there is no depreciation recorded
but - you must disclose info about the condition of the asset and the costs to maintain an d preserve them
What is the difference between fund accounting and budgetary accounting
fund accounting segregates financial resources into sets of self - balancing accounts
Each one is controlled by a governmental entity with a specific mission an legal restrictions on the use of the resources
Budgetary accounting is based on forecasts and estimates
enables the planning, preparation and tracking of a balanced budget wherein estimated expenditures equal estimated revenues and legal restrictions on use of funds are followed.
Do enterprise fund report operating revenues
yes they do on the statement of revenues, expenses and changes in fund net assets
What Method of Accounting?
Enterprise Fund Fixed Assets
Accounted for in a proprietary Fund
What Method of Accounting?
Capital Projects Fund
Accounts for Major construction activities
What Method of Accounting?
General Fixed Assets
Accounted for in a self-balancing account group
What Method of Accounting?
Infrastructure Fixed Assets
Reporting is optional
the fund incurring the cost recored the amount incurred as an expenditure
Can report in the general fixed asset group,but not required to do so
What Method of Accounting?
Enterprise Fund Cash
Proprietary Fund
What Method of Accounting?
General fund
Accounted for in a self-balancing account group
- accounts for property tax - one of the main sources of revenue
What Method ofAccounting?
Agency Fund
Accounted for in a fiduciary fund
What Method of Accounting?
general long term debt
Accounted for in a self balancing account group
Proceeds from debt are recognized as OTHER FINANCING SOURCES by the fund receiving them
The liability is recorded in the general long term debt account group - which is self balancing
What Method ofAccounting?
Special revenue fund
Accounting for in a self balancing fund
These are earmarked for financing of special activities
similar to general revenue fund but earmarked for a specific purpose
What Method of Accounting?
Debt Service Fund
Accouted for in a self-balancing account group
accounts for payment of interest on tax supported debt
general obligation funds - makes the payments of principle and interest on the bonds
JE:
General Obligation Bonds were issues at par
Dr Cash
Cr Other Financing Sources
JE:
Approved purchase orders were issued for supplies
Dr encumbrance control
Cr Fund Balance reserved for encumbrances
JE
Supplies are received and invoices were approved
dr expenditures control
cr encumbrances
JE
general fund salaries and wages were incurred
dr expenditures
cr salaries payable
JE:
Internal Fund had inter fund billings
dr Receivable due from other gov dept
cr. interfund revenues
JE:
Revenues were earned from a perviously awarded grant
When first awarded:
dr cash
cr deferred revenue
When later earned:
dr deferrred revenues
cr revenues
JE:
Property Taxes were collected in advance
dr cash
cr deferred revenue
JE
Appropriated were recorded on adoption of the budget
dr estimated revenues
cr appropriations
and dr or cr budgetary fund balance to balance the equation
JE:
Short term financing was received from a bank secured by the citys taxing power
dr cash
cr tax anticipation notes payable
JE:
there was an excess of estimated inflow over estimated outflows
when budget is recorded:
dr estimated revente
dr estimated other financing sources
cr appropriations
cr estimated other finance uses
the difference is recorded as an adjustment to budgetary fund balance
if estimated inflow exceed estimated outflows - then is a cr to budgetary fund balance
if estimated inflow is less than estimated outflows then is a dr to budgetary fund balance
