M4 - Government-wide Financial Statements

Question 1

Compensated absence liability should be calculated based upon the pay or salary rates in effect at the?

Answer 1

balance sheet date.

The valuation of the noncurrent liability on the government-wide statement of net position will be equal to the number of hours employees are entitle to receive upon termination times the rate of pay earned at the balance sheet date, a point in time.

Question 2

Capital assets donated to a governmental unit should be recorded at their estimated fair value at time of acquisition, plus ancillary charges, if any. (true or false)

Answer 2

true

Question 3

The property retained by the government becomes a general capital asset in the governmental activities column of the government-wide statement of net position and is capitalized at the lower of cost or market. (true or false)

Answer 3

True.

The amount capitalized on its government-wide F/S would be consistent with the treatment afforded to acquired property used in commercial accounting.
Although donated property is recorded at its FV, other acquired property is recorded at the lower of cost or market.

Question 4

For purposes of government-wide F/S, internal service funds are normally reported in the governmental activities column of the government-wide Statement of Net Position and the Statement of Activities since they are generally established to service the governmental funds. (true or false)

Answer 4

true

Question 5

Usually the enterprise funds are exclusively reported in the business-type activities column since the internal service funds are established to service the governmental funds. (true or false)

Answer 5

true

Question 6

The estimated total current cost of a municipal solid waste landfill closure and post closure should be accrued as what?

Answer 6

estimated total current cost

Regardless of their capital or operating nature.

Question 7

Equipment, facilities, and services purchased previously included in the estimated current cost of closure and post-closure care should not be reported as capital assets but should be reported as a reduction of the accrued liability in the general long-term liabilities displayed in the government-wide F/S when they are acquired. (true or false)

Answer 7

True

Question 8

Proprietary funds, such as enterprise funds, carry their own debt. Amounts associated with “enterprise fund” debt is statement of net assets. (true or false)

Answer 8

true

Question 9

The government-wide F/S are prepared using the economic resources measurement focus and the full accrual basis of accounting. Therefore interest expense should include:

Answer 9

all interest accrued to year end and interest payable should include the amount accrued after the interest payment.

Question 10

Capital leases are treated as if a purchase of fixed assets with related debt for net present value of lease payments. (true or false)

Answer 10

True

Question 11

Government-wide financial statements should classify net assets as:

Answer 11

1. Net investments in capital assets
2. Restricted
3. Unrestricted

Question 12

Classification of net assets as
-permanently restricted
-temporarily restricted
-Unrestricted
are used in not-for-profit entities, not governments. (true or false)

Answer 12

true

Question 13

Under the modified approach, infrastructure expenditures are reported as expenses except for outlays that result in additions or improvements, which would be capitalized (true or false)

Answer 13

true

Question 14

The modified approach allows governments to not report depreciation expense for eligible infrastructure assets if:

Answer 14

a) the government manages the eligible infrastructure assets using an asset management system that possesses certain characteristics and
(b) documents that the eligible infrastructure assets are being preserved at (or above) a condition level established by the government.

The government must report the assessed condition of the infrastructure every 3 years and the estimated annual amount to maintain and preserve the conditions level established and disclosed.

Question 15

When government-wide F/S are prepared for a governmental entity, interfund receivables and payables that occur between funds categorized as governmental activities and funds classified as business type activities should be reported as internal balances and aligned so that they sum to zero on the financial statements. (true or false)

Answer 15

True

They are not eliminated from individual fund activities prior to preparation of the government-wide F/S.

Question 16

If a primary government’s general fund has an equity interest in a joint venture, all or a portion of this equity interest should be reported in the:

Answer 16

Government-wide statement of net position

Since the general fund has the equity interest, only the available and expendable portion of the investment should be recorded in that fund. The available and expendable portion would not include any equity interest. The portion of the equity interest in the joint venture that represents the government’s investment in the net position of the venture is recorded in the government-wide statement of net position.

Question 17

Since proprietary funds and trust funds use the full accrual basis of accounting and economic measurement focus, fixed assets of those funds are accounted for within those funds. All other fixed assets of the governmental unit are considered general capital assets and are recorded in the governmental activities column of the government-wide statement of net position. (true or false)

Answer 17

true

Question 18

When special assessment debt is to be repaid from general resources of the government, the debt should be recorded as general long-term liabilities in the governmental activities column of the government-wide statement of net position. (true or false)

Answer 18

true

Any debt that is to be repaid from general resources would be displayed in this way.

Question 19

The categories of program revenue are

Answer 19

S charges (for Services)
O Operating grants and contributions
C Capital grants and contributions

The government can SOC away these revenues.

Question 20

Donated works of art meeting certain criteria are eligible for optional capitalization at the election of the government receiving the works of art and depreciation is not required even if the government elects to capitalize. (true or false)

Answer 20

True

To qualify for this treatment,

• the works of art must be held for public exhibition,
• be protected/unencumbered
• and the proceeds from the sale of any of the works must be reinvested in more works of art.

Question 21

Capital lease obligations associated with general governmental activities are recorded as an asset and as a liability on the full accrual government-wide financial statements. Governmental fund financial statements would record it as what?

Answer 21

It would record the asset financed by a capital lease as an expenditure and the lease financing as other financing sources under the modified accrual accounting.

Question 22

The government-wide F/S are presented using the economic resources measurement focus, a set of principles that requires display of all noncurrent liabilities in addition to current liabilities. (true or false)

Answer 22

true

Question 23

The statement of activities includes separately displayed categories of program revenues. Categories include:

Answer 23

S charges (for Services)
O Operating grants and contributions
C Capital grants and contributions

The government can SOC away these revenues.