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Ch7-10 Student: _ Internal service funds of one government may not provide goods or services, on a cost-reimbursement basis, to other governments True Revenues of internal service funds should be recognized only when they are expected to be collected in time to pay current liabilities of the fund True False Internal service funds account for any long-term liabilities to be serviced from revenue derived from fund operations True False Internal service funds should not account for depreciation of capital assets used in their operations, since this would, in effect, charge the government twice for the same assets True False Internal service funds should account for operating expenditures on the full accrual basis True False False The fund equity of an internal service fund consists of contributed equity and reserves for assets that will not be converted into cash in the normal operation of the fund True False Cash: 350,000 Inventory of Supplies: 38,700 Interfund Loan from Electric Utility Fund: 320,000 Interfund Transfer In from General Fund: 89,200 In the entry above the account "Interfund Loan from Electric Utility Fund" is credited for $320,000 because this amount was loaned by the electric utility fund to the supplies fund and will have to be repaid by the supplies fund True In the information above the account "Interfund Transfer In from General Fund" is credited for $89,200 because this is the amount of assets that was transferred from the General Fund to the supplies fund as a contribution True False False Internal service funds are intended to operate on taxes or other financing sources authorized by the legally enacted revenue budget for each year; therefore, they are classified as governmental funds True False 10 Proprietary funds are accounted for in a manner similar to investor-owned businesses: among other features, the full accrual basis is used and all of the capital assets used in fund operations are accounted for by the using fund True False 11 The Encumbrances account should be used by an internal service fund in the same manner as by the General Fund True False 12 If an internal service fund is created to improve the management of resources devoted to the supply function, the supplies fund should use periodic inventory accounting instead of perpetual physical inventory accounting True False 13 Capital assets acquired under a capital lease for use by an internal service fund should be recorded in the General Fund in order to report all leased assets in one financial statement True False 14 A statement of revenues, expenses, and changes in net assets for an internal service fund is similar in many respects to an income statement prepared for an investor-owned business True False 15 A statement of cash flows is not prepared for an internal service fund True False 16 An internal service fund can be liquidated only if a ready and willing buyer for the fund's assets exists True False 17 Public utilities owned and operated by governments are the most common examples of enterprise funds True False 18 Enterprise funds are used by state and local governments to account for services that are provided to the general public on a user-charge basis, or to account for any services that the governing body of the government has decided should be accounted for on a "business basis." True False 19 Budgets for enterprise funds should be recorded in the accounts in the same manner as budgets for a General Fund or a special revenue fund True False 20 Unbilled customer accounts receivable should be reflected in the balance sheet of a governmentally owned utility even though the exact amount of service to be billed is unknown until the customers' meters can be read True False 21 The liability for utility revenue bonds should be reported in business-type activities on the government-wide statements, but not in the enterprise fund True False 22 General obligation bonds used to increase the capacity of a water treatment plant (part of a water utility enterprise fund), but for which the debt service (including repayment of principal) will be paid from general government revenues should be reported as a long-term liability in the water utility fund balance sheet True False 23 Matured interest and principal on revenue bonds should be recorded in a debt service fund until paid True False 24 Utility enterprise funds that report to regulatory agencies often capitalize both actual interest paid on debt incurred for construction of plant assets and an imputed amount on their own funds so used True False 25 In the context of regulatory utility plant accounting, original cost and historical cost have the same meaning True False 26 The amount of expense and liability to be reported each period for the closure and postclosure costs of a municipal solid waste landfill (MSWLF) is proportional to the amount of landfill capacity used during the period True False 27 The balance sheet format recommended by the NARUC and FERC for utilities subject to regulatory reporting requirements shows Utility Plant before Current and Accrued Assets and Long-Term Debt before Current and Accrued Liabilities True False 28 To facilitate the combination of utility financial statements with the statements of other enterprise funds, GAAP permits utilities to follow the customary format used by nonutility business organizations True False 29 The liability for tax-supported long-term debt issued to provide financing for an enterprise fund and to be serviced from revenues of the enterprise fund should be reported in the financial statements of the enterprise fund True False 30 Premium or discount on bonds payable issued by enterprise funds should not be accounted for in the same manner as premium or discount on tax supported bonds payable reported at the government-wide level True False 31 Plant and equipment utilized by a governmentally owned utility should be depreciated in the same manner as if it belonged to an investor-owned utility True False 32 Which of the following may properly be reported as a component of equity in the proprietary fund statement of net assets? A Retained earnings B Designated equity C Restricted net assets D Contributed capital 33 Internal service funds should be used only if A The reporting government is the predominant participant in the activity B The reporting government provides services primarily to external participants C Either A and B D Neither A nor B 34 Which of the following funds of a government uses the same basis of accounting as an enterprise fund? A Permanent trust B Investment trust fund C Special revenue D Capital projects 35 In which of the following funds is it appropriate to record depreciation of capital assets? A Enterprise fund B Permanent fund C General fund D Capital projects fund 36 Which of the following is a difference between enterprise funds and internal service funds? A The use of cost accounting by enterprise funds but not internal service funds B The identity of those who benefit from the fund's service C The number of basic financial statements required D The measurement focus on economic resources for enterprise funds and current financial resources for internal service funds 37 Depreciation on capital assets used by an enterprise fund of a government A Should not be recorded for infrastructure assets B Should be recorded in the General Fund as an expenditure C Should be recorded in the enterprise fund by a debit to an expense account D Should be recorded in the governmental activities accounts 38 Which of the following is not true regarding proprietary funds? A The difference between assets and liabilities of proprietary funds is called "fund balance." B Proprietary funds record long-term debt directly in the fund accounts C Proprietary funds record capital assets directly in the fund accounts D Proprietary funds report a statement of cash flows 39 The comprehensive annual financial report (CAFR) of a government should contain a statement of revenues, expenses, and changes in net assets for A Both proprietary and governmental funds B Proprietary but not governmental funds C Governmental but not proprietary funds D Neither governmental nor proprietary funds 40 Which of the following activities or services would most likely not be accounted for by an internal service fund? A Electronic data processing B Central purchasing, warehousing, and issuing of supplies C Municipal golf course D Risk management 41 Which of the following is (are) an appropriate basis of accounting for an internal service fund? A Modified accrual basis: No; Full accrual basis: Yes B Modified accrual basis: No; Full accrual basis: No C Modified accrual basis: Yes; Full accrual basis: No D Modified accrual basis: Yes; Full accrual basis: Yes 42 Which of the following funds of a government would account for depreciation in the accounts of the fund? A General B Internal service C Capital projects D Special revenue 43 An internal service fund normally uses which of the following budgetary accounts? A Estimated Revenues B Appropriations C Encumbrances D None of the above 44 In order to conform to GASB standards, goods and services provided by internal service funds to other departments of the government must be priced to A Cover variable costs only B Cover full costs (both fixed and variable) C Cover full costs, plus an additional charge to cover inflation and anticipated needs for expansion D None of the above Each government determines its own operating and pricing policies, which may include subsidizing the cost of operating an internal service fund 45 An internal service fund should prepare, in conformity with GAAP, all of the following financial statements except for a A Statement of revenues, expenditures, and changes in fund balance B Statement of revenues, expenses, and changes in net assets C Statement of net assets D Statement of cash flows 46 What amount should be accounted for in an internal service fund? A $ 350,000 B $2,100,000 C $1,760,000 D $1,640,000 47 What amount should be accounted for in an enterprise fund? A $ 350,000 B $2,100,000 C $1,760,000 D $1,640,000 48 To establish a new internal service fund with a transfer of funds (not to be repaid), which account would be credited in the internal service fund? A Cash B Interfund Transfer In C Interfund Transfer Out D Estimated Revenues 49 GASB accounting and financial reporting standards for risk financing activities provide that an internal service fund should recognize claims expense and a related liability when a claim has been asserted and A It is reasonably possible that a loss has been incurred and the amount can be reasonably estimated B It is probable that a loss has been incurred and the amount can be reasonably estimated C A loss has been incurred, but the amount cannot be reasonably estimated D A municipal court has awarded a judgment to a claimant fund (e.g., the General Fund) 50 Which of the following account balances would only be reported if a city-owned utility followed regulatory accounting principles? A Depreciation expense B Pumping expense C Restricted Assets Cash D Utility Plant Acquisition Adjustments 51 Customers' meter deposits, which cannot be spent for normal operating purposes, would be classified as restricted cash in the balance sheet of which fund type? A Internal service B Private-purpose trust fund C Enterprise D Special revenue 52 Which of the following is a feasible means of dissolving an internal service fund that the government no longer needs or wants? A Conversion of the fund's noncash assets to cash and distribution of the cash to another fund or funds B Transfer the fund's assets to another fund that will continue the same or similar operating activities C Distribute the fund's assets in kind to another fund or funds that will not continue the same or similar operating activities D Any of the above, in any combination, would be feasible 53 Which of the following organizations or units would least likely be accounted for by an enterprise fund? A A hospital B An airport C The health department D A sports stadium 54 Which of the following accounts would be included in the Fund Equity section of an enterprise fund balance sheet? A Fund Balance: Yes: Net Assets: Yes B Fund Balance: Yes; Net Assets: No C Fund Balance: No; Net Assets: No D Fund Balance: No; Net Assets: Yes 55 The water utility fund of the City of Houghton uses cycle billing procedures Under these procedures, the City of Houghton will likely which of the following on December 31, the end of its fiscal year A Read meters and bill all customers on December 31 B Accrue revenue and a receivable for the number of days from the last billing date for each customer until December 31 C Ignore water power consumed by customers from their last billing date until December 31 D Any of the above are acceptable under GAAP 56 Which of the following is a true statement about the Allowance for Funds Used During Construction (AFUDC)? A AFUDC may have either a debt component or an equity component B The amount credited to AFUDC may exceed the amount of interest paid during the period on bonds issued for construction C AFUDC may be credited for an imputed amount of interest on the utility's own funds used for construction D All of the above are true statements 57 Which of the following items is not required to be included in the segment information that must be reported for a municipality's enterprise funds? A Material enterprise fund capital assets B Material enterprise fund operating income or loss C Material enterprise fund tax revenues D Material intergovernmental operating subsidies to an enterprise fund 58 A municipal solid waste landfill (MSWLF) accounted for by an enterprise fund should recognize an expense and liability for the year in the amount of A The estimated total current costs for closure and postclosure of the MSWLF determined at the time the landfill is placed into initial operation divided by the estimated number of years the landfill will be operated B The estimated total current costs for closure and postclosure of the MSWLF as reevaluated at the end of each fiscal year divided by the remaining estimated number of years the landfill will be operated C A portion of the estimated total current costs for closure and postclosure of the MSWLF, determined at the time the landfill is placed into initial operation, equal to the ratio of landfill used during the year to its total capacity D A portion of the estimated total current costs for closure and postclosure of the MSWLF, as reevaluated at the end of the fiscal year, equal to the ratio of landfill used to its total capacity 59 Under utility regulatory accounting principles (RAP), the account "Utility Plant Acquisition Adjustment" reflects A The difference between the amount paid for utility plant and the amount originally paid by the utility that first placed the plant into public service, less accumulated depreciation B The difference between the fair market value of the utility plant and the amount paid for it, less accumulated depreciation C The difference between the amount paid for the utility plant less its current replacement cost D The difference between the amount paid for the utility plant less the fair market value of its tangible plant assets 60 The following cash transactions were among those reported by Crawford County's Water and Sewer Enterprise Fund for the year: Proceeds from sale of revenue bonds for construction: $5,000,000 Cash received from customers: $3,000,000 Capital contributed by developers: $1,000,000 In the Water and Sewer Enterprise Fund's statement of cash flows for the year ended December 31, what amount should be reported as cash flows from capital and related financing activities? A $9,000,000 B $8,000,000 C $6,000,000 D $5,000,000 61 Sales revenues of a utility for a certain fiscal period A Are equivalent to total debits to Customer Accounts Receivable for that period B Include receivables billed during a fiscal period, plus receivables billed early in the next year if meters were read before year-end C Should be reported on the cash basis for the sake of conservatism D Include billed receivables and an accrual for unbilled receivables as of the balance sheet date 62 The liability for general obligation bonds issued for the benefit of a governmentally owned electric utility and serviced by its earnings should be recorded in A An enterprise fund B An enterprise fund and disclosed in the notes to the financial statements C An enterprise fund and the business-like activities accounts D The governmental activities accounts 63 For which of the following assets can the "modified approach" be elected in lieu of depreciation? A Eligible infrastructure assets B All general capital assets C Buildings and equipment D All capital assets 64 The Central Purchasing Fund of Gotham City, an internal service fund, purchased new furniture for use in the warehouse manager's office The debit for the entry to record the event should be to A Expenditures B Purchases C Furniture and fixtures D General capital assets 65 Which of the following accounts would least likely be found in the general ledger of an internal service fund? A Cash B Expenditures C Billings to Departments D Machinery and equipment 66 Which of the following would be reflected in the operating statement of a proprietary fund? A Issuance of debt B Repayment of the principal of debt C Purchase of a capital asset D Incurrence of interest expense 67 How should internal service funds be incorporated into the government-wide financial statements? A As part of governmental activities B As part of business-type activities C A or B, but normally A D A or B, but normally B 68 The operating statement of a proprietary fund should answer which of the following questions? A What are the transactions or events of the period that have increased or decreased the resources available for spending in the near future? B Have current financial resources increased or decreased during the period? C Have cash balances increased or decreased as a result of transactions and events of the period? D What are the transactions or events of the period that have increased or decreased the fund's total economic resources? 69 Most citizens and financial statement users not have a clear understanding of the financial reporting entity whose financial position, results of operations, and cash flows are included in an annual financial report True False 70 State and local governments should prepare only those financial reports required by law generally year-end financial statements True False 71 Comprehensive annual financial reports of state and local governments should include (1) an introductory section, (2) a financial section, and (3) a supplemental section True False 72 The MD&A should provide information that is prospective in nature True False 73 Statistical tables included in comprehensive annual financial reports should include only financial data needed to support information given in the financial statements True False 74 A component unit is dependent on the primary government when the primary government is obligated for its debt True False 75 The accounting system used by a state or local government must make it possible to prepare financial statements as required by the Financial Accounting Standards Board True False 76 Under GASBS 34, the financial statements that report on business-type activities at the government-wide level include the statement of net assets, statement of activities, and statement of cash flows True False 77 GASBS 34 reporting requires combined financial statements as part of the comprehensive annual financial reports True False 78 Fiduciary activities are not reported in the government-wide financial statements under GASBS 34 True False 79 Other comprehensive bases of accounting (OCBOA) are considered generally accepted accounting principles (GAAP) for state and local governments True False 80 In converting from the modified accrual basis of accounting information in a governmental fund to accrual basis for the government-wide statements, capital assets acquired by a governmental fund are deducted from fund balance governmental funds to arrive at net assets of governmental activities True False 81 In preparation of government-wide statements, converting information recorded using the modified accrual basis of accounting to the accrual basis, where appropriate, is conceptually desirable True False 82 GASB reporting objectives emphasize the role of accountability in external financial reporting, and describe accountability as the "paramount objective from which all other objectives must flow." True False 10 124 Evaluating a government's financial condition is important in order to A B C D Prevent financial crises from developing Hold management accountable for the use of tax revenues Determine if the government can continue to offer the current level of services All of the above Content: Concept Level: Medium Wilson - Chapter 10 #16 125 The term that is defined as determining whether current-year revenues are sufficient to pay for the services provided that year and whether future taxpayers will be required to assume burdens for services previously provided is A B C D Financial position Financial condition Interperiod equity None of these terms Content: Concept Level: Medium Wilson - Chapter 10 #17 126 The term that is closely related to the concept of liquidity is A B C D Financial condition Financial position Interperiod equity None of these terms Content: Concept Level: Medium Wilson - Chapter 10 #18 127 Which of the following financial concepts has been defined by the GASB as "the probability that a government will meet both its financial obligations to creditors, consumers, employees, taxpayers, suppliers, constituents, and others as they become due and its service obligation to constituents, both currently and in the future?" A B C D Liquidity Financial position Financial leverage Financial condition Content: Concept Level: Easy Wilson - Chapter 10 #19 128 Which of the following trends is most likely to be a signal of impending fiscal stress? A B C D A decreasing ratio of total revenues to total expenditures An increasing ratio of own source revenues to total revenues A decreasing ratio of debt service expenditures to operating revenues A decreasing ratio of operating expenditures to total revenues Content: Concept Level: Hard Wilson - Chapter 10 #20 29 129 Which of the following ratios would be most helpful in assessing the liquidity of a governmental entity? A B C D Net tax-supported long-term debt/population Own source revenues/total revenues Debt service expenditures/total expenditures Unreserved fund balance/operating revenues Content: Concept Level: Hard Wilson - Chapter 10 #21 130 Benchmarking is a useful tool for A B C D Interpreting ratios in order to make informed judgments about financial condition Comparing ratios to established red-flag levels Time-series trend analysis All of the above Content: Concept Level: Medium Wilson - Chapter 10 #22 131 After financial ratios are calculated, the results should be compared to A B C D The same indicator from prior years Any credit market or other red flag indicators A comparative benchmark value, such as those from Moody's Medians All of the above would make useful comparisons Content: Concept Level: Medium Wilson - Chapter 10 #23 132 Which of the following ratios would be considered favorable if it was high, rather than low? A B C D Total revenues to population Debt service to total revenues Operating expenditures to total expenditures Total General Fund liabilities to General Fund revenues Content: Concept Level: Medium Wilson - Chapter 10 #24 133 A recognizable signal of fiscal stress is A B C D Total revenues from own sources increasing as a percent of total revenues for all sources Increasing population Declining property values An increasing ratio of total revenues to total expenditures Content: Concept Level: Medium Wilson - Chapter 10 #25 30 134 A measure of the extent to which the government's business-type activities depend on subsidies from taxpayer or other general revenues rather than having the full cost of the activities' operations funded by charges to the users of the service is A Unrestricted net assets/total revenues B Business-type activities revenues/business-type activities expenses C Total net assets (governmental activities and business-type activities) less total net assets at the beginning of the year D Total revenues/total expenses Content: Concept Level: Medium Wilson - Chapter 10 #26 135 A measure of whether the government lived within its means in the measurement year, or was required to use prior year resources to fund a portion of current year costs, or shifted the funding of some current year costs to future periods is A B C D Business-type activities revenues/business-type activities expenses Unrestricted net assets/total revenues Total revenues/total expenses Total net assets (governmental activities and business-type activities) less total net assets at the beginning of the year Content: Concept Level: Medium Wilson - Chapter 10 #27 136 A measure of the adequacy of the amount of the government's total unrestricted net assets or deficit at the measurement date is A Unrestricted net assets/total revenues B Business-type activities revenues/business-type activities expenses C Total net assets (governmental activities and business-type activities) less total net assets at the beginning of the year D Total revenues/total expenses Content: Concept Level: Medium Wilson - Chapter 10 #28 137 One of the most important reasons to evaluate the financial performance of a government is to A B C D Determine if property taxes and other revenue sources should be increased Assign responsibility for success or failure of the government to certain parties Determine whether the government is accomplishing its mission Have an early warning of impending financial difficulty for a diverse set of decision makers Content: Concept Level: Medium Wilson - Chapter 10 #29 138 A term that describes a government's ongoing ability and willingness to raise revenues, incur debt, and meet its financial obligations as they become due is A B C D Financial condition Fiscal capacity Economic condition Financial position Content: Concept Level: Medium Wilson - Chapter 10 #30 31 139 Disaster risk, such as potential for natural disasters, is an example in the ICMA's Financial Trend Monitoring Systems of: A B C D Environmental factors Organizational factors Financial factors Management practices and legislative policies Content: Concept Level: Medium Wilson - Chapter 10 #31 140 Which of the following statements about credit analysts' models is true? A Credit analysts focus on debt and finances, and not demographics and management strategies B Credit analysts have access to the same set of information that internal managers use C Credit analysts are concerned with assessing a government's ability to pay interest and principal on debt when due D None of the above statements are true Content: Concept Level: Medium Wilson - Chapter 10 #32 141 For which of the following is a high or increasing value of the item associated with a stronger financial condition of a governmental entity? A B C D Unfunded pension liability Property values Crime rate Unemployment Content: Concept Level: Medium Wilson - Chapter 10 #33 142 Which ratio or concept describes the extent to which the government has lived within its means for the year? A B C D Debt to assets Current ratio Interperiod equity Revenue dispersion Content: Concept Level: Medium Wilson - Chapter 10 #34 143 A financial capability ratio that measures how much the annual budget is loaded with disbursements to pay off long-term debt is: A B C D Revenue dispersion Debt service load Financing margin bonded debt per capita Financing margin legal debt limit Content: Concept Level: Medium Wilson - Chapter 10 #35 32 144 If a state or local government is a party to an agency relationship, it must automatically create an agency fund in order to be in conformity with generally accepted accounting principles FALSE An agency fund must be created only if required by law, or GASB standards In other instances an agency fund may be created by administrative decision If not required by law or administrative decision, an agency relationship may be accounted for by the General Fund (or other fund) if the agency relationship is incidental to the primary purposes of the General Fund (or other fund), the amounts tend to be small in relation to total expenditures of the General Fund, and the agency relationship is ordinarily discharged on a rather current basis Content: Concept Level: Easy Wilson - Chapter 08 #1 145 An agency fund accounts for assets held by a government for the long-term in the capacity of a trustee for an individual, organization, other fund, or other government FALSE Agency funds are used when the government holds assets temporarily as an agent for an individual, organization, other fund, or other government, not for a long period of time Content: Concept Level: Easy Wilson - Chapter 08 #2 146 An agency relationship that usually necessitates the creation of an agency fund is the collection of revenues by one government for several of its funds and/or for other governments and their funds TRUE Agency funds of this nature are commonly found at the state level, and also at the county level Content: Concept Level: Easy Wilson - Chapter 08 #3 147 Tax agency funds assume liability for gross levies, not for the amounts the levying funds or units expect to collect TRUE Tax agency funds should attempt to collect all taxes billed, and should charge back to the levying fund or unit only taxes billed in error, or taxes that, after all legal and reasonable means of collection have been exhausted, cannot be collected Content: Concept Level: Easy Wilson - Chapter 08 #4 33 148 It is common for an agency fund to have relatively small fund balances FALSE Since all of the assets of an agency fund are offset by liabilities there is no fund equity or fund balance Content: Concept Level: Easy Wilson - Chapter 08 #5 149 An agency fund should be used to account for all special assessment billing and collection, and related debt service of special assessment debt FALSE An agency fund is used only for those special assessments financed by debt for which the government is not obligated in any manner If the government is obligated in some manner (e.g., as a guarantor), billing and collection of special assessments is recorded in a debt service fund and the debt is reported in the governmental activities accounts Content: Concept Level: Easy Wilson - Chapter 08 #6 150 Effective management of cash and investments of individual funds may be enhanced by placing the cash and investments in a pool under the control of the Treasurer of the government or other official TRUE The objective of pool creation is to professionalize the management of cash and investments and thereby improve both the safety of the principal and the earnings on the investments Content: Concept Level: Easy Wilson - Chapter 08 #7 151 When a cash and investments pool is created, the investments of each fund entering the pool should be transferred to the pool at their book value at the date of the transfer FALSE Investments should be revalued to fair value (market value) as of the date the fund enters the pool, and any investments already in the pool should be revalued to fair value as of the same date, so that earnings, gains, and losses on pooled investments may be distributed equitably Content: Concept Level: Easy Wilson - Chapter 08 #8 34 152 Fiduciary funds are often identified in annual reports of state and local governments as "Trust and Agency Funds." TRUE Fiduciary funds account for assets held by a government under a trust relationship or an agency relationship Content: Concept Level: Easy Wilson - Chapter 08 #9 153 Investment trust funds and pension trust funds should be accounted for in essentially the same manner as permanent funds FALSE Fiduciary funds focus on the measurement of economic resources using the accrual basis of accounting because their objective is to measure net income on a going-concern basis A permanent fund is a governmental fund, and as such, focuses on the measurement of current financial resources using modified accrual as a basis of accounting Content: Concept Level: Easy Wilson - Chapter 08 #10 154 If the fair value of stock received by a private-purpose trust fund differs from the par value of the stock, the premium or discount should be amortized over the remaining life of the stock FALSE Stock has no maturity date and its par value, if any, is only a nominal amount; not the amount the trustees ever expect to receive As such there is no premium or discount to amortize Content: Concept Level: Medium Wilson - Chapter 08 #11 155 Public Employee Retirement Systems should utilize the modified accrual basis of accounting FALSE GASB standards provide that public employee retirement systems (PERS) use the full accrual basis of accounting Content: Concept Level: Easy Wilson - Chapter 08 #12 35 156 Public employee retirement systems should utilize budgetary accounts in the same manner that General Funds and special revenue funds should FALSE No authoritative organization recommends that public employee retirement systems (PERS) use budgetary accounts Content: Concept Level: Medium Wilson - Chapter 08 #13 157 Employer (and employee, if applicable) contributions to public employee retirement systems should be based on actuarial computations TRUE Actuarial computations should be made annually to determine proper contributions by employers (and employees, if applicable) to public employee retirement systems (PERS) Content: Concept Level: Medium Wilson - Chapter 08 #14 158 Public employee retirement systems should label the difference between assets and liabilities on the statement of plan net assets as "net assets currently available for benefits." FALSE The GASB requires a statement of plan net assets in which the difference between assets and liabilities is labeled "net assets held in trust for pension benefits." This form is shown in the text as Illustration 8-11 Content: Concept Level: Medium Wilson - Chapter 08 #15 159 Fiduciary funds, including agency funds, investment trust funds, private-purpose trust funds, and pension trust funds, report transactions between the fund and both internal and external parties FALSE Fiduciary funds report only transactions in which the government is involved with parties external to the government Content: Concept Level: Medium Wilson - Chapter 08 #16 36 160 Which of the following is the most reliable means of distinguishing a trust relationship from an agency relationship for purposes of deciding which type of fiduciary fund should be used? A Examine the amount of money involved; agency relationships generally involve smaller amounts B Examine the aggregate of factors, such as the enactment that brought the relationship into existence, statutes, regulations, etc, that help define the nature of the relationship C Examine the length of time assets will be held; trust relationships are generally in existence longer than agency relationships D Examine the wording of any agreements to determine if the word "trust" or "agency" is used Content: Concept Level: Easy Wilson - Chapter 08 #17 161 Which of the following activities would be most appropriately recorded by an agency fund? A B C D Assets held for employees' federal and state withholding taxes Deposits held for customers of a city-owned electric utility Assets held for special assessment bondholders when the city is secondarily liable for the bonds Assets held for investment, the earnings from which are used for maintenance of the City Cemetery Content: Concept Level: Medium Wilson - Chapter 08 #18 162 Which of the following is a valid reason for establishing a tax agency fund and charging a collection fee to other governments? A B C D To help eliminate a General Fund deficit To increase the total amount of taxes levied To avoid overlapping taxes To realize administrative efficiencies from centralizing tax billing and collection activities Content: Concept Level: Easy Wilson - Chapter 08 #19 163 Which of the following accounts is least likely to be used by a tax agency fund? A B C D Cash Revenues Taxes receivable for other funds and units Due to other funds and units Content: Concept Level: Easy Wilson - Chapter 08 #20 164 The long-term liability for special assessment bond issues for which the city is not obligated in any manner should be recorded in a (an): A B C D Agency fund only Special assessment fund Agency fund and private-purpose trust fund None of the funds but should be disclosed in the notes to the financial statements Content: Concept Level: Medium Wilson - Chapter 08 #21 37 165 If special assessment receivables are recorded in the accounts of an agency fund, the appropriate account(s) to credit is (are): A B C D Fund balance Revenues and deferred revenues Due to special assessment Bondholders Interfund transfers in Content: Concept Level: Medium Wilson - Chapter 08 #22 166 Which of the following grants received by a city would most appropriately be recorded in a "pass-through" agency fund? A A federal grant for various purposes, for which the ultimate allocation of funds will be decided by a state agency B A state grant for summer employment of juveniles C A federal grant for repairing and overhauling bridges D A federal grant for upgrading low-rent housing Content: Concept Level: Medium Wilson - Chapter 08 #23 167 When a cash and investment pool of a certain city was established, the debt service fund transferred investments to the pool having a cost of $3,000,000 but a current fair market value of $3,100,000 To record this transaction, the journal entry made by the debt service fund will include: A B C D A debit to Equity in Pooled Cash and Investments in the amount of $3,100,000 A credit to Revenues Change in Fair Value of Investments in the amount of $100,000 A credit to Investments in the amount of $3,000,000 All of the above Content: Journal Entry Level: Medium Wilson - Chapter 08 #24 168 The cash and investment pool of Riverside City allocates dividends, interest, and capital gains and losses on a periodic basis When the cash and investment pool accrues interest earned on investments in debt securities, pending allocation to participating funds, it would credit which of the following accounts? A B C D Interfund Loans Undistributed Earnings on Pooled Investments Revenues Interfund Receivables Content: Journal Entry Level: Medium Wilson - Chapter 08 #25 169 Which of these fiduciary fund types has no fund equity? A B C D Investment trust funds Pension trust funds Agency funds Private-purpose trust funds Content: Concept Level: Easy Wilson - Chapter 08 #26 38 170 A difference between agency funds and governmental funds is A B C D Agency funds are not included on any fund financial statements Agency funds use a different basis of accounting Agency funds not report fund balances; only assets and liabilities B and C Content: Concept Level: Easy Wilson - Chapter 08 #27 171 Which basis of accounting best maintains the original principal of a trust? A B C D Accrual basis Cash basis Modified accrual basis Legal basis Content: Concept Level: Medium Wilson - Chapter 08 #28 172 A local civic organization gave the city government $15,000 cash to be used to pay the utility bills of persons whose incomes were below the poverty level The city should account for the $15,000 gift in A B C D An investment trust fund The General Fund A permanent fund Private-purpose trust fund Content: Concept Level: Medium Wilson - Chapter 08 #29 173 A local golfer contributed $100,000 to the city stipulating that the money be invested and that the earnings thereon be used for maintenance of the city golf course The $100,000 would most appropriately be recorded in a (an) A B C D Agency fund Private-purpose trust fund A permanent fund Investment trust fund Content: Concept Level: Medium Wilson - Chapter 08 #30 174 A private-purpose trust fund sold investments in securities having a cost of $32,000 for $34,000, resulting in a $2,000 realized gain The gain is A B C D Generally transferred to an operating fund or the General Fund Generally used to maintain the principal of the trust Generally reported as income of the trust Generally transferred to a permanent fund Content: Concept Level: Medium Wilson - Chapter 08 #31 39 175 Employer contributions to a public employees retirement system (PERS) should be reported as A B C D An expenditure of the General Fund for employees paid by the General Fund An expense of a proprietary fund for employees paid by a proprietary fund An addition to net assets of the PERS All of the above Content: Concept Level: Medium Wilson - Chapter 08 #32 176 A statement of cash flows should be prepared for which of the following fiduciary fund types? A B C D Agency Pension trust Private-purpose trust None of the above Content: Concept Level: Medium Wilson - Chapter 08 #33 177 The financial position of the Policemen's Pension Fund administered by a city should be reported in the city's basic financial statements as a column in the A B C D Statement of fiduciary net assets Statement of assets, liabilities, and fund balances Balance sheet governmental funds None of the above; the assets belong to the policemen, not to the city Content: Concept Level: Medium Wilson - Chapter 08 #34 178 Which of the following is the appropriate basis of accounting for an agency fund? A B C D Accrual basis Modified accrual basis Cash basis None of the above Content: Concept Level: Medium Wilson - Chapter 08 #35 179 A citizen contributed $200,000 to the city stipulating that the money be invested and that the earnings thereon be used for maintenance of the city municipal swimming pool The $200,000 would most appropriately be recorded in a (an) A B C D Agency fund Private-purpose trust fund Permanent fund Endowment fund Content: Concept Level: Medium Wilson - Chapter 08 #36 40 180 In which of the following circumstances is the use of a fiduciary fund appropriate? A B C D When assets are held for the families of the government's police officers killed in the line of duty When assets are held for other governments in an investment pool When assets are held for Internal Revenue Code Section 457 deferred compensation plans All of the above Content: Concept Level: Medium Wilson - Chapter 08 #37 181 Which of the following is the appropriate measurement focus for agency funds? A B C D Economic resources Current financial resources Cash and cash equivalents None of the above Content: Concept Level: Medium Wilson - Chapter 08 #38 182 Fiduciary funds accounted for in a manner similar to proprietary funds are A B C D Agency funds and investment trust funds Pension trust funds, agency funds, investment trust funds, private-purpose trust funds Private-purpose trust funds and agency funds None of the above Content: Concept Level: Medium Wilson - Chapter 08 #39 183 Which of the following activities would be accounted for by a trust fund? A B C D Deposits held for customers of a city-owned electric utility Assets passed-through the state government to the local government Assets held for special assessment bondholders for which the city has no liability Assets which are used for maintenance of a private golf course, which is used by many city residents Content: Concept Level: Medium Wilson - Chapter 08 #40 184 Under GASB standards effective for 2006 and beyond, how will a government report other post-employment retirement benefits (OPEB)? A By disclosing information about OPEB in the notes to the financial statements, but without display of OPEB expenses or liabilities on the face of the financial statements B In a manner that is quite similar to the reporting requirements for pension plans C Using two different methods, one for health care plans other types of OPEB D By using a modified accrual basis, which requires only expenditures of the current period be reported Content: Concept Level: Medium Wilson - Chapter 08 #41 41 185 Which of the following statements is true about other post-employment retirement benefits (OPEB)? A These statements relate only to health care plans, not life insurance or other benefit plans B Employers must retroactively apply these standards in recognizing the expense and liability related to commitments to benefit plans for retirees C Relative to GASBS 26, GASBS 43 and GASBS 45 (issued in 2004) significantly expand on types of OPEB reported D None of the above Content: Concept Level: Medium Wilson - Chapter 08 #42 186 Which of the following statements is true regarding termination benefits? A Voluntary termination benefits occur when employers provide an incentive to hasten an employee's voluntary termination of employment, such as a one-time payout B Voluntary terminations relate to layoffs or reductions in workforce C Employers incur expenses related to voluntary terminations but not to involuntary terminations D All of the above are true statements Content: Concept Level: Medium Wilson - Chapter 08 #43 42 Ch7-10 Summary Category # of Questions Content: Compute Content: Concept 178 Content: Essay Content: Journal Entry Level: Easy 47 Level: Hard Level: Medium 135 Wilson - Chapter 07 70 Wilson - Chapter 08 43 Wilson - Chapter 09 40 Wilson - Chapter 10 35 ... equal to the ratio of landfill used during the year to its total capacity D A portion of the estimated total current costs for closure and postclosure of the MSWLF, as reevaluated at the end of. .. Statement of net assets, statement of activities, and statement of cash flows C Statement of net assets and statement of activities D Statement of activities and statement of cash flows 101 .Infrastructure... and liability should be recognized in an amount proportional to the ratio of landfill usage for the period to total landfill capacity Content: Concept Level: Medium Wilson - Chapter 07 #26 27
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