ACCT 401 Test #2

Which of the following should not be reported on the balance sheet of the General Fund?
A) Equipment.
B) Vouchers payable.
C) Tax anticipation notes payable.
D) Due from federal government.
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Terms in this set (38)
Which of the following should not be reported on the balance sheet of the General Fund?
A) Equipment.
B) Vouchers payable.
C) Tax anticipation notes payable.
D) Due from federal government.
A) Equipment.
The City of Pringle purchased a vehicle for the police department. If the operations of the police department are financed by general revenues, an asset would be recorded in which journal(s)?

A) General Fund: Yes; Governmental
Activities: No
B) General Fund: No; Governmental
Activities: No
C) General Fund: No; Governmental
Activities: Yes
D) General Fund: Yes; Governmental
Activities: Yes
C) General Fund: No; Governmental
Activities: Yes
An interfund transfer in should be reported in a governmental fund operating statement as a(an):
A) Revenue.
B) Due from other funds.
C) Other financing source.
D) Other financing use.
C) Other financing source.
The General Fund has transferred cash to the appropriate fund for eventual retirement of term bonds maturing in 10 years. Which funds would record this transaction?

(1) General Fund
(2) Capital Projects Fund
(3) Debt Service Fund

A) (1) Yes; (2) No; (3) Yes
B) (1) No; (2) No; (3) Yes
C) (1) Yes; (2) No; (3) No
D) (1) Yes; (2) Yes; (3) Yes
A) (1) Yes; (2) No; (3) Yes
Using the information below, what amount should be accounted for in a special revenue fund or funds?

Warehouse equipment used to store supplies for delivery to all city departments and agencies on a cost-reimbursement basis: $300,000

Equipment used for supplying electric power to residents: $1,750,000

Receivables for completed sidewalks to be paid for in installments by affected property owners. Construction was financed by special assessment bonds for which the town has no liability: $1,500,000

Cash received from federal government, dedicated to highway maintenance: $1,800,000

A) $1,800,000.
B) $2,100,000.
C) $3,300,000.
D) $5,350,000.
A) $1,800,000.
Which of the following would be considered an internal exchange transaction?
A) The General Fund transfers $200,000 to establish a Central Supplies Fund; this amount will not be repaid.
B) The General Fund transfers $125,000 to the Debt Service Fund for payment of currently due bond interest payments.
C) The General Fund transfers $9,000 to the Central Supplies Fund for supplies it received from Central Supplies.
D) The Capital Projects Fund completes a library building project and transfers the remaining cash to the Debt Service Fund.
C) The General Fund transfers $9,000 to the Central Supplies Fund for supplies it received from Central Supplies.
Property taxes due and collectible 90 days after the 2020 fiscal year end would be recorded as revenues in 2020 in which journal?

(1) General Fund
(2) Governmental Activities

A) (1) Yes; (2) No
B) (1) No; (2) No
C) (1) No; (2) Yes
D) (1) Yes; (2) Yes
C) (1) No; (2) Yes
Which of the following will require a credit to Fund Balance—Unassigned of a governmental fund when operating statement accounts are closed at the end of the year, assuming there are no other financing sources or uses?
A) Revenues are less than expenditures.
B) Revenues are more than expenditures.
C) Revenues are more than expenditures and encumbrances.
D) Revenues are less than expenditures and encumbrances.
B) Revenues are more than expenditures.
In fiscal year 2020 the "Expenditures—2019" account represents
A) Excess expenditures in 2019 that will be offset against appropriations for 2020.
B) Goods or services received in 2019 which the government has no record of ordering.
C) Amount of expenditures for goods ordered in 2019 that were received in 2020 and chargeable to appropriations of 2019.
D) The amounts of purchase orders issued in 2019 that were intended to be paid in full from appropriations for 2020.
C) Amount of expenditures for goods ordered in 2019 that were received in 2020 and chargeable to appropriations of 2019.
Under the consumption method for recording supplies that are maintained on a perpetual inventory system, the adjusting entry made at year end would affect which of the following accounts?
A) Fund Balance—Nonspendable—Inventory of Supplies.
B) Fund Balance—Restricted—Inventory of Supplies.
C) Expenditures.
D) Inventory of Supplies.
A) Fund Balance—Nonspendable—Inventory of Supplies.
The county received a $10,000,000 endowment, the terms of which indicate that earnings on the endowment are to be used by health and welfare to provide medical services to low-income children. Where would the $10,000,000 be recorded? A) Special revenue fund. B) Permanent fund. C) Private-purpose trust fund. D) Public-purpose trust fund.B) Permanent fund.GASB standards require that general capital assets be recorded in the government-wide statements at: A) Historical cost. B) Fair value at the financial statement date. C) Estimated cost at the financial statement date. D) None of the options are correct.A) Historical cost.GASB standards require that general capital assets be recorded in the fund statements at: A) Historical cost. B) Fair value at the financial statement date. C) Estimated cost at the financial statement date. D) None of the options are correctD) None of the options are correctDuring the year, a wealthy local merchant donated a building to the City of Rosewood. The original cost of the building was $300,000. Accumulated depreciation at the date of the gift amounted to $250,000. The appraised value of the donation at the date of the gift was $600,000. At what amount should this contribution be recorded in the governmental activities accounts at the government-wide level? A) $50,000. B) $300,000. C) $600,000. D) $0.C) $600,000.During the year, a wealthy local merchant donated a building to the city of Rosewood. The original cost of the building was $300,000. Accumulated depreciation at the date of the gift amounted to $250,000. The appraised value of the donation at the date of the gift was $600,000. At what amount should Rosewood record this donated property in the General Fund? A) $50,000. B) $300,000. C) $600,000. D) $0.D) $0.Equipment that had been acquired several years ago by a special revenue fund at a cost of $40,000 was sold for $15,000 cash. Accumulated depreciation of $30,000 existed at the time of the sale. The journal entry to be made in the governmental activities journal will include all of the following except: A) A debit to Cash for $15,000. B) A debit to Accumulated Depreciation for $30,000. C) A credit to Equipment for $40,000. D) A credit to Other Financing Sources for $5,000.D) A credit to Other Financing Sources for $5,000.Equipment that had been acquired several years ago by a special revenue fund at a cost of $40,000 was sold for $15,000 cash. Accumulated depreciation of $30,000 existed at the time of the sale. The journal entry to be made in the special revenue fund will include: A) A debit to Cash for $15,000. B) A debit to Accumulated Depreciation for $30,000. C) A credit to Equipment for $40,000. D) A credit to Other Financing Sources for $5,000.A) A debit to Cash for $15,000.Which of the following statements is correct concerning interest expenditures incurred during the period of construction of capital projects? A) Interest expenditures may not be capitalized as part of the cost of general capital assets reported in governmental activities. B) Interest expenditures may be capitalized as part of the cost of general capital assets reported in the governmental activities accounts at the government-wide level. C) Interest expenditures must be capitalized as part of the cost of general capital assets reported in the capital projects fund. D) The capitalization of interest expenditures as part of the cost of general capital assets reported in the capital projects fund is optional.A) Interest expenditures may not be capitalized as part of the cost of general capital assets reported in governmental activities.Governments can opt not to capitalize collections or individual works of art or historical treasures if the collection is: A) Held for public exhibition, education, or research in furtherance of public service rather than for financial gain. B) Protected, kept unencumbered, cared for, and preserved. C) Subject to an organizational policy that requires the proceeds from sales of collection items to be used to acquire other items for collections. D) All of the options are correct.D) All of the options are correct.Which of the following is not a requirement that must be met to elect the "modified approach" to reporting certain eligible infrastructure assets? A) The government gets the permission of the Government Accounting Standards Board. B) The government documents that the eligible infrastructure assets are being preserved approximately at (or above) the condition level established and disclosed. C) The government manages the assets using an asset management system that includes condition assessments of the assets and summary of results using a measurement scale. D) The government manages the assets using an asset management system that includes estimates each year of the annual amount needed to maintain and preserve the eligible assets at the condition level established and disclosed by the government.A) The government gets the permission of the Government Accounting Standards Board.Definition: Assets that lack physical substance and are nonfinancial in nature Options: A. Bond anticipation notes B. Infrastructure assets C. Service Concession Arrangements D. General capital assets E. Capital projects funds F. Asset impairment G. Intangible assets H. DepreciationG. Intangible assetsDefinition: Short-term interest-bearing instruments issued by a government with a plan to replace with longer-term debt Options: A. Bond anticipation notes B. Infrastructure assets C. Service Concession Arrangements D. General capital assets E. Capital projects funds F. Asset impairment G. Intangible assets H. DepreciationA. Bond anticipation notesDefinition: Roads, bridges, curbs and gutters, streets, sidewalks, and drainage systems installed for the common good Options: A. Bond anticipation notes B. Infrastructure assets C. Service Concession Arrangements D. General capital assets E. Capital projects funds F. Asset impairment G. Intangible assets H. DepreciationB. Infrastructure assetsDefinition: Capital assets of a government that are not recorded in a proprietary or fiduciary fund Options: A. Bond anticipation notes B. Infrastructure assets C. Service Concession Arrangements D. General capital assets E. Capital projects funds F. Asset impairment G. Intangible assets H. DepreciationD. General capital assetsDefinition: Significant, unexpected decline in the service utility of a capital asset Options: A. Bond anticipation notes B. Infrastructure assets C. Service Concession Arrangements D. General capital assets E. Capital projects funds F. Asset impairment G. Intangible assets H. DepreciationF. Asset impairmentWhich of the following is not properly recorded in the governmental activities accounts? A) Tax-supported general obligation bonds. B) Obligations under leases used to finance general capital assets. C) The long-term portion of judgments and claims. D) Revenue bonds issued by an enterprise fund.D) Revenue bonds issued by an enterprise fund.When Sunny City makes its annual lease payment on an unpaid lease obligation, the journal entry for the governmental activities accounts will include: A) A debit to Lease Obligation Payable. B) A credit to Lease Obligation Payable. C) A debit to Lease Expense. D) A debit to Expenditures—Principal of Lease Obligation.A) A debit to Lease Obligation Payable.When Sunny City makes its annual lease payment on an unpaid lease obligation, the journal entry for the debt service fund accounts will include: A) A debit to Lease Obligation Payable. B) A credit to Lease Obligation Payable. C) A debit to Lease Expense. D) A debit to Expenditures—Principal of Lease Obligation.D) A debit to Expenditures—Principal of Lease Obligation.On the due date for a bond interest and principal payment, the debt service fund journal entry (or entries) will include: A) A debit to Bonds Payable. B) A debit to Interfund Transfers Out. C) A debit to Expenditures—Bond Interest. D) A debit to Interest Expense.C) A debit to Expenditures—Bond Interest.When bonds are sold at a premium for a capital project, the premium amount generally: A) Increases the cash available to the capital projects fund. B) Is transferred to the debt service fund. C) Is applied against the principal balance by the fiduciary agent. D) Is recorded in a fiduciary fund since it does not belong to the capital projects fund.B) Is transferred to the debt service fund.The City of Spartan's fiscal year ends on December 31. On October 1, 2020, the city issued $1,000,000 of 6%, 10-year term bonds with semiannual interest payments due on April 1 and October 1 each year, beginning on April 1, 2021. What amount of expenditures should the city recognize in its debt service fund for the years 2020 and 2021? A) $60,000 in 2020; $60,000 in 2021. B) $30,000 in 2020; $60,000 in 2021. C) $15,000 in 2020; $6,000 in 2021. D) $0 in 2020; $60,000 in 2021.D) $0 in 2020; $60,000 in 2021.The City of Spartan's fiscal year ends on December 31. On October 1, 2020, the city issued $1,000,000 of 6%, 10-year term bonds with semiannual interest payments due on April 1 and October 1 each year, beginning on April 1, 2021. What amount of expense should the city recognize in its governmental activities journal for the years 2020 and 2021? A) $60,000 in 2020; $60,000 in 2021. B) $30,000 in 2020; $60,000 in 2021. C) $15,000 in 2020; $60,000 in 2021. D) $0 in 2020; $60,000 in 2021.C) $15,000 in 2020; $60,000 in 2021.On June 1, Brooktown levied special assessments in the amount of $500,000, payable in 10 equal annual installments beginning on June 30. The assessment installments are intended to pay principal and interest on special assessment bonds for which the town has pledged its full faith and credit should assessments be insufficient. Assuming no allowance for uncollectible receivables, the journal entry in the debt service fund on June 1 would include: A) A debit to Assessments Receivable—Current for $500,000. B) A debit to Assessments Receivable—Current for $50,000. C) A credit to Revenues for $500,000. D) No journal entry is made in the debt service fund because special assessments are used.B) A debit to Assessments Receivable—Current for $50,000.Definition: A transaction in which cash or other assets are placed into an irrevocable trust for the benefit of debt holders Term Options: A. Legal defeasance B. Regular serial bonds C. In-substance defeasance D. Irregular serial bonds E. Debt limit F. Annuity serial bonds G. Debt marginC. In-substance defeasanceDefinition: Bonds for which the amount of annual principal repayments is scheduled to increase each year by approximately the same amount that interest payments decrease Term Options: A. Legal defeasance B. Regular serial bonds C. In-substance defeasance D. Irregular serial bonds E. Debt limit F. Annuity serial bonds G. Debt marginF. Annuity serial bondsDefinition: Bonds payable in which the total principal is repayable in a specified number of equal annual installments Term Options: A. Legal defeasance B. Regular serial bonds C. In-substance defeasance D. Irregular serial bonds E. Debt limit F. Annuity serial bonds G. Debt marginB. Regular serial bondsDefinition: The maximum amount of gross or net debt that is legally permitted Term Options: A. Legal defeasance B. Regular serial bonds C. In-substance defeasance D. Irregular serial bonds E. Debt limit F. Annuity serial bonds G. Debt marginE. Debt limitDefinition: A transaction in which debt is legally satisfied based on certain provisions in the debt instrument even though the debt has not been repaid Term Options: A. Legal defeasance B. Regular serial bonds C. In-substance defeasance D. Irregular serial bonds E. Debt limit F. Annuity serial bonds G. Debt marginA. Legal defeasance