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Ch4-6
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1. Furniture used by the city attorney’s office should be accounted for in the General Fund.
True False
2. General funds and special revenue funds are entitled to record legally approved revenue budgets as
receivables and legally approved appropriations as payables.
True False
3. Assuming all legal requirements have been met, the revenues budget total should be credited to the
Estimated Revenues control account; the appropriations budget total should be debited to Appropriations
and the difference should be debited or credited to Fund Balance.
True False
4. Governments that are temporarily short of cash but that have levied taxes expected to be collectible
during the fiscal year are generally able to borrow on short-term notes known as “tax anticipation notes
payable”.
True False
5. In order to account correctly for the receipt of goods or services ordered in a prior fiscal year it is
necessary to know which appropriations were affected when the encumbrance documents were issued.
True False
6. When purchase orders or contracts are issued for legally authorized purposes a record must be kept, but
no entries in the General Fund or special revenue fund accounts are necessary.
True False
7. If the actual liability for goods or services ordered in the current year differs from the estimated liability,
the Encumbrances account should be credited in the amount of the actual liability.
True False
8. The payment of liabilities by the General Fund or a special revenue fund requires the expenditure of an
appropriation.
True False
9. Under the modified accrual basis of accounting applicable to governmental fund types, Revenues is
credited for the total amount of property tax bills prepared.
True False
10. Under the modified accrual basis of accounting applicable to governmental fund types, revenue from
sources such as fines and forfeits is accrued and recorded at net realizable value.
True False
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11. Under current GASB standards the revenue from property taxes should be recorded in the period and in
the amounts in which taxes are collected.
True False
12. If property taxes are not collected by the date specified by law, additional revenue is generally earned by
the fund of the government for which the taxes were levied.
True False
13. Correction of errors in recording revenues or expenditures of the current year must be recorded both in
the proper general ledger control account (Revenues or Expenditures) and in each subsidiary ledger
account affected.
True False
14. A government that uses the encumbrance method for purchases of goods and services is not required to
use encumbrance accounting for its payrolls.
True False
15. Governments, unlike business organizations, generally do not incur expenditures/expenses for the
employer’s share of FICA taxes and for contributions to other retirement plans established by law.
True False
16. An interim balance sheet for the General Fund reflects balances of budgetary control accounts and
balances of operating statement control accounts, as well as assets, liabilities, and fund equity.
True False
17. A statement comparing the detailed budgeted revenues with actual revenues to the date of the interim
balance sheet should accompany the interim balance sheet in order to disclose the detail of amounts
shown in summary in the resources section of the balance sheet.
True False
18. A statement comparing the detail of appropriations, expenditures, and encumbrances should accompany
an interim balance sheet in order to disclose the detail of the amount shown in summary in the
appropriations subdivision of the fund equity section of the interim balance sheet.
True False
19. Whenever a tax or other revenue source is authorized by a legislative body to be used for a specified
purpose only, a special revenue fund should be established.
True False
20. Interfund transactions that would result in the recognition of revenues, expenditures, or expenses, if one
of the parties were external to the government, should be reported as fund revenues, expenditures, or
expenses.
True False
21. Although a governmentally owned utility may receive police and fire protection and other services from
governmental departments financed by “governmental” funds, such a utility is exempt from taxes and
should not pay the General Fund anything for services received.
True False
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22. A payment made by a city-owned utility to the General Fund of the city in lieu of taxes is an example of
an “internal exchange transaction.”
True False
23. Interfund loans and advances should be eliminated from the accounts of the debtor fund and from the
accounts of the creditor fund so the annual financial statements of the government will show only
receivables from and payables to external individuals or organizations.
True False
24. If one fund is both a debtor and creditor of a second fund, both funds must report the full amounts
receivable and payable in their year-end balance sheets.
True False
25. As a general rule, revenues, expenditures, and expenses should be reported as such only once in the
funds of a government.
True False
26. Regular periodic transfers of resources raised by one fund to another fund that is to use the resources are
classified as “interfund transfers.”
True False
27. A transfer of General Fund assets to create an internal service fund that is not expected to repay the
assets is an example of an interfund transfer.
True False
28. Which of the following is properly reported as a liability of the General Fund?
A. General obligation bonds payable.
B. Accounts payable.
C. Tax anticipation notes payable.
D. Both B and C are correct.
29. When a vehicle is ordered by a government, the purchase order should be recorded in the General Fund
as a debit to
A. Appropriations.
B. Equipment.
C. Encumbrances.
D. Expenditures.
30. In an interim balance sheet of a governmental fund, the fund equity section would not include
A. Reserve for encumbrances.
B. Contributed capital.
C. Reserve for inventory.
D. Available appropriations.
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31. The Town of Woodhaven levied property taxes in the amount of $800,000. The Town estimates that 1
percent will be uncollectible. The journal entry to record the tax levy will include
A. A debit to cash for $792,000.
B. A credit to revenues for $792,000.
C. A debit to estimated uncollectible current taxes for $8,000.
D. A debit to estimated revenues for $800,000.
32. An interfund transfer should be reported in a governmental fund operating statement as a (an)
A. Revenue or expenditure.
B. Due from or due to other funds.
C. Change in fund balance.
D. Other financing source or use.
33. The City of Oldetown purchased a vehicle for the police department. If the operations of the police
department are financed by general revenues, the purchase would be recorded in which funds and/or
activities?
A. General Fund: Yes; Governmental Activities: No
B. General Fund: No; Governmental Activities: No
C. General Fund: Yes; Governmental Activities: Yes
D. General Fund: No, Governmental Activities: Yes
34. 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?
A. General Fund: Yes; Capital Projects Fund: No; Debt Service Fund: Yes
B. General Fund: No; Capital Projects Fund: No; Debt Service Fund: Yes
C. General Fund: Yes; Capital Projects Fund: No; Debt Service Fund: No
D. General Fund: Yes; Capital Projects Fund: Yes; Debt Service Fund: Yes
35. Using the information below, what amount should be accounted for in a special revenue fund or funds?
A. $1,800,000.
B. $2,100,000.
C. $3,300,000.
D. $5,350,000.
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36. Which of the following would be considered an internal exchange or quasi-external 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 receives supplies from the Central Supplies Fund in the amount of $9,000.
D. The Capital Projects Fund completes a library building project and transfers the remaining cash to the
Debt Service Fund.
37. Which of the following would be reflected in the operating statement of a governmental fund?
A. Incurrence of a liability for vacation leave for employees.
B. Amortization expense.
C. Depreciation expense.
D. Revenue related to prior periods.
38. The General Fund recorded a liability to the city-owned electric utility (an enterprise fund of the city) for
electricity used during the prior month. The journal entry for the General Fund will include
A. A debit to Encumbrances.
B. A debit to Interfund Transfers Out.
C. A debit to Expenditures.
D. None of the above.
39. Which of the following accounts appears on both the interim and year-end balance sheets of the General
Fund?
A. Revenues.
B. Reserve for encumbrances.
C. Encumbrances.
D. Appropriations.
40. On May 1, Yuca City was notified of approval of a $300,000 federal operating grant, payable on a
reimbursement basis as the city expends resources for the intended purpose of the grant. As of May 1, no
expenditures had been made for grant purposes. The journal entry to record approval of this grant will
include
A. A credit to revenues in the amount of $300,000.
B. A credit to deferred revenues in the amount of $300,000.
C. A debit to grants receivable in the amount of $300,000.
D. No journal entry will be made until eligibility requirements are met by expending resources for the
authorized purpose(s).
41. Which of the following best describes the proper treatment for uncollectible amounts of tax revenue?
A. Report bad debt expense.
B. Report revenue net of uncollectible amounts.
C. Report bad debt expenditures.
D. Report deferred revenue.
42. The Revenues account of a government is debited when
A. The budget is recorded at the beginning of the year.
B. Property taxes are recorded.
C. The account is closed out at the end of the year.
D. Property taxes are collected.
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43. Fund balance of the General Fund will be increased by the closing entry when
A. Appropriations are more than expenditures and vouchers payable.
B. Appropriations are more than expenditures and encumbrances.
C. Appropriations are less than expenditures and encumbrances.
D. Appropriations are less than estimated revenues.
44. The following items were among Birch Village’s capital expenditures during the year ended December
31:
Equipment for village tax collector’s office: $40,000
Vehicles for village electric utility: $60,000
What amounts should have been recorded in the General Fund and enterprise fund for the increase in
equipment during the year ended December 31, assuming the electric utility is accounted for in an
enterprise fund?
A. General Fund: $0; Enterprise Fund: $0
B. General Fund: $0; Enterprise Fund: $60,000
C. General Fund: $40,000; Enterprise Fund: $60,000
D. General Fund: $100,000; Enterprise Fund: $0
The city of Grand Marais’ fiscal year ends on June 30. Grand Marais uses encumbrance accounting. On
May 6, a purchase order was approved and issued for supplies in the amount of $6,000. Grand Marais
received these supplies on June 2, and the $6,000 invoice was approved for payment.
45. What General Fund journal entry should Grand Marais make on May 6, to record the approved purchase
order?
A. Item A
B. Item B
C. Item C
D. Item D
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46. What General Fund journal entry or entries should Grand Marais make on June 2, upon receipt of the
supplies and approval of the invoice?
A. Item A
B. Item B
C. Item C
D. Item D
47. The General Fund received $200,000 in lieu of taxes from the city owned water utility, an Enterprise
Fund. This is an example of a (an)
A. Interfund transfer.
B. Interfund loan.
C. Reimbursement.
D. Internal exchange or quasi-external transaction.
48. Liabilities incurred, such as for accrued payroll, but still unpaid at year-end, should be recorded in the
General Fund by a debit to which of the following accounts?
A. Expenditures.
B. Encumbrances.
C. Expenses.
D. Appropriations.
49. Which of the following will require a debit to fund balance of a governmental fund when closing entries
are prepared, assuming the original budget entry was not reversed?
A. Revenues exceed expenditures and reserve for encumbrances.
B. Appropriations exceed estimated revenues.
C. Estimated revenues exceed revenues.
D. Revenues exceed estimated revenues.
50. The Reserve for Encumbrances account is properly termed a
A. Fixed liability.
B. Reservation of fund equity.
C. Budgetary account.
D. Current liability if paid within a year; otherwise, long-term debt.
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51. On July 1, the first day of its fiscal year, Elsie City levied a $1,000,000 property tax which is payable in
full on December 1 of the same year. On September 15, the city decided to borrow $200,000 in 90 day
tax anticipation notes to cover operating expenditures until the tax revenues are collected. The journal
entry on September 15 to record the issuance of tax anticipation notes will include
A. A credit to proceeds of tax anticipation notes.
B. A credit to tax anticipation revenue.
C. A credit to tax anticipation notes payable.
D. Either B or C is acceptable if consistently applied.
52. Which of the following journal entries should be made to close the encumbrances account at the end of
the fiscal year?
A. Debit Reserve for Encumbrances and credit Encumbrances.
B. Debit Encumbrances and credit Reserve for Encumbrances.
C. Debit Fund Balance and credit Encumbrances.
D. None. The account is only closed when no encumbrance documents are outstanding.
53. During January 2009 General Fund supplies ordered in the previous fiscal year and encumbered at an
estimated amount of $2,000 were received at an actual cost of $2,200. The entry to record this
transaction will require a debit to
A. Expenditures–2009 in the amount of $2,200.
B. Expenditures–2008 in the amount of $2,000.
C. Expenditures–2009 in the amount of $200.
D. Both B and C are correct.
54. When a fire truck purchased from General Fund revenues was received, the appropriate journal entry
was made in the governmental activities general journal. What account, if any, should have been credited
in the General Fund?
A. No journal entry should have been made in the General Fund.
B. Expenditures.
C. Encumbrances.
D. Capital Assets.
55. Which of the following accounts would not be closed at the end of each fiscal year?
A. Fund balance.
B. Estimated revenues.
C. Interfund transfers out.
D. Expenditures.
56. If state law requires that local governments prepare General Fund and special revenue fund budgets on a
basis that differs from the basis of accounting required by GAAP, then the budgetary comparison
schedule or statements should
A. Not be included in the general purpose external financial statements.
B. Be included with budget figures adjusted to the GAAP basis and presented only in the general
purpose external financial statements.
C. Be included with the actual figures presented on the budget basis and then reconciled to the GAAP
basis.
D. None of the above.
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57. In fiscal year 2009 the “Expenditures–2008” account represents
A. Excess expenditures in 2008 that will be offset against appropriations for 2009.
B. Goods or services received in 2008 which the government has no record of ordering.
C. Amount of expenditures for goods ordered in 2008 that were received in 2009 and chargeable to
appropriations of 2008.
D. The amounts of purchase orders issued in 2008 that were intended to be paid from in full from
appropriations for 2009.
58. What would be the effect on the General Fund fund balance in the current fiscal year of recording a
$6,000 expenditure for a new computer server, for which a $5,800 encumbrance had been recorded in
the General Fund in the previous fiscal year?
A. Reduce the General Fund fund balance $6,000.
B. Reduce the General Fund fund balance $5,800.
C. Have no effect on the General Fund fund balance.
D. Reduce the General Fund fund balance $200.
59. Which of the following transactions is classified as an exchange transaction rather than a nonexchange
transaction?
A. Property taxes.
B. Fees charged by a municipal airport.
C. Bequest left to the city by a wealthy citizen.
D. State grant to conduct an after school program for children.
60. The City of Beauchamp received 100 acres of land located in the city limits as a gift from a local
property owner for use as a city recreation park. The debit for the entry to record this event in the
General Fund should be to
A. General capital assets.
B. Land.
C. Expenditures.
D. None of the above–no entry required in General Fund.
61. Equipment acquired several years ago by a capital projects fund and reported in the governmental
activities was sold. The receipts were considered to be unrestricted revenue. Entries are necessary in the
A. General Fund, capital projects fund, and governmental activities.
B. General Fund and governmental activities.
C. General Fund, capital projects fund, and enterprise fund.
D. None of the above.
Based on the following selected General Fund account balances and other information for Turner City at
the end of the first quarter of the current fiscal year.
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62. The amount of Turner City’s total assets as of the end of the first quarter is
A. $120,000.
B. $150,000.
C. $70,000.
D. Some other amount.
63. Assuming there were no reservations of fund equity at the end of the previous fiscal year and none
currently other than reserve for encumbrances, Turner City’s fund balance at the end of the previous
fiscal year and at the end of the first quarter was (is) ___ and ___, respectively
A. $50,000 and $10,000.
B. $50,000 and $70,000.
C. $70,000 and $50,000.
D. $50,000 and $60,000.
64. Which of the following journal entries should a government use to record $475,000 for police
department salaries and wages during a particular month?
A. Item A
B. Item B
C. Item C
D. Item D
65. Which of the following assets could appear in the governmental fund balance sheet?
A. Capital assets.
B. Inventories.
C. Deferred charges for debt issuance costs.
D. Goodwill.
66. If a government issues debt to finance capital acquisition by another government and the proceeds of the
debt are delivered directly to the intended beneficiaries, how should the related long-term debt be
reflected in a governmental fund?
A. Other financing source and other financing use.
B. Revenue and expenditure.
C. Other financing source and expenditure.
D. Not reported because there are no actual flows of financial resources.
67. Which of the following would be reflected in the operating statement of a governmental fund?
A. Depreciation expense.
B. Incurrence of a liability for vacation leave.
C. Amortization expense.
D. Revenue related to prior periods.
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68. Which of the following is a requirement for revenue recognition under the modified accrual basis of
accounting?
A. Receipt of cash.
B. Earning.
C. Availability.
D. Both B and C.
69. Which of the following is properly reported as a liability of the General Fund?
A. General obligation bonds payable.
B. Tax anticipation notes payable.
C. Vouchers payable.
D. Both B and C are correct.
70. Which of the following funds are governmental funds?
A. General Fund, special revenue funds, capital projects funds, debt service funds, and private-purpose
trust fund.
B. General Fund, special revenue funds, capital projects funds, debt service funds, and permanent funds.
C. General Fund, special revenue funds, capital projects funds, debt service funds, and internal service
funds.
D. General Fund, special revenue funds, public-purpose trust funds.
71. The governmental fund operating statement presents
A. Net income (loss).
B. Other financing sources and uses.
C. Revenues and expenditures.
D. Both B and C.
72. In which fund would you most likely account for the assets confiscated in drug arrests and subsequently
used for drug prevention education?
A. General Fund.
B. Permanent fund.
C. Enterprise fund.
D. Special revenue fund.
73. The General Fund is used to account for:
A. Revenues and expenditures legally restricted to a specific purpose.
B. The accumulation of resources to pay for principal and interest on the current portion of long-term
debt.
C. Construction of major capital assets.
D. General administration expenses of the government.
74. How many general funds may a government have?
A. One.
B. Two.
C. As many as necessary to record its projects and activities.
D. None, this is not a fund type used by governments under GASBS 34.
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75. When an enterprise fund pays the General Fund an amount in lieu of taxes, the account to be credited in
the General Fund is
A. Cash.
B. Transfer in.
C. Revenues.
D. Fund balance.
76. Revenues that are legally restricted to expenditures for specified purposes should be accounted for in
special revenue funds, including
A. Endowment where the investment earnings are to be used for public purposes.
B. Pension trust fund revenues.
C. Accumulation of resources for payment of general long-term debt principal and interest.
D. Gasoline taxes to finance road repairs.
77. Proceeds from general obligation bonds for capital construction should generally be recorded in the
A. Business-type activities.
B. General Fund.
C. Capital projects funds.
D. Debt service funds.
78. Which of the following transactions is classified as an exchange transaction rather than a nonexchange
transaction?
A. Personal property taxes.
B. State grant to conduct a smoking cessation program for middle school-aged youth.
C. Bequest left to the city by a former mayor.
D. Fees charged by a municipal swimming pool.
79. Which of the following types of nonexchange transactions recognize revenue when all the eligibility
requirements are met?
A. Voluntary nonexchange transactions
B. Government-mandated nonexchange transactions.
C. Derived tax revenues.
D. A and B.
80. Which of the following are reported in the functions/programs section of the statement of activities at the
government-wide level where they reduce the net expense of each function or program to produce a net
revenue?
A. Program revenues.
B. Indirect revenues.
C. General revenues
D. Nonexchange revenues.
81. Revenue from nonexchange transactions is recognized:
A. When the underlying transaction has occurred and the resources are available.
B. When the cash is received.
C. When the transaction occurs and the revenue has been earned.
D. It depends upon the classification of the nonexchange transaction.
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82. If a capital projects fund starts construction of a building in one year and finishes it in a subsequent year
an entry must be made in the governmental activities accounts until the building is completed, inspected,
and accepted.
True False
83. If a general capital asset is disposed of without revenue or expenditure to the government, the event need
be recorded only in the governmental activities accounts.
True False
84. A government must capitalize the cost of improvements such as roads, bridges, sidewalks, and so forth,
because the GASB requires the cost of such assets to be displayed in the basic financial statements.
True False
85. General capital assets must be depreciated and the amount of depreciation for the period should be
reported in the operating statements for governmental activities in the government-wide statements.
True False
86. The net cost of demolishing a building on land purchased as a site for an addition to city hall should be
debited to the buildings account in the governmental activities accounts.
True False
87. The cost of the periodic redecoration of the office of the mayor of a city should be capitalized in the
governmental activities accounts.
True False
88. The General Fund expended $200,000 to buy land to be used by the city electric utility as a site for an
office building. This land should be capitalized in the utility fund, not in the governmental activities
accounts.
True False
89. Property, plant, and equipment constructed or acquired by use of special assessment financing is
recorded in the governmental activities accounts because the assets belong to the reporting entity.
True False
90. General capital assets acquired under capital leases should not be recorded in the governmental activities
accounts.
True False
91. If land purchased by a proprietary fund of a city, at a cost of $70,000, is later transferred to the city’s
Park Department (accounted for by the General Fund) it should be recorded in the governmental
activities accounts at fair value on the date of transfer.
True False
92. Cash discounts available on purchase of capital assets but not taken should be capitalized as part of the
cost of the capital assets.
True False
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93. In addition to required disclosures about general capital assets, a government must allocate the
depreciation expense on those capital assets to the functional categories in which the assets are used.
True False
94. A required disclosure about general capital assets is to report on the additions to, and deductions from,
general capital assets during the course of a fiscal year.
True False
95. Capital projects funds should use the modified accrual basis of accounting for revenues and expenses.
True False
96. Capital projects funds generally do not use the Estimated Revenues and Appropriations control accounts;
it is also recommended that the Encumbrances control account not be used.
True False
97. GASB standards require that all governmental expenditures for long-lived assets be accounted for by a
capital projects fund.
True False
98. When a bond issue is legally authorized it is usual practice to make either no entry or a memorandum
entry in the capital projects fund general journal.
True False
99. In a capital projects fund the offsetting credit to the debit for assessments receivable–current should be
to other financing sources–special assessments.
True False
100.Debt backed by both assessments and the full faith and credit of a government should be reported in the
CAFR in the governmental activities column of the statement of net assets at the government-wide
level.
True False
101.Proceeds of tax-supported debt issued for the construction or acquisition of capital assets are recognized
by capital projects funds as “other financing sources” because the liability is recorded in the
governmental activities journal.
True False
102.If a bond sale occurs between interest dates, accrued interest sold should be credited to Proceeds of
Bonds.
True False
103.Premium (or discount) on tax-supported bonds issued should be amortized by a government in the same
manner as bond premium (or discount) would be by a business that issued bonds.
True False
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104.Interest incurred on interim or long-term financing during construction of general capital assets cannot
be capitalized as part of the cost of those assets.
True False
105.Construction contracts for governmental projects often provide that a stipulated percentage of each
billing by the contractor will be retained by the government until the project is inspected and accepted
upon completion.
True False
106.When a project has been completed, inspected, and accepted, retained percentages of contract billings
may be paid.
True False
107.Streets, curbs, and sidewalks constructed or acquired through use of capital projects fund resources
should never be reported in the financial statements of a government because they are for the use of the
public, not for use by the government.
True False
108.The acquisition of long-lived assets under an operating lease does not require any recognition in the
accounts of any governmental fund.
True False
109.The fund balance shown in a year-end balance sheet of a capital projects fund is more comparable with
the fund balance shown in an interim balance sheet of a General Fund than with that of a year-end
General Fund balance sheet.
True False
110.Even though the life of a capital projects fund is the life of the project, not year-to-year, operating
statement accounts and encumbrances should be closed at year-end to facilitate preparation of year-end
financial statements.
True False
111.Because year-end closings are artificial in a capital projects fund it is desirable to debit encumbrances on
the first day of the new fiscal year in the amount that was closed at the end of the prior fiscal year.
True False
112.After all liabilities are paid and the operating statement accounts closed, it is common to transfer any
remaining assets of a capital projects fund to the General Fund.
True False
113.If all asset, liability, and fund equity accounts of a capital projects fund were closed during a certain
fiscal year, it is unnecessary to prepare any financial statements for that fund for that year.
True False
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114.Accountability for capital assets used by departments accounted for by the governmental funds of a
government should be established in
A. The appropriate governmental funds.
B. The property, plant, and equipment fund.
C. Departmental memorandum records.
D. The governmental activities accounts at the government-wide level.
115.Which of the following would be considered a general capital asset?
A. A vehicle purchased from general fund revenues.
B. A vehicle purchased and maintained by an enterprise fund.
C. A computer purchased from revenues of an internal service fund and used by the supplies department.
D. Real estate purchased with the assets of a pension trust fund.
116.The following items were included in Prairie City’s General Fund expenditures for the year ended June
Personal computer for the city treasurer: $4,000
Furniture for the mayor’s office: $10,000
How much should be classified as capital assets in Prairie City’s General Fund balance sheet at June
30?
A. $ 0.
B. $ 4,000.
C. $10,000.
D. $14,000.
117.A wealthy local merchant donated a building to the city of Rosewood during the year. The original cost
of the building was $300,000. Accumulated depreciation at the date of the gift amounted to $250,000.
Fair market value at the date of the gift was appraised at $600,000, of which $40,000 was appraised as
value of the land on which the building was situated. At what amount should Rosewood record this
donated property in the governmental activities accounts at the government-wide level?
A. $50,000.
B. $250,000.
C. $600,000.
D. $ 0.
118.The city of Oak Park constructed a new storage facility using the city’s own public works employees.
Construction costs were incurred in the amount of $900,000, plus $25,000 in interest on short-term notes
used to finance construction. To record the entry for the new garage the amount that should be
capitalized as a capital asset is
A. $900,000.
B. $925,000.
C. $875,000.
D. $ 0.
119.The following general capital assets were owned by the town of Otterville:
Town buildings: $3,250,000
Equipment: $1,000,000
Streets, sidewalks, and water mains: $2,000,000
What amount should be recorded as capital assets in the town’s governmental activities accounts if
Otterville follows GASB standards?
A. $ 0.
B. $2,000,000.
C. $4,250,000.
D. $6,250,000.
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120.Equipment in general governmental service that had been acquired several years ago by a capital
projects 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 of $30,000.
C. A credit to equipment for $40,000.
D. All of the entries above will be made.
121.Which of the following funds of a government uses the modified accrual basis of accounting?
A. Private-purpose trust fund.
B. Capital projects.
C. Internal service.
D. Enterprise.
122.Equipment acquired under capital leases and used by activities accounted for in governmental funds
should be recorded in the governmental activities accounts at the inception of the lease at
A. Fair value.
B. Present value of minimum lease payments.
C. Lower of fair value or present value of minimum lease payments.
D. None of the above; leased assets should not be recorded in the accounts.
123.The city of Columbus issued bonds at par for the construction of a new city office building. Receipt of
the bond proceeds would result in journal entries in which funds?
A. Capital Projects Fund: Yes; Debt Service Fund: No
B. Capital Projects Fund: No; Debt Service Fund: Yes
C. Capital Projects Fund: Yes; Debt Service Fund: Yes
D. Capital Projects Fund: No; Debt Service Fund: No
124.Five trucks were leased by Pleasantville under terms qualifying as a capital lease. These trucks are to be
used in the fire department. This transaction would require an entry in
A. Internal service fund.
B. Special revenue fund.
C. Plant and equipment fund.
D. Governmental activities.
125.With regard to depreciation of general capital assets
A. Depreciation expense should be charged in the appropriate governmental funds, and reported in the
governmental activities accounts.
B. Depreciation expense must be recorded in the governmental fund, but no depreciation expense can be
recorded in the governmental activities accounts.
C. No depreciation can be recorded in any governmental fund, but depreciation expense must be
reported in the governmental activities accounts.
D. No depreciation can be recorded in any governmental fund, nor is it permissible to record
depreciation expense in the governmental activities accounts.
126.A capital projects fund might be used to account for which of the following activities?
A. Maintaining roads and bridges.
B. Building a parking garage.
C. Providing water and sewer services.
D. Servicing long-term debt
