Accounting for Governmental and Nonprofit Entities 17th Edition Reck Test Bank

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Accounting for Governmental and Nonprofit Entities 17th Edition Reck Test Bank

 

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Chapter 02
Principles of Accounting and Financial Reporting for State and Local
Governments
True / False Questions
1. Governmental activities are to be classified as governmental or business-type.
True False
2. Governmental funds are identical to governmental activities, proprietary funds are identical to
business-type activities, and fiduciary funds are identical to fiduciary activities of a government.
True False
3. Only those governmental and proprietary funds that meet the GASB size criteria for major funds
are reported in separate columns of the governmental and proprietary fund financial statements.
True False
4. Economic resources are cash or items expected to be converted into cash during the current
period, or soon enough thereafter to pay current period liabilities.
True False
5. Governmental funds account for assets but not the liabilities.
True False
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6. The types of funds that may be used in governmental accounting are classified into the three
categories of governmental, proprietary, and fiduciary.
True False
7. The governmental funds category includes the General Fund, special revenue funds, debt service
funds, capital projects funds, and internal service funds.
True False
8. Governments can, in part, demonstrate operational accountability by reporting proprietary and
fiduciary fund financial information, as well as all government-wide financial information, using an
economic resources measurement focus and the accrual basis of accounting.
True False
9. All capital assets acquired by or used by a fund should be reported in the fund balance sheet or
statement of net position.
True False
10. Because budgetary accounts are used by governments, government financial statements can never
be said to be in accord with generally accepted accounting principles.
True False
11. The maximum sets of fund financial statements a government would present are three.
True False
12. When revenues are legally restricted by external resource providers or committed by enabling
legislation for particular operating purposes, a private purpose trust fund is created.
True False
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13. A debt service fund is used to account for financial resources segregated for the purpose of
making principal and interest payments on general long-term debt.
True False
14. A deferred inflow of resources is defined as “an acquisition of net assets by the government that is
applicable to a future reporting period.”
True False
15. Expenditures are never recorded in governmental funds.
True False
16. Deferred outflow of resources is a type of asset that is unique to government.
True False
17. Revenues is an example of what the GASB terms an inflow of resources.
True False
18. An expenditure is an example of what the GASB terms an outflow of resources.
True False
19. Deferred inflow of resources and deferred outflow of resources would be shown in separate
sections of a government’s statement of net position.
True False
20. In accordance with GASB standards, a deferred inflow of resources is reported on the financial
statements the same as an unearned revenue.
True False
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21. The GASB concept statements indicate that an asset that is going to be converted to cash should
be reported at a remeasured amount at the financial statement date.
True False
22. Proprietary funds primarily provide services to the general public for a fee.
True False
23. A permanent endowment is an example of a nonspendable fund balance.
True False
24. Assigned fund balances can be either positive or negative.
True False
25. The General Fund is the only fund that can have a positive unassigned fund balance.
True False
26. The positive fund balance in a special revenue fund must at a minimum be reported as assigned.
True False
27. Nonmajor funds are not reported on the fund financial statements.
True False
Multiple Choice Questions
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28. Which of the following is true regarding financial reporting for internal service funds?
A. Internal service funds are reported in the governmental fund financial statements.
B. Internal service funds are aggregated and reported as a major fund in the proprietary fund
financial statements.
C. Internal service funds are generally reported in the Business-type Activities column of the
government-wide financial statements.
D. Internal service funds are generally reported in the Governmental Activities column of the
government-wide financial statements.
29. Which of the following is not a characteristic of a fund as defined by GASB standards?
A. An accounting entity.
B. A fiscal entity.
C. A reporting entity.
D. A self-balancing set of accounts.
30. In accounting for state and local governments the modified accrual basis is required for
A. Proprietary and fiduciary funds.
B. Governmental funds.
C. Governmental and fiduciary funds.
D. Governmental and internal service funds.
31. Under the modified accrual basis of accounting, revenues should be recognized when
A. Earned.
B. Collected in cash.
C. Authorized by the budget ordinance.
D. Measurable and available.
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32. The accrual basis of accounting applicable to proprietary fund types requires that exchange
revenues be recognized when
A. Earned.
B. Collected in cash.
C. Authorized by the budget ordinance.
D. Measurable and available.
33. Which of the following funds is a governmental fund-type?
A. Private-purpose trust fund.
B. Internal service fund.
C. Permanent fund.
D. Enterprise fund.
34. Financial resources set aside to pay principal and interest on general long-term debt may be
accounted for in which of the following fund types?
A. Private-purpose trust fund.
B. Debt service fund.
C. Principal and interest trust fund.
D. Internal service fund.
35. According to GASB standards transfers should be recognized
A. When earned.
B. When collected in cash.
C. When authorized by the budget ordinance.
D. In the period the interfund receivable and payable arise.
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36. Generally accepted accounting principles applicable to state and local governments require that
A. Only governmental funds and proprietary funds should be established.
B. Only those funds required by law, GASB standards, and sound financial administration should be
established.
C. Only those funds required by law and sound financial administration should be established.
D. All categories of funds must be established.
37. Which of the following is a proprietary fund?
A. Special revenue fund.
B. Investment trust fund.
C. Debt service fund.
D. Internal service fund.
38. Which of the following is a fiduciary fund?
A. Investment trust fund.
B. Special revenue fund.
C. Debt service fund.
D. Enterprise fund.
39. Which of the following funds would be most appropriate when accounting for an activity that
provides goods or services to the public for a fee that is intended to make the activity selfsupporting?

A. Investment trust fund.
B. Enterprise fund.
C. Internal service fund.
D. Special revenue fund.
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40. Which of the following funds should be used if resources provided by a federal grant must be
segregated and used for counseling of youthful offenders?
A. Private-purpose trust fund.
B. Enterprise fund.
C. Internal service fund.
D. Special revenue fund.
41. Which of the following funds would be used to account for an activity that provides centralized
purchasing and sales of goods or services to other departments or agencies of the government on
a cost-reimbursement basis?
A. Enterprise fund.
B. Fiduciary fund.
C. Internal service fund.
D. Permanent fund.
42. Which of the following funds would record depreciation of capital assets?
A. Special revenue fund.
B. Permanent fund.
C. Internal service fund.
D. Agency fund.
43. Capital assets used by departments accounted for by the General Fund of a governmental unit
should be accounted for in
A. The General Fund.
B. The governmental activities journal.
C. The business-type activities journal.
D. The general capital assets fund.
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44. Capital assets used by an enterprise fund should be accounted for in the
A. Enterprise fund and depreciation on the capital assets should be recorded.
B. Business-type activities journal but no depreciation on the capital assets should be recorded.
C. Governmental activities journal and depreciation on the capital assets should be recorded.
D. Enterprise fund but no depreciation on the capital assets should be recorded.
45. Which of the following funds are proprietary funds?
A. Enterprise funds, investment trust funds, pension trust funds, and the General Fund.
B. Enterprise funds and internal service funds.
C. Internal service funds, special revenue funds, and enterprise funds.
D. Proprietary funds are not used in governmental accounting.
46. Which of the following funds are governmental funds?
A. General Fund, special revenue funds, capital projects funds, debt service funds, and privatepurpose
trust funds.
B. General Fund, special revenue funds, private-purpose trust funds.
C. General Fund, special revenue funds, debt service funds, capital projects funds, and permanent
funds.
D. General Fund, special revenue funds, capital projects funds, debt service funds, and internal
service funds.
47. The activities of a water utility department, which offers its services to the general public on a user
charge basis, should be accounted for in
A. An enterprise fund.
B. A special revenue fund.
C. The General Fund.
D. An internal service fund.
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48. The measurement focus and basis of accounting that are most unlike those used by business
entities are those used by
A. Governmental funds.
B. Fiduciary funds.
C. Proprietary funds.
D. Contribution funds.
49. Which of the following governmental funds must be reported as a major fund?
A. The General Fund.
B. Any fund with total assets, liabilities, revenues, or expenditures that are 10% or more of the
General Fund and 5% or more of total General Fund and Business-type Activities.
C. The government may opt to include or exclude any fund it choses as a major fund.
D. Only the General Fund and special revenue funds that meet the 10% and 5% size criteria.
50. The basis of accounting that should be used in preparing fund financial statements is:

Governmental funds Proprietary funds Fiduciary funds
A) Modified accrual Accrual Modified accrual
B) Modified accrual Modified accrual Modified accrual
C) Modified accrual Accrual Accrual
D) Accrual Accrual Accrual
A. Choice A
B. Choice B
C. Choice C
D. Choice D
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51. A major governmental fund is one that has one or more elements (e.g., assets, liabilities, revenues,
or expenditures) that is at least:
A. Five percent of the corresponding element(s) of total governmental funds and 10 percent of the
corresponding element(s) of total governmental and enterprise funds combined.
B. Ten percent of the corresponding element(s) of total governmental funds and 10 percent of the
corresponding element(s) of total governmental and enterprise funds combined.
C. Five percent of the corresponding element(s) of total governmental funds and five percent of
the corresponding element(s) of total governmental and enterprise funds combined.
D. Ten percent of the corresponding element(s) of total governmental funds and 5 percent of the
corresponding element(s) of total governmental and enterprise funds combined.
52. A city received resources that the state indicates can only be used for public works projects, such
as road construction. Assuming the resources have not been expended by year end, how would
the resources the city received be shown in the city’s fund balances?
A. Spendable-Designated Fund Balance.
B. Spendable-Committed Fund Balance.
C. Spendable-Restricted Fund Balance.
D. Spendable-Assigned Fund Balance.
53. Which of the following would be reported as a nonspendable fund balance?
A. Inventory.
B. Restricted assets.
C. Assets whose use is limited.
D. Capital assets.
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54. Under GASB standards which of the following funds can report a positive amount for unassigned
fund balance?
A. Capital projects fund.
B. Special revenue fund.
C. General Fund.
D. All of the above.
55. Use the following information to determine whether the Development Special Revenue and the
Debt Service Funds should be reported as major funds based on asset amounts provided.
Development Special Revenue Fund Assets $740,000 Debt Service Fund Assets $150,000 Total
Governmental Fund Assets $7,500,000 Total Governmental Fund and Enterprise Fund Assets
$8,750,000
A. The Development Special Revenue Fund should be reported as major.
B. The Debt Service Fund should be reported as major.
C. Both the Development Special Revenue Fund and the Debt Service Fund should be reported as
major.
D. Neither the Development Special Revenue Fund nor the Debt Service Fund should be reported
as major.