(Answer: C; Easy; LO2)
10. For general purpose external financial reporting, discretely presented component unit
information
A. Is not presented.
B. Is included in the government-wide statements only.
C. Is included in the fund financial statements only.
D. Is included in both the government-wide and the fund financial statements.
11. The government-wide statement of net position would report the following component of net
position except
A. Unrestricted net position.
B. Restricted net position.
C. Net investment in capital assets.
D. Designated net position.
12. In the government-wide statement of net position, interfund receivables and payables
A. Should not be reported.
B. Should only be reported for balances payable between governmental activities and
business-type activities.
C. Can be reported in either the governmental activities or business-type activities columns.
D. Should be eliminated in the governmental activities column but not the business-type
activities column.
13. Which of the following may be reported in the government-wide statements and the fund
financial statements?
A. Nonfiduciary component units
B. General government long-term debt
C. General government capital assets
D. Short-term debt.
14. In the government-wide statements, business-type activities include
A. Primarily only Enterprise Fund operations.
B. Primarily only Internal Service Fund operations.
C. Both a government’s Enterprise Fund and all of its Internal Service Fund activities.
D. A government’s Enterprise Fund, Internal Service Fund, and nonexpendable trust fund
activities.
15. Which of the following classifications is not used in the government-wide statement of
activities?
111
Copyright © 2013 Pearson Education, Inc.
B. Extraordinary items.
C. Transfers.
D. Nonoperating revenues.
16. In the statement of activities, depreciation is reported on
A. All depreciable capital assets of the government except infrastructure assets that use the
modified approach.
B. All depreciable capital assets of the government.
C. Only depreciable capital assets of business-type activities of the government.
D. Only depreciable capital assets of governmental activities of the government.
17. The government-wide statements include
A. Statement of Activities.
B. Statement of Cash Flows.
C. Statement of Assets and Liabilities
D. Budget-to-actual statement
18. The government-wide statement of net position must include a column for each of the
following except
A. Governmental activities.
B. Business-type activities.
C. Component units.
D. Fiduciary activities.
19. Depreciation was calculated for the police department’s vehicle fleet. The expense will be
reported
A. As depreciation expenditure in the General Fund.
B. As depreciation expense in the General Fund.
C. As depreciation expense in the public safety function of governmental activities.
D. As unallocated depreciation expense for governmental activities.
20. Capital assets are not reported
A. In governmental activities.
B. In business-type activities.
C. In the Enterprise Funds.
D. In the General Fund.
21. The government-wide financial statements do not include
A. Discretely presented component units.
112
Copyright © 2013 Pearson Education, Inc.
C. Business-type activities.
D. Net position.
22. A city had the following accounts and amounts on its statement of activities:
Public safety expenses of $2,755,500
Public safety charges for services of $20,500
Public safety operating grants and contributions of $105,000
Public safety capital grants and contributions of $75,000
General government charges for services of $455,500
Property tax general revenues of $2,905,000
Unrestricted grants of $300,000
Net (expense) revenue for the public safety function would be
A. $(2,555,000).
B. $200,500.
C. $956,000.
D. $2,555,000.
23. The government-wide financial statements report all of the following equity classifications
except
A. Restricted net position.
B. Retained earnings.
C. Unrestricted net position.
D. Net investment in capital assets.
24. If the General Fund has restricted fund balance, then the governmental activities column will
automatically have
A. Committed net position.
B. Restricted net position.
C. Designated net position.
D. Net investment in capital assets.
25. Interest expense for governmental activities at the government-wide level should be reported
A. As part of the function for which the financing was beneficial.
B. As part of the general government function.
C. In total as capitalized interest.
D. As an indirect expense not allocated to a functional area.
113
26. The General Fund levies taxes of $3,750,000 during the fiscal year, 1% of which is deemed
to be uncollectible. $3,650,000 was collected or met the availability criteria. How much
revenue should be recorded in the government-wide financial statements?
A. $3,613,500.
B. $3,650,000.
C. $3,712,500.
D. $3,750,000.
27. A city reports three Pension Trust Funds, one Private-Purpose Trust Fund, one Investment
Trust Fund, and three Agency Funds. How many columns would the City’s statement of
fiduciary net position would report?
A. Two (2).
B. Three (3).
C. Four (4).
D. Eight (8).
28. A government issued general obligation bonds to finance the construction of a new fire
station. In the current year, the government incurred $107,000 of interest expense on the
debt. This amount will be reported on the government-wide statement of activities as
A. Expenses of the general government function.
B. Expenses of the public safety function.
C. Interest expenses of the governmental activities.
D. An offset to interest earnings in the General Fund.
29. Fiduciary funds are reported
A. In both the fund financial statements and the government-wide financial statements.
B. As required supplementary information.
C. By fund type in the government-wide financial statements.
D. By fund type in the fund financial statements.
30. Each of the following would be considered required supplementary information except
A. Management’s discussion and analysis.
B. Budgetary comparison information that is eligible for basic financial statement
presentation but not included therein.
C. A letter of transmittal.
D. Disclosures for governments that use the modified approach to infrastructure accounting
and reporting.
114
31. Equity in a fiduciary fund is, by nature, considered to be
A. Committed.
B. Assigned.
C. Designated.
D. Restricted.
32. A city determines that it has three major governmental funds, including the General Fund,
and two major enterprise funds. The city will
A. Always have three major governmental funds and two major enterprise funds.
B. Evaluate each year which funds are major and which funds are considered to be nonmajor
except the General Fund which is always considered a major fund.
C. Only be required to show a separate column for the General Fund.
D. Be able to report all of the major funds in one column on the respective fund financial
statements.
33. Assume that a governmental entity has, in addition to the General Fund, four other
governmental funds. Upon applying the quantitative criteria to determine the minimum
requirements for major fund reporting it is determined that two of those four funds meet the
criteria. At a minimum, the governmental entity will report how many major funds?
A. One (1).
B. Two (2).
C. Three (3).
D. Four (4).
34. A city has, in addition to the General Fund, three other governmental funds. Two of those
three governmental funds have been deemed to be major funds. At most, how many funds
may be reported as major funds?
A. One (1).
B. Two (2).
C. Three (3).
D. Four (4).
35. Major fund reporting is required for which of the following fund types?
A. Enterprise Funds.
B. Internal Service Funds.
C. Agency Funds.
D. Private-Purpose Trust Funds.
115
36. A governmental entity has a General Fund, four Special Revenue Funds, two Debt Service
Funds, a Permanent Fund, two Enterprise Funds, three Internal Service Funds, and two
Pension Trust Funds. Using the criteria from GASB Statement No. 34 to identify major
funds, the government discovers that two of the Special Revenue Funds and one Enterprise
Fund meet the minimum criteria to be a major fund. How many individual governmental
funds may be reported as major funds?
A. Four (4).
B. Eight (8).
C. Ten (10).
D. Fifteen (15).
37. Hannah Township has a General Fund, two Capital Projects Funds, one Permanent Fund, two
Enterprise Funds, two Internal Service Funds, three Pension Trust Funds, and one Private-
Purpose Trust Fund. Assuming all governmental and enterprise funds meet the major fund
criteria, how many columns will the proprietary fund statement of net position have?
A. Two (2).
B. Three (3).
C. Four (4).
D. Five (5).
38. Which of the following funds would not be eligible for major fund reporting?
A. General Fund.
B. Enterprise Fund.
C. Debt Service Fund.
D. Internal Service Fund.
39. In the government-wide financial statements, pass-through grants would be reported as
A. Program revenues.
B. General revenues.
C. Other financing sources.
D. Operating revenues.
40. Which of the following types of revenue would always be reported as a general revenue in
the government-wide financial statements?
A. Interest earned on a capital grant.
B. Charges for services.
C. Operating grant.
D. Property taxes.
116
41. A county had the following earnings during the year:
Charges for services in public works of $289,000
Public safety operating grants of $100,000
Property taxes of $1,950,000
Interest earned on restricted grants of $5,750
Interest earned on unrestricted grants of $3,250
Public works capital grants of $310,000
Sales taxes of $425,000
Based on this information and assuming all revenues were earned, governmental activities
general revenues for the year would be
A. $704,750.
B. $1,950,000.
C. $2,378,250.
D. $3,083,000.
42. Sales taxes levied by a county government are shared with the local municipal government.
The municipal government chooses to use the intergovernmental revenues for drug
enforcement activities. In the government-wide statement of activities, the municipal
government would report the sales taxes as
A. Unrestricted grants and contributions general revenue.
B. Operating grants and contributions program revenue.
C. Capital grants and contributions program revenue.
D. A transfer in general revenue.
43. Which of the following cannot be classified as program revenues?
A. Contributions.
B. Grants.
C. Charges for services.
D. Taxes.
44. Which of the following would not be classified as charges for services?
A. Operating special assessments.
B. Licenses and permits.
C. Fines and forfeitures.
D. A special tax levied for a particular function.
117
45. A government that uses the modified approach to account for qualifying assets should report
all infrastructure asset related costs for the year as
A. Expenses.
B. Assets.
C. Expenses, unless they were additions or qualitative improvements.
D. Assets unless incurred in disposing of an infrastructure asset.
46. A government that uses the modified approach will
A. Report depreciation expense on infrastructure assets.
B. Capitalize all costs related to infrastructure assets.
C. Expense all costs related to infrastructure assets.
D. Expense costs related to maintenance of infrastructure capital assets.
47. Topics to be covered in the management’s discussion and analysis
A. Are limited to a specific list of topics in GASB Statement No. 34.
B. Must, at a minimum, cover the specific list of topics in GASB Statement No. 34 but may
include additional topics that management considers significant.
C. Are determined based upon management’s judgment.
D. Can only include topics not in the specific list in GASB Statement No. 34 if agreed to by
both management and the auditors.
48. Management’s discussion and analysis
A. Does not have to cover any budgetary issues.
B. May not include charts and graphs.
C. Must discuss significant variations between the original budget and the final budget.
D. May provide speculative information about future government actions.
49. Which of the following statements concerning the notes to the financial statements is true?
A. The notes to the financial statements are an integral part of the basic financial statements.
B. The notes to the financial statements are considered to be required supplementary
information.
C. The auditor’s opinion generally does not extend to the notes to the financial statements.
D. The notes support the basic financial statements, management’s discussion and analysis,
and other required supplementary information.
118
Copyright © 2013 Pearson Education, Inc.
Part I contains generic questions about deriving the government-wide financial statements.
Part II contains questions that specifically address the two-worksheet approach to the conversion
process, which is in the main part of the chapter.
Part III contains questions that specifically address the one-worksheet approach to the conversion
process, which is in Appendix 14-1 of the chapter.
1. Which of the following do most governmental entities not integrate into their general ledger
accounts?
A. Governmental fund accounts.
B. Fiduciary fund accounts.
C. Government-wide information.
D. Proprietary fund accounts.
2. All of the following transactions could potentially be reconciling items between the governmental
fund financial statements and government-wide governmental activities column except
A. The purchase of capital assets.
B. Accrual of compensated absences liability.
C. Issuance of long-term debt.
D. Borrowing from a local bank with a short-term loan.
3. If an Internal Service Fund provides 60% of its services to the General Fund and 40% of its services
to an Enterprise Fund, then governmental activities column in the government-wide financial
statements will
A. Include 60% of the capital assets of the Internal Service Fund.
B. Reflect a reduction in expenses equal to 60% of the profit the Internal Service Fund reported for
the year.
C. Include none of the capital assets of the Internal Service Fund.
D. Reflect a reduction in expenses equal to 100% of the profit the Internal Service Fund reported for
the year.
4. When converting the multiple governmental funds to the single entity represented by the
governmental activities in the government-wide financial statements, which of the following
adjustments will not be necessary?
A. Converting the cash account to reflect the different basis of accounting.
B. Adjusting for capital assets.
C. Adjusting for long-term liabilities.
D. Converting fund balance to net position.
5. Which of the following financial accounting elements is not common to both the governmental funds
and the governmental activities function in the government-wide financial statements?
A. Cash.
B. Short-term liabilities.
C. Deferred inflows.
D. Capital assets.
119
Copyright © 2013 Pearson Education, Inc.
6. Which of the following adjustments will not be necessary to covert the measurement focus and basis
of accounting found in the governmental funds to the governmental activities reported in the
government-wide financial statements?
A. Recording expenses with no corresponding expenditures.
B. Converting “when due” payables to accrual based payables.
C. Eliminating expenditures with no expense counterparts.
D. Adjusting the fair value of investments.
7. Which of the following items would not require an adjustment to convert governmental fund
information to governmental activities in the statement of net position?
A. Due to Debt Service Fund
B. Due to an Enterprise Fund
C. Due from a Special Revenue Fund
D. Due to Capital Projects Fund.
8. A city reports deferred tax revenue of $300,000 at the beginning of the year and $350,000 at the end
of the year. What adjustment is needed to changes in fund balance to reconcile the governmental
funds operating statement information to the changes in net position for governmental activities in the
government-wide statement?
A. ($300,000).
B. $(50,000).
C. $50,000.
D. $350,000.
9. A city reports deferred tax revenue of $300,000 at the beginning of the year and $350,000 at the end
of the year. What adjustment is needed to fund balance to reconcile the governmental funds balance
sheet information to net position for governmental activities in the government-wide statement?
A. $350,000.
B. $50,000.
C. $(50,000).
D. ($300,000).
120