10. A city has a long-term general government liability for compensated absences of $700,000 at the
beginning of the year and $650,000 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. $(50,000).
B. $50,000.
C. $650,000.
D. $700,000.
11. A city has a long-term general government liability for compensated absences of $700,000 at the
beginning of the year and $650,000 at the end of the year. What adjustment is needed to the fund
balance to reconcile the governmental funds balance sheet information to net position for
governmental activities in the government-wide statement?
A. $(650,000).
B. $(50,000).
C. $50,000.
D. $700,000.
12. A city’s Internal Service Fund provides services only to general government departments. During the
year, the Internal Service Fund reports operating revenue of $100,000 and operating expenses of
$80,000. What adjustment is needed to the governmental funds operating statement information to
reflect these transactions in the statement of activities in the government-wide statement?
A. Increase revenue by $100,000.
B. Decrease revenue by $20,000.
C. Decrease expenses by $20,000.
D. Increase expenses by $80,000.
13. A city’s Internal Service Fund provides services only to general government departments. During the
year, the Internal Service Fund reports operating revenue of $100,000, operating expenses of $80,000
and interest income of $10,000. What adjustments are needed to the governmental funds operating
statement information to reflect these transactions in the statement of activities in the government-
wide statement?
A. Increase revenue by $110,000 and decrease expenses by $80,000.
B. Increase revenue by $10,000 and decrease expenses by $20,000.
C. Decrease expenses by $80,000 and increase revenue by $10,000.
D. Decrease expenses by $30,000 and decrease revenue by $20,000.
14. Adjustments to Enterprise Funds to prepare the government-wide financial statements will mostly be
limited to
A. Changes in measurement focus adjustments.
B. Changes in basis of accounting adjustments.
C. Internal Service Fund adjustments.
D. Changes in budgetary basis adjustments.
121
15. General capital assets with a net book value of $46,000 were transferred to an Enterprise Fund. The
business-type activities column in the government-wide financial statements would report
A. A transfer in of $46,000.
B. A capital contribution of $46,000.
C. An other financing source of $46,000.
D. A revenue of $46,000.
16. The General Fund borrowed $100,000 from a Special Revenue Fund. Interest will be paid on the loan
annually for five years and the principal repaid in full at the end of the fifth year. The governmental
activities column should report
A. Both a loan payable and loan receivable for $100,000.
B. Other financing sources of $100,000.
C. Other financing uses of $100,000.
D. Nothing related to the loan arrangement.
17. Business-type activities typically include
A. Only the enterprise funds.
B. Only the internal service funds.
C. All of the proprietary funds.
D. All of the proprietary and fiduciary funds.
18. A county’s Central Warehouse Internal Service Fund provides 65% of its services to governmental
funds, 30% of its services to Enterprise Funds, and the remaining 5% to a local municipality. If there
was a $10,000 loss in the Internal Service Fund during 20X9, the expenses in the governmental
activities column would
A. Decrease by $10,000.
B. Increase by $7,000.
C. Increase by $10,000.
D. Decrease by $7,000.
19. Internal Service Funds, classified as a proprietary fund type, are reported in the government-wide
statements as
A. Governmental activities.
B. Business-type activities.
C. Either governmental activities or business-type activities depending upon the primary user of the
activity.
D. Like Fiduciary Funds, Internal Service Funds are not reported in the government-wide
statements.
122
20. Depreciation expense for the current year was $366,750 in the Water Enterprise Fund. Depreciation
expense will be reported at the government-wide level as
A. Part of unallocated depreciation expense in governmental activities.
B. Part of unallocated depreciation expense in the business-type activities.
C. Part of the business-type activities expenses for the water activity.
D. Capital outlay expenses in business-type activities.
21. The General Fund transferred $10,000 to Enterprise Fund A; a Special Revenue Fund transferred
$20,000 to a Capital Projects Fund; Enterprise Fund A transferred $35,000 to a Capital Projects Fund
and $25,000 to Enterprise Fund B. The governmental activities column on the Statement of Activities
will be report
A. Transfers in of $25,000.
B. Transfers out of $30,000.
C. Transfers in of $55,000.
D. Transfers in of $35,000.
22. The General Fund paid $195,000 related to compensated absences during the year. If the beginning
balance of long-term compensated absences payable for the governmental activities was $65,000 and
the ending balance was $55,000, then the expenses related to compensated absences in the
governmental activities column would be
A. $195,000.
B. $185,000.
C. $65,000.
D. $55,000.
23. Net investment in capital assets would not include
A. Accounts payable, even if it was capital related.
B. Notes payable that is capital related.
C. Inventory.
D. Accumulated depreciation.
24. The required reconciliation of the governmental fund financial statement information to the
governmental activities information in the corresponding government-wide financial statements
A. Must be presented at the bottom of the fund financial statements and at the bottom of the
government-wide financial statements.
B. Must be presented only at the bottom of the government-wide financial statements.
C. May be presented either at the bottom of the fund financial statements or in separate schedules.
D. Must be presented in separate schedules, not on the face of the financial statements.
123
25. Which of the following items is NOT included in reconciling the governmental funds operating
statement information to the changes in net position in the government-wide statement?
A. Depreciation.
B. Amortization of bond premiums.
C. Expenditures for retirement of general long-term debt principal.
D. Increase in salaries payable.
26. The required reconciliation of the governmental fund balance sheet to the governmental activities
statement of net position does not include adjustments related to
A. Capital assets.
B. Interfund charges for services.
C. Deferred revenue.
D. Long-term liabilities.
27. Which of the following items would be added to changes in fund balance in reconciling the
governmental funds operating statement information to the changes in net position in the government-
wide statement?
A. Depreciation.
B. Capital outlay expenditures.
C. Book value of capital assets sold.
D. Bond proceeds.
28. Which of the following items would be added to changes in fund balance in reconciling the
governmental funds operating statement information to the changes in net position in the government-
wide statement?
A. Depreciation.
B. Bond proceeds.
C. Book value of capital assets sold.
D. Repayment of bond principal.
29. Which of the following items would be subtracted from changes in fund balance in reconciling the
governmental funds operating statement information to the changes in net position in the government-
wide statement?
A. Depreciation.
B. Capital outlay expenditures.
C. Internal Service Fund increase in net position.
D. Repayment of bond principal.
124
30. Which of the following items would be subtracted from changes in fund balance in reconciling the
governmental funds operating statement information to the changes in net position in the government-
wide statement?
A. Depreciation.
B. Bond issue costs.
C. Salary expenditures.
D. Debt principal payments.
31. In the two-worksheet approach, each of the following worksheet adjustments would be made for the
operating statement except
A. Adding depreciation expense.
B. Adding accumulated depreciation.
C. Converting interest expenditures to interest expenses.
D. Eliminating other financing sources or uses.
32. In the two-worksheet approach, what type of adjustment will be necessary for interest payable on the
balance sheet conversion worksheet?
A. No adjustment is necessary for interest payable. This amount is the same in the fund statements
and the government-wide statements.
B. Interest on long-term debt that has been incurred but not paid will need to be added to the interest
payable reported on the governmental funds balance sheet.
C. Interest paid this year that is attributable to the previous year accrual for long–term debt will need
to be deducted from interest payable reported on the governmental funds balance sheet.
D. The net change in accrued interest payable on long-term debt from the beginning of the year to
the end of the year will be added to the amount of interest payable reported on the governmental
funds balance sheet.
33. In the two-worksheet approach, which of the following worksheet adjustments would not be made for
the balance sheet?
A. Add capital assets.
B. Add accrued interest payable.
C. Add depreciation expenses.
D. Add bonds payable.
34. The Capital Projects Fund issued general long-term debt at a premium. The balance sheet conversion
worksheet of the two-worksheet approach would include
A. A deduction from an other financing source.
B. An addition to an other financing use.
C. An addition to an other financing source.
D. A deduction from an other financing use.
125
35. In the two-worksheet approach, what type of adjustment will be necessary for interest
expenditure/expense on the operating statement conversion worksheet?
A. No adjustment is necessary for interest expenditure/expense. The amount of interest expenditure
on the governmental fund financial statements is the same amount that will be reported as interest
expense in the government-wide statements.
B. Interest on long-term debt that has been incurred but not paid will need to be added to the interest
expenditure reported on the governmental funds balance sheet.
C. Interest paid this year that is attributable to the previous year accrual for long–term debt will need
to be deducted from interest expenditure reported on the governmental funds balance sheet.
D. An adjustment to the interest expenditure reported on the governmental funds operating statement
will be necessary for the net change in accrued interest payable on long-term debt from the
beginning of the year to the end of the year.
36. Depreciation expense on assets of the public safety function totaled $195,000 for the year. What is
the effect on the operating statement conversion worksheet in the two-worksheet approach of this
event?
A. There is no effect. The impact of depreciation is already reflected in the General Capital Assets
accounts.
B. Public safety expenditures/expenses will be increased by $195,000.
C. Unallocated depreciation for the governmental activities will be increased by $195,000.
D. The depreciation will decrease the program revenues of the public safety function.
37. If a county sells a capital asset with a net book value of $35,000 for $27,000, how will this transaction
be recorded on the operating statement conversion worksheet of the two–worksheet conversion
approach?
A. A deduction from an other financing source for $8,000.
B. An addition to an other financing use for $35,000.
C. An addition to an other financing use for $8,000.
D. A deduction from an other financing source for $35,000.
38. A government had capital outlay expenditures of $226,000 during the year for the public safety
function accounted for in the General Fund. It was determined that only $195,000 of the expenditures
met the capitalization threshold of the government. How would this transaction appear on the
operating statement conversion worksheet in the two-worksheet conversion approach?
A. The only effect would be to reduce capital outlay expenditures by $226,000.
B. Capital outlay expenditures would be reduced by $226,000, and public safety
expenditures/expenses would be increased by $31,000.
C. Capital outlay expenditures would be reduced by $195,000, and public safety
expenditures/expenses would be increased by $31,000.
D. The only effect would be to reduce capital outlay expenditures by $195,000.
126
Copyright © 2013 Pearson Education, Inc.
39. The Cable Enterprise Fund purchased $300,000 of capital equipment during the year. The one-
worksheet conversion adjustment necessary for the preparation of the government-wide financial
statements would be
Debit Credit
A
.
Capital Assets
Capital Outlay Expenditures
$300,000
$300,000
B
.
Capital Assets
Cash
$300,000
$300,000
C
.
Capital Assets
Capital Contributions
$300,000
$300,000
D
.
Capital Assets
Capital Outlay Expenses
$300,000
$300,000
40. A government had capital outlay expenditures of $226,000 during the year for the public safety
function accounted for in the General Fund. It was determined that $195,000 of the capital outlay
should be reported as capital assets in the government-wide financial statements. What would the
one-worksheet conversion adjustment be to record the capital assets as a governmental activity?
Debit Credit
A. Capital Outlay Expenditures
Fund Balance
$226,000
$226,000
B. Capital Assets
Capital Outlay Expenditures
$195,000
$195,000
C. Capital Assets
Capital Outlay Expenditures
$226,000
$226,000
D. Capital Assets
Capital Outlay Expenditures
$195,000
226,000
127
41. If a county receives $27,000, for the sale of a dump truck with a historical cost of $60,000, and
accumulated depreciation of $25,000, the one-worksheet conversion adjustment would be
Debit Credit
A
.
Other Financing Source – Sale of Vehicle
Accumulated Depreciation – Vehicle
Loss on sale of vehicle
Vehicle
27,000
25,000
8,000
60,000
B
.
Other Financing Source – Sale of Vehicle
Vehicle
27,000
27,000
C
.
Other Financing Source – Sale of Vehicle
Accumulated Depreciation – Vehicle
Vehicle
27,000
33,000
60,000
D
.
Other Financing Source – Sale of Vehicle
Loss on sale of vehicle
Vehicle
27,000
33,000
60,000
42. The Capital Projects Fund issued general long-term debt at a premium. The one-worksheet
conversion adjustment would include a
A. Debit to cash.
B. Credit to bonds payable.
C. Debit to unamortized premium on bonds.
D. Credit to other financing sources.
43. The one-worksheet conversion adjustment to reflect debt service payments of $85,000 ($55,000
principal; $30,000 interest) by a governmental fund would be
Debit Credit
A. Debt Service Expense
Net Position
$85,000
$85,000
B. Bonds Payable
Cash
$55,000
$55,000
C. Bonds Payable
Debt Service Expenditures – Principal
$55,000
$55,000
D. Bonds Payable
Debt Service Expenditures – Principal
$85,000
$85,000
44. Taxes were levied in the General Fund during 20X8. $157,700 of the taxes were still uncollectible as
of the end of the fiscal year. The one-worksheet conversion adjustment necessary as the government-
wide statements are being prepared would include a DEBIT to
A. Deferred revenues.
B. Allowance for doubtful accounts.
C. Taxes receivable.
D. Other financing sources.
128
Copyright © 2013 Pearson Education, Inc.
worksheet conversion adjustment necessary to record the depreciation expense as part of
governmental activities would be
Debit Credit
A
.
Depreciation Expense – Public Safety
Accumulated Depreciation
$195,000
$195,000
B
.
Depreciation Expense – Public Safety
Capital Outlay Expenditures
$195,000
$195,000
C
.
Capital Outlay Expenditures
Capital Assets
$195,000
$195,000
D
.
Capital Outlay Expenditures
Accumulated Depreciation
$195,000
$195,000
1. Management’s Discussion and Analysis is
A. Part of the basic financial statements.
B. Included in the introductory section of a CAFR.
C. Required supplementary information.
D. Optional in a CAFR.
2. Which of the following must be included to meet the minimum requirements for general purpose
external financial reporting?
A. Basic financial statements, notes to the financial statements, management’s discussion and
analysis, and other required supplementary information.
B. Basic financial statements, notes to the financial statements, and other required supplementary
information.
C. Basic financial statements, notes to the financial statements, narrative explanations, and required
supplementary information.
D. Basic financial statements, notes to the financial statements, management’s discussion and
analysis, other required supplementary information, and combining statements.
3. Which of the following statements is false?
A. Governments that do not prepare a CAFR are not required to prepare a Management’s Discussion
and Analysis.
B. The Governmental Accounting Standards Board has established requirements for the statistical
section of a CAFR.
C. Governments have some latitude in selecting major funds to be reported in the CAFR.
D. Governments are allowed to have additional information in their statistical section that is not
required information.
129
Copyright © 2013 Pearson Education, Inc.
A. The letter of transmittal.
B. An organizational chart.
C. The independent auditor’s opinion.
D. The table of contents.
5. The independent auditor’s opinion covers, at a minimum, the
A. Basic financial statements.
B. CAFR.
C. Financial section of the CAFR.
D. Primary government.
6. In the statistical section, the required demographic and economic information includes all of the
following except
A. Unemployment rate.
B. Total personal income.
C. Debt per capita.
D. Population.
7. The independent auditor’s report is normally included within
A. The introductory section of a CAFR.
B. Management’s discussion and analysis.
C. The financial section of a CAFR.
D. The statistical section of a CAFR.
8. GAAP do not require
A. A management’s discussion and analysis.
B. Governments to prepare a CAFR.
C. A statistical section to be included within a CAFR.
D. Discretely presented component units to be included in the government-wide financial
statements.
9. All of the following statistical tables should include ten individual years of trend information except
A. Demographic and economic indicators.
B. Information about net position.
C. Information about government employees.
D. Information about principal revenue payers.
10. Which of the following is not part of the financial section of a comprehensive annual financial report?
A. Transmittal letter.
B. Management’s discussion and analysis.
C. Required supplementary information.
D. Notes to the financial statements.
130