B. A net decrease of $5,000.
C. A decrease of $15,000.
D. A net increase of $5,000.
(Answer: A; Moderate; LO3)
19. The city’s central garage, which is accounted for as an Internal Service Fund, repairs and
maintains all of the city’s vehicles. The fire department is accounted for in the General Fund.
The Central Garage Internal Service Fund sends a bill to the fire department for $18,000,
which represents the cost of maintaining fire trucks for the month. The Central Garage should
record
A. Debit Due from General Fund and credit Revenues.
B. Debit Due from General Fund and credit Expenses.
C. Debit Expenses and credit Due to General Fund.
D. Debit Revenues and credit Due to General Fund.
20. A city’s police department receives goods from an Internal Service Fund for which it has not
yet paid the ISF. To record this transaction the city should record a credit to what account in
the General Fund?
A. Due to the Internal Service Fund.
B. Advance from the Internal Service Fund.
C. Vouchers payable.
D. Reserve fund balance.
21. Assume the General Fund borrows $50,000 from the Enterprise Fund. The interfund loan is
scheduled to be paid back in five years. Which of the following statements properly
characterize the reporting effects of this transaction?
A. General Fund Assets increase; General Capital Assets account increase.
B. General Fund Assets and Fund Balance increase.
C. General Fund Assets and Liabilities increase.
D. General Fund Assets and General Long-Term Liabilities account increase.
22. A city’s General Fund provides a two-year loan to the Internal Service Fund. To record this
transaction the city should record a debit to what account in the General Fund?
A. Due from the Internal Service Fund.
B. Advance to the Internal Service Fund.
C. Advance from the Internal Service Fund.
D. Transfer to the Internal Service Fund.
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23. A local school district issued a short-term note payable to purchase $500,000 of recreation
equipment. The note will be repaid with General Fund resources. The General Fund would
record
A. Debit Expenditures – Capital Outlay and credit Due to Bank, for $500,000.
B. Debit Capital Assets and credit Notes Payable, for $500,000.
C. Debit Capital Assets and credit Revenues, for $500,000.
D. Debit Expenditures – Capital Outlay and credit Note Payable, for $500,000.
24. Taxes receivable of $80,000, which have a related allowance for uncollectible taxes of
$8,000, become delinquent. The entry to record this includes a debit to
A. Taxes Receivable – Current.
B. Allowance for Uncollectible Current Taxes.
C. Allowance for Uncollectible Delinquent Taxes.
D. Revenues – Property Taxes.
25. Accounts receivables are determined to be uncollectible and are written off. The following
account should be debited:
A. Bad Debt Expense.
B. Revenue.
C. Allowance for Uncollectible Accounts Receivable.
D. Accounts Receivable.
26. In governmental funds, governments must accrue interest on
A. General long-term debt.
B. General long-term debt, but only if the interest is paid in the first 60 days after year end.
C. Short-term debt of the fund.
D. Short-term debt of the fund, buy only if the interest is paid in the first 60 days after year
end.
27. Which of the following should not be accrued as expenditures in a governmental fund at year
end?
A. Salaries earned by employees but not paid.
B. Repair work performed by contractors, but not completed.
C. Interest incurred on short-term debt, but not yet due.
D. Interest incurred on long-term debt, but not yet due.
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28. Assume the General Fund has two outstanding investments as of its 6/30/X5 year end, as
follows:
$100,000 Certificate of Deposit, 6 month original maturity, 3% annual interest rate,
purchased 4/30/X5
$500,000 Commercial Paper, 8 month original maturity, 3% annual interest rate,
purchased 1/31/X5
The interest revenue that would be recorded in the GAAP-based external financial statements
for the General Fund as of 6/30/X5 would be
A. $500.
B. $6,250.
C. $6,750.
D. $11,500.
29. The Special Revenue Fund of the city of Wakefield ended its fiscal year with revenues of
$750,000, other financing sources of $50,000, and expenditures of $725,000. The closing
entry in the Special Revenue Fund would be
Debit Credit
Net profit
Other Financing Sources
75,000
50,000
Other Financing Uses
Other Financing Sources
75,000
50,000
Other Financing Sources
Other Financing Uses
50,000
75,000
Other Financing Sources
Fund Balance
50,000
75,000
30. For a transaction to be classified as an extraordinary item it must be
A. Unusual in nature and infrequent in occurrence.
B. Unusual in nature or infrequent in occurrence but not under the control of management.
C. Unusual in nature or infrequent in occurrence and under the control of management.
D. Unusual in nature or infrequent in occurrence.
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31. For a transaction to be classified as a special item it must be
A. Unusual in nature or infrequent in occurrence but not under the control of management.
B. Unusual in nature and infrequent in occurrence.
C. Unusual in nature or infrequent in occurrence and under the control of management.
D. Unusual in nature or infrequent in occurrence.
32. Which of the following events could potentially qualify for reporting as an extraordinary
item?
A. A city government sells city hall.
B. City Hall is hit by lightning and is significantly damaged by fire.
C. The city offers employees an early retirement incentive package and 15 employees accept
the offer.
D. City has unexpected loss on sale of an investment in AT&T stock.
33. The City of Trixie reports in their General Fund a $505,000 special item (an inflow) and a
$1,750,000 extraordinary item (an outflow) in the same year. Which of the following
statements would be false?
A. Fund balance would decrease $1,245,000.
B. The extraordinary item and the special item should be reported separately on the face of
the Statement of Revenues, Expenditures, and Changes in Fund Balance.
C. Fund balance would increase by only $505,000.
D. Of extraordinary items and special items, only special items are under the control of
management.
34. Which of the following would not result in a portion of fund balance being classified as
nonspendable?
A. Advances to other funds.
B. Inventory.
C. A city council passing enabling legislation that requires proceeds from a newly
authorized sales tax be spent on a downtown revitalization project.
D. Prepaid insurance.
35. Restricted fund balance in the General Fund can be the result of
A. A city budget director setting aside funds to be spent for city street improvement.
B. Donors requiring monies given to a city where the donation must remain intact but the
earnings can be spent for park beautification.
C. A city council passing enabling legislation that requires proceeds from a newly
authorized sales tax be spent on a downtown revitalization project.
D. A city council taking a formal action to set aside money for a future contract.
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A. The residual fund balance that remains after accounting for nonspendable fund balance,
restricted fund balance, committed fund balance, and assigned fund balance.
B. A fund balance category that is used to report positive and negative balances in any
governmental fund.
C. The amount of governmental fund net assets with no constraints on their use.
D. A fund balance category that is used to report positive and negative balances in the
General Fund, but only negative balances in other governmental funds.
37. Assume a city’s General Fund has $75,000 of inventory, $600,000 of long-term loans
receivable, $250,000 long-term loans due from other funds, and $1,900,000 of investments.
Based solely on this information, the city’s nonspendable fund balance would be
A. $925,000.
B. $850,000.
C. $675,000.
D. $600,000.
38. Which of the following could never be considered part of assigned fund balance?
A. The finance director sets aside a substantial amount of resources for a special project.
B. Unassigned amounts loaned to another fund for more than one year.
C. Program manager – with blessing of city council – sets aside funds for multi-year project.
D. Fund balances remaining in a Special Revenue Fund after determining the appropriate
balances for nonspendable fund balance, restricted fund balance, and committed fund
balance.
39. Which of the following is an appropriate use of a fund balance restriction?
A. To report the amount of capital assets acquired during the year.
B. To indicate that the finance director is setting aside a substantial amount of resources for
a special project.
C. To report the amount of long-term debt that will mature in the next 12 months.
D. To report amounts that can only be used for specific purposes due to debt covenant
constraints.
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40. Fund balance may be assigned when
A. Management determines that a portion of unassigned fund balance should be set aside for
the construction of a new fire station.
B. The city council passes an ordinance to set aside a portion of unassigned fund balance for
construction of a new fire station.
C. Management believes that a portion of restricted fund balance should be set aside for the
construction of a new fire station.
D. Management determines it needs a predetermined amount of materials and supplies
inventory at the end of each year.
41. Hannah County has a total fund balance in the General Fund as of the end of the year of
$1,565,000. Assume the following:
The budget officer decided to set aside $405,000 for new road maintenance. The county’s
governing board had previously given her this authority.
Unspent restricted drug enforcement grant proceeds of $75,000.
The county’s governing board passed a resolution to use $500,000 for construction of a
fleet maintenance facility.
In the year-end financial statements, Hannah County would report unassigned fund balance
and assigned fund balance, respectively, in the General Fund as
A. $1,085,000 unassigned fund balance; $405,000 assigned fund balance.
B. $660,000 unassigned fund balance; $905,000 assigned fund balance.
C. $585,000 unassigned fund balance; $405,000 assigned fund balance.
D. $495,000 unassigned fund balance; $480,000 assigned fund balance.
42. Hannah County has a total fund balance in the General Fund as of the end of the year of
$1,565,000. Assume the following:
The budget officer decided to set aside $405,000 for new road maintenance. (The
county’s governing board had previously given her this authority.)
Unspent restricted drug enforcement grant proceeds of $75,000
The county’s governing board passed a resolution to use $500,000 for construction of a
fleet maintenance facility
In the year-end financial statements, Hannah County would report committed fund balance in
the General Fund as
A. $75,000.
B. $500,000.
C. $575,000.
D. $905,000.
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43. The following information pertains to the Scott County General Fund:
Expenditures $14,800,000
Revenues $14,200,000
The change in fund balance Scott County’s General Fund for the year is a
A. $1,600,000 decrease.
B. $1,000,000 decrease.
C. $600,000 decrease.
D. $400,000 increase.
44. The following information pertains to the Richardson County General Fund:
Expenditures $12,800
Revenues 9,200
Long-term bond issue proceeds 1,000
Short-term note principal retirements 250
Operating transfers to other funds 75
The change in fund balance for Richardson County’s General Fund for the year is a
A. $2,600 decrease.
B. $2,675 decrease.
C. $2,925 decrease.
D. $3,600 decrease.
45. A government levies property taxes of $2,500,000, 1% of which are expected to prove
uncollectible. The property taxes should be reported in the General Fund statement of
revenues, expenditures, and changes in fund balances as
A. Revenues of $2,500,000 and expenditures of $25,000.
B. Revenues of $2,500,000 and other financing uses of $25,000.
C. Revenues of $2,475,000 and no expenditures or other financing uses.
D. Other financing sources of $2,500,000 and expenditures of $25,000.
46. Which of the following does not affect the “Excess of Revenues over Expenditures”?
A. Purchase of capital assets.
B. Incurring and paying salaries.
C. Property taxes levied and collected in the year.
D. Transfers from Enterprise Funds.
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47. A city acquired a dump truck for general government usage. The government paid nothing
down and signed a 10%, short-term note payable for the price of the truck, $80,000. The note
will mature in the next fiscal year. What items should appear in the statement of revenues,
expenditures, and changes in fund balance for the General Fund in the year the truck was
purchased?
A. Capital outlay expenditures of $80,000, but no interest.
B. Interest expenditures on the note, but no capital outlay expenditures since nothing was
paid.
C. Capital outlay expenditures of $80,000 and interest expenditures on the note.
D. Depreciation expenses (depending on the estimated useful life of the truck) and interest
expenditures on the note.
48. The General Fund had the following transactions during the month of June: (1) took delivery
of 10 new patrol cars that had been ordered and encumbered the previous month — the total
costs were $270,000; (2) issued purchase orders totaling $25,000 for various supplies; (3)
issued payroll checks in the amount of $110,000; and (4) various other short term liabilities
were incurred in the amount of $1,500. Expenditures in the General Fund for the month of
June would be
A. $381,500.
B. $136,500.
C. $111,150.
D. $25,000.
49. Which of the following should be reported in the statement of revenues, expenditures, and
changes in fund balance of a General Fund?
A. A short-term loan to another governmental fund.
B. A long-term loan to another governmental fund.
C. Repayment of a short-term loan from a bank.
D. Repayment of a long-term loan from a bank.
50. Which of the following would be classified as Other Financing Sources (Uses)?
A. Purchase of capital assets.
B. Proceeds from the issuance of 6-month notes payable.
C. Transfers from an Internal Service Fund.
D. Special item.
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These multiple choice questions include outstanding orders at year-end as part of the situation.
38. Which of the following could never be considered part of assigned fund balance?
A. The finance director sets aside a substantial amount of resources for a special project.
B. Unassigned amounts loaned to another fund for more than one year.
C. Expected costs of orders outstanding at year-end that are to be filled in the next fiscal
year.
D. Fund balances remaining in a Special Revenue Fund after determining the appropriate
balances for nonspendable fund balance, restricted fund balance, and committed fund
balance.
39. Which of the following is an appropriate use of a fund balance restriction?
A. To report the amount of capital assets acquired during the year.
B. To indicate that the finance director is setting aside a substantial amount of resources for
a special project.
C. To report the expected costs of orders outstanding at year-end that are to be filled in the
next fiscal year.
D. To report amounts that can only be used for specific purposes due to debt covenant
constraints.
41. Hannah County has a total fund balance in the General Fund as of the end of the year of
$1,565,000. Assume the following:
The budget officer decided to set aside $405,000 for new road maintenance. The county’s
governing board had previously given her this authority.
Purchase orders of $41,000, which were not related to restricted or committed resources,
were outstanding at year-end.
Unspent restricted drug enforcement grant proceeds of $75,000.
The county’s governing board passed a resolution to use $500,000 for construction of a
fleet maintenance facility.
In the year-end financial statements, Hannah County would report unassigned fund balance
and assigned fund balance, respectively, in the General Fund as
A. $949,000 unassigned fund balance; $41,000 assigned fund balance.
B. $544,000 unassigned fund balance; $405,000 assigned fund balance.
C. $544,000 unassigned fund balance; $446,000 assigned fund balance.
D. $1,044,000 unassigned fund balance; $446,000 assigned fund balance.
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42. Hannah County has a total fund balance in the General Fund as of the end of the year of
$1,565,000. Assume the following:
A. The budget officer decided to set aside $405,000 for new road maintenance. (The
county’s governing board had previously given her this authority.)
B. Unspent restricted drug enforcement grant proceeds of $75,000
C. Purchase orders of $41,000, which were not related to restricted or committed resources,
were outstanding at year-end,
D. The county’s governing board passed a resolution to use $500,000 for construction of a
fleet maintenance facility
In the year-end financial statements, Hannah County would report committed fund balance in
the General Fund as
A. $41,000.
B. $75,000.
C. $500,000.
D. $541,000.
1. What general ledger account is not needed for an expenditures subsidiary ledger?
A. Appropriations.
B. Expenditures.
C. Encumbrances.
D. Encumbrances Outstanding.
2. A city’s General Fund general ledger includes accounts called Estimated Revenues,
Appropriations, and Encumbrances. This indicates that the city
A. Formally integrates its budget into its accounts.
B. Uses a cash plus encumbrances basis of accounting.
C. Maintains its accounts on an accrual basis.
D. Erroneously reports encumbrances as expenditures.
3. Under an encumbrance system, which account is debited when a purchase order is issued?
A. Expenditures.
B. Appropriations.
C. Encumbrances.
D. Encumbrances Outstanding.
4. Which of the statements regarding the accounting for encumbrances is false?
A. The budgetary entry to record an encumbrance would be a debit to Encumbrances
Outstanding and a credit to Encumbrances.
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