A. Taxes Receivable
Allowance for Uncollectible Taxes
Revenues
$700,000
$14,000
681,000
B. Taxes Receivable
Revenues
$700,000 $700,000
Expenditures
Revenues
5,000
686,000
D. Taxes Receivable
Revenues
$700,000
686,000
13. The Town of Lily Branch anticipated that discount opportunities of up to $3,000 would be
taken by their taxpayers. Which of the following statements accurately reflects the
accounting for the anticipated discounts when the taxes are levied?
A. Revenues are initially recorded at the entire levy amount. Discounts taken are recorded as
expenditures when they are actually taken.
B. Taxes receivable are reduced by the amount of discounts anticipated. The discounts
anticipated are recorded as expenditures at the time of the levy.
C. Revenues are recorded at the time of levy net of anticipated discounts. Taxes receivable
are recorded at the full levy amount.
D. Revenues are recorded at gross at the time of levy. At collection, taxes receivable are
reduced by the gross amount, the discount is recognized as a miscellaneous revenue, and
cash is recorded at net.
14. A government allows discounts on taxes if payments are made within two months of the levy
date. How does the government account for the discounts as they are being taken?
A. Allowance for discounts is debited for the amount of the discounts taken.
B. Expenditures are debited for the amount of the discounts taken.
C. Revenue is debited for the amount of the discounts taken.
D. Allowance is credited for the discount and is recorded at the time the discount is taken.
15. A county anticipated that $6,500 of discounts would be taken on their initial tax levy. Which
of the following statements is true if discounts were less than anticipated?
A. Revenues would be increased.
B. Revenues would be decreased.
C. Expenditures would be decreased.
D. Expenditures would be increased.
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liens
A. In every possible situation.
B. Only if the expected salable value of the property against which the lien was established
is less than the fair value of the property.
C. Only if the expected salable value of the property against which the lien was established
is less than the total amount of the liens receivable against that property.
D. Only if the lien is contested in court.
17. A city levies $200,000 of property taxes for its current fiscal year. One percent of the tax levy
is expected to be uncollectible. The city collects $170,000 of its taxes during the year and
another $25,000 during the first two months of the following year. What amount of property
tax revenues should the city report in the General Fund financial statements for the current
fiscal year?
A. $200,000
B. $198,000
C. $195,000
D. $170,000.
18. A city levies $200,000 of property taxes for its current fiscal year. One percent of the tax levy
is expected to be uncollectible. The city collects $170,000 of its taxes during the year and
another $25,000 during the first two months of the following year. In addition, the city
collected $3,000 of prior year taxes during the first two months of the current fiscal year and
another $2,000 during the remainder of the current fiscal year. What amount of property tax
revenues should the city report in the General Fund financial statements for the current fiscal
year?
A. $200,000.
B. $198,000.
C. $197,000.
D. $195,000.
19. A city collected $750,000 of taxes levied during the current fiscal year (the total levy was
$780,000), $50,000 of past due taxes levied in a previous year, and $25,000 of prepayments
for next year’s taxes. The city should report tax revenue in the General Fund of
A. $750,000.
B. $800,000.
C. $825,000.
D. $855,000.
20. In Year 1, a county levied $1,500,000 of property taxes and collected $1,400,000 of that levy;
in Year 2, the levy was $1,550,000 and the related collections totaled $1,495,000; in Year 3,
the levy was $1,575,000 and the related collections totaled $1,530,000. Also, collections of
past due taxes in Years 1, 2, and 3 were $15,000, $14,000, and $19,000, respectively.
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Assuming that the General Fund’s deferred revenue at the beginning of Year 1 was $410,000,
what would deferred revenue be as of the end of Year 3?
A. $362,000.
B. $562,000.
C. $610,000.
D. $658,000.
21. GASB Statement No.31 requires the following investments to be recorded at fair value
except
A. Participating interest-earning investment contracts.
B. Equity securities with readily determinable fair values.
C. Debt securities.
D. Nonparticipating interest-earning investment contracts.
22. When a governmental entity is decreasing the fair market value of an investment, the
appropriate debit would be to
A. Investments.
B. Investment income.
C. Cash.
D. Loss on investments.
23. Which of the following statements regarding the accounting for investments in governmental
funds is false?
A. Interest receivable should be accrued as it is earned.
B. Interest revenue should be recognized on a cash basis.
C. Interest revenue is accrued as it meets the availability criteria.
D. Decreases in the fair market value of equity securities with readily determinable fair
values result in a decrease in investment income.
24. A government received $30,000 of interest on investments of its General Fund during the
year. The fair value of its investments increased by $3,500 during the year. In its General
Fund statement of revenues, expenditures, and changes in fund balance the government
should report
A. Investment income of $30,000 as revenues and the increase in the fair value of
investments of $3,500 as an other financing source.
B. Investment income of $33,500 as revenues.
C. Investment income of $33,500 as an other financing source.
D. Investment income of $30,000 as revenues and disclose the increase in the fair value of
investments in the notes to the financial statements.
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25. All of the following are examples of intergovernmental revenues except
A. Amounts to which a government is entitled as determined by the federal government
pursuant to an allocation formula contained in a federal statute.
B. Revenues levied by a state government but shared on a predetermined basis with other
governments.
C. Interest earned on investments in bonds issued by other governments.
D. Cash contributions received from another government to be used for a specified purpose.
26. Pass-through grants are accounted for
A. Only in Agency Funds.
B. By increasing or decreasing governmental fund assets and liabilities to reflect the agency
relationship–no revenues are reported in the governmental fund.
C. As revenues and expenditures or expenses in the appropriate fund of the pass-through
entity (primary recipient).
D. As other financing sources and other financing uses in the appropriate fund of the pass-
through entity (primary recipient).
27. The county received a $1,500,000 restricted grant from the state government to be used to
improve its public safety department’s communication systems. The county has met all
eligibility requirements of the grant. In the current year, the General Fund should report this
grant as
A. Other financing sources.
B. Deferred revenues.
C. Revenues.
D. Unearned revenues.
28. If a city receives notification of a grant award and the actual proceeds sixty days prior to the
start of the grant period, the entry to record the grant in the Special Revenue Fund would be
A. A debit to grants receivable and a credit to grants revenue.
B. A debit to cash and a credit to grants revenue.
C. A debit to grants receivable and a credit to unearned revenue.
D. A debit to cash and a credit to unearned revenue.
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29. The county received a $1,500,000 restricted grant from the state government to be used to
improve its public safety department’s communication systems. The county will not meet all
eligibility requirements of the grant until next fiscal year, when the county plans to begin
incurring expenditures for this purpose. In the current year, the General Fund should report
this grant as
A. Other financing sources.
B. Deferred revenues.
C. Revenues.
D. Unearned revenues.
30. The City of Ruth has been awarded a $1,000,000 federal expenditure-driven grant to improve
bike trails. The federal government advanced the city $600,000 when the grant was awarded
on January 10, 20X8. The city incurred $418,000 of qualifying expenditures during 20X8.
How much should the city of Ruth recognize as unearned revenue for its fiscal year ending
December 31, 20X8?
A. $182,000.
B. $418,000.
C. $582,000.
D. $600,000.
31. The City of Ruth has been awarded a $1,000,000 federal reimbursement grant to improve
bike trails. The city has incurred $418,000 of qualifying expenditures during the current year,
for which the federal government has reimbursed the city $180,000. How much should the
city of Ruth recognize as revenue for the current year?
A. $1,000,000
B. $598,000.
C. $418,000.
D. $180,000.
32. The City of Ruth has been awarded a $1,000,000 federal reimbursement grant to improve
bike trails. The city has incurred $418,000 of qualifying expenditures to date, for which the
federal government has reimbursed the city $180,000. How much should the city of Ruth
show as due from the federal government?
A. $820,000.
B. $582,000.
C. $418,000.
D. $238,000.
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33. Clark County was hired by Catlett City, the largest city in the county, to maintain some of its
roads. Clark County billed Catlett City for its cost of maintaining the roads. The amount of
the billing was $60,000. Clark County should report the $60,000 as
A. An other financing source.
B. A revenue.
C. A reduction of expenditures.
D. A gain on work performed for other governments.
34. The Ruby Falls Independent School District receives significant payments in lieu of taxes
from the federal government to reimburse the district for lost revenues because a military
base, which is not subject to property tax, is within the district’s boundaries. These payments
should be reported as
A. Other financing sources — transfer.
B. Revenue.
C. An extraordinary item.
D. A special item.
35. Inactive bank accounts that revert to the state after a period of time should be
A. Reported at their full fair value as liabilities of the government.
B. Recognized as revenue–net of any amounts expected to be claimed by heirs.
C. Reported as unearned revenue.
D. Reported in a special revenue fund.
36. The county received $75,000 from the annual sale of surplus general government property.
The proceeds are deposited in the General Fund. The General Fund should report the
proceeds as
A. Other financing sources.
B. Due to other funds.
C. Revenues.
D. Special item.
37. The county received a $75,000 payment in lieu of taxes from the water Enterprise Fund. The
Enterprise Fund receives no service from the county for this payment. The General Fund
should report the payment in
A. Other financing sources — transfer.
B. Interfund charges.
C. Revenues.
D. Special item.
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38. Assume that a general capital asset was sold for $2,500. The asset was originally purchased
for $10,000 and has been in use for 3 years. It has an estimated life of 5 years. What entry
would be made in the General Fund to reflect this sale?
Debit Credit
A. Cash
General Capital Assets
$2,500
$2,500
General Capital Assets
10,000
C. Cash
Other Financing Sources
$2,500
$2,500
Loss on Sale of Capital Assets
General Capital Assets, net
1,500
$4,000
39. If an expenditure was inadvertently charged to the General Fund instead of the appropriate
Special Revenue Fund, what effect would the correction of this error later in the same fiscal
year have on the General Fund?
A. An entry would be made directly to the General Fund’s fund balance to correct the error.
B. Revenues would be increased.
C. Expenditures would be decreased.
D. Transfers in would be increased.
40. Assume the following transactions occurred in a school district General Fund during the
year:
Charges for services collected – $25,000
Taxes levied – $2,450,000
Taxes collected from current year levy and prior year tax levies – $2,320,000
Tax prepayments received – $10,000
Grants earned and received during the year – $300,000
Grants awarded but not yet available – $250,000
The amount of revenues recorded in the General Fund for the year would be
A. $2,895,000.
B. $2,655,000.
C. $2,645,000.
D. $2,450,000.
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1. Expenditures are defined as
A. Costs expired.
B. Uses of current financial resources.
C. Decreases in net financial resources.
D. Changes in liabilities and deferred inflows.
2. Which of the following is not a typical governmental fund liability, and thus not an
expenditure that is recognized when the liability is incurred?
A. Accounts payable.
B. Long-term note payable.
C. Salaries payable.
D. Vouchers payable.
3. A city government purchased a new fire truck in Year 1 for $270,000. The city incurred an
additional $30,000 in transportation and calibration costs to ready it for use. It has an
estimated useful life of 20 years, though it is being financed over a 15 year period. The
amount of depreciation that will be reported each year in the General Fund will be
A. $0.
B. $13,500.
C. $15,000.
D. $18,000.
4. Assume that General Fund employees accrued $125,000 of compensated absences liability
during the year. Compensated absences liability, which is considered to be a long-term
liability, decreased $30,000 from the beginning of the year to the end of the year. The fund
also actually paid $550,000 in salaries and wages during the year. At the end of the fiscal
year, salaries and wages payable was $12,000. The General Fund would report salaries and
wages expenditures for the year of
A. $532,000.
B. $550,000.
C. $562,000.
D. $592,000.
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5. Which of the following governmental fund expenditures would not be considered a current
operating expenditure?
A. Capital outlay.
B. Rent.
C. Salaries and wages.
D. Employee benefits.
6. The village of Bear Creek uses General Fund resources to pay debt service payments for its
sole outstanding general obligation bonds, which were issued to finance the new Village Hall.
Which of the following statements is false?
A. GAAP require the village to use a Debt Service Fund to account for the payment of
principal and interest on the long-term debt if the debt covenant calls for it.
B. GAAP permit but do not require the village to use a Debt Service Fund to account for the
payment of principal and interest on the long-term debt.
C. The General Fund would record an expenditure for both the principal and interest
portions of the debt service payment.
D. The General Fund may record an expenditure for only the interest portion of the debt
service payment.
7. Expenditures in a governmental fund are recognized when due for
A. Interest on general long-term debt.
B. Salaries and wages.
C. Capital outlay.
D. Rent.
8. Which of the following is not a managerial problem associated with expenditures?
A. Misapplication of assets.
B. Overspending of appropriations.
C. Misapplication of the availability criterion.
D. Misallocation or poor allotments of appropriations.
9. The purchases method of accounting is permitted for
A. Materials and supplies, but not for prepaid insurance.
B. Prepaid insurance, but not for materials and supplies.
C. Neither prepaid insurance nor materials and supplies.
D. Both prepaid insurance and materials and supplies.
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10. Assume that the Village of Hannah uses the purchases method of inventory accounting. At
the end of the year the inventory levels have increased. What entry would be made to reflect
the inventory increase?
A. Debit Expenditures, Credit Inventory of Supplies.
B. Debit Inventory of Supplies, Credit Other Financing Sources.
C. Debit Expenditures, Credit Other Financing Sources.
D. Debit Inventory of Supplies, Credit Expenditures.
11. Assume that a government purchases $85,000 of inventory for the General Fund during the
year. The General Fund began the year with an inventory balance of $15,000 and ended the
year with a balance of $35,000. The General Fund uses the consumption method of inventory
accounting and a perpetual inventory system. The General Fund should report
A. Expenditures of $85,000 for the year.
B. Expenditures of $65,000 for the year.
C. Other financing source of $20,000 for the year.
D. Other financing use of $20,000 for the year.
12. If a government uses a perpetual inventory system for its General Fund and there is an
inventory overage at the end of the year, the inventory asset account should
A. Be increased and the expenditure account decreased.
B. Be decreased and the expenditure account increased.
C. Remain the same. The expenditure account will be decreased, offset by an allowance for
inventory overage account.
D. Remain the same. The expenditure account will be increased, offset by an allowance for
inventory overage account.
13. A county uses the consumption method to account for General Fund materials and supplies.
The beginning inventory of materials and supplies was $122,000. The ending inventory was
$150,000. The beginning balance of reserve for encumbrances (for supplies ordered but not
received at the beginning of the year) was $50,000; the ending balance was $20,000.
Supplies purchased during the year totaled $750,000. The county General Fund should report
expenditures for materials and supplies for the year of
A. $722,000.
B. $750,000.
C. $752,000.
D. $780,000.
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