Chapter 10: Government-Wide Financial Statements
Multiple Choice
1. To what extent should fund or fund type data be displayed on the face of
government-wide financial statements?
a. Information should be displayed for the government as a whole, but
individual funds or fund types should not be displayed
b. Information should be displayed by fund type, with a total for the
government as a whole
c. Information should be displayed by major fund, with a total for the
government as a whole
d. Information should be displayed by major fund, except for fiduciary funds
2. Which measurement focus should be used in government-wide financial
statements?
a. the same measurement focus as that used in accounting for each fund type
b. the current financial resources measurement focus
c. the economic resources measurement focus
d. the economic resources measurement focus for governmental fund types
and the current financial resource measurement focus for proprietary and
fiduciary fund types
3. How should the difference between assets, deferred outflows, deferred inflows,
and liabilities be characterized in government-wide financial statements?
a. as fund balances
b. as net position
c. as fund equity
d. as available for spending
4. How should component units be displayed in government-wide financial
statements?
a. Component units should not be reported in government-wide financial
statements
b. All component units should be included either in the column for
governmental activities or in the column for business-type activities
c. Component units should be blended where appropriate; discretely
presented component units should be reported in a separate column
d. All component units should be included with other business-type activities
5. How should bonds payable be reported on government-wide financial statements?
a. Bonds payable should be reported as an offset to capital assets in the
assets section of the statement of net position
b. Bonds payable should not be reported on the government-wide financial
statements
c. Bonds payable should be separated between amounts due to be paid in
one year and amounts due to be paid in more than one year
d. Bonds payable should be reported in the net position section of the
statement of net position
6. In accordance with a bond agreement, assets are being accumulated in a sinking
fund to pay bonds due in 20 years. The assets are reported as Investments. What
other information should be reported about that item on the face of the
government-wide financial statements?
a. It should be reported as part of net position invested in capital assets, net
of related debt
b. It should be reported as part of net position restricted for debt service
c. It should be reported as part of net position reserved for debt service
d. It should be reported as part of fund balance reserved for debt service
7. A city health department charges fees for copies of birth certificates provided to
its citizens. How should those fees be reported in the government-wide statement
of activities?
a. as a separate item of revenue in the revenue section
b. as a direct reduction of the expenses of the health department
c. as an element of program revenues, which reduce gross expenses of the
health department
d. as a special item
8. A city government levies property taxes that are recorded directly into a Debt
Service Fund, rather than the General Fund. How should those property taxes be
reported in the government-wide statement of activities?
a. as property tax revenue in the general revenues section
b. as a direct reduction of interest expenses in the functional expense section
c. as an element of program revenue, which reduce gross interest expenses
d. as a negative expense, which is then allocated to all functions or programs
9. How should Internal Service Fund (ISF) activities be reported in the government-
wide statement of activities?
a. ISF activities should be reported in a separate column
b. ISF activities should be included in the column headed “business-type activities.”
c. ISF activities should be included in the column headed “governmental-
type activities.”
d. ISF activities (revenues and expenses) should be eliminated and interfund
profits or losses should be eliminated by decreasing or increasing the costs
of the activities that were billed
10. Merchants remit $800,000 to a county government in calendar year 2013 for sales
taxes collected in 2013. In January, 2014, they send the county an additional
$25,000 applicable to the year 2014. Based on past experience, the county expects
to receive an additional $15,000 later in 2014, but applicable to 2013. How much
should the county recognize as sales tax revenues when it prepares its fund and
government-wide financial statements?
Fund Government-wide
Statements Statements
a. $800,000 $800,000
b. $800,000 $840,000
c. $825,000 $825,000
d. $825,000 $840,000
11. An Internal Service Fund (ISF) provided services to two agencies financed by the
General Fund — the Tax Department (which it billed $200,000) and the
Comptroller’s Office (which it billed $100,000). In the fund financial statements,
the ISF reported a loss of $30,000. How should this information be reported in the
government-wide statement of activities?
a. Under “business-type activities,” in a separate line captioned ISF,
revenues of $300,000, expenses of $330,000, and net expenses of
($30,000) should be reported
b. Under “governmental-type activities,” in a separate line captioned ISF,
revenues of$300,000, expenses of $330,000, and net expenses of
($30,000) should be reported
c. ISF activities should not be reported, but expenses reported for the Tax
Department and the Comptroller’s Office should be increased by $20,000
and $10,000, respectively
d. ISF activities should not be reported, but expenses reported for the Tax
Department and the Comptroller’s Office should be reduced by $20,000
and $10,000, respectively
12. A county, that did not previously have a property tax levies a property tax for
$900,000 in December 2012. The tax is for the budget year January 1 – December
31, 2013. Because it sends out the bills on December 1, it actually collects
$500,000 in cash before December 31, 2012. It collects an additional $375,000 of
2013 property taxes during calendar year 2013, $20,000 during January 1 –
February 28, 2014, and the remaining $5,000 in June 2014. How much property
tax revenue should the county report in its 2013 fund and government-wide
financial statements?
Fund Government-wide
Statements Statements
a. $375,000 $400,000
b. $875,000 $900,000
c. $875,000 $895,000
d. $895,000 $900,000
13. When should property tax revenues be recognized in government-wide financial
statements?
a. in the period for which the taxes are levied (net of estimated refunds and
uncollectibles),provided they are measurable and available
b. in the period for which the taxes are levied (net of estimated refunds and
uncollectibles),even if the enforceable legal claim arises or due date for
payment is in a different period
c. in the period they are collected in cash, together with an accrual for
uncollected taxes
d. in the period when an enforceable legal claim arises or when the resources
are received, whichever occurs first
14. Pursuant to law, a state agrees to reimburse a county 50 percent of the costs
incurred by the county to maintain county roads, provided the county incurs no
more than $800,000 in allowable costs. Allowable costs include accrued but
unpaid salaries, but do not include encumbrances. For its calendar year 2012, the
county’s records show the following for its road maintenance program: cash
disbursements – $780,000; accrued salaries payable -$15,000; encumbrances –
$10,000. How much intergovernmental revenue should the county recognize in its
government-wide financial statements?
a. $390,000
b. $397,500
c. $400,000
d. $402,500
15. A city experienced several auto damage claims during its year ended December
31, 2012. The total amount claimed was $600,000. No cash was paid out in 2012.
However, claims totaling $200,000 were settled by December 31, 2012. These
claims were settled for $80,000, and were scheduled for payment on January 15,
2013. City attorneys felt that the remaining $400,000 of claims could be settled
during 2013 for about $160,000. How much should the city recognize as claims
expenses in its government-wide financial statements for 2012?
a. $0
b. $80,000
c. $240,000
d. $480,000
16. A small village (which keeps its records on a calendar-year basis) issued $1
million of bonds on April 1, 2012. The first payment of principal was due April 1,
2013, but interest at 6 percent per annum on the outstanding debt was due on
October 1, 2012 and April 1, 2013. How much interest expenditure (expense)
should the village recognize in its governmental fund and government-wide
financial statements for the calendar year 2012?
Fund Government-wide
Statements Statements
a. $30,000 $30,000
b. $30,000 $45,000
c. $30,000 $60,000
d. $45,000 $45,000
17. What is the general rule regarding use of the “consumption method” for
recognizing materials and supplies in fund-level and government-wide financial
statements?
Fund Government-wide
Statements Statements
a. Optional Required
b. Optional Optional
c. Required Required
d. Required Optional
18, 19, and 20. The following set of facts relates to questions 18 through 20: On July 1, 2012, a
city used tax resources of $70,000 to acquire three police cruisers. The police cars were expected
to have a useful life of three years, after which the salvage value would be $10,000.
18. Describe the adjustment or adjustments needed to prepare government-wide
financial statements from the city’s calendar year 2012 fund-level financial
statements
a. No adjustments are needed
b. Record capital assets, and record six months’ depreciation ($10,000)
c. Record capital assets, reduce capital outlay expenditures, and record six
months’ depreciation ($11,667)
d. Record capital assets, reduce capital outlay expenditures, and record six
months’ depreciation ($10,000)
19. Identify the adjustment entries, if any, necessary to prepare government-wide
financial statements from the city’s calendar year 2012 fund-level statements
a. No journal entries are needed
b. Capital assets – equipment 70,000
Expenditures – capital outlay 70,000
Depreciation expense – equipment 11,667
Accumulated depreciation – equipment 11,667
c. Capital assets – equipment 60,000
Expenditures – capital outlay 60,000
Depreciation expense – equipment 10,000
Accumulated depreciation – equipment 10,000
d. Capital assets – equipment 70,000
Expenditures – capital outlay 70,000
Depreciation expense – equipment 10,000
Accumulated depreciation – equipment 10,000
20. How much should the city report in its December 31, 2012, government-wide
financial statements as net position invested in capital assets, net of related debt?
a. $70,000
b. $60,000
c. $58,333
d. $10,000
21. Just before the close of its fiscal year, a city government issues $2 million of
bonds to finance the acquisition of capital assets. However, no part of the debt is
repaid by year-end and no part of the debt is used to purchase capital assets. What
adjusting entry is needed to prepare the city’s government-wide financial
statements from its fund-level financial statements?
a. No adjusting entry is needed
b. Available for capital assets 2,000,000
Bonds payable 2,000,000
c. Net investment in capital assets 2,000,000
Bonds payable 2,000,000
d. Other financing source – proceeds from bond issue 2,000,000
Bonds payable 2,000,000
22. During its calendar year 2012, a city issued $800,000 of bonds to acquire various items of
capital equipment. By the end of 2013, the city had spent all the bond proceeds to
purchase capital assets. Accumulated depreciation on the assets was $120,000, and
$150,000 of the bonds had been paid off. How much should the city report in its
government-wide statement of net position as net investment in capital assets?
a. $0
b. $30,000
c. $630,000
d. $650,000
23. Which of the following is a plausible explanation for the difference between the
net change in fund balances of governmental funds (fund-level statement of
revenues, expenditures, and changes in fund balances) and the change in net
position of governmental activities (government-wide statement of activities)?
a. Some expenses reported in the statement of activities do not require the
use of current financial resources and are not reported as expenditures in
the fund-level statements
b. Amounts reported as expenditures in the statement of activities are
reported as capital assets in the fund-level statements
c. Debt proceeds provide current financial resources in the statement of
activities, but are reported as long-term liabilities in the fund-level
statements
d. Depreciation of general fixed assets is not reported as an expense in the
statement of activities, but it is reported as an expense in the fund-level
statements
24. Which of the following is a typical reconciling item between the fund-level
financial statements and the government-wide financial statements?
a. reporting the amount of cash on hand for governmental activities
b. reporting revenues on the accrual basis, rather than the modified accrual
basis, for business-type activities
c. reporting depreciation expense, rather than capital outlay expenditures, for
governmental activities
d. reporting the net effect of transfers between the general fund and debt
service fund
25. Which of the following is the most accurate statement regarding the depreciation
of general capital assets in the governmental activities column of the statement of
activities?
a. All general capital assets must be depreciated
b. General capital assets are not required to be depreciated
c. General capital assets should be depreciated, but financial statement
preparers may choose not to depreciate land and infrastructure assets
d. General capital assets should be depreciated, except for land and
infrastructure assets that are reported using the “modified approach.”
26. What is the general rule for reporting capital assets in the governmental activities
column of the government-wide statement of net position?
a. Capital assets are not reported in that column
b. Both proprietary fund and general capital assets are reported in that column
c. All general capital assets should be reported in that column
d. All general capital assets, except infrastructure assets, should be reported
in that column.
27. What must a government do to avoid depreciating its infrastructure assets and still
meet the GASB’s financial reporting standards?
a. have an asset management system and document that its assets are being
preserved at a condition level that it establishes and discloses
b. estimate the dollar amount of its infrastructure assets and report that
amount in the government-wide statement of net position
c. leave the dollar value of its infrastructure assets off both the government-
wide statement of net position and the governmental fund balance sheet
d. take a compete inventory of its infrastructure assets every year
28. A government issued $4 million of bonds on November 1, 2012, to build a fire
house. The first debt service payment ($200,000 principal plus 6 percent interest
per annum on outstanding debt) was due November 1, 2013. To prepare
government-wide financial statements at December 31, 2012, what journal entry
is needed regarding the debt service due on November 1, 2013?
a. no journal entry is needed
b. Interest expense 40,000
Interest payable 40,000
c. Interest expense 40,000
Bond principal expense 33,333
Debt service payable 73,333
d. Interest expense 240,000
Interest payable 240,000
29. On January 1, 2012, a county’s government-wide financial statements shows
general fixed assets of $2,400,000. For the year ended December 31, 2012, the
county’s fund financial statement shows an amount of $125,000 next to the
caption “Expenditures – capital outlay.” To prepare its 2012 government-wide
financial statements, the preparer makes a worksheet that uses the 2012 fund-level
financial statements as the starting point. As a result, the worksheet does not show
any capital assets at the beginning of the year. What adjusting entry is needed to
report the facts about capital assets on the government-wide statements?
a. Capital assets 2,525,000
Expenditures – capital outlay 2,525,000
b. Capital assets 125,000
Expenditures – capital outlay 125,000
c. Capital assets 2,525,000
Net position 2,400,000
Expenditures – capital outlay 125,000
d. Capital assets 2,400,000
Expenditures – capital outlay 125,000
Net position 2,525,000
30. Which of the following elements properly will not be displayed as a specific item
in a government-wide statement of activities prepared by a city or county
government?
a. program revenues
b. interfund reimbursements
c. interest expense on long-term debt
d. the beginning net position balance(s)
31. Jace Township’s General Fund reports a balance due from another fund. This
item and the corresponding interfund liability will appear in Jace Township’s
government-wide statement of net position only if the debtor fund is
a. an enterprise fund
b. a capital projects fund
c. an internal service fund
d. a permanent fund