Chapter 11 – Financial Reporting Issues
MULTIPLE CHOICE
1. The GASB Statement No. 34 reporting model includes, but is not limited
to which of the following reports?
a.
Government-wide financial statements
b.
a management discussion and analysis section
c.
funds based financial statements
d.
all of the above
2. Required supplementary information now includes all of the following
except for:
a.
A budgetary comparison statement or schedule
b.
Management discussion and analysis
c.
pension related information
d.
information about the condition of infra-structure assets
3. Which of the following statements relating to the requirements for
financial reporting is not true?
a.
General purpose financial statements are a columnar overview of
the financial position and operating results of all funds
b.
General purpose financial statements provide the minimum financial
reporting necessary for fair representation of government activity
c.
General purpose financial statements are part of the financial
section of a comprehensive annual financial report
d.
General purpose financial statements are part of required
supplementary information
4. Which of the following could be considered a component unit of a
primary government unit?
a.
water utility enterprise
b.
stadium taxing authority board
c.
pension plan
d.
affiliated booster club
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5. When operations of component units of government are blended with the
primary government unit, the are reported by
a.
a separate column on the General Purpose Financial Statements of
the primary governmental unit
b.
disclosed in a footnote to the primary government unit General
Purpose Financial Statements
c.
Not reported or disclosed separately from the primary governmental
unit
d.
a separate set of general purpose financial statements
6. Which of the following were innovations in financial reporting
introduced by GASB Statement No. 34?
a.
An introductory narrative section
b.
An overall view of the government in government wide statements
c.
Comprehensive information about the cost of delivering services to
citizens
d.
all of the above
7. The purpose of the Management Discussion and Analysis section is
a.
to give a concise overview and analysis of the financial
statements
b.
to provide detailed cost information relating to providing
services to citizens
c.
pension cost calculations for the governmental unit
d.
detailed information about short term spending and fiscal
compliance
8. Which of the following is/are reporting requirements in funds-based
statements under GASB Statement No.34?
a.
the statements highlight major funds and aggregate non major funds
into one column
b.
provide detailed information about short term spending and fiscal
compliance
c.
separate funds based statements are required for governmental,
proprietary, and fiduciary funds
d.
All of the above
9. Major funds are described as
a.
the general fund and enterprise funds
b.
at least 5% of all government and enterprise funds combined
c.
those in which assets, liabilities, revenues, or expenditures are
at least 10% of all funds in that type.
d.
all of the above
Chapter 11
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10. GASB Statement No. 34 requires the reporting for internal service funds
by
a.
combining income statement results with general fund activities
b.
requiring internal service funds to be reported separately as
major funds
c.
classifying internal service funds as proprietary funds, labeled
as government activities
d.
All of the above
11. Which of the following is NOT a classification of the equity accounts
of a proprietary fund?
a.
Equity invested in capital assets, net of related debt
b.
Equity restricted both externally and internally
c.
Equity encumbrances
d.
Equity unrestricted
12. Under the new requirements for a Statement of Cash Flow, what sections
must be included in the statement?
1) Operating Cash Flows
2) Cash Flows from noncapital financing
3) Capital and related financing flows
4) Investing Cash Flows
a.
1, 2, 4, and interfund transfers in
b.
1, 2, 3, 4
c.
2, 3, 4, and cash receipts from taxes
d.
1, 2, 3, and cash receipts from taxes
13. GASB Statement No. 34 requirements for the reporting for general fixed
assets include
a.
the use of account groups
b.
reporting general fixed assets as a major fund
c.
general fixed assets will be included only in the government wide
financial statements
d.
report general fixed assets as a component unit
14. Reciprocal interfund activities include all but which of the following?
a.
interfund loans
b.
interfund services between government and proprietary funds
c.
advances to/from other funds
d.
interfund reimbursements
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15. Key characteristic of the statement of net assets include all of the
following except:
a.
general long-term assets at face value only
b.
all capital assets
c.
depreciation on capital assets except for certain infrastructure
exceptions
d.
interfund payables and receivables between governmental funds are
eliminated
16. Which of the following combination of reports is needed on the
statement of activities?
Revenue
Direct Allocated specifically Program
expenses by indirect connected to general
program expenses programs fixed assets
a.
yes yes no no
b.
yes no yes no
c.
yes yes yes no
d.
yes yes no no
17. GASB Statement No.34 now requires the reporting for infrastructure
assets. Special provisions for reporting include
a.
mandatory straight line depreciation on all infrastructure assets
b.
depreciation should not be recorded on any infrastructure assets
c.
mall government unit do not have to report on infrastructure
assets now or in the future
d.
allowing various approaches to estimating infrastructure costs
18. The most common difference between funds-based and government-wide
financial statements is
a.
government-wide statements of activities show operating data by
function
b.
government-wide statements of activities use a format that differs
from proprietary funds statements of revenues
c.
interfund payables and receivables must be eliminated in the
preparation of the statement of activities
d.
all of the above
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19. In order to convert the governmental fund balance sheet to a government
wide statement of net assets requires which of the following
activities?
1) Add general fixed assets, net of accumulated depreciation
2) Add general long-term debt, using the effective interest
method
3) Eliminate the assets and liabilities of most internal
service funds (those whose primary customer is the
general government)
4) Eliminate the fund balance and classify the net assets
into invested in capital assets, restricted net assets,
and unrestricted net assets
a.
1, 2, 3, 4
b.
1, 3
c.
1, 2, 4
d.
3, 4
20. In order to convert the governmental fund statement of revenues to a
government wide statement of activities which of the following
activities is necessary?
1) Eliminate capital outlay expenditures
2) Reclassify revenues between program revenues and general
revenues
3) Record bad debt expenses
4) Convert from Economic flow of resource method of account
to current financial resources modified accrual based
accounting
a.
1, 3, 4
b.
1, 2, 3
c.
1, 2, 3, 4
d.
1, 2, 4
21. Which of the following is not a purpose of the financial audit that
accompanies statements?
a.
ensuring compliance with fiscal requirements
b.
render an opinion about whether the statements present fairly the
financial position, results of operation, and cash flows of the
government
c.
to comment on the economy, efficiency or program results of a
governmental unit
d.
statements have been prepared in accordance with GAAP, GASB, and
state, municipal, and federal laws
22. Audit reports prepared under the Single Audit Act include which of the
following?
a.
a report on compliance with laws and regulations
b.
a report on the study of the internal control systems
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c.
an opinion on the fairness of financial statement presentation
d.
all of the above
PROBLEM
1. Briefly discuss the minimum requirements of the Management Discussion
and Analysis section in the comprehensive annual financial report.
2. What is the financial reporting pyramid and how would you describe the
GASB Statement No. 34 reporting requirements?
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3. GASB Statement No. 34 requires a separate set of financials statements
for each of the three categories of funds. Prepare an analysis of the
basic types of fund categories, what the measurement focus is and the
basis of accounting, and which basic financial statements are needed.
4. From the following information, prepare a statement of net assets for
the city of Franklin as of June 30, 2003:
Cash and Cash equivalents, Governmental $ 500,000
Cash and Cash equivalents, Business Activities 300,000
Receivables, Governmental 280,000
Inventories, Business Activities 135,000
Capital Assets, net, Governmental 1,330,000
Capital Assets, net, Business Activities 750,000
Accounts Payable, Governmental 158,000
Accounts Payable, Business Activities 96,000
Noncurrent liabilities, Governmental 1,005,000
Noncurrent liabilities, Business Activities 585,000
Net Assets invested in Capital Assets (net of Debt)
Governmental 733,000
Business activities 465,000
Net Assets Restricted:
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Governmental 132,000
Business Activities 93,000
Net Assets Unrestricted:
Governmental 82,000
Business Activities (54,000)
5. The City of Terrytown reports the following information:
Government Activities:
General-Direct $ 85,000
Police-Direct $115,000
Fire Safety-Direct $ 95,000
Public Works-Direct $185,000
Recreation-Direct $ 75,000
Library-Direct $140,000
Interest on Long term Debt-Direct $ 30,000
Police-Indirect Allocation $ 20,000
Fire Safety-Indirect Allocation $ 25,000
Public Safety-Indirect Allocation $ 25,000
Recreation-Indirect Allocation $ 10,000
Library-Indirect Allocation $ 20,000
Charges for Police service $ 90,000
Charges for Fire Protection $ 50,000
Charges for Public Works $105,000
Charges for Library $ 25,000
Charges for Recreation $ 45,000
Operating Grants for Fire Safety $ 15,000
Capital Grants for Library $ 75,000
Chapter 11
There are no business type activities for this city or other component
units. Taxes raised for general revenues equal $200,000 and taxes
raised for debt service equal $25,000. Other general revenues were
generated through fines, fees, and permits that total $100,000. The
city also sold a plot of land for a gain of $10,000. The beginning of
the year net assets totaled $155,000.
Required:
Prepare a statement of activities schedule for the city.