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REVIEW QUESTIONS
Q9-1 The major external users of governmental financial reports are:
Q9–2 Financial reporting can assist in fulfilling government’s duty to be publicly accountable and assist
users in assessing that accountability by:
a. providing information to determine whether current-year revenues were sufficient to pay for
Q9-3 A reporting entity is an economic unit identified for financial reporting purposes. The reporting entity
Q9-4 A primary government is financially accountable for a legally separate organization if:
b. either:
Q9-5 When reporting component units in a governmental organization’s financial statements:
a. Blending is the process of treating the funds used by the component unit as if they were the
Q9-6 The major components of the Financial Section of a comprehensive annual financial report are:
A. Auditor’s report
B. Management’s discussion and analysis
C. Basic financial statements
2. Fund financial statements
3. Notes to the financial statements
Q9-7 The minimum requirements established by the GASB for general purpose external financial reports
Q9–8 The 9 statements that comprise the basic financial statements are as follows:
1. Government-wide financial statements
2. Fund financial statements
a. Governmental funds
(2) Statement of revenues, expenditures, and changes in fund balances
b. Proprietary funds
(2) Statement of revenues, expenses, and changes in fund net position
c. Fiduciary funds
(1) Statement of fiduciary net position
Q9–9 Management’s Discussion and Analysis provides an objective analysis of the government’s financial
Q9-10 Fund financial statements report on the activities and balances of each of the government’s major
Q9–11 There are three categories of major funds, namely:
a. The General Fund,
b. A governmental or enterprise fund (including a blended component unit) whose total assets,
Q9–12 The measurement focus (MF) and basis of accounting (BA) used by the fund categories in the fund
financial statements are:
Q9–13 In financial reporting, a special item is a significant transaction or event that is within the control of
management and that is either unusual in nature or infrequent in occurrence.
Q9-14 A budgetary comparison schedule compares (a) the original appropriated budget, (b) the final
Q9-15 Notes to the financial statements contain information that is considered essential for fair
presentation of the basic financial statements that is not shown on the face of those statements, and are
therefore integral to the financial statements.
The notes should start with a summary of the primary government’s significant accounting policies,
Q9–16 The statistical section of the CAFR provides trend data useful in assessing a government’s financial
and economic condition. It generally covers 5 categories of data:
Financial trends, such as revenues by source and expenses by function
DISCUSSION SCENARIOS AND ISSUES
D9-1 The Building Authority is a component unit and should be blended. The authority’s governing body is
D9-2 The MEU is neither a component unit of the city nor a related organization. The nature of the
nomination and confirmation process for the citizen members of the MEU’s board is sufficiently restrictive
D9-3 The STC is a component unit and should be discretely presented. The STC’s separate board is
appointed by the governor. The state is not able to impose its will on the STC, is not entitled to the
D9-4 This question is based on an actual situation. Oneida County reports the Mohawk Valley Community
College as one of its component units. The County does not appoint a voting majority of the College’s
D9-5 Based on the facts in this case, it would be unethical (and probably illegal) to lend the money to the
General Fund. Therefore, the mayor should not approve this transaction. Further, even though this fund
EXERCISES
E9-1 (15 minutes)
1. b and c
E9-2 (20 minutes)
1. True
E9-3 (15 minutes)
1. Notes to the financial statements
E9-4 (15 minutes)
A CAFR is organized as follows:
1. Introductory section
2. Financial section
A. Auditor’s report
B. Management’s Discussion and Analysis
C. Basic financial statements
2. Fund financial statements
3. Notes to financial statements
3. Statistical section
E9-5 (40 minutes)
Each student will have a different answer to this question, based on the entity selected for review. The
Chapter 9
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E9-6 (40 minutes)
E9-7 (40 minutes)
E9-8 (40 minutes)
PROBLEMS
P9-1 (20 minutes)
1. c 7. b
P9-2 (20 minutes)
Tom’s Village
Balance Sheet
Governmental Funds
December 31, 200X
Other Total
Debt Governmental Governmental
General Service Funds Funds
Liabilities and Fund Balances
Liabilities
Accounts payable $ 9,000 $ $ 600 $ 9,600
Fund Balances
Restricted 7,000 7,000
Assigned 1,000 1,000 2,000
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P9-3 (20 minutes)
1. c
P9-4 (25 minutes)
West Chester County
General Fund
Statement of Revenues, Expenditures, and Changes in Fund Balance
For the Year Ended December 31, 2012
Revenues:
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P9-5 (25 minutes)
The City of Breukelen
Breukelen RTS
Statement of Revenues, Expenses, and Changes in Fund Net Position
For the Year Ended December 31, 2012
Enterprise
Funds
Nonoperating revenues (expenses)
Investment income 50,000
Interest expense (320,000)
P9-6 (Moderate – 40 minutes)
1. Revenues 20,000
2. Due from state government 58,500
3. Revenues 15,000
Due to county government 15,000
4. Taxes receivable – delinquent 30,000
Taxes receivable – current 30,000
To reclassify taxes as delinquent
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5. Expenditures – bond principal 40,000
Expenditures – interest 12,000
6. Expenditures 104,900
8. Expenditures 2,000
Accrued liabilities 2,000
P9-7 (Moderate – 75 minutes)
Journal Entries
1. CPF Estimated other financing sources 2,000,000
Estimated revenues 200,000
2. CPF Cash 2.030,000
3. CPF Encumbrances 100,000
4. CPF Investments 1,000,000
5. CPF Encumbrances 2,400,000
6. CPF Cash 1,010,000
Investments 1,000,000
7. GF Transfer out to Capital Projects Fund 300,000
8. CPF Budgetary fund balance reserved for encumbrances 2,400,000
Encumbrances 2,400,000
To record reversal of encumbrance
9. CPF Cash 200,000
10. CPF Retained percentage on construction contracts 240,000
Cash 240,000
To record payment of retainage
11. CPF Transfer out to Debt Service Fund 40,000
Cash 40,000
12. GF Transfer out to Debt Service Fund 60,000
Cash 60,000
To record transfer to DSF, calculated as follows:
13. DSF Expenditures – principal 50,000
Expenditures – bond interest 50,000
Matured bond interest payable 50,000
Matured bond principal payable 50,000
To record matured debt service payable
Statement of revenues, expenditures, and changes in fund balance
City of Lexington
Capital Projects Fund
Statement of Revenues, Expenditures and Changes in Fund Balance
Year Ended December 31, 2013
Revenues:
Intergovernmetnal grant $ 200,000
Interest on investments 10,000 $ 210,000
Expenditures:
Other financing sources (uses)
Proceeds from bond issue 2,000,000
P9-8 (Moderate – 60 minutes)
1. GF Estimated revenues 5,000,000
Estimated other financing sources 300,000
2. CPF Cash 7,200,000
Other financing sources – proceeds from bond issue 7,000,000
Other financing sources – bond issue premium 200,000
To record sale of bonds.
3. GF Expenditures – civil defense training program 90,000
Cash 90,000
4. SRF Cash 400,000
5. DSF Expenditures – bond principal 200,000
Expenditures – bond interest 120,000
Matured bond principal payable 200,000
6. GF Property taxes receivable – current 3,230,000
7. GF Expenditures – salaries 800,000
Due to federal government 65,000
Cash 735,000
8. ISF Due from General Fund 15,000
Due from Gas Service Enterprise Fund 8,000
Revenues – billings to departments 23,000
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9. EF Due from General Fund 2,500
Due from Central Supplies ISF 1,000
Accounts receivable 2,500,000
10. GF Accounts receivable 25,000
11. GF Expenditures – annual leave 15,000
Accrued leave payable 15,000
PART A (5 minutes)
1. General Fund
PART B (30 minutes) – General Fund entries
Item 1. Estimated revenues – property taxes 400,000
Estimated revenues – sales taxes 70,000
Item 2. Encumbrances (police supplies) 35,000
Item 3. Budgetary fund balance reserved for encumbrances 35,000
Encumbrances 35,000
Item 4. Vouchers payable 33,000
Cash 33,000
To record payment of voucher
Appropriation Ledger (Police Supplies)
Appropriation Encumbrances Expenditures Balance
Item Credit Debit Credit Debit Credit
1. Budget 40,000 40,000
2. Order 35,000 5,000
PART C (40 minutes) General Fund entries
Item 1. Property taxes receivable 404,000
Item 2. Allowance for uncollectible property taxes 3,000
Item 3. Cash 370,000
Item 4. Allowance for uncollectible property taxes 1,000
Revenues – property taxes 1,000
To reverse allowance for uncollectible taxes
Item 5. Cash 68,000
Revenues – sales taxes 68,000
Item 6. Cash 18,000
Item 7. Vouchers payable 35,000
Item 8. Expenditures – police salaries 290,000
Item 9. Expenditures – police salaries 8,000
Item 1. Capital Projects Fund:
Item 2. Capital Projects Fund:
Item 3. General Fund:
Transfer to Debt Service Fund 45,000
Item 4. Debt Service Fund:
Expenditures – bond principal 25,000