Governmental and Nonprofit Accounting: Theory and Practice, 9e Update (Freeman)

Chapter 13 Financial ReportingThe Basic Financial Statements and Required

Supplementary Inormation
1) When preparing external financial statements that are in accordance with generally accepted
accounting principles, a government is required to prepare
A) Basic financial statements, management's discussion and analysis, and other required
supplementary information.
B) A comprehensive annual financial report.
) !one of the a"ove.
#) Both items A and B.
Answer$ A
%) &overnmental activities in the government'wide financial statements would potentially report
the following equity classifications except
A) (estricted net assets.
B) (estricted fund "alance.
) )nrestricted net assets.
#) *nvested in capital assets, net of related de"t.
+) +ach of the a"ove classifications are proper equity classifications for government'wide
activities.
Answer$ B
,) +quity in a fiduciary fund is, "y nature, considered to "e
A) ommitted.
B) Assigned.
) #esignated.
#) (estricted.
+) !one of the a"ove
Answer$ #
-) *f the &eneral .und has committed fund "alance, then the governmental activities column will
automatically have
A) ommitted net assets.
B) (estricted net assets.
) #esignated net assets.
#) *nvested in capital assets, net of related de"t.
+) !one of the a"ove as there is no direct connection "etween committed fund "alance and a
particular net asset classification.
Answer$ +
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2) Which of the following statements concerning the notes to the financial statements is true3
A) 4he notes to the financial statements are an integral part of the "asic financial statements.
B) 4he notes to the financial statements are considered to "e required supplementary
information.
) 4he auditor's opinion generally does not extend to the notes to the financial statements.
#) All of the a"ove statements are true.
Answer$ A
5) .iduciary funds are reported
A) *n "oth the fund financial statements and the government'wide financial statements.
B) As required supplementary information.
) By fund type in the government'wide financial statements.
#) By fund type in the fund financial statements.
Answer$ #
6) A city determines that it has three ma7or governmental funds, including the &eneral .und, and
two ma7or enterprise funds. 4he city will
A) Always have three ma7or governmental funds and two ma7or enterprise funds.
B) +valuate each year which funds are ma7or and which funds are considered to "e nonma7or.
) 8nly "e required to show a separate column for the &eneral .und.
#) Be a"le to report all of the ma7or funds in one column on the respective fund financial
statements.
Answer$ B
9) Assume that a governmental entity has, in addition to the &eneral .und, four other
governmental funds. )pon applying the quantitative criteria to determine the minimum
requirements for ma7or fund reporting it is determined that two of those four funds meet the
criteria. At a minimum, the governmental entity will report how many ma7or funds3
A) :ero
B) two
) three
#) four
+) five
Answer$
;) A city has, in addition to the &eneral .und, three other governmental funds. 4wo of those
three governmental funds have "een deemed to "e ma7or funds. At most, how many funds may "e
reported as ma7or funds.
A) :ero
B) one
) two
#) three
+) four
Answer$ +
10) 4he &eneral .und levies taxes of <,,620,000 during the fiscal year, 1= of which is deemed
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to "e uncollecti"le. <,,520,000 was collected or met the availa"ility criteria. >ow much revenue
should "e recorded in the government-wide financial statements3
A) <,,51,,200
B) <,,520,000
) <,,61%,200
#) <,,620,000
Answer$
11) *nterest expense for governmental activities at the government'wide level should "e reported
A) As part of the function for which the financing was "eneficial.
B) As part of the general government function.
) *n total as capitali:ed interest.
#) As an indirect expense not allocated to a functional area.
Answer$ #
1%) *n the government'wide financial statements, pass'through grants would "e reported as
A) 1rogram revenues.
B) &eneral revenues.
) 8ther financing sources.
#) 8perating revenues.
Answer$ A
1,) +ach of the following would "e considered required supplementary information except
A) ?anagement's discussion and analysis.
B) Budgetary comparison information that is eligi"le for "asic financial statement presentation
"ut not included therein.
) A letter of transmittal.
#) #isclosures for governments that use the modified approach to infrastructure accounting and
reporting.
Answer$
1-) 4he government'wide financial statements do not include
A) #iscretely presented component units.
B) &overnmental fund information.
) Business'type activities.
#) !et assets.
+) All of the a"ove are included in the government'wide financial statements.
Answer$ B
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12) apital assets used "y &eneral .und departments and functions would "e reported in
A) 4he note disclosures.
B) &overnmental activities column of the government'wide financial statements.
) 4he &eneral .und.
#) All of the a"ove.
+) Both items A and B.
Answer$ +
15) 4he government'wide financial statements report all of the following equity classifications
except
A) (estricted net assets.
B) (etained earnings.
) )nrestricted net assets.
#) *nvested in capital assets, net of related de"t.
+) All of the a"ove are common equity classifications in the government'wide financial
statements.
Answer$ B
16) Assume that the following is found on the statement of activities of a local municipality$
@ 1u"lic safety expenses of <%,622,200
@ 1u"lic safety charges for services of <%0,200
@ 1u"lic safety operating grants and contri"utions of <102,000
@ 1u"lic safety capital grants and contri"utions of <62,000
@ &eneral government charges for services of <-22,200
@ 1roperty tax general revenues of <%,;02,000
@ )nrestricted grants of <,00,000
!et Aexpense) revenue for the pu"lic safety function would "e
A) <,20,000.
B) <1,102,200.
) <A%,222,000).
#) <%,222,000.
+) <A902,200).
Answer$
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19) Assume that the town of Beatrice earned the following during the year$
@ harges for services in pu"lic worBs of <%9;,000
@ 1u"lic safety operating grants of <100,000
@ 1roperty taxes of <1,;20,000
@ *nterest earned on restricted grants of <2,620
@ *nterest earned on unrestricted grants of <,,%20
@ 1u"lic worBs capital grants of <,10,000
@ Cales taxes of <-%2,000
Based on this information and assuming all revenues were earned, governmental activities
general revenues for the year would "e
A) <,,09,,000.
B) <60-,620.
) <1,;20,000.
#) <%,,69,%20.
+) <%,,9-,000.
Answer$ #
1;) A governmental entity has a &eneral .und, four Cpecial (evenue .unds, two #e"t Cervice
.unds, a 1ermanent .und, two +nterprise .unds, three *nternal Cervice .unds, and two 1ension
4rust .unds. )sing the criteria from &ACB Statement No. 34 to identify ma7or funds, the
government discovers that two of the Cpecial (evenue .unds and one +nterprise .und meet the
minimum criteria to "e a ma7or fund. >ow many individual governmental funds may "e reported
as ma7or funds3
A) three
B) four
) eight
#) twelve
+) fifteen
Answer$
%0) >annah 4ownship has a &eneral .und, two apital 1ro7ects .unds, one 1ermanent .und,
two +nterprise .unds, two *nternal Cervice .unds, three 1ension 4rust .unds, and one 1rivate'
1urpose 4rust .und. Assuming all governmental and enterprise funds meet the ma7or fund
criteria, how many columns will the proprietary fund statement of net assets have3
A) two
B) three
) four
#) five
+) eight
Answer$ A
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%1) Which of the following types of revenue would always "e reported as a general revenue in
the government'wide financial statements3
A) *nterest earned on a capital grant
B) harges for services
) 8perating grant
#) 1roperty taxes
+) Both items A and B.
.) Both items and #.
Answer$ #
%%) !et assets restricted for capital pro7ects could "e reported for
A) &overnmental activities.
B) Business'type activities.
) apital pro7ects funds.
#) All of the a"ove.
+) Both items A and B.
Answer$ +
%,) A city reports three 1ension 4rust .unds, one 1rivate'1urpose 4rust .und, one *nvestment
4rust .und, and three Agency .unds. >ow many columns would the ity's statement of
fiduciary net asset would report3
A) two
B) three
) four
#) six
+) eight
Answer$
%-) &overnment A issued general o"ligation "onds to finance the construction of a new fire
station. *n the current year, the government incurred <106,000 of interest expense on the de"t
issuance. 4his amount will "e reported on the government'wide statement of activities as
A) +xpenses of the general government function.
B) +xpenses of the pu"lic safety function.
) *nterest expenses of the governmental activities.
#) An offset to interest earnings in the &eneral .und.
+) !one of the a"ove.
Answer$
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%2) Cales taxes levied "y a county government are shared with the local municipal government.
4he municipal government chooses to use the intergovernmental revenues for drug enforcement
activities. *n the government'wide statement of activities, the municipal government would
report the sales taxes as
A) )nrestricted grants and contri"utions general revenue.
B) 8perating grant and contri"ution program revenue.
) apital grant and contri"ution program revenue.
#) A transfer in general revenue.
+) !one of the a"ove.
Answer$ A
%5) #epreciation was calculated for the police department's vehicle fleet. 4he expense will "e
reported
A) As depreciation expenditure in the &eneral .und.
B) As depreciation expense in the &eneral .und.
) As depreciation expense in the pu"lic safety function of governmental activities.
#) As unallocated depreciation expense for governmental activities.
+) Both items B and .
Answer$
%6) apital assets are not reported
A) *n governmental activities.
B) *n "usiness'type activities.
) *n *nternal Cervice .unds.
#) *n the +nterprise .unds.
+) *n the &eneral .und.
.) *n either items or +.
Answer$ +
%9) Which of the following funds would not "e eligi"le for ma7or fund reporting3
A) &eneral .und
B) +nterprise .und
) #e"t Cervice .und
#) *nternal Cervice .und
+) All of the a"ove could "e reported as a ma7or fund.
Answer$ #
%;) 4he minimum requirements for general purpose external financial reporting does not include
A) .und financial statements.
B) A transmittal letter.
) ?anagement's discussion and analysis.
#) (equired supplementary information.
Answer$ B
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,0) 4he government'wide statements include
A) Ctatement of !et Assets.
B) Ctatement of Activities.
) Ctatement of ash .lows.
#) Both items A and B.
+) All of the a"ove.
Answer$ #
,1) 4he government'wide statement of net assets must include a column for each of the
following except
A) &overnmental activities.
B) Business'type activities.
) omponent units.
#) .iduciary activities.
+) All of the a"ove are included in the government'wide financial statements.
Answer$ #
,%) .or general purpose external financial reporting, component unit information
A) *s not presented.
B) *s included in the government'wide statements only.
) *s included in the fund financial statements only.
#) *s included in "oth the government'wide and the fund financial statements.
Answer$ B
,,) 4he government'wide statement of net assets would report the following component of net
assets except
A) )nrestricted net assets.
B) (estricted net assets.
) *nvested in capital assets net of related de"t.
#) #esignated net assets.
Answer$ #
,-) *n the government'wide statement of net assets, interfund receiva"les and paya"les
A) Chould not "e reported.
B) Chould only "e reported for "alances paya"le "etween governmental activities and "usiness'
type activities.
) +liminated in the total primary government column.
#) Both items B and .
Answer$ #
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,2) Which of the following are reported only in the government'wide statements, not in the fund
financial statements3
A) !onfiduciary component units
B) &eneral government long'term de"t
) &eneral government capital assets
#) All of the a"ove.
Answer$ #
,5) *n the government'wide statements, "usiness'type activities include
A) 1rimarily only +nterprise .und operations.
B) 1rimarily only *nternal Cervice .und operations.
) Both a government's +nterprise .und and all of its *nternal Cervice .und activities.
#) A government's +nterprise .und, *nternal Cervice .und, and nonexpenda"le trust fund
activities.
Answer$ A
,6) Which of the following classifications is not used in the government'wide statement of
activities3
A) &eneral revenues
B) +xtraordinary items
) 4ransfers
#) !onoperating revenues
+) All of the a"ove are common classifications in the government'wide financial statements.
Answer$ #
,9) Which of the following may !84 "e reported as transfers in a government'wide statement of
activities3
A) 4ransfers "etween governmental activities and "usiness'type activities.
B) 4ransfers "etween a primary government and a "lended component unit.
) 4ransfers "etween a primary government and a discretely presented component unit.
#) All of the a"ove may "e included in a government'wide statement of activities.
Answer$
,;) *n the statement of activities, depreciation is reported on
A) All deprecia"le capital assets of the government except infrastructure assets that use the
modified approach.
B) All deprecia"le capital assets of the government.
) 8nly deprecia"le capital assets of "usiness'type activities of the government.
#) 8nly deprecia"le capital assets of governmental activities of the government.
Answer$ A
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-0) Which of the following cannot "e classified as program revenues3
A) ontri"utions
B) &rants
) harges for services
#) 4axes.
Answer$ #
-1) Which of the following would not "e classified as charges for services3
A) 8perating special assessments
B) Dicenses and permits
) .ines and forfeitures
#) !one, all of the a"ove would "e classified as charges for services.
Answer$ #
-%) 4he fund financial statements included in the "asic financial statements include separate
"alance sheets Aor statements of net assets) for all of the following except
A) .iduciary funds.
B) &overnmental funds.
) 1roprietary funds.
#) #iscretely presented component units.
Answer$ #
-,) *n the fund financial statements, a government should include a separate column for all of the
following except
A) +ach ma7or +nterprise .und.
B) +ach ma7or *nternal Cervice .und.
) +ach ma7or apital 1ro7ects .und.
#) +ach ma7or 1ermanent .und.
+) 4he &eneral .und.
Answer$ B
--) Which governmental fund must always "e reported in a separate column in the governmental
fund financial statements3
A) apital 1ro7ects .und
B) #e"t Cervice .und
) &eneral .und
#) Cpecial (evenue .und
Answer$
-2) Which of the following is true3
A) ?a7or fund reporting is required for +nterprise .unds
B) ?a7or fund reporting is required for *nternal Cervice .unds
) ?a7or fund reporting is required for Agency .unds
#) ?a7or fund reporting is require for 1rivate'purpose 4rust .unds
Answer$ A
-5) *n the proprietary fund financial statements, a government should include a separate column
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for
A) +ach ma7or +nterprise .und.
B) A total column for all +nterprise .unds.
) 4he *nternal Cervice .und type.
#) +ach ma7or +nterprise .und, the nonma7or +nterprise .unds in the aggregate and the *nternal
Cervice .unds in the aggregate.
Answer$ #
-6) .or governmental funds, the minimum financial statements required to "e presented in the
fund financial statements include a
A) Balance sheet.
B) Ctatement of revenues, expenditures, and changes in fund "alances A&AA1 "asis).
) Budgetary comparison statement for all fund with annual "udgets.
#) Both items A and B.
Answer$ #
-9) A "udgetary comparison schedule is required for
A) 4he &eneral .und and all ma7or governmental funds with legally adopted annual "udgets.
B) 4he &eneral .und and all ma7or Cpecial (evenue .unds with legally adopted annual "udgets.
) 4he &eneral .und only.
#) All governmental funds.
Answer$ B
-;) Which financial statement may "e presented as required supplementary information3
A) &overnment'wide statement of cash flows
B) &eneral .und and ma7or Cpecial (evenue .unds statement of revenues, expenditures, and
changes in fund "alancesE"udget and actual
) 1roprietary fund statement of cash flows
#) !one of the a"ove.
Answer$ B
20) A city's "asic financial statements must "e accompanied "y
A) A transmittal letter.
B) ?anagement's discussion and analysis.
) Both a transmittal letter and management's discussion and analysis.
#) +ither a transmittal letter or management's discussion and analysis.
Answer$ B
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21) 4opics to "e covered in the management's discussion and analysis
A) Are limited to a specific list of topics in &ACB Statement No. 34.
B) ?ust, at a minimum, cover the specific list of topics in &ACB Statement No. 34 "ut may
include additional topics that management considers significant.
) Are determined "ased upon management's 7udgment.
#) an only include topics not in the specific list in &ACB Statement No. 34 if agreed to "y "oth
management and the auditors.
Answer$ A
2%) ?anagement's discussion and analysis
A) #oes not have to cover any "udgetary issues.
B) ?ay not include charts and graphs.
) ?ust discuss significant variations "etween the original "udget and the final "udget.
#) ?ust discuss significant variations "etween the final "udget and actual results.
+) Both items and #.
Answer$ +
2,) Which special purpose governments must present management's discussion and analysis3
A) 4hose engaged in "oth governmental and "usiness'type activities.
B) 4hose engaged in only fiduciary activities.
) 4hose engaged in a single governmental program.
#) All special purpose governments must present management's discussion and analysis.
Answer$ #
2-) Which of the following special purpose governments do not have to present government'
wide financial statements3
A) 4hose engaged in "oth governmental and "usiness'type activities.
B) 4hose engaged in only governmental activities.
) 4hose engaged in only "usiness'type activities.
#) All special purpose governments must present government'wide financial statements.
Answer$
22) A government that uses the modified approach to account for qualifying assets should report
A) All infrastructure asset related costs for the year as expenses.
B) All infrastructure asset related costs for the year as assets.
) All infrastructure asset related costs for the year as expenses, unless they were additions or
qualitative improvements.
#) All infrastructure asset related costs for the year as assets unless incurred in disposing of an
infrastructure asset.
Answer$
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25) A government that uses the modified approach will
A) !ot report depreciation expense on infrastructure assets.
B) apitali:e all costs related to infrastructure assets.
) +xpense all costs related to infrastructure assets.
#) Both items A and B.
Answer$ A
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