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Governmental and Nonprofit Accounting: Theory and Practice, 10e (Freeman)

Chapter 2 State and Local Government Accounting and Financial Reporting Model—The Foundation

• If a government is obligated to legally report information in a manner that differs from

GAAP

• GAAP take precedence over the legal requirements.
• Legal requirements take precedence over GAAP.
• Both GAAP requirements and legal requirements must be met.
• Information should be presented that meets as many legal requirements as possible

without violating GAAP in a material manner.

(Answer: C; Difficult; LO1)

• Which of the following is not a fund category used by state and local governments?
• Fiduciary funds.
• Plant and Equipment funds.
• Governmental funds.
• Proprietary funds.

(Answer: B; Easy; LO2)

• Which of the following is an official fund category used by state and local governments?
• Current funds.
• Expendable funds.
• Governmental funds.
• General capital asset funds.

(Answer: C; Easy; LO2)

• Which of the following is considered a proprietary fund?
• General Fund.
• Special Revenue Fund.
• Permanent Fund.
• Internal Service Fund.

(Answer: D; Easy; LO2)

• The operations of a city bus line receiving all its funding from user charges would be

accounted for in

• A General Fund.
• An Enterprise Fund.
• An Internal Service Fund.
• A Special Revenue Fund.

(Answer B; Easy; LO2)

Governmental and Nonprofit Accounting 10th Edition Smith Test Bank Visit TestBankDeal.com to get complete for all chapters

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• Which of the following is not considered a fiduciary fund?
• Agency Fund
• Investment Trust Fund
• Permanent Fund
• Private-purpose Trust Fund

(Answer: C; Easy; LO2)

• Activities of a central motor pool that provides and services vehicles for the use of municipal

employees on official business should be accounted for in

• General Fund.
• Enterprise Fund.
• Internal Service Fund.
• Special Revenue Fund.

(Answer: C; Easy; LO2)

• A government can only have one
• Capital Projects Fund.
• General Fund.
• Private-Purpose Trust Fund.
• Special Revenue Fund.

(Answer: B; Moderate; LO2)

• Which of the following is not considered a governmental fund?
• General Fund.
• Debt Service Fund.
• Permanent Fund.
• Internal Service Fund.

(Answer: D; Easy; LO2)

• Which of the following is the basic proprietary fund accounting equation?
• Assets – Liabilities = Net Assets.
• Financial Assets – Related Liabilities = Fund Balance.
• Financial Assets + Deferred Outflows – Related Liabilities – Deferred Inflows = Fund

Balance.

• Assets + Deferred Outflows – Liabilities – Deferred Inflows = Net Position.

(Answer: D; Difficult; LO3)

• Which of the following uses the flow of economic resources measurement focus?
• General Fund.
• Debt Service Fund.
• Special Revenue Fund.
• Internal Service Fund.

(Answer: D; Easy; LO3)

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• Proprietary funds recognize
• Expenditures when the fund incurs a liability for goods or services.
• Expenditures when the fund uses goods or services.
• Expenses when the fund incurs a liability for goods or services.
• Expenses when the fund uses goods or services.

(Answer: D; Easy; LO3)

• Which of the following is the basic governmental fund accounting equation?
• Assets – Liabilities = Net Assets.
• Financial Assets – Related Liabilities = Fund Balance.
• Financial Assets + Deferred Outflows – Related Liabilities – Deferred Inflows = Fund

Balance.

• Assets + Deferred Inflows – Liabilities – Deferred Outflows = Net Position

(Answer: C; Difficult; LO3)

• Which of the following uses the flow of current financial resources measurement focus?
• Agency Fund.
• Enterprise Fund.
• Special Revenue Fund.
• Internal Service Fund.

(Answer: C; Moderate; LO3)

• In which of the following financial statements should a government not report depreciation

expense?

• Fiduciary fund financial statements.
• Governmental fund financial statements.
• Proprietary fund financial statements.
• Government-wide financial statements.

(Answer: B; Moderate; LO3)

• The availability criterion for recognizing revenues applies to all of the following funds except
• Capital Projects Funds.
• Debt Service Funds.
• Internal Service Funds.
• Special Revenue Funds.

(Answer: C; Moderate; LO3)

• Governmental funds recognize
• Expenses when the governmental unit uses goods or services.
• Expenditures when the governmental unit incurs a liability for goods or services.
• Expenditures when the fund incurs a liability.
• Expenses when the fund assets are consumed.

(Answer: C; Moderate; LO3)

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• Which of the following would not be classified as an expenditure?
• Salaries and wages.
• Depreciation.
• Capital outlay.
• Debt service — principal and interest.

(Answer: B; Moderate; LO4)

• Assume that Kelly County issues $3,000,000 in general obligation bonds to build a new fire

station and $7,000,000 in revenue bonds to finance the upgrade of their water treatment facility. How will these transactions affect the funds of the county?

• Financial assets of the Capital Projects Fund will increase by $10,000,000, as will the

related fund liabilities.

• Financial assets and related fund liabilities of the Capital Projects Fund will increase by

$3,000,000; current assets and long-term liabilities will increase by $7,000,000 in the Water Enterprise Fund.

• Financial assets, but not the related fund liabilities, will increase in the General Fund by

$10,000,000.

• Financial assets, but not the related fund liabilities, will increase in the Capital Projects

Fund by $3,000,000; current assets and the long-term liabilities will increase by $7,000,000 in the Water Enterprise Fund.

(Answer: D; Moderate; LO4)

• Ashley Woods Village issued $4,000,000 in general obligation bonds to finance the widening

of a local thoroughfare. This transaction will most likely

• Increase fund balance in the General Fund by $4,000,000.
• Decrease fund balance in the General Fund by $4,000,000.
• Increase fund balance in the Capital Projects Fund by $4,000,000.
• Decrease fund balance in the Capital Projects Fund by $4,000,000.

(Answer: C; Moderate; LO4)

• Ashley Woods Village paid $1,000,000 principal and $200,000 interest on its general

obligation bonds that it issued to finance widening of a local thoroughfare. This transaction will most likely

• Decrease fund balance in the Capital Projects Fund by $1,000,000.
• Decrease fund balance in the Capital Projects Fund by $1,200,000.
• Decrease fund balance in the Debt Service Fund by $1,000,000.
• Decrease fund balance in the Debt Service Fund by $1,200,000.

(Answer: D; Moderate; LO4)