Governmental Accounting Exam 2
questions & actual answers.
Record equipment acquired with demand bonds ANS -Government-wide statement
Equipment XXX
Demand bond payable - S/T XXX
What Funds Use Expenses ANS -Government-wide/proprietary/fiduciary
What method of accounting is used for expenses ANS -Full Accrual
What Funds Use Expenditures ANS -Governmental funds
What method of accounting is used for expenditures ANS -Modified Accrual
When is an expenditure recognized ANS -When an asset is acquired
Rule for liabilities in government ANS -A liability is current if it will be paid/liquidated from current
financial resources
When should governments accrue a liability ANS -1.) When it is incurred
2.) GASB allowed exception - which allows the delay of recognizing liability/expenditure until the period
the liability is paid
7 GASB Allowed Exceptions Liabilities ANS -1.) Compensated Absences
2.) Pension & Other post-employment benefits
3.) Claims & Judgments
4.) Inventories
5.) Prepayment
,6.) Capital Assets
7.) Principal & Interest
1.) Compensated Absences ANS -Ex. vacations, holidays, sick leave, sabbatical leave, or jury duty
Earned in one period, but often not paid until several periods later
GASB Rules for compensated absences ANS -the liabilities and expenditures are recognized in the
periods in which payment is made
Where are compensated absences recorded? ANS -1.) Government-wide statements
2.) Schedule of long term obligations
City employees earn $6M in vacation leave. Of this amount, they are paid $4.5M in 2017 & postpone the
balance until future years. The leave vests & can be taken anytime up to retirement or as additional
compensation at the time of retirement. ANS -Governmental Fund - 2017
Vacation Pay Expenditures 4.5M
Cash (Salary/Wages Payable) 4.5M
Government-Wide Statements - 2017
Expense - Vacation Pay 6M
Cash 4.5M
Accrued Vacation Pay 1.5M
2.) Sick Leave ANS -GASB states that sick leave is recognized as a liability only if it is probable that the
employer will compensate the employee for the benefits through cash payments conditions on the
employees termination or retirement
A city allows employees one day of sick leave a month and permits them to accumulate any sick leave
they do not take. If they terminate after at least 10 yrs of service, they will be paid for unused sick leave
up to 30 days. In 2017, employees earned 10M of sick leave that they did not take during the year. The
city estimates that of this amount 7M will be paid to employees in future years as sick leave, 2M will be
paid to ten-year employees upon termination, & 1M will not be paid. ANS -Governmental Fund
Sick leave termination benefit expenditure 2M
,Cash 2M
Government-wide Statements
Sick leave termination benefit expenses 2M
Accrued sick leave 2M
Restricted Leave ANS -Leave Taken
Unrestricted Leave ANS -Period Earned
3.) Sabbatical Leave & When to Recognize ANS -1.) When earned by the employee leading up to the
leave
2.) Over the course of the leave
3.) Over the years to be benefited from the leave
GASB standards on Sabbatical Leave & When to Accrue It ANS -1.) If leave will benefit employer, the
sabbatical should be accounted for in the period the leave is taken. No liability accrued in advance of the
leave.
2.) If leave is for "compensated unrestricted time off" then the government should accrue a liability
during the period the leave is earned
A school district grants faculty members a one-year leave after seven years of service to engage in
research. In a particular year, it paid 2M to faculty on leave. In addition, it estimated that faculty
"earned" 2.4M toward leave they are likely to take in the future. ANS -Governmental Fund
Sabbatical leave expenditure 2M
Cash 2M
Government-wide Statements
Sabbatical leave expense 2M
Accrued sabbatical leave 2M
T/F: If no sabbatical leave was expected to be paid with expendable/available resources, no
governmental fund entry would be made. ANS -True
, If sabbatical leave was unrestricted and the government expected to pay 1M of the 2.4M with
expendable/available resources. ANS -Governmental Fund
Sabbatical leave expenditure 1M
Cash 1M
Government-wide statement
Sabbatical leave expense 2.4M
Accrued sabbatical leave 2.4M
Two types of Pension plans ANS -1.) Defined benefit plan
2.) Defined contribution plans
GASB standards for pensions ANS -The expenditure should be the amount that will be paid with
expendable/ available financial resources
A city is informed by the plan administrator of its pension plan, that per the contractual arrangement its
actual contribution for the current year is 40M. The city expects to make the contribution shortly after
year-end. ANS -Governmental Fund
Pension expenditure 40M
Pension Liab./Cash 40M
Government-wide fund
Pension Expense 40M
Pension Liab/cash 40M
Pension under Government-Wide statements that is under paid ANS -Government-wide statements
Pension Expense(required by actuary) 45M
Cash 40M
Net Pension obligation 5M
questions & actual answers.
Record equipment acquired with demand bonds ANS -Government-wide statement
Equipment XXX
Demand bond payable - S/T XXX
What Funds Use Expenses ANS -Government-wide/proprietary/fiduciary
What method of accounting is used for expenses ANS -Full Accrual
What Funds Use Expenditures ANS -Governmental funds
What method of accounting is used for expenditures ANS -Modified Accrual
When is an expenditure recognized ANS -When an asset is acquired
Rule for liabilities in government ANS -A liability is current if it will be paid/liquidated from current
financial resources
When should governments accrue a liability ANS -1.) When it is incurred
2.) GASB allowed exception - which allows the delay of recognizing liability/expenditure until the period
the liability is paid
7 GASB Allowed Exceptions Liabilities ANS -1.) Compensated Absences
2.) Pension & Other post-employment benefits
3.) Claims & Judgments
4.) Inventories
5.) Prepayment
,6.) Capital Assets
7.) Principal & Interest
1.) Compensated Absences ANS -Ex. vacations, holidays, sick leave, sabbatical leave, or jury duty
Earned in one period, but often not paid until several periods later
GASB Rules for compensated absences ANS -the liabilities and expenditures are recognized in the
periods in which payment is made
Where are compensated absences recorded? ANS -1.) Government-wide statements
2.) Schedule of long term obligations
City employees earn $6M in vacation leave. Of this amount, they are paid $4.5M in 2017 & postpone the
balance until future years. The leave vests & can be taken anytime up to retirement or as additional
compensation at the time of retirement. ANS -Governmental Fund - 2017
Vacation Pay Expenditures 4.5M
Cash (Salary/Wages Payable) 4.5M
Government-Wide Statements - 2017
Expense - Vacation Pay 6M
Cash 4.5M
Accrued Vacation Pay 1.5M
2.) Sick Leave ANS -GASB states that sick leave is recognized as a liability only if it is probable that the
employer will compensate the employee for the benefits through cash payments conditions on the
employees termination or retirement
A city allows employees one day of sick leave a month and permits them to accumulate any sick leave
they do not take. If they terminate after at least 10 yrs of service, they will be paid for unused sick leave
up to 30 days. In 2017, employees earned 10M of sick leave that they did not take during the year. The
city estimates that of this amount 7M will be paid to employees in future years as sick leave, 2M will be
paid to ten-year employees upon termination, & 1M will not be paid. ANS -Governmental Fund
Sick leave termination benefit expenditure 2M
,Cash 2M
Government-wide Statements
Sick leave termination benefit expenses 2M
Accrued sick leave 2M
Restricted Leave ANS -Leave Taken
Unrestricted Leave ANS -Period Earned
3.) Sabbatical Leave & When to Recognize ANS -1.) When earned by the employee leading up to the
leave
2.) Over the course of the leave
3.) Over the years to be benefited from the leave
GASB standards on Sabbatical Leave & When to Accrue It ANS -1.) If leave will benefit employer, the
sabbatical should be accounted for in the period the leave is taken. No liability accrued in advance of the
leave.
2.) If leave is for "compensated unrestricted time off" then the government should accrue a liability
during the period the leave is earned
A school district grants faculty members a one-year leave after seven years of service to engage in
research. In a particular year, it paid 2M to faculty on leave. In addition, it estimated that faculty
"earned" 2.4M toward leave they are likely to take in the future. ANS -Governmental Fund
Sabbatical leave expenditure 2M
Cash 2M
Government-wide Statements
Sabbatical leave expense 2M
Accrued sabbatical leave 2M
T/F: If no sabbatical leave was expected to be paid with expendable/available resources, no
governmental fund entry would be made. ANS -True
, If sabbatical leave was unrestricted and the government expected to pay 1M of the 2.4M with
expendable/available resources. ANS -Governmental Fund
Sabbatical leave expenditure 1M
Cash 1M
Government-wide statement
Sabbatical leave expense 2.4M
Accrued sabbatical leave 2.4M
Two types of Pension plans ANS -1.) Defined benefit plan
2.) Defined contribution plans
GASB standards for pensions ANS -The expenditure should be the amount that will be paid with
expendable/ available financial resources
A city is informed by the plan administrator of its pension plan, that per the contractual arrangement its
actual contribution for the current year is 40M. The city expects to make the contribution shortly after
year-end. ANS -Governmental Fund
Pension expenditure 40M
Pension Liab./Cash 40M
Government-wide fund
Pension Expense 40M
Pension Liab/cash 40M
Pension under Government-Wide statements that is under paid ANS -Government-wide statements
Pension Expense(required by actuary) 45M
Cash 40M
Net Pension obligation 5M
