Governmental Accounting-Exam 2 Questions and Answers 2023

Governmental Accounting-Exam 2 Questions and Answers 2023 Fund basics-Governmental fund types The general fund, where a government accounts for everything not reported in another fund Special revenue funds, for reporting specific revenue sources that are limited to being used for a particular purpose Debt service funds, which account for the repayment of debt Capital project funds, which track the accumulation and use of resources for constructing, acquiring, and rehabilitating capital assets, such as buildings and roads Permanent funds, where a government reports principal amounts that are restricted to being invested to produce income but cannot be spent. Nature of and when to use capital project funds Understand typical cpf finacning sources, how many cpfs are required, and life cycle of cpf Life cycle-Only lasts until completion of the project Can be multiple different ones Taxes, bonds, usually fund them Determine costs to be charged to CPFs Fund balance designations Why use capital project funds? CPFs used to account for finacial resources that are used to construct/acquire major, long lived general capital facilities Ex: buildings, highways and bridges, storm water drainage systems CPF Expenditure Construction cost Asset including construction in process are capitlized in GCA, not CP fund Bond issue costs If a governmental entity issued 3,000,000 in bonds for a capital project, received 500,000 federal capital grant, and transferred 750,000 to a capital projects fund from the general fund, the capital projects fund financial statements should report other financing sources of... D. 3,750,000 Purpose of DSFs To account for the accumulation of resources for, and the payment of, general long-term debt principal and interest Required only if -legally mandated -Financial resources accumulated for principal and payments in future years Financial Statements (pg 311) Balance sheet Statement of revenues, expenditures, and changes in fund balance -Revenues= taxes, and interest -expenses=bond principal, interest and fiscal agent fees -Refunding from new bond issues to pay OFU Understand how to maintain GCA and GLTL information for reporting purposes Understand how to account for transactions affecting GCA and GLTL Understand how governmental funds and GCA and GLTL are related Characteristics of Capital Assets Used in operations of the government (Not for resale) Have useful lives extending beyond a single reporting period (may be modified by governments capitalization policy) May be tangible or intangible capital assets does not mean GCA automatically All genreal capital assets are capital assets but not all capital assets are GCA. GCA used by the governmental funds (General government) Governmental assets are fund specific proprietary funds Initial Valuation Cost,=Invoice price+cost of delivery+ cost to get asset ready for intended use Estimated cost,=Used when invoice price is unknown frequent problem for governments with poor inventory records Gifts,=Fair value+cost of delivery+cost to get asset ready for intended use Reporting works of art and historical treasures Should capitalize but not required to capitalize if all 3 criteria are met: -Collection is held for public exhibition, education or research in furtherance of public service rather than financial gain -It is protected, kept unencumbered, cared for and preserved -It is subject to policy that requires proceeds from sale to be used to acquire other items for collection *do not depreciate unless they are considered depriciable General long term liabilities All un-matured long term debt of the government except that accounted for in a proprietary fund or trust fund Examples: Bonds, warrants, notes -Capital leases and CoPs -Underfunded pension plan contributions -Claims and judgments -Compensated absences -Landfill upkeep Reporting Financial statements-governmental activities column of government-wide statement of net assets Notes to the financial statements -Beginning and ending Permanent Fund Used to account for resources held in trust by the government for the benefit of the gopvernemtn or of its citinzery as a whole Contrast with private purpose trust fund where the assets are to benefit private indivudals organizations, or other groups Financial statements Statement of fund net assets (Balance sheet) Statement of revenues, expenses and changes in fund net assets (Fund equity) Statement of cash flows Categories of fund net assets Invested in capital assets, net of related debt Restricted net assets Unrestricted net assets Contribution capital and retained earnings no longer used Statement of cash flows Based on GASB number 9-issued 2 years after FASB 95-See page 424 Direct method required for GASB Nonncash transactions reported on fa statement Know 4 parts of cash flow statement for a proprietary fund and required method Required method=Direct Method Cash flows from operating activities-Ex:Cash received from customers, cash paid to suppliers of goods and services, cash paid to employees Cash flows from non capital financing activities-Ex: Cash received from intergovernmental operating grant, cash paid for inter fund transfers, cash paid for interest on customer deposits Cash flows from capital and related financing activities-Ex:Cash received from issuing bonds, cash received from sale of land, cash paid for interest cash paid for equipment, cash paid for construction of capital assets Cash flows from investing activities-Ex: Cash paid for investments, cash received from interest Know journal entries/funds for issuance and repayment of debt Capital project fund___Cash OFS-Bonds payable GLTLGCA Net position Bonds payable Debt Service fund_____Interest-expenditures Cash Debt service fund_____Interest-expenditures Principal-expenditures Cash GLTLGCA_____ Bonds payable Net position An internal service fund is considered to be A proprietary fund Interest revenue earned by an internal service fund will be reported on the sttement of revnues, expenses, and changes in net assets as Non-operating revenue The use of an internal service fund is mandated by generally accepted accounting principles for which of the following activities Risk financing Government motor pool Centralized warehouse All of the above E $None of the above activities are required to be accounted for in an internal service fund A citys enterprise fund issued revnue bonds with face value of 10,000,000. The bonds were issued with a 2% premium and the issuance cost totaled 150,000. When the bonds are issued, the enterpise find wil report total other finacning sources in the amount of A- $0 Not recorded in enterpirse fund. Its OFS capital outlay expndiutre A city enterprise fund recived an operating grant durinfg the fiscal year. The enterpirse fund will report this grant on the statemnt of revenues, edpnes and changes in net assets as B. Non-operating revenues A government establishes a permanent fund to account for a bequest. The earnings from the bequest are to be used to purchase books for library. How should the bequest be reported in the permanent fund statement of revenues, expenditures and changes in fund balance B. Revenue The parks and recreatin department, which is acounted for tihin the genral fund, purchased a new atheltic field mower at a cost of 25,000. The mower has an estimated usefiul life of 5 years. The general fund would report the deprication expense at the end of year 2 in the amount of A- $0 Depricatin is recorde only in GCA and GLTL as well as some enterprise fund items