ILLUSTRATIVE EXAM QUESTIONS AND PROBLEMS
PROBLEMS AND ESSAY QUESTIONS
PROBLEM 1 (GAAP hierarchy) – Chapter 1
Rank the following in terms of their level of authority under government GAAP--from
highest (1) to lowest (5)
___ A GASB Technical Bulletin
___ A GASB Implementation Guide
___ AICPA Industry Audit and Accounting Guide cleared by the GASB
___ An article in the AICPA Journal of Accountancy
___ A GASB Interpretation
PROBLEM 2 (Fund categories) – Chapter 2
Indicate how the following funds would be classified as to type: (G) governmental, (P)
proprietary, or as (F) fiduciary
___ Internal service
___ Agency
___ General
___ Special revenue
___ Investment trust
,___ Capital projects
___ Debt service
___ Pension trust
___ Permanent
___ Enterprise
___ Private-purpose trust
,PROBLEM 3 (Transaction analysis) – Chapter 2
Analyze the effects of the following transactions on all the funds and nonfund accounts of a
state or local government. Also, indicate how each transaction would be reported in the
operating statements of the various funds that are affected.
1. Retired general government bonds payable upon maturity. The face value was
$2,000,000. Interest of $100,000 was also due and paid. All resources had been
accumulated in a separate fund prior to the retirement date.
2. Sold land for $300,000. The land had been purchased many years ago for $140,000.
The proceeds of the sale are unrestricted.
3. The general government paid the utility fund $25,000 for electricity used during the
month.
4. Incurred construction costs on a major general government construction project,
$6,000,000; $5,400,000 was paid.
5. General Fund resources of $3,000,000 were paid to a newly established Swimming
Pool Enterprise Fund to provide permanent capital for that operation.
, PROBLEM 4 (Transaction analysis) – Chapters 4 and 6
a. Analyze the effects of the following transactions on the accounting equations of the
various funds and nonfund accounts of a state or local government. Unless
otherwise indicated, the items are for unrelated entities.
b. Indicate how each transaction would be reported in the operating statement for
each fund affected. Indicate both the statement and the fund as well as the reporting
classification.
1. Salaries paid to a city's general government employees totaled $3,000,000 for the
year. Accrued salaries at the end of the year were $150,000. There were no accrued
salaries at the beginning of the year.
2. A government electric utility purchased transmission equipment during the year at
a cost of $5,000,000. One million dollars was paid in cash and the government
borrowed the balance on a two-year, 8% note payable.
3. The equipment purchase in transaction 2 has a 20-year estimated useful life and no
residual value. The purchase occurred at the beginning of the year.
4. Benton County issued $8,000,000 of ten-year, 6% bonds at par on July 1, 20X8. The
bonds were issued to finance construction of a high school gymnasium/office
building complex.
5. Benton County paid $3,200,000 during the year to the contractor for the project in
transaction 4.
6. Benton paid $240,000 from its General Fund to the fund to be used to service the
bonds to provide for the first annual interest payment which will be due in the next
fiscal year.
7. Interest on the Benton County bonds was paid when due.
8. Albemarle County repaid a $500,000 bond plus interest of $30,000 at the due date,
July 1, 20X8. The bond was issued for finance construction of a police station.
9. Franklin County borrowed $300,000 on a 6-month, 9% note payable on November
1, 20X8. The note was issued to provide financing for general fund operations and is
considered a fund liability.
PROBLEMS AND ESSAY QUESTIONS
PROBLEM 1 (GAAP hierarchy) – Chapter 1
Rank the following in terms of their level of authority under government GAAP--from
highest (1) to lowest (5)
___ A GASB Technical Bulletin
___ A GASB Implementation Guide
___ AICPA Industry Audit and Accounting Guide cleared by the GASB
___ An article in the AICPA Journal of Accountancy
___ A GASB Interpretation
PROBLEM 2 (Fund categories) – Chapter 2
Indicate how the following funds would be classified as to type: (G) governmental, (P)
proprietary, or as (F) fiduciary
___ Internal service
___ Agency
___ General
___ Special revenue
___ Investment trust
,___ Capital projects
___ Debt service
___ Pension trust
___ Permanent
___ Enterprise
___ Private-purpose trust
,PROBLEM 3 (Transaction analysis) – Chapter 2
Analyze the effects of the following transactions on all the funds and nonfund accounts of a
state or local government. Also, indicate how each transaction would be reported in the
operating statements of the various funds that are affected.
1. Retired general government bonds payable upon maturity. The face value was
$2,000,000. Interest of $100,000 was also due and paid. All resources had been
accumulated in a separate fund prior to the retirement date.
2. Sold land for $300,000. The land had been purchased many years ago for $140,000.
The proceeds of the sale are unrestricted.
3. The general government paid the utility fund $25,000 for electricity used during the
month.
4. Incurred construction costs on a major general government construction project,
$6,000,000; $5,400,000 was paid.
5. General Fund resources of $3,000,000 were paid to a newly established Swimming
Pool Enterprise Fund to provide permanent capital for that operation.
, PROBLEM 4 (Transaction analysis) – Chapters 4 and 6
a. Analyze the effects of the following transactions on the accounting equations of the
various funds and nonfund accounts of a state or local government. Unless
otherwise indicated, the items are for unrelated entities.
b. Indicate how each transaction would be reported in the operating statement for
each fund affected. Indicate both the statement and the fund as well as the reporting
classification.
1. Salaries paid to a city's general government employees totaled $3,000,000 for the
year. Accrued salaries at the end of the year were $150,000. There were no accrued
salaries at the beginning of the year.
2. A government electric utility purchased transmission equipment during the year at
a cost of $5,000,000. One million dollars was paid in cash and the government
borrowed the balance on a two-year, 8% note payable.
3. The equipment purchase in transaction 2 has a 20-year estimated useful life and no
residual value. The purchase occurred at the beginning of the year.
4. Benton County issued $8,000,000 of ten-year, 6% bonds at par on July 1, 20X8. The
bonds were issued to finance construction of a high school gymnasium/office
building complex.
5. Benton County paid $3,200,000 during the year to the contractor for the project in
transaction 4.
6. Benton paid $240,000 from its General Fund to the fund to be used to service the
bonds to provide for the first annual interest payment which will be due in the next
fiscal year.
7. Interest on the Benton County bonds was paid when due.
8. Albemarle County repaid a $500,000 bond plus interest of $30,000 at the due date,
July 1, 20X8. The bond was issued for finance construction of a police station.
9. Franklin County borrowed $300,000 on a 6-month, 9% note payable on November
1, 20X8. The note was issued to provide financing for general fund operations and is
considered a fund liability.
