ACC/410 Government and Not-for-Profit Accounting Week 8 Quiz – Strayer

ACC 410 Week 8 Quiz – Strayer

 

 Chapter 10

 

Permanent Funds and Fiduciary Funds

 

TRUE/FALSE (CHAPTER 10)

 

1.    Per GASB Statement No. 34, permanent funds are classified as fiduciary funds.

 

2.    In accounting for permanent funds only the income can be spent; the principal must be preserved intact.

 

3.    Fiduciary funds focus on current financial resources and use a full accrual basis of accounting.

 

4.    Fiduciary funds are excluded from the government-wide statements.

 

5.    The concept of major versus nonmajor funds does not apply to fiduciary funds, as it does to governmental and proprietary funds.

 

6.    Accounting for the employer’s contribution in a defined contribution plan is straight forward, because the employer is obligated only to make annual contributions in the amount specified in the plan terms.

 

7.    Accounting for the employer’s contribution in a defined benefit plan is straight forward,  because the employer is obligated only to make annual contributions in the amount specified in the plan terms.

 

8.    Most public pension plans are defined benefit plans.   

 

9.    An employer may have a liability to a defined benefit plan other than for its annual required contributions, depending on the future financial health of the plan.

 

10.  In an agency fund, assets always equals fund balance because there are no liabilities.

 

 

MULTIPLE CHOICE (CHAPTER 10)

 

1.   A governmental entity receives a gift of cash and investments with a fair value of $200,000.  The donor specified that the earnings from the gift must be used to beautify city-owned parks and the principal must be re-invested.  The $200,000 gift should be accounted for in which of the following funds?

       a)   Investment trust fund.

       b)   Private-purpose trust fund.

       c)   Agency fund.

       d)   Permanent fund.

 

2.   In previous years, Center City had received a $400,000 gift of cash and investments.  The donor had specified that the earnings from the gift must be used to beautify city-owned parks and the principal must be re-invested.  During the current year, the earnings from this gift were $24,000.  The earnings from this gift should generally be considered revenue to which of the following funds?

       a)   Special revenue fund.

       b)   Private-purpose trust fund.

       c)   Agency fund.

       d)   Permanent fund.

 

3.   Which of the following activities of a governmental entity should be accounted for in a fiduciary fund?

       a)   Funds received from the federal government to support public transportation activities.

       b)   Funds received from an individual who specified that the principal must be kept intact but the income can be used to support families of police officers killed in the line of duty.

       c)   Funds received from the state government that must be used to purchase capital assets.

       d)   Funds received from a contractor to assist with the development of utility infrastructure.

 

4.   What basis of accounting is used to account for transactions of a governmental private-purpose trust fund?

       a)   Full accrual basis of accounting.

       b)   Modified accrual basis of accounting.

       c)   Cash basis of accounting.

       d)   Budgetary basis of accounting.

 

5.   Which of the following would NOT be accounted for in a fiduciary fund of a governmental entity?

       a)   Nonexpendable resources held for the benefit of other governmental units.

       b)   Nonexpendable resources held for the benefit of the government holding the resources.

       c)   Expendable resources held for the benefit of other governmental units.

       d)   Funds held as an agent for other entities.

 

6.   Permanent funds are classified as

       a)   Governmental funds.

       b)   Proprietary funds.

       c)   Fiduciary funds.

       d)   Trust funds.

 

  1. Which of the following is NOT a fiduciary fund?

a)   Pension trust funds.

       b)   Investment trust funds.

       c)   Permanent funds.

       d)   Private-purpose trust funds.

 

8.   What basis of accounting is used to account for transactions of a government permanent fund?

       a)   Full accrual basis of accounting.

       b)   Modified accrual basis of accounting.

       c)   Cash basis of accounting.

       d)   Budgetary basis of accounting.

 

Use the following information to answer #9-#12

Previously a city received a $1 million gift, the income from which was restricted to support maintenance of city-owned parks.  During the current year the endowment earned $70,000 of which  $50,000 was transferred to the City Park Special Revenue Fund.

 

9.   On the year-end fund financial statement, the endowment fund would report revenues of:

       a)   $0.

       b)   $50,000.

       c)   $70,000.

       d)   None of the above.

 

10.  On the year-end fund financial statement, the endowment fund would report the $50,000 transferred to the Special Revenue Fund as:

       a)   A reduction of revenues.

       b)   A nonreciprocal transfer out.

       c)   A reduction of equity.

       d)   An expenditure.

 

11.  On the year-end financial statements, the endowment fund would report, as a result of these transactions, a fund balance (net assets) of:

       a)   $1,000,000

       b)   $1,070,000

       c)   $1,050,000

       d)   $1,020,000

 

12.  On the year-end financial statements, the special revenue fund will report

       a)   $50,000 Nonreciprocal Transfer In

       b)   $70,000 Nonreciprocal Transfer In

       c)   $50,000 Revenue

       d)   $70,000 Revenue

 

13.  Cedar City has a permanent fund that reported current year investment earnings (realized and unrealized) of $80,000.  The endowment principal is $800,000 and the city council has adopted a policy of considering only the inflation adjusted rate of return to be available for transfer to the recipient fund.  During the current year the Council declared the inflation-adjusted rate of return to be 8%.  How much revenue would be recognized in the permanent  fund?

       a)   $ 0.

       b)   $ 64,000.

       c)   $ 80,000.

       d)   Unable to determine.

 

14.  At the beginning of the year, the permanent fund of  Rapid City had an investment portfolio with a historical cost of $200,000 and a fair value of $220,000.  There were no purchases or sales of securities during the year.  At year end the portfolio had a fair value of $240,000.  At the end of the year Rapid City will account for this increase in fair value in which of the following ways?

       a)   Credit Investment Income, $20,000.

       b)   Credit Investment Income, $40,000.

       c)   Credit Fund Balance, $20,000.

       d)   No entry is made to recognize increase in fair value.

 

15.  Several years ago, a donor gave $5 million to the City and specified that the principal was to be kept intact but the earnings were to be used to support operations of the city parks.  During the current year, the City earned $300,000 on the gift.  To what type of fund should the City transfer accountability for the $300,000 earnings.

       a)   It should not transfer accountability.  The $300,000 should remain in the Permanent Fund.

       b)   A special revenue fund.

       c)   The General Fund.

       d)   An enterprise fund.

 

16.  A defined contribution pension plan is one in which the employer agrees to which of the following?

       a)   The employer agrees to make specific payments to a specified pension plan with no guarantee of a specific pension amount to be paid to the employee.

       b)   The employer agrees to make specific payments to a specified pension plan AND guarantees that the employee will receive a specified pension (usually determined by length of service and salary).

       c)   The employer agrees to make necessary payments to a specified pension plan that guarantees that the employee will receive a specified pension (usually determined by length of service and salary).

       d)   The employer agrees to pay a specified amount (usually determined by length of service and salary) to the employee, but the employer makes no specific guarantee to make payments to the specified pension plan.

 

 

17.  Hill City Light & Water (a proprietary fund) contributes to a defined  benefit plan for its employees.  During 1999 Hill City contributed $27 million to its pension plan.   On February 15, 2000,  Hill City made an additional $3 million contribution related to 1999.   The actuarially determined contribution amount was $32 million.   The amount of pension expense recognized by Hill City Light & Water for 1999 should be:

       a)   $ 0

       b)   $ 27 million

       c)   $ 30 million

       d)   $ 32 million

 

18.  During the fiscal year ended December 31, 2001, the Highland City General Fund contributed $48 million to a defined benefit pension plan for its employees.   On February 27, 2002, Highland made an additional $2 million contribution related to the 2001 pension contribution requirements.  The actuarially determined contribution amount for 2001 is $52 million.   The amount of pension expenditure recognized by Highland City General Fund for 2001 should be:

       a)   $ 0

       b)   $ 48 million

       c)   $ 50 million

       d)   $ 52 million

 

19.  The Schedule of Changes in Long-Term Obligations contains an account Net Pension Obligation.  Which of the following describes the event that gave rise to this account?

       a)   The actual contribution by a proprietary fund was less than the actuarially required contribution.

       b)   The actual contribution by a governmental fund was less than the actuarially required contribution.

       c)   The actuarially computed pension liability exceeded the pension plan assets.

       d)   The pension plan assets exceeded the actuarially computed pension liability.

 

20.  Required disclosure by a government General Fund related to its pension plan does NOT include which of the following?

       a)   The employer’s funding policy.

       b)   The components of the pension cost.

       c)   The key assumptions used in determining the pension costs.

       d)   The present value of the future benefits to be paid.

 

21.   A plan’s unfunded actuarially accrued liability is the excess of

       a)   The actuarially-determined plan cost over the actual contribution.

       b)   The actuarially-determined plan cost over the plan assets.

       c)   The actuarially-determined pension liability over the plan assets.

       d)   The actuarially-determined pension liability over the total contributions.

 

 

22.  Citizens within a defined geographic area of Hill City created a special assessment district to facilitate the construction of sidewalks.  Hill City was responsible for overseeing the entire construction project.  Hill City issued bonds in its own name to pay the contractor for the construction.   However, Hill City was not responsible in any manner for the bonds.  The bonds were secured by the special assessments which would be levied against the property within the special assessment district.  Collections of special assessments would be recorded in which of the following funds of Hill City?

       a)   Special Assessment Fund.

       b)   Agency Fund.

       c)   Special Revenue Fund.

       d)   Debt Service Fund

 

23.  The City of Highland Hills receives a federal grant to assist in nutrition (feeding) programs for senior citizens.  The City will select the contractors to provide the feeding and approve the participants in the program.  The proceeds of this grant should be accounted for in which of the following funds of the City?

       a)   General Fund.

       b)   Special Revenue Fund.

       c)   Agency Fund.

       d)   Expendable Trust Fund.

 

24.  The City of Highland Hills receives a federal grant to assist in nutrition (feeding) programs for senior citizens.   Senior citizens whose income is below a specified amount (the amount was specified by the Federal government) are eligible to participate in the program.  Monthly checks of $100 (this amount was specified by the Federal government) will be mailed to eligible senior citizens.  The proceeds of this grant should be accounted for in which of the following funds of the City?

       a)   General Fund.

       b)   Special Revenue Fund.

       c)   Agency Fund.

       d)   Expendable Trust Fund.

 

25.  Financial assets held by a governmental investment pool should be valued at

       a)   Cost.

       b)   Amortized cost.

       c)   Fair value on the date of the financial statements.

       d)   Fair value computed by a weighted-average approach.

Chapter 11

 

Issues of Reporting, Disclosure, and Financial Analysis

 

TRUE/FALSE (CHAPTER 10)

 

1.    Governments must incorporate their blended component units into both the fund and government-wide statements.

 

2.    Governments must incorporate their discretely presented component units into both the fund and the government-wide statements.

 

3.    A related organization is a contractual arrangement, whereby two or more participants agree to carry out a common activity and share its risks and rewards.

 

4.    A related organization must be incorporated into the primary government’s financial statements.

 

5.    The comprehensive annual financial report (CAFR) is divided into three main sections:  the table of contents section, the auditors’ report section, and the financial section.

 

6.    The typical audit is designed to cover all information included in the CAFR.

 

7.    There are only two government-wide statements:  the statement of net assets and the statement of activities.

 

8.    Required notes are an essential element of the basic financial statements.

 

9.    Required supplementary information (RSI) is considered part of the basic financial statements.

 

10.  Public colleges and universities must adhere to the same GASB pronouncements as other types of governments.

 

 

MULTIPLE CHOICE (CHAPTER 11)

 

 

1.   Which of the following is NOT a primary government?

       a)   A state government.

       b)   A general purpose local government with the ability to determine its own budget.

       c)   A general purpose local government whose tax levies must be approved by the state. 

       d)   A special purpose local government whose tax levies must be approved by the state.

 

2.   Which of the following is NOT required for a special purpose local government to be considered a primary government?

       a)   It must have a separately elected governing body.

       b)   It must have the power to issue tax exempt debt.

       c)   It must be legally separate from other primary governments.

       d)   It must be fiscally independent of other governments.

 

3.   Which of the following is NOT a necessary condition for a governmental entity to be considered fiscally independent?

a)   It must be able to determine its own budget.

       b)   It must be able to levy taxes and/or set rates for its services.

       c)   It must be able to issue bonds.

       d)   It must be able to issue bonds that are tax-exempt.

 

4.   Which of the following is NOT a necessary characteristic of a component unit?

       a)   It is legally separate from the other government.

       b)   The other government appoints a voting majority of the component unit’s governing body or a voting majority of the unit's governing body is composed of officials of the other government.

       c)   The other government can impose its will on the unit or the unit has the potential to provide a financial benefit to or impose a financial burden on the other government.

       d)   The other government provides services that are used by both governments.

 

5.   The Marsh River School District, a legally separate school district that has a separately elected governing body, cannot enter into any debt agreements without the approval of the County Commission.   Marsh River School District would be considered a:

a)   Primary government.

       b)   Component unit.

       c)   Related organization.

       d)   Affiliated organization.

 

6.   The County Commission appoints a voting majority of the members of the Board of a particular organization.  The County Commission cannot impose its will upon the organization.  There is no potential for the organization to provide any financial benefit to the County nor is there is any potential for the organization to impose any financial burden on the county.  The organization is an example of a:

a)   Primary government.

       b)   Component unit.

       c)   Related organization.

       d)   Affiliated organization.

 

7.   The State has a legally separate State Building Authority which has a board appointed by the Governor.  The Authority issues debt in its own name, holds title to buildings in its own name, and leases its building exclusively to the State.  The authority would be considered a

       a)   Primary government.

       b)   Component unit.

       c)   Related organization.

       d)   Affiliated organization.

 

8.   The State has a legally separate State Building Authority which has a board appointed by the Governor.  The Authority issues debt in its own name, holds title to buildings in its own name, and leases its building exclusively to the State.  In what manner would the Authority be included in the State’s Basic Financial Statements?

a)   Blended.

       b)   Discretely presented.

       c)   Note disclosure only.

       d)   Not included in any manner.

 

9.   The City created a legally separate Housing Authority to provide low-income housing to residents of the City.  The City issues debt for the Housing Authority in the name of the City, but the Housing Authority is responsible for repayment of the debt.  The Housing Authority is governed by a board composed of all 5 members of the City Council.  Actions can be taken by the Authority upon receiving an affirmative vote by a simple majority of the board.  The Housing Authority would be considered a:

       a)   Primary government.

       b)   Component unit.

       c)   Related organization.

       d)   Affiliated organization.

 

10.  The City created a legally separate Housing Authority to provide low-income housing to residents of the City.  The City issues debt for the Housing Authority in the name of the City, but the Housing Authority is responsible for repayment of the debt.  The Housing Authority is governed by a board composed of all 5 members of the City Council.  Actions can be taken by Authority upon receiving an affirmative vote by a simple majority of the board.  In what manner would the Authority be included in the City’s Basic Financial Statements?

       a)   Blended.

       b)   Discretely presented.

       c)   Note disclosure only.

       d)   Not included in any manner.

 

11. The County created a legally separate County Hospital authority.   Members of the board of the County Hospital are elected in county-wide elections.  The hospital receives no financial support from the County, except that the County pays the hospital bills for county indigents.  All revenues of the Hospital are user fees.  The County Hospital would be considered a

       a)   Primary government.

       b)   Component unit.

       c)   Related organization.

       d)   Affiliated organization.

 

12.  The County created a legally separate County Hospital authority.   Members of the board of the County Hospital are elected in county-wide elections.  The hospital receives no financial support from the County, except that the County pays the hospital bills for county indigents.  All revenues of the Hospital are user fees.  In what manner would the Hospital be included in the County’s Basic Financial Statements?

a)   Blended.

       b)   Discretely presented.

       c)   Note disclosure only.

       d)   Not included in any manner.

 

13. The City created a legally separate Port Authority.  Members of the board of the Port Authority are elected in general city elections.  The Port Authority receives no tax dollars; it is supported entirely by user fees.  The Port Authority determines its budget, sets user fees, and has the power to issue bonded debt.  The Authority would be considered a  

       a)   Primary government.

       b)   Component unit.

       c)   Related organization

       d)   Affiliated organization.

 

14.  The City created a legally separate Port Authority.  Members of the board of the Port Authority are elected in general city elections.  The Port Authority receives no tax dollars; it is supported entirely by user fees.  The Port Authority determines its budget, sets user fees, and has the power to issue bonded debt.  In what manner would the Port Authority be included in the City’s Basic Financial Statements?

       a)   Blended.

       b)   Discretely presented.

       c)   Note disclosure only.

       d)   Not included in any manner.

 

15.  The City created a legally separate entity to operate a County Hospital.  The City Council appoints a voting majority of the board of the Hospital.  The City cannot impose its will on the Hospital and there is no potential for a financial benefit or financial burden to the City.  The County Hospital would be a

       a)   Primary government.

       b)   Component unit.

       c)   Related organization.

       d)   Affiliated organization.

 

 

  • Item #: 286

ACC 410 Week 8 Quiz – Strayer

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