Chamberlain College of Nursing -ACCT 567 Week 4 Midterm Questions and Answers Rated A

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ACCT 567 Week 4 Midterm 1. (TCOs A and B) Fiduciary funds are to use which of the following measurement and basis of accounting? (Points : 5) Economic resource measurement focus and accrual... basis of accounting. Current financial resources measurement focus and accrual basis of accounting. Economic resources measurement focus and modified accrual basis of accounting. None of the above, the fiduciary funds have no revenues. 2. (TCOs A and B) Funds other than the General Fund are required to be considered to be a major fund when (Points : 5) (A) total assets, liabilities, revenues, or expenditures/expenses of that fund constitute 10 percent of either the governmental or enterprise category. (B) total assets, liabilities, revenues, or expenditures/expenses of that fund are at least 5 percent of the total of the governmental and enterprise category. The conditions of either A or B exist. The conditions of both A and B exist. 3. (TCOs A and B) Which of the following is most correct with regard to Management’s Discussion and Analysis? (Points : 5) Both state and local governments and federal agencies are required to provide a MD&A. Federal agency financial reports are required to provide a MD&A. State and local government agencies are required to provide a MD&A. Both state and local government and federal agencies are encouraged, but not required to provide a MD&A. 4. (TCOs B and C) With regards to budgetary reporting by governmental entities, which of the following is not a true statement? (Points : 5) While GASB standards guide the format of the comparison, it does not require governments to maintain budgetary accounts. GASB standards require governmental entities to present a comparison of budgeted and actual results for the General Fund and special revenue funds with legally adopted budgets. Budgetary accounts are required to appear in the general purpose financial statements. The basis of accounting used to report the actual column in the budgetary comparison schedule is prepared according to legal requirements for budget preparation even if it departs from GASB Statements. 5. (TCOs B and C) The proper journal entry to record an encumbrance would include which of the following? (Points : 5) (A) A debit to the Encumbrance Account. (B) A debit to the Reserve for Encumbrances Account. (C) A credit to the Reserve for Encumbrances Account. A and C would both be included in the journal entry. 6. (TCOs B and C)) Capital assets that are used by an enterprise fund should be accounted for in the following fund? (Points : 5) Enterprise fund but no depreciation on the capital assets should be recorded. Enterprise fund and depreciation on the capital assets should be recorded. Business-type activities journal but no depreciation on the capital assets should be recorded. Governmental activities journal and depreciation on the capital assets should be recorded. 7. (TCO E) When a government acquires general fixed assets under a capital lease agreement, how should the asset be recorded in the government-wide financial statements? (Points : 5) As an expense when payments are made. At the inception of the lease agreement at the lesser of the present value of the minimum lease payments of the fair market value of the property. As an expenditure when payments are made. None of the above 8. (TCO E) Which of the following projects would usually be accounted for in a capital projects fund? (Points : 5) (A) Payment of interest on bonds that are issued to finance the construction of a new city hall. (B) The construction of a parking garage that is operated as an enterprise fund. (C) The construction of a fire station addition. Both A and B would be accounted for in a capital projects fund. 9. (TCO E) Which of the following statements is a true statement regarding the reporting of debt service funds? (Points : 5) Debt service funds are reported in a separate column in the governmental fund financial statements. Debt service funds are reported in the other governmental funds column in the governmental fund financial statements. Debt service funds are reported in a separate column in the government-wide financial statements. Debt service funds are reported in the governmental activities column in the government-wide financial statements. 10. (TCO D) Under GASB Statement No. 33, when would a special revenue fund be considered to have satisfied the eligibility requirement of a reimbursement type federal grant? (Points : 5) Only as the work is completed for a project. When the work has started for the project. Only after the work is completely finished for the project. When a plan for the use of the funds has been developed and approved by the appropriate personnel Essay 1. (TCO E) You are in a staff meeting with the city controller and one of your colleagues was quoted as follows: “Capital projects funds are established by a government to account for all plant or equipment acquired by construction.” Do you agree with this statement? Why or why not? (Points : 30) No, I don’t agree with this statement because fixed assets, such as plant equipment, are not funded by the capital projects fund. In particular, the capital projects fund is used for the accounting of resources that are used for the acquisition or construction of the capital assets that are designated by a government. However, it does not include the assets that are financed by fiduciary or proprietary funds. 2. (TCOs A and B) How are the major funds of a state or local government determined by a governmental entity? (Points : 30) fund. Similarly, any fund that the government considers to be of great importance can be recognized as a major fund. Aside from these, though, GASBS 34 has the following requirements for when a fund can be considered as major: • Total assets, liabilities, revenues, or expenditures/expenses of that governmental or enterprise fund are at least 10% of the corresponding element total (assets, liabilities, and so forth) for all funds of that category or type (that is, total governmental or total enterprise funds). • The same element that met the 10% criterion above is at least 5% of the corresponding element total for all governmental and enterprise funds combined. To be considered a major fund, it is important that the same element of a fund meet both of the criteria mentioned above. In the event that a fund meets both criteria in the last fiscal year but meets only one or none of the criteria during the present fiscal year, the government can opt to continue reporting the fund as major for the present year, subject to a pending determination in the succeeding year. To determine whether a fund meets the 10% and 5% criteria, the threshold amounts must be calculated for each element of the total governmental funds and the total governmental and enterprise funds. Next, each fund’s assets, liabilities, etc., should be compared to the calculated threshold amounts. 3. (TCO D) The City of Norton received a gift of $3,500,000 from a group of local residents on April 1, 2012 and signed an agreement that the funds would be invested on a permanent basis and the income would be used to purchase artifacts for the city museum. The following transactions took place during the fiscal year ended Dec 31, 2012. a. The gift was recorded on the books on April 1. b. On April 1, 2012, the Calvin Co. bonds were purchased in the amount of $3,000,000, at par. The bonds carry an annual interest rate of 5 percent, payable semiannually on October 1 and April 1. The city also purchased a certificate with a face value of $250,000 pays interest of 4 percent on semiannually on October 1 and April 1. c. On October 1, the semiannual interest was received on the bonds and certificate of deposit. d. From October 1 through December 1, payments were made totaling $85,000 to purchase artifacts for the city museum. e. On December 31, an accrual was made for interest for the bonds and the certificate of deposit. f. After a review of the bond market on December 31, 2012, the bonds had a market value of $2,979,000, exclusive of accrued interest. g. The books were closed on December 31. Required Enter the following template in the answer box and complete the journal entries to record the transactions on the books for the Calvin Co. Museum Endowment Fund. ........................................................................................Debit............................Credit a. Cash Revenues-Contributions for Endowment b. Investments in Bonds Certificate of Deposit Cash c. Cash Revenues-Bond Interest Revenues-Certificate of Deposit d. Expenditures-Museum Artifacts Cash e. Accrued Interest Receivable Revenues- Bond Interest Revenues- Certificate of Deposit f. Revenues-Changes in Fair Value of Investments Investment in Bonds g. Revenues-Contributions for Endowment Revenues-Bond Interest Revenues-Certificate of Deposit Revenues-Changes in Fair Value of Investments Expenditures- Library Books Fund Balance- Reserved for Endowment Debit Credit a. Cash 3,500,000 Revenues-Contributions for Endowment 3,500,000 b. Investments in Bonds 3,000,000 Certificate of Deposit 250,000 Cash 3,250,000 c. Cash 80,000 Revenues-Bond Interest 75,000 Revenues-Certificate of Deposit 5,000 d. Expenditures-Museum Artifacts 85,000 Cash 85,000 e. Accrued Interest Receivable 40,000 Revenues- Bond Interest 37,500 Revenues- Certificate of Deposit 2,500 f. Revenues-Changes in Fair Value of Investments 21,000 Investment in Bonds 21,000 g. Revenues-Contributions for Endowment 3,500,000 Revenues-Bond Interest 112,500 Revenues-Certificate of Deposit 7,500 Revenues-Changes in Fair Value of Investments 21,000 Expenditures- Library Books 85,000 Fund Balance- Reserved for Endowment 3,514,000 [Show More]

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