ACC 410

Exam 2

Spring 2011

NAME KEY

I. Multiple Choice: Circle the letter corresponding to the one best answer.

1. Which of the following funds is it appropriate to record depreciation of capital assets? 

A. Internal service fund.
B. Permanent fund.
C. General fund.
D. Capital projects fund.

2. Which of the following is a difference between enterprise funds and internal service
funds? 
A. The use of cost accounting by enterprise funds but not internal service funds.
B. The customers who primarily benefit from the fund's service.
C. The number of basic financial statements required.
D. The measurement focus on economic resources for enterprise funds and current
financial resources for internal service funds.
 3. What amount of the following items should be accounted for in an internal service fund?

    
A. $2,100,000.
B. $1,760,000.
C. $1,640,000.
D. $350,000.

4. The following cash transactions were among those reported by Crawford County's Water and
Sewer Enterprise Fund for the year:

   

In the Water and Sewer Enterprise Fund's statement of cash flows for the year ended
December 31, what amount should be reported as cash flows from capital and related financing
activities? 
A. $5,000,000.
B. $6,000,000.
C. $8,000,000.
D. $9,000,000.

5. For which of the following assets can the "modified approach" be elected in lieu of
depreciation? 
A. Eligible infrastructure assets.
B. All general capital assets.
C. Buildings and equipment.
D. All capital assets.
6. Which of the following activities would most appropriately be recorded by an agency fund? 
A. Assets held for employees' federal and state withholding taxes.
B. Deposits held for customers of a city-owned electric utility.
C. Assets held for special assessment bondholders when the city is secondarily liable for the
bonds.
D. Assets held for investment, the earnings from which are used for maintenance of the City
Cemetery.

7. Which of the following grants received by a city would most appropriately be recorded in a
"pass-through" agency fund? 
A. A federal grant for various purposes, for which the ultimate allocation and use of the money
will be decided by the state government. The city will serve as a conduit for the money
between the state government and various not-for-profit organizations who will use the
money.
B. A state grant to a local not-for-profit organization for summer employment of juveniles.
C. A federal grant made directly to a county for repairing and overhauling bridges.
D. A federal grant via the state government for which the city will be responsible for upgrading
low-rent housing.

8. A local golfer contributed $100,000 to the city stipulating that the money be invested and
that the earnings thereon be used for maintenance of the city golf course. The $100,000 would
most appropriately be recorded in a(an) 
A. Agency fund.
B. A permanent fund.
C. Private-purpose trust fund.
D. Investment trust fund.

9. A statement of cash flows should be prepared for which of the following fiduciary fund
types? 
A. Fiduciary funds do not provide a statement of cash flows.
B. Agency.
C. Pension trust.
D. Private-purpose trust.

10. . In which of the following circumstances would it be inappropriate to report the assets in
the fiduciary fund financial statements? 
A. When assets are held for the families of the government's police officers killed in the line of
duty.
B. When assets are held for other funds of the same government.
C. When assets are held for other governments in an investment pool.
D. When assets are held for Internal Revenue Code Section 457 deferred compensation plans.
11. Which of the following factors would not indicate that a potential component unit (PCU) is
dependent on the primary government? 
A. The primary government provides advice regarding the PCU's budget.
B. The primary government is obligated to provide financial support to the PCU.
C. The primary government is obligated for the PCU's debt.
D. The primary government is entitled to the PCU's resources.

12. Combining financial statements for nonmajor funds of a government should be included in 
A. The basic financial statements.
B. The notes to the financial statements.
C. As supplementary information in the comprehensive annual financial report (CAFR).
D. As part of the statistical section of the comprehensive annual financial report (CAFR).

13. . Which of the following is a required program revenue category in the government-wide
statement of activities? 
A. Special assessments.
B. Operating grants and contributions.
C. Sales taxes.
D. Transfers.

14. Which of the following would increase the balance in net assets—invested in capital assets,
net of related debt? 
A. Acquisition of a building to be used by the police department.
B. Issuance of long-term debt to be used to acquire equipment for the police department.
C. A gift of land to the city restricted by the donor to be used by the city airport, which is
accounted for as an enterprise fund.
D. Recording annual depreciation on capital assets.

15. . Balsam City's library board is appointed by the city council which has agreed to subsidize
the operating costs of the library at a material amount to be determined each year. In addition,
the city is paying debt service on general obligation bonds issued to construct the library. Based
on generally accepted accounting principles (GAAP) criteria for defining the reporting entity: 
A. The library is a component unit.
B. The library is not a component unit.
C. Financial data for the library's General Fund should be blended with the financial data for the
city's special revenue funds.
D. The library can avoid being a component unit by establishing itself as a legally separate
organization.
 II. Prepare the adjusting entries that would be needed in the worksheet to convert the
following governmental fund data to governmental activities data for the
government-wide statements.

Expenditures – capital outlay equipment...................................................... $3,500,000

Expenditure – bond principal retirement...................................................... 200,000
Expenditure – interest................................................................................... 200,000
Other financing sources – proceeds from sale of land.................................. 120,000
Other financing sources – bonds................................................................... 1,000,000
Other financing sources – premium on bonds.............................................. 100,000
Transfers from the General Fund.................................................................. 1,100,000
Transfer to the Debt Service Fund................................................................. 1,100,000
Transfer to the Enterprise Fund..................................................................... 250,000
Revenue property taxes................................................................................. 1,500,000
Increase in compensated absences reported as general long-term liabilities 23,000

Additional information:

1. Land sold had a book value of $25,000.

2. Deferred property taxes were $10,000 at the beginning of the year. Deferred property
taxes at the end of the year were $12,000(this will be an extra credit one).
3. All of the compensated absence liabilities relate to the education function.

1. Equipment................................................................................... 3,500,000
Expenditures -- Capital Outlay Equipment............................ 3,500,000

2. Bonds Payable............................................................................. 200,000

Expenditures -- Bond Principal Retirement........................... 200,000

3. Other Financing Source -- Proceeds from Sale of Land.............. 120,000

Land........................................................................................ 25,000
Gain on Sale of Land.............................................................. 95,000

4. Other Financing Sources -- Bonds............................................... 1,000,000

Bonds Payable........................................................................ 1,000,000

5. Other Financing Sources -- Premium on Bonds.......................... 100,000

Premium on Bonds Payable................................................... 100,000

6. Transfer from the General Fund................................................. 1,100,000

Transfer to the Debt Service Fund......................................... 1,100,000
7. Deferred revenue....................................................................... 12,000
Revenue -- Taxes.................................................................... 2,000
Net Assets (Beginning)........................................................... 10,000
[EXTRA CREDIT ITEM]

8. Expense (by functional areas).................................................... 23,000

Long-Term Liability for Compensated Absences................... 23,000

III. The Central Stores Fund of Cook City provides centralized management of
purchasing, storage, and issue of supplies for the entire City. For the following
summarized transactions and events for the year ended June 30, provide the fund
level entries in general journal form required to conform to generally accepted
accounting principles. If no entry is needed, so indicate.
1) The Central Stores Fund ordered supplies at an estimated cost of $62,000.
2) The supplies ordered in (1) above were received at invoice costs of $60,400; these
invoices were approved for payment.
3) Supplies costing $51,800 were issued to the City General Fund and billed to that
fund at a markup of 20 percent on cost.
4) Expenses paid in cash during the year were: purchasing, $5,700; warehousing,
$7,100; and general and administrative, $6,200. 

   
IV. Ingham County collects, in addition to its own taxes, taxes for other units. Tax levied
for 2011 were as follows:

   

Collections from the 2011 levies amounted to $3,550,000 and were distributed in
proportion to the original levies, less a 1% collection fee charged Mason City and the
Mason School District. Collection fees are remitted to the Ingham County General
Fund.
Required
1) Record the tax levies in the Ingham County Tax Agency Fund.
2) Record the collection from the 2011 tax levies in the Ingham County Tax Agency
Fund and the specific liabilities owed each fund and unit (Round all amounts to the
nearest whole dollar.)
3) Record in the Ingham County Tax Agency Fund the transfer of collected taxes to
each fund and unit.