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7.
Which of the following fund types uses the modified accrual basis of accounting?
A) Private purpose trust fund.
B) Pension Trust Fund.
C) Special revenue fund.
D) Internal service fund.

8. When the budget of a governmental unit is adopted and appropriations are more than Estimated Revenues, the difference is
A) Credited to Budgetary Fund Balance.
B) Debited to Budgetary Fund Balance.
C) Debited to Reserve for Encumbrances.
D) Credited to Reserve for Encumbrances.

9. The government-wide financial statements should include a
A) Statement of revenues, expenditures and changes in fund balances.
B) Statement of net assets.
C) Statement of activities.
D) Both B and C.

10. Which of the following is not a characteristic of a fund as defined by GASB standards?
A) An accounting entity.
B) A segregated quantity of cash and other financial resources on deposit with a designated trustee.
C) A fiscal entity.
D) A self-balancing set of accounts.

11. In accounting for state and local governmental units the accrual basis is recommended for
A) Proprietary and fiduciary funds.
B) Governmental funds only.
C) Proprietary funds only.
D) All funds.

12. In which of the following funds would it not be appropriate to record depreciation of capital assets?
A) Capital projects
B) Enterprise.
C) Internal service.
D) Depreciation can be recorded in all the above funds.


13. Which of the following journal entries should a government use to record $325,000 for police department salaries and wages during a particular month?



14. Which of the following best describes the proper treatment for uncollectible amounts of tax revenue?
A) Report bad debt expense.
B) Report bad debt expenditures.
C) Report revenue net of uncollectible amounts.
D) Report deferred revenue.

15. Which of the following accounts would not be closed at the end of each fiscal year?
A) Encumbrances.
B) Reserve for Encumbrances.
C) Inventory of supplies
D) Both B and C would not be closed at the end of the year


16. When an enterprise fund pays the General Fund an amount in lieu of taxes, the account to be credited in the General Fund is
A) Cash.
B) Revenues.
C) Estimated revenues.
D) Other Financing Use.

17. Which of the following assets could appear in the general fund balance sheet?
A) Capital assets.
B) Copyrights.
C) Deferred charges for debt issuance costs.
D) Due from other funds.


18. When a fire truck purchased from General Fund revenues was received, the appropriate journal entry was made in the governmental activities general journal. What account, if any, should have been debited in the General Fund?
A) No journal entry should have been made in the General Fund.
B) Expenditures.
C) Capital Assets.
D) Encumbrances.

19. During January 2009 General Fund supplies ordered in the previous fiscal year and encumbered at an estimated amount of $1,200 were received at an actual cost of $1,300. The entry to record this transaction will require a debit to
A) Expenditures2009 in the amount of $1,300.
B) Expenditures2008 in the amount of $1,200.
C) Expenditures2009 in the amount of $100.
D) Both B and C are correct.

20. Which of the following journal entries should be made to close the Encumbrances account at the end of the fiscal year?
A) Debit Reserve for Encumbrances and credit Encumbrances.
B) Debit Fund Balance and credit Encumbrances.
C) Debit Encumbrances and credit Reserve for Encumbrances.
D) None. The encumbrance account is not closed at the end of the year.


21. Which of the following is a requirement for revenue recognition under the modified accrual basis of accounting?
A) Receipt of cash.
B) Measurable.
C) Availability.
D) Both B and C.


Use the following information to answer Questions 22 and 23

Grand Marais city's fiscal year ends on June 30. Jasper uses encumbrance accounting. On May 6, a purchase order was approved and issued for supplies in the amount of $5,000. Grand Marias received these supplies on June 2, and the $5,000 invoice was approved for payment.

22. What General Fund journal entry or entries should Grand Marais make on June 2, upon receipt of the supplies and approval of the invoice?


23. What General Fund journal entry should Grand Marais make on May 6, to record the approved purchase order?









24. The City of Portage purchased equipment for the fire department. If the operations of the fire department are financed by general fund revenues, the purchase would be recorded in which funds and/or activities?
A) General Fund: No; Governmental Activities : Yes
B) General Fund: No Governmental Activities: No
C) General Fund: Yes Governmental Activities: No
D) General Fund: Yes Governmental Activities: Yes


25. The governmental fund operating statement presents
A) Net income (loss).
B) Other financing sources and uses.
C) Revenues and expenditures.
D) Both B and C.


26. Which of the following will require a credit to Fund Balance of a governmental fund when closing entries are prepared?
A) Revenues exceed Reserve for Encumbrances.
B) Estimated Revenues exceed Appropriations.
C) Estimated Revenues exceed Fund Balance.
D) Appropriations exceed Estimated Revenues.


27. The Revenues account of a governmental unit is credited when
A) The budget is recorded at the beginning of the year.
B) The account is closed out at the end of the year.
C) Property taxes are recorded.
D) Property taxes are collected.


28. How many capital projects funds can a governmental unit have?
A) One.
B) Two.
C) As many as necessary to record its projects and activities.
D) None, this is not a fund type used by governments under GASBS 34.


29. On July 1, the first day of its fiscal year, the Ovid City levied a $1,000,000 property tax which is payable in full on December 1 of the same year. On September 15, the City decided to borrow $200,000 in 90 day tax anticipation notes to cover operating expenditures until the tax revenues are collected. The journal entry on September 15 to record the issuance of tax anticipation notes will include
A) A credit to Proceeds of Tax Anticipation Notes.
B) A credit to Tax Anticipation Notes Payable.
C) A credit to Tax Anticipation Revenue.
D) Either B or C is acceptable if consistently applied.

30. Which of the following funds are governmental funds?
A) General Fund, special revenue funds, capital projects funds, debt service funds, and private-purpose trust fund.
B) General Fund, special revenue funds, capital projects funds, debt service funds, and internal service funds.
C) General Fund, special revenue funds, capital projects funds, debt service funds, and permanent funds.
D) General Fund, special revenue funds, public-purpose trust funds.

31. Which of the following is properly reported as a liability of the General Fund?
A) Vouchers Payable.
B) Tax Anticipation Notes Payable.
C) Long-Term General Obligation Bonds Payable.
D) Both A and B are correct.

32. Which of the following funds are fiduciary funds
A) Pension trust, agency, permanent trust, and private-purpose trust.
B) Agency, private-purpose trust, investment trust, and permanent trust
C) Investment trust, agency, private-purpose trust, and pension trust.
D) Private-purpose trust, agency, pension trust and special purpose.

33. Which of the following is true regarding capital projects funds?

A) All budgetary accounts are employed in the same manner as for the General and special revenue funds.
B) Encumbrances accounting is not normally employed, but estimated revenues and appropriations accounts are used.
C) No budgetary accounts are ever used.
D) Encumbrances accounting is employed, but since capital projects funds are project-oriented, not oriented to the annual budget, the year-end closing entries are really interim entries in the life of the project.




34. In 2006, the Sim City signed a contract in the amount of $5,000,000 for the
construction of a new city hall. Expenditures were $3,000,000 in 2006 and $2,015,000
in 2007, including a change order in the amount of $15,000. What amount should be
added to net capital assets in the governmental activities accounts in 2007?

A) $5,000,000
B) $5,015,000
C) $2,015,000
D) None of the above.


35. Interfund transfers from the General Fund to a capital projects fund to provide partial
financing of a capital project would be reported by the capital projects fund as a (an)

A) Other financing source.
B) Revenue.
C) Fund balance addition.
D) Current liability.


36. Which of the following is a true statement about governmental units that issue tax-
supported debt to finance capital projects?

A) Most states do not permit bonds to be issued at a premium.
B) Accrued interest is recorded as an other financing source of the capital projects fund.
C) Premiums on bonds issued is recorded as an "other financing source" of the debt service fund.
D) Premiums on bonds issued must be amortized in the debt service fund.


37 Equipment in general governmental service that had been acquired several years ago by a
capital projects fund at a cost of $30,000 was sold for $11,000 cash. Accumulated
depreciation of $20,000 existed at the time of the sale. The journal entry to be made in
the governmental activities journal will include all of the following except

A) A debit to cash for $11,000.
B) A debit to accumulated depreciation of $20,000.
C) A credit to equipment for $30,000.
D) A debit to loss on sale of equipment of $1,000.







38. Equipment acquired under capital leases and used by activities accounted for in
governmental funds should be recorded in the governmental activities accounts at the
inception of the lease at

A) Fair value.
B) Present value of minimum lease payments.
C) Lower of fair value or present value of minimum lease payments.
D) None of the above; leased assets should not be recorded in the accounts.

39. What journal entry should be made at the beginning of the fiscal year to reestablish the
Encumbrances account of a capital projects fund for a multi-year capital project?

A) Debit encumbrances and credit fund balance.
B) Debit reserve for encumbrances and credit encumbrances.
C) Debit fund balance and credit encumbrances.
D) Debit encumbrances and credit reserve for encumbrances.

40. In late June, the Everest Construction Co. submitted a progress billing on a
construction contract for $500,000. On July 2, the bill was approved for payment,
subject to a five percent retention, as provided by the contract. The amount that
should be debited to Construction Expenditure is

A) $475,000.
B) $497,500.
C) $500,000.
D) $ 25,000.
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