Chapter 10 (ACCT-410)

Chapter 10 (ACCT-410) - 10 Chapter Fiduciary Funds and...

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10 Chapter Fiduciary Funds and Permanent Funds TRUE/FALSE (CHAPTER 10) 1. 2. Per GASB Statement No. 34, permanent funds are classified as fiduciary funds. In accounting for permanent funds only the income can be spent; the principal must be preserved intact. Fiduciary funds focus on current financial resources and use the full accrual basis of accounting. Fiduciary funds are excluded from the government-wide financial statements. The concept of major versus nonmajor funds does not apply to permanent funds, as it does to governmental and proprietary funds. Accounting for the employer s contribution to a defined contribution pension plan is straight forward, because the employer is obligated only to make annual contributions in the amount specified in the plan terms. Accounting for the employer s contribution to a defined benefit pension plan is straight forward, because the employer is obligated only to make annual contributions in the amount specified in the plan terms. 3. 4. 5. 6. 7. 8. Not-for- profits report all investment gains and losses on endowments as additions to temporarily restricted net assets, regardless of donor-imposed restrictions. 9. An employer may have a liability to a defined benefit pension plan other than for its annual required contributions, depending on the future financial health of the plan. 10. In an agency fund, assets always equal fund balances because there are no liabilities. ch10 Page 1 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) General 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. Use the following information to answer Questions #3-4 The City received $200,000 to help maintain a local art museum that is owned and operated by a not-for-profit organization. During the year the City transferred net earnings of $20,000 to the appropriate entity/fund. 3. The $200,000 gift would be reported in a (an): a) Special revenue fund. b) Private-purpose trust fund. c) Agency fund. d) Permanent fund. 4. The $20,000 transfer would be reported by the fund that made the transfer as a (an) a) Transfer out. b) Expenditure. c) Deduction from Net Assets Benefits. d) Expense. Use the following information to answer Questions #5-6. In the current year, the City of Katerah earned $24,000 on the
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This note was uploaded on 04/11/2010 for the course ACCT 410 taught by Professor Komani during the Spring '10 term at MD University College.

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Chapter 10 (ACCT-410) - 10 Chapter Fiduciary Funds and...

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