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Unformatted text preview: Chapter 2 2.1. The solution to this and the first exercise of Chapters 1 and 3 through 9 will differ from student to student assuming each has a different CAFR. 2-2. 1. C. 6. B. 2. D. 7. D. 3. A. 8. B. 4. D. 9. B. 5. C. 10. D. 2-3. 1. B. 6. A. 2. C. 7. D. 3. B. 8. C. 4. B. 9. D. 5. D. 10. D 2-4. A. A financial reporting entity is a primary government, organizations for which the primary government is financially accountable, and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. B. A primary government is a state government or general purpose local government. It is also a special-purpose government that has a separately elected governing body, is legally separate, and is fiscally independent of other state or local governments. An example of a primary government would be any state, municipality, or county (general purpose governments) and any special- purpose local government that meets the above criteria. In Illinois, school disricts are generally primary governments as the governing boards are independently elected, levy their own taxes, and are financially independent. C. A component unit is a legally separate organization for which the elected officials of the primary government are financially accountable. In addition, a component unit can be another organization for which the nature and significance of its relationship with a primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. An example might be a library with a separate board appointed by a city council and in which the city council must approve its budget and make up its deficits. D. The two primary methods for reporting component units in the financial statements of a primary government are blending and discrete presentation . Blending reports the component unit as one of the funds of the primary government, which then results in including the component unit as part of the basic financial statements. Blending is used only when component units are "so intertwined with the primary government that they are, in substance, the same as the primary government.” Discrete presentation involves reporting the component unit in a column to the right of the primary government in the government-wide financial statements of the reporting entity. GASB intended that most component units would be discretely presented....
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- Spring '12
- Balance Sheet, Generally Accepted Accounting Principles, net assets, primary government