Chapter 8

Government-wide Statements, Fixed Assets, Long-Term Debt

Multiple Choice

Exercise 1: For each of the following, select the letter corresponding with the best answer.

  1. Which of the following adjustments would not be required when moving from the governmental fund financial statements to the governmental activities in the government-wide financial statements?
  1. Eliminate expenditures for debt principal.
  2. Record additional expenses for salaries earned in the last week of the year but paid in the following year.
  3. Record additional expenses for compensated absences earned during the year but to be paid at some future date.
  4. All of the above would be required.
  1. A government has general obligation serial bonds, outstanding at December 31, 2017 and December 31, 2018. Interest is paid at the end of April and October. The governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances reports interest expenditures of $500,000 for 2018. Interest payable but not yet due was $80,000 at December 31, 2017, and $75,000 at December 31, 2018. What is the amount of interest expense to be reported in the government-wide Statement of Activities for the year ended December 31, 2018 (assume there is no premium or discount)?
  1. $495,000
  2. $500,000
  3. $505,000
  4. $575,000
  1. A governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances reported expenditures of $33,500,000, including capital outlay expenditures of $3,200,000. Capital assets for that government cost $56,000,000, including land of $3,000,000. Depreciable assets are amortized over 20 years, on average. The reconciliation from governmental fund changes in fund balances to governmental activities changes in net assets would reflect a(n):
  1. Increase of $22,500,000
  2. Increase of $550,000
  3. Decrease of $550,000
  4. Increase of $400,000
  1. A governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances reported property tax revenues of $3,900,000. That same government reported a liability for deferred revenues, related to property taxes, in the amount of $120,000 in the current year and $105,000 in the previous year. The property taxes in question related to the fiscal year of the report. The amount that would be reported for property tax revenues for the year in the Statement of Activities would be:
  1. $3,885,000
  2. $3,900,000
  3. $3,915,000
  4. $4,020,000
  1. Which of the following would be considered a program revenue in the Statement of Activities for a governmental unit?
  1. Motor fuel taxes restricted for road repairs.
  2. A grant for the state restricted for road repairs.
  3. Both of the above.
  4. Neither of the above.
  1. A government’s Statement of Revenues, Expenditures, and Changes in Fund Balances reflected expenditures for interest in the amount of $60,000 and expenditures for principal in the amount of $100,000. That statement also reflected proceeds of bonds in the amount of $300,000. Assuming no other changes, the effect, when moving from the changes in fund balances in the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the changes in net assets for governmental activities in the Statement of Activities would be a:
  1. $200,000 decrease.
  2. $200,000 increase.
  3. $140,000 decrease.
  4. $140,000 increase.
  1. The government-wide Statement of Net Position has separate columns for:
  1. Governmental activities, proprietary activities, and fiduciary activities.
  2. Governmental activities, business activities, and internal service funds.
  3. Governmental activities, business activities, and discretely presented component units.
  4. Governmental activities and business activities, only.
  1. Which of the following is true regarding the modified approach?
  1. It applies only to infrastructure assets.
  2. It expenses costs incurred to extend the life of assets.
  3. It capitalizes costs incurred for new facilities or to improve existing ones.
  4. All of the above are true.
  1. Which of the following must exist in order for a government to use the modified approach to record infrastructure?
  1. An up-to-date inventory of eligible infrastructure assets must be maintained.
  2. A condition assessment must be performed at least every three years.
  3. Both of the above.
  4. Neither of the above.
  1. A city government is located entirely within the boundaries of the county. The City had debt of $3,000,000, assessed property value of $100,000,000, and a population of 10,000. The county had debt of $2,000,000, assessed property value of $200,000,000, and a population of 15,000. The direct and overlapping debt per capita for the city would be:
  1. $300
  2. $500
  3. $400
  4. $450

Exercise 2: For each of the following, select the letter corresponding with the best answer.

  1. In its Statement of Net Position, a government reported assets of $100 million, including $30 million in capital assets (net), and liabilities of $60 million, including long-term debt of $15 million, all related to capital asset acquisition. In addition, $1 million of cash was restricted for payment of debt service. The government’s balance in Net Position-Unrestricted would be reported as:
  1. $14 million
  2. $25 million
  3. $24 million
  4. $15 million
  1. A government reported another financing source in the amount of $600,000 related to the sale of land in its governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balance. The land had a cost of $430,000. The adjustment in the reconciliation when moving from the changes in fund balances in the Statement of Revenues, Expenditures, and Changes in Fund Balances to the change in net position in the Statement of Activities would be a reduction of:
  1. $170,000
  2. $430,000
  3. $600,000
  4. $0
  1. A government had the following transfers reported in its governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances: (1) a transfer from the General Fund to a debt service fund in the amount of $600,000; (2) a transfer from the General Fund to an internal service fund in the amount of $500,000, and (3) a transfer from the General Fund to an enterprise fund in the amount of $400,000. The amount that would be shown as a transfer out in the governmental activities column in the Statement of Activities would be:
  1. $1,500,000
  2. $900,000
  3. $400,000
  4. $0
  1. Which of the following amounts related to the operations of an internal service fund would typically be included in the government-wide Statement of Activities?

INTERNAL SERVICE FUND’S INTERNAL SERVICE FUND’S

SERVICE REVENUES INVESTMENT INCOME

  1. YesYes
  2. Yes No
  3. No Yes
  4. NoNo
  1. The excess of asset write-down over insurance recovery resulting from the impairment of general fixed assets would be reported as a loss in which of the following statements.

GOVERNMENTAL FUNDS:

GOVERNMENT-WIDE: STATEMENT OF REVENUES, EXPENDITURES,

STATEMENT OF ACTIVITIES AND CHANGES IN FUND BALANCES

  1. YesYes
  2. YesNo
  3. NoYes
  4. NoNo
  1. A governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances reported expenditures of $40,000,000, including capital outlay expenditures of $8,300,000. Capital assets for that government cost $112,000,000, including land $6,300,000. Depreciable assets are amortized over 20 years, on average. The reconciliation from governmental fund changes in fund balances to governmental activities changes in net assets would reflect a(n):

a. Increase of $3,015,000

b. Decrease of $3,015,000

c. Increase of $72,000,000

d. Decrease of $2,000,000

  1. During the current fiscal year a county government issued general obligation bonds at a premium. Consider the adjustments that would be required when moving from the governmental fund financial statements to the governmental activities in the government-wide financial statements for the year end. What effect will these adjustments have on the following accounts?

OTHER FINANCING SOURCES:

INTEREST EXPENSE PREMIUM ON BONDS PAYABLE

a. IncreaseIncrease

b. Increase Decrease

c. DecreaseIncrease

d. DecreaseDecrease

  1. Reconciliations are required to be presented, showing the change from the Fund Balances shown in the governmental funds Balance Sheet to the Net Positon shown in the governmental activities column of the Statement of Net Position in:

a. A separate schedule in the basic financial statements.

b. The face of the Statement of Net Position.

c. The face of the governmental funds Balance Sheet.

d. Either (a) or (c)

  1. A government incurred expenses for its infrastructure as follows: $12 million for general repairs; $13 million to extend the life of existing infrastructure; and $14 million for improvements other than extending the life. The government chooses to use the modified approach to record infrastructure, that avoiding depreciation. The amount that would be shown as expenses would be:

a. $39 million

b. $26 million

c. $25 million

d. $12 million

  1. A city had general obligation debt outstanding of $30,000,000 and had available resources in the amount of $8,000,000 to pay that debt. The assessed valuation of property in the city is $600,000,000. The state applies an 8 percent debt limit, based on assessed valuation. The debt margin to be reported in the city’s statistical section of the CAFR would be:

a. $18 million

b. $48 million

c. $24 million

d. $26 million