Acct 430/530 – Exam 2 – Fall 2008 Page 15
Name: ______
Exam 2
Acct 430-530
Fall 2008
INSTRUCTIONS:
{Not following instructions could cost you up to 10 points.}
Put your name on answer sheet and exam. Put your name and student ID number on answer sheet in both human and machine-readable formats. (For the ID number, do not put in a hyphen -- the last two columns will be blank.)
If you tear the test apart, please be sure it is in order before stapling back together. Do not staple answer sheet to the exam
MATCHING and MULTIPLE CHOICE: Darken your selected answer on the separate answer sheet. You should also clearly circle or otherwise mark your answer on the exam itself since the answer sheet will not be returned. There is no penalty for guessing.
SHORT PROBLEMS: Show any necessary computations if you want to be eligible for partial credit. Present your work in a neat, well-organized manner. Answer all parts of the problem.
SHORT ANSWER (ESSAY): Write legibly and use complete sentences. If I can’t read it, I can’t give you credit for your thoughts! Abbreviations are acceptable as long as they are obvious, i.e., OFS, TAN, etc. In particular, I need to be able to tell if you meant expense or expenditure!
1-13. MATCHING (2 points each, maximum 20, 1 point extra credit for each correct answer beyond 10)14-33. MULTIPLE CHOICE (60 points total)
(4 points each for first 15 correct answers; 1 point extra credit for each correct answer beyond 15)
34-36. Short Problems (60 points total)
Pick TWO of the three questions (30 points each) / 34.______
35.______
36.______
37-39. Short answer essay questions (10 points)
Pick ONE of the three questions
40. Extra credit (6 points max) / 37. ______
38.______
39.______
Total points earned (max = 150) / ______points ______%
MATCHING QUESTIONS – USE SCANTRON TO RECORD ANSWERS
Which of the GASB 33 classes of nonexchange transactions (list follows) best describes the numbered items below? Each answer may be used once, more than once, or not at all.
A. Derived tax
B. Imposed
C. Government mandated
D. Voluntary
E. None of the above
______1. A state grant that the city must accept and use to hire air pollution inspectors
______2. Revenue from fees charged by the police department to monitor a charity bicycle ride
______3. Fines for traffic violations
______4. Property taxes
______5. Donation from a city resident to support maintenance of city parks
______6. Interest income on short-term investments
______7. Income tax
Ch 2, Problem 6 (modified)
For each of the following (numbered) transactions, indicate which fund would most likely be used to report the transaction: Each answer may be used once, more than once, or not at all.
A. Special revenue
B. Capital projects
C. Debt service
D. Agency
E. None of the above – a different fund (general, permanent, proprietary, etc.)
_____8. The City collects $1 million of taxes for an independent fire district located within the City.
_____9. The City spends $1.2 million on street maintenance using the proceeds of a city gas tax dedicated for road and highway maintenance and improvements.
_____10. The City receives a bequest of $1.5 million. The donor’s Will, requires that the principal amount be invested in perpetuity and that the earnings on the investment be used to maintain a city park to be renamed for the donor.
_____11. The City pays $4 million to a contractor for work on the new bridge.
_____12. The City pays its police officers wages of $325,000.
_____13. The City pays $2.2 million in Bond Interest on its general obligation debt.
Remember to record your answers here AND on your Scantron answer sheet!
Multiple Choice Questions
14. Ch 4-40. D
A governmental entity is the recipient of a bequest of a multi-story office building that the government intends to use as a new city hall. The building has a historical cost of $425,000; a book value in the hands of the benefactor of $350,000; and a fair value of $525,000. The city should recognize on its governmental fund financial statements, donations revenue of
a) $-0-.
b) $350,000.
c) $425,000.
d) $525,000.
15. Ch 4-36. D
Reimbursement-type grant revenues are recognized in the accounting period in which
a) the award is made.
b) the cash is received.
c) the grantee is notified of the award.
d) expenditures are recorded on grant-related activities.
16. Ch 4-6. C
Under the accrual basis of accounting, property tax revenues are recognized
a) when they are received in cash.
b) they are available to finance expenditures of the fiscal period.
c) in the year for which they were levied.
d) in the year for which they were levied and when collection in cash is reasonably assured.
17. Ch 4-5. D
Under the modified accrual basis of accounting, derived nonexchange revenues are recognized when
a) they are earned.
b) they are measurable and available to finance the expenditures of the current period.
c) the underlying exchange transaction occurs.
d) the underlying exchange transaction occurs and they are measurable and available to finance the expenditures of the current period.
18. Ch 5-47 .B
Other financing sources/uses would appear on which of the following statements?
a) Balance sheet.
b) Statement of Revenues, Expenditures, and Changes in Fund Balance.
c) Cash flow statement.
d) None of the above.
19. Ch 5-42 D
Several years ago, Durham City issued $1 million in zero coupon bonds due and payable in 2010. The bonds were sold at an amount to yield investors 6% over the life of the bonds. During the current year, how much interest expenditures would Durham City recognize related to these bonds?
a) None.
b) Difference between the present value of the bonds at the beginning of the period and the present value of the bonds at the end of the period.
c) Face amounts of bonds times 6%.
d) Book value of bonds times 6%.
20. Ch 5-29. C
Shoshone County uses the consumption method to account for supplies. At the beginning of the year the City had no supplies on hand. During the year the City purchased $600,000 of supplies for use by activities accounted for in the General Fund. The City used $400,000 of those supplies during the year. At fiscal year-end, the appropriate account balances on the General Fund financial statements would be
a) Expenditures $600,000; Supplies Inventory $200,000.
b) Expenditures $600,000; Supplies Inventory $0.
c) Expenditures $400,000; Supplies Inventory $200,000.
d) Expenditures $400,000; Supplies Inventory $0.
21. Ch.5-21. B
The amount of pension expenditures that should be recognized in the General Fund financial statements during the current year is
a) The amount paid.
b) The amount paid plus the amount that will be paid with available expendable financial resources.
c) The amount paid so long as it does not exceed the actuarially determined amount.
d) The actuarially determined amount.
Use the following information to answer questions #22 - #23.
The citizens of a specific area of the City of Arlington approved the construction of sidewalks in their residential neighborhood and approved a $1 million bond issue to finance construction of those sidewalks. The citizens agreed to assess themselves for 20 years in an amount sufficient to pay principal and interest on the bonds. The City will oversee the construction of the sidewalks and act as agent for servicing the debt. The City does not guarantee the debt nor does it assume any legal or moral obligation for the bonds.
22. Ch 6-28. C
The proceeds of the bond issue should be recorded in which fund of the City of Arlington?
a) Agency Fund.
b) Special Assessment Fund.
c) Capital Projects Fund.
d) Debt Service Fund.
23. Ch 6-29. A
When the City collects the special assessment, it should be accounted for in which fund of the City of Arlington?
a) Agency Fund.
b) Special Assessment Fund.
c) Capital Projects Fund.
d) Debt Service Fund.
24. Ch 7-34 C
The “restoration cost” approach to determining the extent of an impairment
a) First calculates the percentage decline in the number of service units caused by the impairment.
b) First determines the current cost of an asset that would provide the current (impaired) level of service.
c) Estimates the cost to restore the utility of an impaired asset.
d) Estimates the change in future cash flows generated by the impaired asset.
25. Ch 7-26 B
A broker-dealer or other financial institution transfers cash to a government in exchange for securities and the government agrees to repay the cash plus interest in exchange for return of the same securities. From the government's point of view, this transaction is a
a) Repurchase agreement.
b) Reverse repurchase agreement.
c) Derivative.
d) Option.
26. Ch 7-23 B
GASB standards require that depreciation be reported on all capital assets except
a) Infrastructure accounted for using the standard approach.
b) Infrastructure assets accounted for using the modified approach.
c) Donated assets.
d) Equipment devoted to preservation of works of art.
27. Ch7-18 A
Which of the following is NOT an infrastructure asset?
a) Buildings.
b) Roads.
c) Sidewalks.
d) Bridges.
28. Ch7-17 C
If a government elects to capitalize certain works of art and similar assets, which of the following statement is true relative to depreciation on those assets?
a) Donated assets cannot be depreciated.
b) All of the capitalized assets must be depreciated.
c) All exhaustible works of art and similar assets must be depreciated.
d) The government may elect to omit all depreciation.
29. Ch 8-30 C
The work of bond rating agencies is important because
a) They insure that all principal and interest payments on bonds issued will be made.
b) The rating they assign proves the quality of a particular debt instrument.
c) They affect the debt’s marketability and hence its interest rate.
d) Bonds cannot be issued without them.
30. Ch 8-17 B
Obligations of property owners within a particular government for their proportionate share of debts of other governments with whom they share boundaries are called
a) Conduit debts.
b) Overlapping debts.
c) Committed debts.
d) Moral obligation debts.
31. Ch 8-5 A
In governmental fund financial statements, the assets acquired under a capital lease would be reported at
a) They are not reported in the fund financial statements.
b) The present value of the required lease payments.
c) The undiscounted total of required lease payments.
d) The total of all payments required under the lease.
32. Ch8-4 d
When the proceeds of long term debt are reported in governmental fund financial statements
a) They are reported only as an increase in liabilities in the funds.
b) They are reported only as revenues in the funds.
c) They are reported only as an other financing use—debt proceeds.
d) They are reported only as an other financing source—debt proceeds.
33. Ch 10-35. A
Assets reported in a government’s investment trust fund should include:
a) Only investments owned by external participants in the investment pool.
b) Investments of both the sponsoring government and of external participants in the investment pool.
c) Investments related to the sponsoring government’s governmental funds and of external participants in the investment pool.
d) Investments related to the sponsoring government’s other fiduciary funds and of external participants in the investment pool.
PROBLEMS – PICK TWO OF THE THREE (34, 35, 36)
34. From chapter 10 problem 2.
The City of Shane received a cash gift of $125,000 from a citizen who specified that the gift must be used to support recreational activities for youth of the City. The City accounted for this gift in the appropriate fund. During the year the City engaged in the following activities. Prepare the appropriate journal entries. Be sure to indicate in which fund the entries should be recorded.
a) The City accepted the donation.
b) The City engaged in a fund-raising effort to provide additional funds to support youth recreational activities. The City raised $6,000 in pledges. The City collected $2,000 in cash with the remaining pledges collectible shortly after the end of the year.
34. CONTINUED
c) The City temporarily invested $50,000 of the gift in marketable securities.
d) The City spent $26,000 on goal posts, nets, etc., for a soccer field.
e) The City received $2,000 in dividends and interest earned on the temporary investment.
f) At year-end the temporary investments had a market value of $51,000.
35. FROM Ch 4, problem 1 Property Taxes
Assuming that the City maintains the books and record in a manner that facilitates the preparation of the fund financial statements, prepare all necessary journal entries to record the following events related to property tax revenues for the year ended 12/31/2008. The city has adopted the 60-day rule for all revenue recognition for which it is appropriate.
a. On January 3, the City Council levied property taxes of $1 million to support general government operations, due in two equal installments on June 20th and December 20th. The property taxes were levied to finance the 2008 budget, which had been adopted on November 3, 2007. Historically 2% of property taxes are uncollectible.
b. The City collected the following amounts related to property taxes
Delinquent 2007 taxes collected in January, 2008 $ 11,000
Delinquent 2007 taxes collected in March 2008 $ 12,500
2008 taxes collected in June 2008 $ 540,000
2008 taxes collected in December 2008 $ 400,000
Delinquent 2008 taxes collected in January 2009 $ 10,000
Delinquent 2008 taxes collected in March 2009 $ 15,000
Problem 35 Continued
c. Unpaid 2008 property taxes were reclassified as delinquent after the December payment date.
d. $2,000 of 2006 taxes were written off during 2008.
36. Employees of the City of Hastings are paid from the general fund semi-monthly on the 15th day and the last day of the month. The City provides numerous employee benefits. Employees earn ten vacation days for each 12 months of employment. The employee can take the vacation during any summer months (May-September) prior to retirement. The employees also earn one sick day for each month of employment. Sick pay vests at the completion of five years of continuous service. Vested unused sick pay will be paid upon retirement or termination. The City contributes to a retirement plan that is administered by the State. Each year the City gets a statement from the State explaining the actuarially determined contribution required. The City recognizes revenues/expenditures when collected/paid or if collected/paid within 60 days of year-end. The City’s fiscal year end is December 31.