Multiple-Choice Questions on Government-wide Financial StatementsNote: Items 1 and 2 are b...

Multiple-Choice Questions on Government-wide Financial Statements

Note: Items 1 and 2 are based on the following:

Mountain View City is preparing its government-wide financial statements for the year. As of the year-end, the city has determined the following information for its capital assets, exclusive of its infrastructure assets:

1. On the government-wide statement of net assets for the year-end, what amount should be reported for capital assets in the Governmental Activities column?

a. $550,000.

b. $780,000.

c. $1,330,000.

d. $1,450,000.

2. On the government-wide statement of net assets for the year-end, what amount should be reported in the net assets section for the capital assets?

a. $550,000.

b. $780,000.

c. $1,330,000.

d. $1,450,000.

3. In accordance with GASB 34, "Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments," which of the following statements is correct regarding the reporting of internal service funds?

I. The internal service fund should be discretely presented as part of the business-type activities of the government.

II. The internal service fund should be blended into the governmental activities.

a. I only.

b. II only.

c. I and II.

d. Neither I nor II.

Note: Items 4 and 5 are based on the following:

During the year, the City of Vero Beach sold bonds in its capital projects fund. The 6 percent, $500,000 par bonds were sold for 102. The effective interest rate was 5 percent.

4. How should the bonds be reported in the reconciliation schedule for the statement of revenues, expenditures, and changes in fund balance?

a. A decrease of $500,000 for the par value of the bonds.

b. A decrease of $30,000 for the interest paid on the bonds.

c. A decrease of $510,000 for the selling price of the bonds.

d. Not shown in this reconciliation schedule.

5. How should an interest adjustment be shown in the reconciliation of the balance sheet of governmental funds to the statement of net assets for the year?

a. A decrease of$30,000.

b. A decrease of$25,000.

c. A decrease of$5,000.

d. Not shown in this reconciliation schedule.

6. For which of the following should the accrual basis of accounting be used to measure financial performance?

7. The City of Hastings has a separately elected school board that administers the city’s schools. The city council must approve the school district’s budget and tax levy. The school district’s financial results should be reported in Hastings’s financial statements in which way?

a. Included only as schedules in the footnotes ofHastings’s financial reports.

b. Blended into Hastings’s financial reports.

c. Discretely presented in Hastings’s financial reports.

d. Not required to be presented in Hastings’s financial reports.

8. Glen Valley City has properly adopted the modified approach to account for its infrastructure assets. Which of the following statements is correct about accounting for these infrastructure assets on the government-wide statement of activities?

I. Depreciation expense should be computed based on the assets’ estimated useful lives and reported under the governmental activities column of the city’s statement of activities.

II. The amount of the expenditures made for the infrastructure assets, except for additions and improvements, should be expensed in the period incurred.

a. I only.

b. II only.

c. I and II.

Neither I nor II.

9. A statement of cash flows is required for

10. Which of the following is reported as a restriction of net assets in the net assets section of the statement of net assets?

a. A reservation of the fund balance in the general fund for $10,000 of encumbrances.

b. A requirement in the permanent funds that the $100,000 principal of a bequest be maintained.

c. A governing board decision that $15,000 of general fund resources should be assigned for planning for a city park.

d. A governing board allocation of $4,000 to establish an internal services fund.