In what way do the reporting standards of the GAO differ from those of the AICPA as to (1) public dissemination of the reports and (2) tests of compliance and internal controls?
> In what way, if any, does the accounting equation as applied in governmental and not‐for‐profit accounting differ from that as applied in business accounting?
> From what two perspectives must the financial statements under the GASB No. 34 reporting model be prepared? How do the two differ from each other?
> What is permanent about a permanent fund?
> What are fiduciary funds? What are the two main types, and what is the distinction between them?
> The “object classification” budget of a police department includes the following expense categories: • Salaries • Employee benefits • Supplies • Equipment • Vehicle maintenance, gas, etc. • Dues and subscriptions Based on your lay knowledge of the operat
> As will be emphasized later in this text, depreciation is recorded in proprietary funds but not in governmental funds. What is the rationale for recording depreciation in proprietary funds?
> Distinguish between funds as the term is used in governmental as contrasted with business accounting
> Why are there generally no capital projects (work in progress or other long‐lived assets) in governments’ capital projects funds? Why are there generally no long‐term debts in debt service funds?
> Upon examining the balance sheet of a large city, you notice that the total assets of the general fund far exceed those of the combined total of the city’s ten separate special revenue funds. Moreover, you observe that there are no funds for public safet
> Define the seven key elements that comprise the financial statements.
> GASB Statement No. 34 has been widely criticized for mandating the preparation and presentation of government‐wide statements. Mainly, the critics contend that the benefits of the statements are not commensurate with the costs of preparing them. They arg
> A school district receives a grant from the federal government to support programs directed at special needs students. The grant is a matching grant in which each dollar spent by the school district on teacher salaries for special needs education will be
> This chapter has described the fund structure in governments. Do you think that it is necessary to display individual funds in a government’s annual report? If so, then do you think it is any less necessary to display individual funds in a not‐for‐profit
> The newly formed Buffalo School District engaged in the following transactions and other events during the year: 1. It levied and collected property taxes of $110 million. 2. It issued $30 million in long‐term bonds to construct a build
> See the balance sheet of a not‐for‐profit hospital presented on page 83. It is intended to display the hospital’s fund structure. Inasmuch as it does not conform to FASB standards, it is inappropriate for external reporting. 1. On what basis of accountin
> Select the best answer. 1. Which of the following is likely to be a line item in a fire department’s program budget but not its object classification budget? a. Administrative salaries b. Travel to conferences and training c. Safety inspections d. Acqui
> The balance sheet of the Hillcrest Home Care Service, a not‐for‐profit organization providing assistance to the elderly, is presented here: Hillcrest Home Care Service Balance Sheet as of December 31 (in thousands) Assets Current assets Cash and cash eq
> A newly formed not‐for‐profit advocacy organization, the Center for Participatory Democracy, requests your advice on setting up its financial accounting and reporting system. Meeting with the director, you learn the following: • Member dues can be expect
> Kendal County engaged in the following transactions. For each, prepare an appropriate journal entry and indicate the type of fund in which it would most likely be recorded: 1. It levied and collected $1million in taxes and dedicated to the repayment of o
> See the following balance sheet for the town of Paris governmental funds. In addition, you learn from other records that the town has capital assets with a book value (net of depreciation) of $1,450 million and has outstanding long‐term bonds of $1,315 m
> Bertram County maintains a fund accounting system. Nevertheless, its comptroller (who recently retired from a position in private industry) prepared the following balance sheet (in millions): The fund balance restricted for debt service represents entire
> The following balance sheet was adapted from the financial statements of the Williamsburg Regional Sewage Treatment Authority (dates have been changed). Fund Types The transactions of the authority are accounted for in the following governmental fund ty
> The Sherill Utility District was recently established. Its balance sheet, after one year, is presented below. Note the following additional information: • The general fund received all of its revenue, $150 million, from taxes. It had op
> Entrepreneurs Consultants, a state agency, was established to provide consulting services to small businesses. It maintains only a single general fund and accounts for its activities on a modified accrual basis. During its first month of operations, the
> Review the statistical section. a. What is the population of the entity being reported on? b. Who is the entity’s major employer? c. What types of information are included in the statistical section?
> Review the financial section. a. Which, if any, independent audit firm performed an audit of the CAFR? b. Did the entity receive an “unqualified” audit opinion? If not, why not? c. Does the report contain management’s discussion and analysis (MD&A)? If s
> What are the three main categories of SEA indicators?
> Review the introductory section of the CAFR. a. Was the entity’s annual report of the previous year awarded a “certificate of achievement for excellence in financial reporting” by the Government Finance Officers Association? What is the significance of t
> A city maintains the following funds: 1. General 2. Special revenue 3. Capital projects 4. Debt service 5. Enterprise 6. Internal service 7. Permanent (trust) 8. Agency For each of the following transactions, indicate the fund in which each transaction w
> The newly established Society for Ethical Teachings, a not‐for‐profit organization, maintains two funds—a general fund for operations and a building fund to accumulate resources for a new building. In its first year, it engaged in the following transacti
> A special district accounts for its general fund (its only fund) on a modified accrual basis. In a particular period it engaged in the following transactions: • It issued $20 million in long‐term bonds. • It acquired several tracts of land at a total cos
> A newly established not‐for‐profit organization engaged in the following transactions. 1. A donor pledged $1,000,000, giving the organization a legally enforceable 90‐day note for the full amount. 2. The donor paid $300,000 of the amount pledged. 3. The
> Select the best answer. 1. Oak Township issued the following bonds during the year: Bonds to acquire equipment for a vehicle repair service that is accounted for in an internal service fund…………………………………………………. $3,000,000 Bonds to construct a new city hal
> The following relate to the town of Coupland (dollar amounts in thousands): Equipment used in a vehicle repair service that provides service to other departments on a cost‐reimbursement basis; the equipment has a 10‐year life with no salvage value….....
> What are three main sections of the report?
> The following is from the governmental funds balance sheet section of the Town of Libertyville’s Comprehensive Annual Financial Report. 1. What is the most likely reason that there are no unassigned balances in any of the funds other th
> What is an agency fund? Why is it the easiest fund for which to account?
> The ultimate aim of governmental and not‐for‐profit organizations is to produce outcomes. Yet in preparing program budgets, many organizations link expenditures to outputs rather than outcomes. Why?
> The balance sheets of both enterprise funds and internal service funds report capital assets and longterm debt. What does that tell you about the funds’ measurement focus and basis of accounting? Explain.
> As the auditor of Clearwater County you learn that various assets are subject to spending constraints. Indicate how each of the following constraints would affect the county’s reported fund balance (i.e., in which category of fund balance it would be rep
> Do encumbrances that remain outstanding at year‐end lapse? That is, do the amounts that will be expended in the following year, when the goods or services are received, have to be rebudgeted in the following year? How can you tell?
> The following schedule shows the amounts related to general purpose supplies that a city debited and credited to the indicated accounts during a year (not necessarily the year‐end balances), excluding closing entries. The organization r
> At the start of its fiscal year on October 1, Fox County reported the following (all dollar amounts in thousands): Fund balance: Committed for encumbrances……………………………. $200 Unassigned…………………………………………………………. 400 Total fund balance……………………………………………... $600
> London Township began Year 1 with a balance of $10 million in its bridge repair fund, a capital projects fund. The fund balance is classified as restricted. At the start of the year, the governing council appropriated $6 million for the repair of two bri
> The budgeted and actual revenues and expenditures of Seaside Township for a recent year (in millions) were as presented in the schedule that follows. 1. Prepare journal entries to record the budget. 2. Prepare journal entries to record the actual revenue
> Wickliffe County authorized the issuance of bonds and contracted with the USA Construction Company (UCC) to build a new sports complex. During 2014, 2015, and 2016 the county engaged in the transactions that follow. All were recorded in a capital project
> Kilbourne County engaged in the following transactions in summary form during its fiscal year. All amounts are in millions. You need not be concerned with the category of funds balances to which reserves for encumbrances are classified on the fund balanc
> Select the best answer. 1. Upon ordering supplies a government should a. Debit encumbrances and credit reserve for encumbrances b. Debit reserve for encumbrances and credit encumbrances c. Debit expenditures and credit encumbrances d. Debit expenditures
> What are the key elements of program budgets as exemplified by a zero‐base budget decision package for an activity?
> Select the best answer. 1. Appropriation budgets are typically concerned with a. The details of appropriated expenditures b. Long‐term revenues and expenditures c. Current operating revenues and expenditures d. Capital outlays 2. Which of the following
> The following is a recommendation from Against the Grain, a series of proposals by the State Comptroller of Texas on how the state could enhance revenues and decrease expenditures: Amend the Lottery Act to Abolish the Lottery Stabilization Fund The sta
> The following is an excerpt (with dates changed) from Against the Grain, a series of recommendations by the State Comptroller of Texas on how to “save” $4.5 billion and thereby balance the state’s budget: Require an Annual August Remittance of One-Half o
> Shown below is an excerpt from a city’s subsidiary ledger for the first two months of its fiscal year. Missing is the column that explains or references each of the entries. 1. Prepare the journal entries that were most likely made in the account, adding
> Review the budget note to the Smith City’s financial statements presented in the previous problem. Assume that the city engaged in the following transactions in 2017 and 2018: • In 2017 it signed a service contract wit
> A city’s note to its financial statements provides considerable insight into its budget practices. Shown below is an excerpt from a note, headed Budgets, from the Smith City, annual report for the fiscal year ended June 30. 1. The note
> The data presented below were taken from the books and records of the village of Denaville. All amounts are in millions. The village encumbers all outlays. As is evident from the data, some goods or services that were ordered and encumbered have not yet
> The following information was drawn from a county’s general fund budgets and accounts for a particular year (in millions): You also learn the following: • For purposes of budgeting, the county recognizes encumbrances a
> The transactions that follow relate to the Danville County Comptroller’s Department over a two‐year period. Year 1 • The county appropriated $12,000 for employee education and training. • The department signed contracts with outside consultants to cond
> A city prepares its budget in traditional format, classifying expenditures by fund and object. In 2010, amid considerable controversy, the city authorized the sale of $20 million in bonds to finance construction of a new sports and special events arena.
> In what key ways do program budgets more directly link expenditures to organizational goals than do conventional object classification budgets?
> A city’s visitors’ bureau, which promotes tourism and conventions, is funded by an 8 percent local hotel occupancy tax (a tax on the cost of a stay in a hotel). Because the visitors’ bureau is supported entirely by the occupancy tax, it is accounted for
> The following schedule shows the amounts related to supplies that a city debited and credited to the indicated accounts during a year (not necessarily the year‐end balances), excluding closing entries. The city records its budget, encum
> The following schedule shows the amounts (in thousands) related to expenditures that a city welfare department debited and credited to the indicated accounts during a year (not necessarily the year‐end balances), excluding closing entri
> Your government is permitted to amend the budget even after the end of the year. When presenting the final actual‐to‐budget comparisons, is it permitted to include the amendments that were adopted after the year‐end?
> In your government, appropriations for goods and services that remain encumbered at year‐end are automatically carried forward to the next year. Thus, the budget for the following year must include the amounts required to pay for the goods that were encu
> The GASB requires a government to prepare budgetary comparisons for its general fund and major special revenue funds that have a legally adopted annual budget. The city for which you work does not have a legally adopted budget prepared specifically for i
> What is the total fund balance in the general fund? Can this amount be appropriated and spent for any purpose? Explain.
> What is the government’s property tax rate?
> How are revenues from property taxes accounted for, i.e., as a single amount, or in multiple categories? Identify the various categories and indicate the percentage breakdown (e.g., residential property taxes are 50 percent of the total property tax reve
> Did the government generate revenue from traffic fines? As best you can tell, are these revenues reported in the government-wide statements as program revenues (e.g., associated with police or public safety) or as general revenues?
> Why may an organization foment conflict merely by establishing specific objectives?
> How is reserve for encumbrances reported on a year‐end balance sheet?
> By what percentage did each of the three largest sources of tax revenue increase over the last ten years?
> When are property taxes due? When do interest and penalties begin to accrue?
> At what percentage of fair market value is real property assessed?
> What are allotments? What purpose do they serve?
> Does the government’s government-wide statement of net position or governmental-fund balance sheet report “deferred revenue” (or deferred inflows of resources)? If so, what is the most likely reason this amount has been deferred?
> Does the report discuss the accounting basis for recognizing revenues?
> Which of the entity’s governmental functions or activities had the greatest amount of directly identifiable revenues?
> Why do many governments consider it unnecessary to prepare appropriation budgets for, and incorporate budgetary entries into the accounts of, their capital project funds?
> The following relate to three grants that the town of College Hills received from the state during its fiscal year ending December 31, 2018. Prepare journal entries to record the three grants. 1. A cash grant of $200,000 that must be used to repair roads
> The “object classification” budget of a fire department includes the following expense categories: • Salaries • Employee benefits • Supplies • Equipment • Station maintenance, utilities, etc. • Vehicle maintenance, gas, etc. • Dues and subscriptions Base
> In August 2018, the last month of its fiscal year, Goldwaithe Township issued $88,000 worth of tickets for parking and traffic violations. Of these, the township collected $45,000. It expects to collect an additional $20,000 within 60 days of the close o
> A state requires “large” merchants (i.e., those with sales over a specified dollar amount) to report and remit their sales taxes within 15 days of the end of each month. It requires “small” merchants to report and remit their taxes within 15 days of the
> Green Hills County received the following two contributions during a year: • A developer (in exchange for exemptions to zoning restrictions) donated several acres of land that the county intended to convert to a park. The land had cost the developer $1.7
> Preston Village engaged in the following transactions: 1. It issued $20 million in bonds to purchase a new municipal office building. The proceeds were recorded in a capital projects fund. 2. It acquired the building for $20 million. 3. It recognized, as
> Columbus City was awarded a state reimbursement grant of $150,000 to assist its adult literacy program. The following were significant events relating to the grant: • The city, which is on a calendar year, was notified of the award in November 2017. • Du
> The fiscal year of Duchess County ends on December 31. Property taxes are due March 31 of the year in which they are levied. 1. Prepare journal entries (excluding budgetary and closing entries) to record the following property tax related transactions in
> The following information relates to Hudson City for its fiscal year ended December 31, 2017. • During the year, retailers in the city collected $1,700,000 in sales taxes owed to the city. As of December 31, retailers have remitted $1,1
> Select the best answer. 1. Under the modified accrual basis of accounting, revenues cannot be recognized a. Until cash has been collected b. Unless they will be collected within 60 days of year-end c. Until they are subject to accrual d. Until they are
> A school district is awarded a cash grant to conduct a teacher-training program. As part of the grant, the district is given, rent-free, both office space and training facilities in the building of the state education department. How, if at all, should t
> Going 70 mph in a 60-mph zone, you’ve just been caught in the infamous Goldwaithe Township speed trap. You pay your fine of $150. In the government-wide statement of activities, revenues must be associated with the specific programs (e.g., public safety)
> The city manager of Midfield summoned the city’s sanitation commissioner. He had compared the service efforts and accomplishments data for the sanitation department with those for Lowville, a nearby city of comparable size and population. Midfield fared
> The Lewiston School District receives a $200,000 grant from the Bates Foundation to upgrade its high school computer labs. Total cost of the upgrade is estimated at $450,000. Because the grant is restricted, it accounts for the grant in a special revenue
> The Hensley School District was notified by the state education department that it has been awarded a $2 million grant to implement a unique elementary school reading program. The district has met all eligibility requirements for the grant. As of the end
> You are the independent auditor of various governments. You have been asked for your advice on how the following transactions should be accounted for and reported. Characteristic of each transaction is ambiguity as to whether it is an exchange or a nonex
> A student comments: “A government destroys a recently acquired car, sells the remains for scrap, and its general fund surplus for the year increases. That’s ridiculous. Government accounting makes so much less sense than private-sector accounting.” Expla
> What are pass-through grants? Under what circumstances must a recipient government report them as both a revenue and an expenditure?
> A private citizen makes an unrestricted pledge of $5 million to a city’s museum. The city is confident that the donor will fulfill her pledge. However, the cash will not be received for at least two years. How will the amount of revenue recognized differ
> Explain the distinction between reimbursement grants and entitlements. How does this distinction affect the way each type of grant is accounted for?
