Question: Suppose that you are the independent auditor

> Upon the death of a police officer, Leff City establishes a trust fund to provide for the education of the officer's collegeage children. 1. In what type of fund should the resources contributed to the fund be recorded? 2. Prepare journal entries to reco

> The Westmont School District provides postemployment health care benefits through a cost-sharing plan administered through the State Teachers OPEE Plan (STOP). In its financial statements for its fiscal year ending May 31, 20Xl, STOP reported that the co

> An individual city employee is currently 50 years of age and anticipates retiring at age 65. Per mortality tables, she is expected to live an additional 18 years postretirement. Taking into account her current salary and anticipated increases, her antici

> The ACFR of North Orange included the statement of fiduciary net position for its employee pension plan presented here: 1. A note to the statement indicated that the plan net position was 75 percent of the North Orange (the employer) total pension liabil

> Lemon County permits employees to accumulate any sick leave that they do not take. If employees do not use accumulated sick leave, then they will be paid for those days upon retirement or termination (up to a maximum of 45 days). In 20Xl, employees earne

> Expenditures for vacations do not necessarily reflect the amounts the employees have earned. In 20Xl, employees of Pecos River County earned $5 million in vacation pay. They were paid for $4.2 million but deferred taking the balance of their earned vacat

> During its fiscal year ending June 30, 20X0, the Parkville Independent School District purchases a two-year insurance policy covering the period May l , 20X0, through April 30, 20X2. Annual premiums are $60,000. The policy specifies that the entire premi

> Tax abatements are reductions in taxes that result from an agreement between a government and a taxpayer, typically a corporation. In 20X0, Lionsgate Logistics struck a deal with the city of Des Moines to move its headquarters to a property within the ci

> The amount of revenue to be recognized from grants depends on the type of grant. The following relate to three grants that the town of College Hills received from the state during its fiscal year ending December 31, 20Xl. Prepare journal entries to recor

> Select one of the more recently established (and larger) capital projects funds (a major fund, if there is one).

> Grants are not necessarily recognized as revenue when they are awarded. 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

> Property taxes are not necessarily recognized as revenue in the year collected. The fiscal year of Duchess County ends on December 31. Property taxes are due on March 31 of the year in which they are levied. 1. Prepare journal entries (excluding budgetar

> The Eaton School District engaged in the following transactions during its fiscal year ending August 31, 20Xl. • It established a purchasing department, which would be accounted for in a new internal service fund, to purchase supplies and distribute them

> The Waterville School District has an annual meeting with staff, students, and parents in the summer after the school year to review accomplishments in the school district and financials and address needs for the next school year. The talking points of t

> Different types of assets are accounted for in different ways. The government purchased or constructed the following assets. 1. A monument to honor the sailors who served in the U.S . Coast Guard. 2. Land to be incorporated into a national forest. 3. A t

> The Business Development Corporation (BDC) , a federal agency (fictitious), makes loans to high-tech companies that satisfy specified criteria. The loans are intended to encourage research and development and are made a t rates substantially below market

> The federal government, through its various government agencies, engaged in the following transactions involving revenues. 1. In the middle of its fiscal year, it rented l and to a tenant, another government agency. It signed a one year lease requiring m

> The left-hand column of the following table describes each of seven financial statements that the FASAB recommends agencies prepare. The right-hand column indicates the names of the seven statements. Match the description in the left-hand column with the

> Military hardware should be accounted for as a. Stewardship assets b. Heritage assets c. National defense assets d. General assets 2 . The Executive Office Building has historical significance yet is also used as functioning office space. The cost of the

> The federal government's annual financial statements are issued by a. The Department of the Treasury b. The Office of Management and Budget c. The Department of Commerce d. The Government Accountability Office 2. The Government Accountability Office is p

> In June 20Xl, Jason King completed his audit of a 20X0 grant that a city made to Field of Dreams, a private, not-for-profit organization that sponsors recreational programs for disadvantaged teens. In the course of his testing, King discovered that mater

> Please go to www.Guidestar.org, and download the Form 990 of three health-care organizations for 2018. Note that you will need to create a free account to access the forms: 1. Mental Health America of Greater Houston 2. Southern Illinois Hospital Service

> On June 30, 20X0, a county (government) hospital bought 3,000 shares of stock for $94,000 intending to hold the investment for its proposed expansion of its trauma center. The fair value of the stock on August 31, 20X0, the hospital's fiscal year-end, wa

> A not-for-profit hospital signs a contract with an insurance company in which the company agrees to pay it $6 million in capitation fees for the year July 1, 20X0, through June 30, 20Xl. Between July 1, 20X0, and December 31, 20Xl, the hospital provides

> Windom College, a not-for-profit institution, engaged in the following transactions during its fiscal year ending June 30, 20X0. Prepare appropriate journal entries, indicating the types of funds (by restrictiveness) in which they would be recorded. 1. T

> In June 20X0, a public university bills and collects $30 million in tuition for the summer semester that runs from June 1 through July 15. In addition, in May and June it bills $200 million for the fall semester that runs from September 1 through Decembe

> The objective of this exercise is to get you familiar with the audited financial statements and IRS Form 990 of a Nonprofit Entity, the American Cancer Society (www.cancer.org, click on "About Us," and click on "Financials and Governance") and obtain the

> Discovery Barn, a not-for-profit science center for children, received a contribution of $30,000 explicitly designated for the acquisition of computers. During the year it acquired $21,000 of computers, which it estimated to have a useful life of three y

> The Lung Association received a contribution of marketable securities that were to be placed in a permanent endowment fund. Neither donor stipulations nor applicable state law requires that capital gains or increases in value be added to the endowment pr

> A wealthy alumna donates $500,000 in marketable securities to her alma mater to establish a scholarship fund . Per the trust agreement, only the interest and dividends (including any gains in fair value) from the securities can be distributed to scholars

> For each of the following indicate the type of fiduciary fund in which it is most likely the fiduciary activity should be accounted for and reported. 1. Per a trust agreement a state maintains an investment pool in which governments within the state can

> What was the city's largest expenditure for the fiscal year? By how much did this increase or decrease since the prior year? Can you draw any inferences from this comparison as to the efficiency and effectiveness of the city in providing this service? If

> A city's general fund has an outstanding payable to its electric utility, which is accounted for in an enterprise fund. The utility has a corresponding receivable from the general fund. In the city's government-wide statement of net position, which would

> A city signs a three-year licensing agreement with a software company for use of a payroll management system in its electrical utility fund. Annual charges are $10,000 per year. It is the policy of the city to use a discount rate of 6 percent to value ri

> The accounting for BANs depends on events subsequent to year-end. In anticipation of issuing of long-term bonds, a state issues on May 1, 20Xl, $200 million of 60-day BANs to finance highway construction. It expects to roll over the BANs into long-term b

> What are the four main objectives of federal financial reporting as established by the FASAB?

> Government debts may be reported differently in governmental and government-wide statements. The Alpine school district engaged in the following transactions in its fiscal year ending August 31, 20Xl. By law, the district is required to establish a capit

> What should it use as its discount rate in determining its pension obligation?

> The Office of Management and Budget is responsible for granting agencies apportionments. What are apportionments?

> What is the primary role of the Treasury Department's Bureau of Fiscal Service?

> Into what two categories does the FASAB divide government assets? How are each of the two accounted for?

> What are the basic statements that an agency may have to prepare to be in compliance with FASAB standards?

> What are the key criteria of whether an entity should be accounted for as a "consolidation" entity or a "disclosure" entity?

> Why is the FASAB named an advisory board? What is the relationship between the FASAB and the GAO, the Treasury Department, and the OMB?

> What are tax expenditures, and how must they be reported upon in the federal government's consolidated financial report?

> If an agency makes a loan at a below market rate, what would be the nature of any expense recognized at the time of the loan? If it guaranteed a loan made by others, what would be the nature of any expense recognized at the time of the guarantee?

> Why does it matter whether Social Security is considered a pension plan or an entitlement program? How does the FASAB direct that Social Security be reported? What unique issue does the federal government face in calculating the actuarial value of its So

> Which of the following is true with respect to bankruptcy? a. Per the federal bankruptcy code, a municipality can be declared bankrupt but not insolvent. b. Many major cities have avoided bankruptcy by being placed under the control of financial control

> What measures might be of more value to donors than the fund-raising ratio?

> What are permanent funds used to account for? In light of the requirement that governmental funds can recognize revenues only when they are measurable and available, how can a permanent fund ever recognize revenue?

> As a general rule, when should a government recognize a fiduciary fund liability to the beneficiaries of the fund? More specifically when should a government that collects taxes on behalf of another government recognize the liability to the beneficiary g

> What is the rationale for the requirement that only resources held for the benefit of parties other than the government itself can be accounted for in a fiduciary fund?

> What are investment pools? Why might a government maintain an investment pool? On what basis are the assets measured and reported?

> In what two basic financial statements should a government report its fiduciary funds? On what basis of accounting should they be prepared?

> What is conduit debt? Who issues debt through these conduits? Why are governments required to report it only in notes to their financial statements, not on their balance sheets?

> Why are bond ratings of vital concern to bond issuers?

> What distinguishes moral obligation bonds from other types of debt? Why would one government assume a moral obligation for another government's bonds?

> Which of the following would be least likely to be classified as a city's general capital assets? a. Roads and bridges b. Electric utility lines c. Computers used by the police department d. Computers used by the department that collects the city's sale

> What special problems do governments face in measuring the income taxes associated with a particular year?

> What are the key distinguishing characteristics of fiduciary funds?

> What is meant by "combining statements"?

> Why may it be unclear whether a particular organization associated with the federal government should be considered a federal reporting entity? What are the key criteria as to whether an entity should be included in the Consolidated Financial Report (CPR

> What is meant by the unified budget? Why are Social Security receipts and disbursements said to be "off budget?"

> You are the auditor of a state. The state made a $10 million grant to a city. The grant reimburses the city for allowable costs incurred in hosting a meeting of international leaders. The meeting was held two weeks prior to the end of the state's fiscal

> According to the GASB, "Financial statements for governmental funds should be presented using the current financial resources measurement focus and the modified accrual basis of accounting." Financial resources are conventionally defined as "cash, invest

> The city of Carlasville imposes a one percent sales tax in addition to that levied by the state. The state, however, collects the tax on behalf of the city. The state typically does not notify the city of the amount of taxes collected in the fourth quart

> A separate column to report the variance between the final budget and actual amounts is encouraged but not required. Governments may also report the variance between original and final budget amounts. The implication is clear. The variance between the fi

> Central School District is awarded a $400,000 federal grant to implement and test a new way of teaching middle school math. The award stipulates that the district must provide a 20 percent match. a. In what fund-type ( e.g., general, special revenue, cap

> Did the government receive any funding for SNAP or any other Federal programs? Explain with details.

> Generally accepted accounting principles require governments to include in their annual reports a comparison of actual results with the budget for each governmental fund for which an annual budget has been adopted. This information is generally presented

> To encourage a private health care company to construct a nursing home, a city agrees to issue tax exempt bonds for the benefit of the company. The bonds will fund the construction of the facility. The city will hold title to the home for a period of 30

> A city enters into an 11 month lease with an option to renew the lease for additional 11 months up to 5 times. In your opinion does the lease qualify for the one-year exception and thereby be accounted for as an operating rather than a capital lease? Wou

> Per the GASB, training costs should be expensed as incurred for both internally generated computer software and subscription-based technology arrangements (SBITAs). They should not be capitalized as part of either the resultant computer software or the s

> As discussed in Chapter 4, governments must mark-tomarket their investments (including held-to-maturity debt securities). Suppose that a city has in its portfolio debt securities that it intends to hold to maturity. Interest rates increase. Therefore the

> As indicated in the chapter, the GASE takes a different position with respect to capitalization of interest during periods of construction than does the FASB. Inasmuch as there appears to be little difference in the nature of the transactions, especially

> The "In Practice" on page 261 notes that tax-exempt advance refundings involving debt redemptions are no longer allowed under U.S. tax law and that, as a result, the cost of debt issuance may go up for state and local governments. How might states and ci

> For each of the following indicate the amount of revenue that Beanville should recognize in its 20X2 (1) governmentwide statements and (2) governmental fund statements. Provide a brief justification or explanation for your responses. 1. The state in wh

> The general principles of revenue recognition are the same for both governmental and government-wide statements. For each of the following situations, indicate the amount of revenue that the government should recognize in an appropriate governmental fund

> For each of the following, indicate the fund, if any in which the government would account for the resources described. If a fiduciary, rather than a governmental fund, indicate the type of fund. Briefly justify your response. 1. A government contributes

> Were there any tax abatements disclosed for the year? If so, provide a brief description and the gross amount of taxes that were reduced during the reporting period.

> A state government, enters into an arrangement in which it will transfer to the Western Tollway Corporation (WTC) a recently constructed highway. The state reports the highway on its financial statements at its cost of $2 billion. Upon transfer, the stat

> A city entered into a contract with World Wide Construction Company (WWCC) to design, construct and operate a tunnel for a period of 30 years. Once the tunnel was completed, WWCC had complete responsibility for all aspects of tunnel operations, including

> Decommissioning costs are often nontrivial and must be recognized years in advance. A city constructed a power plant at a cost of $600 million. The facility has an estimated useful life of 50 years. At the end of the year in which the plant went on-line,

> Landfill costs must be reported as expenses during the periods of use-but only in enterprise funds. In 2X21, a city opens a municipal landfill, which it will account for in an enterprise fund. It estimates capacity to be 6 million cubic feet and usable l

> A lessor must report on its balance sheet both a receivable and the underlying asset. Bean County recently acquired a commercial office building at a cost $20 million, paid in cash. It estimates that the economic life of the building is 40 years (with no

> Overlapping debt can significantly alter key measures of debt capacity. The following information was taken from the City of Wyoming, Michigan's, schedule of direct and overlapping debt. 1. What is the most likely way the applicable percentages were deri

> A government hospital entered into a licensing agreement with a commercial software company that would permit it to use the firm's patient billing program and related data storage facilities for a period of five years. The following information relates t

> BANs, TANs, and RANs may sound alike, but they are not necessarily accounted for in the same way. In August 20X0, voters of Balcones, a medium-sized city, approved a $15 million general obligation bond issue to finance the construction of recreational fa

> Demand bonds may provide the issuer with the disadvantages, but not the advantages, of long-term debt. On June l, 20Xl, a city issues $2 million in 7 percent demand bonds. Although the bonds have a term of 10 years , they contain a " put" option permitti

> This example provides an overview of transactions addressed in this and previous chapters. Zeff Township assessed property owners $1,000,000 to construct sidewalks. The assessments were payable over a period of 10 years in annual installments of $123,290

> Did the city enter into any SBITAs? What type and for how long?

> Key information as to long-term obligations may be found in a city's annual comprehensive financial report (ACFR) in sections other than the primary financial statements. This problem is based on information drawn from the ACFR of the City of Davis. 1. T

> Entries in both governmental funds and government-wide statements can be reconstructed from a city's schedule of changes in long-term debt. The accompanying table was drawn from the City of Fort Leah's schedule of long-term liabilities (all amounts in th

> Government-wide statements are on a full accrual basis; fund statements are on a modified accrual basis. The East Eanes School District engaged in or was affected by the following events and transactions during its fiscal year ending June 30, 20Xl. 1. Te

> If governments don't preserve their infrastructure assets, they must depreciate them . In 20XO , Bantham County incurred $80 million in costs to construct a new highway. Engineers estimate that the useful life of the highway is 20 years . 1. Prepare the

> Favorable revenue-to-expenditure ratios may not always be as favorable as they appear. In the management discussion and analysis accompanying its 20XS financial statements, Tiber County reported that "for the fifth consecutive year revenues exceeded expe

> Charter City issued $100 million of 6 percent, 20-year general obligation bonds on January 1, 20Xl. The bonds were sold to yield 6.2 percent and hence were issued at a discount of $2.27 million (i.e., at a price of $97.73 million). Interest on the bonds

> What is the City's credit rating with the different Bond rating agencies?

> Assume that Nolanville's fiscal year ends on December 31. 1. Nolanville's payroll for one of its departments is $15,000 per week. It pays its employees on the Thursday of the week following that in which the wages and salaries are earned. In 20Xl, Decemb

> One of O’Neill’s high-end wetsuits is called the Animal. Total demand for this wetsuit is normally distributed with a mean of 200 and a standard deviation of 130. In order to ensure an excellent fit, the Animal comes in 16 sizes. Furthermore, it comes in