Accounting 4070 Test 2a Row Section

Transcription

1 Accounting 4070 Test 2a Name Row Section I. Multiple Choice. (2 points each, 30 points total) Read the following questions carefully and indicate your answer by circling the letter preceding the one best answer to each question. 1. Which of the following accounts is a budgetary account of a governmental fund? a. Reserve for Inventory of Supplies. b. Reserve for Encumbrances. c. Estimated Uncollectible Current Taxes. d. Estimated Other Financing Sources 2. Which of the following best describes the purpose behind the other financial sources/uses category? a. The category is used to isolate certain nonroutine inflows and outflows that might otherwise distort revenue and expenditure trend analysis. b. The category is used to distinguish exchange and exchange-like transactions from nonexchange transactions. c. The category is used to distinguish interfund activity from transactions and events involving parties outside the financial reporting entity. d. Other financial sources are equivalent to gains and other financing uses are equivalent to losses. 3. Under which basis of accounting for a governmental unit should revenues be recognized in the accounting period in which they are measurable and available? Accrual Modified Basis Accrual Basis a. No No b. No Yes c. Yes Yes d. Yes No 4. When supplies ordered for use in an activity accounted for in the General Fund of a governmental unit are received at an actual price that is less than the estimated price on the purchase order, the Encumbrance account is a. Debited for the estimated price on the purchase order. b. Credited for the estimated price on the purchase order. c. Debited for the actual price for the supplies received. d. Credited for the actual price for the supplies received

2 5. In an interim balance sheet of a governmental fund, the Fund Equity Section would not include a. Reserve for Encumbrances. b. Reserve for Inventory. c. Contributed Capital. d. Available Appropriations. 6. Which of the following will require a credit to Fund Balance of a governmental fund when closing entries are prepared? a. Expenditures exceed Encumbrances. b. Estimated Revenues exceed Appropriations. c. Estimated Revenues exceed Revenues. d. Revenues exceed Estimated Revenues. 7. Accountability for capital assets used by departments accounted for by the governmental funds of a governmental unit should be established in a. The appropriate governmental funds. b. The governmental activities accounts at the government-wide level. c. Departmental memorandum records. d. The property, plant, and equipment fund. 8. A typical cause of a large excess of expenditures over revenues in the operating statement of a capital projects fund during the early stages of construction is a. Poor management; i.e., large cost overruns. b. Insufficient planning. c. Inadequate financing. d. The use of bond anticipation notes for interim financing. 9. When a capital project is completed, and all liabilities of the capital projects fund are satisfied, the remaining cash is usually transferred to a debt service fund. The final journal entry to close the accounts of the capital projects fund will include a. Debit to Cash. b. Credit to interfund transfer out. c. Debit to interfund transfer out. d. Credit to fund balance. 10. Which of the following is not true for capital projects funds? a. Cash or receivables from special assessments to finance construction projects should be recorded as assets of capital projects funds. b. Encumbrance accounting is generally used. c. GASB standards require that construction work in progress be capitalized in the capital projects funds until the project is completed. d. Capital projects funds may account for financial resources provided by federal grants as well as for bond proceeds. 2

3 Use the following information for Questions 11 and 12. In late June, the Eversure Construction Co. submitted a progress billing on a construction contract for $500,000. On July 2, the bill was approved for payment, subject to a five percent retention, as provided by the contract. 11. Construction Expenditure should be debited when a. The bill is received. b. The bill is encumbered. c. The bill is paid (except for the five percent retention). d. The final five percent of the bill is paid. 12. The amount that should be debited to Construction Expenditure is a. $475,000. b. $497,500. c. $500,000. d. $ 25, When a payment is made to a contractor from capital projects fund resources, the debit made in the governmental-wide records would be to: a. Construction in progress. b. Expenditures construction. c. Capital Expense. d. Encumbrances. 14. A government signed a five-year capital lease on January 1, 2004 to obtain some equipment. The lease provided that the government would make a down payment of $10,000 and four $10,000 payments each year after that, beginning January 1, The government has a fiscal year ending December 31. Upon inception of the lease, the government, in its governmental fund accounting records would: a. Debit expenditures for $10,000 and credit cash for $10,000. b. Debit expenditures for $50,000, credit cash for $10,000, and credit accounts payable for $40,000. c. Debit expenditures for the present value of the payments (including the $10,000), credit cash for $10,000, and credit accounts payable for the difference between the $10,000 and the present value of the future payments. d. Debit expenditures for the present value of the payments (including the $10,000), credit cash for $10,000, and credit other financing sources for the difference between the $10,000 and the present value of the future payments. 15. Which of the following debt service fund accounts would not be closed at the end of each fiscal year? a. Fund Balance. b. Estimated Revenues. c. Revenues. d. Expenditures Bond Interest. 3

4 16. The City of Harrison's fiscal year ends on December 31. On July 1, 2005, the City issued $1,000,000 of 6%, 10-year term bonds with semi-annual interest payments due on July 1 and January 1 each year, beginning on January 1, What amount of expenditures should the City recognize in its Debt Service Fund for the years 2005 and 2006? a. $30,000 in 2005; $60,000 in b. $60,000 in 2005; $60,000 in c. $0 in 2005; $60,000 in d. $3,000 in 2005; $6,000 in Which of the following debt service funds would normally have the largest balance in its Fund Balance account? a. Serial Bond Debt Service Fund. b. Deferred Serial Bond Debt Service Fund. c. Debt Service Fund used for recording capital lease payments. d. Term Bond Debt Service Fund. 18. Debt service funds are used to account for which of the following? a. Payment of principal and interest on general long-term debt. b. Payment of principal only on general long-term debt. c. Payment of interest only on general long-term debt. d. Payment of principal and interest on all debt of the governmental unit, including that of enterprise funds. 19. The City of Brandon s legal debt limit is 10 percent of total assessed valuation, total assessed valuation of property within the City of Brandon is $200,000,000, and bonds outstanding are shown below. Description Amount General obligation street construction 12,000,000 Special assessment sidewalk construction 2,000,000 General obligation park acquisition 2,000,000 Water Utility Fund revenue 5,000,000 Industrial development revenue 6,000,000 The City s Water Utility revenue bonds and the industrial development revenue bonds are not general obligation bonds, and thus, are not subject to the limit. What is the legal debt margin for the City of Brandon? a. $2,700,000. b. $4,000,000. c. $9,000,000. d. $20,000,000. 4

5 II. Problems. 1. ( 8 points) The City of Ifran passed an appropriations ordinance for the year ended June 30, year 5. Included in the appropriations ordinance was an appropriation for the Street Department in the amount of $800,000. During the month ended July 31, year 4 the following transactions took place: Purchase orders were issued in the amount of $35,000. $5,000 of the above purchase orders were cancelled. Goods were received, related to the above purchase orders. The goods received had purchase order amounts of $25,000, and invoice amounts of $26,750. Salaries were paid to Street Department personnel in the amount of $40,000. Because of an economic slowdown, a budget amendment was passed cutting all departments' annual appropriations by 10%. Required: Compute the amount of appropriations available at July 31, year 4. 5

6 2. (20 points) During fiscal year 5 of the City of Braşov, the following transactions took place. Record the entries that should be made in Braşov s General Fund. Do not make subsidiary ledger entries. a. The budget for FY 5 provided for General Fund estimated revenues of $780,000 and appropriations totaling $775,000. b. The city received a $70,000, three-month tax anticipation loan. Interest at the rate of 7% per annum is to be repaid at the maturity date of the loan. c. Property taxes were levied in the amount of $500,000. It was estimated that 2 percent of the levy will be uncollectible. d. Property tax collections amounted to $467,000. Any unpaid property taxes were then moved into delinquent status. e. Cash payments for salaries and wages amounted to $275,000. Related to this payroll, $30,000 was withheld for Federal Income Tax, $2,000 withheld for State Income Tax, and $23,000 withheld for employees FICA Tax. Also record the employers FICA Tax payment for $23,000. f. The tax anticipation loan was repaid. 6

7 3. (14 points) The following preclosing trial balance is from the City of Monterosso s Capital Projects Fund. This is the first year of operations for the fund. Required: prepare a balance sheet for the Capital Projects Fund. Account Dr Cr Cash 15,000 Investments 501,500 Interest Receivable on Investments 7,500 Contracts Payable Retained Percentage 40,000 Reserve for Encumbrances 200,000 Revenue 512,500 Expenditures Interest 500 Expenditures Construction 248,000 Encumbrances 980,000 OFS - Proceeds of Bonds 1,000,000 Total 1,752,500 1,752,500 City of Monterosso Balance Sheet - Capital Projects Fund 7

8 4. ( 20 points) The Village of Iaşi issued $5,000,000 in 6 percent general obligation, taxsupported, 10-year term bonds on July 1, 2013 at 101 to be used to construct a new warehouse for the street department. Record the following transactions on the books of the Village s Debt Service Fund (DSF). Only make the entries for the DSF, do not make entries for any other funds. Resources for principal and interest payments are to come from the General Fund in amounts exactly equal to the required payments. Interest payment dates are December 31 and June 30. There will be 10 annual sinking fund payments of $370,000 each starting on July 1, Iaşi has a calendar fiscal year. a. On July 1, 2013, the bonds were issued in the Capital Projects Fund and the premium was immediately transferred to the DSF to be used for principal retirement. b. On July 2, 2013 the premium amount received was invested. c. On December 31, 2013, funds for the first interest payment were received from the General Fund and the first interest payment was accrued. d. On January 1, 2014, a budget was adopted providing for transfers from the General Fund to the DSF equal to two interest payments and the annual principal payment. Also, the amount due from the General Fund was accrued. e. On July 1, 2014, funds for the second interest payment and the first sinking fund payment were received from the General Fund and the payments were made. 8

9 Answers Multiple Choice 1. d 2. a 3. b 4. b 5. c 6. d 7. b 8. d 9. b 10. c 11. a 12. c 13. a 14. d 15. a 16. c 17. d 18. a 19. b Problems 1. Appropriations, July 1, year 4 $800,000 Encumbered POs (35,000) Cancelled POs 5,000 Unencumbered PO 25,000 Actual Invoices (26,750) Expenditures for salaries (40,000) Amended budget (80,000) Total $648,250 9

10 2. a. Estimated Revenue 780,000 Appropriations 775,000 Fund Balance 5,000 b. Cash 70,000 Tax Anticipation N/P 70,000 c. Taxes Receivable-Current 500,000 Est. Uncollectible Taxes-Current 10,000 Revenue 490,000 d. Cash 467,000 Taxes Receivable-Current 467,000 Taxes Receivable-Delinquent 33,000 Est. Uncollectible Taxes-Current 10,000 Est. Uncollectible Taxes-Delinquent 10,000 Taxes Receivable-Current 33,000 e. Expenditures 330,000 Due to Federal Gov t 53,000 Due to State Gov t 2,000 Cash 275,000 Expenditures 23,000 Due to Federal Gov t 23,000 Due to Federal Gov t 23,000 Cash 23,000 f. Tax Anticipation N/P 70,000 Expenditures 1,225 Cash 71, City of Monterosso Balance Sheet - Capital Projects Fund 10

11 Assets Liabilities Cash 15,000 Contracts Payable-Ret. Percentage 40,000 Investments 501,500 Interest Receivable 7,500 Fund Equity Total 524,000 Reserve for Encumbrances 200,000 Fund Balance 284,000 Total 524,000 Fund Balance: (512, ,000,000) ( , ,000) = 284, a. Cash 50,000 OFS Transfers In 50,000 b. Investments 50,000 Cash 50,000 c. Cash 150,000 OFS Transfers In 150,000 Expenditures 150,000 Cash 150,000 d. Estimated OFS 670,000 Appropriations 300,000 Fund Balance 370,000 Due From GF 670,000 OFS Transfers In 670,000 e. Cash 520,000 Due From GF 520,000 Expenditures 150,000 Investments 370,000 Cash 520,000 11