ACC 430 Chapter Notes - Chapter 6: Governmental Accounting Standards Board, Fiduciary

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tanhyena210

3 Aug 2020

School

Ball State University

Department

Accounting

Course

ACC 430

Professor

Ben Angelo

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Document Summary

Chapter 6: accounting for general long-term liabilities and debt service. The interest earned on most debt issued by state and local governments is exempt from federal taxation and, in some states, from state taxation. The tax exempt feature enables governments to raise large amounts of capital at relatively low cost. Relative ease for governments to issue debt most state impose statutory limits on debt that can be incurred by state and local governments. 6-1: explain what types of liabilities as general long-term liabilities. General long-term liabilities: those that arise from activities of governmental funds and that are not reported as fund liabilities of a proprietary or fiduciary fund. Reported as liabilities in the governmental activities column of the government-wide statement of net position. Claims and judgements, compensated absences, pensions and other postemployment. Long term liabilities related to operating activities benefits, and obligations related to landfills and pollution remediation.

Related Questions

1. Which standard issued by the Governmental AccountingStandards Board in 1999 requires two distinct sets of financialstatements for state and local governments?

A) GASB Statement No. 32
B) GASB Statement No. 33
C) GASB Statement No. 34
D) GASB Statement No. 35
E) GASB Statement No. 36

2. Which group of governmental financial statements reports allrevenues and all costs of providing services each year?

A) GAAP-Based Financial Statements
B) Fund-Based Financial Statements
C) Cost-Based Financial Statements
D) Government-Wide Financial Statements
E) General Fund Financial Statements

3. Proprietary fundsare

A) Funds used to account for the activities of a government thatare carried out primarily to provide services to citizens
B) Funds used to account for a government's ongoing organizationsand activities that are similar to those operated by for-profitorganizations
C) Funds used to account for monies held by the government in atrustee capacity
D) Funds used to account for all financial resources except thoserequired to be accounted for in another fund
E) Funds used to account for revenues that have been legallyrestricted as to expenditure

4. Fiduciary fundsare

5. The term "current financial resources" refers to

A) Those assets that can quickly be converted into cash
B) Monetary assets that are available to meet the government'sneeds
C) The government's current assets and current liabilities
D) The current value of all net assets owned by the governmentalunit
E) Financial resources used to provide electricity to localcitizens

6. Which group of financial statements is prepared using the"modified accrual accounting" approach?

A) GAAP-Based Financial Statements
B) Fund-Based Financial Statements
C) Cost-Based Financial Statements
D) Government-Wide Financial Statements
E) General Purpose Financial Statements

7. Under modified accrual accounting, when should anexpenditure to recognize interest on long-term debt berecorded?

A) At the end of each accounting period
B) When payment is due within one fiscal year
C) When payment is due
D) When cash is available to pay the interest
E) When the interest is incurred

8. Revenue from property taxesshould be recorded in the General Fund

A) when received
B) when there is an enforceable legal claim
C) when they are available for recognition
D) in the period for which they are required or permitted to beused
E) in the period in which the tax bills are mailed

9. A city received a grant of$5,000,000 from a private agency. The money was to be used to builda new city library. In which fund should the money be recorded forthe Fund-Based Financial Statements?

A) The General Fund
B) An Expendable Trust Fund
C) A Capital Projects Fund
D) An Agency Fund
E) A Permanent Fund

10. For government-wide financialstatements, what account is credited when a piece of equipment isleased on a capital lease?

A) Equipment - Capital Lease
B) Encumbrances - Long Term
C) Encumbrances - Lease Obligations
D) Capital Lease Obligation
E) The lease is not recorded

11. Jones College, a publicinstitution of higher education, must prepare financialstatements

A) As if the college was an enterprise fund
B) Following the same rules as state and local governments
C) According to GAAP
D) As if the college was a fiduciary fund
E) In the same manner as private colleges anduniversities

peachlion740

I need assistance with preparing journal entries for the belowitems.

This is the first year of operations for the city â 20X4. Thefollowing transactions are summarized for the city this year:

The city levied $9,000,000 of general property taxes, $8,800,000of which has been collected. It expects to collect the balanceshortly after the end of the year. These taxes are unassigned; theycan be used for any legitimate city purpose. You believe thesetaxes should be recorded in the general fund, but you decide todouble check by reviewing the GASBâs following website: Touringthe Financial Statements, Part III: The Governmental Fundsnoting the explanation for general funds.http://www.gasb.org/cs/ContentServer?pagename=GASB/GASBContent_C/UsersArticlePage&cid=1176156735732

The City received a state grant of $200,000 to purchasecomputers. This grant is restricted by the state for a specificpurpose. You need to determine in which fund you should record(categorize) the state grant for the purchase of the computers. Youremember reading in GASB Statement No. 54 that governmental fundbalance information is reported in five different classifications(nonspendable, restricted, committed, assigned and unassigned).Further, you decide to read the Fact Sheet about Fund BalanceReporting and Governmental Fund Type Definitions.

The City issued $12,000,000 in long-term bonds to construct acity building. The proceeds must be used for the intended purpose.You are unsure of the fund in which you record the proceeds of thelong-term bonds, designated to construct a city building; however,you remember the major types of expenditures: operating, capital,debt service, and intergovernmental charges. Capital expendituresrelate to the acquisition of capital assets (such as the citybuilding). You recall that such expenditures may be recorded in theGeneral Fund, Special Revenue Funds, or Capital Projects Funds,depending on the source of funding. You review the National Centerfor Education Statistics Government-wide Reporting requirements fortypes of expenditures and accounting treatments.

The City constructed the school building for $11,000,000. Youdecide to account for the construction of the school building as anexpenditure, causing the City Controllerâs asking for yourjustification in doing so. In gathering information from which toprepare a response, you note two things: 1) fund accounting followsthe modified accrual basis of accounting and 2) fund accountingfinancial statements are the Fund Balance Sheet and the Statementof Fund Revenues, Expenditures, and Other Changes in Fund Balances.To prepare the memo to explain your decision to the CityController, you browse the GASB Website in search of anauthoritative explanation about the use of expenditure or expensesfor fund accounting.

Knowing that GASB Statement No. 54 provides governmental fundrequirements for constructing buildings, you search GASB for anexplanation as to why capital assets and long-term liabilities arenot included on Fund Balance Sheets. Further, you are interested inlearning more about the nature of the Statement of Fund Revenues,Expenditures and Other Changes in Fund Balances.

The City incurred $6,000,000 in general operating expenditures,$5.5. million of which has been paid. You review GASB No 54 and theGASB website to help you explain why the City uses the termexpenditures instead of expenses for fund accounting.

Using its state grant, the City purchased computers for$100,000. As with the construction of the building, the City wouldrecognize the acquisition as an expenditure. You must justify tothe City Controller why the correct recording of the computers areexpenditures, even though the City would record them as assets in asupplementary ledger or list. When the government-wide statementsare prepared, the computers would be recognized asassets.

The City transferred $1,100,000 from the general fund to thedebt service fund to make the first payments of both principal andinterest that are due the following year. Viewed as broken downinto its components, this transaction is straightforward, involvingsimple entries to each of the two funds. You research which fundsto use for this transfer using the GASB websites above and otherwebsites that you find during your research.

Obtain a copy of the Comprehensive Annual Financial Report(CAFR) for the State of Texas for the Fiscal Year Ended August 31,2014 from the Texas Department of Finance and Administrationwebsite -

http://www.texastransparency.org/State_Finance/Budget_Finance/Reports/Comprehensive_Annual_Financial/14/,

and answer the following questions. Provide page numbers whereyou found the information. You may copy and paste text from theCAFR. Please submit type-written answers.

Page numbers (1-283) can be found at the bottom of each page ofthe CAFR document and should be included in the blank provided tothe left of each question to reference where your selected answerswere located within the CAFR report. Note that the PDF Adobe pagenumbers (1-294) at the top of the screen will be different from theCAFR page numbers and should not be referenced for purposes of thisexercise.

______1. Provide the name and title of the individualresponsible for transmitting the CAFR to the Governor, Members ofthe Legislature, and Citizens of the State of Texas.

______2. Who was the CAFR report transmitted to?

______3. What achievement was awarded for the State of TexasCAFR for the prior fiscal year ended August 31, 2013? Who grantedthe award and what are the requirements?

______4. Who performed an audit of the financial statements forthe State of Texas? For the Independent Auditorâs Report, whatletterhead was the opinion printed on, who signed the audit report,and what was the date of the audit report?

_____5. The audit of the State of Texas financial statements wasconducted in accordance with which standards?

______6. What type of audit opinion did the State of Texasreceive for the fiscal year ended August 31, 2014? Provide thelanguage included in the opinion paragraph of the audit report.

_____7. The government-wide financial statements are designed toprovide the reader with a broad overview of the Stateâs finances.What are the names of the government-wide financial statements?

The government-wide financial statements are prepared using the_______ basis of accounting and the _________ measurementfocus.

_____ 8. As for other state and local governments, what are the3 fund categories for the Texasâs fund financial statements?

_____ 9. Most of the Stateâs general activities are reported ingovernmental funds. Governmental funds are accounted for using the______ basis of accounting and ________ measurement focus.

_____ 10. The State of Texas maintains two types of ProprietaryFunds: enterprise and internal service. The fiscal 2014 financialstatements include ______ total enterprise funds, including _____major fund and _____nonmajor funds.

List the major enterprise fund:

_____ 11. What Required Supplementary Information (RSI) andother supplementary information is included in the TX CAFRreport?

_____ 12. What was the total $ amount of the Stateâs combinednet assets for governmental and business-type activities for thefiscal year 2014?

_____ 13. What were the Stateâs two major revenue sources, andwhat were the $ amounts? Together, they accounted for _______percent of total revenues.

_____ 14. Expenses reported on the Government-wide financialstatements are reported on a functional basis. Name the 10functional categories of expenses for the Stateâs governmentalactivities and rank them for 2014 in $ amounts from largest tosmallest:

_____ 15. The bulk of the Stateâs total expenses for fiscal 2014were related to the health and social services function. What wasthe $ amount of the expenses for this function, and what % of totalprimary government expenses do these expenses represent?

_____ 16. What is the chief operating fund of the State, andwhat was its ending fund balance as of Aug. 31, 2014?

ACC 430 Chapter Notes - Chapter 6: Governmental Accounting Standards Board, Fiduciary

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