Exam 10: Pensions and Other Fiduciary Activities

Ashby City receives a federal grant to assist in nutrition programs for its senior citizens. Senior citizens whose income is below a specified amount (the amount was specified by the Federal government) are eligible to participate in the program. Monthly checks of $100 (this amount was specified by the Federal government) will be mailed to eligible senior citizens. The proceeds of this grant should be accounted for in which of the following funds of the city?

State University maintains accounts for each of its student groups. The monies collected by the Accounting Fraternity are deposited with the university. As the fraternity authorizes disbursements of its funds, the university disburses the monies. During the year, the fraternity engaged in the following transactions. REQUIRED: Prepare the appropriate entries on the books of the university. Be sure to indicate in which fund the entries should be recorded. a) The fraternity deposited $400 in student dues. b) The fraternity authorized payments of $350 to Delta Airlines for an airline ticket for a member to fly to the national meeting, and of $100 to the National Accounting Fraternity for registration. c) The fraternity received a contribution of $500 from a major accounting firm to be used by the fraternity to offset the cost of attending the national meeting. d) The fraternity operated a book exchange on a consignment basis and collected revenues of $10,000. It authorized the university to write $9,000 of checks to the students whose books the fraternity had sold. The fraternity was pleased with the $1,000 profit. e) The fraternity received a reimbursement of $150 from the National office to offset the costs of attending the National meeting.

In contrast to most private-sector pension plans, most government plans are defined contribution plans.

The primary financial statements for a government-sponsored pension plan are:

GASB standards of accounting for other postemployment benefits (OPEB) require that governments

A donor gives your city $100,000 to be used to support youth recreational programs. What type of fund should be used to account for this gift? How or why did you select this fund? Include in your answer other types of funds that could be considered to account for similar donations and why you did not select one of those funds.

Fiduciary funds focus on current financial resources and use the modified accrual basis of accounting.

Which of the following is NOT true of agency funds?

Which of the following is a potential reform for defined benefit plans?

Wilmer County provides a defined benefit pension plan for its employees. The county accounts for the pension plan in a pension trust fund, which is included in the county's basic financial statements. In the years indicated, the county engaged in the following transactions related to the pension trust fund. REQUIRED: Prepare all necessary journal entries. Clearly indicate the fund in which the entry is being made. If no entry is needed, please write "No entry required." a) In Year 1, the pension trust fund sent billings to the general fund and the City Utility (enterprise) Fund for the actuarially determined amount of required contributions. The general fund was billed $300,000 but paid only $220,000 during the year. The enterprise fund was billed $450,000 and paid $530,000. b) In Year 2, the pension trust fund sent billings to the general fund and the City Utility Fund for the actuarially determined amount of required contributions. The general fund was billed $320,000 and paid the entire amount plus $30,000 of last year's underpayment. The enterprise fund was billed $480,000 and paid only $380,000.

Permanent funds are classified as

An employer may have a liability to a defined benefit pension plan other than for its annual required contributions, depending on the future financial health of the plan.

During the fiscal year ended December 31, 2016, Glen City's general fund contributed $60 million to a defined benefit pension plan for city employees. On February 27, 2017, the general fund made an additional $3 million contribution related to the 2016 pension contribution requirements. The actuarially determined contribution requirement for 2016 is $65 million. The amount of pension expenditure recognized by the general fund for 2016 should be:

Whether gains on the sale of a government endowment's investments should be considered additions to principal or expendable income for accounting purposes is:

Financial assets reported by most investment trust funds of governments should be reported at

During the current year the private-purpose trust fund will recognize, related to the cash outflow:

At the beginning of the year, the permanent fund of Rose City had an investment portfolio with a historical cost of $300,000 and a fair value of $330,000. There were no purchases or sales of securities during the year. At the end of the year the portfolio had a fair value of $360,000. At year-end, the city s account for this increase in fair value in which of the following ways?

At the end of 2015, Learning Tree, a not-for-profit organization, received a $5 million contribution (fair value), consisting entirely of investment securities. The contribution is required to be used to establish a permanent endowment, the income from which must be used exclusively to provide free "chapter books" to elementary school children. The endowment specifies that both realized and unrealized gains may be used for this purpose in addition to investment income. Learning Tree applies FASB accounting standards for not-for-profit organizations. At the start of 2016, Learning Tree had $600,000 in unrestricted net assets. During 2016, the endowment earns $100,000 in dividends and interest. Learning Tree spends the entire amount on books and distribution costs. At year-end, the value of the endowment portfolio is $5.5 million. During 2017, the endowment earns $100,000 in dividends and interest. The entire amount is spent on books. At year-end, the fair value of the endowment portfolio has decreased by $1 million to $4.5 million. During 2018, the endowment earns $100,000 in dividends and interest. The entire amount is spent on books. At year-end, the fair value of the endowment portfolio has gone back up by $0.4 million to $4.9 million. REQUIRED: a) Assuming no other transactions, prepare a schedule showing the balances in unrestricted, temporarily restricted, and permanently restricted net assets for the years ending in 2016, 2017, and 2018. b) What effect would there be on these three balances of net assets if the donor specified that all gains (realized and unrealized) must be reinvested?

In accounting for permanent funds only the income can be spent; the principal must be preserved intact.

Which of the following would NOT be accounted for in a fiduciary fund of a government?