Exam 8: Accounting for Fiduciary Activitiesagency and Trust Funds

Which of the following accounts is least likely to be used by a tax agency fund?

The collection of taxes or other revenues by one government for several of the funds it operates and for other governments often results in the creation of a trust fund.

Assets that are held in an agency fund belong to the party or parties for which the government acts as agent; however,the government retains legal right of ownership in the event of party's bankruptcy.

Kirby County established a tax agency fund to collect property taxes for the City of Kix,the City of Denton,and Kirby County School District.Total tax levies of the three governmental units were $200,000 for the year,of which $60,000 was for the City of Kix,$40,000 for Denton,and $100,000 for the School District. The tax agency fund charges a 2% collection fee that it transfers to the General Fund of the County in order to cover costs incurred for agency fund operations.During the year the tax agency fund collected and remitted $150,000 of the $200,000 levies to the various governmental units.Collection fees associated with the $150,000 were remitted to Kirby County's General Fund prior to year end. For the Kirby County Tax Agency Fund prepare the journal entries to record the taxes collected during the year and the remittances made to participating governments.

It is common for an agency fund to have relatively small net position balances.

The following are key terms in Chapter 8 that relate to accounting for pension plans. A.Agent multiple-employer pension plan B.Cost-sharing multiple-employer pension plan C.Covered payroll D.Defined benefit plan E. Defined contribution plan F. Net pension liability G.Service cost H.Total pension liability For each of the following definitions,indicate the key term from the list above that best matches by placing the appropriate letter in the blank space next to the definition. _____ 1. A pension plan which specifies the amount or rate of contribution that the employer and employees must contribute to the members' accounts in the pension plan. _____ 2. The portion of the present value of projected benefit payments to be provided through the pension plan to current active and inactive employees that is attributed to those employees' past periods of service. _____ 3. The portion of the actuarial present value of projected benefit payments that is attributed to the current year,interest on the total pension liability,benefit payments,and other changes to the total pension liability. _____ 4. The pension obligations of many employers are pooled and plan assets can be used to pay the benefits of the employees of any employer that provides pensions through the pension plan. _____ 5. Plan assets of numerous employers are pooled for investment purposes but accounts are maintained for the individual employer participants. A. Agent multiple-employer pension plan B. Cost-sharing multiple-employer pension plan C. Covered payroll D. Defined benefit plan E. Defined contribution plan

Defined benefit pension plans are classified as either single-employer pension plans or multiple-employer pension plans.

Trust funds often exist over a longer period of time than agency funds,represent and develop vested interests of a beneficiary to a greater extent,and involve more complex administration and financial accounting and reporting.

Which of the following statements is regarding termination benefits?

A common example of a private-purpose trust fund is a state-sponsored 529 savings plan,structured such that parents make after-tax contributions to an investment fund managed by the state government.

Investment trust funds and pension trust funds should be accounted for in the same manner as permanent funds.

Which of the following financial statements is prepared by fiduciary funds?

Which of the following activities would most appropriately be recorded by a trust fund?

A donor contributed $500,000 to the city stipulating that the money be invested and that the earnings thereon be used for maintenance of the a band shell in the city's park.The $500,000 would most appropriately be recorded in a(an):

In pension accounting,the employer's net pension liability:

Billing and collection of special assessments and payment of debt principal and interest on special assessment debt for which the city is not obligated in any manner should be recorded in a(an):

Describe the types of pension plans most often found in governmental entities and the differences between them.

Earnings on pooled investments and changes in fair value of investments are allocated to the participants having an equity interest in the pool in proportion to their relative contributions to the pool.

Which of the following is the appropriate basis of accounting for an agency fund?

Pension trust funds should utilize budgetary accounts in the same manner that General Funds and special revenue funds do.