Question 1

In previous years, Boze City had received a $400,000 gift of cash and investments. The donor had specified that the earnings from the gift must be used to beautify city-owned parks and the principal must be re-invested. During the current year, the earnings from this gift were $24,000. The earnings from this gift should generally be considered revenue to which of the following funds?

Accepted Answer

A)  Special revenue fund. 
B)  Private-purpose trust fund. 
C)  Agency fund. 
D)  Permanent fund.

Question 2

You are asked by a wealthy businesswoman to help construct a permanent endowment for a local university. She asks you whether you believe the university should be required to add investment gains to the principal of the endowment or whether it would be preferable for the gains to be available for spending. How would you respond and why?

Accepted Answer

The answer of You are asked by a wealthy businesswoman...

Question 3

Permanent funds focus on measuring current financial resources and use a modified accrual basis of accounting.

Accepted Answer

A) True 
 B)False

Question 4

Dale City Light & Water (a proprietary fund) contributes to a defined benefit pension plan for its employees. During 2017, the city contributed $36 million to the pension plan. The city also made a $4 million contribution related to 2016. The actuarially determined contribution requirement for 2017 was $43 million. The amount of pension expense recognized by Dale City Light & Water for 2017 should be:

Accepted Answer

A)  $ 0 
B)  $ 36 million 
C)  $ 40 million 
D)  $ 43 million

Question 5

On its year-end statement of financial position, the charity would report restricted net assets of:

Accepted Answer

A)  $1 million. 
B)  $1.04 million. 
C)  $1.03 million. 
D)  $1.01 million.

Question 6

Which of the following is a NOT a true statement concerning postemployment benefits other than pensions (OPEB)?

Accepted Answer

A)  OPEB comprise predominantly healthcare benefits. 
B)  Many governments do not provide OPEB or provide them on a pay-as-you-go basis. 
C)  GASB standards of accounting for OPEB are very similar to those for pension benefits. 
D)  OPEB plans should be accounted for in permanent funds.

Question 7

The funded status of a defined benefit pension plan is

Accepted Answer

A)  The result of comparing the actuarial value of plan assets with the plan's actuarial accrued liability for benefits. 
B)  The amount by which plan assets exceed benefits due to current retirees. 
C)  Current-year contributions less amounts currently due but not paid to current retirees, 
D)  The policy as to whether the plan is being financed on a pay-as-you-go (cash) basis or through actuarially determined employer contributions.

Question 8

During the year, a state-owned university received a $5 million gift. The donor specified that the principal of the gift must be held intact for 3 years, but the earnings from the gift can be used to support technology improvements in the college of business. At the end of the 3 years, the donor together with the university president and the college dean will decide how the $5 million gift can be used. The university will report the gift in what type of fund?

Accepted Answer

A)  Permanent fund. 
B)  Private-purpose trust fund. 
C)  Plant fund. 
D)  Special revenue fund

Question 9

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

Accepted Answer

A)  $24,000 revenues. 
B)  $20,000 revenues. 
C)  $24,000 addition to net position. 
D)  $20,000 addition to net position.

Question 10

A plan's unfunded actuarially accrued liability is the excess of the:

Accepted Answer

A)  Actuarially determined plan cost over the actual contribution. 
B)  Actuarially determined plan cost over the plan assets. 
C)  Actuarially determined pension liability over the plan assets. 
D)  Actuarially determined pension liability over the total contributions

Question 11

The statement of fiduciary net position for a school district's defined benefit pension plan shows the following (in condensed form and in thousands)
A.  The plan has been in operation for over 20 years and covers all school district employees. What is the most reasonable explanation of why the benefits payable to current employees and retirees is so small relative to plan assets?
B. Suppose that in the current year the school district's annual required contribution was $6,300,000. In the past, the district has always paid the annual required contribution in full. However, in the current year the district budgeted and paid into the pension trust fund only $5,000,000.
1. Prepare the journal entry that the district (not the plan) should make to record the year's pension contribution. You need not make budgetary or closing entries. The plan is accounted for in a governmental fund.
2. Prepare the journal entry to record the year's pension contribution for reporting in the district's government-wide statements.
C. The district's annual financial report indicated that its "normal cost" was $530,000 and that the "amortization of the unfunded actuarial accrued liability" was $100,000.
1. What is meant by "normal cost?"
2. What is meant by "unfunded actuarial accrued liability"? What are its principal causes? Why must it be amortized?

Accepted Answer

The answer of The statement of fiduciary net position for...

Question 12

What basis of accounting is used to account for the transactions of a government's permanent fund?

Accepted Answer

A)  Full accrual basis of accounting. 
B)  Modified accrual basis of accounting. 
C)  Cash basis of accounting. 
D)  Budgetary basis of accounting.

Question 13

On its year-end statement of activities, the charity would report interest revenues of:

Accepted Answer

A)  $0 
B)  $30,000 
C)  $40,000 
D)  None of the above.

Question 14

Fiduciary funds are excluded from the government-wide financial statements.

Accepted Answer

A) True 
 B)False

Question 15

In an agency fund, assets always equal fund balances because there are no liabilities.

Accepted Answer

A) True 
 B)False

Question 16

Employers that provide postemployment healthcare benefit plans should account for them in private-purpose trust funds.

Accepted Answer

A) True 
 B)False

Question 17

Briana City provides a defined benefit pension plan for its full-time employees. The city includes the plan as a pension trust fund in its fund financial statements.
REQUIRED:
Using the information below, prepare a statement of fiduciary net position and a statement of changes in fiduciary net position for the pension trust fund.

Accepted Answer

The answer of Briana City provides a defined benefit pension...

Question 18

Accounting for the employer's contribution to a defined contribution pension plan is straight forward, because the employer is obligated only to make annual contributions in the amount specified in the plan terms.

Accepted Answer

A) True 
 B)False

Question 19

In which of the following funds would a government report depreciation expense?

Accepted Answer

A)  Private-purpose trust fund. 
B)  Agency fund. 
C)  Permanent fund. 
D)  None of the above

Question 20

Pension and OEB trust funds, custodial funds and internal service funds are examples of fiduciary funds

Accepted Answer

A) True 
 B)False

Exam 10: Pensions and Other Fiduciary Activities

Permanent funds focus on measuring current financial resources and use a modified accrual basis of accounting.

On its year-end statement of financial position, the charity would report restricted net assets of:

Which of the following is a NOT a true statement concerning postemployment benefits other than pensions (OPEB) ?

The funded status of a defined benefit pension plan is

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

A plan's unfunded actuarially accrued liability is the excess of the:

What basis of accounting is used to account for the transactions of a government's permanent fund?

On its year-end statement of activities, the charity would report interest revenues of:

Fiduciary funds are excluded from the government-wide financial statements.

In an agency fund, assets always equal fund balances because there are no liabilities.

Employers that provide postemployment healthcare benefit plans should account for them in private-purpose trust funds.

Accounting for the employer's contribution to a defined contribution pension plan is straight forward, because the employer is obligated only to make annual contributions in the amount specified in the plan terms.

In which of the following funds would a government report depreciation expense?

Pension and OEB trust funds, custodial funds and internal service funds are examples of fiduciary funds