Question 1

Carl City received $200,000 to help maintain a local art museum that is owned and operated by a not-for-profit organization. During the year the city transferred net earnings of $20,000 to the appropriate entity/fund. 
-The $200,000 gift would be reported in a (an):

Accepted Answer

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

Question 2

Several years ago, a donor gave $5 million to Denton City and specified that the principal was to be kept intact but the earnings were to be used to support the operations of city parks. During the current year, the city earned $300,000 on the gift. To what type of fund, should the city transfer the $300,000 earnings?

Accepted Answer

A)  It should not make any transfers. The $300,000 should remain in the city's permanent fund. 
B)  A special revenue fund. 
C)  The general fund. 
D)  An enterprise fund.

Question 3

Which of the following is NOT a criterion that an employer's annual required contribution must satisfy to be considered acceptable?

Accepted Answer

A)  It must consist of the employer's normal cost plus a provision for amortizing the plan's unfunded actuarially accrued liability. 
B)  Actual assumptions must be in accordance with standards of the Actuarial Standards Board. 
C)  Actuarial value of pension plan assets must be based on market values on the financial statement date. 
D)  Assumptions as to investment earnings should be based on long-term projections.

Question 4

The concept of major versus nonmajor funds does not apply to permanent funds, as it does to governmental and proprietary funds.

Accepted Answer

A) True 
 B)False

Question 5

Colleges that use a fixed rate of return approach to manage the distribution of income from their endowments must apply the same rate to determine how much investment income to report in their financial statements.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following activities of a government should be accounted for in a fiduciary fund?

Accepted Answer

A)  Funds received from the federal government to support public transportation activities. 
B)  Funds received from an individual who specified that the principal must be kept intact but the income can be used to support families of police officers killed in the line of duty. 
C)  Funds received from the state government that must be used to purchase capital assets. 
D)  Funds received from a contractor to assist with the development of utility infrastructure.

Question 7

How does a defined contribution pension plan differ from a defined benefit pension plan? What are some of the advantages and disadvantages of each type of plan? How do they differ for accounting and financial reporting? Which type of plan would you prefer to belong to? Why?

Accepted Answer

The answer of How does a defined contribution pension plan...

Question 8

Scofield City received a donation from the estate of the late Lisa O'Reilly to be used to support the city's public library. The gift consisted of $200,000 cash and a portfolio of securities with a market value of $350,000. The securities have a book value of $250,000. The donor stipulated that the principal of the gift, including investment gains (realized and unrealized) but excluding investment losses, must be kept intact. The income must be used to care for and maintain the book collection at the newly renamed O'Reilly Public Library. All appropriate costs, including investment losses, may be charged against the revenues yearly to determine the amount available for the specified purposes. During the year, the city engaged in the following transactions on behalf of the library.
REQUIRED:
Prepare the appropriate entries in the city's permanent fund.
a) Accepted the donation.
b) Received dividends and interest of $18,000.
c) Purchased securities for $200,000.
d) Sold securities that were part of the original gift (market value at date of gift $72,000; book value in hands of donor $68,000) for $78,000.
e) Sold some of the securities that were acquired in transaction (c) for $53,000. They were acquired at a price of $55,000.
f) The portfolio of securities at year-end had a market value of $432,000.
g) Closed the fund's revenue and expense accounts and transferred the amount available for expenditure to the appropriate fund. Close the transfer account.

Accepted Answer

The answer of Scofield City received a donation from the...

Question 9

Carl City received $200,000 to help maintain a local art museum that is owned and operated by a not-for-profit organization. During the year the city transferred net earnings of $20,000 to the appropriate entity/fund. 
-The $20,000 transfer would be reported by the fund that made the transfer as a (an)

Accepted Answer

A)  Transfer-out. 
B)  Expenditure. 
C)  Deduction from net position-benefits. 
D)  Expense.

Question 10

A defined contribution pension plan is one in which the employer agrees to do which of the following?

Accepted Answer

A)  To make payments to a specified pension plan with no guarantee of a specific pension amount to be paid to the employees. 
B)  To make actuarially determined payments to a pension plan AND to guarantee that the employees will receive a specified pension benefit (usually determined by length of service and salary). 
C)  To make actuarially determined payments to a pension plan that guarantees employees will receive a specified pension (usually determined by length of service and salary). 
D)  To pay specified amounts (usually determined by length of service and salary) to the employees upon retirement.

Question 11

Governments must present which of the following financial statements for fiduciary funds?

Accepted Answer

A)  Statement of assets and benefits and statement of cash flows. 
B)  Statement of fiduciary net assets and statement of changes in benefits, 
C)  Statement of fiduciary net position and statement of changes in fiduciary net position. 
D)  Statement of net assets and statement of accrued benefit obligations.

Question 12

Required disclosure by the general fund of a government related to its pension plan does NOT include which of the following?

Accepted Answer

A)  The employer's funding policy. 
B)  The components of the pension cost. 
C)  The key assumptions used in determining the pension cost. 
D)  The present value of the future benefits to be paid.

Question 13

GASB standards require a defined benefit pension plan to report investments at fair market value even if the plan's actuary uses a different value in determining the employer's contribution requirements.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is NOT a fiduciary fund?

Accepted Answer

A)  Pension trust fund. 
B)  Investment trust fund. 
C)  Permanent fund. 
D)  Private-purpose trust fund.

Exam 10: Pensions and Other Fiduciary Activities

Carl City received $200,000 to help maintain a local art museum that is owned and operated by a not-for-profit organization. During the year the city transferred net earnings of $20,000 to the appropriate entity/fund. -The $200,000 gift would be reported in a (an) :

Which of the following is NOT a criterion that an employer's annual required contribution must satisfy to be considered acceptable?

The concept of major versus nonmajor funds does not apply to permanent funds, as it does to governmental and proprietary funds.

Colleges that use a fixed rate of return approach to manage the distribution of income from their endowments must apply the same rate to determine how much investment income to report in their financial statements.

Which of the following activities of a government should be accounted for in a fiduciary fund?

How does a defined contribution pension plan differ from a defined benefit pension plan? What are some of the advantages and disadvantages of each type of plan? How do they differ for accounting and financial reporting? Which type of plan would you prefer to belong to? Why?

A defined contribution pension plan is one in which the employer agrees to do which of the following?

Governments must present which of the following financial statements for fiduciary funds?

Required disclosure by the general fund of a government related to its pension plan does NOT include which of the following?

GASB standards require a defined benefit pension plan to report investments at fair market value even if the plan's actuary uses a different value in determining the employer's contribution requirements.

Which of the following is NOT a fiduciary fund?