Question 1

A government is financially accountable for another entity if it appoints the voting majority of the entity's governing board.

Accepted Answer

A) True 
 B)False

Question 2

Similar in purpose to the International Accounting Standard Board (IASB) is the International Public Sector Accounting Standards Board.

Accepted Answer

A) True 
 B)False

Question 3

State and local governments should prepare only those financial reports required by law-generally year-end financial statements.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following actions is not required to convert data from the governmental fund financial statements to enable preparation of the government-wide financial statements?

Accepted Answer

A)  Adding annual depreciation expense proportionately to functional expense categories. 
B)  Eliminating interfund payables and receivables between governmental funds. 
C)  Aggregating fund information. 
D)  Eliminating receivables and payables between governmental and enterprise funds.

Question 5

GASB standards require that governmental fund financial statements include which of the following?

Accepted Answer

A)  Balance sheet. 
B)  Statement of activities. 
C)  Statement of cash flows. 
D)  Both Balance sheet and Statement of activities.

Question 6

In reconciling the total fund balances of the governmental funds to the net position of governmental activities, which of the following would be added to the net position of governmental activities?

Accepted Answer

A)  Accumulated depreciation. 
B)  Premium on bonds payable. 
C)  Construction work in progress. 
D)  Bond interest payable.

Question 7

Which of the following is evidence of fiscal independence for the purpose of considering whether one legally separate organization is a component unit of another?

Accepted Answer

A)  The potential component unit is precluded from issuing long-term debt. 
B)  The potential component unit raises its own taxes without the approval of the primary government. 
C)  The potential component unit names its board of directors without the approval of the primary government. 
D)  The potential component unit sets user charges with the approval of the primary government.

Question 8

A not-for-profit organization could be reported as a component unit of a primary government.

Accepted Answer

A) True 
 B)False

Question 9

Similar to for-profit entities, the GASB requires governments to prepare quarterly interim financial reports.

Accepted Answer

A) True 
 B)False

Question 10

Fiduciary activities are not reported in the government-wide financial statements under GASB standards.

Accepted Answer

A) True 
 B)False

Question 11

In reconciling between the governmental fund and government-wide statements, capital assets acquired by a governmental fund are deducted from fund balance-governmental funds to arrive at net position of governmental activities.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following would increase the governmental activities balance in Net Position-Net Investment in Capital Assets?

Accepted Answer

A)  Use of tax revenues to acquire a police department building. 
B)  Issuance of long-term debt to be used to acquire equipment for the police department. 
C)  A gift of land to the city restricted by the donor to be used by the city airport, which is accounted for as an enterprise fund. 
D)  Recording annual depreciation on capital assets.

Question 13

Under GASB standards, the financial statements that report on business-type activities at the government-wide level include the statement of net position, statement of activities, and statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 14

Balsam City's library board is appointed by the city council, which has agreed to subsidize the operating costs of the library at a material amount to be determined each year. In addition, the city is paying debt service on general obligation bonds issued to construct the library. Based on generally accepted accounting principles (GAAP) criteria for defining the reporting entity:

Accepted Answer

A)  The library is a component unit. 
B)  The library is a special purpose government. 
C)  The library is a joint venture. 
D)  The library is a jointly governed organization.

Question 15

What constitutes the basic financial statements of a government?

Accepted Answer

A)  Financial section of the comprehensive annual financial report (CAFR). 
B)  Government-wide financial statements plus notes. 
C)  Government-wide financial statements plus fund financial statements plus notes. 
D)  Government-wide financial statements plus fund financial statements plus notes plus required supplementary information (RSI).

Question 16

Special purpose accounting frameworks are considered generally accepted accounting principles (GAAP) for state and local governments.

Accepted Answer

A) True 
 B)False

Question 17

Under GASB standards, where are nonmajor funds reported?

Accepted Answer

A)  In the management's discussion and analysis preceding the financial statements. 
B)  In aggregate amounts in a single column in the fund financial statements. 
C)  In a note disclosure following the financial statements. 
D)  In the government-wide financial statements.

Question 18

Describe what the government-wide statements are intended to convey to readers and contrast with the intent of the fund financial statements.

Accepted Answer

The answer of Describe what the government-wide statements are intended...

Question 19

On the statement of revenues, expenditures, and changes in fund balance for governmental funds, how are capital outlays reported?

Accepted Answer

A)  As a separate line item in the expenditures section of the statement. 
B)  Capital outlays are allocated to the functional areas, much like depreciation. 
C)  As a separate line item in the other financing sources (uses) section of the statement. 
D)  Below net change in fund balances, but before beginning fund balance.

Question 20

Which of the following would not be included within the financial section of the comprehensive annual financial report (CAFR)?

Accepted Answer

A)  Letter of transmittal. 
B)  Management's discussion and analysis (MD&
A) . 
C)  Independent auditor's report. 
D)  Required supplementary information (RSI).

Exam 9: Financial Reporting of State and Local Governments

A government is financially accountable for another entity if it appoints the voting majority of the entity's governing board.

Similar in purpose to the International Accounting Standard Board (IASB) is the International Public Sector Accounting Standards Board.

State and local governments should prepare only those financial reports required by law-generally year-end financial statements.

Which of the following actions is not required to convert data from the governmental fund financial statements to enable preparation of the government-wide financial statements?

GASB standards require that governmental fund financial statements include which of the following?

In reconciling the total fund balances of the governmental funds to the net position of governmental activities, which of the following would be added to the net position of governmental activities?

Which of the following is evidence of fiscal independence for the purpose of considering whether one legally separate organization is a component unit of another?

A not-for-profit organization could be reported as a component unit of a primary government.

Similar to for-profit entities, the GASB requires governments to prepare quarterly interim financial reports.

Fiduciary activities are not reported in the government-wide financial statements under GASB standards.

In reconciling between the governmental fund and government-wide statements, capital assets acquired by a governmental fund are deducted from fund balance-governmental funds to arrive at net position of governmental activities.

Which of the following would increase the governmental activities balance in Net Position-Net Investment in Capital Assets?

Under GASB standards, the financial statements that report on business-type activities at the government-wide level include the statement of net position, statement of activities, and statement of cash flows.

What constitutes the basic financial statements of a government?

Special purpose accounting frameworks are considered generally accepted accounting principles (GAAP) for state and local governments.

Under GASB standards, where are nonmajor funds reported?

Describe what the government-wide statements are intended to convey to readers and contrast with the intent of the fund financial statements.

On the statement of revenues, expenditures, and changes in fund balance for governmental funds, how are capital outlays reported?

Which of the following would not be included within the financial section of the comprehensive annual financial report (CAFR) ?