File: Chapter 16 Accounting for State and Local Governments, Part I

Multiple Choice

[QUESTION]
1. Which standard issued by the Governmental Accounting Standards Board in 1999 significantly
modified fund accounting and created a second group of financial statements based on an
entirely different approach to financial reporting?
A) GASB Statement No. 32.
B) GASB Statement No. 33.
C) GASB Statement No. 34.
D) GASB Statement No. 35.
E) GASB Statement No. 36.
Answer: C
Difficulty: Easy

[QUESTION]
2. Which group of governmental financial statements reports all revenues and all costs of
providing services each year?
A) GAAP-Based Financial Statements
B) Fund-Based Financial Statements.
C) Cost-Based Financial Statements.
D) Government-Wide Financial Statements.
E) General Fund Financial Statements.
Answer: D
Difficulty: Easy

[QUESTION]
3. Proprietary funds are
A) Funds used to account for the activities of a government that are carried out primarily to
provide services to citizens.
B) Funds used to account for a government's ongoing organizations and activities that are similar
to those operated by for-profit organizations.
C) Funds used to account for monies held by the government in a trustee capacity.
D) Funds used to account for all financial resources except those required to be accounted for in
another fund.
E) Funds used to account for revenues that have been legally restricted as to expenditure.
Answer: B
Difficulty: Easy

[QUESTION]
4. Fiduciary funds are
A) Funds used to account for the activities of a government that are carried out primarily to
provide services to citizens.
B) Funds used to account for a government's ongoing organizations and activities that are similar
to those operated by for-profit organizations.
C) Funds used to account for monies held by the government in a trustee capacity.
D) Funds used to account for all financial resources except those required to be accounted for in
another fund.
E) Funds used to account for revenues that have been legally restricted as to expenditure.
Answer: C
Difficulty: Easy

[QUESTION]
5. Governmental funds are
A) Funds used to account for the activities of a government that are carried out primarily to
provide services to citizens.
B) Funds used to account for a government's ongoing organizations and activities that are similar
to those operated by for-profit organizations.
C) Funds used to account for monies held by the government in a trustee capacity.
D) Funds used to account for all financial resources except those required to be accounted for in
another fund.
E) Funds used to account for revenues that have been legally restricted as to expenditure.
Answer: A
Difficulty: Easy

[QUESTION]
6. Special Revenue funds are
A) Funds used to account for the activities of a government that are carried out primarily to
provide services to citizens.
B) Funds used to account for a government's ongoing organizations and activities that are similar
to those operated by for-profit organizations.
C) Funds used to account for monies held by the government in a trustee capacity.
D) Funds used to account for all financial resources except those required to be accounted for in
another fund.
E) Funds used to account for revenues that have been legally restricted as to expenditure.
Answer: E
Difficulty: Easy

[QUESTION]
7. The term current financial resources refers to
A) Those assets that can quickly be converted into cash.
B) Monetary assets that are available to meet the government's needs.
C) The governments current assets and current liabilities.
D) The current value of all net assets owned by the governmental unit.
E) Financial resources used to provide electricity to local citizens.
Answer: B
Difficulty: Medium

[QUESTION]
8. What are the broad types or classifications of funds for a governmental entity such as a city?
A) general, governmental, and trust funds.
B) governmental, proprietary, and fiduciary funds.
C) revenue, trust, and governmental funds.
D) enterprise, revenue, and fiduciary funds.
E) governmental, agency, and enterprise funds.
Answer: B
Difficulty: Easy

[QUESTION]
9. Which group of financial statements is prepared using the modified accrual accounting
approach?
A) GAAP-Based Financial Statements.
B) Fund-Based Financial Statements.
C) Cost-Based Financial Statements.
D) Government-Wide Financial Statements.
E) General Purpose Financial Statements.
Answer: B
Difficulty: Easy

[QUESTION]
10. Under modified accrual accounting, revenues should be recognized when they are
A) collected.
B) realizable.
C) reasonably estimable.
D) measurable and available.
E) earned.
Answer: D
Difficulty: Easy

[QUESTION]
11. Under modified accrual accounting, when should an expenditure to recognize interest on
long-term debt be recorded?
A) at the end of each accounting period.
B) when payment is due within one fiscal year.
C) when payment is due.
D) when cash is available to pay the interest.
E) when the interest is incurred.
Answer: C
Difficulty: Medium

[QUESTION]
12. Which of the following is a new fund created by GASB Statement No. 34?
A) Enterprise Fund.
B) Internal Service Fund.
C) Debt Service Fund.
D) Capital Projects Fund.
E) Permanent Fund.
Answer: E
Difficulty: Easy

[QUESTION]
13. Revenue from property taxes should be recorded in the General Fund
A) when received.
B) in the period for which the taxes are levied.
C) at the time of eligibility.
D) when they are available for recognition.
E) in the period in which they are consumed.
Answer: B
Difficulty: Medium

[QUESTION]
14. Which type of fund is not included in the Government-Wide Financial Statements?
A) Governmental Funds
B) Proprietary Funds
C) Fiduciary Funds
D) Debt Service Funds
E) Special Revenue Funds
Answer: C
Difficulty: Medium

[QUESTION]
15. A city received a grant of $5,000,000 from a private agency. The money was to be used to
build a new city library. In which fund should the money be recorded for the Fund-Based
Financial Statements?
A) the General Fund.
B) an Expendable Trust Fund.
C) a Capital Projects Fund.
D) an Agency Fund.
E) a Permanent Fund.
Answer: C
Difficulty: Medium

[QUESTION]
16. When a city received a federal grant for providing food and other assistance to the homeless,
the money should have been recorded in
A) the General Fund.
B) an Expendable Trust Fund.
C) a Capital Projects Fund.
D) an Agency Fund.
E) a Special Revenue Fund.
Answer: E
Difficulty: Medium

[QUESTION]
17. Bay City received a federal grant to provide health care services to low income mothers and
children. When should the revenues be recognized?
A) as health care services are provided.
B) when the awarding of the grant is announced.
C) when the grant money is received.
D) at the end of Bay City's fiscal year.
E) when the grant money is receivable.
Answer: A
Difficulty: Medium

[QUESTION]
18.
Trapper City issued 30-year bonds for the purpose of building a new City Hall. The proceeds
of the bonds are deposited in the General Fund. For the Fund-Based Financial Statements, in
what fund will the Bonds Payable appear?
A) General Fund.
B) Capital Projects Fund.
C) Permanent Fund.
D) Debt Service Fund.
E) Bonds Payable do not appear on Fund-Based Financial Statements.
Answer: E
Difficulty: Easy

[QUESTION]
19. Which of the following is a governmental fund?
A) Enterprise fund.
B) Internal service fund.
C) Permanent fund.
D) Investment trust fund.
E) Agency fund.
Answer: C
Difficulty: Easy

[QUESTION]
20. Which of the following is a fiduciary fund?
A) Pension trust fund.
B) Debt service fund.
C) Permanent fund.
D) Enterprise fund.
E) Capital projects fund.
Answer: A
Difficulty: Easy

[QUESTION]
21. According to GASB Concepts Statement No. 1, what are the three groups of primary users of
external state and local governmental financial reports?
A) The Securities Exchange Commission, the citizenry, and legislative and oversight bodies.
B) The Securities Exchange Commission, legislative and oversight bodies, and investors and
creditors.
C) The Securities Exchange Commission, the citizenry, and investors and creditors.
D) The citizenry, legislative and oversight bodies, and investors and creditors.
E) The citizenry, management, and the Governmental Accounting Office.
Answer: D
Difficulty: Easy

[QUESTION]
22. Which of the following statements is true regarding fund-based financial statements?
A) Fund-based financial statements report a government's activities and financial position as a
whole.
B) Fund-based financial statements should tell the amount spent this year on such services as
public safety, education, health and sanitation, and the construction of a new road.
C) Fund-based financial statements utilize the accrual basis of accounting much like any for-
profit entity.
D) Fund-based financial statements help to determine whether the government's overall financial
position improved or deteriorated.
E) Fund-based financial statements report all assets, liabilities in a way comparable to business-
type accounting.
Answer: B
Difficulty: Medium
[QUESTION]
23. Which of the following statements is false regarding government-wide financial statements?
A) Government-wide financial statements report a government's activities and financial position
as a whole.
B) The government-wide financial statement approach helps users make long-term evaluations of
the financial decisions and stability of the government.
C) Government-wide financial statements focus on the short-term instead of the long-term.
D) Government-wide financial statements assess the finances of the government in its entirety,
including the year's operating results.
E) The measurement focus of government-wide financial statements is on all economic
resources and utilizes accrual accounting.
Answer: C
Difficulty: Medium

[QUESTION]
24. How do the balance sheet and statement of revenues, expenditures, and changes in fund
balances of governmental funds differ from the financial statement presentation for the
governmental activities in the government-wide statement of net assets and statement of
activities?
(1) Internal service funds are not included in the fund-based financial statements of governmental
funds but could be reported in the governmental activities of government-wide financial
statements.
(2) The economic resources measurement basis is used for fund-based financial statements of
governmental funds and the current financial resources measurement basis is used for
governmental activities in the government-wide financial statements.
(3) Modified accrual accounting is used for fund-based financial statements of governmental
funds to time revenues and expenditures and accrual accounting is used for governmental
activities of government=wide financial statements.
(4) The financial statements of governmental funds for fund-based financial statements are the
same as governmental activities in government-wide financial statements but with different titles
of the financial statements.
A) 1 and 2.
B) 2, 3, and 4.
C) 1, 2 and 3..
D) 1 and 3.
.E) 1, 2, 3, and 4.
Answer: D
Difficulty: Medium

[QUESTION]
25. Which of the following is not a classification of nonexchange transactions according to
GASB Statement Number 33?
A) Derived tax expenditures.
B) Voluntary nonexchange transactions.
C) Government-mandated nonexchange transactions.
D) Derived tax revenues.
E) Imposed nonexchange revenues.
Answer: A
Difficulty: Easy

[QUESTION]
26. GASB Statement Number 33 divides all eligibility requirements into four general
classifications including all of the following except:
A) Required characteristics of the recipients.
B) Time requirements.
C) Reimbursement.
D) Contingencies.
E) Refunding.
Answer: E
Difficulty: Medium

[QUESTION]
27. Which statement is not correct?
A) Governmental funds account for expenditures of financial resources rather than matching
revenues and expenses.
B) The Fund Balance Reserved for Encumbrances account is not closed at the end of a fiscal year.
C) Revenues from licenses and permit fees are recognized when received in cash if using the
modified accrual basis of accounting for governmental funds.
D) A fund is an independent accounting entity composed of cash and other financial resources,
segregated for the purpose of carrying on specific activities and objectives.
E) Commitments for purchase orders are recorded as expenses.
Answer: E
Difficulty: Medium

[QUESTION]
28. For governmental entities, the accrual basis of accounting is used for:
A) Special revenue funds.
B) Internal service funds.
C) Debt service funds.
D) General Fund.
E) Capital Projects Fund.
Answer: B
Difficulty: Medium

[QUESTION]
29. What account is debited in the general fund when equipment is received by a governmental
entity?
A) Expenditures.
B) Encumbrances.
C) Plant assets.
D) Accounts Payable.
E) Fund Balance-Reserve for Encumbrances.
Answer: A
Difficulty: Medium

[QUESTION]
30. Generally, annual budgets are recorded within the following funds:
A) General fund and special revenue funds.
B) Capital projects funds and debt service fund.
C) Enterprise funds and internal service funds.
D) General Fund and Pension Trust Fund.
E) Agency Funds and General Fund.
Answer: A
Difficulty: Easy

[QUESTION]
31. When a city received a federal grant for books to be purchased for a library, the money
should have been recorded in
A) the Permanent Fund.
B) an Expendable Trust Fund.
C) a Capital Projects Fund.
D) an Agency Fund.
E) a Special Revenue Fund.
Answer: E
Difficulty: Medium

[QUESTION]
32. When a city holds pension monies for city employees, the monies should be recorded in
A) the General Fund.
B) an Expendable Trust Fund.
C) a Fiduciary Fund.
D) an Agency Fund.
E) a Special Revenue Fund.
Answer: C
Difficulty: Medium

[QUESTION]
33. When a city received a private donation of $1,000,000 stipulating that the principal donation
would be preserved but allowing the interest income to be spent on building a city park with
access for disabled children, which fund should the money be recorded in?
A) the General Fund.
B) an Expendable Trust Fund.
C) a Permanent Fund.
D) an Agency Fund.
E) a Special Revenue Fund.
Answer: C
Difficulty: Medium

[QUESTION]
34. When a city collects fees from citizens who use the public swimming pool, the money should
be recorded in
A) the General Fund.
B) an Enterprise Fund.
C) a Capital Projects Fund.
D) an Agency Fund.
E) an Internal Service Fund.
Answer: B
Difficulty: Medium

[QUESTION]
35. A city operates a central data processing facility. The expenses of this facility would be
accounted for using
A) the General Fund
B) an Enterprise Fund
C) a Capital Projects Fund
D) an Agency Fund
E) an Internal Service Fund
Answer: E
Difficulty: Medium

[QUESTION]
36. What are the two proprietary fund types?
(1) Internal service funds
(2) Investment trust funds
(3) Enterprise funds.
(4) Agency funds
A) 1 and 2.
B) 2 and 3.
C) 1 and 3.
D) 2 and 4.
E) 1 and 4.
Answer: C
Difficulty: Easy

[QUESTION]
37. Salaries and wages that have been earned by governmental employees that have not yet been
paid are recorded in the general fund as:
A) An expenditure.
B) An encumbrance.
C) An appropriation.
D) An expense.
E) An investment.
Answer: A
Difficulty: Medium

Essay

[QUESTION]
38. For each of the following transactions, select the area of accounting records in which an entry
will be recorded.
(A) General Fund only.
(B) Governmental Activities only.
(C) General Fund and Governmental Activities.
(D) General Fund and Debt Service Fund.
(E) Capital Projects Fund and Governmental Activities.
(F) Debt Service Fund and Governmental Activities.
(G) Special Revenue Fund and Governmental Activities.
___ (1.) The city council adopts an annual budget for the General Fund.
___ (2.) Property taxes are levied.
___ (3.) Computers are ordered for the fire department.
___ (4.) A transfer of funds is made from the General Fund to the Debt Service Fund.
___ (5.) The principal and interest of a bond are paid.
___ (6.) A building is acquired for the police department, and renovations begin immediately.
___ (7.) Depreciation on fire trucks is recorded.
___ (8.) Citizens are assessed for a street lighting project that has been legally restricted for those
citizens.___ (9.) A grant is received to landscape tree-lined areas beside city-owned streets.
___ (10.) The city spends grant money received in (9.) above and landscapes the tree-lined areas
beside the streets for which the grant money was received.
Answer: (1) A; (2) C; (3) A; (4) D; (5) F; (6) E; (7) B; (8) G; (9) G; (10) G
Difficulty: Medium

[QUESTION]
39. What organization is responsible for establishing accounting principles for governmental
entities? By whom was this organization established?
Answer: The organization that is responsible for establishing accounting principles for
governmental entities is the GASB (Governmental Accounting Standards Board). The Financial
Accounting Foundation has oversight responsibility for the GASB, as it does for the FASB.
Difficulty: Easy

[QUESTION]
40. What is a special revenue fund used to account for?
Answer: A special revenue fund is used to account for revenues that are legally restricted as to
how they can be spent.
Difficulty: Easy

[QUESTION]
41. What is the definition of the term fund?
Answer: The term fund is defined as a self-balancing set of accounts used to record data
generated by an identifiable government function.
Difficulty: Easy

[QUESTION]
42. For a government, what kind of operations are accounted for using a proprietary fund? Give
three examples.
Answer: A proprietary fund is used to account for governmental operations similar to those found
in the private sector. They usually involve user charges. Three examples are (1) a toll road, (2) a
municipal swimming pool, and (3) a city maintenance garage.
Difficulty: Medium

[QUESTION]
43. What are the five types of governmental funds?
Answer: The five types of governmental funds are:
(A.) The General Fund.
(B.) Special Revenue Funds.
(C.) Capital Projects Funds.
(D.) Debt Service Funds.
(E.) Permanent Funds.
Difficulty: Easy

[QUESTION]
44. A city enacted a special tax levy to provide medical services at the municipal hospital. What
kind of fund should have been used to record the revenues generated by the tax?
Answer: A special revenue fund should have been used.
Difficulty: Medium
[QUESTION]
45. In governmental accounting, what term is used for a decrease in financial resources?
Answer: The appropriate term is expenditure.
Difficulty: Easy

[QUESTION]
46. Under modified accrual accounting, when are expenditures recorded?
Answer: Under modified accrual accounting, expenditures are usually recorded when the related
liability is incurred.
Difficulty: Medium

[QUESTION]
47. What assets would be included in the accounting records of a city's general fund?
Answer: The assets in the accounting records of a city's general fund would typically include
financial resources such as (1) cash, (2) receivables, and (3) investments, but no capital assets.
Difficulty: Medium

[QUESTION]
48. Under modified accrual accounting, when should revenues be reported by a governmental-
type fund?
Answer: Under modified accrual accounting, revenues should be reported by a governmental-type
fund when they are both measurable and available. Revenues are measurable when they are
subject to reasonable estimation. They are available when they are collectible within the current
period or soon enough thereafter to pay liabilities of the current period.
Difficulty: Medium

[QUESTION]
49. When should property taxes be recognized under modified accrual accounting?
Answer: Property taxes should be recognized under modified accrual accounting when they
become both measurable and available.
Difficulty: Medium

[QUESTION]
50. What are the two groups of financial statements mandated by GASB Statement No. 34? For
each group, what are the names of the individual statements that must be produced?
Answer: GASB No. 34 requires two groups of financial statements. They are the Government-
Wide Financial Statements and the Fund-Based Financial Statements. The Government-Wide
Financial Statements include the Statement of Net Assets and the Statement of Activities. The
Fund-Based Financial Statements include the Balance Sheet and the Statement of Revenues,
Expenditures, and Changes in Fund Balance.
Difficulty: Medium

[QUESTION]
51. What is the primary difference between monies accounted for in the general fund and monies
accounted for in the special revenue fund?
Answer: Monies in the special revenue fund are legally restricted as to expenditure and monies
in the general fund are used for general public benefit.
Difficulty: Medium

[QUESTION]
52. What are the two proprietary fund types?
Answer: Internal service funds and enterprise funds.
Difficulty: Easy

[QUESTION]
53. What are the four fiduciary fund types?
Answer: Investment trust funds, private-purpose trust funds, pension trust funds, and agency
funds.
Difficulty: Medium

[QUESTION]
54. What is the purpose of fund-based financial statements?
Answer: To show restrictions on the planned use of resources or to measure, in the short term, the
revenues and expenditures arising from certain activities.
Difficulty: Easy

[QUESTION]
55. What is the purpose of government-wide financial statements?
Answer: To show longer-term focus because they will report all revenues and all costs of
providing services each year, not just those received or paid in the current year or soon after year-
end.
Difficulty: Easy

[QUESTION]
56. The board of commissioners of the city of Jarmaine adopted a General Fund budget for the
year ending June 30, 2008, which indicated revenues of $1,300,000, bond proceeds of $520,000,
appropriations of $1,170,000, and operating transfers out of $390,000.
Required:
If this budget was formally integrated into the accounting records used to produce the Fund-
Based Financial Statements, what was the required journal entry at the beginning of the year?
Answer:

Difficulty: Medium

[QUESTION]
57. On July 1, 2008, Fred City ordered $1,500 of office supplies. They were to be paid for out of
the General Fund.
Required:
(A.) What journal entry was required for the Fund-Based Statements?
(B.) What journal entry was required for the Government-Wide Statements?
Difficulty: Medium
Answer:
(A.) For the Fund-Based Statements, an encumbrance must be recorded in the General Fund.
Encumbrance Control 1,500
Fund Balance Reserve for Encumbrances 1,500

(B.) For the Government-Wide Statements no entry is required, because

under accrual accounting, no entry is made until a transaction occurs.
Difficulty: Medium

[QUESTION]
58. On July 12, 2008, Fred City ordered a new computer at an anticipated cost of $114,400. The
computer was received on July 16 with an actual cost of $116,220. Payment was subsequently
made on August 15, 2008.
Required:
(A.) Prepare all the required journal entries and identify the type of fund in which each entry was
recorded for the Fund-Based Financial Statements.
(B.) Prepare all the required journal entries and identify the type of fund in which each entry was
recorded for the Government-Wide Financial Statements.
Answer:
(A.) Fund-Based Financial Statements-General Fund
7/12 Encumbrances Control 114,400
Fund Balance-Reserve for 114,400
Encumbrances

7/16 Expenditures Computer 116,220

Vouchers Payable 116,220

7/16 Fund Balance-Reserve for Encumbrances 114,400

Encumbrance Control 114,400

8/15 Vouchers Payable 116,220

Cash 116,220

(B.) Government-Wide Financial Statements-

Governmental Activities

7/12 No entry at this time..

7/16 Computer 116,220

Vouchers Payable 116,220

8/15 Vouchers Payable 116,220

Cash 116,220

Difficulty: Medium

[QUESTION]
59. A new truck was ordered for the sanitation department at a cost of $122,200 on September 3,
2008.
Required:
(A.) Prepare the required journal entry in the General Fund for the Fund-Based Financial
Statements.
(B.) Prepare the required journal entry for the Government-Wide Financial Statements.
Answer:
(A.) Fund-Based Financial Statements-General Fund
9/3 Encumbrances Control 122,200
Fund Balance-Reserve for Encumbrances 122,200

(B.) Government-Wide Financial Statements-

Governmental Activities
9/3 No entry

Difficulty: Medium

[QUESTION]
60. The school system had some booklets printed by a local print shop on September 22, 2008.
The school system was charged $1,560 for the printing, but the bill is not due until October.
Required:
(A.) Prepare the required journal entry in the General Fund for the Fund-Based Financial
Statements.
(B.) Prepare the required journal entry for the Government-Wide Financial Statements.
Difficulty: Medium
Answer:
(A.) Fund-Based Financial Statements-General Fund
9/22 Expenditures Printing 1,560
Vouchers Payable 1,560

(B.) Government-Wide Financial Statements-

Governmental Activities
9/22 Printing Expense 1,560
Vouchers Payable 1,560

Difficulty: Medium

[QUESTION]
61. A $910,000 bond was issued on October 1, 2008 to build a new road. The bonds carried a
6% interest rate and are due in 10 years.
Required:
(A.) Prepare the required journal entry in the Capital Projects Fund on October 1 for the Fund-
Based Financial Statements.
(B.) Prepare the required journal entry for the Government-Wide Financial Statements.
Difficulty: Medium
Answer:
(A.) Fund-Based Financial Statements-Capital Projects
Fund
10/1 Cash 910,000
Other Financing Sources Bonds Proceeds 910,00
0

(B.) Government-Wide Financial Statements-

Governmental Activities
10/1 Cash 910,000
 Bonds Payable 910,00
0

Difficulty: Medium

[QUESTION]
62. On June 14, 2008, Fred City agreed to transfer cash of $52,000 from the General Fund to
provide permanent financing for a municipal swimming pool that will be viewed as an Enterprise
Fund. The cash was transferred on June 30.
Required:
(A.) Prepare all the required journal entries and identify the fund in which each entry was
recorded for the Fund-Based Financial Statements.
(B.) Prepare all the required journal entries and identify the type of activity for the Government-
Wide Financial Statements.
Answer:
(A.) Fund-Based Financial Statements-General Fund
6/14 Other Financing Use Transfers out to 52,000
Enterprise Fund (Swimming Pool)
Due to Enterprise Fund 52,000

6/30 Due to Enterprise Fund 52,000

Cash 52,000

Fund-Based Financial Statements - Enterprise Fund

6/14 Due from General Fund 52,000
Other Financing Source- Transfers in 52,000
from
General Fund

6/30 Cash 52,000

Due from General Fund 52,000

(B.) Government-Wide Financial Statements-

Governmental Activities

6/14 No Entry.

6/30 Transfers out (Swimming Pool) 52,000

Cash 52,000

Government-Wide Financial Statements-Business

Type Activities

6/14 No Entry

6/30 Cash 52,000

Transfers in (Swimming Pool) 52,000

Difficulty: Medium
[QUESTION]
63. On August 21, 2008, Fred City transferred $100,000 to the School System to cover repairs to
a school building.
Required:
Prepare all the required journal entries and identify the fund in which each entry was recorded for
the Fund-Based Financial Statements.
Answer:
Fund-Based Financial Statements-General Fund
8/21 Other Financing Use Transfers out to 100,000
Capital Projects Fund (School Repair)
Cash 100,000

Fund-Based Financial Statements Capital

Projects Fund
8/21 Cash 100,000
Other Financing Source- Transfers in 100,000
from
General Fund (School Repair)

Difficulty: Medium

[QUESTION]
64. On January 1, 2008, Wakefield City purchased $40,000 office supplies. During the year
$35,000 of these supplies were used.
Required:
Record the journal entries for these transactions using the purchases method.
Answer:
Expenditures Supplies 40,000
Vouchers Payable 40,000
To record the purchase of supplies

Inventory of Supplies 5,000

Fund Balance-Reserve for inventory of supplies 5,000
To record supplies remaining at year end

Difficulty: Medium

[QUESTION]
65. On January 1, 2008, Wakefield City purchased $40,000 office supplies. During the year
$35,000 of these supplies were used.
Required:
Record the journal entries for these transactions using the consumption method.
Answer:
Inventory of Supplies 40,000
Vouchers Payable 40,000
To record the purchase of supplies

Expenditures-Control 35,000
Inventory of Supplies 35,000
To record consumption of supplies during the period
Difficulty: Medium

[QUESTION]
66. The town council adopted an annual budget estimating general revenues of $2,000,000,
approved expenditures of $1,700,000 and other financing for other funds of $130,000.
Required:
Record the journal entry to record the budget and identify the fund in which it is recorded.
Answer:
In General Fund
Estimated Revenues Control 2,000,000
Appropriations Control 1,700,000
Estimated Other Financing Uses 130,000
Budgetary Fund Balance 170,000

Difficulty: Medium

[QUESTION]
67. Property taxes of 1,500,000 are levied for Miner County. The county expects that 5% will be
uncollectible.
Required:
Prepare the required journal entry and identify the fund in which it is recorded.
Answer:
In General Fund
Property tax receivable 1,500,000
Allowance for uncollectible taxes 75,000
Revenues-Property taxes 1,425,000

Difficulty: Easy

[QUESTION]
68. Shell City transfers $100,000 from the General Fund to the Debt Service fund.
Required:
Prepare the required journal entries and identify the funds in which they are recorded.
Answer:
In General Fund
Other Financing Uses-transfers out 100,000
Cash 100,000
In Debt Service Fund
Cash 100,000
Other Financing sources-transfer in 100,000

Difficulty: Medium

[QUESTION]
69. Prepare the journal entry and identify the fund to record the purchase order of two trucks
owned by Simple City for $100,000. Identify the fund in which the entry is recorded.
Answer:
In General Fund
Encumbrances Control 100,000
Fund Balance Reserve for encumbrance 100,000
Difficulty: Easy

[QUESTION]
70. Simple City has recorded the purchase order of two trucks for a total of $100,000.
Prepare the journal entries to reflect that the two trucks have been received with a voucher price
of $105,000. This amount has been approved but not yet paid. Identify the fund in which the
entries are recorded.
Answer:
In General Fund
Fund Balance Reserve for encumbrance 100,000
Encumbrances Control 100,000
Expenditures Control 105,000
Vouchers Payable 105,000

Difficulty: Easy

[QUESTION]
71. A $5,000,000 bond is issued by Northern City to build a new hospital.
Required:
Prepare the journal entry and identify the fund in which it is recorded to reflect the bond issue.
Answer:
In Capital Projects Fund
Cash 5,000,000
Other Financing Sources-Bond Proceeds 5,000,000

Difficulty: Easy

[QUESTION]
72. The Town of Anthrop receives a $10,000 grant to make the Town Hall handicapped-
accessible.
Required:
Prepare the journal entry, and identify the fund in which it is recorded, to record the receipt of the
grant.
Answer:
In Special Revenue Fund
Cash 10,000
Deferred Revenue 10,000

Difficulty: Medium

[QUESTION]
73. The Town of Anthrop has recorded the receipt of a $10,000 grant to make its Town Hall
handicapped-accessible. The town now spends $10,000 to make the Town Hall handicapped-
accessible.
Required:
Prepare the journal entry (or entries), and identify the fund for recording, to record that the town
spends $10,000 of a grant it received to make the Town Hall handicapped-accessible.
Answer:
In Special Revenue Fund
Expenditure 10,000
 Cash 10,000
Deferred Revenue 10,000
Revenues-grants 10,000

Difficulty: Medium