Multiple Choice Questions
Identify the best answer for each of the following:
1. Which of the following fund types is never to be included as part of governmental activities?
a. Special Revenue
b. Private-Purpose Trust
c. Internal Service
d. Permanent

2. All of the following statements are true except
a. Both governmental funds and proprietary funds are reported in fund financial statements using the economic resources measurement focus.
b. Both governmental activities and business-type activities are reported in government-wide financial statements using the accrual basis of accounting.
c. Fund balance is reported for governmental funds in the fund financial statements, but net position is reported for governmental activities in the government-wide financial statements.
d. Depreciation expense is reported for governmental activities but not for governmental funds.

Questions 3 and 4 are based on the following scenario:
Assume that Bruderer City’s General Fund had cash collections of $11,108,900 associated with property taxes as of June 30, 20X8. The levy for the fiscal year ending June 30, 20X8, net of the allowance for uncollectible accounts, was $11,925,700. Of the amount collected, $108,000 collected in November 20X7 was for past due taxes of previous fiscal years, and $25,000 collected in June 20X8 represented prepayments for the next year’s levy. In addition, $975,900 was collected in July 20X8, $325,000 in August 20X8, and $100,500 in September 20X8, all associated with the tax year that ended June 30, 20X8.

3. The amount of property tax revenues reported in the governmental activities for the year ended June 30, 20X8, would be
a. $11,108,900.
b. $12,409,800.
c. $12,384,800.
d. $11,925,700.

4. The amount of property tax revenues reported in the General Fund for the year ended June 30, 20X8, would be
a. $11,108,900.
b. $12,409,800.
c. $12,384,800.
d. $11,925,700.

5. All of the following statements are true concerning the conversion of governmental funds to governmental activities except
a. Depreciation expenditure reported in governmental funds simply becomes depreciation expense in governmental activities.
b. A decrease in the long-term liability for compensated absences will result in expenses of various functions at the government-wide level being less than expenditures at the governmental fund level.
c. Assuming capital outlay expenditures all reflect purchases of capital assets as per the government’s capitalization threshold policy, capital outlay expenditures simply become additions to capital assets.
d. Bonds payable are not reported in the governmental funds financial statements but will be reported in the government-wide financial statements for governmental activities.

6. Which of the following best describes the general nature of the governmental activities column?
a. Governmental activities are simply governmental funds added together.
b. Governmental activities are derived by adding the governmental funds together and converting the measurement focus and basis of accounting.
c. Governmental activities include neither Permanent Funds nor any component units.
d. Governmental activities typically include all governmental funds, with the measurement focus and basis of accounting converted, as well as all general capital assets and general long-term liabilities.

7. Business-type activities would be derived according to which of the following scenarios?
a. All Enterprise and Internal Service Funds are added together because they use the same measurement focus and basis of accounting.
b. Enterprise Funds are added together, with only the measurement focus converted.
c. Enterprise Funds are added together, with only the basis of accounting converted.
d. Enterprise Funds are added together because they have the same measurement focus and basis of accounting as the government-wide statements.

8. Assume that Nathan County sold $3,179,500 of bonds during the fiscal year at a discount of $25,000. In addition, the county incurred $22,500 of bond issue costs that were withheld from the proceeds the county received. When these events are applied to the conversion worksheet, what will be the net adjustment on the change in fund balance/net position.
a. Net decrease of $3,179,500.
b. Net decrease of $3,154,500.
c. Net decrease of $3,132,000.
d. Net decrease of $3,204,500.

9. Which of the following statements is true regarding reporting net position in the government-wide financial statements?
a. Net position is reported for both governmental activities and business-type activities.
b. Net investment in capital assets is calculated in the same manner for both governmental activities and business-type activities.
c. Restricted net position in the governmental activities always equals restricted fund balance in the governmental funds.
d. Items a and b are true.

10. When preparing the balance sheet conversion worksheet, which of the following items must be eliminated?
a. Deferred charges for debt issuance costs
b. Accrued interest payable
c. Inventories and prepaid items
d. Deferred revenue (not available)