Copley - essentials of accounting for governmental and not-for-profit organizations - 12e, sm and tb 0078025818
Chapter 2 Overview of Financial Reporting for State and Local Governments
2-1. The solution to this and the first exercise of Chapters 1 and 3 through 9 will differ from student to student assuming each has a different CAFR.
2-2.
A. A financial reporting entity is a primary government, organizations for which the primary government is financially accountable, and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete.
B. A primary government is a state government or general purpose local government. An example of a primary government would be any state, municipality, or county (general purpose governments) and any special-purpose local government that meets the certain criteria. In some states, school disricts are generally primary governments as the governing boards are independently elected, levy their own taxes, and are financially independent.
C. A component unit is a legally separate organization for which the elected officials of the primary government are financially accountable. In addition, a component unit can be another organization for which the nature and significance of its relationship with a primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. An example might be a library with a separate board appointed by a city council and in which the city council must approve its budget and make up its deficits.
D. The two primary methods for reporting component units in the financial statements of a primary government are blending and discrete presentation. Blending reports the component unit as one of the funds of the primary government, which then results in including the component unit as part of the basic financial statements. Blending is used only when component units are sufficiently intertwined with the primary government that they are, in substance, the same as the primary government. Discrete presentation involves reporting the component unit in a column to the right of the primary government in the government-wide financial statements of the reporting entity.
2-3.
A. The three major sections of the Comprehensive Annual Financial Report are the introductory, financial, and statistical sections.
B. The Government-Wide Financial Statements are the Statement of Net position and the Statement of Activities. Government-Wide Statements are presented using the economic resources measurement focus and the accrual basis of accounting.
C. The Governmental Fund Statements are the Balance Sheet and the Statement of Revenues, Expenditures, and Changes in Fund Balances. Governmental Fund Statements are presented using the current financial resources measurement focus and modified accrual basis of accounting.
D. The Proprietary Fund Statements are the Statement of Net position (or Balance Sheet), Statement of Revenues, Expenses, and Changes in Fund Net position, and the Statement of Cash Flows. The Proprietary Fund Statements are prepared using the economic resources measurement focus and the accrual basis of accounting.
E. The Fiduciary Fund Statements are the Statement of Fiduciary Net position and the Statement of Changes in Fiduciary Net position. Fiduciary Fund Statements are prepared using the economic resources measurement focus and the accrual basis of accounting.
F. Management's Discussion and Analysis (MD&A) is considered to be Required Supplementary Information (RSI) and is presented in the financial section after the auditor's report. The remainder of RSI is generally presented after the notes to the financial statements and includes (a) budgetary comparison schedules, (b ) information regarding infrastructure assets when using the modified approach (c) schedules required for defined contribution pension plans, and (d) information required for external financing pools.
2.4 The General Fund is always considered a major fund. Other governmental funds are considered major when both of the following conditions exist: (a) total assets, liabilities, revenues, or expenditures of that individual governmental fund constitute 10 percent of the total for the governmental funds category, and (b) total assets, liabilities, revenues, or expenditures of that individual governmental or enterprise fund are 5 percent of the total of the governmental and enterprise categories, combined. Additionally, a government may designate any fund major if reporting that fund separately would be useful. When applying these rules, deferred outflows of resources are included with assets and deferred inflows are included with liabilities.
An enterprise fund is considered major if: (a) assets, liabilities, revenues, or expenses are 10 percent or more of the total for all enterprise funds, and (b) its assets, liabilities, revenues, or expenses are 5 percent or more of the total of the governmental and enterprise categories, combined. When applying these rules, deferred outflows of resources are included with assets and deferred inflows are included with liabilities.
| 2-5 Several differences exist between the GASB format cash flow statement and the FASB format required of commercial businesses: 1) GASB requires governments to prepare cash flows from operating activities on the direct method. 2) The reconciliation of income to cash flows from operating activities of the proprietary fund, which appears in the bottom section of the statement, begins with operating income, not net income (or total change in net position). 3) The statement has four sections, rather than the three observed in FASB format statements. These include: |
· Operating activities are those associated with operating income. As a result, cash flows from interest expense, interest revenue and investment income do not appear in the operating activities section.
| · Noncapital related financing activities involve the borrowing and payment (including interest) of loans for purposes other than financing capital additions – chiefly, borrowing for operations. · Capital and related financing include grants and debt transactions (including interest) used to finance capital additions. · Investing activities involve the acquisition and sale of investments as well as cash received from investment income. |
2-6. The difference between assets and liabilities is called net position and is reported in three categories:
§ Net investment in capital assets is computed by taking the capital assets, less accumulated depreciation, and deducting outstanding debt that is related to the financing of capital assets. Liabilities incurred to finance operations (including long-term liabilities for compensated absences or employee benefits) would not be deducted.
§ Restricted net position include resources that are restricted by: (a) external parties, including creditors, grantors, contributors, or by laws or regulations of other governments, or (2) laws or constitutional provisions of the reporting government.
§ The remaining amount, Unrestricted net position, is a “plug” figure that is determined by deducting the balances of the other two categories from the overall excess of assets over liabilities.
2-7.
CITY OF SOUTHERN SPRINGS
STATEMENT OF NET POSITION
APRIL 30, 2015
| | Governmental Activities | Business-Type Activities |
Total | ||
| Assets: Cash and Cash Equivalents Receivables Inventories Capital Assets, Net Total Assets | $3,880,000 750,000 10,500,000 15,130,000 | $ 850,000 1,330,000 520,000 11,350,000 14,050,000 | $4,730,000 2,080,000 520,000 21,850,000 29,180,000 | ||
| Liabilities: Accounts Payable Noncurrent Liabilities Total Liabilities | 650,000 5,350,000 6,000,000 | 659,000 3,210,000 3,869,000 | 1,309,000 8,560,000 9,869,000 | ||
| Net position: Net investment in capital Assets Restricted for Debt Service Unrestricted Total Net position | 5,150,000 754,000 3,226,000 $9,130,000 | 8,140,000 223,000 1,818,000 $10,181,000 | 13,290,000 977,000 5,044,000 $19,311,000 | ||
2-8. CITY OF NORTHERN PINES
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2015
| | | Program Revenues | Net(Expense)Revenue and Change in Net position | ||||||||
|
Functions/Programs |
Expenses | Charges for Services | Operating Grants | Governmental Activities | Business-Type Activities |
Total | |||||
| Governmental Activities: General Government Public Safety Public Works Health and Sanitation Culture and Recreation Interest on Long-Term Debt Total Governmental Activities | $10,100,000 22,900,000 11,890,000 6,210,000 4,198,000 1,021,000 56,319,000 | $1,110,000 1,210,000 2,555,000 2,198,000 ________ 7,073,000 | $ 698,000 1,210,000 ________ 1,908,000 | $(8,990,000) (20,992,000) (11,890,000) (2,445,000) (2,000,000) ( 1,021,000) (47,338,000) | $ | $(8,990,000) (20,992,000) (11,890,000) (2,445,000) (2,000,000) (1,021,000) (47,338,000) | |||||
|
Business-Type Activities: Water and Sewer System Parking System Total Business-Type Activities |
11,550,000 419,000
11,969,000 | 12,578,000 398,000
12,976,000 | ---- ----
---- | ---- ----
---- | 1,028,000 (21,000)
1,007,000 |
1,028,000 21,000
1,007,000 | |||||
| Total – primary government | $68,288,000 | $20,049,000 | $1,908,000 | (47,338,000) | 1,007,000 | (46,331,000) | |||||
| General Revenues: Property Taxes Sales Taxes Investment Earnings Special Item-Gain on Sale of Land Transfers Total General Revenues, Special Items, and Transfers Change in Net position Net position, Beginning of year Net position, End of Year | 27,112,000 20,698,000 1,250,000 (688,000)
48,372,000 1,034,000 11,222,000 $12,256,000 | 319,000 688,000
1,007,000 2,014,000 22,333,000 $24,347,000 | 27,112,000 20,698,000 319,000 1,250,000 -
49,379,000 3,048,000 33,555,000 $36,603,000 | ||||||||
2-9
CITY OF EASTERN SHORES
GENERAL FUND STATEMENTS OF REVENUES,
EXPENDITURES, AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED SEPTEMBER 30, 2015
| Revenues: Property Taxes | $28,120,000 | |
| Sales Taxes | 13,216,000 | |
| Fees and Fines | 1,124,000 | |
| Licenses and Permits | 1,921,000 | |
| Intergovernmental Revenues | 1,368,000 | |
| Investment Earnings | 654,000 | |
| Total Revenues | 46,403,000 | |
|
Expenditures: Current: General Government | $ 10,252,000 | |
| Public Safety | 24,444,000 | |
| Public Works | 6,211,000 | |
| Health and Sanitation | 1,163,000 | |
| Culture and Recreation | 2,154,000 | |
| Debt Service: | ||
| Principal | 652,000 | |
| Interest | 821,000 | |
| Total Expenditures | 45,697,000 | |
| Excess of Revenues Over Expenditures | 706,000 | |
| Other Financing Sources (Uses): | ||
| Proceeds of Long-Term, Capital Related Debt | 2,210,000 | |
| Transfer to Special Revenue Fund | (1,119,000) | |
| Total Other Financing Sources (Uses) | 1,091,000 | |
| Special Item: Proceeds From Sale of Land | 821,000 | |
| Net Change in Fund Balance |
2,618,000 | |
| Fund Balance, Beginning of Year | 1,812,000 | |
| Fund Balance, End of Year | $4,430,000 |
2-10.
CITY OF WESTERN SANDS
WATER AND SEWER FUND
STATEMENT OF REVENUES, EXPENSES,
AND CHANGES IN FUND NET POSITION
YEAR ENDED DECEMBER 31, 2015
| Operating Revenues: Charges for Services | $17,687,000 | ||||
| Operating Expenses: Personnel Services | $ 6,977,000 | ||||
| Contractual Services | 2,195,000 | ||||
| Utilities | 888,000 | ||||
| Repairs and Maintenance | 1,992,000 | ||||
| Depreciation | 5,422,000 | | |||
| Total Operating Expenses | 17,474,000 | ||||
| Operating Income | 213,000 | ||||
| Nonoperating Revenues (Expenses): Interest Revenue State Aid | 129,000 100,000 | ||||
| Interest Expense | (534,000) | ||||
| Total Nonoperating Revenues and Expenses | (305,000) | ||||
| Income (loss) Before Contributions and Transfers | (92,000) | ||||
|
Capital Contributions | 1,632,000 | ||||
| Transfer to General Fund | (965,000) | ||||
| Change in Net position | | 575,000 | |||
| Net position, Beginning of year |
4,500,000 | ||||
| Net position, End of year | $5,075,000 | ||||
2-11.
| # | Information Item | Statement | $ amount |
| A. | Total capital outlay for the courthouse renovation | Statement of Revenues Expenditures & Changes in Fund Balance – governmental funds | $ 10,924,818 |
| B. | Total cash paid for capital additions for the Solid waste fund | Statement of Cash Flows- Proprietary Funds | $ 456,179 |
| C. | Interest paid (not expense) on general long-term debt | Statement of Revenues Expenditures & Changes in Fund Balance – governmental funds | $ 924,818 |
| D. | Interest paid (not expense) on water department debt | Statement of Cash Flows- Proprietary Funds | $ 535,567 |
| E. | Capital asset (net) for the government’s component units | Statement of Net position (government-wide) | $ 11,197,985 |
| F. | Contributions received for use by the private purpose trust | Statement of Changes in Fiduciary Net position | $ 100,000 |
| G. | Noncurrent liabilities associated with governmental activities that are due in more than one year. | Statement of Net position (government-wide) | $ 39,834,882 |
| H. | Noncash contributions of capital assets for the Water department. | Statement of Cash Flows- Proprietary Funds | $ 3,085,946 |
2-12.
| # | Information Item | Statements | $ amount | |
| A. | Total fund balance of the Special Revenue Fund | Statement of Revenues Expenditures & Changes in Fund Balance – governmental funds | Balance Sheet – Governmental Funds | $ 572,014 |
| B. | Net position available for employee pensions | Statement of Changes in Fiduciary Net position | Statement of Fiduciary Net position | $ 10,983,590 |
| C. | Operating income for the Internal Service Funds | Statement of Revenues, Expenses, and Changes in Fund Net position – Proprietary funds | Statement of Cash Flows- Proprietary Funds | $ 23,822 |
| D. | Net position of the primary government | Statement of Net position (government-wide) | Statement of Activities (government-wide) | $ 86,285,455 |
test bank
ch2 Key
| 1. | A Comprehensive Annual Financial Report (CAFR) would include an introductory section, management's discussion and analysis, basic financial statements, required supplementary information other than MD&A, combining and individual fund statements, narrative explanations, and statistical section. |
| Copley - Chapter 02 #1 |
| 2. | The three major sections of a CAFR are the Introductory, Financial, and Statistical sections. |
| Copley - Chapter 02 #2 |
| 3. | The introductory and statistical sections of a CAFR are required to be audited. |
| Copley - Chapter 02 #3 |
| 4. | State and local governments are not required to prepare a CAFR. |
| Copley - Chapter 02 #4 |
| 5. | Combining statements are required whenever a non-major column is used in one of the fund financial statements. |
| Copley - Chapter 02 #5 |
| 6. | A complete CAFR includes combining financial statements to reflect major funds. |
| Copley - Chapter 02 #6 |
| 7. | In addition to the government-wide statements, governments are required to prepare fund financial statements for governmental, proprietary and fiduciary funds. |
| Copley - Chapter 02 #7 |
| 8. | In addition to the government-wide statements, governments are required to prepare fund financial statements for governmental funds only. |
| Copley - Chapter 02 #8 |
| 9. | The General Fund is not always considered to be a major fund when preparing fund basis financial statements. |
| Copley - Chapter 02 #9 |
| 10. | With respect to fund basis financial statements, governmental funds are considered to be a major fund when total assets, liabilities, revenues and expenditures combined are at least 10% of the total for the governmental funds category. |
| Copley - Chapter 02 #10 |
| 11. | With respect to fund basis financial statements, a government may only designate a fund to be a major fund if it meets the size thresholds established by GASB. |
| Copley - Chapter 02 #11 |
| 12. | With respect to fund basis financial statements, a government may designate any fund to be a major fund if reporting that fund separately would be useful. |
| Copley - Chapter 02 #12 |
| 13. | When preparing fund basis financial statements, any funds not reported separately are aggregated and reported in a single column under the label non-major funds. |
| Copley - Chapter 02 #13 |
| 14. | When preparing fund basis financial statements, any funds not reported separately are reported individually by function. |
| Copley - Chapter 02 #14 |
| 15. | Fiduciary fund statements are prepared using the current financial resources measurement focus and modified accrual basis of accounting. |
| Copley - Chapter 02 #15 |
| 16. | Governmental fund statements are prepared using the economic financial resources measurement focus and modified accrual basis of accounting. |
| Copley - Chapter 02 #16 |
| 17. | According to GASB, a primary government can only be a state or a general-purpose local government, such as a city or county. |
| Copley - Chapter 02 #17 |
| 18. | Blending of financial information is done only when component units and the primary government are so intertwined that they are essentially the same. |
| Copley - Chapter 02 #18 |
| 19. | The statistical section of the CAFR contains the combining schedules of non-major funds. |
| Copley - Chapter 02 #19 |
| 20. | The government-wide financial statements present the government as a whole, including component units and including fiduciary activities. |
| Copley - Chapter 02 #20 |
| 21. | The basic financial statements of a state or local governmental unit include the MD&A, government-wide statements, fund statements, and the notes. |
| Copley - Chapter 02 #21 |
| 22. | Governmental-type fund financial statements include the Balance Sheet and the Statement of Revenues, Expenditures, Changes in Fund Balances, and a Statement of Cash Flows. |
| Copley - Chapter 02 #22 |
| 23. | Governmental-type fund financial statements do not include a Statement of Cash Flows. |
| Copley - Chapter 02 #23 |
| 24. | Governmental fund financial statements include columns for the General Fund and all other "major" governmental funds. |
| Copley - Chapter 02 #24 |
| 25. | The total fund balances reported in the total column of the fund basis statements must be reconciled to the total Net Position presented in the governmental activities column of the government-wide Statement of Net Position. |
| Copley - Chapter 02 #25 |
| 26. | Entities which are determined to be component units of state and local governmental units must be discretely presented in the financial statements. |
| Copley - Chapter 02 #26 |
| 27. | The government-wide financial statements are prepared using the current resources measurement focus and accrual basis of accounting. |
| Copley - Chapter 02 #27 |
| 28. | The government-wide financial statements do not include a Statement of Cash Flows. |
| Copley - Chapter 02 #28 |
| 29. | Prior-year data is required for government-wide financial statements. |
| Copley - Chapter 02 #29 |
| 30. | The governmental fund statements are prepared using the current financial resources measurement focus and accrual basis of accounting. |
| Copley - Chapter 02 #30 |
| 31. | The fiduciary fund financial statements are prepared using the economic financial resources measurement focus and accrual basis of accounting. |
| Copley - Chapter 02 #31 |
| 32. | The General Fund is always a major fund for purposes of financial reporting. |
| Copley - Chapter 02 #32 |
| 33. | Notes to the financial statements must distinguish between the primary government and discretely presented component units. |
| Copley - Chapter 02 #33 |
| 34. | Special-purpose governments engaged in business type activities only are required to prepare both proprietary fund and government-wide financial statements. |
| Copley - Chapter 02 #34 |
| 35. | Only governmental fund statements include separate columns for discretely presented component units. |
| Copley - Chapter 02 #35 |
| 36. | Governmental accounting standards require the statistical section. |
| Copley - Chapter 02 #36 |
| 37. | The Government-wide financial statements include a separate column for fiduciary fund information. |
| Copley - Chapter 02 #37 |
| 38. | Management's Discussion and Analysis (MD&A) in The Comprehensive Annual Financial Report (CAFR) is part of the Financial Section. |
| Copley - Chapter 02 #38 |
| 39. | Government-wide statements are to be prepared using the economic resources measurement focus and accrual basis of accounting. |
| Copley - Chapter 02 #39 |
| 40. | Government-wide statements are to be prepared using the current financial resources measurement focus and modified accrual basis of accounting. |
| Copley - Chapter 02 #40 |
| 41. | Prior-year data may be presented but are not required on government-wide statements. |
| Copley - Chapter 02 #41 |
| 42. | Prior-year data are required to be presented on government-wide statements. |
| Copley - Chapter 02 #42 |
| 43. | Proprietary funds are required to prepare a Statement of Cash Flows from operating activities using the direct method. |
| Copley - Chapter 02 #43 |
| 44. | Government-wide financial statements use the economic resources measurement focus and the accrual basis of accounting. |
| Copley - Chapter 02 #44 |
| 45. | A Comprehensive Annual Financial Report for a state or local governmental unit should contain an introductory section, a financial section, and a statistical section. |
| Copley - Chapter 02 #45 |
| 46. | A government may not selectively designate any fund to be a major fund even if reporting the fund separately would be useful. |
| Copley - Chapter 02 #46 |
| 47. | The Comprehensive Annual Financial Report (CAFR) contains four major sections: introductory, financial, supplementary, and statistical. |
| Copley - Chapter 02 #47 |
| 48. | The fund balance reported in the Governmental Funds Balance Sheet must be reconciled to the total Net Position in the governmental activities column of the government-wide Statements of Net Position. |
| Copley - Chapter 02 #48 |
| 49. | The fund balance reported in the Governmental Funds Balance Sheet must equal the total Net Position in the governmental activities column of the government-wide Statements of Net Position. |
| Copley - Chapter 02 #49 |
| 50. | Fund balance is an account title used only in governmental funds to indicate the excess of assets over liabilities. |
| Copley - Chapter 02 #50 |
| 51. | The Governmental Accounting Standards Board considers the financial reporting entity to include the primary government, but not its component units. |
| Copley - Chapter 02 #51 |
| 52. | Which of the following is true regarding the proprietary fund financial statements?
|
| Copley - Chapter 02 #52 |
| 53. | Which of the following is true regarding the fiduciary fund financial statements?
|
| Copley - Chapter 02 #53 |
| 54. | Which of the following is not considered Required Supplementary Information (RSI)?
|
| Copley - Chapter 02 #54 |
| 55. | Which of the following is considered Required Supplementary Information (RSI)?
|
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