Municipal Accounting
Midterm Exam
Course Introduction
Municipal Accounting focuses on the principles, methods, and practices used to record, analyze, and report financial transactions within governmental entities such as cities and towns. The course covers the unique aspects of public sector accounting, including fund accounting, budgetary control, and compliance with relevant legal and regulatory frameworks. Emphasis is placed on understanding the governmental financial reporting model, preparation and interpretation of financial statements, and the role of accountability and transparency in public finance. Students will gain practical skills in managing public funds, ensuring fiscal responsibility, and supporting the decision-making processes of municipal officials and stakeholders.
Recommended Textbook
Introduction to Governmental and Not for Profit Accounting 7th Edition by Patton
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538 Verified Questions
538 Flashcards
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Chapter 1: Governmental and Not-For-Profit
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Sample Questions
Q1) An activity that is unique to governments is
A)Budgeting
B)Cash management
C)Levying taxes
D)Advertising
Answer: C
Q2) Which of the following activities is performed by governments but not by not-for-profit organizations?
A)Issuing federal tax-free debt
B)Receiving grants
C)Preparing budgets
D)Providing services to constituents
Answer: A
Q3) A not-for-profit organization performs all of the following activities except
A)Charging a fee for services provided
B)Paying dividends to shareholders
C)Purchasing long-lived (capital)assets
D)Paying overtime to employees
Answer: B
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Page 3
Chapter 2: The Use of Funds in Governmental Accounting
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49 Flashcards
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Sample Questions
Q1) A governmental fund has total liabilities in excess of its total assets at the end of the fiscal year.It has no deferred resource inflows or outflows.Which of the following statements is always true?
A)fund balance is negative
B)cash is less than short-term receivables
C)payables exceed receivables
D)payables exceed cash
Answer: A
Q2) What is the purpose of a debt service fund?
A)to accumulate resources for paying interest on all debt issued by the government
B)to account for all outstanding long-term and short-term debt issued by the government
C)to account for outstanding general long-term debt
D)to accumulate resources for paying principal and interest on general long-term debt
Answer: D
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Chapter 3: Budgetary Considerations in Governmental Accounting
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28 Flashcards
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Sample Questions
Q1) Which of the following is an estimated amount?
A)encumbrance
B)appropriation
C)expenditure
D)tax levy
Answer: A
Q2) Which of the following is expected to occur first in the budget process?
A)determine the property tax (millage)rate
B)hold public hearings on the budget
C)prepare revenue estimates
D)prepare departmental expenditure requests
Answer: C
Q3) For a typical city government,the budget has an important influence on the determination of the annual
A)income tax rate
B)hotel/motel tax rate
C)sales tax rate
D)property tax rate
Answer: D
Page 5
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Chapter 4: The Governmental Fund Accounting Cycle
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Sample Questions
Q1) On January 1,2009,a city adopted a budget wherein estimated revenues were $30,000 greater than the appropriations.Because of a slowdown in the economy,it became apparent in June that there would be a shortfall of $25,000 in sales tax collections.The city amended its budget to take account of the reduction in estimated sales tax collections.What entry should the city make?
A)debit sales tax revenues and credit estimated revenues - sales tax for $25,000
B)debit appropriations and credit estimated revenues - sales tax for $25,000
C)debit estimated revenues - sales tax and credit sales tax revenues for $25,000
D)debit budgetary fund balance and credit estimated revenues - sales tax for $25,000
Q2) A village derives about .005 percent of its General Fund revenues from traffic violation fines.Violators of the law have 30 days to appeal the fines.Experience shows that the village ultimately collects on about 75% of the violations.When should the village recognize these revenues in the General Fund?
A)when the budget is prepared
B)at the beginning of the year,based on an estimate of collections
C)when the traffic violation tickets are issued
D)when the cash is collected
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Chapter 5: The Governmental Fund Accounting Cycle
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Sample Questions
Q1) If a taxpayer fails to pay his property taxes on time and the city decides to foreclose the property,what accounting entry should the city make?
A)write off the property tax receivable as uncollectible
B)reduce property tax revenues by the amount of the receivable
C)reclassify the property tax receivable account to a delinquent receivable account
D)reclassify the property tax receivable account to a tax lien receivable account
Q2) For the general fund,the residual fund balance classification is:
A)unassigned fund balance
B)assigned fund balance
C)committed fund balance
D)restricted fund balance
Q3) At the time a government levies the property tax,an allowance for uncollectible property taxes is established so that
A)probable delinquent taxpayers can be identified individually
B)property tax revenues can be reported at a net collectible amount
C)an expenditure for bad debts is recorded in the accounts
D)property tax revenues will exceed the total amount of the levy
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Chapter 6: The Governmental Fund Accounting Cycle
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Sample Questions
Q1) A city keeps its books on a calendar year basis.On April 1,2013,the city sold $500,000 of 6% general obligation bonds,payable in semi-annual installments.The first installment,due October 31,2013 covered interest of $15,000 and principal of $25,000.For the year ended December 31,2013,how much should the Debt Service Fund report as expenditures?
A)$15,000
B)$40,000
C)$15,000,plus an accrual for three months' interest
D)$40,000,plus an accrual for three months' interest and principal
Q2) A city sells $5 million of 6% ten-year general obligation bonds on April 1,2013.The first installment of debt principal ($250,000)is due to be paid on September 30,2013.What entry should the city make on September 30,2013 in the Debt Service Fund regarding the bond principal?
A)It should recognize a $250,000 liability for Matured bonds payable.
B)It should reduce the $5 million long-term liability by $250,000.
C)It should do nothing in the Debt Service Fund,but it should reduce Bonds payable by $500,000 in the Capital Projects Fund
D)It should make no entry anywhere until the principal is actually paid.
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Page 8
Chapter 7: The Governmental Accounting Cycle
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Sample Questions
Q1) A proprietary fund statement of net position report assets and liabilities in what format?
A)relative order of liquidity
B)classified (current/noncurrent)
C)by asset/liability type
D)separating capital assets and related debt for other assets and liabilities
Q2) Which of the following activities is most likely to be accounted for in an Internal Service Fund?
A)operation of the municipal parks and cultural centers
B)sale of printing services to all departments in the municipality
C)sale of electricity services to the municipality's residents
D)accumulation of resources to pay pension benefits to municipal employees
Q3) Which of the following accounts properly would not appear in a proprietary-type statement of net position (balance sheet)?
A)accumulated depreciation
B)retained earnings
C)net position,unrestricted
D)inventory
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9
Chapter 8: The Governmental Fund Accounting
Cycle--Fiduciary Funds
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Sample Questions
Q1) Liberty County maintains an investment pool on behalf of certain cities within the county.When it prepares its statement of fiduciary net position at year-end,how should Liberty value the corporate securities that it holds on behalf of the cities?
A)at the amount of cash originally sent by the cities for investment
B)at the amount paid by the county to acquire the securities
C)at the fair value (at year-end)of the securities held on behalf of the cities
D)at the average value of the securities held during the year on behalf of the cities
Q2) In the statement of fiduciary net position prepared for an Investment Trust Fund,how should the equity of the participants in the investment pool be characterized?
A)as fund balance
B)as retained earnings
C)as the excess of additions over deductions
D)as net position held in trust
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Chapter 9: Reporting Principles and Preparation of Fund
Financial Statements
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Sample Questions
Q1) Which of the following statements is true regarding the inclusion of individual non-major funds in the fund-level financial statements?
A)Individual non-major internal service funds are reported in the fund-level financial statements if a government makes a special election to report them
B)Individual non-major funds must always be reported in the fund-level financial statements.
C)Individual non-major funds must be reported in the fund-level financial statements if,in total,they are more than 50 percent of the total assets or liabilities of the fund category.
D)Individual non-major funds may be reported as "major funds" in the fund-level financial statement if governmental officials believe it is important to financial statement users.
Q2) Which of the following interfund transactions does not affect fund balance?
A)reimbursements
B)transfers
C)loans
D)interfund services provided and used
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Chapter 10: Government-Wide Financial Statements
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Sample Questions
Q1) Merchants remit $800,000 to a county government in calendar year 2013 for sales taxes collected in 2013.In January,2014,they send the county an additional $25,000 applicable to the year 2014.Based on past experience,the county expects to receive an additional $15,000 later in 2014,but applicable to 2013.How much should the county recognize as sales tax revenues when it prepares its fund and government-wide financial statements? \(\begin{array}{lll}&\text { Fund } & \text { Government-wide } \\
&\text { Statements } & \text { Statement }\\
\text { a. } & \$ 800,000 & \$ 800,000 \\
\text { b. } & \$ 800,000 & \$ 840,000 \\
\text { c. } & \$ 825,000 & \$ 825,000 \\
\text { d. } & \$ 825,000 & \$ 840,000 \end{array}\)
Q2) In 2013,Monks Town received a State grant of $300,000 that can only be used to hire additional police officers.How should this revenue be reported in the Town's government-wide statement of activities?
A)as a general revenue
B)as a program-specific capital grant
C)as a charge for services
D)as a program-specific operating grant
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Chapter 11: Federal Government Accounting and Reporting
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Sample Questions
Q1) What basis of accounting is used in the Statement of Net Costs prepared by a federal agency?
A)the budgetary basis
B)the accrual basis
C)the cash basis
D)the modified accrual basis
Q2) When a federal agency receives supplies that have been ordered previously,what kind of entry (or entries)is (or are)required?
A)both a budgetary and a proprietary entry
B)only a proprietary entry
C)only a budgetary entry
D)neither a budgetary nor a proprietary entry
Q3) What is the name of the entity that recommends accounting standards for the federal government?
A)the Governmental Accounting Standards Board
B)the Federal Accounting Standards Advisory Board
C)the Financial Accounting Standards Board
D)the American Institute of Certified Public Accountants
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Chapter 12: Accounting for Not-For-Profit Organizations
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Sample Questions
Q1) Which of the following is an example of a mandatory transfer in college and university accounting?
A)a transfer to a Plant Fund to set aside amounts that will be used to pay debt service in accordance with a clause in a bond agreement
B)a transfer to a Plant Fund based on a decision by the Board of Trustees to build a new school of engineering
C)a transfer to a Plant Fund based on a decision by management to build new box seats in the football stadium for major donors
D)a reclassification from temporarily restricted to unrestricted net assets
Q2) In response to a fund-raising campaign,an electric utility provides free electricity to a not-for-profit entity.How should the not-for-profit entity report this gift in its statement of activities?
A)It should not be reported in the statement.
B)It should not be reported on the face of the statement,but should be disclosed in the notes.
C)It should be reported at its fair value as a revenue and as an expense.
D)The entity may choose either to not report it or to report it at fair value as a revenue and as an expense.
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Page 14
Chapter 13: Accounting for Health Care Organizations
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Sample Questions
Q1) A hospital invested $780,000 in equity securities in March,2012.When it prepared its financial statements at year-end,the securities had a fair value of $802,000.How should the hospital report the securities in its balance sheet at year end?
A)report the securities at cost ($780,000).
B)report the securities at cost ($780,000)and show the fair value ($802,000)parenthetically next to the caption "Investments."
C)report the securities at cost ($780,000)and show the fair value ($802,000)in the notes to he financial statements.
D)report the securities at the fair value ($802,000)
Q2) The accounting and financial reporting procedures for which fund category apply to governmental hospitals?
A)governmental type funds
B)proprietary type funds
C)fiduciary type funds
D)restricted type funds
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Chapter 14: Analysis of Financial Statements and Financial Condition
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Sample Questions
Q1) The most important reason for being concerned with a municipality's available fund balance as a percentage of its revenues and certain transfers in is that the ratio provides a good measure of:
A)the liquidity of its resources
B)the volatility of its revenue structure
C)its ability to weather future revenue shortfalls
D)its efficiency and effectiveness
Q2) The following information comes from a hospital's financial statements: Net patient accounts receivable - $3.5 million;Gross patient service revenues - $15 million;Contractual adjustments - $3 million;and Charity care - $1 million.What is the hospital's number of days' revenue in patient accounts receivable (rounded to nearest whole day)?
A)85
B)106
C)116
D)1147
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Page 16
Chapter 15: Fundamentals of Accounting
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Sample Questions
Q1) Tina opens a business to do small printing jobs.Her first few transactions are shown below.For each of them,state which two of the following six possibilities occurred as a result of each transaction - an asset increased,an asset decreased,a liability increased,a liability decreased,equity increased,or equity decreased:
a.Tina invested $25,000 of her personal cash in the business
b.Tina purchased a high-speed copying machine on credit;the machine should last 4 years
c.Tina paid cash to a student she hired to make deliveries for her that day.
Q2) John pays cash to buy auto insurance for a three-year period starting January 1.What is the accounting effect of this transaction on John's records when he makes the payment?
A)An asset increases and an asset decreases
B)An asset increases and a liability increases
C)Equity increases and a liability decreases
D)An asset decreases and equity decreases
Q3) Angel's Appliances buys four washing machines for its inventory at a price of $400 each.It makes the purchase on credit.It then sells three of the machines for cash at $550 each.Make journal entries to record these transactions.Then state how much gross profit Angel made.
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