Government-Wide Financial Statements
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CPA Financial Accounting and Reporting (FAR) › Government-Wide Financial Statements
Which basis of accounting is required for a city's government wide financial statements?
Modified accrual
Accrual
Modified cash
Cash
Explanation
The government wide financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting.
Taxes levied on citizens for infrastructure improvements should be reported in:
Functional revenues
None of the above
General revenues
Program revenues
Explanation
Program revenues would include charges for services and grants. Nonexchange revenues for governmental activities are general revenues.
What is the measurement focus and the basis of accounting for the government wide financial statements?
Economic resources measurement focus
Accrual basis of accounting
Both
Neither
Explanation
The government wide financial statements use both the economic resources focus and accrual accounting.
Hamilton County purchases a new police car at an estimated cost of \$20,000 on August 5, Year 1. The vehicle arrives on September 9, Year 1, with an invoice of \$21,250. Hamilton County pays the vendor in full on October 3, Year 1. The journal entry for this transaction would include which of the following on August 5, Year 1?
\$20,000 debit to expenditures
\$21,250 debit to expenditures
\$20,000 debit to encumbrances
\$21,250 debit to encumbrances
Explanation
When the purchase is made, a debit will be made to encumbrances for the estimated price at the time of purchase.
The city of Abernathy's internal service fund estimates revenues and expenses at the beginning of each year. In Year 2, Abernathy estimates revenues for the year of \$2 million and estimates expenses for the year of \$1.7 million. What will be the balance in the budgetary control account at the beginning of the year?
\$300,000 credit
\$300,000 debit
\$2 million credit
\$0
Explanation
Internal service funds do not use budgetary accounting; budgetary accounting is used by governmental funds.
The library of the city of Howerton has ordered new shelving units at the cost of \$40,000. How is this order recorded by the city in the government-wide financial statements?
Financial commitments are not formally reported on the government-wide financial statements
As an encumbrance in the governmental activities
As an encumbrance in the business-type activities
As temporarily restricted net assets in the governmental activities
Explanation
Financial commitments (such as ordering items before receiving them) are recorded in the fund financial statements as encumbrances but they are not recorded in the government-wide statements.