Osman Dzudzevic

Government Financial Accounting & Reporting

Module 5 – Assignment
Friday, April 23, 2025

Chapter 9 - EX.9-1

1. What basis of accounting do enterprise and internal service funds use?

Answer: Full accrual, Full accrual
Explanation: Both fund types use full accrual because they follow the economic
resources measurement focus.
2. Which of the following is not a GASB‐required statement for proprietary funds?
Answer: Statement of changes in fund net position
Explanation: GASB requires a Statement of Net Position, Statement of Revenues,
Expenses, and Changes, and a Statement of Cash Flows.
3. A government need not necessarily account for an activity in an enterprise fund
even though it:
Answer: Charges fees for the activity
Explanation: Charging fees alone doesn’t require enterprise fund accounting unless
other criteria apply.
4. Tap fees, to the extent that they do not exceed the cost of hooking customers into
the utility, should be accounted for as:
Answer: ordinary revenues
Explanation: Fees that only cover the hookup cost are treated as capital
contributions, not ordinary revenue.
5. Tap fees, a portion of which exceed the cost of hooking customers into the utility,
should be accounted for as:
Answer: A combination of capital contributions and ordinary revenues
Explanation: The part covering hookup costs is a capital contribution; any excess is
operating revenue.
6. Landfill closure and postclosure costs should be recognized as expenses:
Answer: In the periods that the landfill is in operation
Explanation: Costs must be recognized over the landfill’s active life as capacity is
used.
 7. Which of the following would not be included in the computation of the amount to
be recognized as a landfill closure expense?
Answer: An appropriate discount rate
Explanation: The liability is based on costs and usage, not on discounting future
costs.
8. A city maintains a staff of internal auditors. It may properly account for its internal
audit costs in an internal service fund only if:
Answer: It charges a fee to the city departments for which it provides service
Explanation: Internal service funds must charge for services, even to other
government units.
9. A government accounts for its self‐insurance activities in an internal service fund.
Per GASB guidelines, the premiums charged to other funds:
Answer: Must, in total and over time, cover the actual losses incurred by the
fund
Explanation: Premiums must be sufficient to cover actual insurance claims over
time.
10. If a government accounts for self‐insurance activities in its general fund, then
premiums charged in excess of actual claims should be accounted for as:
Answer: A nonreciprocal transfer‐in
Explanation: Excess premiums are treated as a transfer, not as revenue.

Chapter 9 - EX.9-2

1. A city's general fund has an outstanding payable to its electric utility, which is
accounted for in an enterprise fund. In the city's government‐wide statement of net
position, which would be correct?
Answer: The payable should be reported in the governmental activities column
and the receivable in the business‐type activities column
Explanation: Interfund balances across activities are shown separately in
government-wide statements.
2. A city's general fund has an outstanding payable to its vehicle repair internal service
fund. In the city's government‐wide statements, which would be correct?
Answer: The payable and the corresponding receivable would be eliminated in
the consolidation process and thus would not be reported
Explanation: Internal service fund transactions are eliminated in consolidation.
3. Which of the following projects is a state university most likely to finance with
revenue bonds rather than general obligation bonds?
Answer: A football stadium
Explanation: Revenue bonds fund self-supporting projects like stadiums.
4. In what way would the statement of cash flows of a government‐owned electric
utility differ from that of a privately owned counterpart?
Answer: It would have separate categories for cash flows from noncapital
financing activities and cash flows from capital and related financing activities
Explanation: GASB requires splitting noncapital and capital financing activities.
5. A government decided to account for a vehicle repair service in an internal service
fund rather than its general fund. In a year of heavy equipment acquisition, the
amount recorded as an expense would be
Answer: less than if the repair service were accounted for in the general fund
because the general fund would have recognized the entire cost of the
equipment in the year acquired as an expenditure rather than the amount billed
by the internal service fund.
Explanation: Internal service funds expense assets gradually through depreciation;
general funds expense the full cost immediately.
6. A school district's internal service fund has cash on hand at year‐end of $2 million.
On its government‐wide financial statements, this amount would be reported as an
asset in the
Answer: Governmental activities and total columns
Explanation: Internal service fund balances usually roll into governmental
activities.
7. A city makes an interest payment of $6 million on its utility fund revenue bonds that
were issued to finance new sewer lines. In the utility fund statement of cash flows,
the payment would be reflected as a cash flow from
Answer: Capital and related financing activities
Explanation: Interest on capital debt is shown under capital financing.
8. A utility fund temporarily invests the proceeds from the issuance of revenue bonds
in U.S. Treasury bills and receives interest of $300,000. In the utility fund statement
of cash flows, the receipt would be reflected as a cash flow from
Answer: Investing activities
Explanation: Interest from investments is reported as investing activities.
9. A city's transportation service, which is accounted for in an enterprise fund, has
outstanding $10 million in revenue bonds also guaranteed by the city. These bonds
should be reported as a liability in
Answer: Only the proprietary fund statements and the “business‐type activities”
column of the government‐wide statements
Explanation: Revenue bonds belong to enterprise funds and business-type
activities only.
 10. A city enters into a public‐private partnership and transfers a tolled bridge to a
corporation for $50 million, keeping toll approval rights. The bridge's book value was
$8 million. At the time of transfer, the city should
Answer: Recognize a deferred inflow of resources of $50 million and should
continue to report and depreciate the bridge as it did previously
Explanation: Service concession arrangements recognize deferred inflows, not
revenue.

Chapter 11 - EX.11-1

1. New York State has unlimited authority to control and regulate Yonkers. Consistent
with GASB standards:
Answer: Both New York State and Yonkers could be considered primary
governments
Explanation: Local governments can still be primary governments if they meet
GASB criteria.
2. Which of the following is not a power a municipality must have to be considered
fiscally independent?
Answer: To establish debt limitations
Explanation: Fiscal independence requires control over budget, taxes, and issuing
debt, not setting debt limits.
3. Carson City's council appoints a voting majority of the Housing Authority's board.
Which would not be sufficient evidence of financial accountability?
Answer: Two of the five members of the Housing Authority's board are also
members of the Carson City council
Explanation: Having overlapping officials alone does not establish financial
accountability.
4. Which fund types would not be combined in the blended statements of Sierra
County and Sierra Library District?
Answer: General funds
Explanation: it should report general funds of its component unit as it they were
special revenue funds)
5. A primary government should “blend” its financial statements with a component
unit if
Answer: The governing boards of the two governments are substantively the
same
Explanation: Same board members trigger blending under GASB rules.
6. With respect to a component unit that does not satisfy the criteria for blending, the
primary government
 Answer: Must present each major component unit in a separate column
Explanation: Discrete presentation is required for component units that are not
blended.
7. Which of the following is incorrect with respect to a joint venture?
Answer: It must be reported as a component unit of each government that has
an interest of 20 percent or more in the venture
Explanation: Joint ventures are not reported as component units solely based on
percentage ownership.
8. A related organization
Answer: must be described in notes to the financial statements of the reporting
government to which it is related but must not be incorporated into the financial
statements of that government.
Explanation: Related organizations must be disclosed in notes but are not included
in the main financial statements.
9. James City school system administration situation: James City
Answer: Should account for, and report, the system as it does other city
departments
Explanation: Lack of separate legal standing makes the system part of the city's
operations.
10. If a primary government has several component units, none qualifying for blending,
in its government-wide statements it
Answer: Must incorporate data of all component units, whether major or
nonmajor, into one or more columns
Explanation: GASB requires reporting all component units, with separate columns
for majors and aggregation for nonmajors.

Chapter 11 - EX.11-2

1. Which of the following should not be included in the introductory section of a city's
ACFR?
Answer: Management's discussion and analysis
Explanation: MD&A is part of required supplementary information, not the
introduction.
2. Which of the following should not be included in a city's management's discussion
and analysis?
Answer: A 10-year forecast of sales tax revenues
Explanation: MD&A focuses on historical and current analysis, not future forecasts.
3. A city's general-fund budget-to-actual comparisons should be included as part of an
ACFR's
 Answer: Required supplementary information
Explanation: Budget-to-actual comparisons are required supplementary
information under GASB.
4. Internal service funds
Answer: Should be presented in the proprietary fund statements in a single
column
Explanation: Internal service funds are combined into one column in proprietary
fund statements.
5. Which of the following tables would be least likely to be found in the statistical
section of a city's ACFR?
Answer: Salaries of key government officials—last 10 years
Explanation: Salaries are not part of standard statistical section requirements.
6. Which of the following would not be reported as required supplementary
information?
Answer: The GFOA certificate of achievement (if earned)
Explanation: The certificate is an external award and not part of required
supplementary information.
7. Which of the following is least likely to be included in the ACFR of the New Bradford
Water District, a public utility?
Answer: Government-wide statement of activities
Explanation: Single-purpose business-type entities prepare only fund-level and not
government-wide statements.
8. A special-purpose government, such as an independent school district, that carries
out multiple programs
Answer: Must report as if it were a general-purpose government
Explanation: Governments with multiple programs must report like general-
purpose governments.
9. Silicon County is growing rapidly. It is likely to have a high
Answer: Long-term debt to total population
Explanation: Rapid growth often requires infrastructure financed by long-term debt.
10. A government's fiscal effort is best measured by the ratio of
Answer: Revenue from own sources to total appraised value of property
Explanation: Fiscal effort measures how much revenue is raised relative to the tax
base.
Chapter 9 – P.9-1

Answer:

1. Journal Entries
Transaction Transaction Journal Entry Explanation
No.

T1 Issued $6,000,000 of Dr. Cash $6,000,000 Bonds issued to finance

revenue bonds Cr. Revenue Bonds Payable plant acquisition.
$6,000,000

T2 Purchased plant and Dr. Capital Assets Bought assets from

equipment for $4,500,000 $4,500,000 private water company.
Cr. Cash $4,500,000

T3 Incurred $500,000 in Dr. Capital Assets $500,000 Capitalized plant

improvements Cr. Cash $500,000 improvements.

T4 Billed customers $1.8 Dr. Accounts Receivable Revenue recognized

million $1,800,000 when billed.
Cr. Operating Revenues –
Water Sales $1,800,000

T5 Collected $1.5 million from Dr. Cash $1,500,000 Cash collected on billed
customers Cr. Accounts Receivable water services.
$1,500,000

T6 Billed and collected Dr. Cash $200,000 Tap fees recorded as

$200,000 tap connection Cr. Capital Contributions – capital contributions.
fees Tap Fees $200,000

T7 Paid $140,000 for hookups Dr. Expenses – Hookup Expense for physical
Costs $140,000 hookups.
Cr. Cash $140,000

T8 Paid $850,000 for water Dr. Operating Expenses – Water supply costs paid.
purchases Water Purchase $850,000
Cr. Cash $850,000

T9 Paid $320,000 for labor and Dr. Operating Expenses – Payroll and contract
services Labor and Services services.
$320,000
Cr. Cash $320,000

T10 Paid $80,000 for interest Dr. Interest Expense Interest expense on
$80,000 bonds.
Cr. Cash $80,000
 T11 Paid $60,000 for Dr. Operating Expenses – Minor supplies and
supplies/miscellaneous Supplies $60,000 miscellaneous
Cr. Cash $60,000 expenses.

T12 Recognized $350,000 Dr. Depreciation Expense Annual asset

depreciation $350,000 depreciation.
Cr. Accumulated
Depreciation $350,000

2. Year-End Statement of Revenues, Expenses, and Changes in Net Position

Item Amount Explanation

Operating Revenues: Water Sales $1,800,000 (T4) Water billed to customers.

Operating Revenues: Tap Fees (Capital $200,000 (T6) Tap connection fees billed and
Contribution) collected.

Operating Expenses: Water Purchase $(850,000) (T8) Cost of buying water.

Operating Expenses: Labor and Services $(320,000) (T9) Payroll and contracts.

Operating Expenses: Supplies and Misc. $(60,000) (T11) Supplies expense.

Operating Expenses: Depreciation $(350,000) (T12) Depreciation on capital assets.

Operating Income $420,000 Revenue minus operating expenses.

Nonoperating Expenses: Interest $(80,000) (T10) Interest on debt.

Change in Net Position $340,000 Operating income minus interest

expense.

3. Year-End Balance Sheet

Account Amount Explanation

Assets:

Cash $2,820,000 Cash from bond proceeds, collections minus expenses.

Accounts Receivable $300,000 (T4, T5) Uncollected water sales.

Capital Assets (net) $4,650,000 $5,000,000 (T2 + T3) − $350,000 (T12 Depreciation).

Total Assets $7,770,000

Liabilities:
 Revenue Bonds Payable $6,000,000 (T1) Bonds issued.

Net Position:

Net Investment in Capital Assets $4,650,000 Assets minus related debt (if separated).

Unrestricted (Deficit) $(2,880,000) Negative due to high bonds payable.

4. If Reported Like a Full-Service Government

Aspect Full-Service Reporting Explanation

Capital Assets Recorded in government-wide Only shown in government-wide,

statements, not general fund not fund-level.

Long-Term Debt Recorded only in government-wide General fund reports no long-term

statements debt.

Revenues/Expenditures Recorded in general fund on modified No full accrual at fund level; no

accrual basis depreciation.

Depreciation Only reported in government-wide Not reported in general fund.

statements

Chapter 9 – P.9-2

Answer:

Account Debit Credit Explanation

Cash 2,000 To record cash grant received from
Revenues – Grant from State 2,000 the state
Cash 20 To record interest earned and
Revenues – Interest Earnings 20 received on temporary investments
Cash 10,000
To record proceeds from bond
Other Financing Sources – issuance
10,000
Proceeds of Bonds
Cash 200
Other Financing Sources – To record bond premium received
200
Bond Premium
Other Financing Uses – Transfer
150 To record transfer of bond premium to
to Debt Service Fund
the debt service fund
Cash 150
Expenditures – Bond Issue
50
Costs To record bond issuance costs paid
Cash 50
 Expenditures – Construction To record construction costs incurred
4,300
Costs for bridge project
Accounts Payable –
2,600 Unpaid balance to contractors
Contractors
Cash 1,700 Paid portion of construction costs
Fund Balance – Assigned 1,700 To record encumbrance (remaining
Reserve for Encumbrances 1,700 contract commitments)

2. General Fund Journal Entries (if self-insurance done within General Fund)
No. Transaction Journal Entry Explanation

T1 Claims recognized Dr. Claims Expenditures Recognized claims; paid $1.3M cash,
and paid $1,500,000 $0.2M payable.
Cr. Cash $1,300,000
Cr. Claims Payable $200,000

T2 Premiums billed to Dr. Due from Utility Fund Utility department premiums treated as
utility fund $800,000 other financing sources.
Cr. Other Financing Sources –
Premiums $800,000

3. Net Expenses Calculation

Fund Setup General Fund Net Utility Fund Explanation
Expenses Expenses

(1) Internal $0 $800,000 ISF nets out internally; general fund

Service Fund sees no net cost. Utility fund records
accounting full $800,000 premium expense.

(2) General Fund $700,000 ($1.5M claims − $800,000 General Fund reports net expenditure
accounting $0.8M premiums after recognizing $800,000 recovery.
collected from utility) Utility still charged $800,000.

4. Comment on Rationale for Differences

Reason Explanation

Cost Recovery vs Internal service funds reflect full cost recovery like a business, matching premiums
Budgetary Focus to claims. General fund focuses on spending control, showing claims less external
recoveries.
 GASB Policy GASB allows this to match different government needs: some prioritize operating
Flexibility efficiency (ISF), others prioritize spending oversight (General Fund).

Utility Fund Impact In either case, the utility fund always bears its share of insurance costs through
premiums.

Chapter 11 – P.11-1

1. Should the city include the public housing authority as a component unit?
Answer: Yes, report as a discretely presented component unit.
Explanation: City appoints board (even if it routinely approves nominations) and
approves the budget, creating financial accountability per GASB 14. Authority is
separately legal but dependent on the city’s oversight.
2. 2. Suppose the authority lent money to the city's housing department (instead of
building homes)?
Answer: Still include as a discretely presented component unit.
Explanation: Financial accountability remains because the city appoints the board
and approves budgets. The authority's activities are still closely tied to the city's
mission. Lending versus construction doesn’t change GASB criteria.
3. Suppose the city council also served as the authority's board of trustees?
Answer: Include as a blended component unit.
Explanation: When the governing boards are identical (city council = housing
board), GASB requires blending because the authority is essentially the same entity
as the city for financial reporting purposes.

Chapter 11 – P.11-2

1. Should the state include the authority in its reporting entity?

Answer: No, the authority should likely not be included.
Explanation: Under GASB 14, the key issue is financial accountability. Although the
governor appoints the board, the board operates independently: no operational
control, no budget approval, no debt guarantee. Rate regulation by the PUC is
treated like regulation of a private entity. Therefore, the state is not financially
accountable.
2. Suppose the governor could remove members of the board at will.
Answer: Yes, it would likely need to be included as a discretely presented
component unit.
Explanation: If the governor can remove board members at will, it indicates ongoing
control over the authority, satisfying GASB's financial accountability test. Thus, the
authority would now meet the criteria for discrete presentation.
3. Suppose members serve indefinitely, subject to annual reappointment by the
governor.
Answer: Probably yes, include as a component unit.
Explanation: If the governor reappoints members annually, the governor effectively
controls board membership, implying financial accountability. Therefore, the
authority would likely be discretely presented as a component unit.