Sm10e TIF Ch12 Mc

Governmental and Nonprofit Accounting: Theory and Practice, 10e (Freeman)Chapter 12 Trust and Agency (Fiduciary) Funds Summary of Interfund-GCA-GLTL Accounting

1. An other postemployment benefit plan where assets have been placed in trust would be reported asA. A Permanent Fund.B. An Agency Fund.C. Part of the General Fund.D. As a Pension and Other Employee Benefit Trust Fund.

(Answer: D; Easy; LO1)

2. Which types of funds are classified as fiduciary funds?A. Pension trust, private-purpose trust, and Investment Trust Funds.B. Pension trust, permanent trust, and Agency Funds.C. Pension trust, private-purpose trust, investment trust, and Agency Funds.D. Expendable trust, nonexpendable trust, pension trust, and Investment Trust Funds.

(Answer: C: Easy; LO1)

3. The accounting parameters established by GASB Statement No. 25 do not apply to amounts reported in which of the following?A. Schedule of funding progress.B. Statement of changes in plan net position.C. Statement of plan net position.D. Statement of cash flows.

(Answer: D; Moderate; LO1)

4. Even though each of the following funds involve a form of fiduciary responsibility, the fund that is not reported as a fiduciary fund for GAAP reporting purposes is a (an)A. Investment Trust Fund.B. Permanent Fund.C. Private-purpose Trust Fund.D. Pension Trust Fund.

(Answer: B; Moderate; LO2)

5. Which of the following activities would most likely be accounted for in an Agency Fund that would be reported in the external financial statements?A. Tax collections by a county on behalf of local municipalities.B. Interfund loan payments and disbursements.C. A Federal pass-through grant.D. Special assessments for debt on which the government is not obligated in any manner.

(Answer: A; Moderate; LO2)

6. Generally accepted accounting principles require the use of an Investment Trust Fund

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A. For governments that have any investment activity.B. For governments that sponsor external investment pools.C. For governments that are investing in investments that carry high risk.D. For governments that pool their cash for investment purposes.


7. A county provides health insurance coverage for retirees up until they reach the age of 65. This type of plan is known asA. A simple pension plan.B. A deferred compensation plan.C. An other postemployment benefit plan.D. A permanent plan.

(Answer: C; Easy, LO2)

8. The principal of a Private-Purpose Trust FundA. Must be nonspendable in nature.B. Must be spendable in nature.C. Must never fall below a pre-determined threshold that is determined by generally

accepted accounting principles.D. May be spendable or nonspendable in nature.


9. A Pension Trust Fund that is provided by a government solely for the benefit of its employees is known as aA. Single-employer plan.B. Cost-sharing plan.C. Defined contribution plan.D. Defined benefit plan.

(Answer: A; Moderate; LO2)10. An Agency Fund is used to account for debt service on special assessment bonds

A. That are not backed by the full faith and credit of the governmental unit.B. That are not backed by the full faith and credit of the governmental unit unless the

government guarantees the indebtedness.C. On which the government is not obligated in any manner.D. With terms exceeding 10 years.

(Answer: C; Difficult; LO2)


11. Pass-through grants are reported in an Agency Fund of the primary recipientA. In all cases.B. Unless the primary recipient holds the resources longer than one year prior before paying

the subrecipients.C. Only if the primary recipient has no direct financial involvement in the grant program.D. Only if the primary recipient has no administrative or direct financial involvement in the

grant program.(Answer: D; Difficult; LO2)

12. A government receives a donation of $300,000 to establish an endowment fund whose income is to be used to support scholarships for local high school students. The school district is not part of the government. The government should report this activity in which type of fund?A. Permanent FundB. Private-Purpose Trust FundC. Investment Trust FundD. Agency Fund


13. A Pension Trust Fund will be reported in the government-wide financial statements withinA. The governmental activities column.B. The business-type activities column.C. The discrete component unit presentations.D. The Pension Trust Fund is not reported at the government-wide level.


14. The General Fund's share of its contribution to a Pension Trust Fund on behalf of the its employees would be reported by the General Fund asA. A transfer out.B. An other financing source.C. An expenditure.D. An other financing use.

(Answer: C; Moderate; LO3)

15. A county uses an agency fund to collect property taxes for both itself and on behalf of the three municipalities within its borders. If the county collected $7,000 of municipal taxes during the month, what would be reported in the agency fund?

A. Revenues of $7,000.B. Revenues of $7,000, offset by expenses of $7,000.C. An increase in equity in the agency fund of $7,000.D. An increase in assets of $7,000 and an increase in liabilities of $7,000.


16. A Scholarship Private-Purpose Trust Fund of a local school board pays tuition of $10,000 on behalf of scholarship recipients. What journal entry would be made to record this transaction


in the trust fund?

Debit CreditA.

Tuition ExpensesCash

$10,000$10,000

B. Transfers to Other Governmental UnitsCash

$10,000$10,000

C. Deductions – TuitionCash

$10,000$10,000

D.

Trust RevenueCash

$10,000$10,000


17. The General Fund transfers $75,000 of employer pension contributions to the Pension Trust Fund. The Pension Trust Fund shouldA. Report revenues of $75,000.B. Report transfers of $75,000.C. Report expenses of $75,000.D. Report additions of $75,000.


18. The General Fund transfers $25,000 withheld from employee's gross pay during the last quarter to the Pension Trust Fund. Which of the following statements regarding this transaction is true?A. The General Fund will reduce a liability and the Pension Trust Fund will record

additions.B. The General Fund will report expenditures and the Pension Trust Fund will record

revenues.C. The General Fund will report expenditures and the Pension Trust Fund will record

additions.D. The General Fund will reduce a liability and the Pension Trust Fund will record revenues.

(Answer: A; Difficult; LO3)

19. Which of the following accounts would typically be reported in an agency fund?A. Due to Other Governments.B. Taxes Receivable.C. Restricted Net Position.D. Due from the General Fund.


20. Which of the following statements are required for a Tax Agency Fund?A. Statement of revenues, expenditures and changes in net positionB. Statement of revenues, expenses, and changes in net positionC. Statement of cash flowsD. Statement of changes in assets and liabilities.



21. At year end, a county tax agency fund's only asset was $500,000 in cash. The cash was collected on behalf of the following entities:County–$300,000School district–$150,000Fire district–$50,000In the county basic financial statements, the tax Agency Fund should report what amount of assets and liabilities? A. $200,000.B. $300,000.C. $450,000.D. $500,000.


22. In a Tax Agency Fund, revenues must be recognizedA. When measurable and available.B. On the cash basis.C. At net realizable value of the taxes receivable.D. Revenues are not reported for Agency Funds.


23. The local school board received a donation of $1,000,000 to establish a scholarship fund for graduating students. The scholarship is accounted for in a Private-Purpose Trust Fund. The fund would reportA. Additions of $1,000,000.B. Revenues of $1,000,000.C. A transfer of $1,000,000.D. Capital contributions of $1,000,000.


24. A Private-Purpose Trust Fund has investments totaling $1,500,000. As of the end of the fiscal year, the fair market value of these investments increased by $125,000 from the previous year. The Private-Purpose Trust Fund wouldA. Report revenues of $125,000.B. Report additions of $125,000.C. Report a transfer of $125,000.D. Not report any change until the investments are sold.


25. If an Enterprise Fund transfers employer contributions to the Pension Trust Fund, which of the following best describes the effect of the transaction on each fund?A. The Enterprise Fund will report expenses and the Pension Trust Fund will report

revenues.B. The Enterprise Fund will report deductions and the Pension Trust Fund will report

additions.5

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C. The Enterprise Fund will report expenses and the Pension Trust Fund will report additions.

D. The Enterprise Fund will report expenditures and the Pension Trust Fund will report revenues.


26. A local citizen donated land to the city's Private-Purpose Trust Fund. The land has a fair market value of $50,000 but the donor's basis was $45,000. The trust fund will reportA. Additions of $50,000.B. Additions of $45,000.C. Capital contributions of $50,000.D. Capital contributions of $45,000.


27. The municipalities for whom the county collects property taxes paid $5,000 in administrative fees to county to cover collection costs. The county will reportA. Revenues of $5,000 in the General Fund.B. Revenues of $5,000 in the Agency Fund.C. Other financing sources of $5,000 in the General Fund.D. Other financing sources of $5,000 in the Agency Fund.


28. Additions reported in the statement of changes in plan net position of a pension plan commonly include all of the following exceptA. Actuarial gains from revision of actuarial assumptions.B. Employer contributions.C. Net appreciation in the fair value of investments.D. Employee contributions.


29. Which of the following is not reported in the schedule of funding progress for a defined benefit pension plan?A. Actuarial value of assets.B. Actuarial accrued liability for future benefits.C. Covered payroll.D. Percentage of annual required contribution actually contributed.


30. Which of the following are reported for a private-purpose trust fund?A. ExpendituresB. ExpensesC. DeductionsD. Decreases to nonspendable fund balance.

(Answer: C; Easy; LO5)


31. A government receives a donation of $300,000 to establish a Private-Purpose Trust Fund. The donation should be reported asA. Revenues.B. Other financing sources.C. Additions.D. Special items.


32. A government establishes an Investment Trust Fund. During the year, it receives $500,000 from other separate legal entities to invest. The Investment Trust Fund should report this activity in the statement of changes in net position as A. Revenues.B. Other financing sources.C. Additions.D. Should not be reported.


33. Which financial statements are required for a private purpose trust fund?A. Statement of net position and statement of revenues, expenses and changes in net

position.B. Statement of net position, statement of revenues, expenses, and changes in retained

earnings, and statement of cash flows.C. Statement of net position and statement of changes in net position.D. Statement of net position, statement of changes in net position, and statement of cash

flows.(Answer: C; Moderate; LO5)

34. Equity in a fiduciary fund is referred to asA. Net position.B. Fund balance.C. Retained earnings.D. Contributed Capital.



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Sm10e TIF Ch12 Mc