Appendix 10: Answers to Reinforcement Quiz ñ Section II, Chapter 4
Answers to Reinforcement Quiz ñ Section II, Chapter 4
1.
Describe the three categories of credit risk for deposits.
Answer:
(1) Collateralized with securities held by the pledging financial
institutionís trust department or agent, but not in the depositor-
governmentí name.
(2) Collateralized with securities held by the pledging financial
institution.
(3) Uncollateralized. The uncollateralized category includes any bank
balances that are collateralized with securities held by the pledging
financial institution, or by its trust department or agent that are not
in the entityís name.
2.
Unrealized gains and losses should be reported as revenue based on the
fair value of investments. True or false?
Answer: True.
3.
Which of the following is a nonexchange transaction?
a. traffic fine
b. building permit
c. driverís license
d.
parking meter charge
Answer: A traffic fine is an imposed nonexchange transaction (a).
4.
Identify different eligibility requirements for government-mandated or
voluntary nonexchange transactions.
Answer: The recipient and secondary recipients meet characteristics
specified by the provider. For example, to receive a law enforcement
grant, the recipient has to be a law enforcement agency.
The time requirements specified by the provider have been met. For
example, a federal grant may allow spending to take place between Oct. 1
and Sept. 30. Any spending prior to, or after, those dates would not be
eligible.
The provider specifies that resources will be provided on a reimbursement
basis; this is also known as an ìexpenditure-drivenî grant.
The provider may specify contingencies, such as providing matching
funds.
Online version, for personal use only
AGA Study Guide 2, 2016 Edition

Appendix 10: Answers to Reinforcement Quiz ñ Section II, Chapter 4
5.
Receivables should be reported as the amount due, irrespective of
discounts or allowances. True or false?
Answer: False. Receivables should be reported net of allowances,
refunds and discounts.
6.
A government is reporting the receivable for property taxes. The amount
of the levy is $10 million. Historically, 15 percent of the levy is not paid by
the end of the year and 5 percent of the levy is not paid within 60 days
after the end of the year. The historical uncollectible percentage is 1
percent of the levy. How much should the government report as a
receivable at the end of the year?
a. $100,000
b. $500,000
c. $1.4 million
d. $1.5 million
Answer: (c). The amount of the receivable at the end of the year is 15
percent of $10 million, or $1.5 million. Historically, 1 percent of $10 million
is uncollectible, or $100,000. Thus the receivable at the end of the year is
$1.4 million.
7.
Describe the types of reciprocal and nonreciprocal interfund activity.
Answer: Reciprocal transactions are interfund loans and interfund
services provided. Nonreciprocal transactions are interfund transfers and
reimbursements.
8.
An interfund loan that is not expected to be repaid within a reasonable
time after the end of the fiscal year is reclassified as an advance. True or
false?
Answer: False. It is reported as a transfer between funds.
9.
A government must recognize inventory as an asset on the balance sheet
of governmental funds, or as asset of governmental activities on the
statement of net position if the amount is significant. True or false?
Answer: True.
10. Describe the major classes of capital assets.
Answer: Land, buildings, improvements other than buildings, machinery
and equipment, intangible assets, works of art and historical treasures,
and infrastructure are all major classes of capital assets,
Online version, for personal use only
AGA Study Guide 2, 2016 Edition

Appendix 10: Answers to Reinforcement Quiz ñ Section II, Chapter 4
11. Which of the following is not a required disclosure for capital assets?
a. acquisitions
b. dispositions
c. gain or loss
d. accumulated depreciation
Answer: Gain or loss (c) on the sale is not a required disclosure.
12. Revenue must be reported as a deferred inflow in governmental funds if it
is not available. True or false?
Answer: True. This is consistent with the current financial resources
measurement focus and modified accrual basis of accounting.
13. Describe the two criteria for recognizing a liability for compensated
absences in proprietary funds.
Answer: The right to receive compensation is attributable to services
already rendered, and it is probable that the employer will compensate the
employee.
14. A government has a policy to pay 50 percent of the value of sick leave to
employees when they terminate. At year-end, employees working in
governmental funds have accumulated $10 million in sick leave benefits.
The government expects 5 percent of the employees to retire and another
15 percent to terminate employment within the next fiscal year. The
government also expects 50 percent of the accumulated leave to be used
prior to termination or retirement. ...











































































































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AGA CGFM Study Guide 2: Governmental Accounting, Financial Reporting and Budgeting