ACC 410 Week 8 Quiz – Strayer
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Quiz
6 Chapter 10 and 11
Chapter
10
Permanent Funds and Fiduciary
Funds
TRUE/FALSE (CHAPTER 10)
1. Per GASB Statement No. 34, permanent funds
are classified as fiduciary funds.
2. In accounting for permanent funds only the
income can be spent; the principal must be preserved intact.
3. Fiduciary funds focus on current financial
resources and use a full accrual basis of accounting.
4. Fiduciary funds are excluded from the
government-wide statements.
5. The concept of major versus nonmajor funds
does not apply to fiduciary funds, as it does to governmental and proprietary
funds.
6. Accounting for the employer’s contribution
in a defined contribution plan is straight forward, because the employer is
obligated only to make annual contributions in the amount specified in the plan
terms.
7. Accounting for the employer’s contribution
in a defined benefit plan is straight forward,
because the employer is obligated only to make annual contributions in
the amount specified in the plan terms.
8. Most public pension plans are defined
benefit plans.
9. An employer may have a liability to a
defined benefit plan other than for its annual required contributions,
depending on the future financial health of the plan.
10. In an agency fund, assets always equals fund
balance because there are no liabilities.
MULTIPLE CHOICE (CHAPTER 10)
1. A governmental entity receives a gift of
cash and investments with a fair value of $200,000. The donor specified that the earnings from
the gift must be used to beautify city-owned parks and the principal must be
re-invested. The $200,000 gift should be
accounted for in which of the following funds?
a)
Investment trust fund.
b)
Private-purpose trust fund.
c)
Agency fund.
d)
Permanent fund.
2. In previous years, Center City had received
a $400,000 gift of cash and investments.
The donor had specified that the earnings from the gift must be used to
beautify city-owned parks and the principal must be re-invested. During the current year, the earnings from
this gift were $24,000. The earnings
from this gift should generally be considered revenue to which of the following
funds?
a)
Special revenue fund.
b)
Private-purpose trust fund.
c)
Agency fund.
d)
Permanent fund.
3. Which of the following activities of a
governmental entity should be accounted for in a fiduciary fund?
a)
Funds received from the federal government to support public
transportation activities.
b)
Funds received from an individual who specified that the principal must
be kept intact but the income can be used to support families of police
officers killed in the line of duty.
c)
Funds received from the state government that must be used to purchase
capital assets.
d)
Funds received from a contractor to assist with the development of
utility infrastructure.
4. What basis of accounting is used to account
for transactions of a governmental private-purpose trust fund?
a)
Full accrual basis of accounting.
b)
Modified accrual basis of accounting.
c)
Cash basis of accounting.
d)
Budgetary basis of accounting.
5. Which of the following would NOT be
accounted for in a fiduciary fund of a governmental entity?
a)
Nonexpendable resources held for the benefit of other governmental
units.
b)
Nonexpendable resources held for the benefit of the government holding
the resources.
c)
Expendable resources held for the benefit of other governmental units.
d)
Funds held as an agent for other entities.
6. Permanent funds are classified as
a)
Governmental funds.
b)
Proprietary funds.
c)
Fiduciary funds.
d)
Trust funds.
7. Which of the following is NOT a
fiduciary fund?
a) Pension trust funds.
b)
Investment trust funds.
c)
Permanent funds.
d)
Private-purpose trust funds.
8. What basis of accounting is used to account
for transactions of a government permanent fund?
a)
Full accrual basis of accounting.
b)
Modified accrual basis of accounting.
c)
Cash basis of accounting.
d)
Budgetary basis of accounting.
Use the following information to answer
#9-#12
Previously
a city received a $1 million gift, the income from which was restricted to
support maintenance of city-owned parks.
During the current year the endowment earned $70,000 of which $50,000 was transferred to the City Park
Special Revenue Fund.
9. On the year-end fund financial statement,
the endowment fund would report revenues of:
d)
None of the above.
10. On the
year-end fund financial statement, the endowment fund would report the $50,000
transferred to the Special Revenue Fund as:
a)
A reduction of revenues.
b)
A nonreciprocal transfer out.
c)
A reduction of equity.
d)
An expenditure.
11. On the year-end financial statements, the
endowment fund would report, as a result of these transactions, a fund balance
(net assets) of:
a)
$1,000,000
b)
$1,070,000
c)
$1,050,000
d)
$1,020,000
13. Cedar City has a permanent fund that reported
current year investment earnings (realized and unrealized) of $80,000. The endowment principal is $800,000 and the
city council has adopted a policy of considering only the inflation adjusted
rate of return to be available for transfer to the recipient fund. During the current year the Council declared
the inflation-adjusted rate of return to be 8%.
How much revenue would be
recognized in the permanent fund?
a)
$ 0.
b)
$ 64,000.
c)
$ 80,000.
d)
Unable to determine.
14. At the beginning of the year, the permanent
fund of Rapid City had an investment
portfolio with a historical cost of $200,000 and a fair value of $220,000. There were no purchases or sales of
securities during the year. At year end
the portfolio had a fair value of $240,000.
At the end of the year Rapid City will account for this increase in fair
value in which of the following ways?
a)
Credit Investment Income, $20,000.
b)
Credit Investment Income, $40,000.
c)
Credit Fund Balance, $20,000.
d)
No entry is made to recognize increase in fair value.
15. Several years ago, a donor gave $5 million to
the City and specified that the principal was to be kept intact but the
earnings were to be used to support operations of the city parks. During the current year, the City earned
$300,000 on the gift. To what type of
fund should the City transfer accountability for the $300,000 earnings.
a)
It should not transfer accountability.
The $300,000 should remain in the Permanent Fund.
b)
A special revenue fund.
c)
The General Fund.
d)
An enterprise fund.
16. A defined contribution pension plan is one in
which the employer agrees to which of the following?
a)
The employer agrees to make specific payments to a specified pension
plan with no guarantee of a specific pension amount to be paid to the employee.
b)
The employer agrees to make specific payments to a specified pension
plan AND guarantees that the employee will receive a specified pension (usually
determined by length of service and salary).
c)
The employer agrees to make necessary payments to a specified pension
plan that guarantees that the employee will receive a specified pension
(usually determined by length of service and salary).
d)
The employer agrees to pay a specified amount (usually determined by
length of service and salary) to the employee, but the employer makes no
specific guarantee to make payments to the specified pension plan.
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