CGFO Governmental Accounting & Financial Reporting 4 — Questions and Answers
Question 1: Under GASB 34, which of the following would be included in the government-wide Statement of Activities as a 'program revenue'?
- Property taxes levied for general purposes
- State revenue sharing distributions
- Fees charged to library cardholders for overdue materials (Correct answer)
- General sales tax collections
Correct answer: Fees charged to library cardholders for overdue materials
Program revenues are directly associated with a specific function, including charges for services, so library fines directly offset library program costs.
Question 2: A city receives a $500,000 federal grant that must be used only for road repairs. In which fund should this be recorded?
- General Fund, because all government revenues go there first
- Special Revenue Fund, because the grant is restricted to a specific purpose (Correct answer)
- Capital Projects Fund, since roads are capital assets
- Permanent Fund, because it is from an external source
Correct answer: Special Revenue Fund, because the grant is restricted to a specific purpose
Restricted grants for a specific operating purpose are accounted for in a Special Revenue Fund to demonstrate legal compliance with spending restrictions.
Question 3: When reporting internal service fund activity in government-wide statements, where is the net revenue or deficit typically reclassified?
- Business-type activities column
- Governmental activities column, since ISFs predominantly serve governmental funds (Correct answer)
- Fiduciary activities column
- It is eliminated entirely with no reclassification
Correct answer: Governmental activities column, since ISFs predominantly serve governmental funds
Because internal service funds primarily serve governmental functions, their residual net revenue or loss is reclassified to governmental activities in the government-wide statements.
Question 4: What does GASB Statement No. 75 address?
- Accounting for leases in governmental entities
- Other postemployment benefits (OPEB) for governmental employers (Correct answer)
- Revenue recognition for grants and contributions
- Capital asset impairment
Correct answer: Other postemployment benefits (OPEB) for governmental employers
GASB 75 established accounting and financial reporting requirements for OPEB (e.g., retiree health care), paralleling GASB 68 for pensions.
Question 5: A government's total assets are $50 million, total deferred outflows are $2 million, total liabilities are $40 million, and total deferred inflows are $3 million. What is the net position?
- $9 million (Correct answer)
- $10 million
- $12 million
- $7 million
Correct answer: $9 million
Net Position = (Assets + Deferred Outflows) − (Liabilities + Deferred Inflows) = ($50M + $2M) − ($40M + $3M) = $9 million.
Question 6: Under GASB 33, a capital grant restricted to capital acquisition should be recognized as revenue when:
- The grant agreement is signed
- All eligibility requirements have been met (Correct answer)
- Cash is received from the grantor
- The capital asset is placed into service
Correct answer: All eligibility requirements have been met
GASB 33 requires that grant revenues be recognized when all eligibility requirements—including time, purpose, and reimbursement conditions—have been satisfied.
Question 7: Which component of net position represents the net amount invested in capital assets reduced by outstanding related debt?
- Restricted net position
- Unrestricted net position
- Net investment in capital assets (Correct answer)
- Committed fund balance
Correct answer: Net investment in capital assets
Net Investment in Capital Assets equals the cost of capital assets less accumulated depreciation and less any outstanding debt used to acquire those assets.
CGFO Governmental Accounting & Financial Reporting 4
Under GASB 34, which of the following would be included in the government-wide Statement of Activities as a 'program revenue'?