GAC Financial Analysis & Reporting 3

Question 1

A city's general fund shows a $500,000 fund balance deficit. Which component of fund balance is most likely to cause this?

Accepted Answer

Unassigned fund balance

Answer

Only the unassigned fund balance classification can be negative; deficits in the general fund are reported as negative unassigned fund balance under GASB 54.

Question 2

Which of the following would be classified as a program revenue on the government-wide Statement of Activities?

Accepted Answer

Federal grant restricted to highway maintenance

Answer

Program revenues are directly linked to a specific function or program, such as a restricted federal grant for highway maintenance, and offset that program's expenses.

Question 3

Under GASB standards, infrastructure assets reported using the modified approach are NOT required to be:

Accepted Answer

Depreciated

Answer

The modified approach allows governments to expense preservation costs rather than depreciate infrastructure assets, provided condition assessment requirements are met.

Question 4

What is the primary purpose of a reconciliation between fund financial statements and government-wide financial statements?

Accepted Answer

To explain differences arising from measurement focus and basis of accounting

Answer

The reconciliation bridges the modified accrual, current financial resources basis used in governmental funds to the accrual, economic resources basis used in government-wide statements.

Question 5

A government issues $10M in general obligation bonds at a premium of $500,000. How should the premium be reported in governmental fund statements?

Accepted Answer

As other financing source

Answer

In governmental fund accounting, bond premiums are reported as other financing sources in the period received because they represent a current financial resource.

(GAC) Governmental Accounting Certification Practice Test

(GAC) Governmental Accounting Certification Practice Test

GAC Financial Analysis & Reporting 3