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Exam 4: An Introduction to General and Special Revenue Funds

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Question 21

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The tax roll serves as the subsidiary ledger for a government's property taxes receivable.

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Question 22

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The village of Briarcliff operates on a calendar-year basis. Because of cash flow imbalances in the General Fund, the village needs to borrow cash during the year. Also, at various times during the year, the village has idle cash to invest. Prepare journal entries to record the following transactions: a. The village borrows $1,500,000 on a tax anticipation note (TAN) on February 1, 2020 at an interest rate of 1.2 percent. One-half of the borrowing is payable with interest on July 31, 2020; the other half is payable with interest on January 31, 2021. b. The village repays $750,000 of the TAN with interest on July 31, 2020. c. On September 1, 2020, the village invests idle cash of $400,000 in a three-month CD paying 1.5 percent per annum. d. The investment made on September 1, 2020 (item c, above) matures on November 30, 2020. The village receives the cash, including interest e. The village prepares financial statements as of December 31, 2020 and accrues the interest payable on the TAN (see item a., above).

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Question 23

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A city or county always will have $\begin{array}{cc} & \text { One or more } \\\text { A General Fund } & \text { Special Revenue Funds }\end{array}$ A) $\begin{array}{cc} && \text { yes } &&&&&&&& \text { no } \\\end{array}$ B) $\begin{array}{cc} && \text { no } &&&&&&&& \text { yes } \\\end{array}$ C) $\begin{array}{cc} && \text { no } &&&&&&&& \text { no } \\\end{array}$ D) $\begin{array}{cc} && \text { yes } &&&&&&&& \text { yes }\end{array}$

Governments use Special Revenue Funds to provide elected officials, resource providers, and the citizenry with a greater degree of assurance that the revenues provided for specified purposes are used only for those purposes.

Which of the following accounts would not be appropriate in the closing entry of a General Fund or a Special Revenue Fund?

The City of Seales has a December 31 fiscal year end. Salaries earned by the City's General Fund employees for the period December 24 through December 31 will not be paid until January 7 of the next year. When it closes its books for the year, the City of Seales' accounting personnel would:

The General Fund is formally defined as the fund used to account for and report on:

The preclosing trial balance of the General Fund of the City of Thomason shows the following balances at the end of the fiscal year. Based on that information, (a) prepare closing entries for the budgetary and financial accounts, and (b) calculate the city's actual ending fund balance. $\begin{array} { l r } \text { Budgetary fund balance } & \$ 10,000 \\\text { Fund balance, beginning (actual) } & 150,000 \\\text { Estimated revenues } & 620,000 \\\text { Appropriations } & 610,000 \\\text { Revenues (actual) } & 625,000 \\\text { Expenditures } & 605,000\end{array}$

Which of these line items is not appropriate in the statement of revenues, expenditures, and changes in fund balance of the General Fund?

To close the nominal financial accounts of a Special Revenue Fund, a debit needs to be made to revenue accounts and a credit made to expense accounts.

Which of the following is required to be prepared for the General Fund according to GASB standards?

The Village of Walton borrows $500,000 for a period not to exceed six months using a tax anticipation note. The proceeds from the borrowing are deposited in the General Fund. The note will be repaid when property taxes are collected. What journal entry, if any, should be made in the General Fund when the Village borrows the money? a. $\begin{array}{ll}\text { Cash } & 500,000 \\\text { Other financina source-debtissued } && 500.000\end{array}$ b. $\begin{array}{lll}\text { Cash } & 500,000 & \\\quad \text { Revenues-property taxes } && 500,000\end{array}$ c. $\begin{array}{lll}\text { Cash } & 500,000 & \\\text { Tax anticipation notes payable } && 500,000\end{array}$ d. Tax anticipation notes are not recorded in governmental-type funds, including the General Fund.

Following is the adjusted trial balance for the General Fund of the Township of Whitt as of June 30, 2020, the end of the fiscal year. Prepare (a) a balance sheet and (b) a statement of revenues, expenditures, and changes in fund balance. $\begin{array}{c}\text {Township of Whitt }\\\text {General Fund }\\\text {Adjusted Trial Balance}\\\text { June 30, 2020}\\\begin{array}{lrr}\text { Cash } & \$ 6,200 \\\text { Taxes receivable } & 40,000 \\\text { Investments } & 65,000\\\text { Vouchers payable } && \$ 38,750 \\\text { Tax anticipation notes payable } && 12,750 \\\text { Unassigned fund balance }&&57,000\\\text { Estimated revenues } & 101,000 \\\text { Appropriations } && 99,000 \\\text { Budgetary fund balance } && 2,000 \\\text { Revenues-taxes } && 100,000 \\\text { Revenues-other } && 2.080\\\text { Expenditures--personal services } & 94,700 \\ \text { Expenditures-supplies } & \underline{4,680}&\underline{\quad\quad} \\& \underline{\$ 311,580}& \underline{\$ 311,580} \\ \end{array}\end{array}$

In the General Fund, revenues for property taxes are recognized only if they are both measurable and available.

The City of Stewart levies property taxes of $1,800,000 for its current fiscal year. The City expects to collect all of the property taxes before its fiscal year-end. What journal entry, if any, should the City of Stewart make to record this levy of the property taxes in its General Fund? a. $\begin{array}{lll}\text { Property taxes receivable } & 1,800,000 & \\\quad \text { Revenues-property taxes } && 1,800,000 \\\end{array}$ b. $\begin{array}{lll}\text { Property taxes receivable } & 1,800,000 \\\quad \text { Other financing source-property taxes } & &1,800,000 \\\end{array}$ c. $\begin{array}{lll}\text { Property taxes receivable } & 1,800,000 \\\quad \text { Deferred revenues-property taxes }& & 1,800,000\end{array}$ d. No entry is required because this transaction relates to an activity accounted for in the General Fund and revenue should only be recognized when it is collected.

When making a budget adjustment to decrease appropriations in a Special Revenue Fund's budgetary accounts, a credit entry is made to an appropriations account.

The Village of Monroe borrowed $500,000 for a period of six months using a tax anticipation note on November 1, 2019. The Village is charged interest on the borrowing at annual rate of 6 percent. The Village's fiscal year-end is December 31, 2019. What journal entry, if any, should be made in the Village's General Fund on December 31, 2019? a. $\begin{array}{l}\text { Expenditures-interest } &5,000\\\text { Interest payable }&&5,000\end{array}$ b. $\begin{array}{l}\text { Expenditures-interest } &15,000\\\text { Interest payable }&&15,000\end{array}$ c. $\begin{array}{lll}\text { Interest expense } & 5,000 & \\\text { Interest payable } && 5,000\end{array}$ d. No entry is required on December 31, 2019.

To record its General Fund budget at the beginning of its fiscal year, a city would debit appropriation accounts and credit estimated revenue accounts.

According to GASB financial reporting requirements, the General Fund and major Special Revenue Funds are required to prepare a budgetary comparison statement.

The city council passed a budget for its only Special Revenue Fund. The budget included estimated revenues of $380,000 and appropriations of $410,000. The budget was recorded in the general ledger at the beginning of the year and no amendments to the budget occurred during the year. What journal entry should be made to close the city's budgetary accounts for its Special Revenue Fund at its fiscal year-end? a. $\begin{array}{lr}\text { Appropriations } & 410,000 \\\text { Estimated revenues } && 380,000 \\\text { Budgetary fund balance } && 30,000\end{array}$ b. $\begin{array}{lrl}\text { Estimated revenues } & 380,000 & \\\text { Budgetary fund balance } & 30,000 & \\\text { Appropriations } & & 410,000\end{array}$ c. $\begin{array}{lr}\text { Appropriations } & 410,000 \\\text { Estimated revenues } && 380,000 \\\text { Unassigned fund balance } && 30,000\end{array}$ d. $\begin{array}{lrl}\text { Estimated revenues } & 380,000 & \\\text { Unassigned fund balance } & 30,000 & \\\text { Appropriations } & & 410,000\end{array}$