CPA Financial Accounting and Reporting (FAR) : CAFR (Fund) Accounting
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Example Questions
Example Question #1 : Cafr (Fund) Accounting
The city of Hammond opened a landfill at the beginning of Year 1, which is expected to take 10 years to fill. At the end of Year 1, the land full is 8% full and the estimated current closures costs are $150,000. At the end of Year 2, the landfill is currently 20% full and the estimated closure costs are $200,000. The city does not charge a fee to use the landfill and thus reports it in the general fund. What amount of expenditures should be reported in Year 2 in the fund-based financial statements in connection with the closure of the landfill?
$0
$38,000
$40,000
$12,000
$0
Nothing is recorded for closure costs in the fund financial statements because no current economic resources were used for closing the landfill. A liability would be recorded in the government-wide statements because the focus in those statements is on both current and non-current resources.
Example Question #2 : Cafr (Fund) Accounting
The fire department of Forbes Township purchased a new fire truck on January 1, Year 1. Fund-based financial statements are being produced for Year 1 that include the fire department in the general fund. Which of the following statements is true?
Recognition of depreciation expense is optional
Depreciation expense should be calculated and reported for the fire truck only if the modified approach is used
Depreciation expense should be calculated and reported for the fire truck
Recognition of depreciation expense is not appropriate
Recognition of depreciation expense is not appropriate
The focus of the fund financial statements is current financial resources, and recording depreciation will not impact current financial resources. Thus, the purchase of the car will be reflected in the fund statements, but the depreciation will only be recorded in the government-wide statements, which includes non-current resources as well as current resources.
Example Question #3 : Cafr (Fund) Accounting
Golden City levies a real estate tax. In Year 1, the city expects to collect $400,000 between January 1, Year 2, and March 15, Year 2. It expects to collect $160,000 per month in January and February, and an additional $80,000 in March. The city's policy is that money collectible within 60 days is considered available. How much of the revenue should be recognized in Year 1 in the fund financial statements?
$160,000
$400,000
$0
$320,000
$320,000
At the end of Year 1, the city will only recognize the revenue it expects to collect within the next 60 days. This includes January and February, so Year 1 revenue will include $160K for January + $160K for February.
Example Question #4 : Cafr (Fund) Accounting
If a primary government's general fund has an equity interest in a joint venture, all or a portion of this equity interest should be reported in the:
Custodial fund
Internal service fund
Trust fund
Government wide statement of net position
Government wide statement of net position
The portion of the equity interest in the joint venture that represents the government's investment in the net position of the venture is recorded in the government wide statement of net position.
Example Question #5 : Cafr (Fund) Accounting
Which of the following would be reported as program revenues on a local government's government wide statement of activities?
Charges for services
Taxes levied for a specific function
Interest revenues
Proceeds from the sale of a capital asset used for a specific function
Charges for services
For a local government's government wide statement of activities, charges for services are reported as program revenue.
Example Question #6 : Cafr (Fund) Accounting
Internal service funds, while being proprietary funds, are reported under which at the government wide level?
Proprietary
Fiduciary
Disclosure
Governmental activities
Governmental activities
When the consolidation of governmental financial statements are complete, the internal service funds are displayed under governmental activities rather than proprietary.
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