Question

MC11-14. Which of the following is considered an asset in computing the quick ratio?

		Supplies inventory
		Prepaid insurance
		Investments in long-term bonds
		Certificates of deposit purchased with an original maturity of 30 days

MC11-15. What is the basic purpose of calculating the number of days' cash on hand?

		To determine the speed with which property taxes are collected
		To determine whether cash should be invested in certificates of deposit
		To determine how long the cash and short-term investments will be available to pay forthcoming expenditures
		To determine how much cash and certificates of deposit should be placed in a "rainy day" fund

MC11-16. Which of the following pairs of accounts are used in computing a city's budgetary cushion?

		cash and investments
		unassigned fund balance and assigned fund balance
		quick assets and taxes receivable
		cash and restricted fund balance

MC11-17. Current guidance suggests that a "reasonable" budgetary cushion intended to enable local governments to weather economic contractions and unforeseen emergency needs should fall within which of these ranges, as a percentage of General Fund revenues and transfers in?

		0%-6%
		10%-16%
		20%-26%
		30%-36%

MC11-18. When calculating a government's operating margin, which of the following transactions is most likely to cause the analyst to consider reducing the numerator (net change in fund balance), assuming the dollar amount is significant?

		proceeds from the sale of the government's parking facilities to a private entity
		a recurring transfer in from the Lottery Fund
		a routine transfer out to the Debt Service Fund
		payment of the entity's pension contribution to the Pension Fund, based on the actuary's determination

MC11-19. Overlapping debt is which of the following?

		general obligation debt sold to finance the capital assets of Enterprise Funds
		debt sold by a public authority on behalf of a primary government
		the proportionate share of debt issued by other governmental units that provide services to the citizens of the government
		the portion of total debt issued by a government that is due in future years

MC11-20. What does the funded ratio measure?

		the portion of the outstanding debt that has been set aside in a debt service reserve fund
		the portion of the current year's tax levy that was collected during the year
		the portion of the outstanding debt that is scheduled to be paid off in the next 10 years
		the portion of the total pension liability that is covered by the fiduciary net position

MC11-21. Historically, at what level should the funded ratio of a pension plan be in order for the plan to be considered "reasonably" funded?

		80 percent
		100 percent
		60 percent
		50 percent

Answer 1

1) Solution: Certificates of deposit purchased with an original maturity of 30 days

Explanation: Quick ratio is computed as: {Current asset - Inventory - Prepaid expenses] / Current assets

2) Solution: To determine how long the cash and short-term investments will be available to pay forthcoming expenditures

Explanation: The the number of days' cash on hand is computed to know the time frame the cash and short-term investments will be available for paying the business forthcoming expenditures

3) Solution: unassigned fund balance and assigned fund balance

Explanation: The funds in unassigned and assigned balance are utilized to determine the city's budgetary cushion.

4) Solution: 10%-16%

Explanation: 10%-16% of General Fund revenues and transfers allow local governments to determine the economic contractions and unforeseen emergency needs

5) Solution: proceeds from the sale of the government's parking facilities to a private entity

Explanation: There will be proceeds from the sale of the parking facilities in a government entity to a private entity

6) Solution: the proportionate share of debt issued by other governmental units that provide services to the citizens of the government

Explanation: Overlapping debt refers to proportionate debt share issued by other governmental units which give services to the government citizens.

7) Solution: 80 percent

Explanation: History reveals that 80% funded ratio of a pension plan should be in order for the plan