A. Required in the basic financial statements and in the CAFR.
B. Optional in the basic financial statements but required in the CAFR.
C. Optional in the basic financial statements and optional in the CAFR.
D. Required in the CAFR.
(Answer: D; Moderate; LO1)
12. Footnote information that duplicates information in financial statements included in the CAFR
A. May be eliminated.
B. May be eliminated if the government does not issue its basic financial statements separately.
C. May be eliminated if the government does issue its basic financial statements.
D. Is common and must be presented despite the duplication.
13. A “dual opinion” audit is one where
A. The auditors render an opinion on the primary government and any component units.
B. The auditors render an opinion on both the basic financial statements and the combining and
individual fund financial statements.
C. The auditors render an opinion on both the financial and statistical sections of the CAFR.
D. The auditors render an opinion on the primary government, component units, and the CAFR as a
whole.
14. In reviewing their governmental funds, a local municipality determines that three of the funds
(including the General Fund are considered major funds and the remaining six governmental funds
are nonmajor. However, management prefers to report all of its governmental funds as major funds.
What is the maximum number of fund columns that could be presented on the governmental fund
balance sheet?
A. 3.
B. 4.
C. 6.
D. 9.
15. Assume that a government has three nonmajor Enterprise Funds. Which of the following statements
regarding the reporting requirements in a CAFR is false?
A. Nonmajor funds are not reported on an Enterprise Fund statement of cash flows.
B. Even if the funds are nonmajor, the government may choose to declare them as major funds and
report each in a separate column on the appropriate fund statements.
C. The CAFR must include combining financial statements for any nonmajor fund columns that
include more than one fund.
D. Nonmajor funds are reported in the aggregate on all proprietary fund financial statements.
16. Which of the following financial statements would not be reported anywhere in the fund financial
statements presented as part of the basic financial statements?
A. Statement of net position.
B. Statement of cash flows.
C. Balance sheet.
D. Statement of Changes in Assets and Liabilities.
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17. Which fund types report the results of operations using a Statement of Revenues, Expenditures, and
Changes in Fund Balances?
A. General Fund, Special Revenue Funds, Debt Service Funds, Capital Projects Funds, Enterprise
Funds, and Internal Service Funds.
B. General Fund, Special Revenue Funds, Debt Service Funds, and Enterprise Funds.
C. General Fund, Special Revenue Funds, Debt Service Funds, Capital Projects Funds.
D. General Fund, Special Revenue Funds, Debt Service Funds, Capital Projects Funds, Permanent
Funds.
18. Which fund type would be reported in the Statement of Revenues, Expenditures, and Changes in
Fund Balance?
A. Enterprise Funds.
B. Internal Service Funds.
C. Permanent Funds.
D. Pension trust funds.
19. In the basic financial statements, separate sets of fund financial statements should be presented for
A. Each fund.
B. Each major fund
C. Each fund type.
D. Each fund category.
20. Whether or not to declare a fund as being major is not optional for
A. The General Fund.
B. A Capital Projects Fund.
C. Debt Service Fund.
D. Enterprise Fund.
21. What is the maximum number of columns that could appear on the statement of fiduciary net position
in the fund financial statements presented as part of the basic financial statements?
A. 1.
B. 2.
C. 3.
D. 4.
22. When there are more than two funds of the relevant fund type, combining financial statements would
not be required in the CAFR for which types of funds?
A. Nonmajor governmental funds.
B. Major Enterprise Funds.
C. Internal Service Funds.
D. Agency Funds.
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23. In which of the following situations would a component unit be required to prepare a CAFR, not just
the basic financial statements?
A. The primary government prepares a CAFR.
B. The component unit will be issuing general obligation bonds in the coming year.
C. The component unit has prepared a CAFR in the past.
D. There are no situations in GAAP where any entity is required to prepare a CAFR.
24. Blended and discretely presented component units may issue separate financial statements. Which of
the following statements is false related to this provision in GAAP?
A. If a blended or discretely presented component unit issues separate financial statements, they are
not required to be reported as part of the primary government’s reporting entity.
B. GAAP require component units to report any component units they may have as part of their
separately issued financial statements.
C. GAAP do not prevent component units from separately issuing their own financial statements.
D. The primary government must include any component units in their external financial reporting to
comply with GAAP.
25. If a primary government reports a discretely presented component unit, then the primary government
must
A. Prepare two separate Management’s Discussion and Analyses.
B. Prepare two sets of note disclosures.
C. Include the financial information of the discretely presented component unit in the government-
wide financial statements.
D. Include information related to the discretely presented component unit within the statistical
section of the CAFR.
26. Britt County has seven discretely presented component units. Three of the component units are
considered “governmental” in nature and the remaining four are considered “business-type” in nature.
How many columns for the discretely presented component units would be reported on the General
Fund balance sheet?
A. 0.
B. 1.
C. 2.
D. 7.
27. If a state has three discretely presented component units, two of which are “governmental” in nature
and one of which is “business-type” in nature, what is the minimum number of discretely presented
component unit columns that can be reported in the government-wide statements?
A. 0.
B. 1.
C. 2.
D. 3.
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28. The City of Newport appointed the original governing board of the Newport Historical Association, at
which point the board became self-sustaining. The city has historically (but voluntarily) provided
funding for the Association for the past several years. The city of Newport should
A. Not report the Association as a component unit.
B. Report the Association as a blended component unit.
C. Report the Association as discretely presented component unit.
D. Disclose that the Association is a joint venture.
29. Which of the following criteria is not required to be met for a government to be considered fiscally
independent?
A. Has separate legal standing.
B. Has the authority to adopt its own budget without the substantive approval of any other entity.
C. Has the authority to issue bonded debt without the substantive approval of any other entity.
D. Has the authority to set its own fees and charges without substantive approval of any other entity.
30. An entity is a component unit of another entity if
A. A voting majority of its governing body is appointed by the other entity.
B. It is fiscally dependent on the other entity and a benefit or burden relationship exists with the
other entity.
C. It has a financial benefit or burden relationship with the other entity.
D. The other entity is obligated in some manner on its debt.
31. In discrete presentation, component unit
A. Funds are reported as the same type of funds of the primary government.
B. Funds are treated as Special Revenue Funds of the primary government since the resources can
only be used for the component unit’s programs.
C. Data is presented in the government-wide financial statements separate from the primary
government data.
D. Basic financial statements must always be included in the primary government’s comprehensive
annual financial report.
32. Substantively the same governing body means that
A. Virtually the entire governing body of the primary government serves, in an ex officio capacity, as
virtually the entire governing body of a component unit.
B. A voting majority of the component unit governing body is made up of a voting majority of the
primary government governing body.
C. A voting majority of the primary government governing body serves on the component unit
governing body.
D. A voting majority of the component unit governing body also serves on the primary government
governing body.
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33. How should information about each major discretely presented component unit be presented in the
financial statements?
A. Report only as condensed financial statements reported in the notes to the financial statements.
B. Report only in single column in the government-wide statements.
C. Report only in combining financial statements which are included in the primary government’s
basic financial statements after the fund financial statements.
D. Report only in a single column in the government-wide statements with condensed financial
statements in the notes.
34. The governing board of the City of Wheaton is also the governing board of Mosquito Abatement
District, a business-type activity. A benefit or burden relationship exists between the city and the
district. Which of the following statements regarding the financial reporting options is false?
A. The District is a blended component unit and is reported in both the fund financial statements and
the government-wide financial statements.
B. The District is not subject to major fund reporting criteria.
C. The District may be reported in a separate column on the Proprietary Fund financial statements,
but would most likely be reported within the business-type activities column in the government–
wide financial statements.
D. The District is not to be reported as a discretely presented component unit.
35. The Mount Pilot Airport Authority is governed by a seven-member board. Four of the board members
are appointed by the town of Mount Pilot and the remaining three are appointed by the governing
board of Griffith County. Neither the town nor the county share in any profits, nor are required to
fund any deficits, of the Authority. The town, however, does approve the Authority’s proposed budget.
The county may make budgetary recommendations to the Authority, but they are not required to
approve the proposed budget. The Authority should be reported as
A. A jointly governed organization by both the town and the county.
B. A joint venture by both the town and the county.
C. Discrete component units of both the town and the county.
D. A discretely presented component unit of the town.
36. If a governmental entity has a blended component unit, the note disclosures should include all of the
following except
A. How the component unit met the blending criteria.
B. A statement that identifies the component units as a being blended.
C. How to access separately issued external financial statements.
D. The number of component unit governing board members.
37. Assume that a blended component unit of the town has its own General Fund, Special Revenue Fund,
and Capital Projects Fund. All funds meet the major fund criteria. The primary government has a
General Fund, three Special Revenue Funds, one Permanent Fund, one Debt Service Fund, and three
Capital Projects Funds. All but the Permanent Fund and two Special Revenue Funds of the primary
government are major funds. How many fund columns would be presented on the governmental
funds’ balance sheet?
A. 4.
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C. 9.
D. 12.
38. Which of the following potential component units would not be reported as blended component unit
of the county?
A. A hospital which is the primary health care provider for the county residents and whose board is
appointed by the county.
B. A recreation district where the governing board of the county serves as its governing board and
the management of the country operates the recreation district.
C. A financing authority that exclusively serves the county.
D. A school district whose debt will be repaid by the county.
39. Which of the following scenarios does not describe governing boards of a primary government and a
potential component unit that are substantially the same?
A. A city’s governing board members are the ex-officio governing board members of the Library
District.
B. A county has a seven-member board. Five of these board members serve on an eight-member
authority board.
C. A county has a seven-member board. Three of these board members serve on a five-member
authority board.
D. There are seven members serving on the city council. Five of these council members are the
entire governing board of a historical district board.
40. Wakefield Village and Wakefield County were partners in the development of the Wakefield Water
Authority, which is a separate legal entity. Neither the village nor the county will share in any profits
of the Authority. Both, however, are obligated to fund any deficits or debt defaults that may occur,
though this scenario is considered to be highly unlikely. Both the village and the county appoint three
of the seven Water Authority board members. The seventh is appointed by another village in the
county. Both the Wakefield Village and Wakefield County should report the Authority as
A. A related organization.
B. A jointly governed organization.
C. A joint venture.
D. A discretely presented component unit.
1. Nongovernment not-for profit organizations that wish to follow generally accepted
accounting principles in the preparation of their financial statements should follow
A. FASB standards.
B. GASB standards.
C. FASB standards.
D. AICPA Auditing Accounting Guide Non-Profit Organizations.
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volunteer. The volunteer works as a receptionist for the organization. The market value of
service is $5,000. How should this activity be reported be in the statement of activities?
A. Not be reported.
B. Unrestricted support, $5,000.
C. Restricted support, $5,000.
D. Both unrestricted support and program expense, $5,000.
3. Other not-for-profit organizations include
A. Hospitals.
B. Colleges and universities.
C. Religious organizations.
D. Voluntary health and welfare organizations.
4. Nongovernment not-for-profit organizations are required to report their financial statements
on
A. A current financial resources measurement focus.
B. An economic resources measurement focus.
C. A cash measurement focus.
D. An accrual measurement focus.
5. A not-for-profit organization was the recipient of a significant fixed asset donation. The
assets, a building valued at $82,000, and one acre of land, valued at $210,000, are going to be
used by the organization for office space and parking. The donor’s net book value of the
building was $22,000, and the land basis was $65,000. The not-for-profit organization’s total
basis for the assets should be
A. $87,000.
B. $104,000.
C. $147,000.
D. $292,000.
6. A not-for-profit organization receives donated supplies valued at $40,000 in June. As of the
fiscal year end December, 31, 20X3, the organization had used 25% of the materials. The
organization should report
A. Restricted contributions of $40,000 and no expenses.
B. Restricted contributions and expenses of $40,000.
C. Unrestricted contributions of $40,000 and expenses of $10,000.
D. Unrestricted contributions of $10,000 and no expenses.
7. A nongovernment voluntary health and welfare organization received unrestricted cash
donations of $23,000 for the current year, $30,000 of donations to be used for the following
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organization should report
A. Unrestricted revenues of $53,000 and permanently restricted revenues of $100,000.
B. Temporarily restricted revenues of $153,000.
C. Unrestricted revenues of $23,000 and temporarily restricted revenues of $130,000.
D. Unrestricted revenues of $23,000, temporarily restricted revenues of $30,000, and
permanently restricted revenues of $100,000.
8. A private school is given $40,000 to permanently endow one of its education programs. A
debit of $40,000 should be made to
A. Cash.
B. Unrestricted cash.
C. Temporarily restricted cash.
D. Cash restricted for endowment.
9. The board of directors of a nongovernmental not-for-profit organization voted to designate
$100,000 of its unrestricted net assets to be used for its permanent endowment. Which of the
following best describes the accounting and financial reporting implications of this action?
A. The net assets are still considered unrestricted.
B. The net assets are now considered temporarily restricted.
C. The net assets are now considered permanently restricted.
D. Unrestricted net assets will decrease in total.
10. The statement of net assets for a nongovernment nonprofit organization would report the
following components of net assets except
A. Unrestricted net assets.
B. Temporarily restricted net assets.
C. Net investment in capital assets.
D. Permanently restricted net assets.
11. A nongovernment, not-for-profit organization provides the following information and asks
you to determine how much revenue should be reported in each of its changes in net assets
categories. All pledges are unconditional
Cash contributions restricted to specific programs $200,000
Cash contributions restricted to endowment $1,000,000
Net realizable value of pledges to a building program
resulting from current year fund raising efforts $450,000
Net realizable value of unconditional pledges resulting
from current year fund raising efforts $105,000
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Unrestricted
Net Assets
Temporarily
Restricted
Net Assets
Permanently
Restricted
Net Assets
A. $105,000 $650,000 $1,000,000
B. $105,000 $200,000 $1,450,000
C. $0 $305,000 $1,450,000
D. $0 $755,000 $1,000,000
12. The line item, net assets released from restrictions, may be reported in a nongovernment, not-
for-profit organization’s statement of activities in which classifications?
A. Changes in unrestricted net assets only.
B. Changes in unrestricted net assets and changes in temporarily restricted net assets.
C. Changes in unrestricted net assets and changes in permanently restricted net assets.
D. Changes in unrestricted net assets, changes in temporarily restricted net assets, and/or
changes in permanently restricted net assets.
13. Special fund-raising events of a nongovernment, not-for-profit organization
A. Must always be reported as revenues and at gross amounts.
B. Must always be reported as gains and at net amounts.
C. Must be reported as revenues at gross amounts or gains reported at net amounts.
D. Must be reported as revenues at gross amounts unless the event is incidental or
peripheral.
14. Membership dues of nongovernment, not-for-profit organizations are
A. Always treated as exchange transactions and reported as revenues.
B. Always treated as contribution revenues.
C. Permitted to be reported either as exchange revenues or as contributions revenues
depending on the organization’s preference.
D. Reported as contribution revenues if no benefits are received as a result of membership.
15. Fund-raising expenses are classified as
A. Program services expenses.
B. Supporting services expenses.
C. Management and general expenses.
D. Nonoperating expenses.
16. The net realizable value or present value of unrestricted pledges receivable outstanding at the
end of a year for a nongovernmental not-for-profit organization are
A. Always considered unrestricted net assets.
B. Always considered temporarily restricted net assets.
C. Always considered permanently restricted net assets.
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D. Considered temporarily restricted unless the donor specified that the pledge was intended
to finance current year expenses.
17. Pledges should be reported by a nongovernment not-for-profit organization as revenues in the
period that they are unconditionally received
A. By the organization.
B. By the organization if the pledges are unrestricted.
C. By the organization if the pledges are unrestricted and have been collected by year end.
D. If the organization has incurred qualifying costs.
18. With respect to collections, nongovernment not-for-profit organizations are
A. Required to capitalize all collections.
B. Prohibited from capitalizing collections.
C. Required to either capitalize all collections or to capitalize no collections.
D. Permitted to capitalize no collections, to capitalize all collections, or to capitalize only
those collections acquired after FASB Statement 116 was adopted.
19. Computer equipment used in the business office of a not-for-profit organization was sold for
$9,000. The original cost of the equipment had been $21,000 and there was $15,000 of
accumulated depreciation as of the date of sale. How will the gain be reported?
A. Gains are not recognized in not-for-profit organizations.
B. Unrestricted gain of $3,000.
C. Temporarily restricted gain of $3,000.
D. Permanently restricted gain of $3,000.
20. How should a nongovernment not-for-profit organization generally report increases in the
fair value of marketable debt securities in its statement of activities?
A. Such increases in fair value should not be reported because debt securities are reported at
amortized cost.
B. As an increase in restricted net assets
C. As an increase in temporarily restricted net assets
D. As an increase in unrestricted net assets, unless restricted by donor stipulation or law
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