State educational appropriations received by a public university are classified as which
of the following on the statement of revenues, expenses, and changes in net position?
A. Nonoperating revenue.
B. Operating revenue.
C. Other financing source.
D. Increase in unrestricted net position.
If special assessment receivables are recorded in the accounts of an agency fund, the
appropriate account(s) to credit upon receipt of assessments from property owners will
include:
A. Contributions to Net Position.
B. Revenues and Deferred Revenues.
C. Due to Special Assessment Bondholders.
D. Interfund Transfers In.
Explain why other comprehensive bases of accounting (OCBOA) may be used by a
state or local government instead of GASB standards which are generally accepted
accounting principles (GAAP).
What constitutes the basic financial statements of a government?
A. Financial section of the comprehensive annual financial report (CAFR).
B. Government-wide financial statements plus notes.
C. Government-wide financial statements plus fund financial statements plus notes.
D. Government-wide financial statements plus fund financial statements plus notes plus
required supplementary information (RSI).
The GASB requires business-type health care organizations to prepare which of the
following financial statements?
A. Statement of revenues, expenses, and changes in net position; statement of net
position; and statement of cash flows.
B. Statement of operations; statement of net assets; and a statement of cash flows.
C. Statement of revenues, expenses, and changes in net position; and statement of net
position.
D. Statement of activities; statement of net position; statement of changes in net
position; and statement of cash flows.
Pollution remediation obligations should be recognized if which of the following
obligating events has occurred?
A. A violation of a pollution prevention permit has occurred.
B. The government is named or will be named as the responsible or potentially
responsible party to a remediation.
C. The government is compelled to take remediation action due to imminent
endangerment to the public health.
D. All of the above items are obligating events that would require recognition of a
pollution remediation obligation.
Which of the following will require a credit to Fund Balance-Unassigned of a
governmental fund when operating statement accounts are closed at the end of the year,
assuming there are no other financing sources or uses?
A. Revenues are less than expenditures.
B. Revenues are more than expenditures.
C. Revenues are more than expenditures and encumbrances.
D. Revenues are less than expenditures and encumbrances.
Which of the following would be reported as a nonspendable fund balance?
A. Inventory.
B. Restricted assets.
C. Assets whose use is limited.
D. Capital assets.
Which of the following not-for-profit organizations is most likely to be tax-exempt
under IRC Sec. 501(c)(3)?
A. Beta Kappa Alpha Sorority.
B. Peaceful Dreams Cemetery Association.
C. Regional Association of Tree Trimmers.
D. Survivors of Breast Cancer Club.
The cash and investment pool of Lake City allocates dividends, interest, and capital
gains and losses on a periodic basis. When the cash and investment pool accrues
interest earned on investments in debt securities, pending allocation to participating
funds, it would credit which of the following accounts?
A. Interfund Loans.
B. Revenues.
C. Undistributed Earnings on Pooled Investments.
D. Interfund Receivables.
The following key terms from Chapter 6 relate to accounting for general long-term
liabilities and debt service:
A. Legal defeasance
B. Regular serial bonds
C. In-substance defeasance
D. Irregular serial bonds
E. Debt limit
F. Annuity serial bonds
G. Debt margin For each of the following definitions, indicate the key term from the list
above that best matches by placing the appropriate letter in the blank space next to the
definition.
_____ 1) A transaction in which cash or other assets are placed into an irrevocable trust
for the benefit of debt holders
_____ 2) Bonds for which the amount of annual principal repayments is scheduled to
increase each year by approximately the same amount that interest payments decrease
_____ 3) Bonds payable in which the total principal is repayable in a specified number
of equal annual installments
_____ 4) The maximum amount of gross or net debt that is legally permitted
_____ 5) A transaction in which debt is legally satisfied based on certain provisions in
the debt instrument even though the debt has not been repaid
Which of the following activities would most appropriately be recorded by a trust fund?
A. Donations collected for improvements to the public library.
B. Deposits held for customers of a municipal-owned electric utility.
C. Assets held for investment, the earnings from which are used for maintenance of the
City Cemetery.
D. Assets held for college scholarships to be awarded to the children of police officers.
Tuition scholarships for which there is no intention of collection from the student
should be classified by a private university as
A. Reductions of gross revenue to arrive at net revenue.
B. Revenues and expenditures.
C. Revenues and expenses.
D. Reductions of gross revenue or as expenses provided they are consistently classified
in the same manner from year to year.
Which of the following funds should be used if resources provided by a federal grant
must be segregated and used for counseling of youthful offenders?
A. Private-purpose trust fund.
B. Enterprise fund.
C. Internal service fund.
D. Special revenue fund.
According to the FASB, a voluntary health and welfare organization would report the
account Provision for Uncollectible Pledges as which of the following?
A. Expense.
B. Contra revenue.
C. Contra asset.
D. FASB allows management to determine its policy for reporting the Provision for
Uncollectible Pledges.
The City of Crescent Hill operates a central motor pool as an internal service fund for
the benefit of the city’s other funds and departments. In the current year, this fund billed
the Parks Department $30,000 for vehicle rentals. What account should the internal
service fund use to record these billings?
A. Interfund Transfers In.
B. Interfund Exchanges.
C. Billings to Departments.
D. Cost of Providing Rentals to Other Funds and Units.
Which of the following is a primary objective of financial reporting by state and local
governments?
A. To provide information that can be used for capital allocation decisions made by
external investors.
B. To report on the legal requirements imposed on the government by its elected
officials.
C. To provide information that can be used to assess a government’s accountability.
D. To fulfill the government’s statutory duty to report on cash received and cash
disbursed.
The GASB identifies which of the following three broad categories of service efforts
and accomplishments (SEA) measures:
A. Measures of service efforts, measures of service accomplishments, and measures of
efficiency.
B. Measures of service efforts and accomplishments, measures of service efficiency,
and measures of service effectiveness.
C. Measures of service efforts, measures of service accomplishments, and measures of
the costs of service efforts and accomplishments.
D. Measures of service efforts, measures of service accomplishments, and measures that
relate efforts to accomplishments.
Which of the following is not one of the criteria for an allowable cost under a federal
grant?
A. A cost that is necessary and reasonable for the performance of the federal award and
allocable thereto under the OMB cost principles.
B. A cost that conforms to any limitations or exclusions set forth in the OMB cost
principles or in the federal award as to types or amount of cost items.
C. A cost that has been approved by the FASB or GASB as an allowable cost.
D. A cost that is adequately documented.
Contractual Adjustments is properly characterized as:
A. An expense.
B. An other financing use.
C. A liability.
D. A contra revenue.
When the debt service fund makes a payment of principal and interest on an
outstanding long-term debt, the governmental activities accounts:
A. Reflect the principal payment only.
B. Reflect the interest payment only.
C. Have no record of the transaction.
D. Reflect both principal and interest payments.
The FASB states that donated services should be recorded as contributions by a
not-for-profit organization if material, and if they meet the recognition criteria.
A tax-exempt organization that receives its support primarily from a large number of
individuals or corporations and a relatively small amount from investment income is
called a:
A. Public charity.
B. Private foundation.
C. Public foundation.
D. Voluntary health and welfare organization.
Which of the following is not properly recorded in the governmental activities
accounts?
A. Tax-supported general obligation bonds.
B. Obligations under capital leases used to finance general capital assets.
C. The long-term portion of judgments and claims.
D. Revenue bonds issued by an enterprise fund.
An auditor would not render an opinion on a(an):
A. Financial audit of financial statements.
B. Performance audit.
C. Audit to determine whether the entity has adhered to specific compliance
requirements applicable to a major program.
D. Audit to determine whether a governmental department’s financial information
complies with specific state regulatory requirements.
The following are key terms in Chapter 15 that relate to accounting for colleges and
universities:
A. Term endowments
B. Annuity agreements
C. Collections
D. Pooled life income agreements
E. Spending rate
F. Total return
For each of the following definitions, indicate the key term from the list above that best
matches by placing the appropriate letter in the blank space next to the definition.
_____1) Agreements to pay the donor the income earned by assets donated to an
organization over the specified beneficiary’s lifetime
_____ 2) A comprehensive measure of the rate of investment return, which includes
unrealized and realized gains and losses, as well as interest and dividend income
_____ 3) A contribution that must be retained intact until the happening of a specific
event or the passage of a stated period of time
_____ 4) The proportion of total return that may prudently be used by an institution for
current purposes
_____ 5) Agreement to pay stipulated amounts periodically to the donor of assets by the
recipient organization
The goal(s) of a performance audit include(s) assessment of:
A. Program effectiveness.
B. Economy.
C. Internal control compliance.
D. All of the above.
The mission of the not-for-profit organization, Save Our Butterflies Foundation, is to
provide research and education concerning the conservation of butterflies. Which of the
following expenses would be reported as a support expense by the Foundation?
A. The costs of exhibiting at the local Nature Conservancy annual fair held for the
general public.
B. The costs of depreciation on it butterfly facility.
C. The cost of printed materials distributed to the local elementary schools on how to
start butterfly gardens.
D. The cost of printing and distributing its annual report.
The receipt of equipment that had previously been ordered should be recorded in the
General Fund as a debit to
A. Appropriations.
B. Equipment.
C. Encumbrances.
D. Encumbrances.
The Appropriations account of a governmental fund is credited when:
A. The budgetary accounts are closed.
B. The budget is recorded.
C. Supplies are purchased.
D. Expenditures are recorded.
Which of the following organizations issue standards that focus on both internal and
external financial reporting?
A. Federal Accounting Standards Advisory Board.
B. Governmental Accounting Standards Board.
C. Financial Accounting Standards Board.
D. American Institute of CPAs.