1) Examples of budgetary accounts include Estimated Revenues, Appropriations, and
Estimated Other Financing Uses.
2) The Governmental Accounting Standards Board sets financial reporting standards for
all units of government: federal, state, and local.
3) According to the rules for accounting for colleges and universities under the
jurisdiction of the FASB, multiyear pledges are recorded as restricted revenue for the
present value pledge (net of estimates for uncollectible amounts) when the pledge is
made.
4) Modified accrual accounting is essentially the same as cash basis except that long
term assets are not recorded.
5) Private colleges and universities are required to report net assets within the
categories of unrestricted, restricted and net investment in capital assets.
6) The budgetary account used to record budgeted revenues is called Estimated
Revenues Control.”
7) When preparing fund basis financial statements, any funds not reported separately
are reported individually by function.
8) Supporting expenses are not included in the denominator of the program expense
ratio.
9) The economic resource measurement focus and accrual basis of measurement is an
important feature of government-wide financial statements.
10) A disclaimer of opinion is the appropriate audit opinion when the auditor is not
independent.
11) Governments have the option to capitalize infrastructure assets in the governmental
funds fund-basis financial statements.
12) The General Fund is not always considered to be a major fund when preparing fund
basis financial statements.
13) Activities that produce goods or services to be provided to other departments or
other governmental units on a cost-reimbursement basis are accounted for by enterprise
funds.
14) The Department of Treasury maintains a government-wide system of accounts and
prepares the federal governments consolidated financial statements.
15) Health care organizations that are privately owned and operated to provide a return
to investors report the same net asset classifications as private not-for-profit health care
organizations.
16) The statement reflecting revenues, expenses, and other changes in unrestricted net
assets for a private sector, not-for-profit hospital is called the:
A)Statement of Changes in Unrestricted Net Assets
B)Statement of Operations
C)Statement of Activities
D)Income Statement
17) Investment Trust Funds are restricted to:
A)External investment pools
B)Open-end mutual funds
C)Debt securities
D)All the above
18) Which of the following statements is False with respect to private not-for-profit
organizations?
A) Exchange transactions should be recorded on the accrual basis of accounting where
the revenues are recognized when earned
B) An intention to give should be recorded as revenue when the intention is
communicated to the not-for-profit
C) In certain situations contributed services should be recognized as revenue
D) FASB statement 124 requires that investments in equity securities with readily
determinable values be reported at fair market value
19) The
A)Private sector, not-for-profit hospitals
B)Public sector, government-owned hospitals
C)Both (a) and (b) above
D)Neither (a) nor (b) above
20) Internal service funds account for
A) Activities that produce goods or services to be provided to other governmental units
on a cost reimbursement basis
B) Activities that produce goods or services to be provided to outside consumers units
on a cost reimbursement basis
C) Both A and B
D) None of the above
21) Which of the following is True of a Statement of Cash Flows for a private college
or university?
A) Either the direct or indirect method is acceptable
B)Four categories are used: Operating, Capital Related Financing, Non-capital Related
Financing, and Investing
C)Cash flows must be presented separately for Unrestricted, Temporarily Restricted,
and Permanently Restricted categories
D)All of the above are True
22) The highest bond rating assigned by Moody’s is:
A)A+
B)A
C)AAA
D)AAA+
23) Which of the following is True regarding fund classifications?
A)Governmental funds include the General, special revenue, debt service, capital
projects, and permanent
B)Proprietary funds include enterprise, internal service, and private-purpose
C)Both of the above
D)None of the above
24) Which of the following would be considered a performance audit under the
Government Auditing Standards?
A)An investigation into whether a purchasing department of a government was
operated efficiently
B)An investigation into whether a social service agency of a state government
improved the lives of its clients
C)Both A and B above
D)Neither A nor B above
25) An internal service fund provided services to a General Fund department. At the
time of billing, the debit entry in the General Fund would be:
A)Other Financing Sources-Transfers Out
B)Expenditures
C)Operating Revenues-Charges for Services
D)Expenses
26) The City of Aurora increased its revenue budget by $75,000 and the appropriation
for the Public Works Department was increased by $100,000. What is the journal entry
to record this event in the General Fund?
A)Estimated Revenues Control75,000
Fund Balance25,000
Appropriations Control100,000
B)Appropriations Control100,000
Estimated Revenues Control75,000
Budgetary Fund Balance25,000
C)Estimated Revenues Control75,000
Budgetary Fund Balance25,000
Appropriations Control100,000
D)Estimated Revenues Control75,000
Appropriations Control75,000
27) Under NACUBO guidelines, tuition waivers associated with student work study
programs should be reported as:
A)Reductions in revenue
B)Decreases in Temporarily Restricted Net Assets
C)Transfers
D)Expenses
28) In the government-wide statements, Internal ServiceFunds are a(n) ______ activity,
whereas Enterprise Funds are typically a(n) ______activity.
A) business-type; governmental
B)governmental; business-type
C)restricted; unrestricted
D)unrestricted; restricted
29) Which of the following federal entities wouldbe required to prepare a Statement of
Custodial Activity?
A)Department of Defense
B)Internal Revenue Service
C)Department of Homeland Security
D)Department of Health and Human Services
30) Which type of pension plan most commonly results in an unfunded actuarial
liability?
A) Defined benefit plan
B) Defined contribution
C) Both A and B
D) Neither A or B
31) Which of the following is True with respect to rainy day funds?
A)Rainy day funds are classified as committed if they are created by a resolution or
ordinance that identifies the specific circumstances under which the resources may be
expended
B)If rainy day funds are available in emergencies or periods of revenue shortfalls they
are classified as committed
C)Both A and B
D)Neither A nor B
32) The journal entry to write off an uncollectible property tax receivable for a
municipality would include:
A)A credit to Estimated Uncollectible Current Taxes
B)A debit to Bad Debts Expense
C)A credit to Taxes Receivable Current
D)B and C would both be included in the journal entry
33) Which of the following is a governmental fund?
A)Agency
B)Enterprise
C)Special revenue
D)Internal service
34) When a capital project has been constructed entirely with bond proceeds and funds
are left over at the end of the project, which of the following would normally take
place?
A)The funds would be transferred to a debt service fund; the capital projects fund
would debit Other Financing Uses-Transfers Out and the debt service fund would credit
Other Financing Sources-Transfers In
B)The funds would be transferred to a debt service fund; the capital projects fund
would debit Expenditures and the debt service fund would credit Other Financing
Sources-Transfers In
C)The funds would be transferred to the General Fund and expended for any purpose
desired by the management of the government
D)The funds would be returned to the bondholders
35) Indicate which of the following use Modified Accrual Accounting?
Capital Projects Fund Government- wide Financial Statements Special Revenue Fund
Internal Service Fund
A) Yes No Yes No
B) No Yes No Yes
C) Yes No Yes Yes
D) Yes Yes No No
36) Liabilities incurred, such as for accrued payroll, but still unpaid at year-end, should
be recorded in the General Fund by a debit to which one of the following accounts?
A)Current Expense
B)Appropriations
C)Encumbrances
D)Expenditures
37) Assume an outstanding account payable of a federal agency is paid. The journal
entries at the agency level to record this event will include:
A)a debit to the account Accounts Payable
B)a credit to the account Cash
C)Both (a) and (b)
D)Neither (a) nor (b)
38) Fiduciary funds are to use the:
A)economic resources measurement focus and modified accrual basis of accounting
B)current financial resources measurement focus and accrual basis of accounting
C)economic resources measurement focus and accrual basis of accounting
D)none of the above, the fiduciary funds have no revenues
39) Which of the following may be deducted in computing income from unrelated
business activities?
A)Ordinary and necessary business expenses
B)$1,000 exemption
C)Charitable contributions
D)All of the above
40) The City of Presho had the following transactions related to the construction of a
new courthouse.
(a)1/2/2015: 20 year 4% General Obligation Serial Bonds with a face value of
$5,000,000 are issued at102 . Interest and principle payments are made on Jan. 1 and
July 1 of each year. The premium was transferred into the Debt Service Fund. The
General Fund will fully fund each payment as they become due.
(b)3/1/2015: Land is purchased for a new courthouse at a cost of $ 300,000.
(c)3/1/2015: A contract is signed for construction of the new courthouse in the amount
of $ 4,300,000.
(d)6/15/2015: Cash ($ 225,000)sufficient to cover interest and principal payments for
the year less the premium is transferred from the General Fund.
(e)7/1/2015: Interest ($100,000) and principal ($125,000) are paid on the courthouse
fund serial bonds.
(f)12/1/2015: Receive an invoice for progress completed to date on the courthouse
construction project in the amount of $3,700,000.
(g)12/27/2015: $97,500 is transferred from the General Fund for the 1/1/2015 interest
payment due on the courthouse fund serial bonds. Interest is accrued as of 12/31/2015,
following the exception permitted by GASB.
Required: Prepare a Statement of Revenues, Expenditures and Changes in Fund
Balance for the Capital Projects and Debt Service Funds. Assume this is the first year
for each fund (beginning fund balances are zero) and the City has no other long-term
debt than that described above. Use separate columns for the two funds
41) What financial ratio is most commonly used to evaluate charitable organizations?
A)Current assets / current liabilities
B)Program expenses / total expenses
C)Increase in net assets / total assets
D)Total expenses / total revenues
42) A fund that exists when the government is the sponsor of a multigovernment
investment pool and accounts for the external portion of the trust assets is a(n):
A)Agency fund
B)Private-Purpose Trust Fund
C)Investment Trust Fund
D)Pension Trust Fund
43) Which of the following statements is True?
A)Fund balances of debt service funds are classified as Restricted and Unrestricted
B)The fund balance of permanent funds should be classified as Non spendable,
Spendable and Committed
C)The principal of permanent funds are classified as Nonspendable Fund Balance
D)Any governmental fund may have an Unassigned Fund Balance
44) A private-purpose trust fund where the principal is not expendable, normally it is
called a/an:
A) Donation
B)Endowment
C)Gift
D)Transfer
45) Government Auditing Standards, published in a document called the Yellow Book,
incorporate the
A)Higher materiality thresholds than in the private sector
B)Public availability of audit reports
C)Written evaluation of internal controls
D)Requirement that auditors have knowledge of government accounting and auditing
46) In 2014 a faculty member at a private college received a grant from the National
Science Foundation to conduct basic research on tree frogs in the amount of $400,000.
Expenses associated with the grant totaled $375,000 in 2015 . In the Statement of
Activities for 2015, the college should show:
A)Temporarily Restricted Revenues of $400,000 and Unrestricted expenses of
$375,000
B)Temporarily Restricted Revenues of $375,000 and Unrestricted expenses of $375,000
C)Revenues of $375,000 and expenses of $375,000 in Unrestricted Net Assets
D)Expenses of $375,000 in Unrestricted Net Assets and a decrease in Temporarily
Restricted Net Assets of $375,000
47) Which of the following statements is (are) True regarding public colleges and
universities choosing to report as special-purpose entities engaged in business-type
activities only?
A)Endowments would be reported in the Statement of Net Position as Net Position
Restricted-Nonexpendable
B)Capital appropriations from state governments are shown, in the Statement of
Revenues, Expenses, and Changes in Net Position, as a category separate from revenues
C)Both of the above
D)Neither of the above
48) A donor made a cash contribution of $300,000 to a private college for the purpose
of acquiring a building. The private college properly recorded the gift of cash as a
temporarily restricted revenue. When the building is acquired, the college should:
A)Record the building as unrestricted
B)Show an expense equivalent to the amount paid for the building in unrestricted net
assets and reclassify the same amount from temporarily restricted to unrestricted net
assets
C)Record the building as either unrestricted or temporarily restricted, as long as a
consistent policy is followed
D) Record the building as permanently restricted
49) An example of an activity that would not normally be accounted for in an enterprise
fund would be:
A)Swimming pool
B)Printing Services
C)Airport
D)Lottery
50) With regard to the government-wide statements, indicate the three categories of Net
Position that should be reported and describe what would be put into each category.