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1) According to GASB 34, restricted Net Position does not include those that are the
results of constraints imposed by creditors, grantors, contributors, or laws or regulations
of other governments.
2) When preparing fund basis financial statements, any funds not reported separately
are aggregated and reported in a single column under the label non-major funds.
3) FASB statement 116 requires conditional promises to give to be recorded as revenue
when the condition is met.
4) The principal of permanent funds is classified as Nonspendable Fund Balance.
5) Private colleges and universities recognize contribution revenue in the year in which
the unconditional pledge is made.
6) When a contributor and a government agree that the principle and/or income of trust
assets is for the benefit of individuals, organizations, or other governments, a
private-purpose trust has been formed.
7) The program expense ratio is calculated as follows: Total expenses / (Program
service expenses + supporting service expenses).
8) Government-wide statements are to be prepared using the economic resources
measurement focus and accrual basis of accounting.
9) Donated services should be considered revenue if the service creates or enhances a
nonfinancial asset and requires a specialized skill which would have had to be
purchased if not donated.
10) Public colleges and universities account for revenue bonds using the accrual
method to account for interest and amortization of premiums and discounts.
11) When governments construct projects that are financed with special assessment
debt, to be paid back by affected property owners, those projects could be accounted for
in capital projects funds.
12) The proprietary accounts of a federal agency reflect the status of an appropriation.
13) Examples of voluntary health and welfare organizations would include the Girl
Scouts and the American Heart Association.
14) FASAB, GASB and FASB standards are set forth primarily in documents called
statements.
15) Special-purpose governments that are engaged in more than one governmental
activity are permitted to combine the fund and government-wide financial statements.
16) According to GASB standards relating to Budgetary Accounting, budgetary
comparisons are required for all funds even those for which an annual budget has not
been adopted.
17) An endowment to provide scholarships would be reported in a Private-purpose
Trust Fund.
18) The Financial Accounting Standards Board sets financial reporting standards for
profit-seeking businesses and nongovernmental, not-for-profit organizations.
19) The Statement of Operations and Changes in Net Position for the consolidated
report of the federal government is prepared on the modified accrual basis of
accounting.
20) Investor-owned proprietary schools are subject to the standards issued by the FASB
21) Under GASB Statement 34, modified accrual accounting would be found in the:
A)government-wide financial statements only
B)governmental fund financial statements only
C)governmental and fiduciary fund financial statements only
D)governmental, proprietary, and fiduciary fund financial statements but not in the
government-wide financial statements
22) The categories of Net Position for a proprietary fund are classified within which of
the following categories?
A)Net Investment in Capital Assets, Restricted Net Position and Unrestricted Net
Position
B)Spendable Net Positionand SpendableNet Position
C)CommittedNet Position, Assigned Net Positionand UnassignedNet Position
D)Restricted Fund balance, Committed Fund balance, Assigned Fund Balance, and
Nonspendable Fund Balance
23) Answer the following questions:
(a)Other than a Statement of Financial Position (i.e. balance sheet), what are the
remaining financial statements required of private not-for-profit health care entities?
(b)What accounts appear in the equity section of the balance sheet of commercial
hospitals, government owned hospitals, and private not-for-profit hospitals?
24) Under modified accrual accounting, budgetary authority expires at year end and the
balances of Revenues and Expenditures are closed to
A) Net Position
B)Fund Balance
C) Other Financing Uses
D)Other Financing Sources
25) What are the financial statements required for all nongovernmental, not-for-profit
organizations?
A)Statement of Financial Position, Statement of Activities, Statement of Cash Flows,
Statement of Functional Expenses
B)Statement of Financial Position, Statement of Activities, Statement of Functional
Expenses
C)Statement of Financial Position, Statement of Net Assets, Statement of Functional
Expenses
D)Statement of Financial Position, Statement of Activities, Statement of Cash Flows
26) Which of the following audit opinions is issued when a government fails to comply
with generally accepted accounting principles?
A)Qualified
B)Adverse
C)Either of the above, depending on the severity of the noncompliance
D)Neither (a) or (b) above
27) The following description provides the best definition for which fund: Accounts for
resources that are legally restricted and both earnings and principal may be used to
support government programs
A) Capital projects
B) Special Revenue
C) General Fund
D) Permanent
28) The Budgetary Fund Balance -- Reserve for Encumbrances account is properly
considered to be a(an):
A)current liability
B)expenditure
C)long-term liability
D)None of the above
29) Tuition and fees for the Northern University was assessed at $22,000,000.
Scholarship allowances, for which no services are required, were $1,600,000 and
graduate assistantships, for which services are required, were $1,000,000.
What is the journal entry to record the graduate assistantships?
A)Not recorded because it was deducted from tuition revenue before revenue it was
recorded
B)Assistantships and Fellowships Expense1,000,000
Accounts receivable1,000,000
C)Operating Revenue Deduction Scholarship
Allowances1,000,000
Accounts Receivable1,000,000
D)Operating Revenue Deduction Scholarship
Allowances1,000,000
Deferred Revenues1,000,000
30) Which of the following is False with respect to Special revenue funds?
A)Resources appropriately reported within proprietary or fiduciary funds are excluded
from special revenue funds
B)A special revenue funds would be used to account for taxes which are required by
state law to be used by the government to support specific activities
C)Special revenue funds may be used for any designated purpose to segregate revenues
and ensure compliance with restrictions
D)None of the above
31) Which of the following statements is not True regarding agency funds?
A)Agency funds use modified accrual accounting
B)Agency funds report only assets and liabilities; no fund equities, revenues, or
expenditures are recorded
C)Agency funds are reported in the fiduciary funds Statement of Fiduciary Net Position
D)None of the above; all are True
32) Which of the following is True of a Statement of Cash Flows for a private sector,
private not-for-profit organization?
A)Four categories are used: Operating, Capital Related Financing, Non-capital Related
Financing, and Investing
B)If the direct method is used, the not-for-profit must also present a reconciliation
between total change in net assets and cash flows from operating activities
C)Cash flows must be presented separately for Unrestricted, Temporarily Restricted,
and Permanently Restricted categories
D)None of the above; all are True
33) To qualify for tax-exempt status, an organization must do all of the following
except:
A)Have an Employers Identification Number
B)Be organized as a corporation, trust, or association
C)Complete IRS form 1023
D)Receive most of its income from contributions rather than by providing goods or
services
34) A ___________ is used when a contributor and a government agree that the
principal and/or income of trust assets are for the benefit of individuals.
A)Investment Trust
B)Private-Purpose Trust
C)Pension Trust
D)Employee Benefit Trust
35) Pollution remediation costs:
A)Are to be accrued as a liability in the basic financial statements
B)Are recorded as expenses if they will be paid from current resources
C)Are not an issue is the state or local government merely used (but did not operate) the
polluted site
D)All of the above
36) Which of the following is not correct with respect to acquisitions under the rules
established by FASB Statement No. 164, Not-for-Profit Entities: Mergers and
Acquisitions?
A)If the combination qualifies as an acquisition, the not-for-profit may acquire control
of a business enterprise or other not-for-profit organization and will be accounted for
using the acquisition method
B)Combinations not meeting the definition of a merger are reported as acquisitions
C)Assets and liabilities of the acquired entity are recorded at fair value on the books of
the not-for-profit
D)Entities that derive their revenues from business-like activities are required to
expense the goodwill at the date of acquisition
37) Which of the following is not True regarding proprietary funds?
A)Enterprise funds are used by governments to account for services provided to the
general public on a user-charge basis
B)General obligation bonds that will be paid from enterprise revenues must be reflected
in the accounts of enterprise funds
C)Internal service self-insurance should set fees based on anticipated charges or a
long-range plan to break even over time
D)The operation of internal service funds has no impact on other funds because it is run
as a business and provides services that would have been purchased elsewhere by the
other funds
38) The Village of Canandaigua determined that, as of July 1, 2014, infrastructure
assets estimated at $375 million were in place, with an estimated useful life of 25 years.
During the year ended June 30, 2015, expenditures were $9 million for the routine
maintenance of infrastructure, $3 million to extend the life of existing infrastructure,
and $15 million for infrastructure additions and improvements.
Required:
a)If the modified approach is used, what would be the amount charged to expense
during the fiscal year ended June 30, 2015 . What amount would be capitalized?
b) What amount would have been charged to expense if the modified approach were
not used? What amount would be capitalized?
39) Which of the following is True regarding the Comprehensive Annual Financial
Report?
A)The basic financial statements consist of the government-wide, the governmental
fund, the proprietary fund, and the fiduciary fund financial statements (and the notes to
the financial statements)
B)The government-wide financial statements include the Statement of Net Position, the
Statement of Activities, and the Statement of Cash Flows
C)Both (A) and (B) are True
D)Neither (A) nor (B) is True
40) Budgets are typically recorded for which of the following:
A) Capital Projects Funds
B) Debt Service Funds
C) Special Revenue Funds
D) None of the above
41) The Fire Department of a given city received an appropriation in the amount of
$15,000,000 for the fiscal year ended June 30, 2015 . During the month ended July 31,
2014, the following transactions occurred: (a) purchase orders were issued in the
amount of $650,000; (b) purchase orders, related to (a) above, were filled in the amount
of $610,000; the related invoice amount was $595,000; invoices were paid in the
amount of $550,000; (c) salaries were accrued and paid in the amount of $600,000. The
balance available for the fire department as of July 31, 2014 is:
A)$13,740,000
B)$13,765,000
C)$13,800,000
D)$13,840,000
42) If taxes are levied specifically for payment of interest and principal on long-term
debt, those taxes are:
A)Includedas a liability of the General Fund
B)Recorded as operating transfers to the debt service fund
C)Included as revenues of the debt service fund
D)Both A and B are correct
43) The expenditures account equals the amount of supplies purchased during a period
under which of the following inventory methods?
A) Perpetual
B)Purchases
C) Periodic
D)Consumption
44) Uptown Church received a donation of marketable equity securities from a church
member. In reviewing the financial press, it is determined that the securities had
appreciated during the year. At what amount should Uptown report its marketable
equity securities in the year-end balance sheet?
A)Market value at the date of receipt
B)Donor's cost
C)Market value at the balance sheet date
D)The lower of a, b or c
45) The external portion of an investment trust fund relates to
A)The portion of the investment that legally belongs to the sponsoring government
B)The portion of the investment that is allocated among the sponsoring governments
funds
C)The portion of the investment that belongs to other participating governments
D)External portion relates only to agency funds, not investment trust funds
46) If a person names a private not-for-profit organization in his or her will, this is
considered a(n) ________ and is __________.
A) Conditional promise to give; not recorded
B) Unconditional promise to give; recorded
C) Intention to give; recorded
D) Intention to give; not recorded
47) Which of the following is notnTrue regarding financial reporting of health care
entities?
A)It is important to distinguish operating revenues and expenses from non operating
B)It is important to distinguish between current and noncurrent assets and liabilities
C)Private sector organizations use a three-category format for the Statement of Cash
Flows, and public sector organizations us a four-category format
D)Private sector organizations use accrual accounting, while public sector organizations
use modified accrual
48) Which organization has standard setting authority over governmentally related
not-for-profit organizations, such as hospitals colleges and universities?
A) FASB
B) GASB
C)
D) SEC
49) Which of the following items would likely appear in the reconciliation between the
governmental fund financial statements and the governmental activities column in the
government-wide financial statements?
A)The inclusion of long-term liabilities in the government-wide financial statements
and not in the governmental fund financial statements
B)The inclusion of depreciation of capital assets in the governmental activities column
of the government-wide financial statements and not in the governmental fund
statements
C)The additional accrual of some revenues and expenses in the government-wide
financial statements that were not made in the governmental fund financial statements
D)All of the above
50) Which of the following lease criteria would not qualify a lease as a capital lease?
A)The lease transfers ownership of the property to the lessee by the end of the lease
term
B)The lease contains an option to purchase the leased property at its fair market value
C)The lease term is equal to or greater than 75% of the estimated economic life of the
leased property
D)The present value of the minimum lease payments equals or exceeds 90% of the fair
value of the leased property
51) Jasper City is trustee for the Henry J. Moooney Endowment Fund, created to
provide scholarships for students. This is an example of which type of fund?
A)Permanent
B)Pension trust
C)Agency
D)Private-purpose trust
52) Which of the following is True regarding the governmental fund statements?
A)The Governmental Funds Balance Sheet does not reflect capital assets or long-term
debt
B)The Governmental Funds Statement of Revenues, Expenditures, and Changes in
Fund Balances reports columns for major funds, non-major funds (in total), and total
C)Both of the above
D)Neither of the above
53) Capital assets of internal service funds should be reported:
A)In the internal service funds only
B)In the government-wide statements only
C)In both the internal service funds and the government-wide statements
D)None of the above, they are not reported
54) What is the maximum threshold for a tax-exempt organization to file a form
990-EZ?
A)A charity with gross receipts of < $25,000
B)A charity with gross receipts of < $50,000
C)A charity with gross receipts of < $500,000
D)A charity with gross receipts of < $500,000 and total assets of < 2.5 $million
55) In addition to a Statement of Net Position, Proprietary Fund level financial
statements include which of the following?
A) Statement of revenues, expenses, and changes in fund Net Position
B) Statement of cash flows
C)Both of the above
D)Neither of the above
56) A fund that is the result of an agreement between a contributor and a government
that the principal and/or income of trust assets is for the benefit of individuals,
organizations, or other governments is a(n):
A)Agency fund
B)Private-Purpose Trust Fund
C)Investment Trust Fund
D)Pension Trust Fund
57) Which of the following statements is False?
A) Resources representing supplies and prepaid items are classified in governmental
funds as Nonspendable Fund balance
B)Capital Projects, debt service and permanent funds do not typically record budgets
C)Debt service and permanent funds do not record encumbrances
D)Principal of permanent funds is classified as Committed Fund Balance
58) Which of the following is True regarding the fiduciary fund financial statements?
A)Fiduciary fund financial statements are prepared using the current financial resources
measurement focus and modified accrual basis of accounting
B)Fiduciary fund financial statements include the Statement of Fiduciary Net Position
and Statement of Changes in Fiduciary Net Position
C)Fiduciary fund financial statements reflect equity as reserved and unreserved
D)Agency funds are reported only on the Statement of Changes in Fiduciary Net
Position
59) On April 1, 2015, the City of Southern Ponds issued $3,500,000 in 4% general
obligation, tax supported bonds at 101 for the purpose of constructing a new police
station. The premium was transferred to a debt service fund. A total of $3,490,000 was
used to construct the police station, which was completed before December 31, 2015,
the end of the fiscal year. The remaining funds were transferred to the debt service fund.
The bonds were dated April 1, 2015, and paid interest on October 1 and April 1 . The
first of 20 equal annual principal payments of $175,000 is due April 1, 2016 .
What amount would be reported as debt service expenditures for 2015?
A)$ -0-
B)$ 70,000
C)$140,000
D) $245,000
60) Which of the following is True regarding the Internal Revenue Services concern
regarding tax-exempt organizations?
A)Organizations are charging many of their program expenses to fund-raising
B)Executives of tax-exempt organizations are receiving excessive salaries and benefits
C)Both (a) and (b)
D)Neither (a) nor (b)
61) Center Citys General Fund has the following net resources at December 31, 2015:
Total assets of $846,000 and liabilities of $137,500.
$400,000 rainy day fund approved by the township governing board
$3,600 of supplies inventory
$15,000 state grant for snow removal
$120,000 contractual obligations for capital projects
$66,000 of outstanding encumbrances representing purchase orders which will be paid
from the General Fund
Required: Prepare the fund balance section of the Balance Sheet
62) What are the components of the equity section of the Balance Sheet of Statements
of Net Assets, as appropriate for the following types of organizations?
Not-for-profit, Business-Oriented Organizations
Investor-Owned Health Care Enterprises
Government Health Care Organizations
63) Contrast the reporting of mergers and acquisitions under the rules established by
FASB Statement No. 164, Not-for-Profit Entities: Mergers and Acquisitions?
64) Give 2 examples of unrestricted inflows, restricted inflows and permanently
restricted inflows for a private college or university.
65) What is the appropriate accounting treatment for real estate investments held in
endowments (GASB Statement 52)?
66) What is a defined benefit pension plan?
