1) The FASB requires private not-for-profit organizations to report net assets (the
excess of assets over liabilities) separated by unrestricted, temporarily restricted and
permanently restricted.
2) Special-purpose governments that are engaged in both governmental and
business-type activities are required to use the full reporting model including MD&A,
government-wide and fund-basis statements, notes to the financial statements and RSI.
3) Debt service funds are used to account for the payment of principal and interest of
both general and enterprise related long-term debt of a state or local governmental unit.
4) Under the purchases method to account for supplies inventory, an asset is recorded
when inventories are acquired, and the expenditure is recorded when the suppliesare
consumed.
5) An endowment that is for the benefit of individuals and not the government
controlling the funds should be accounted for using a private-purpose trust fund.
6) A conditional pledge should be recognized as revenue when the pledge is made.
7) Under the accrual basis of accounting, revenues are recognized when measurable and
available to finance expenditures of the current period.
8) The only difference between modified accrual accounting and accrual accounting is
the difference in the recognition of long-term assets and liabilities.
9) An example of an imposed non exchange revenue is the property tax.
10) A Management’s Discussion and Analysis is required forstate and local
governmental units, and the federal government.
11) The total fund balances reported in the total column of the fund basis statements
must be reconciled to the total Net Position presented in the governmental activities
column of the government-wide Statement of Net Position
12) A Statement of Functional Expenses is required for government-owned hospitals.
13) According to the FASB, fixed assets acquired by colleges and universities with
either unrestricted or restricted resources are recorded as:
A)Restricted
B)Unrestricted
C)Initially as temporarily restricted and reclassified as unrestricted in accordance with
the depreciation schedule
D)Either B or C
14) Record the following transactions on the books of Franklin College, a private
college. All of the transactions are for the year 2015 .
(a)The College received $315,000 in funds that were pledged in 2014, to be used for
unrestricted purposes in 2015 .
(b)The College was awarded $600,000 in grants that are to be used for restricted
research purposes. $410,000 in cash was received, and $450,000 was expended on these
projects.
(c)On Dec. 1, the College received a pledge of $6,000,000 to build a new basketball
arena. The funds were not expended or received in 2015, but are expected to be
received early in 2015 .
(d)The College had received cash of $200,000 in 2014 to be used to purchase computer
equipment for the student labs. The equipment was purchased and put into service in
early January 2015 . The equipment has a five-year life and the College follows the
practice of maintaining the balance of fixed assets (net of depreciation) in the
temporarily restricted net asset category.
(e)On Dec. 31, the College received an unrestricted pledge to receive $20,000 per year
each year for six years, beginning on December 31, 2015 . The first installment of $
20,000 was received on that date. The discount rate is 6%. The present value of six
payments of $20,000 is $104,248.
15) The City of Little River had the following transactions related to the construction of
a new courthouse.
(a)1/2/2015: 20 year 6% General Obligation Serial Bonds with a face value of
$3,000,000 are issued at 101 . Interest 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 park at a cost of $ 175,000.
(c)3/1/2015: A contract is signed for landscaping and construction of various structures
in the park in the amount of $ 2,600,000.
(d)6/15/2015: $165,000 is transferred from the General Fund for the 7/1 payment due
on the courthouse fund serial bonds.
(e)7/1/2015: Interest ($90,000) and principal ($75,000) 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 $1,716,000.
(g)12/27/2015: $87,750 is transferred from the General Fund for the 1/1/10 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
16) Which of the following statements is not True regarding modified accrual
accounting?
A)Expenditures and fund liabilities are recorded when goods and services are received
B)Debt service expenditures for principal and interest are accrued
C)Expenditures for claims and judgments and landfill post-closure care costs of
governmental funds should be recognized to the extent that the liabilities are going to
be paid with available resources
D)Compensated absences and special termination benefits of governmental funds that
will not be paid with available resources should be reported as liabilities in the
government-wide statements
17) Which of the following is True with respect to Special revenue funds?
A)Special revenue funds are used when it is desirable to provide separate reporting of
resources that are restricted or committed as to expenditure for purposes other than debt
service or capital projects
B)Special revenue funds are used when it is desirable to provide separate reporting of
resources that are designated for specific purposes
C)Special revenue funds are used when it is desirable to provide separate reporting for
funds provided by other governments to support capital projects
D)Both B and C
18) In an agency fund, assets are equal to:
A)Liabilities + Net Position
B)Net Position
C)Liabilities
D)There are no assets in an Agency Fund
19) Allotmentsis an example of which type of federal government account?
Budgetary Proprietary
Account Account
A) Yes Yes
B) No Yes
C) Yes No
D) No No
20) Which of the following items would typically not need an encumbrance?
A)New Building
B)Regular Salaries
C)New Computer
D)Office Equipment
21) St. Marthas Hospital, a private not-for-profit, began the year 2015 with the
following trial balance:
Transactions for 2015 are as follows:
(a)Collected $340,000 of the Patient Accounts Receivable that was outstanding at
12-31-2014 . Actual contractual adjustments on these receivables totaled $152,000.
(b)The Hospital billed patients $2,350,000 for services rendered. Of this amount, 7% is
expected to be uncollectible. Contractual adjustments with insurance companies are
expected to total $831,000. (Hint: use an allowance account to reduce accounts
receivable for estimated contractual adjustments).
(c)In 2014 the Hospital had received a contribution of $240,000 to purchase new
ultrasound equipment. The equipment was purchased for $300,000 in 2015 .
(d)Charity care in the amount of $60,000 (at standard charges) was performed for
indigent patients.
(e)The Hospital received $700,000 in securities to establish a permanent endowment.
Income from the endowment is unrestricted.
(f)Other revenues collected in cash were: gift shop $11,000 and cafeteria $33,000.
(g)The Hospital received in cash unrestricted interest income on endowments of $5,000.
Unrealized gains on endowment investments totaled $7,000.
(h)Expenses amounting to $1,120,000 for Professional Care of Patients,$310,000 for
General Services, and $190,000 for Administration were paid in cash.
(i)Depreciation on fixed assets, including the ultrasound equipment, totaled $124,000
for the year. ($90,000 for Professional Care of Patients, $18,000 for General Services,
and $16,000 for Administration.)
(j)Closing entries were prepared.
Required:
A.Record the transactions described above.
B.Prepare in good form, a Statement of Operations for the year ended December 31,
2015
C.Prepare in good form, a Statement of Changes in Net Assets for the year ended
December 31, 2015 .
22) When delinquent taxes are written off:
A) Fund balance will decrease
B)Fund balance will be unaffected
C)Expenditures will increase
D) Both a and c
23) The purpose of an encumbrance is to prevent governments from:
A) Overriding Unauthorized Contracts
B)Spending in Excess of the Amounts Authorized
C) Revising the Approved Budget
D) Misappropriating Tax Revenues
24) Siler City receives a trust donation for the purpose of maintaining flower beds in
city parks, but the donor does not specify that the principal must be maintained. This
type of trust would be most appropriately accounted for in a:
A)Permanent Fund
B)General Fund
C)Private Purpose Trust Fund
D)Special Revenue Fund
25) Which of the funds listed below would include capital assets in its Statement of Net
Position?
A)Permanent
B)Special Revenue
C)Internal Service
D)None of the above; no funds in governmental accounting have capital asset accounts
26) Encumbrance accounting is only typically used for
A) Permanent Funds
B) Debt Service Funds
C) Capital Projects Funds
D) None of the above
27) If a trust is to be used for the benefit individuals, private organizations or other
governments, the following fund(s) should be used:
A) Special revenue fund
B) Permanent fund
C) Private purpose fund
D) Either A or B, depending upon whether the principal must be maintained
28) Under which of the following conditions is it appropriate for a private not-for-profit
to allocate the cost of mass mailings from fund raising to a program related activity,
such as Public Education?
A)The purpose of the mailing includes accomplishing program functions
B)The audience is selected based on characteristics other than ability to make
contributions
C)The mailing calls for specific action by the recipient that is consistent with the goals
of the not-for-profit’s mission
D)All of the above
29) The City of Casper levied property taxes for 2015 in the amount of $9,000,000. By
the end of the year, $7,200,000 had been collected. It was estimated that $500,000
would be collected during the next 60 days of 2015 and that $240,000 would be
collected after that and the remainder would be uncollectible. The City has a policy of
recognizing the full amount possible for property taxes. Which of the following
statements is True?
A)The amount reported for property tax revenue in the government-wide Statement of
Activities would be $7,700,000
B)The amount reported for property tax revenue in the governmental fund Statement of
Revenues, Expenditures, and Changes in Fund Balances would be $7,940,000
C)Both A and B
D)None of the above
30) Which is True regarding the basis of accounting for fiduciary funds?
A)All four fiduciary fund types are accounted for using the same basis of accounting
and measurement focus as proprietary funds
B)Agency funds are accounted for using the same basis of accounting and measurement
focus as governmental funds, trust funds are accounted for using the same basis of
accounting and measurement focus as proprietary funds
C)Trust funds are accounted for using the same basis of accounting and measurement
focus as governmental funds, and agency funds are accounted for using the same basis
of accounting and measurement focus as proprietary funds
D)All four fiduciary fund types are accounted for using the same basis of accounting
and measurement focus as governmental funds
31) The City of Sycamore has investments in bonds. These bonds have an amortized
cost of $1,996,000. At year end, the financial press reports a market value of
$2,002,000 for these bonds. The original cost of the bonds was $1,992,000. The par
value at maturity will be $2,000,000. The amount at which the investments would be
reported is:
A)$2,002,000
B)$2,000,000
C)$1,996,000
D)$1,992,000
32) When liabilities authorized by an appropriation have been incurred, the
appropriation is said to be
A) Expensed
B) Encumbered
C)Expired
D)Expended
33) Which of the following is not True regarding enterprise funds?
A)Similar to commercial businesses, enterprise funds equity accounts include both
contributed capital and retained earnings
B)A Statement of Revenues, Expenses, and Changes in Fund Net Position would be the
primary operating statement for enterprise funds
C)Enterprise funds’ Cash Flow Statements could have up to four categories
D)None of the above; all are True
34) A local government issued bonds and recorded the event by debiting Cash and
crediting Other Financing Source – Proceeds of Bonds and Other Financing Source –
Premium on Bonds. What is the worksheet entry when preparing the government-wide
statements?
A)Debit Other Financing Sources Proceeds of Bonds and Other Financing Sources
Premium on bonds and Credit Bonds Payable and Premium on Bonds
B)Debit Cash and Credit Bonds Payable and Premium on bonds
C)Debit Other Financing Sources Proceeds of Bonds and Credit Bonds payable and
Premium on Bonds
D)No adjustment is necessary
35) The total amount of indebtedness of specified kinds that is allowed by law to be
outstanding at any time is known as:
A)Debt margin
B)Debt limit
C)Borrowing power
D)Maximum debt
36) Which of the following best describes how many funds a government should use?
A) One for each revenue source
B)Two at a minimum; the General Fund and one enterprise fund
C)As many as necessary to fulfill legal requirements and sound financial administration
D)None of the above
37) In 2015, Susan tells The Art Museum, a private not-for-profit organization, that she
has named the museum in her will. When should the organization recognize the
contribution revenue?
A) Only after Susan dies and the will is declared valid
B) Ratably over a five year period beginning in 2015
C) All in 2015
D) When the Museum receives the contribution
38) Henry Highbrow promises to donate $25,000 to his church toward the purchase of a
new piano if the church is able to raise matching funds of $25,000 from other
contributors. At what point should the church record revenue?
A)When Henry makes his pledge, as long as collection is reasonably assured
B)When the matching funds are raised
C)When the piano is purchased
D)When Henry pays the $25,000 to the church
39) Activities that produce goods or services to be provided to other departments or
other governmental units would be reported in which fund?
A)Enterprise fund
B)Agency fund
C)Internal service fund
D)Advance fund
40) Which of the following is not a characteristic that distinguishes a private
not-for-profit organization from a business?
A. Contributions are from resource providers who expect nothing in return
B. Financial statements are intended primarily for use by donors
C. The organizations revenues exceed expenses
D. Absence of ownership interests
41) When using the modified approach to account for infrastructures, expenditures to
extend the life of the infrastructure assets are:
A)Expensed
B)Capitalized
C) Either A or B
D)Neither A nor B
42) Identify the primary functions of the following entities as they relate to financial
reporting by the federal government:
a)Office of Management and Budget
b)Department of Treasury
c)Government Accountability Office
43) A local government recorded the payment of bond principal by debiting
Expenditure: bond principal and crediting Cash. What is the worksheet entry when
preparing the government-wide statements?
A)Debit Bonds Payable and credit Cash
B)Debit Cash and credit Expenditure: Bond Principal
C)Debit Bonds Payable and credit Expenditure: Bond Principal
D)None of the above
44) Which of the following steps in the federal governments budgetary authority
process is most similar to the recording of encumbrances by state and local
governments?
A)Apportionment
B)Appropriation
C)Allotment
D)Obligation
45) A company has bonds outstanding at the beginning of the current year. The debit in
the worksheet entry to bring these on to the books would be to:
A) Proceeds from Sale of Bonds
B) Amount to be Provided for Long-Term Debt
C) Expenditures Bond Principal
D)Net Position beginning balance
46) How is the Unrelated Business Income Tax computed?
47) The City of Stromfield had the following partial list of pre-closing account balances
in its General Fund as of June 30, 2015 .
Required: Prepare, in good form, a Statement of Revenues, Expenditures, and Changes
in Fund Balances for the General Fund for the year ended June 30, 2015 .
48) What is the difference between Permanent Funds and Private Purpose Trust Funds?
49) Describe the accounting treatment of investments with determinable fair values
reported in a Private-Purpose Trust Fund
50) What is a cost sharing state pension plan?
51) List the Government-wide financial statements required by GASB Statement 34 .
52) Identify the three types of temporary restrictions placed on contributions to a
private sector not-for-profit health care organization and outline the accounting
requirements for each type.
53) NACUBO has issued a position paper titled Accounting and Reporting Scholarship
Allowances to Tuition and Other Revenues by Higher Education to address the issue of
scholarship allowances. How are scholarships and allowances treated in the financial
statements by private colleges and universities?