An effective system of monitoring financial condition may permit management to
identify unfavorable financial trends in sufficient time to take preventive action to avoid
financial distress.
The FASB requires that long-term unconditional pledges (those that will not be
collected within a year) be reported at fair value.
A private college would record a federal grant received to test a medical device that the
federal government intends to patent as Contributions-Temporarily Restricted.
One characteristic that separates a governmental not-for-profit from a nongovernmental
not-for-profit is the ability to raise taxes.
Assets limited as to use are unrestricted assets whose use is limited by parties other than
donors or grantors.
All not-for-profit organizations are required to file some type of Form 990 with the
Internal Revenue Service.
A given parcel of real estate may be subject at a given time to assessments for the
payment of taxes to retire bonds issued by two or more governments.
itchRatings, Thomson Municipal Market, and Standard & Poor’s are the three major
agencies that provide credit ratings for state and local government debt.
The FASB requires a statement of functional expenses be prepared by all not-for-profit
organizations.
If all asset, liability, and fund equity accounts of a capital projects fund were closed
during a certain fiscal year, it is unnecessary to prepare any financial statements for that
fund for that year.
The Uniform Prudent Management of Institutional Funds Act specifies the spending
rate a not-for-profit should use when establishing its expenditure policies.
The AICPA’s Audit and Accounting Guide, State and Local Governments requires
auditors to make separate materiality determinations for each opinion unit.
The City of Castle Rock issued bonds at par for the construction of a new city office
building. Receipt of the bond proceeds would result in journal entries in which funds?
A. Capital Projects Fund: Yes; Debt Service Fund: No
B. Capital Projects Fund: No; Debt Service Fund: Yes
C. Capital Projects Fund: Yes; Debt Service Fund: Yes
D. Capital Projects Fund: No; Debt Service Fund: No
Which of the following best describes the proper treatment for uncollectible amounts of
taxes?
A. Report as bad debt expense.
B. Report as deferred inflow of resources.
C. Report as bad debt expenditures.
D. Report receivables net of uncollectible amounts.
Capital assets used by governmental funds should be reported in:
A. The appropriate governmental funds.
B. The property, plant, and equipment fund.
C. Departmental memorandum records.
D. The governmental activities column of the government-wide statements.
Which of the following funds would record depreciation of capital assets?
A. Special revenue fund.
B. Permanent fund.
C. Internal service fund.
D. Agency fund.
The three major rating agencies for governments have each developed quantitative tools
for assessing credit risk. Which of the following general factors is used by all three
rating agencies in assessing credit risk?
A. Economy.
B. Budgetary flexibility.
C. Revenue dispersion.
D. Geographic location.
Which of the following assets would not be found in the balance sheet of a debt service
fund?
A. Cash with fiscal agent.
B. Investments.
C. Equipment.
D. Interest Receivable.
Which of the following financial statements is not required by OMB Circular A-136?
A. Statement of budgetary resources.
B. Statement of cash flows.
C. Balance sheet.
D. Statement of changes in net position.
A not-for-profit organization incurred $10,000 in management and general expenses in
the current fiscal year. In the organization’s statement of activities prepared in
conformity with FASB standards, the $10,000 would be reported as:
A. A deduction from program revenue.
B. Fund-raising expense.
C. Program services expenses.
D. Supporting services expenses.
An interfund transfer in should be reported in a governmental fund operating statement
as a(an):
A. Revenue.
B. Due from other funds.
C. Other financing source.
D. Other financing use.
An Olympic medalist swimmer who grew up in the city contributed $75,000 to the city
stipulating that the money be invested and that the earnings thereon be used for
maintenance of the swimming complex. The $75,000 would most appropriately be
recorded in a(an):
A. Agency fund.
B. A permanent fund.
C. Private-purpose trust fund.
D. Investment trust fund.
Under service efforts and accomplishments (SEA) reporting input measures are quantity
measures that reflect the quantity of a service provided, such as the number of
lane-miles of road repaired.
Under FASB standards how would a not-for-profit organization recognize a conditional
pledge?
A. It would debit Pledges Receivable and credit Contributions-Temporarily Restricted.
B. It would debit Pledges Receivable and credit Deferred Contributions.
C. It would debit Conditional Pledges Receivable and Credit Deferred Contributions.
D. It would not recognize the conditional pledge until pledge conditions are
substantially met.
Which of the following ratios would be considered favorable if it was low?
A. Total revenues to population.
B. Debt service to total revenues.
C. Capital outlay from operating funds to operating expenditures.
D. Cash and short-term investments to current liabilities.
The FASB states that depreciation expense in a not-for-profit organization should be:
A. Assigned to or allocated to the functions to which it relates.
B. Reported under the management and general function.
C. Disclosed in the notes to the financial statements.
D. Allocated to program but not support functions.
Which of the following is true regarding financial reporting for internal service funds?
A. Internal service funds are reported in the governmental fund financial statements.
B. Internal service funds are aggregated and reported as a major fund in the proprietary
fund financial statements.
C. Internal service funds are generally reported in the Business-type Activities column
of the government-wide financial statements.
D. Internal service funds are generally reported in the Governmental Activities column
of the government-wide financial statements.
Which of the following would decrease the governmental activities balance in Net
Position-Net Investment in Capital Assets?
A. An increase in accumulated depreciation.
B. Acquisition of a capital lease.
C. Sale of a fully depreciated capital asset.
D. Receipt of a capital grant that has not been expended at fiscal year-end.
The City of Oak Park constructed a new storage facility using the city’s own public
works employees. Construction costs were incurred in the amount of $900,000, plus
$25,000 in interest on short-term notes used to finance construction. What amount
should be capitalized in the government-wide statements?
A. $900,000.
B. $925,000.
C. $875,000.
D. $0.
Which of the following financial concepts has been defined by the GASB as “the
probability that a government will meet both its financial obligations to creditors,
consumers, employees, taxpayers, suppliers, constituents, and others as they become
due and its service obligation to constituents, both currently and in the future”?
A. Financial condition.
B. Financial position.
C. Financial leverage.
D. Liquidity.
The following are key terms in Chapter 7 that relate accounting for the business-type
activities of state and local governments:
A. Allowance for Funds Used during Construction
B. Revenue bonds
C. Utility plant acquisition adjustment
D. Regulatory accounting principles
E. Original cost
F. Historical cost
G. General obligation bonds 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) In utility accounting, the net cost for the period of construction of borrowed
funds used for construction purposes and a reasonable rate on other funds so used
_____ 2) Accounting principles prescribed by federal or state regulatory commissions
for investor-owned and some governmentally owned utilities.
_____ 3) Bonds whose principal and interest are payable exclusively from earnings of a
public enterprise.
_____ 4) Bonds which carry the pledge of the government entity’s full faith and credit,
although the intent may be to service them from proprietary revenues rather than
general taxes.
_____ 5) The account that captures the premium paid on a utility plant purchased by a
government.
In late April, the Acme Construction Co. submitted a $1,200,000 progress billing on a
construction contract. On May 2, the bill was approved for payment, subject to a ten
percent retention, as provided by the contract. Construction expenditures should be
debited when:
A. The bill is approved for payment.
B. The contract is signed.
C. The bill is paid (except for the ten percent retention).
D. The final ten percent of the bill is paid.
The liability for special assessment bonds that carry a secondary pledge of a city’s
general credit should be reported in the balance sheet(s) of:
A. A debt service fund.
B. An agency fund.
C. The governmental activities accounts.
D. An agency fund and disclosed in the notes to the financial statements.
Which of the following properly portrays the components of net position for proprietary
funds?
A. Net investment in capital assets, Reserved, Unreserved.
B. Designated, Undesignated, Restricted, Unrestricted.
C. Net investment in capital assets, Restricted, Unrestricted.
D. Contributed capital, Net investment in capital assets, Reserved, Unreserved.
Capital assets used by departments accounted for by the General Fund of a
governmental unit should be accounted for in
A. The General Fund.
B. The governmental activities journal.
C. The business-type activities journal.
D. The general capital assets fund.
A properly prepared schedule of revenues, expenditures, and changes in fund
balances-budget and actual will include which of the following columns?
A. Actual revenue and expenditure amounts on the GAAP basis.
B. Actual revenue and expenditure amounts on the budget basis.
C. Encumbrances outstanding at year-end.|
D. Unexpended appropriations.
One of the purposes of the Federal Financial Management Improvement Act of 1996
was to:
A. Establish a requirement that the financial statements of the federal government as a
whole be audited.
B. Improve the effectiveness of programs receiving federal funds.
C. Establish generally accepted federal accounting principles.
D. Rebuild the credibility and restore public confidence in the federal government.
Some governments provide to their citizens highly condensed financial information,
budget summaries, and narrative descriptions. This report is called a(an)
A. Comprehensive annual financial report.
B. Basic financial statements.
C. Required supplementary information.
D. Popular report.
A capital projects fund might be used to account for which of the following activities?
A. Maintaining sidewalks.
B. Building a parking garage.
C. Providing water and sewer services.
D. Servicing long-term debt.
In 2017, Sunrise City signed a contract in the amount of $8,000,000 for the construction
of a new city hall. Expenditures were $4,000,000 in 2017 and $2,050,000 in 2018,
which included a change to the original construction design in the amount of $50,000.
What amount should be added to capital assets in the governmental activities accounts
in 2018?
A. $ 0
B. $ 50,000
C. $ 2,050,000
D. $ 2,000,000
The General Fund is used to account for:
A. Revenues and expenditures legally restricted to a specific purpose.
B. The accumulation of resources to pay for principal and interest on the current portion
of long-term debt.
C. Construction of major capital assets.
D. General administration of the government.
According to the FASB Codification, which of the following is a condition that must be
met for contributed services to a not-for-profit organization (NFP) to be recorded as
both a contribution and as an expense?
A. The service creates or enhances nonfinancial assets, such as a carpenter renovating a
building.
B. The service requires a specialized skill and is provided by someone who possesses
the specialized skill, such as a lawyer preparing contracts.
C. The service supplements the management function, such as an auditor preparing a
program audit, which is not normally done.
D. All of the above must be met for contributed services to be recognized as a
contribution and an expense.
The purpose of a statement of functional expenses is to:
A. Report on the net income of each program and the related direct and indirect
expenses.
B. Report on program expenses and supporting expenses.
C. Report on the natural expenses (object-of-expense), as well as program and support
functions expenses.
D. Report on the cash flows of each program and that of supporting the programs.
Which of the following is not a category of program revenue reported on the statement
of activities at the government-wide level?
A. General program revenues.
B. Charges for services.
C. Operating grants and contributions.
D. Capital grants and contributions.
On March 2, 2016, 20-year, 6 percent, general obligation serial bonds were issued at the
face amount of $3,000,000. Interest of 6 percent per annum is due semiannually on
March 1 and September 1. The first payment of $150,000 for redemption of principal is
due on March 1, 2017. Fiscal year-end occurs on December 31. What is the interest
expense for the fiscal year ending December 31, 2016?
A. $90,000.
B. $135,000.
C. $150,000.
D. None of the above.