Multiple Choice Answers

1) The General Fund of the City of Richmond approved a tax levy for the calendar year 2009 in the amount of $1,600,000. Of that amount, $30,000 is expected to be uncollectible. During 2009, $1,400,000 was collected. During 2010, $100,000 was collected during the first 30 days, $40,000 was collected during the next 30 days and $30,000 was collected during the next 30 days. During the postaudit, you discovered that the city showed $1,570,000 in revenues. What adjusting entry would you need to make, assuming you decided to allow the maximum amount of revenues for 2009, using modified accrual accounting?
A. Debit Revenues and Credit Deferred Revenues in the amount of $200,000
B. No entry is necessary
C. Debit Revenues and Credit Deferred Revenues in the amount of $70,000
D. Debit Revenues and Credit Deferred Revenues in the amount of $30,000

2) Which of the following choices regarding the government-wide Statement of Net Assets is TRUE?
A. The government-wide Statement of Net Assets includes all resources entrusted to the government; including governmental, proprietary and fiduciary
B. A reporting entity (primary government plus component units) total column is required
C. The government-wide Statement of Net Assets must be prepared in a classified format; that is, both assets and liabilities must be separated between current and long-term categories
D. The government-wide Statement of Net Assets reflects capital assets, net of accumulated depreciation, for both governmental and business-type activities

3) According to GASB Statement No. 44, all of the following is a recommendation category for the CAFR’s statistical section EXCEPT:
A. comparative information
B. operating information
C. debt capacity information
D. financial trends information

4) Which of the following choices regarding the proprietary fund financial statements is TRUE?
A. Statements include the Statement of Net Assets (or Balance Sheet), Statement of Revenues, Expenses and Changes in Fund Net Assets and Statement of Cash Flows
B. The Statement of Cash Flows may be prepared using either the direct or the indirect methods
C. Normally, reconciliation is required between the proprietary fund financial statements and the business-type activities column in the government-wide financial statements
D. The Statement of Net Assets (or Balance Sheet) reflects equity as contributed equity and retained earnings

5) All of the following is likely to be recorded in a special revenue fund EXCEPT:
A. sales taxes restricted to courthouse additions
B. state motor fuel tax restricted to road maintenance
C. hotel taxes restricted to promoting tourism
D. phone fees restricted to supporting the emergency 911 access system

6) A local government was awarded a federal grant in the amount of $600,000 to provide for a summer employment program for young people. The grant was a reimbursement grant and was awarded on April 30, 2009. The local government expended the resources as follows: June, 2009, $220,000; July 2009, $200,000; August, 2009, $180,000. The federal government provided the funds the following months. The local government would recognize revenues for the fiscal year ended June 30, 2009 in which amount?
A. $420,000
B. $600,000
C. $220,000
D. $ – 0 –

7) Which of the following accounts of a governmental unit is credited to close it at the end of the fiscal year?
A. Reserve for Encumbrances
B. Encumbrances Control
C. Other Financing Sources-Transfers In
D. Appropriations Control

8) The initial transfer of cash from the General Fund to establish a motor pool internal service fund would require the General Fund to credit Cash and debit:
A. Expenditures – Vehicle maintenance
B. Other Financing Uses-Transfers Out Control
C. Accounts Receivable-Internal Service Fund
D. Investment in Internal Service Fund

9) Which of the following accounts of a governmental unit is debited when supplies previously ordered are received?
A. Reserve for Encumbrances
B. Reserve for Supplies
C. Appropriations
D. Encumbrances Control

10) Expenditures are generally recorded and fund liabilities are recognized:
A. when purchase orders are issued, regardless of whether resources are available in the fund
B. when goods and services are received, regardless of whether or not resources are available in the fund
C. when invoices are paid
D. when goods and services are received, but only if resources are available in the fund

11) What is a Special Revenue Fund?
A. A fund used to account for revenues from general taxes or other revenue sources that by law are designated to finance general activities of the government
B. A fund used to account for all revenue transactions of a governmental unit that are not accounted for in another fund
C. A fund used to account for revenues from specific taxes or other revenue sources that by law are designated to finance particular activities of the government other than capital projects
D. A fund created to account for all resources and revenues to be used for the construction or acquisition of capital assets

12) When payrolls and other liabilities are incurred and must be paid before substantial amounts of cash will be collected, what type of short-term note is desirable and secured by a government’s power to tax?
A. Tax Anticipation Note Payable
B. Tax Budget Note Payable
C. Tax Encumbrances Note Payable
D. Tax Relief Note Payable

13) Funds that are used to account for activities similar to those often engaged in by profit-seeking businesses are:
A. capital project funds
B. special revenue funds
C. agency funds
D. proprietary funds

14) Proprietary funds utilize what basis of accounting?
A. Cash
B. Accrual
C. Budgetary
D. Modified accrual

15) In the Statement of Net Assets for proprietary funds, GASB requires a classified format where current assets, noncurrent assets, current liabilities and noncurrent liabilities are presented:
A. intermingled
B. combined
C. not at all
D. separately

16) The tax agency fund of Fulton County collected $6,000,000 for a school district, $3,000,000 for the county general fund and $4,000,000 for a municipality. County general fund employees handle the collections and a 3% collection fee is charged all units except the county. The total amount of revenue recognized by the county general fund would be:
A. $3,090,000
B. $3,000,000
C. $3,300,000
D. $2,910,000

17) GASB Statement 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, applies to all of the following investment types EXCEPT:
A. debt securities
B. open-end mutual funds
C. investments of pension funds
D. external investment pools

18) The City of Springfield has three pension plans: a locally administered police plan for which it is trustee, a statewide cost sharing plan and a statewide agency plan. The city would include in its CAFR financial statements for:
A. both statewide plans
B. the locally administered plan plus the statewide agency plan
C. the locally administered plan only
D. all three plans

19) Which disqualifies a lease as a capital lease?
A. The lease term is equal to or greater than 75% of the estimated economic life of the leased property
B. The lease contains an option to purchase the leased property at its fair market value
C. The present value of the minimum lease payments equals or exceeds 90% of the fair value of the leased property
D. The lease transfers ownership of the property to the lessee by the end of the lease term

20) In which fund type is interest on long term debt typically not accrued, yet is recognized as an expenditure in the year in which interest is legally due?
A. Internal service fund
B. Debt service fund
C. Pension fund
D. Enterprise fund

21) If taxes or special assessments are levied by the General Fund and then-transferred to the debt service fund, they are:
A. included in the revenues budget of the general fund and budgeted by that fund as transfers out to the debt service fund
B. recorded as revenues of the debt service fund
C. recorded as an expense and voucher payable by the general fund and are recorded as a revenue and receivable by the debt service fund.
D. included as transfers out in the General Fund but are not budgeted as revenue in that fund

22) A government had the following transfers reported in its governmental funds Statement of Revenues, Expenditures and Changes in Fund Balances: (1) a transfer from the General Fund to a debt service fund in the amount of $l,000,000; (2) a transfer from the General Fund to an enterprise fund in the amount of $1,200,000; and (3) a transfer from the General Fund to an internal service fund in the amount of $400,000. The amount that would be shown as a transfer out in the governmental activities column in the Statement of Activities would be:
A. $1,400,000
B. $2,600,000
C. $ 800,000
D. $1,200,000

23) A government’s Statement of Revenues, Expenditures and Changes in Fund Balances reflected proceeds of bonds in the amount of $1,000,000. That statement also reflected expenditures for debt service in the amount of $3,000,000, including $2,600,000 for principal payments. Assuming no other changes, the effect, when moving from the change in fund balances in the governmental funds Statement of Revenues, Expenditures and Changes in Fund Balances to the change in net assets for governmental activities in the Statement of Activities would be a:
A. $1,000,000 decrease
B. $1,000,000 increase
C. $1,600,000 decrease
D. $1,600,000 increase

24) A government reported an other financing source in the amount of $800,000, related to the sale of land in its governmental funds Statement of Revenues, Expenditures and Changes in Fund Balances. The land had a cost of $350,000. The adjustment in the reconciliation when moving from the governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the change in net assets for governmental activities in the Statement of Activities would:
A. Decrease of $450,000
B. Increase of $450,000
C. Decrease of $350,000
D. Increase of $350,000

25) Which of the following choices regarding Government-wide financial statements is TRUE?
A. Prior year data must be presented
B. Statement of Cash Flows is not required for Government-wide statements
C. Fiduciary activities are only reported if they qualify as a major fund
D. Depreciation can be reported in the statements or disclosed in footnotes

26) An example of an expenditure classification by function would be:
A. Public safety
B. Current
C. Police Department
D. Salaries
E. Financial trends information

27) Under GASB rules for the financial reporting entity:
A. counties are component units of the State Government
B. component units are included if the primary government is financially accountable for their operations
C. component units must be reported in columns (discrete presentation) separate from the funds of a primary government
D. blended and discretely presented component units are to be reported in government-wide financial statements but not in fund financial statements

28) According to NACUBO guidelines, what is the correct treatment for recognizing summer school revenues and expenses when a college’s fiscal year ends on June 30?
A. Recognize the entire amount of revenues and expenses in the year in which the term began
B. Recognize the entire amount of revenues and expenses in the year in which the term is predominantly conducted
C. Apportion the revenues and expenses to the two fiscal years, following accrual accounting practices similar to those employed by commercial enterprises
D. Recognize expenses in the year in which they were billed and the expenses in the year in which they were incurred

29) In 2008 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 $350,000. Expenses associated with the grant totaled $225,000 in 2009. In the Statement of Activities for 2009, the college should show:
A. revenues of $225,000 and expenses of $225,000 in Temporarily Restricted Net Assets
B. revenues of $350,000 and expenses of $225,000 in Temporarily Restricted Net Assets
C. expenses of $ 225,000 in Unrestricted Net Assets and a decrease in Temporarily Restricted Net Assets of $ 225,000
D. revenues of $225,000 and expenses of $225,000 in Unrestricted Net Assets

30) The FASB has the authority to set accounting standards for all of the following organizations EXCEPT:
A. private colleges
B. public colleges
C. educational foundations established to support a private college or university
D. for profit proprietary schools

31) Assume a government is a special-purpose entity engaged in fiduciary activities only. Which of the following financial statements would be required?
A. Statement of Net Assets and Statement of Activities
B. Statement of Fiduciary Net Assets and Statement of Changes in Fiduciary Net Assets
C. Statement of Fiduciary Net Assets, Statement of Changes in Fiduciary Net Assets and Statement of Cash Flows
D. Statement of Net Assets, Statement of Activities, Statement of Fiduciary Net Assets, Statement of Changes in Fiduciary Net Assets

32) The fund statements for governmental funds are presented using:
A. Current Financial Resources Measurement focus and the Modified Accrual Basis of Accounting
B. Economic Resources Measurement focus and the Modified Accrual Basis of Accounting
C. Economic Resources Measurement focus and the Accrual Basis of Accounting
D. Current Financial Resources Measurement focus and the Accrual Basis of Accounting
33) A public college had tuition and fees of $20,000,000. Scholarships, for which no services were required, amounted to $2,000,000. Graduate assistantships, for which services were required, amounted to $1,000,000. The amount to be reported by the public college as net tuition and fees would be:
A. $19,000,000
B. $17,000,000
C. $20,000,000
D. $18,000,000
34) To compute the net debt per capita, a user of financial statements would need to look at (in the CAFR):
A. The debt and the amount available to pay that debt in the governmental funds Balance Sheet and the population from the statistical section
B. All three items from the government-wide Statement of Net Assets
C. The debt in the government-wide Statement of Net Assets, the amount available to pay that debt in the governmental funds Balance Sheet and the population from the statistical section
D. The debt in the governmental funds Balance Sheet, the amount available in the government-wide Statement of Net Assets and the population from the statistical section

35) Which organization promulgates the Government Auditing Standards?
A. The U.S. Office of Management and Budget
B. The U.S. Government Accountability Office
C. The American Institute of Certified Public Accountants
D. The Securities and Exchange Commission

 

 

36) All of the following are considered to be a major user group by the GASB EXCEPT:
A. investors and creditors
B. government executive branch officials
C. citizen groups
D. legislative and oversight officials

37) Which of the following funds is used to account for the payment of principal and interest of general long term debt of a government?
A. Debt Service Fund
B. Capital Projects Fund
C. General Fund
D. Agency Fund

38) The GASB is under the oversight of:
A. FASAB
B. FASB
C. GAO
D. FAF

39) Assume a government is a special-purpose government engaged in only one governmental activity. Which financial statements would be required?
A. Governmental fund statements only
B. Either government-wide or governmental funds statements, issued separately
C. Government-wide statements only
D. Statements combining the governmental funds and government-wide statements