Reference no: EM1361344

A primary characteristic that distinguishes not-for-profit entities from business entities is
a) The need to generate revenues equal to or in excess of expenditures/expenses.
b) The importance of the budget in the governing process.
c) The need to provide goods or services.
d) The correlation between revenues generated and demand for goods or services.

Which of the following is an objective of financial reporting by governmental
entities as established by GASB?
a) Financial reporting should assist users in assessing the management skills of top management.
b) Financial reporting should assist users in determining if current-period revenues were sufficient to pay for current-period services.
c) Financial reporting should assist users in evaluating the cash management operations of the governmental entity for the year.
d) Financial reporting should assist users in assessing whether the government provided appropriate services to its constituents in the current year.

What is the primary reason that governmental entities use fund accounting?
a) Fund accounting is required by law.
b) Fund accounting is required by GAAP.
c) Fund accounting promotes control and accountability over restricted resources.
d) Fund accounting promotes better control over operating activities.

5. A fund is
a) A separate legal entity.
b) A separate fiscal and accounting entity.
c) A separate self-balancing set of accounts for inventory purposes.
d) None of the above.

Under the GASB Statement No. 34 reporting model for governmental entities,
which of the following is required?
a) Only one set of financial statements, prepared on the full accrual basis of accounting.
b) Only one set of financial statements, prepared on the modified accrual basis of accounting.
c) Two sets of financial statements, one that views the government as a collection of separate funds and reports using the current financial resources measurement focus and modified accrual basis of accounting for governmental funds and one that views the government as a whole by combining all governmental activities in one column and all business-type activities in another column using the full accrual basis of accounting for both columns.
d) Two sets of financial statements, one that views the government as a whole using the current financial resources measurement focus and modified accrual basis of accounting and one that views the government by function and combines all governmental activities in one column and all business-type activities in another column using the full accrual basis of accounting for both columns.

Under the GASB Statement No. 34 reporting model for governmental entities, fund financial statements include separate sets of financial statements for:
a) Each major function of the government.
b) Governmental funds, proprietary funds, and fiduciary funds.
c) Governmental funds, enterprise funds, and internal service funds.
d) Governmental funds, special revenue funds, and debt service funds.

Property taxes levied on the citizens of the Hill County would most appropriately be
budgeted in which of the following budgets?
a) Operating budget.
b) Capital budget.
c) Flexible budget.
d) All of the above.

GASB requires that governmental entities present actual data in comparison budget
data on which of the following bases of accounting?
a) Budgetary basis.
b) Cash basis.
c) Modified accrual basis.
d) Accrual basis.

Which of the following is NOT a reason that legally adopted budgets may not be
readily comparable to amounts reported in the GAAP-based financial statements?
a) Differences in Basis of Accounting.
b) Differences in Timing.
c) Differences in Reporting Entity.
d) Differences in Recognition.

As used in governmental accounting, interperiod equity refers to a concept of
a) providing the same level of services to citizens each year.
b) measuring whether current year revenues are sufficient to pay for current year services.
c) levying property taxes at the same rate each year.
d) requiring that general fund budgets be balanced each year.

For fund financial statements, the measurement focus and basis of accounting used
by governmental fund types are
a) current financial resources and modified accrual accounting.
b) economic resources and modified accrual accounting.
c) financial resources and full accrual accounting.
d) economic resources and full accrual accounting.

The modified accrual basis of accounting is used in presenting the fund financial
statements of the governmental funds because
a) it is the superior method of accounting for the economic resources of any entity.
b) it provides information as to the extent the entity achieved interperiod equity.
c) it is budget oriented while facilitating comparisons among entities.
d) it results in accounting measurements based on the substance of transactions.

As used in defining the modified accrual basis of accounting, the term "available" means
a) received in cash.
b) will be received in cash within 60 days of year-end.
c) collection in cash is reasonably assured.
d) collected within the current period or expected to be collected soon enough thereafter to be used to pay liabilities of the current period.

Which of the following funds would use the modified accrual basis of accounting in preparing its fund financial statements?
a) City Electric Utility Enterprise Fund.
b) City Hall Capital Project Fund.
c) City Motor Pool Internal Service Fund.
d) City Employee Pension Trust Fund.

In which fund type would a governmental entity's debt service fund be found?
a) Governmental fund type.
b) Proprietary fund type.
c) Fiduciary fund type.
d) Governmental activities.

With regard to the resources dedicated to the acquisition of fixed assets that will be
used in general government activities, which of the following is true?
a) Governments must maintain capital projects funds for resources that are legally restricted to the acquisition of fixed assets.
b) Governments may maintain capital projects funds for resources that are legally restricted to the acquisition of fixed assets.
c) Governments may account for any resources dedicated (whether legally or not) to the acquisition of fixed assets in any of the governmental funds.
d) Government must account for all resources set aside for fixed asset acquisition in a capital projects fund.

Salt City issued $5 billion of bonds at face value to fund the reconstruction of the
major interstate highways in and around their city. The bond underwriters
withheld $2 million for underwriting fees and remitted the balance to the City.
Assuming the City maintains its books and records in a manner that facilitates the
preparation of fund financial statements, how would the underwriting fee be
accounted for in the capital projects fund?
a) Reduce Other Financing Sources by $2 million.
b) Reduce Bonds Payable by $2 million.
c) Increase Expenditures by $2 million.
d) It would not be accounted for in the capital projects fund.

General long-term debt of a governmental entity includes
a) All future financial obligations.
b) All future financial obligations that result from past transactions.
c) All future financial obligations that result from past transactions for which the government has already received a benefit.
d) All future financial obligations that are backed by the government's general credit and revenue raising power and that result from past transactions for which the government has already received a benefit.

When the proceeds of long term debt are reported in governmental fund financial statements
a) They are reported only as an increase in liabilities in the funds.
b) They are reported only as revenues in the funds.
c) They are reported only as an other financing source?debt proceeds.
d) They are reported only as an other financing use?debt proceeds.

Which of the following is a valid reason for governmental entities to engage in
business-type activities?
a) The entity does not want control over the activity.
b) The activity competes with general government activities.
c) The entity does not want to subsidize the activity.
d) The entity can provide the services more cheaply or efficiently than can a private firm.

Which of the following is a valid argument for separate accounting principles
for proprietary activities?
a) Two separate measurement focuses and bases for accounting within the same set of financial statements are confusing.
b) There are no clear-cut distinctions between business and non-business activities.
c) The measurement focus on all economic resources is more consistent with the GASB's objectives that financial reporting should provide information to determine whether current-year revenues were sufficient to pay for current-year services.
d) Surveys of statement users indicate that information on depreciation is not of high priority to governmental decision makers.

A governmental entity receives a gift of cash and investments with a fair value of $200,000. The donor specified that the earnings from the gift must be used to
beautify city-owned parks and the principal must be re-invested. The $200,000
gift should be accounted for in which of the following funds?
a) General fund.
b) Private-purpose trust fund.
c) Agency fund.
d) Permanent fund.

In previous years, Center City had received a $400,000 gift of cash and investments.
The donor had specified that the earnings from the gift must be used to beautify
city-owned parks and the principal must be re-invested. During the current year,
the earnings from this gift were $24,000. The earnings from this gift should
generally be considered revenue to which of the following funds?
a) Special revenue fund.
b) Private-purpose trust fund.
c) Agency fund.
d) Permanent fund.

Use the following information to answer Questions #27-28
The City received $200,000 to help maintain a local art museum that is owned and operated by a not-for-profit organization. During the year the City transferred net earnings of $20,000 to the appropriate entity/fund.

The $200,000 gift would be reported in a (an):
a) Special revenue fund.
b) Private-purpose trust fund.
c) Agency fund.
d) Permanent fund.

The $20,000 transfer would be reported by the fund that made the transfer as a
(an)
a) Transfer out.
b) Expenditure.
c) Deduction from Net Assets?Benefits.
d) Expense.

The financial reporting entity is composed of
a) The primary government.
b) The primary government and all legally separate governments for which the primary government is financial accountable.
c) The primary government and all legally separate organizations for which the primary government is financially accountable.
d) The primary government, all legally separate organizations for which the primary government is financially accountable and any organizations whose omission would cause the primary governments financial statements to be misleading or incomplete.

Which of the following is necessary for a special purpose local government to be
considered a primary government?
a) It must operate for a single purpose.
b) It must have a separately elected governing body.
c) It must tax its citizens with ad valorem taxes.
d) It must be fiscally dependent on another government.