ATG 401 - Exam 1 Multiple Choice
The town of Stockdale reports a net increase in its governmental funds of $15,000. During the year, it purchased a truck for $50,000 and recognized $2,000 for depreciation expense. Is the preparation of its statement of activities for the year, what amount should it report for the change in net position? a. $15,000 b. $65,000 c. $63,000 d. $(37,000)
$63,000 15,000+20,000-2,000=63,000 Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. The statement of activities, therefore, backs out the expenditure and recognizes depreciation expense on the capital asset.
On January 1, Cleaner Water, Inc., a nongovernmental not-for-profit organization, received $20,000 and an unconditional pledge of $20,000 for each of the next four calendar years to be paid on the last day of each year. The present value of an ordinary annuity for four years at a constant interest rate of 8% is 3.312. What amount of net assets with donor restrictions is reported in the year the pledge was received? a. $66,240 b. $80,000 c. $86,240 d. $100,000
$66,240
During the current year, Wythe County levied $2,000,000 property taxes, 1% of which is expected to be uncollectible. During the year, the county collected $1,800,000 and wrote off $15,000 as uncollectible. Wythe County expects to collect the remaining amounts owed within 60 days of the close of its fiscal year. What amount should Wythe County report as property tax revenue in its statement of revenues, expenditures, and changes in fund balances for the current year? a. $1,800,000 b. $1,980,000 c. $1,985,000 d. $2,000,000
$1,980,000 Wythe should recognize 99% of the property tax levy since the amount it expects to collect and all amounts are expected to be collected w/in 60 days of its fiscal year-end
A government makes a contribution to its pension plan in the amount of $10,000 during the year. The actuarially determined annual required contribution for the year was $13,500. The pension plan paid benefits of $8,200 and refunded employee contributions of $800 during the year. What is the pension expenditure for the government's general fund for the year? a. $8,200 b. $9,000 c. $10,000 d. $13,500
$10,00 Cash paid by the government is considered an expenditure since the accounting entity we are focused on is the government's General Fund that follows modified accrual basis of accounting.
Other financing uses Menominee County's general fund had the following transactions during the year: Transfer to a debt service fund......................... $100,000 Payment to a pension trust fund.....................................500,000 Purchase of equipment...................... 300,000 What amount should Menominee County report for the general fund as other financing uses in its governmental funds' statement of revenues, expenditures, and changes in fund balances? a. $100,000 b. $400,000 c. $800,000 d. $900,000
$100,000 Only the transfer to the debt service fund is "other financing uses."
In Year 2, the East Association, a nongovernmental not-for-profit organization, received a $100,000 contribution to fund scholarships for medical students. The donor stipulated that only the interest earned on the contribution be used for the scholarships. Interest earned in Year 2 of $15,000 was used to award scholarships in Year 3. What amount should East Association report as net assets with donor restrictions at the end of Year 2? a. $115,000 b. $100,000 c. $15,000 d. $0
$115,000
A nongovernmental not-for-profit animal shelter receives contributed services from the following individuals valued at their normal billing rates: Veterinarian provides volunteer animal care .................................... $8,000 Board members volunteer to prepare books for audit .................. 4,500 Registered nurse volunteers as receptionist .................................... 3,000 Teacher provides volunteer dog walking ....................................... 2,000 What amount should the shelter record as contribution revenue? a. $8,000 b. $11,000 c. $12,500 d. $14,500
$12,500 - $4,500+8,000=12,500 only recognized if create or enhance nonfinancial assets or require specialized skills
Coalition for Healthy Communities, a nongovernmental not-for-profit organization, received a gift of treasury bills. The cost to the donor was $20,000, with an additional $500 for brokerage fees that were paid by the donor prior to the transfer of the treasury bills. The treasury bills had a fair value of $15,000 at the time of the transfer. At what amount should Coalition for Healthy Communities report the trea- sury bills in its statement of financial position? a. $15,000 b. $15,500 c. $20,000 d. $20,500
$15,000 -contribution is recorded at its fair value on the date it is received
Autism Research, Inc., a not-for-profit organization, received a grant in the amount of $200,000 that was restricted to fund research activities during the upcoming year. Later in the year, Autism Research recognized revenues of $500,000 and expenses of $450,000, including expenses relating to research activities amounting to $150,000. What amount, if any, should Autism Research report as net assets released from restriction during the year? a. $0 b. $200,000 c. $150,000 d. $250,000
$150,000
At the beginning of the current year, Mackinac County's enterprise fund had a $125,000 balance for accrued compensated absences. At the end of the year, the balance was $150,000. During the year, Mackinac paid $400,000 for compensated absences. What amount of compensated absences expense should Mackinac County's enterprise fund report for the year? a. $375,000 b. $400,000 c. $425,000 d. $550,000
$425,000 Compensated absences expense is equal to the amount paid plus the change in the accrued liability. Since the accrual liability increased by $25,000 during the year, the expense is equal to $400,000 + $25,000 = $425,000
Mighty Big Museum, a nongovernmental not-for-profit organization, had the following balances in its statement of functional expenses: Education ............................................................... $300,000 Fundraising.............................................................. 250,000 Management and general............................... 200,000 Research ..................................................................50,000 What amount should Mighty Big Museum report as expenses for support services? a. $350,000 b. $450,000 c. $500,000 d. $800,000
$450,000 - Support services are all activities of a non-for-profit organization than program services. Generally include management and general, fundraising, and membership-development activities
The Town of Bolton recorded an encumbrance in the amount of $50,000 relating to the purchase of a truck. When the truck was received, the actual cost amounted to $49,000. What amount should the Town credit to the encumbrance when the truck is finally purchased? a. $50,000 b. $49,000 c. $1,000 d. $(1,000)
$50,000
A nongovernmental not-for-profit organization received a $2 million gift from a donor who specified it be used to create an endowment fund that would be invested in perpetuity. The income from the fund is to be used to support a specific program in the second year and beyond. An investment purchased with the gift earned $40,000 during the first year. At the end of the first year, the fair value of the investment was $2,010,000. What is the net effect on net assets with donor restrictions at year end? a. $0 b. $10,000 increase c. $40,000 increase d. $50,000 increase
$50,000 increase = $40,000 in earnings + $10,000 in market price appreciation
Which of the following should be included in the financial statements of the Town of Acton: 1. Primary government 2. Discretely presented component units 3. Blended component units a. 1 only b. 1 and 2 only c. 1, 2, and 3 d. 2 and 3 only
1, 2, and 3
Which of the following criteria are used to determine the primary government? 1. Separately elected governing body 2. Legally independent 3. Fiscally independent a. 1 only b. 1 and 2 only c. 1, 2, and 3 d. 2 and 3 only
1, 2, and 3 The primary government is a governmental unit that, a) Has a separately elected governing body, b). is legally separate, and c). is fiscally independent of other state and local governments
The capitalization of works of art and historical treasures is encouraged, but is not required, for collec- tions that are: 1. Held for public exhibition 2. Protected and preserved 3. Subject to an organizational body that requires the proceeds from sales of collection items to be used to acquire other items for collections a. 1 only b. 1 and 2 only c. 1, 2, and 3 d. 2 and 3 only
1, 2, and 3 capitalization of works of art and historical treasures is encouraged but is not required. for collections that are all of the following
Which of the following should not be included in the management's discussion and analysis section of the CAFR? a. A forecast of revenues b. An explanation relating to changes in the City's fund balances c. A statement of condensed financial information contained in the government-wide financial statements d. A discussion of the condition of the City's infrastructure
A forecast of revenues -The MD&A section contains a discussion of the financial results presented for the year and not prospective forward-looking financial information
Which of the following is not a power that a municipality must possess in order to be considered fiscally independent? a. Ability to set its own budget b. Ability to issue bonds c. Ability to set and levy taxes d. Ability to set its own debt ceiling to control borrowings
Abilitiy to set its own debt ceiling to control borrowings
Chapter 11 `
Accounting for NFP Organizations
The Town of Littleton collects special taxes from property owners to pay for the construction of a sewer many years ago. The town has no obligation for the bonds if property owners fail to pay their assess- ments. What type of fund should the Town use to account for the collection of these assessments? a. Capital projects b. Debt service c. General d. Agency
Agency
Fund types Harland County received a $2,000,000 capital grant to be equally distributed among its five municipali- ties. The grant is to finance the construction of capital assets. Harland had no administrative or direct financial involvement in the construction. In which fund should Harland record the receipt of cash? a. Agency fund b. General fund c. Special revenue fund d. Private purpose trust fund
Agency fund
Stapleton College received $200,000 from a donor that was restricted for student scholarships. During the year, the College awarded all of the scholarships to deserving students. How should the donation be recognized in the year-end statement of activities? a. As both an increase and a decrease in net assets without donor restrictions b. As a decrease in net assets without donor restrictions c. With only a note reference d. The transaction is not reported
As both increase and a decrease in net assets without donor restrictions
Which of the following financial categories or elements are used in a nongovernmental not-for-profit organization's statement of financial position? a. Net assets, income, and expenses b. Income, expenses, and unrestricted net assets c. Assets, liabilities, and net assets d. Changes in unrestricted, temporarily restricted, and permanently restricted net assets
Assests, liabilities, and net assests
Property taxes represent which of the following? a. Mandated nonexchange transactions b. Voluntary nonexchange transactions c. Imposed tax revenues d. Derived tax revenues
Imposed tax revenues - property taxes are imposed nonexchange revenue transactions
Good Sports, Inc., a nongovernmental not-for-profit organization, received funds during its annual campaign that were specifically pledged by the donor to another nongovernmental not-for-profit health organization. How should Good Sports record these funds? a. Increase in assets and increase in liabilities b. Increase in assets and increase in revenue c. Increase in assets and increase in deferred revenue d. Decrease in assets and decrease in fund balance
Increase in net assests and increase in liabilities
Measurement focus and accrual basis of accounting The economic resources measurement focus and the accrual basis of accounting are appropriate for which of the following funds: a. Capital projects fund b. Internal service fund c. Debt service fund d. Special revenue fund
Internal service fund F/S for the internal service fund would be prepared using the economic resources measurement focus and the accrual basis of accounting.
What is the measurement focus and the basis of accounting for the government-wide financial statements? Measurement Focus Basis of Accounting a. Current financial resources Modified accrual b. Economic resources Modified accrual c. Current financial resources Accrual d. Economic resources Accrual
Measurement focus - Economic resources Basis of Accounting - Accrual Government-wide f/s should be prepared using the economic resources measurement focus and the accrual basis of accounting
The Music Listening Room, Inc. received a new building from a benefactor with no restrictions as to its use. The Music Listening Room does not have a policy implying a time restriction on donated assets. How should the donation be recognized? a. Net assets without donor restrictions b. Net assets with temporarily restricted donor restrictions c. Net assets with permanently restricted donor restrictions d. Net assets with donor restrictions
Net assets without donor restrictions
Which of the following statements is true regarding the budget vs. actual comparison disclosure? a. Municipalities are encouraged but not required to present a comparison schedule of budget-to- actual amounts. b. The budget-to-actual comparison schedule is included in the notes to the CAFR. c. The budget-to-actual comparison schedule is included in the basic financial statements section of the CAFR. d. The budget-to-actual comparison schedule is included either in the basic financial statements or in the required supplementary information section of the CAFR.
The budget-to-actual comparison schedule is included either in the basic financial statements or in the required supplementary information section of the CAFR.
The statement of activities is designed to provide information that allows readers to assess which of the following? a. Fiscal accountability b. Financial accountability c. Operational accountability d. Functional accountability
operational accountability - Government-wide financial statements provide information that is relevant to assess the extent to which the government is meeting its operational objectives effectively and efficiently
Depreciation expense It is appropriate to record depreciation expense in all of the following funds except: a. An enterprise fund b. An internal service fund c. A fiduciary fund d. A capital projects fund
A capital projects fund
Which of the following would not be reported as required supplementary information? a. Disclosures relating to pension actuarial valuations b. Discussion relating to the condition of the infrastructure c. Management's discussion and analysis d. A certificate of achievement
A certificate of achievement
Fund journal entry for taxes Assume that the Town of Wellesley bills property owners for their 4th quarter real estate tax, but doesn't expect to collect a portion of the receivable until more than 60 days after the close of its fiscal year. The portion that it does not expect to collect should be accounted for with a credit to which account? a. A deferred outflow of resources b. A deferred inflow of resources c. An allowance for uncollectible accounts receivable d. Nonspendable fund balance
A deferred inflow of resouces
Blended and discrete presentation The Town of Cardinal's public school system is administered by a separately elected board of education which is not organized as a separate legal entity and does not have the ability to either issue bonds or assess taxes. The Town must approve the school system's budget. The Town should report the school system as follows: Blended Discrete Presentation a. Yes Yes b. Yes No c. No Yes d. No No
Blended - Yes Discrete Presentaion - No
Fund types King City Council will be establishing a library fund. Library fees are expected to cover 55% of the library's annual resource requirements. King has decided that an annual determination of net income is desirable in order to maintain management control and accountability over the library. What type of fund should King establish in order to meet their measurement objectives? a. Special revenue fund b. General fund c. Internal service fund d. Enterprise fund
Enterprise fund - a business-type activity of the government that is available to the public and is financed, in whole or in part by fees charged to users of the enterprise
Debt service funds Which of the following statements is true regarding debt service funds? a. Debt service funds can be used for any of the governmental, proprietary, or fiduciary funds. b. Debt service funds can only be used for the governmental and proprietary funds. c. Debt service funds can only be used for the governmental funds. d. Debt service funds can only be used for fiduciary funds
Debt service funds can only be used for the Governmental fund. Debt service funds are used to account for the accumulation of resources for, and the payment of, principal and interest of general debt of the government. Both fiduciary funds and proprietary funds record long-term liabilities and service their own debt.
The Town of Grandview's Housing Authority provides loans to low income families within the Town. It is governed by a Board appointed by the Town of Grandview's Manager and its debt is guaranteed by the Town. In what manner should the Housing Authority be reported? a. Discrete presentation b. Blending c. Inclusion as a note in the Town's CAFR d. Either blending or inclusion as a note
Discrete presentaion
The Town of Krebs School System has a separately elected governing body that oversees its activities. The School system's budget must be approved by the Town of Krebs Board. The School system's finan- cial results should be reported in the Town's financial statements in what manner? a. Discrete presentation b. Blending c. Inclusion as a footnote in the Town's CAFR d. Either blending or inclusion as a note
Discrete presentation
Kenn City obtained a municipal landfill and passed a local ordinance that required the city to operate the landfill so that the costs of operating the landfill, as well as the capital costs, are to be recovered with charges to customers. Which of the following funds should Kenn City use to report the activities of the landfill? a. Enterprise b. Permanent c. Special revenue d. Internal service
Enterprise
Setting accounting standards Which organization is responsible for setting accounting standards for state and local governments? a. GASB b. AICPA c. FASB d. FASAB
GASB
Chapter 9
Government Accounting: Fund-Based F/S
Chapter 10
Government Accounting: Government-wide F/S
Current financial resources measurement focus and modified accrual basis of accounting Which of the following funds would be most appropriate for the use of the current financial recourses measurement focus and the modified accrual basis of accounting? Governmental Proprietary Fiduciary a. Yes Yes Yes b. No Yes Yes c. Yes No No d. No No Yes
Governmental - Yes Proprietary- No Fiduciary - No Governmental funds use the current financial resources measurement focus and the modified accrual basis of accounting. Proprietary and fiduciary funds use the economic resources measurement focus and the accrual basis of accounting
Neighborhood Health Clinic, Inc., a humanitarian not-for-profit focusing on affordable and convenient health care, is preparing its year-end financial statements. Which of the following financial statements is required? a. Statement of revenue, expenses, and changes in fund balance b. Statement of cash flows c. Statement of changes in financial position d. Statement of changes in fund balance
Statement of Cash flows
Scouting for All, Inc., a not-for-profit organization, received unrestricted cash donations of $50,000 and $100,000 of contributions restricted solely for the purchase of land, buildings, or equipment. In its statement of cash flows for the year, Scouting for All will report which of the following amounts: Operating Activities Investing Activities Financing Activities a. $150,000 $ 0 $ 0 b. $ 50,000 $100,000 $ 0 c. $ 50,000 $ 0 $100,000 d. $ 0 $ 50,000 $100,000
Operation = $50,000 Investing = $0 Financing = $100,000
Which of the following funds would be reported as a fiduciary fund in Cedar City's financial statements? a. Special revenue b. Permanent c. Private-purpose trust d. Internal service
Private-purpose trust
Reporting objectives Which of the following is not one of the GASB's reporting objectives? a. Providing assurance that the governmental entity is solvent b. Providing information on the extent of the governmental entity's service efforts and accomplishments c. Providing information relating to variances from the approved budget d. All of the above are GASB objectives
Providing assurance that the governmental entity is solvent
Green Planet, Inc., a nongovernmental not-for-profit organization, received a contribution in December Year 1. The donor restricted use of the contribution until March Year 2. How should Green Planet, Inc. record the contribution? a. Note the contribution in Year 1 and record as support when it becomes available in Year 2 b. No entry required in Year 1 and record as support in Year 2 when it becomes available c. Report as support in Year 1 d. Report as deferred income in Year 1
Report as support in Year 1
Fund balance categories Assume that the Town of Maynard reports a balance in a fund that is limited as to its use as a result of enabling legislation. The balance of the fund should be reported in which of the following categories? a. Assigned b. Nonspendable c. Restricted d. Committed
Restricted - fund balances are those with resources whose use has been limited by external sources such as enabling legislation
All of the following statements regarding notes to the basic financial statements of governmental enti- ties are true except: a. The notes contain disclosures related to required supplementary information. b. Some notes presented by governments are identical to notes presented in business financial statements. c. Notes that are considered essential to the basic financial statements need to be presented. d. It is acceptable to present notes in a very extensive format.
The notes contain disclosures related to required supplementary information
On January 1, Cass City approved the following general fund resouces for the new fisical period: Property taxes ......................................................... $4,000,000 Licenses and permits .................................................... 300,000 Intergovernmental revenues............................................... 250,000 Transfers in from other funds .............................................. 150,000 What amount should Cass record as estimated revenues for the new fiscal year? a. $5,400,000 b. $5,550,000 c. $4,700,000 d. $4,550,000
The transfers in from other funds is not revenue. Total estimated revenue is, therefore, $4,000,000 + $300,000 + $250,000 = $4,550,000
