cpa financial
Ocean Corp.'s comprehensive insurance policy allows its assets to be replaced at current value. the policy has a 50,000 deductible clause. one of Ocean's waterfront warehouses was destroyed in a winter storm. such storms occur approximately every four years. Ocean incurred 20,000 of costs in dismantling the warehouse and plans to replace it. the tax rate is 30%. the following data relate to the warehouse: current carrying amount 300,000 replacement cost 1,100,000 under GAAP, what amount of gain should Ocean report as a separate component of income from continuing operations? a. 780,000 b. 1,030,000 c. 730,000 d. 0
c. 730,000 replacement cost 1,100,000 - deductible clause 50,000 = insurance proceeds 1,050,000 - costs to dismantle 20,000 = 1,030,000 - current carrying amount 300,000 = 730,000 gain
which of the following is an example of a transaction involving a market participant? a. a company purchases a commercial rental property from a company that is owned by the same shareholders b. a judge orders a company to sell machinery during a bankruptcy proceeding c. a company purchases real estate zoned for recreational use d. a company sells land to a local government to satisfy an outstanding tax lien
c. a company purchases real estate zoned for recreational use
according to the FASB conceptual framework, an entity's revenue may result from: a. a decrease in an asset from primary operations b. an increase in a liability from incidental transactions c. a decrease in a liability from primary operations d. an increase in an asset from incidental transactions
c. a decrease in a liability from primary operations
Lisa County issued 5,000,000 of general obligation bonds at 101 to finance a capital project. the 50,000 premium was to be used for payment of principal and interest. this transaction should be accounted for in the: a. capital projects funds and debt service funds only b. debt service funds and the general long-term debt account group only c. capital projects funds, debt service funds and as assets and liabilities in the government-wide financial statements d. debt service funds only
c. capital projects funds, debt service funds and as assets and liabilities in the government-wide financial statements
the following data have been extracted from the financial statements of Hutton Inc. .... if at the end of Year 2 Hutton Inc. borrowed $100 of cash by issuing a $100 long-term note payable, what would be the effect on the following ratios (relative to the ratios computed based on the balances currently shown on Hutton Inc.'s financial statements)? effect on 12/31/Year 2 current ratio quick ratio a. no effect decrease b. decrease increase c. increase increase d. increase no effect
c. current ratio - increase, debt-to-assets ratio - increase
Central County received proceeds from various towns and cities for capital projects financed by the country's long-term debt. a special tax was assessed by each local government, and a portion of the tax was properly restricted to repay the long-term debt of the county's capital projects. Central County should account for the restricted portion of the special tax in which of the following funds? a. capital projects fund b. internal service fund c. debt service fund d. enterprise fund
c. debt service fund
after speaking to the company's sales manager, a customer placed a large order. the customer has no immediate need for the products, so the customer asked the company to wait 60 days before delivering the products. in this case, the company should recognize revenue for the sale when the order is : a. verified as in-stock by the company b. placed by the customer c. delivered to the customer d. packed and ready for shipment
c. delivered to the customer
Gold County received goods that had been approved for purchase but for which payment had not yet been made. should the accounts listed below be increased? encumbrances expenditures .a. yes no b. no no c. no yes d. yes yes
c. encumbrances - no, expenditures - yes
Concept Industries is preparing its income statement for the year ended December 31. in preparing the statement, the line item displayed before considering income tax effects is: a. accumulated other comprehensive income b. income (loss) from continuing operations c. income (loss) from operations d. net income
c. income (loss) from operations
the orientation of accounting and reporting for all proprietary funds of governmental units is: a. program b. flow of funds c. income determination d. project
c. income determination
which of the following should be included in the introductory section of a local government's comprehensive annual financial report? a. management letter b. auditor's report c. letter of transmittal d. engagement letter
c. letter of transmittal
GASB 34 establishes financial reporting standards for state and local government. basic financial statements and required supplementary information for general purpose governments should consist of: a. liftable financial statements, notes to the financials statements, and statistical schedules b. basic financial statements and required supplementary information introduced after the basic financial statements c. management's discussion and analysis, basic financial statements, and required supplementary information d. general purpose financial statements, notes to the financial statements, combining financial statements and statistical schedules
c. management's discussion and analysis, basic financial statements, and required supplementary information
Farmer Joe sells corn at four exchanges, as follows: exchange by farmer joe by all suppliers illinois 4,000 1,000,000 iowa 3,500 1,750,000 michigan 2,800 2,000,000 nebraska 3,200 1,400,000 for purposes of determining the fair value of Farmer Joe's corn, which exchange is the "principal" market? a. illinois b. nebraska c. michigan d. iowa
c. michigan michigan has the highest volume for all suppliers (2,000,000). even though Farmer Joe does not participate as heavy in that market, he still has access to it
Lake County received the following proceeds that are legally restricted to expenditure for specified purposes: levies on affected property owners to install sidewalks 500,000 gasoline taxes to finance road repairs 900,000 what amount should be accounted for in Lake's special revenue funds? a. 900,000 b. 1,400,000 c. 500,000 d. 0
a. 900,000
compared to the accrual basis of accounting, the cash basis of accounting understates income by the net decrease during the accounting period of: AR accrued expenses a. no yes b. no no c. yes yes d. yes no
a. AR - no, accrued expenses - yes
under GAAP, which of the following would be included in income from continuing operations on the income statement? I. a large loss from a foreign currency transaction II. a union strike that shuts down operations for three months III. a foreign government takes possession of a company's only plant IV. damage to a factory due to an earthquake in an area that had not previously experienced earthquakes a. I, II, III, IV b. I, II c. III, IV d. I, II, IV
a. I, II, III, IV
a city council designates funds in the enterprise fund for future equipment replacement. the enterprise fund should report this as: a. an unrestricted component of net position b. a net investment in capital assets c. a designated component of net position d. a restricted component of net position
a. an unrestricted component of net position
a change from the cost approach to the market approach of measuring fair value is considered to be what type of accounting change? a. change in accounting estimate b. change in valuation technique c. error correction d. change in accounting principle
a. change in accounting estimate
what information should a public company present about revenues from its reporting segments? a. disclose separately the amount of sales to unaffiliated customers and the amount of intracompany sales b. no disclosure of revenues from foreign operations need be reported c. disclose separately the amount of sales to unaffiliated customers but not the amount of intercompany sales between geographic areas d. disclose as a combined amount sales to unaffiliated customers and intracompany sales between geographic areas
a. disclose separately the amount of sales to unaffiliated customers and the amount of intracompany sales
Park City uses encumbrance accounting and formally integrates its budget into the general fund's accounting records. for the year ending July 31, Year 1, the following budget was adopted: estimated revenues 30,000,000 appropriations 27,000,000 estimated transfer to debt service fund 900,000 Park incurred salaries and wages of 800,000 for the month of April Year 1. what amount should Park debit to record this 800,000? a. expenditures control b. operating funds control c. salaries and wages expense control d. encumbrances control
a. expenditures control
a state had general obligation bonds outstanding that required payment of interest on July 1 and January 1 of each year. state law allowed for the general fund to make debt payments without the use of a fiscal agent. the fiscal year ended June 30. which of the following accounts would have decreased when the state paid the interest due on July 1? a. fund balance b. interest expense c. interest payable d. interest expenditures
a. fund balance
which of the following fund types used by a government most likely would have a fund balance non-spendable inventory of supplies? a. general b. internal service c. private purpose d. capital projects
a. general
when valuing certain financial instruments, a company that has elected the fair value measurement option must apply the accounting measurement based on which of the following criteria? a. instrument-by-instrument basis b. type-by-type basis c. at the entity level d. a portion of an asset or liability
a. instrument -by-instrument basis
each of the following statements is correct regarding the financial accounting standards board, except: a. it develops principles and attributes that allow organizations to understand the necessary elements to ensure a robust system of internal control b. it is recognized as authoritative by the SEC and the AICPA c. it establishes accounting concepts and standards for financial accounting and reporting, and provides guidance on implementation of standards d. it provides a conceptual framework that helps to increase understanding of, and confidence in, financial information on the part o fusers of financial reports
a. it develops principles and attributes that allow organizations to understand the necessary elements to ensure a robust system of internal control
if Hutton Inc. sold $100 of inventory for $100 of cash on December 31, Year 2, which of the following ratios would decrease? a. net profit margin b. working capital turnover c. return on assets d. return on equity
a. net profit margin inventory is sold at cost, so net income would not change. however, sales increases
the County Road & Bridge fund is funded by gas taxes whose use is restricted by law to road construction and is properly classified as a special revenue fund. the fund maintains inventories of road signage and road constructions materials. resources associated with those inventories would be classified within fund balance as: a. non-spendable b. assigned c. unassigned d. restricted
a. non-spendable
the billings for transportation services provided to other governmental units are recorded by the internal service fund as: a. operating revenues b. transportation appropriations c. interfund exchanges d. intergovernmental transfers
a. operating revenues
which of the following is not a common modification used to prepare modified cash basis financial statements? a. recognizing revenues when earned b. accrual of income taxes c. capitalizing inventory d. recording long-term liabilities
a. recognizing revenues when earned
the following items were among those that were reported on Lee Co.'s income statement for the year ended December 31: legal and audit fees 170,000 rent from office space 240,000 interest on inv. floorplan 210,000 loss on aban. equipment 35,000 the office space is used equally by Lee's sales and accounting departments. what amount of the above-listed items should be classified as general and administrative expenses in Lee's multiple-step income statement? a. 500,000 b. 290,000 c. 410,000 d. 325,000
b. 290,000 legal and audit fees 170,000 + rent for admin office 120,000 = (1/2 x 240,000)
at the beginning of the current year, Paxx 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, Paxx paid 400,000 for compensated absences. what amount of compensated absences expense should Paxx County's enterprise fund report for the year
b. 425,000 (150,000 - 125,000) = 25,000 + 400,000 = 425,000
during the year, a city's electric utility, which is operated as an enterprise fund, rendered billings for electricity supplied to the general fund. which of the following accounts should be debited by the general fund? a. appropriations b. expenditures c. other financing uses-operating transfers out d. due to electric utility enterprise fund
b. expenditures
Rock County has acquired equipment through a lease contract that transfers ownership that is dated December 31, Year 0. this agreement requires no down payment and the following minimum lease payments: ... if the lease payments are required to be made from a debt service fund, what account or accounts should be debited in the debt service fund for the December 31, Year 1, lease payment of 65,000? a. expenditures control 50,000, amount to be provided for lease payments 15,000 b. expenditures control 65,000 c. other financing sources control 50,000, expenditures control 15,000 d. amount to be provided for lease payments 50,000, expenditures control 15,000
b. expenditures control 65,000
during the current year, Vann County's motor pool internal service fund sold two vehicles for ,. the vehicles had a cost of 6,000 and a carrying value of,. how should Vann County's motor pool internal service fund report this transaction in its fund financial statements? a. revenue of 5,000 b. gain of 1,000 c. special item of 1,000 d. other financing source of 5,000
b. gain of 1,000
for which of the following funds do interfund transfers affect the results of operations in their fund financial statements? governmental proprietary funds funds a. no yes b. yes yes c. yes no d. no no
b. governmental funds - yes, proprietary funds - yes
under GAAP, a gain that is both unusual and infrequent should be reported as which of the following? a. comprehensive income b. income from continuing operations c. net of tax, following discontinued operations d. income from continuing operations, net of tax
b. income from continuing operations
the tax collection fund of Gearty County accounts for receipts of taxes levied and collected on behalf of cities and districts within its borders. state law allows the county to withhold a fee from the collections made on behalf of each city and district for this administrative service. the county's tax collection fund would account for the fee as: a. additions b. liability - due to other funds c. asset - due from other governments d. transfer out
b. liability - due to other funds
the Baker County Headstart fund, which is properly accounted for as a special revenue fund, overspent its available resources. the deficit in this fund would likely be displayed as: a. due from the general fund b. negative fund balance - unassigned c. due from other governments - headstart d. negative fund balance - restricted
b. negative fund balance - unassigned
how should state appropriations to a state university choosing to report as engaged only in business-type activities be reported in its statement of revenues, expenses, and changes in net position? a. operating revenues b. nonoperating revenues c. other financing sources d. capital contributions
b. nonoperating revenues
Stone Corp. donated investments to Pine City and stipulated that the income from the investments be used to acquire art for the city's museum. which of the following funds should be used to account for the investments? a. private purpose trust fund b. permanent fund c. special revenue fund d. endowment fund
b. permanent fund permanent funds are used to account for principal that is restricted and may not be expended
the following financial resources were among those received by Seco City during Year 1: for acquisition of major capital facilities 6,000,000 to create a non-expendable trust 2,000,000 with respect to the foregoing resources, what amount should be recorded in special revenue funds? a. 2,000,000 b. 8,000,000 c. 0 d. 6,000,000
c. 0 6,000,000 in capital projects fund, 2,000,000 in a private purpose trust fund
a county that operates a capital projects fund for infrastructure needs had the following information available on transactions for the current year: proceeds from debt issuance 1,000,000 transfer from general fund 500,000 special assessments 400,000 fees for extra services 100,000 how much would the capital projects fund report as other financing sources for the current year? a. 1,000,000 b. 500,000 c. 1,500,000 d. 900,000
c. 1,500,000 the transfer from the general fund of 500,000 would be reported as "other financing sources"
the premium on a three-year insurance policy expiring on December 31, Year 3 was paid in total on January 2, Year 1. if the company has a six-month operating cycle, then on December 31, Year 1, the prepaid insurance reported as a current asset would be for: a. 18 months b. 24 months c. 12 months d. 6 months
c. 12 months current assets are defined as one year (12 months)
Marr Corp. reported rental revenue of 2,210,000 in its cash basis federal income tax return for the year ended November 30, Year 2. additional information is as follows: - rents receivable - November 30, Year 2 1,060,000 - rents receivable - November 30, Year 1 800,000 - uncollectible rents written off during the fiscal year 30,000 under the accrual basis, Marr should report rental revenue of: a. 2,440,000 b. 1,980,000 c. 2,500,000 d. 1,920,000
c. 2,500,000 2,210,000 + 1,060,000 - 800,000 + 30,000 = 2,500,000
the following data have been extracted from the financial statements of Hutton Inc. 12/31/Y2 12/31/Y1 total equity 1,610,000 1,432,000 net income 350,000 308,000 what was Hutton Inc.'s return on equity for Year 2? a. 32.84% b. 21.74% c. 22.99% d. 65.68%
c. 22.99% (1,610,000 + 1,432,000) / 350,000 = 22.99%
a country's balances in the general fund included the following: appropriations 435,000 encumbrances 18,000 expenditures 164,000 vouchers payable 23,000 what is the remaining amount available for use by the country? a. 248,000 b. 271,000 c. 253,000 d. 230,000
c. 253,000 BAE budget appropriations (435,000) - activity: expenditures (164,000) - encumbrances (18,000) = 253,000
Best County's capital projects fund had the following receipts during the year: transfer from the general fund 100,000 federal capital grant 75,000 special assessment for capital improvements 300,000 what amount of revenues should Best County report in its capital projects fund at the end of the year? a. 75,000 b. 475,000 c. 375,000 d. 300,000
c. 375,000 the transfer from the general fund of 100,000 would be reported as "other financing sources"
Macklin Co. entered into a service agreement with Heath Co. for an initial fee of 50,000. Macklin received 10,000 when the agreement was signed. the balance was to be paid at a rate of 10,000 per year, starting the next year. all services were performed by Macklin and the refund period had expired. operations started in the current year. what amount should Macklin recognize as revenue in the current year? a. 10,000 b. 0 c. 50,000 d. 20,000
c. 50,000
the following data have been extracted from the financial statements of Hutton Inc. 12/31/Y2 12/31/Y1 total cur. assets 1,260,000 1,245,000 total cur. liab. 900,000 850,000 sales 3,000,000 2,600,000 what was Hutton Inc.'s working capital turnover for Year 2? a. 5.30 b. 8.33 c. 7.95 d. 2.65
c. 7.95 WC turnover = sales / avg WC (1,260,000 - 900,000) = 360,000 (1,245,000 - 850,000) = 395,000 (360,000 + 395,000) = 755,000 / 2 = 377,500 3,000,000 / 377,500 = 7.95
the Ajax Corporation reported the following operating results and net income (net loss) from its components for the year ended December 31: net component eliminations consolidated A 215,000 (120,000) 95,000 B 30,000 0 30,000 C (180,000) 50,000 (130,000) D 80,000 (50,000) 30,000 E (20,000) 20,000 0 total 125,000 (100,000) 25,000 based purely on operating results, which of the components would be deemed reportable segments? a. A, B, and D b. A, B, C, D, and E c. A, B, C, and D d. A, C, and D
d. A, C, and D income loss A 215,000 B 30,000 C (180,000) D 80,000 E (20,000) total 325,000 (200,000) 10% threshold is 32,500
a major exception to the general rule of expenditure accrual for governmental funds under the modified accrual basis relates to unmatured: principal of general interest on general long-term debt long-term debt a. yes yes b. no no c. no yes d. yes no
principal of general long-term debt - yes, interest on general long-term debt - yes
Clear Co.'s trial balance has the following selected accounts: cash (includes 10,000 sink. fund) 50,000 acc. rec. 20,000 allowance for doubt. accts. 5,000 deposits received 3,000 inventory 7,000 unearned rent 1,000 investment in trad. secur. 2,000 what amount should Clear report as total current assets in its balance sheet? a. 64,000 b. 72,000 c. 67,000 d. 74,000
a. 64,000 40,000 cash (50,000 - 10,000 sinking fund) 15,000 AR (20,000-5,000 allowance) 7,000 inventory 2,000 trading securities
Redwood Co.'s financial statements had the following information at year end: cash 60,000 accounts receivable 180,000 allowance for uncol. accts. 8,000 short-term mark. securities 90,000 current liabilities 400,000 what was Redwood's quick ratio? a. 0.81 b. 0.94 c. 1.46 d. 0.83
a. 0.81 (60,000 + 90,000 + (80,000 - 8,000)) / 400,000 = 0.81
in Dart Co.'s Year 2 single-step income statement, as prepared by Dart's controller, the section titled "Revenues" consisted of the following: sales 250,000 purchase discounts 3,000 recovery of accts written off 10,000 total 263,000 in its Year 2 single-step income statement, what amount should Dart report as total revenues? a. 250,000 b. 253,000 c. 263,000 d. 260,000
a. 250,000
on August 1, Metro Inc. leased a luxury apartment unit to Klum. the parties signed a one-year lease, beginning September 1, for a 1,000 monthly rent payable on the first day of the month. the normal lease term for this property is three years. at the August 1 signing date, Metro collected 540 as a nonrefundable fee for allowing Klum to sign a one-year lease, and 1,000 rent for September. Klum has made timely payments each month, but prepaid January's rent on December 20. in Metro's income statement for the year ended December 31, rent revenue should be reported as: a. 4,180 b. 5,180 c. 4,000 d. 4,540
a. 4,180 (540/12) x 4 months = 180 (1,000 x 4 months) = 4,000 = 4,180
Coffey Corp.'s trial balance of income statement accounts for the year ended December 31 as follows: net sales 1,600,000 cogs 960,000 selling exp. 235,000 admin. exp. 150,000 int. exp. 25,000 hurricane damage 40,000 gain on debt exting. 10,000 totals 1,410,000 1,610,000 Coffey's uses GAAP and has an income tax rate of 30%. the gain on debt extinguishment is considered a usual and recurring part of Coffey's operations. the hurricane is considered an unusual and infrequent event. Coffey prepares a multiple-step income statement. net income is: a. 161,000 b. 140,000 c. 200,000 d. 168,000
b. 140,000 income from continuing operations (1,610,000 - 1,410,000) = 200,000 - income taxes (30%) = 140,000
a company provides the following information: yr 1 yr 2 yr 3 from yr 1 sales 95,000 120,000 from yr 2 sales 200,000 75,000 from yr 3 sales 50,000 225,000 what is the accrual-based revenue for Year 2? a. 320,000 b. 275,000 c. 200,000 d. 370,000
b. 275,000 200,000 + 75,000 = 275,000
Alex Inc. files financial statements with the SEC; Betty Corp. does not. both corporations have a fiscal year-end of December 31, Year 1; both corporations had received all approvals necessary for issuance of their GAAP- compliant December 31, Year 1, financial statements by January 21, Year 2, and both corporations had actually distributed such financial statements to all financial statement users by January 29, Year 2. which of the following is true with respect to how long Alex Inc. and Betty Corp. must evaluate subsequent events for purposes of potentially having to make adjustments and/or footnote disclosures to the December 31, Year , financial statements? a. both corporations must evaluate subsequent events through January 24, Year 2 b. Alex Inc. must evaluate subsequent events through January 29, Year 2, and Betty Corp. must evaluate subsequent events through January 24, Year 2 c. Alex Inc. must evaluate subsequent events through January 24, Year 2, and Betty Corp. must evaluate subsequent events through January 29, Year 2 d. both corporations must evaluate subsequent events through January 29, Year 2
b. Alex Inc. must evaluate subsequent events through January 29, Year 2, and Betty Corp. must evaluate subsequent events through January 24, Year 2 SEC filer (Alex) - through the date that financial statements are "issued". non-SEC filer (Betty) - through the date that financial statements are "available to be issued"
Wright Co. is a small, privately held entity established at the beginning of Year 1. Wright decided to prepare cash basis financial statements. at the end of Year 1, the company recorded receivables of 2,000,000 and accrued expenses of 900,000, which were included in the total expenses incurred for the year of 2,200,000, with 1,300,000 paid during the year. cash sales of 1,200,000 were fully recognized for the year. what is the company's cash-basis income/loss from operations at the end of Year 1? a. a loss of 1,900,000 b. a loss of 100,000 c. income of 1,000,000 d. a loss of 1,000,000
b. a loss of 100,000 cash sales 1,200,000 expenses (1,300,000) = (100,000)
for a company to obtain a retail business license in a particular state, the company is required to pay the state the equivalent of three months of sales taxes on its projected retail sales. this amount is fully refundable after five years, provided the company has filed all required sales tax returns and paid all sales taxes due. initially the company should report the payment related to this licensing requirement as: a. a noncurrent liability b. a noncurrent asset c. an expense d. a current asset
b. a noncurrent asset
a budgetary control (open purchase orders) account balance in excess of a balance of encumbrances indicates: a. an excess of appropriations over encumbrances b. a recording error c. an excess of purchase orders over invoices received d. an excess of vouchers payable over encumbrances
b. a recording error
a municipality preparing its basic financial statements and required supplementary information in accordance with GASB #34 would introduce the basic financial statements and provide analytical overview of the government's financial statements in: a. a section titled Management's Discussion and Analysis included as part of the city's required supplementary information following the financial statements b. a section titled Management's Discussion and Analysis as part of the city's required supplementary information before the basic financial statements c. a section titled Management's Discussion and Analysis included as part of the city's optional supplementary information immediately following the notes to the financial statements but before the required supplementary information d. a section titled Management's Discussion and Analysis only in the event that the basic financial statements are issued in connection with a public bond offering
b. a section titled Management's Discussion and Analysis as part of the city's required supplementary information before the basic financial statements
Grove Township issued 50,000 of bond anticipation notes at face amount in Year 1 and placed the proceeds into its capital projects fund. all legal steps were taken to refinance the notes, but Grove was unable to consummate refinancing. in the capital projects fund, what account should be credited to record the 50,000 proceeds? a. other financing sources control b. bond anticipation notes payable c. revenues control d. deferred inflows of resources
b. bond anticipation notes payable
on March 2, Year 1, Finch City issued -year general obligation bonds at face amount, with interest payable March 1 and September 1. the proceeds were to be used to finance the construction of a civic center over the period April 1, Year 1, to March 31, Year 2. during the fiscal year ended June 30, Year 1, no resources had been provided to the debt service fund for the payment of principal and interest. on June 30, Year 1, Finch's financial statements should report the construction in progress for the civic center in the: capital government-wide projects financial fund statements a. no no b. no yes c. yes yes d. no yes
b. capital projects fund - no, government-wide financial statements - yes
the City of Opulence maintains an investment pool to invest idle cash. the city extends the service to benefit its own funds as well as other governments. the invested assets would be accounted for as follows: city-owned funds from funds other governments a. investment internal service trust fund fund b. assets of investment investing fund trust fund c. internal service custodial fund fund d. custodial assets of fund fund
b. city-owned funds - assets of investing fund, funds from other governments - investment trust fund
which of the following constraints under GASB 54 imposes an internal limitation on the use of equity/assets of a governmental fund (balances) established by the highest internal governing authority? a. restricted b. committed c. assigned d. non-spendable
b. committed
the following data have been extracted from the financial statements of Hutton Inc. .... if at the end of Year 2, Hutton Inc. used $100 of cash to buy $100 of inventory, what would be the effect on the following ratios (relative to the ratios computed based on the balances currently shown on Hutton Inc.'s financial statements)? effect on 12/31/Year 2 current ratio quick ratio a. decrease decrease b. no effect decrease c. increase no effect d. no effect no effect
b. current ratio - no effect, quick ratio - decrease
the City of Sequoia made contributions to the police pension fund during the year ended December 31, Year 1. the contribution would be recorded in the General Fund as a(an): a. transfer in b. expenditure c. expense d. transfer out
b. expenditure
at October 31, Dingo, Inc. had cash accounts at three different banks. one account balance is segregated solely for a November 15 payment into a bond sinking fund. a second account, used for branch operations, is overdrawn. the third account, used for regular corporate operations, has a positive balance. how should these accounts be reported in Dingo's October 31 classified balance sheet? a. the segregated account should be reported as a noncurrent asset, and the regular account should be reported as a current asset net of the overdraft b. the segregated account should be reported as a noncurrent asset, the regular account should be reported as a current asset, and the overdraft should be reported as a current liability c. the segregated and regular accounts should be reported as current assets net of the overdraft d. the segregated and regular accounts should be reported as current assets, and the overdraft should be reported as a current liability
b. the segregated account should be reported as a noncurrent asset, the regular account should be reported as a current asset, and the overdraft should be reported as a current liability
Cooper Co. files financial statements with the SEC; Davis Corp. does not. both corporations have a fiscal year-end of December 31, Year 1; both corporations received all approvals necessary for issuance of their GAAP- compliant December 31, Year 1, financial statements by January 27, Year 2, and both corporations distributed such financial statements to all interested parties by February 5, Year 2. under GAAP, which of the following must be disclosed by Cooper Co. with respect to when its subsequent event evaluation period ended? a. it must disclose that its subsequent event evaluation period ended January 27, Year 2 b. it must disclose that its subsequent event evaluation period ended February 5, Year 2 c. no disclosure is necessary d. it must disclose that its subsequent event evaluation period ended December 31, Year 1
c. no disclosure is necessary SEC filers are not required to disclose subsequent events. if they do, it's through the dates that the financial statements are "issued"
shared revenues received by an enterprise fund of a local government for operating purposes should be recorded in fund financial statements as: a. operating revenues b. other financing sources c. non-operating revenues d. interfund transfers
c. non-operating transfers
is the recognition of depreciation expense always required for externally published fund financial statements of public colleges and externally published financial statements of private not-for-profits colleges? public private a. yes yes b. yes no c. no yes d. no no
c. public - no, private - yes
Progressive Township Community College received a 900,000 multiyear research grant available for use on a pro rata basis over the next three years subject to other enrollment-based eligibility requirements. at the end of Year 1 of the grant, the college has achieved enrollment levels that satisfy grant eligibility requirements equal to 500,000. as a result of this transaction, the community college would recognize: deferred inflows unearned revenues of resources revenue a. 500,000 400,000 0 b. 500,000 0 400,000 c. 300,000 200,000 400,000 d. 300,000 600,000 0
c. revenues - 300,000. deferred inflows of resources - 200,000, unearned revenue - 400,000
which of the following is not a criterion in determining whether to disclose information in the footnotes to the financial statements about vulnerability to a concentration? a. the concentration makes the entity vulnerable to the risk of a near-term severe impact b. the concentration exists as of the financial statement date c. the concentration pertains to a specific geographic region d. it is at least reasonable possible that the events that could cause a severe impact from the vulnerability will occur in the near term
c. the concentration pertains to a specific geographic region
which of the following statements is the most significant characteristic in determining the classification of an enterprise fund? a. laws or regulations require that the activity's costs of providing services including capital costs be recovered with taxes or similar revenues b. the activity is financed by debt that is secured partially by a pledge of the net revenues from fees and charges of the activity c. the pricing policies of the activity establish fees and charges designed to recover its cost d. the predominant customer is the primary government
c. the pricing policies of the activity establish fees and charges designed to recover its cost
Wood City, which is legally obligated to maintain a debt service fund, issued the following general obligation bonds on July 1, Year 1: term of bonds 10 years face amount 1,000,000 issue price 101 stated interest rate 6% interest is payable January 1 and July 1. what amount of bond premium should be amortized in Wood's debt service fund for purposes of fund financial reporting for the year ended December 31, Year 1? a. 250 b. 500 c. 1,000 d. 0
d. 0
on March 2, Year 1, Finch City issued 10-year obligation bonds at face amount, with interest payable March 1 and September 1. the proceeds were to be used to finance the construction of a civic center over the period April 1, Year 1, to March 31, Year 2. during the fiscal year ended June 30, Year 1, no resources had been provided to the debt service fund for the payment of principal and interest. on June 30, Year 1, Finch's debt service fund should include interest payable on the general obligation bonds for: a. 4 months b. 6 months c. 3 months d. 0 months
d. 0 months
Sussman Co. prepared cash-basis financial statements for the month ended January 31. a summary of Sussman's January activities follows: - credit sales of 5,600 - collections of 1,900 relating to January credit sales - accrued salaries of 1,200 by what amount with Sussman's cash-basis income for the month ended January 31 increase as a result of restating these activities to the accrual basis of accounting? a. 4,400 b. 3,700 c. 4,900 d. 2,500
d. 2,500 5,600 - 1,900 - 1,200 = 2,500
a capital projects fund for a new city courthouse recorded a receivable of 300,000 for a state grant and a 450,000 transfer from the general fund. what amount should be reported as revenue by the capital projects fund? a. 750,000 b. 0 c. 450,000 d. 300,000
d. 300,000 the 450,000 would be recorded as "other financing sources"
a company reports on the cash basis. during the company's first year of business, it had sales on account of 1,000,000, inventory purchases on account of 400,000, and other expenses of 200,000. at the end of the year, the company had accounts receivable, inventory, and inventory-related accounts payable of 100,000, 10,000, and 50,000, respectively. what is the company's cash basis income for its first year of operations? a. 450,000 b. 300,000 c. 400,000 d. 350,000
d. 350,000 cash basis income = 900,000-350,000-200,000 = 350,000 900,000 = 1,000,000 REV - 100,000 AR 350,000 = 400,000 INV PUR - 50,000 AP
Cedar City issues 1,000,000, 6% revenue bonds were issued at par on April 1, to build a new water line for the water enterprise fund. interest is payable every six months. what amount of interest expense should be reported for the year ended December 31? a. 60,000 b. 0 c. 30,000 d. 45,000
d. 45,000 (1,000,000 x 6/12 x 6%) = 30,000 interest paid 4/1-9/30 (30,000 x 3/6) = 15,000 interest accrued 10/1-12/31 30,000 + 15,000 = 45,000
Kell Corp.'s $95,000 GAAP net income for the quarter ended September 30, Year 1, included the following after-tax items: - a 60,000 gain on sale of equipment, realized on April 30, Year 1, was allocated equally to the second, third, and fourth quarters of Year 1 - a 16,000 cumulative-effect loss resulting from a change in inventory valuation method was recognized on August 2, Year 1 in addition, Kell paid 48,000 on February 1, Year 1, for Year 1 calendar-year property taxes. of this amount, 12,000 was allocated to the third quarter of Year 1. for the quarter ended September 30, Year 1, Kell should report net income of: a. 111,000 b. 115,000 c. 103,000 d. 91,000
d. 91,000 95,000 (20,000) = 75,000 + 16,000 = 91,000
Ina Co. had the following beginning and ending balances in its prepaid expense and accrued liabilities accounts for the current year: prepaid accrued expenses liabilities beg. balance 5,000 8,000 end. balance 10,000 20,000 debits to operating expenses totaled 100,000. what amount did Ina pay for operating expenses during the current year? a. 107,000 b. 83,000 c. 117,000 d. 93,000
d. 93,000 100,000 - 12,000 AL + 5,000 PE = 93,000
which of the following is a required financial statement for an investment trust fund? a. statement of activities b. statement of revenues, expenses, and changes in fiduciary net position c. statement of revenues, expenditures, and changes in fiduciary net position d. statement of changes in fiduciary net position
d. statement of changes in fiduciary net position
the following information pertains to Grove City's interfund receivables and payables at December 31, Year 1: due to special revenue from general fund 10,000 due to custodial fund from special revenue fund 4,000 in Grove's special revenue fund balance sheet at December 31, Year 1, how should these interfund amounts be reported? a. as an asset of 4,000 and a liability of 10,000 b. as a liability of 6,000 c. as an asset of 6,000 d. as an asset of 10,000 and a liability of 4,000
d. as an asset of 10,000 and a liability of 4,000
under Regulation S-X, an entity's annual financial statements filed with the SEC should include, at a minimum, two: a. statements of changes in owner's equity b. statements of cash flows c. income statements d. balance sheets
d. balance sheets
in which situation(s) should property taxes due to a governmental unit be recorded as deferred inflows of resources? I. property taxes receivable are recognized in advance of the year for which they are levied II. property taxes are collected in advance of the year in which they are levied a. I only b. II only c. neither I nor II d. both I and II
d. both I and II
on March 2, Year 1, Finch City issued 10-year general obligation bonds at face amount, with interest payable March 1 and September 1. the proceeds were to be used to finance the construction of a civic center over the period April 1, Year 1, to March 31, Year 2. during the fiscal year ended June 30, Year 1, no resources had been provided to the debt service fund for the payment of principal and interest. proceeds from the general obligation bonds should be recorded in the: a. general long-term debt account grouo b. general fund c. debt service fund d. capital projects fund
d. capital projects fund
Tott City's serial bonds are serviced through a debt service fund with cash provided by the general fund. in a debt service fund's statements, how are cash receipts and cash payments reported? cash receipts cash payments a. revenues expenditures b. revenues transfers c. transfers transfers d. transfers expenditures
d. cash receipts - transfers, cash payments - expenditures
on April 1, Year 1, Ivy began operating a service proprietorship with an initial cash investment of 1,000. the proprietorship provided 3,200 of services in April and received full payment in May. the proprietorship incurred expenses of 1,500 in April, which were paid in June. during May, Ivy drew $500 against her capital account. what as the proprietorship's income for the two months ended May 31, Year 1, under the following methods of accounting? cash-basis accrual-basis a. 1,200 1,200 b. 2,700 1,200 c. 1,700 1,700 d. 3,200 1,700
d. cash-basis - 3,200, accrual-basis - 1,700 cash basis income is the 3,200 from services. accrual basis income is the 3,200 from services minus the 1,500 in expenses incurred = 1,700
the most restrictive classification of governmental fund balances listed below is titled: a. reserved b. assigned c. unassigned d. committed
d. committed
receipts from a special tax levy to retire and pay interest on general obligation bonds should be recorded in which fund? a. capital projects b. general c. special revenue d. debt service
d. debt service
encumbrances outstanding at year-end in a state's general fund would most likely be reported as a: a. liability in the general long-term debt account group b. fund balance restriction in the general fund c. liability in the general fund d. fund balance commitment in the general fund
d. fund balance commitment in the general fund
revenues that are legally restricted or committed to expenditures for specified purposes should be accounted for in special revenue funds, including: a. proprietary fund revenues b. pension trust fund revenues c. accumulation of resources for payment of general long-term debt principal and interest d. gasoline taxes to finance road repairs
d. gasoline taxes to finance road repairs
which of the following should be included in general and administrative expenses? interest advertising a. yes yes b. yes no c. no yes d. no no
d. interest - no, advertising - no interest is a separate line item on the income statement. advertising is a selling expense
income tax-basis financial statements differ from those prepared under GAAP in that income tax-basis financial statements: a. include detailed information about current and deferred income tax liabilities b. do not include nontaxable revenues and nondeductible expenses in determining income c. contain no disclosures about capital and operating lease transactions d. recognize certain revenues and expenses in different reporting periods
d. recognize certain revenues and expenses in different reporting periods
according to the FASB conceptual framework, certain assets are reported in financial statements at the amount of cash or its equivalent that would have to be paid if the same or equivalent assets were acquired currently. what is the name of the reporting concept? a. net realizable value b. historical cost c. current market value d. replacement cost
d. replacement cost
Davis County has a December 31 year end and typically bills and collects occupational license fees of regulated businesses in its jurisdiction in the year before the license fees in the amount of 250,000. the country had fully collected these fees by December 31, Year 1. in its Year 1 financial statements, Davis would record: deferred inflows revenue of resources a. 62,500 187,500 b. 0 0 c. 250,000 0 d. 0 250,000
d. revenue - 0, deferred inflows of resources - 250,000
in Year 10, hail damaged several of Toncan Co.'s vans. hailstorms had frequently caused similar damage to Toncan's vans. over the years, Toncan had saved money by not buying hail insurance and either paying for repairs, or selling damaged vans and then replacing them. in Year 10, the damaged vans were sold for less than their carrying amount. how should the hail damage cost be reported in Toncan's Year 10 financial statements under GAAP? a. the expected average hail damage loss in continuing operations, with separate disclosure b. the actual Year 10 hail damage loss in continuing operations, with separate disclosure c. the expected average hail damage loss in continuing operations, with no separate disclosure d. the actual Year 10 hail damage loss in continuing operations, with no separate disclosure
d. the actual Year 10 hail damage loss in continuing operations, with no separate disclosure no separate disclosure because the hail damage is frequent and not unusual
a public entity sells steel for use in construction. one of its customers accounts for 43 percent of sales, and another customer accounts for 40 percent of sales. what should the entity disclose in its annual financial statements about these two customers? a. the financial condition of the two customers b. the names of the two customers c. the payment terms of AR due from each of the two customers d. the amount of the entity's revenue from each of the two customers
d. the amount of the entity's revenue from each of the two customers
conceptually, interim financial statements can be described as emphasizing which of the following enhancing qualitative characteristics? a. faithful representation b. verifiability c. relevance d. timeliness
d. timeliness
