Gov Exam 3 (9-13)

Which of the following would be true regarding the Statement of Net Position for a public college? a) Both current and long-term assets and liabilities are presented b) The net asset categories are: net investment in capital assets, restricted and unrestricted c) Both of the above are true d) Neither of the above are true

C Current and long -term assets are separately stated in the Statement of Net Position for a public college. Public colleges and universities are required to report net position as Net Investment in Capital Assets, Restricted Net Position and Unrestricted Net Position

T or F: Accounting standards for the federal government and its agencies are established by the Governmental Accounting Standards Board.

False GASB sets the standards for state and local agencies. The Federal Accounting Standards Advisory Board sets the federal standars

Which of the following is true regarding the Single Audit Act and its amendments Question options: a) Major programs selected for audit must equal 50 percent or more of federal expenditures, unless the organization is deemed to be low risk b) Separate reports are filed with every federal agency from which the audited organization receives funds c) Both A and B d) Neither A nor B above

A

Which of the following is true with respect to special assessment levies? a) If the government is not liable for the special assessment debt directly or through guarantee, the special assessment is accounted for in an agency fund b) Taxpayers may opt out of a service-type special assessment if they agree to not use the service funded by the assessment c) Service-type special assessments may not be accounted for in the General or special revenue fund. d) Construction-type special assessments are accumulated until there is enough money to finance the construction project

A

Which of the following organizations would not be subject to the accounting and reporting requirements of FASB Statements 116 (Accounting for Contributions) and 117 (Financial Reporting for Not-for-Profit Organizations)? a) The City of Hannibal, Missouri b) St. Jude Children's Hospital c) Live Arts Theater d) Girl Scouts

A

Public colleges are required to report residual equity in the following categories: a) Unrestricted, Restricted, and Net Investment in Capital Assets b) Temporarily Restricted , Permanently Restricted and Unrestricted c) Unrestricted, Temporarily Restricted and board designated d) Restricted, Unrestricted and Temporarily Restricted

A Public colleges and universities are required to report net position as Net Investment in Capital Assets, Restricted Net Position and Unrestricted Net Position

With respect to public colleges and universities, state appropriations for operating purposes are shown as a) Nonoperating revenue b) Operating revenue c) Nonexpendable endowments d) None of the above

A State appropriations are reported as nonoperating revenue in the Statement of Revenues, Expenses, and Changes in Net Position for a public institution

Private colleges are required to report residual equity in the following categories: a) Unrestricted and Restricted b) Temporarily Restricted , Permanently Restricted and Unrestricted c) Unrestricted, Temporarily Restricted and board designated d) Restricted, Unrestricted and Temporarily Restricted

B

Private not-for-profit health care organizations follow standards set by: a) GASB b) FASB c) SEC d) All of the above

B

Private not-for-profits must follow all applicable ____ standards in recording transactions a) GASB b) FASB c) AICPA d) SEC.

B

What financial ratio is most commonly used to evaluate charitable organizations? a) Current assets / current liabilities b) Program expenses / total expenses c) Increase in net assets / total assets d) Total expenses / total revenues

B

When a governmental unit is primarily or secondarily liable for the debt, debt proceeds for special assessment obligations levied for the construction phase of a capital improvement project should be reported in which of the following fund types? a) Special Assessment fund b) Capital projects c) Agency d) Debt service

B

Which of the following is true of a Statement of Cash Flows for a private sector, private not-for-profit organization a) Four categories are used: Operating, Capital Related Financing, Non-capital Related Financing, and Investing b) If the direct method is used, the not-for-profit must also present a reconciliation between total change in net assets and cash flows from operating activities c) Cash flows must be presented separately for Unrestricted, Temporarily Restricted, and Permanently Restricted categories d) None of the above; all are true

B

Which of the following pledges of support would not be recognized in the year the pledge was made? a) An unconditional pledge restricted to a particular year in the future. b) A pledge with no restrictions, but conditional on receiving matching pledges c) An unconditional pledge restricted to a particular purpose. d) None of the above - all would be recognized

B

A private college had tuition and fees for the year ended June 30, 2017 in the amount of $45,000,000. Scholarships, for which no services were required, amounted to $4,800,000. Graduate assistantships, for which services were required, amounted to $2,300,000. The amount to be reported by the college for net tuition and fee revenue would be: a) $37,900,000 b) $40,200,000 c) $42,700,000 d) $45,000,000

B $45,000,000 of tuition and fees - $4,800,000 of scholarships = $40,200,000

Which of the following statements is true regarding accounting and financial reporting for public colleges and universities? a) Public colleges and universities may choose to report in the same manner as private colleges and universities, using FASB standards b) Public colleges and universities may choose to report as special-purpose entities c) Both A and B are true d) Neither A nor B is true

B A public university must follow GASB standards. Most public colleges and universities report as special purpose governments engaged in business-type activities.

Federal agencies which are required to report a Statement of Custodial Activity have transactions which are similar to which fund type of a state or local government? a) Internal service funds b) Capital projects funds c) Agency funds d) Permanent funds

C

Lisa informed her church that she had named the church in her will and later provided a written copy of the will to the church. At what point should the church record the contribution? a) At the time when the church was informed of her will. b) At the time the church receives a written copy of the will c) At the date the probate court declares the will valid following her death d) At Lisa's death.

C

The AICPA Audit and Accounting Guide: Health Care Organizationsapplies to a) Private sector, not-for-profit hospitals b) Public sector, government-owned hospitals c) Both (a) and (b) above d) Neither (a) nor (b) above

C

The program expense ratio is calculated as follows a) Total expenses / Program service expenses b) Program service expenses + supporting service expenses / Total expenses c) Program service expenses / Total expenses d) Total expenses / (Program service expenses + supporting service expenses)

C

Which of the following is not required in a federal agency's financial report?? a) Management's Discussion and Analysis b) Notes to the Financial Statements c) Citizen's Guide to the Financial Report d) Required Supplemental Information

C

Which of the following is not true of a Statement of Activities prepared for a private college or university? a) Reimbursement type grants are recorded as operating revenue when qualifying expenses are made, not when the grant is approved b) Reclassifications from temporarily restricted to unrestricted net assets are reported when the donor's restrictions have been met c) Expenses may be unrestricted or temporarily restricted depending on donor intent d) All of the above are true

C

T or F: Entities that are tax exempt under IRS Section 501(c)3 are prohibited from endorsing political candidates or attempting to influence legislation.

True

T or F: The Government Accountability Office has authority for issuing Governmental Auditing Standards.

True

T or F: The budgetary authority process for a federal agency begins with an appropriation by Congress.

True

T or F: The program expense ratio for a not-for-profit organization will improve if the organization shifts costs from fund raising to program expenses.

True This is one thing that auditors will check closely becuase it makes them look better to potential donors.

Which of the following is not true regarding accounting and financial reporting for nongovernmental, not-for-profit organizations? a) Expenses are classified as unrestricted or temporarily restricted. b) Expenses must be reported by function, either in the Statements of Activities or in the notes c) Net assets are classified according to donor-imposed restrictions d) All of the above are true.

A Expenses for not-for-profits, including depreciation, are measured on the accrual basis and are reported in the restricted net asset class. Expenses are reported by function in the Statement of Activities or in the notes. The GASB requires expenses to be classified as program or supporting. Major program classifications should be shown.

Which of the following is true of a Statement of Cash Flows for a private college or university? Question options: a) Either the direct or indirect method is acceptable b) Four categories are used: Operating, Capital Related Financing, Non-capital Related Financing, and Investing c) Cash flows must be presented separately for Unrestricted, Temporarily Restricted, and Permanently Restricted categories d) All of the above are true.

A GASB requires the direct method, and FASB permits a choice. Private colleges follow standards established by the FASB so either method may be used. Most organizations use the indirect method

Which of the following is correct with respect to the recording of charity care for health care organizations? a) Revenues are not recorded for the value of charity care services provided, but related expenses are included with other expenses on the Statement of Operations b) Charity care is recorded as revenue and an adjustment is recorded for the difference between the value of the revenue and expenses incurred in providing health care services c) The value of foregone charity care revenue is deducted as a charitable contribution expense in the Statement of Operations d) Management's policy for providing charity care and the level of charity care provided is an optional disclosure

A Patient service revenue does not include charity care. Expenses related to charity care are deducted on the Statement of Operations

St. Mary's Medical Center performed charity care at a cost (supplies etc.) of $21,000. The standard charge to patients for these services is $63,000. How much should the hospital recognize as revenue a) No revenue should be recognized b) $ 42,000 c) $ 21,000 d) $63,000

A Patient service revenue does not include charity care. Expenses related to charity care are deducted on the Statement of Operations.

Which of the following is true regarding Service Efforts and Accomplishments Reporting a) SEA reporting utilizes both financial and non-financial performance measures b) GASB standards require the reporting of service efforts and accomplishments for public school systems c) Service efforts and accomplishments reporting is commonly covered by the auditor's opinion d) All of the above

A The framework for combining financial and nonfinancial information to more effectively communicate organizational effectiveness is termed Service and Accomplishments Reporting. GASB has issued no standards for Service Efforts and Accomplishments Reporting; it is voluntary. Audit opinions are not associated with SEA reporting

When accounting for defined benefit pensions, the net pension liability for employees of governmental activities is: a) Reported in the government-wide statements b) Reported in the governmental fund-basis statements c) Both A and B d) Neither A nor B

A The government-wide Statement of Net Position reports the net pension liability for employees engaged in governmental and business-type activities. The General and other governmental funds do not recognize long-term obligations. Governmental funds should report a liability for pensions in the fund-basis statements only to the extent the liability is expected to be paid with current financial resources.

A donor pledged $500,000 to a not-for-profit hospital in 2016 to conduct medical research, conditional on the hospital raising $500,000 from other donors. The other donors met the condition in 2016 The donor transferred the funds to the hospital in 2017. In which year would the revenue be recognized a) 2016 b) 2017 c) Half in 2016 and half in 2017 d) None of the above; the hospital would only recognize revenue when the amounts had been expended according to the donor's wishes

A The pledge is recorded after the full amount of matching funds had been raised which would be in 2016

Which of the following is not an example of a special-purpose government? a) Village government b) Tollway authority c) Library district d) Library district

A The village government is an example of a general purpose-government. General-purpose governments include states, counties, cities, towns and villages. Special-purpose governments are commonly limited to one, or perhaps a few, service programs such as government-operated hospitals, public school systems, fire protection district, or public colleges, park districts, library districts, tollway authorities and other not-for-profit entities such as museums.

A special assessment tax is a) Assessed against all property owners following a referendum in which voters approved the special project being constructed b) Assessed only against certain property owners who are deemed to benefit from the service or project being paid for by the proceeds of the special assessment levy c) A waiver of property taxes for businesses willing to locate within a government's jurisdiction d) None of the above

B A special assessment is a tax levy that is assessed only against certain taxpayers - those taxpayers who are deemed to benefit from the service or project paid for by the proceeds of the special assessment

What is the principle advantage of obtaining section 501(c)3 status? a) The charitable organization is permitted to engage in a trade or business unrelated to its mission without having to pay income taxes b) Donors to the charitable organization are permitted to deduct contributions to the organization in computing their income taxes c) Both of the above d)Neither of the above

B Getting tax deductions for the donors is the principal reason, They do have to pay income taxes on their unrelated business income.

Which of the following lease criteria would not qualify a lease as a capital lease a) The lease transfers ownership of the property to the lessee by the end of the lease term b) The lease contains an option to purchase the leased property at its fair market value c) The lease term is equal to or greater than 75% of the estimated economic life of the leased property d) The present value of the minimum lease payments equals or exceeds 90% of the fair value of the leased property

B The option to purchase must be bargain purchase; not at fair market value. A noncancelable lease must meet any of the following four criteria to be classified as a capital lease; (1) The lease transfers ownership of the property to the lessee, (2) The lease contains a bargain purchase option, (3) The lease term is equal to or greater than 75% of the estimated economic life of the leased property, and (4) The present value of the minimum lease payments equals or exceeds 90% of the fair value of the leased property.

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 summer term is predominantly conducted b) Recognize the entire amount of revenues and expenses in the year in which the summer term began 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

C Because accrual accounting is used, the tuition revenue and expenses are split between the two periods that summer school covers

Which of the following items does not increase the net pension liability and pension expense for a government offering a defined benefit pension plan a) Service cost b) Interest c) Benefit payments to retired employees d) None of the above, all of these increase net pension liability and pension expense.

C Benefits paid to retired employees would decrease the net pension liability. Increases to the net pension liability would be: service cost, interest, increases in the total pension liability attributable to current period changes in the terms, amortization over the service life of the employees of any increases in the pension liability

Which of the following is not true regarding financial reporting of health care entities a) It is important to distinguish between current and noncurrent assets and liabilities b) Private sector organizations use a three-category format for the Statement of Cash Flows, and public sector organizations us a four-category format c) Private sector organizations use accrual accounting, while public sector organizations use modified accrual d) It is important to distinguish operating revenues and expenses from nonoperating.

C Both private sector and public sector health care entities use accrual accounting.

Government financial audits must comply with the following a) Generally Accepted Auditing Standards b) Government Auditing Standards c) Both A and B d) Generally Accepted Accounting Principles

C Financial audits of state and local governments and not-for-profit organizations must comply with the AICPA's generally accepted auditing standards for fieldwork and reporting as well as Government Auditing Standards. The Government Auditing Standards are issued by the U.S. Government Accountability Office (GAO) and apply to audits conducted to satisfy the requirement of the Single Audit Act as well as other governmental audits.

Public colleges and universities follow __________ guidelines while private colleges and universities follow ________ guidelines a) GAO, FASB b) FASB, GAO c) GASB, FASB d) FASB, GASB

C Private colleges follow standards established by the FASB, including those specifically for not-for-profit entities. Public colleges and universities following accounting standards established by the GASB and investor-owned colleges follow FASB

Which of the following is not accurate with respect to unrelated business income for a 501(c)(3) organization a) A tax-exempt organization is required to pay tax at the corporate on income generated from any trade or business activities unrelated to the entity's tax-exempt purposes b) The purpose of the requirement to tax unrelated business income of a 501(c)(3) organization is to eliminate advantages that tax-exempt organizations have over profit-making organizations c) As long as the proceeds are used to further the tax exempt organization's purpose, the income will not be taxed d) If volunteers perform most of the labor, income-producing activities from will be exempt from unrelated business income tax

C Tax-exempt organizations are required to pay tax at the corporate rate on the income generated from any trade or business activities unrelated to the entity's tax-exempt purposes. The purpose of this requirement is to eliminate advantages that tax-exempt organizations have over profit-making organizations. The existence of one or more of the following conditions will exempt income-producing activities from UBIT: (1) The business is not regularly carried on, (2) volunteers perform most of the labor, (3) the not-for-profit sells donated merchandise, and (4) it is operated for the convenience of employees, patients, students, etc. In addition to certain activities being exempt from UBIT, certain exceptions have been provided in legislation. One of the exceptions is income from royalties, dividends, interest and annuities (except from controlled corporations) are not included in come

Which of the following is required in a federal agency's financial report? a) Statement of Revenues, Expenditures and Changes in Fund Balance b) Statement of Cash Flows c) Statement of Activity d) Statement of Net Cost

D

The equity section of the Statement of Net Position of a government-owned hospital may contain which of the following descriptions a) Fiduciary, Proprietary, and General b) Nonspendable, Committed, Restricted and Assigned c) Permanently Restricted, Temporarily Restricted, and Unrestricted d) Net Investment in Capital Assets, Restricted, and Unrestricted Net Position

D A health care organization owned is typically considered a special-purpose entity engaged only in business-type activities and would use proprietary fund accounting. The categories in the equity section (Net Position) are Net Investment in Capital Assets, Restricted, and Unrestricted Net Position

A donor made a gift of cash to a private not-for-profit organization in 2017 with an expressed purpose restriction. All the funds were expended in 2017. The organization must: a) Record the gift as a temporarily restricted revenue, reclassify the funds to unrestricted, and then report the expense as unrestricted. b) Record the gift and expense as unrestricted c) Record the gift and expense as temporarily restricted d) Use either of the methods described in (a) or (b).

D Donor restricted contributions whose restrictions are satisfied in the same accounting period that the contribution is received may be reported in two ways; record the gift as a temporarily restricted revenue, reclassify the funds to unrestricted, and then report the expense as unrestricted or record the gift and expense as unrestricted

A "performance indicator" is required in the Statement of Operations for health care entities. Which of the following must be reported below that performance indicator? a) Other revenue, such as parking lot or cafeteria revenue b) Net assets released from restrictions for operating purposes c) Both (a) and (b) above d) Neither (a) nor (b) above

D Other revenue, such as parking lot or cafeteria revenue and net assets released from restrictions for operating purposes are both included in the calculation of operating income

Assume a government is a special-purpose government engaged in only one governmental activity. Which financial statements would be required? a) Government-wide statements only. b) Statements combining the governmental funds and government-wide statements c) Both government-wide and governmental fund basis statements d) Either B or C above

D Special purpose governments that are engaged in only one governmental-type activity are permitted to combine the fund and government-wide financial statements. Otherwise, both the government-wide and fund statements would be required.

According to AICPA Health Care Guide, which of the following should not be included in the determination of a performance indicator for a health care organization? a) Transfers among affiliated organizations b) Receipt of temporarily or permanently restricted contributions c) Transactions with the owners, other than in exchange for services d) All of the above should be excluded

D The Audit and Accounting Guide identifies the following items that should not be included in the determination of operating income: (1) transactions with the owners, other than in exchange for services, (2) transfers among affiliated organizations, (3) Receipt of temporarily or permanently restricted contributions, (4) items identified by FASB standards as elements of other comprehensive income, (5) items requiring separate display and (6) unrealized gains and losses on investments other than those classified as trading securities.

Which of the following is not true regarding the Statement of Cash Flows for nongovernmental, not-for-profit organizations? a) Either the direct or indirect method may be used b) If a not-for-profit organization received a restricted cash contribution for long-term purposes, that cash contribution would be reported as a cash flow from financing activities. c) Restricted contributions used for long-term purposes are reported as financing activities d) Four categories of cash flows are used

D The Statement of Cash Flows uses the standard FASB categories; operating, investing and financing. The direct or indirect method may be used. Restricted contributions or restricted investment proceeds that will be used for long-term purposes such as endowments or plant, are reported as financing activities.

Contractual allowances for amounts billed to 3rd parties are treated as: a) Contractual allowance expense b) An other financing use c) A bad debt expense d) A contra-revenue

D The journal entry would be a debit to Contractual Adjustments - Unrestricted and a credit to Patient Accounts Receivable. Contractual Adjustments - Unrestricted is a contra-revenue account.

At the inception of a capital lease agreement for a piece of equipment used in governmental operations a) A liability is incurred and reported in the governmental fund's balance sheet b) A liability is incurred and reported in the government-wide financial statements. c) An expenditure is recorded in the governmental fund d) Both B and C

D Under a capital lease, the present value of the rental and other minimum lease payments or the fair value of the leased property and the related liability are recorded in the government-wide statements and proprietary funds. Governmental funds, including the general fund, record an expenditure for the present value of the payments.

Which of the following may be deducted in computing income from unrelated business activities? a) $1,000 special deduction b) Charitable contributions c) Ordinary and necessary business expenses d) All of the above

D When computing the unrelated business income tax, not-for-profit organizations are allowed to deduct ordinary and necessary business expenses directly connected with their trade or business, a $1,000 special deduction, charitable contributions, and many of the other deductions available to business organizations

With the exception of collections, fixed assets may be recorded by a private not-for-profit as a) Temporarily restricted b) Unrestricted c) Permanently restricted d) Either A or B

D With the exception of collections, fixed assets may be recorded as either temporarily restricted or unrestricted, depending on the policy of the organization. This is true both when an asset is acquired with temporarily restricted resources and when it is acquired with restricted resources.