Financial 9 PassMaster Questions
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Financial 9 PassMaster Questions

Course Number: ACCOUNTING AC555ON, Spring 2011

College/University: Keller Graduate School...

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Becker CPA Review, PassMaster Questions Lecture: Financial 9 CPA PassMaster QuestionsFinancial 9 Export Date: 10/30/08 1 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Governmental Accounting (Part B) CPA-00967 Type1 M/C 1. CPA-00967 ARE R03 #17 A-D Corr Ans: B PM#2 F 9-01 Page 22 Nox City reported a $25,000 net...

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CPA Becker Review, PassMaster Questions Lecture: Financial 9 CPA PassMaster QuestionsFinancial 9 Export Date: 10/30/08 1 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Governmental Accounting (Part B) CPA-00967 Type1 M/C 1. CPA-00967 ARE R03 #17 A-D Corr Register to View Answer PM#2 F 9-01 Page 22 Nox City reported a $25,000 net increase in the fund balances for total governmental funds. Nox also reported an increase in net assets for the following funds: Motor pool internal service fund Water enterprise fund Employee pension fund $9,000 12,000 7,000 The motor pool internal service fund provides service to the general fund departments. What amount should Nox report as the change in net assets for governmental activities? a. b. c. d. $25,000 $34,000 $41,000 $46,000 CPA-00967 Explanation Choice "b" is correct. The reconciliation of the change in fund balances in governmental fund financial statements to the change in net assets for governmental activities in the government-wide financials is computed using the GOES BARE mnemonic. The fact pattern only describes measurement focus (GOES) issues computed as follows: G Change in Governmental Fund Balance $25,000 O Capital Outlay (net of depreciation) 0 0 E Expenditure Principal Payments on Debt - Proceeds from New Debt 0 S Internal Service Fund Net Income 9,000 Change in Net Assets in government-wide financial statements $34,000 Choice "a" is incorrect. The change in fund balance is not equal to the change in net assets after consideration of the reconciling items described above. Choice "c" is incorrect. The change in fund balance reconciles to the change in net assets as a result of considering only the change in internal service fund net assets per above. Changes in pension fund net assets are not relevant to the reconciliation. Choice "d" is incorrect. The change in fund balance reconciles to the change in net assets as a result of considering only the change in internal service fund net assets per above. Changes in water and sewer (enterprise) net assets are not relevant to the reconciliation. CPA-00986 Type1 M/C 2. CPA-00986 ARE R02 #12 A-D Corr Register to View Answer PM#5 F 9-01 Page 28 Hunt Community Development Agency (HCDA), a financially independent authority, provides loans to commercial businesses operating in Hunt County. This year, HCDA made loans totaling $500,000. How should HCDA classify the disbursements of loans on the cash flow statement? a. b. c. d. Operating activities. Non-capital financing activities. Capital and related financing activities. Investing activities. CPA-00986 Explanation 2 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Rule: Government proprietary funds (enterprise and internal service) prepare a statement of cash flows in a manner similar to commercial enterprises. Choice "a" is correct. Cash activities associated with the ongoing and central activities of an entity would be classified as operating activities on its statement of cash flows. The HCDA is in the business of providing loans. Cash activities associated with the HCDA's loans consistent with its charter would be classified as operating activities. Choices "b", "c", and "d" are incorrect per the rule above. CPA-01002 Type1 M/C 3. CPA-01002 ARE C00 #4 A-D Corr Register to View Answer PM#8 F 9-01 Page 3 The financial statements of governments have focused on two forms of accountability. Government-wide financial statements focus the reader on accountability in which way(s): a. b. c. d. Fiscal Accountability Yes No Yes No Operational Accountability Yes Yes No No CPA-01002 Explanation Choice "b" is correct. Government-wide financial statements focus on the operational accountability of the government. Operational accountability takes an economic view that reports on the long-term efficient and effective use of resources. Fiscal accountability takes a short-term view that focuses the reader on compliance and current year performance. Choices "a", "c", and "d" are incorrect. Government-wide financial statements focus on the operational accountability, not the fiscal accountability of the organization. Fund financial statements focus the reader on fiscal accountability. CPA-01015 Type1 M/C 4. CPA-01015 ARE C00 #5 A-D Corr Register to View Answer PM#9 F 9-01 Page 3 The City of Reformville has elected to early adopt the reporting standards of GASB #34. Citizens of the City of Reformville can expect to find the following items in their basic financial statements: a. Management's Discussion and Analysis, Required Supplementary Information, Government-wide Financial Statements and Notes to the Financial Statements. b. Government-wide financial statements, Fund financial statements and notes to the financial statements. c. Statement of Net Assets and a Statement of Activities. d. Statement of Net Assets, Statement of Activities and a Statement of Public Accountability. CPA-01015 Explanation Rule: Government reporting standards established by GASB #34 require presentation of basic financial statements and required supplementary information. Basic financial statements are defined as government-wide financial statements, fund financial statements and notes to the financial statements. Supplementary information covers a wide range of information including management's discussion and analysis and supporting schedules such as combining financial statements by fund type and budget versus actual presentations. Choice "b" is correct. Basic financial statements include government-wide financial statements, fund financial statements and notes to the financial statements. 3 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Choice "a" is incorrect. Management's discussion and analysis and required supplementary information represent part of the total requirement to meet GASB #34 reporting standards, not the basic financial statements. Choice "c" is incorrect. The Statement of Net Assets and Statement of Activities are included in the government-wide financial statements. Choice "d" is incorrect. The Statement of Net Assets and Statement of Activities are included in the government-wide financial statements. The "Statement of Public Accountability" is a well-designed distracter. CPA-01022 Type1 M/C 5. CPA-01022 ARE C00 #6 A-D Corr Register to View Answer PM#10 F 9-01 Page 3 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 financial statements, and statistical schedules. b. General purpose financial statements, notes to the financial statements, combining financial statements and statistical schedules. c. Basic financial statements and required supplementary information introduced after the basic financial statements. d. Management's Discussion and Analysis, Basic Financial Statements and Required Supplementary Information. CPA-01022 Explanation Choice "d" is correct. The basic financial statements and required supplementary information should consist of Management's Discussion and Analysis, Basic Financial Statements and Required Supplementary Information. Choice "a" is incorrect. Basic financial statements and required supplementary information do not include the terms liftable or statistical schedules. Choice "b" is incorrect. Basic financial statements and required supplementary information do not include the terms general purpose financial statements, combining financial statements or statistical schedules. Choice "c" is incorrect. Basic financial statements and required supplementary information include a section for Management's Discussion and Analysis that is required to appear before the financial statements in addition to basic financial statements and other required supplementary information. CPA-01026 Type1 M/C 6. CPA-01026 ARE C00 #7 A-D Corr Register to View Answer PM#11 F 9-01 Page 3 The presentation of government-wide financial statements prepared using a uniform method of accounting and measurement focus in combination with both fund based financial statements that use the method of accounting and measurement focus appropriate to the particular fund type along with appropriate reconciliation is best referred to as: a. b. c. d. The Financial Reporting Pyramid. The Integrated Approach. The Segregated Approach. The Public Accountability Approach. CPA-01026 Explanation Choice "b" is correct. The joint presentation of government-wide and fund financial statements and appropriate reconciliation is called the integrated approach. Choice "a" is incorrect. The Financial Reporting Pyramid was the reporting model used prior to the introduction of GASB #34 reporting standards. The pyramid was comprised of individual, combining and 4 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 combined or general purpose financial statement, which essentially built from a broad base of information to, condensed summary information similar to a pyramid. Choice "c" is incorrect. The term segregated approach is a distracter. Choice "d" is incorrect. The public accountability approach is a distracter. CPA-01030 Type1 M/C 7. CPA-01030 ARE C00 #8 A-D Corr Register to View Answer PM#12 F 9-01 Page 5 Sample City has elected to adopt the standards of GASB #34 early relative to the preparation of their financial statements. The city has identified the non-major funds within its fund types. In its financial report, Sample City: a. Must include combining financial statements for non-major funds for each fund type in the basic financial statements. b. Must include combing financial statements for non-major funds for each fund type in the required supplementary information. c. May include combining financial statements for non-major funds for each fund type in the supplementary information. d. Must include combining financial statement disclosures for non-major funds for each fund type in the notes to the financial statements. CPA-01030 Explanation Choice "c" is correct. Sample City may report combining non-major individual fund financial statements in the supplementary information. Reporting the combining fund financial statements is optional. Choices "a", "b", and "d" are incorrect. Sample City's reporting is optional. CPA-01036 Type1 M/C 8. CPA-01036 ARE C00 #9 A-D Corr Register to View Answer PM#13 F 9-01 Page 5 A government's Comprehensive Annual Financial Report (CAFR) is divided into three sections as follows: a. Management's Discussion and Analysis, Basic Financial Statements and Required Supplementary Information. b. Introductory Section, Basic Financial Statements and Required Supplementary Information, and Statistical Section. c. Introductory Section, Financial Section, Required Supplementary Information. d. Introductory Section, General Purpose Financial Statements and Combining Financial Statements, and Statistical Section. CPA-01036 Explanation Choice "b" is correct. The CAFR is divided into an introductory section, which includes a title page and table of contents, a section for the Basic financial statements and the required supplementary information (including the Management's Discussion and Analysis) and a section for statistical data (ten years of revenue by type, expenses by type, assessed property values, etc.). Choice "a" is incorrect. Management's Discussion and Analysis, Basic Financial Statements and Required Supplementary Information define the reporting standards required by GASB #34. Choice "c" is incorrect. The components of the CAFR included an introductory section, a statistical section and a section that included the Basic financial statements and required supplementary information. Choice "d" is incorrect. Financial statement titles described by GASB #34 reporting standards exclude the terms General Purposes Financial Statements. 5 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 CPA-01039 Type1 M/C 9. CPA-01039 ARE C00 #10 A-D Corr Register to View Answer PM#14 F 9-01 Page 5 Readers of the Comprehensive Annual Report of the City of Scenic Beach would expect to find Management's Discussion Analysis in the CAFR section titled: a. b. c. d. Introductory Section. Basic Financial Statements and Required Supplementary Information. Statistical Section. Management's Discussion and Analysis. CPA-01039 Explanation Choice "b" is correct. Management's Discussion and Analysis is considered to be Required Supplementary Information that precedes the Basic Financial Statements but is still part of the Basic Financial Statements and Required Supplementary Information. Choice "a" is incorrect. The Introductory Section of the CAFR includes extremely limited information about the government. Choice "c" is incorrect. The Statistical Section included ten years of historical statistical data pertaining to the government. Choice "d" is incorrect. The CAFR does not devote a separate section to Management's Discussion and Analysis. CPA-01049 Type1 M/C 10. CPA-01049 ARE C00 #12 A-D Corr Register to View Answer PM#16 F 9-01 Page 9 A government's management's discussion and analysis would likely include all of the following features, except: a. An objective and easily readable analysis of the government's financial activities based on currently known facts, decisions or conditions. b. A comparison of current year to the prior year based on government-wide information along with other information helpful in assessing the improvement or deterioration of the government's financial position. c. A discussion of significant changes in individual funds and significant budget variances. d. A reconciliation of fund financial statements and government-wide financial statements. CPA-01049 Explanation Rule: The management's discussion and analysis (MD&A) is part of required supplementary information and is meant to introduce the basic financial statements and provide an analytical overview of the government's financial activities. The MD&A may include objective analysis of current conditions, comparison of prior and current year activities and significant results reported in fund financial statements. Reconciliation of the fund financial statements is included as part of the basic financial statements, not required supplementary information. Choice "d" is correct. A reconciliation of fund financial statements and government-wide financial statements would not be included in the MD&A. Choices "a", "b", and "c" are incorrect, per the rule above. CPA-01055 Type1 M/C 11. CPA-01055 ARE C00 #13 A-D Corr Register to View Answer PM#17 F 9-01 Page 10 Government-wide financial statements would include all government-wide activities associated with operational accountability for all activities, except: a. Governmental Activities. 6 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 b. Business-type Activities. c. Component Unit Activities. d. Fiduciary Activities. CPA-01055 Explanation Choice "d" is correct. Fiduciary activities should be excluded from government-wide measures of operational accountability since fiduciary resources cannot be used to support the government's programs or other services. Choices "a", "b", and "c" are incorrect. Governmental Type, Business-type and Component Units are specifically included in the Statement of Activities. CPA-01059 Type1 M/C 12. CPA-01059 ARE C00 #14 A-D Corr Register to View Answer PM#18 F 9-01 Page 10 The City of Accountability has decided to adopt the reporting standards of GASB #34. As a result, the city will report its net assets in its government-wide financial statements classified in three categories as follows: a. b. c. d. Unrestricted, Permanently Restricted and Temporarily Restricted. Invested in capital assets (net of related debt), restricted and unrestricted. Invested in capital assets, restricted for debt service and unrestricted. Reserved, Designated, Undesignated and unreserved. CPA-01059 Explanation Rule: Government-wide financial statements should classify net assets as: 1. Invested in capital assets (net of related debt). 2. Restricted and 3. Unrestricted. Choice "b" is correct. Invested in capital assets (net of related debt), restricted and unrestricted. Choice "a" is incorrect. Classification of net assets as permanently restricted, temporarily restricted and unrestricted is used in not-for-profit entities, not governments. Choice "c" is incorrect. Invested in capital assets, restricted for debt service and unrestricted are not appropriate classifications per the above rule. Choice "d" is incorrect. Reserved, designated and undesignated and unreserved were the terms applied to Fund Equity in the governmental reporting standards in effect prior to the issuance of GASB #34. CPA-01063 Type1 M/C 13. CPA-01063 ARE C00 #15 A-D Corr Register to View Answer PM#19 F 9-01 Page 11 Under the modified approach to capitalizing infrastructure, governments apply the following principles to recording current year additions: a. Roads and streets are recorded as capital additions only when they are both measurable and available. b. All infrastructure expenditures are reflected as capital outlay expenditures. c. All infrastructure expenditures are capitalized and depreciated over their useful lives. d. Infrastructure expenditures are reported as expenses except for outlays that result in additions or improvements, which would be capitalized. CPA-01063 Explanation Choice "d" is correct. Under the modified approach, infrastructure expenditures are reported as expenses except for outlays that result in additions or improvements, which would be capitalized. 7 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Choice "a" is incorrect. The modified accrual basis of accounting requires recording of revenues when they are both measurable and available. The modified approach to recording infrastructure is not related to this concept. Choice "b" is incorrect. Not all infrastructure outlays are expensed. Infrastructure additions and improvements are capitalized, not expensed. Choice "c" is incorrect. Not all infrastructure outlays are capitalized. Infrastructure expenditures other than improvements or additions are expensed. CPA-01065 Type1 M/C 14. CPA-01065 ARE C00 #16 A-D Corr Register to View Answer PM#20 F 9-01 Page 10 The City of Basicville is preparing its basic financial statements in conformity with GASB #34. The readers of Basicville's government-wide financial statements prepared as part of the basic financial statements should expect to find information about all of the assets, liabilities, revenues, expenses and gains and losses of the city in: a. A statement of net assets and a statement of activities using the economic resources measurement focus and the accrual basis of accounting. b. A balance sheet, income statement and statement of cash flows using the capital maintenance measurement focus and the accrual basis of accounting. c. A statement of financial position, statement of revenues, expenditures and changes in fund balance and statement of cash flows using various measurement focuses and methods of accounting as appropriate to each fund type. d. A statement of comprehensive public accountability prepared on the cash basis. CPA-01065 Explanation Choice "a" is correct. The government-wide financial statements include a statement of net assets and a statement of activities prepared using the economic resources measurement focus and the accrual basis of accounting distinguishing between governmental and business-type activities. Choice "b" is incorrect. Government-wide financial statements are not titled balance sheet and income statement, do not include a statement of cash flows and do not use a capital maintenance measurement focus. Choice "c" is incorrect. Government-wide financial statements do not include fund financial statements prepared using differing measurement focuses or methods of accounting. Choice "d" is incorrect. Well designed distracter. There is no report titled statement of comprehensive public accountability and the cash basis is inappropriate for GAAP basis accounting. CPA-01066 Type1 M/C 15. CPA-01066 ARE C00 #17 A-D Corr Register to View Answer PM#21 F 9-01 Page 16 The Statement of Activities includes separately displayed categories of program revenues. Categories include: a. b. c. d. Charges for Services Yes No Yes Yes Operating Grants & Contributions No Yes Yes Yes Capital Grants & Contributions No Yes No Yes CPA-01066 Explanation Choice "d" is correct. Program revenues include earnings classified as charges for services, operating grants and contributions, and capital grants and contributions. Choices "a", "b", and "c" are incorrect, per the above. 8 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 CPA-01069 Type1 M/C 16. CPA-01069 ARE C00 #18 A-D Corr Register to View Answer PM#22 F 9-01 Page 19 Fund financial statements report major funds based on the following criteria: a. b. c. d. Aggregate Revenues and Expenditures/Expenses Yes Yes Yes No Aggregate Assets and Liabilities Yes Yes No Yes Aggregate Fund Balance/Equity Yes No No Yes CPA-01069 Explanation Rule: The criteria for determining major funds includes qualification as to revenues, expenditures/expenses, assets, or liabilities that are at least 10 percent of the associated total for ALL governmental OR enterprise (as appropriate) AND at least 5 percent of the total of the associated totals for ALL governmental AND enterprise funds. Choice "b" is correct. Governments evaluate the classification of major funds using aggregate revenues and expenditures/expenses and aggregate assets and liabilities. Choices "a", "c", and "d" are incorrect. Governments evaluate the classification of major funds using aggregate revenues and expenditures/expenses and aggregate assets and liabilities per the rule above, not fund balance/equity. CPA-01110 Type1 M/C 17. CPA-01110 ARE C00 #19 A-D Corr Register to View Answer PM#23 F 9-01 Page 34 Progressive Township has elected to early adopt GASB #34. As a result, the town's financial statements will: a. Include the net book value of its general governmental assets in its General Fixed Asset Account Group. b. Include a mandatory comprehensive transmittal letter as part of its required supplementary information that focuses on the positive elements. c. Include a comparison of the town's budgeted and actual performance including disclosure of the originally adopted budget and all amendments included in the final amended budget. d. Display of combined financial statements by fund type in government-wide financial statements. CPA-01110 Explanation Rule: Financial statements prepared in accordance with the provisions of GASB #34 will include: government-wide financial statements prepared using accrual basis accounting, fund financial statements, notes to the financial statements and required supplementary information that encompasses a letter titled "management's discussion and analysis," combining fund financial statements for non-major funds and budget versus actual comparisons including display of the originally adopted budget and the changes that resulted in the final amended budget. Choice "c" is correct. Government financial statements prepared in accordance with GASB #34 include a comparison of the government's budgeted and actual performance including disclosure of the originally adopted budget and all amendments included in the final amended budget. Choice "a" is incorrect. GASB #34 eliminates the presentation of a General Fixed Asset Account Group in favor of presentation of capital assets, net of accumulated depreciation, in the Statement of Net Assets for Government Activities. 9 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Choice "b" is incorrect. GASB #34 requires presentation of letter called management's discussion and analysis, which objectively describes the economic, financial and administrative performance of the government. A transmittal letter is used in Comprehensive Annual Financial Reports prepared in conformity with standards issued by the Government Finance Officers Association. Choice "d" is incorrect. GASB #34 requires presentation of fund financial statements separate from government-wide financial statements. Fund financial statements display major funds by fund type with non-major funds disclosed as required supplementary information. CPA-01113 Type1 M/C 18. CPA-01113 ARE C00 #20 A-D Corr Register to View Answer PM#24 F 9-01 Page 34 The City of Budgetburg has elected to adopt the standards of GASB #34 early relative to the preparation of their financial statements. The city plans to present its Budgetary Comparison Schedules as part of required supplementary information. Which of the following is not a true statement regarding this schedule? a. The schedule may use either GAAP or budgetary presentation formats and basis of accounting. b. The schedule must include the originally adopted budget, the final amended budget and the actual results for the year. c. The schedule must include the variance of actual performance from the final amended budget. d. The schedule may include the computed difference between the original budget and the final amended budget. CPA-01113 Explanation Choice "c" is correct. Presentation of the computed variance between the final amended budget and actual results is optional and not required. Choice "a" is incorrect. The government may use any format or basis of accounting to present its budgetary comparison schedule as long as a reconciliation to GAAP is also prepared. Choice "b" is incorrect. The originally adopted budget, final amended budget and actual data must be presented in the budgetary comparison schedule. Choice "d" is incorrect. The schedule may compute the difference between original and final budget. CPA-01122 Type1 M/C 19. CPA-01122 ARE C00 #21 A-D Corr Register to View Answer PM#25 F 9-01 Page 34 The City of Accountability Junction has applied GASB #34 reporting standards to its current year financials. Readers of the financial statements should expect to find the following financial reports relative to the city's performance in relation to budget: a. A presentation of government-wide budget in comparison to government-wide financial statements. b. A presentation of budget and actual data for all governmental fund types with variances of actual performance computed from both the original budget and the final adjusted budget. c. Presentation of budget versus actual amounts for the General Fund and each major Special Revenue Fund with a legally adopted budget presented in either the Required Supplementary Information or within the Basic Financial Statements. d. Presentation of budget versus actual data on the cash basis in the Required Supplementary Information for all funds with a legally adopted budget. CPA-01122 Explanation Choice "c" is correct. Budgetary comparison schedules should be presented as required supplementary information or in the Basic Financial Statements for the general fund and for each major special revenue fund that has a legally adopted annual budget. Choice "a" is incorrect. Budgetary comparisons are made relative to fund financial statements, not government-wide financial statements. 10 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Choice "b" is incorrect. Budgetary comparisons are mandated for General and Special Revenue Funds with legally adopted budget, not all governmental funds. Schedules should present both the original and amended budgets. Presentation of variances of the amended budget to the actual results are optional. Presentation of the variance of the original budget to the final amended budget is also optional. Choice "d" is incorrect. No such requirement, the GASB does not mandate a specific basis of accounting for budgetary comparisons and does not mandate the point at which it is displayed. CPA-01134 Type1 M/C 20. CPA-01134 ARE C00 #22 A-D Corr Register to View Answer PM#26 F 9-01 Page 36 Olde Towne has relatively few records pertaining to the value of its roads, bridges, and other general governmental infrastructure and has elected to use the modified approach for reporting infrastructure. In order to comply with the requirements of the modified approach to reporting infrastructure, Olde Towne must prepare schedules which: a. Disclose the government's election, by policy to provide no accounting for infrastructure assets. b. Disclose the assumptions made as part of the annual appraisal of infrastructure value and useful life along with the associated allocation of costs to prior periods. c. Describe the assessed condition of the infrastructure (updated once every three years) and the estimated annual amount to maintain and preserve the condition level established and disclosed. d. Disclose the historical cost of all infrastructure assets, inflated using the historical cost constant dollar index net of associated depreciation. CPA-01134 Explanation Choice "c" is correct. The modified approach allows governments to not report depreciation expense for eligible infrastructure assets if (a) the government manages the eligible infrastructure assets using an asset management system that possesses certain characteristics and (b) documents that the eligible infrastructure assets are being preserved at (or above) a condition level established by the government. The government must report the assessed condition of the infrastructure every three years and the estimated annual amount to maintain and preserve the conditions level established and disclosed. Choice "a" is incorrect. Governments no longer have the option to simply not report infrastructure, the option available prior to issuance of GASB #34. Choice "b" is incorrect. The modified approach does not require an annual appraisal and disclosure of accumulated depreciation as of the end of the prior year. Choice "d" is incorrect. The modified approach does not contemplate inflation adjusted historical cost net of accumulated depreciation. CPA-01138 Type1 M/C 21. CPA-01138 ARE R98 #21 A-D Corr Register to View Answer PM#27 F 9-01 Page 7 Valley Town's public school system is administered by a separately elected board of education. The board of education is not organized as a separate legal entity and does not have the power to levy taxes or issue bonds. Valley's city council approves the school system's budget. How should Valley report the public school system's annual financial results? a. b. c. d. Discrete presentation Yes Yes No No Blended Yes No Yes No CPA-01138 Explanation Choice "c" is correct. Valley Town's Board of Education is a special purpose local government with a separately elected board, but it is not a separate legal entity and it does not have the power to levy taxes 11 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 or issue debt. The governing ability of the board is so intertwined with the town that it should be blended with Valley Town. Rule: Blending is used when the component unit is so intertwined with the primary government that it is in substance the same as the primary government. Choice "a" is incorrect. Simultaneous presentation of a component unit in both a blended and discrete manner is impossible. Choice "b" is incorrect. Discrete presentation is not appropriate for the board of education because it meets the criteria for blended presentation. Choice "d" is incorrect. Valley Town's Board of Education is a special purpose local government that fails to qualify as a primary government because it does not stand by itself. Although separately elected, the entity's board does not represent a legally separate entity and does not have the authority to function as a fiscally independent entity. The Valley Town Board of Public Education does not qualify as a primary government and must be included as a component unit of another government. CPA-01146 Type1 M/C 22. CPA-01146 ARE R97 #14 A-D Corr Register to View Answer PM#29 F 9-01 Page 7 Marta City's school district is a legally separate entity, but two of its seven board members are also city council members and the district is financially dependent upon the city. The school district should be reported as a: a. b. c. d. Blended unit. Discrete presentation. Note disclosure. Primary government. CPA-01146 Explanation Choice "b" is correct. Marta City's school district meets the test of component unit of the City: It is financially accountable to the City. Thus, its financial data needs to be reported with the City's financial data. However, since the school district is not substantially the same as the City and since the school district does not exclusively service or benefit the City itself, the financial data should be reported using the discrete presentation method. Choice "a" is incorrect. Since Marta City's school district meets the test of component unit, its financial data needs to be reported with the City's financial data. The financial data would not be blended since the school district does not meet the tests for blending-the school district is not substantially the same as the City and the school district does not exclusively service or benefit the City itself. Choice "c" is incorrect. Marta City's school district meets the test of component unit of the City: It is financially accountable to the City. Thus, its financial data needs to be reported with the City's financial data. However, since the school district is not substantially the same as the City and since the school district does not exclusively service or benefit the City itself, the financial data should be reported using the discrete presentation method. The discrete presentation is either in condensed financial statements with the notes to the reporting entity's financial statements, or in combining statements in its general purpose financial statement. Thus the response note disclosure is not sufficient in itself and a better alternative exists among the responses. Choice "d" is incorrect. Marta City's school district meets the test of component unit, not of the primary government. Its financial data needs to be reported with the City's financial data. CPA-01151 Type1 M/C A-D 23. CPA-01151 ARE Nov 95 #62 Corr Register to View Answer PM#30 F 9-01 Page 6 What is the basic criteria used to determine the reporting entity for a governmental unit? a. Special financing arrangement. 12 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 b. Geographic boundaries. c. Scope of public services. d. Financial accountability. CPA-01151 Explanation Choice "d" is correct. The reporting entity is the oversight unit and all related component units. The basic criteria include financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations, and accountability of fiscal matters. CPA-01153 Type1 M/C A-D 24. CPA-01153 ARE Nov 95 #63 Corr Register to View Answer PM#31 F 9-01 Page 28 Which event(s) should be included in a statement of cash flows for a governmental entity? I. Cash inflow from issuing bonds to finance city hall construction. II. Cash outflow from a city utility representing payments in lieu of property taxes. a. b. c. d. I only. II only. Both I and II. Neither I nor II. CPA-01153 Explanation Choice "b" is correct. The cash inflow from issuing bonds to finance city hall construction is a cash inflow for a governmental fund. Governmental funds do not prepare a statement of cash flows since the measurement focus is financial resources. The cash outflow from a city utility representing payments in lieu of property taxes is a cash outflow from operating activities for an enterprise fund. Enterprise funds prepare a statement of cash flows. CPA-01158 Type1 M/C A-D Corr Register to View Answer 25. CPA-01158 ARE May 95 #53 (Adapted) PM#32 F 9-01 Page 40 In preparing government-wide financial statements for a governmental entity, interfund receivables and payables between governmental and enterprise funds should be: a. b. c. d. Reported as reservations of fund balance. Reported as additions to or reductions from the unrestricted fund balance. Reported as amounts due to and due from other funds. Reported as internal balances. CPA-01158 Explanation Choice "d" is correct. When government-wide financial statements are prepared for a governmental entity, interfund receivables and payables that occur between funds categorized as governmental activities and funds classified as business type activities should be reported as internal balances and aligned so that they sum to zero on the financial statements. They are not eliminated from individual fund activities prior to preparation of the government-wide financial statements. Choice "a" is incorrect. Reservations of fund balance are used only for portions of the fund balance, which are not appropriable or are legally segregated for a specific future use, such as reserve for encumbrances and are appropriate for fund financial statements. Choice "b" is incorrect. Interfund receivables and payables should not be used to adjust the fund balance. Choice "c" is incorrect. Interfund receivables and payables are displayed in the fund financial statements but are eliminated as part of the preparation of the government-wide financial statements. CPA-01162 Type1 M/C A-D Corr Register to View Answer PM#33 F 9-01 13 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 26. CPA-01162 ARE Nov 94 #5 Page 14 If a primary government's general fund has an equity interest in a joint venture, all or a portion of this equity interest should be reported in the: a. b. c. d. Government-wide statement of net assets. Trust fund. Agency fund. Internal service fund. CPA-01162 Explanation Choice "a" is correct. Since the general fund has the equity interest, only the available and expendable portion of the investment should be recorded in that fund. The available and expendable portion would not include any equity interest. The portion of the equity interest in the joint venture that represents the government's investment in the net assets of the venture is recorded in the government-wide statement of net assets. Choice "b" is incorrect. Trust funds are used to account for resources of the governmental unit acting as a trustee. Choice "c" is incorrect. Agency funds are used to account for funds where the governmental entity is acting as a custodian. Choice "d" is incorrect. Internal service funds are used to account for resources within a governmental unit, not a joint venture. CPA-01167 Type1 M/C A-D Corr Register to View Answer PM#34 F 9-01 27. CPA-01167 ARE Nov 94 #7 Page 11 Fixed assets of a governmental unit, other than those accounted for in proprietary funds or fiduciary funds, should be accounted for in the: a. b. c. d. General fund. Capital projects fund. Permanent fund. Governmental activities column of the government-wide statements of net assets. CPA-01167 Explanation Choice "d" is correct. Since proprietary funds and trust funds use the full accrual basis of accounting and economic measurement focus, fixed assets of those funds are accounted for within those funds. All other fixed assets of the governmental unit are considered general capital assets and are recorded in the governmental activities column of the government-wide statement of net assets. Choice "a" is incorrect. The general fund is used to account for financial resources only. Capital assets and long-term liabilities are not accounted for in the general fund since they will neither provide nor use financial resources. Choice "b" is incorrect. Capital projects funds account for the sources and uses of financial resources in the construction of major fixed assets. Once constructed, the capital asset is no longer accounted for through the capital projects fund since it will neither provide nor use financial resources. Choice "c" is incorrect. The permanent fund is used to account for assets whose principal cannot be spent. Capital assets are not recorded in the permanent fund. CPA-01170 Type1 M/C A-D 28. CPA-01170 ARE Nov 94 #16 Corr Register to View Answer PM#35 F 9-01 Page 38 During the year, a citys 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? 14 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 a. b. c. d. Appropriations. Expenditures. Due to electric utility enterprise fund. Other financing uses-operating transfers out. CPA-01170 Explanation Choice "b" is correct. Transfers between funds do not generally give rise to operating expenditures and revenues. However, an exception is made for quasi-external transactions (one in which the governmental fund acquires a good or service that could have been purchased from an unrelated business enterprise). Routine service charges for utilities is one example of a quasi-external transaction. The following entry should be made in the general fund to record billings from the enterprise fund: Expenditures Due to electric utility enterprise fund XXX XXX Choice "a" is incorrect. Appropriations are recorded when the budget is formally integrated into the accounting system. Choice "c" is incorrect. Due to electric utility enterprise fund is credited, not debited. Choice "d" is incorrect. Transfers between funds do not generally give rise to operating expenditures and revenues. However, an exception is made for quasi-external transactions (one in which the governmental fund acquires a good or service that could have been purchased from an unrelated business enterprise). Routine service charges for utilities is one example of a quasi-external transaction. CPA-01172 Type1 M/C A-D Corr Register to View Answer PM#37 F 9-01 29. CPA-01172 PII Nov 93 #19 Page 28 Hill City's water utility fund held the following investments in U.S. Treasury securities at June 30, 1993: Investment 3-month T-bill 3-year T-note 5-year T-note Date purchased 5/31/93 6/15/93 10/1/89 Maturity date 7/31/93 8/31/93 9/30/94 Carrying amount $ 30,000 50,000 100,000 In the fund's balance sheet, what amount of these investments should be reported as cash and cash equivalents at June 30, 1993? a. b. c. d. $0 $30,000 $80,000 $180,000 CPA-01172 Explanation Choice "c" is correct. Cash equivalents are short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in interest rates. Generally, only investments with original maturities of 3 months or less qualify as cash equivalents. Original maturity is determined from the date an investment was purchased by the reporting entity, not the date of issuance of the security. Both the 3-month $30,000 T-bill and the 3-year $50,000 T-note mature in 3 months or less from the date purchased, for a total cash equivalents of $80,000. Choice "a" is incorrect. Cash equivalents include investments with original maturities (from date purchased) of 3 months or less. Choice "b" is incorrect. Cash equivalents include investments with original maturities (from date purchased) of 3 months or less. The 3-year T-note has a 2 month maturity from the date purchased so it qualifies as a cash equivalent. 15 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Choice "d" is incorrect. The $100,000 5-year T-note has a 5-year maturity from the date purchased. To qualify as a cash equivalent, it must mature in 3 months or less from the date purchased. CPA-01173 Type1 M/C A-D Corr Register to View Answer PM#38 F 9-01 30. CPA-01173 Th Nov 93 #58 Page 28 With regard to the statement of cash flows for a governmental unit's enterprise fund, items generally presented as cash equivalents are: a. b. c. d. 2-month treasury bills No No Yes Yes 3-month certificates of deposit No Yes Yes No CPA-01173 Explanation Choice "c" is correct. Cash equivalents include highly liquid items that mature within 3 months of acquisition. Both the treasury bills and the certificates of deposit meet this definition. CPA-01302 Type1 M/C 31. CPA-01302 PII Nov 93 #9 A-D Corr Register to View Answer PM#39 F 9-01 Page 40 The following information pertains to Grove City's interfund receivables and payables at December 31, 1992: Due to special revenue fund from general fund Due to agency fund from special revenue fund $10,000 4,000 In Grove's special revenue fund balance sheet at December 31, 1992, how should these interfund amounts be reported? a. b. c. d. As an asset of $6,000. As a liability of $6,000. As an asset of $4,000 and a liability of $10,000. As an asset of $10,000 and a liability of $4,000. CPA-01302 Explanation Choice "d" is correct. In the special revenue fund balance sheet, the $10,000 Due From General Fund is an asset because it is a receivable to the special revenue fund. The $4,000 Due to Agency Fund is a liability that the special revenue fund has to the agency fund. Choice "a" is incorrect. Do not net the due from/due to accounts. They are shown separately as assets and liabilities. Choice "b" is incorrect. Do not net the due from/due to accounts. They are shown separately as assets and liabilities. Choice "c" is incorrect. The $10,000 Due From General Fund is the asset to the special revenue fund, while the $4,000 is the liability. CPA-04670 Type1 M/C A-D Corr Register to View Answer PM#40 F 9-01 32. CPA-04670 Released 2005 Page 15 During the current year, Knoxx County levied property taxes of $2,000,000, of which 1% is expected to be uncollectible. The following amounts were collected during the current year: Prior year taxes collected within the 60 days of the current year Prior year taxes collected between 60 days and 90 days into the current year 16 2009 DeVry/Becker Educational Development Corp. All rights reserved. $ 50,000 120,000 Becker CPA Review, PassMaster Questions Lecture: Financial 9 Current year taxes collected in the current year Current year taxes collected within the first 60 days of the subsequent year 1,800,000 80,000 What amount of property tax revenue should Knoxx County report in its entity-wide statement of activities? a. b. c. d. $1,800,000 $1,970,000 $1,980,000 $2,000,000 CPA-04670 Explanation Choice "c" is correct. Knoxx County would report revenue from its governmental funds on the full accrual basis in its entity wide (government-wide) statement of activities. As such, Knoxx County would recognize revenues from property taxes, net of estimated refunds and estimated uncollectible amounts in the period in which they are levied. The examiners provide additional irrelevant data necessary to compute earnings on the modified accrual basis. Earnings on the accrual basis are computed as follows: Property tax levy Estimated uncollectible (1%) Revenue recognized $2,000,000 (20,000) $1,980,000 Choice "a" is incorrect. The amount collected from the current year levy ($1,800,000) would not be the amount recognized as property tax revenue on the accrual basis. Choice "b" is incorrect. The total of all amounts collected in the current year from both prior year and current year levies ($1,970,000 = $50,000 + $120,000 + $1,800,000) would not be the amount recognized as property tax revenue on the accrual basis. Choice "d" is incorrect. The total amount of the levy ($2,000,000) or the revenue computed on the modified accrual basis (also $2,000,000 representing the sum of the $120,000 collected after the 60 day availability criteria from the prior year, the $1,800,000 in current year collections and the $80,000 collected within 60 days of the current year) would not be the amount recognized as property tax revenue on the accrual basis. CPA-05213 Type1 M/C A-D Corr Register to View Answer PM#51 F 9-01 33. CPA-05213 Released 2006 Page 32 Assuming no outstanding encumbrances at year end, closing entries for which of the following situations would increase the unreserved fund balance at year end? a. b. c. d. Actual revenues were less than estimated revenues. Estimated revenues exceed actual appropriations. Actual expenditures exceed appropriations. Appropriations exceed actual expenditures. CPA-05213 Explanation RULE: Unreserved fund balance represents the amount of current resources carried forward into the following year that will be available for appropriations. Assuming there are no encumbrances, the relationships between estimated and actual amounts has a determinable relationship with final fund balance amounts. The Budgetary Comparison Schedule illustrated for Progressive Township in your text shows that the "Final" budgeted fund balance at the beginning of the year is equal to the "Actual" fund balance a the beginning of the year. The examiners question effectively asks when the relationships between budgeted and actual results create an actual fund balance greater than expected. Choice "d" is correct. Appropriations (estimated expenditures) in excess of actual expenditures would increase the unreserved fund balance. Not all of the original budget (appropriations) was spent, and the excess was returned to fund balance. 17 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Choice "a" is incorrect. Actual revenues less than estimated revenues would indicate that the unreserved fund balance would decrease. There was effectively a revenue shortfall, and it had to come out of fund balance. Choice "b" is incorrect. The relationship between estimated revenues exceeding actual appropriations is a comparison of budgeted amounts that does not give sufficient information to draw any conclusion with regard to the impact on unreserved fund balance. The "actual" appropriations is a distracter. Choice "c" is incorrect. Actual expenditures in excess of appropriations would decrease the unreserved fund balance. More money was spent than was anticipated. CPA-05231 Type1 M/C A-D Corr Register to View Answer PM#52 F 9-01 34. CPA-05231 Released 2006 Page 15 Which of the following would be reported as program revenues on a local government's government-wide statement of activities? a. b. c. d. Charges for services. Taxes levied for a specific function. Proceeds from the sale of a capital asset used for a specific function. Interest revenues. CPA-05231 Explanation Choice "a" is correct. For a local government's government-wide statement of activities, charges for services are reported as program revenue. Program revenue is revenue directly associated with a program or function. Remember the categories of program revenue and recall that the government can "SOC" away these revenues: S Charges (for services) O Operating grants and contributions C Capital grants and contributions Choice "b" is incorrect. Taxes are not program revenue. Even though the taxes are levied for the specific function, taxes are not revenue. The words "levied for a specific function" were included to attempt to confuse. Choice "c" is incorrect. Proceeds from the sale of a capital asset used for a specific function are not program revenue. Again, the words "used for a specific function" were included to confuse. Choice "d" is incorrect. Interest revenue is not program revenue. CPA-05453 Type1 M/C A-D Corr Register to View Answer PM#53 F 9-01 35. CPA-05453 Released 2007 Page 28 Cash receipts from grants and subsidies to decrease operating deficits should be classified in which of the following sections of the statement of cash flows for governmental, not-for-profit entities? a. b. c. d. Operating. Noncapital financing. Capital and related financing. Investing. CPA-05453 Explanation Rule: Cash flows from noncapital financing activities include: 1. Proceeds or payments related to borrowing not attributable to the acquisition, construction or improvement of capital assets. 2. Cash receipts or payments related to grants or subsidies not attributable to capital purposes. 18 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 3. Property taxes not designated for capital purposes. 4. Cash paid to other funds (other than for interfund services). Choice "b" is correct. Cash receipts from grants and subsidies used to decrease operating deficits (not used for capital purposes) should be classified as noncapital financing activities in the statement of cash flows of a proprietary fund. Choice "a" is incorrect. Noncapital cash receipts from grants and subsidies are noncapital financing activities. Operating cash flows related to receipts and disbursements related to sales of goods and services, interfund reimbursements, etc. Choice "c" is incorrect. Noncapital cash receipts from grants and subsidies are noncapital financing activities. Capital and related financing activity is typically associated with cash activities related to acquisition, construction or improvement of capital assets, etc. Choice "d" is incorrect. Noncapital cash receipts from grants and subsidies are noncapital financing activities. Investing activities include cash receipts and disbursements associated with the purchase and sale of equity or debt securities, etc. Not-for-profit Organizations CPA-01207 Type1 M/C 36. CPA-01207 ARE R03 #11 A-D Corr Register to View Answer PM#1 F 9-02 Page 59 Oz, a non-governmental not-for-profit organization, received $50,000 from Ame Company to sponsor a play given by Oz at the local theater. Oz gave Ame 25 tickets, which generally cost $100 each. Ame received no other benefits. What amount of ticket sales revenue should Oz record? a. b. c. d. $0 $2,500 $47,500 $50,000 CPA-01207 Explanation Rule: Generally, the difference between the fair value of purchases and the amount transferred is classified as a contribution. Choice "b" is correct. Oz would account for the $50,000 receipt from Ame Company as a contribution and as ticket sales revenue. Ticket sales revenue is equal to the fair value of the purchase ($25 100 tickets = $2,500). Contribution revenue is equal to the difference between the amount contributed and the fair value of purchases given in the exchange ($50,000 $2,500 = $47,500). Choice "a" is incorrect. The fair market value of the tickets purchased by the Ame Company is accounted for as ticket sales revenue. Choice "c" is incorrect. The difference between the fair market value of the tickets sold to the Ame Company and the total transferred is contribution revenue, not ticket sales revenue. Choice "d" is incorrect. The total amount of the transfer is not accounted for as ticket sale revenue, only the fair market value of the items sold. CPA-01215 Type1 M/C 37. CPA-01215 ARE R03 #15 A-D Corr Register to View Answer PM#3 F 9-02 Page 56 Pica, a non-governmental not-for-profit organization, received unconditional promises of $100,000 expected to be collected within one year. Pica received $10,000 prior to year-end. Pica anticipates collecting 90% of the contributions and has a June 30 fiscal year-end. What amount should Pica record as contribution revenue as of June 30? a. $10,000 19 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 b. $80,000 c. $90,000 d. $100,000 CPA-01215 Explanation Choice "c" is correct. Pica would recognize contribution revenue based on the net realizable value of its pledges receivable. Total Pledge Receivable Net realizable value Contributed revenues $100,000 90% $ 90,000 Allowance for Doubtful Accounts $ 10,000 Rule: Recording promises to give are journalized as follows: Dr. Pledge Receivable Cr. Allowance for Doubtful Accounts Cr. Contributed Revenue $100,000 $10,000 $90,000 Choice "a" is incorrect. Pica would recognize contribution in the amount of unconditional pledges whose collection is deemed to be probable along with actual receipts. Pica would not limit its recognition of contribution revenue to only those amounts received. Choice "b" is incorrect. Pica would recognize contribution in the amount of unconditional pledges whose collection is deemed to be probable and in addition to amounts actually received. Pica would not limit its recognition of contribution revenue to only the uncollected amounts whose receipt is deemed to be probable. Choice "d" is incorrect. Pica would not recognize the full amount of pledges as contribution revenue if some amounts are deemed to be uncollectible. CPA-01216 Type1 M/C 38. CPA-01216 ARE R03 #18 A-D Corr Register to View Answer PM#4 F 9-02 Page 62 A not-for-profit voluntary health and welfare organization received a $500,000 permanent endowment. The donor stipulated that the income must be used for a mental health program. The endowment fund reported $60,000 net decrease in market value and $30,000 investment income. The organization spent $45,000 on the mental health program during the year. What amount of change in temporarily restricted net assets should the organization report? a. b. c. d. $75,000 decrease. $15,000 decrease. $0 $425,000 increase. CPA-01216 Explanation Rule: Generally, losses on the investments of a donor-restricted endowment fund serve to reduce temporarily restricted net assets to the extent that donor-imposed temporary restrictions on net appreciation (cumulative losses minus gains) of the fund have not been met before the loss occurs. Any remaining loss reduces unrestricted net assets. Choice "c" is correct. The change in temporarily restricted net assets is comprised of the increase in temporarily restricted net assets related to investment earnings and the amounts released from temporary restrictions. Losses in excess of satisfaction of donor-restricted stipulations are treated as unrestricted as follows. Unrestricted Mental Health Program Investment Income Temporarily Restricted 30,000 Permanently Restricted Total 30,000 20 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Release restriction Expenses Subtotal 30,000 (45,000) (15,000) Investments Losses Beginning of year End of year (30,000) 0 0 (60,000) 0 (75,000) 0 0 0 0 (45,000) (15,000) 0 500,000 500,000 (60,000) 500,000 425,000 The decline in fair value of the assets of the endowment fund first reduce the temporarily restricted net assets and then reduce unrestricted net assets. Choice "a" is incorrect. The unrealized loss on the investment and the net operating loss associated with unrestricted activities are not combined and reported as temporarily restricted. Choice "b" is incorrect. The net loss in operations is not displayed as temporarily restricted. Choice "d" is incorrect. The net value of permanent and temporarily restricted net assets and unrestricted net assets are not displayed as temporarily restricted. CPA-01230 Type1 M/C A-D Corr Register to View Answer PM#9 F 9-02 39. CPA-01230 C01 #6 Page 59 Not-for-profit organizations are considered financially interrelated organizations in the event that one of the organizations: a. Is able to influence the operating and financial decisions of the other. b. Has an ongoing economic interest in the net assets of the other. c. Is both able to influence the operating and financial decisions of the other AND has an ongoing economic interest in the net assets of the other. d. Serves a broader geographic area that fully includes the area defined by mission of the interrelated organization. CPA-01230 Explanation Choice "c" is correct. In order for not-for-profit organizations to be financially interrelated as defined by FAS 136, their relationship must share both characteristics: one organization must be able to influence the operating and financial decisions of the other AND have an ongoing economic interest in the net assets of the other. Choice "a" is incorrect. Although the ability to influence operating and financial decisions is significant to determining if organizations are financially interrelated, the ability to influence must be coupled with an economic interest. Choice "b" is incorrect. Although the economic interest is significant to determining if organizations are financially interrelated, the economic interest must be coupled with the ability to influence operating and financial decisions of the other organization. Choice "d" is incorrect. Coincidence of coverage area is not relevant to the determination of financial interrelationship. CPA-01236 Type1 M/C A-D Corr Register to View Answer PM#10 F 9-02 40. CPA-01236 ARE R99 #2 (Adapted) Page 56 On July 1, 1998, Mission Goodworks, a religious organization, received property as a gift from a local corporation with the understanding that the building would be used principally for a purpose consistent with the organization's mission. How should Mission Goodworks record this gift on its December 31,1998 financial statement? a. Record the property as an increase in assets and revenue at the donor's basis. b. Record the property as an increase in assets and unrestricted net assets at its fair market value. 21 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 c. Record the property as an increase in assets on the Statement of Financial Position and as support on the Statement of Activities and measure the property at its fair value. d. Memorandum only. CPA-01236 Explanation Choice "c" is correct. Donated property is recorded at its fair market value and is recognized as support. Choice "a" is incorrect. Donated property should be recorded at its fair market value. Contributions are typically recorded as support, not revenue (exchange transactions). Choice "b" is incorrect. Donated property is recorded as support, not as a direct increase to net assets. Choice "d" is incorrect. Donated property must be recorded at fair market value. CPA-01237 Type1 M/C 41. CPA-01237 ARE R99 #3 A-D Corr Register to View Answer PM#11 F 9-02 Page 58 Altruistic University, a not-for-profit research university, conducts cancer research as part of its normal ongoing activities and regularly receives contributions to support these efforts. Experimental Pharmaceuticals Corporation, a large for profit corporation that markets drugs for cancer treatment, provides resources to Altruistic University to perform clinical trial research on an experimental drug to treat cancer. Resources are provided on the condition that Altruistic University comply with specific restrictions governing the manner in which the research is conducted and the frequency and the character of outcome reports. Altruistic University should account for the resources provided by Experimental Pharmaceuticals as: a. A contribution that increases permanently restricted net assets. b. A contribution that increases temporarily restricted net assets and is reclassified as an increase to unrestricted net assets upon satisfaction of research and reporting restrictions. c. A contribution that increases unrestricted net assets provided the restrictions are met in the current year and the university uniformly applies this method of recognition to all similar transactions. d. An exchange transaction that increases unrestricted net assets. CPA-01237 Explanation Choice "d" is correct. This is an exchange transaction, which increases unrestricted net assets. The results of the clinical trials performed by altruistic university have a commercial value to experimental pharmaceuticals corporation, resources have been provided in exchange for research results and do not constitute a contribution. Choice "a" is incorrect. The transaction represents a reciprocal transfer, or exchange, not a contribution. Choice "b" is incorrect. The transaction represents a reciprocal transfer, or exchange, not a contribution. Choice "c" is incorrect per the above explanation. CPA-01238 Type1 M/C 42. CPA-01238 ARE R99 #22 A-D Corr Register to View Answer PM#12 F 9-02 Page 51 Functional expenses recorded in the general ledger of ABC, a non-governmental not-for-profit organization, are as follows: Soliciting prospective members Printing membership benefits brochures Soliciting membership dues Maintaining donor list $45,000 30,000 25,000 10,000 What amount should ABC report as fund-raising expenses? a. $10,000 b. $35,000 22 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 c. $70,000 d. $110,000 CPA-01238 Explanation Choice "a" is correct. The expense categories used by not-for-profit organizations generally fall under two main headings: program services and support services. Program services relate to functional expenses directly related to the mission of the organization. Support services summarize the functional expenses related to general and administrative costs, costs of membership development, and fund-raising. Fundraising contemplates inducing potential donors to contribute to the entity. Membership activities involve seeking prospective members, ensuring current member satisfaction, etc. The $10,000 cost incurred to maintain a donor list for contributions is the only fund-raising expense listed. CPA-01243 Type1 M/C 43. CPA-01243 ARE R99 #23 A-D Corr Register to View Answer PM#13 F 9-02 Page 55 Famous, a non-governmental not-for-profit art museum, has elected not to capitalize its permanent collections. In 1998 a bronze statue was stolen. The statue was not recovered and insurance proceeds of $35,000 were paid to Famous in 1999. This transaction would be reported in: I. The statement of activities as permanently restricted revenues. II. The statement of cash flows as cash flows from investing activities. a. b. c. d. I only. II only. Both I and II. Neither I nor II. CPA-01243 Explanation Choice "b" is correct. Investing activities in the statement of cash flows should include proceeds from the sale of long lived assets or insurance proceeds associated with the loss of long lived assets. Entities that do not capitalize their permanent collections display insurance proceeds from lost, stolen or damaged items on the statement of activities in an appropriate change in net asset classification separate from revenues, expenses, gains, and losses. CPA-01248 Type1 M/C 44. CPA-01248 ARE R97 #15 A-D Corr Register to View Answer PM#14 F 9-02 Page 56 Child Care Centers, Inc., a not-for-profit organization, receives revenue from various sources during the year to support its day care centers. The following cash amounts were received during 1996. - $2,000 restricted by the donor to be used for meals for the children. $1,500 received for subscriptions to a monthly child care magazine with a fair market value to subscribers of $1,000. $10,000 to be used only upon completion of a new playroom that was 75% complete at December 31, 1996. What amount should Child Care Centers record as contribution revenue in its 1996 Statement of Activities? a. b. c. d. $2,000 $2,500 $10,000 $11,000 CPA-01248 Explanation Choice "b" is correct. Contributions to a non-profit include transactions which are unconditional (not requiring a future event to occur), non-reciprocal, voluntary, and not of an ownership investment. Contribution revenue for 1996 includes the $2,000 to be used for meals and $500 above the FMV of the 23 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 subscriptions. The $10,000 contribution requires a future event to take place-completion of the playroom and is, thus, not included. Choice "a" is incorrect. Contributions to a non-profit include transactions which are unconditional (not requiring a future event to occur), non-reciprocal, voluntary, and not of an ownership investment. Contribution revenue for 1996 includes the $2,000 to be used for meals plus some other amount. Choice "c" is incorrect. The $10,000 contribution requires a future event to take place-completion of the playroom and is, thus, not considered a contribution in 1996. Choice "d" is incorrect. The $10,000 contribution requires a future event to take place-completion of the playroom and is, thus, not considered a contribution in 1996. CPA-01249 Type1 M/C 45. CPA-01249 ARE R97 #16 A-D Corr Register to View Answer PM#15 F 9-02 Page 59 A not-for-profit organization receives $150 from a donor. The donor receives two tickets to a theater show and an acknowledgment in the theater program. The tickets have a fair market value of $100. What amount is recorded as contribution revenue? a. b. c. d. $0 $50 $100 $150 CPA-01249 Explanation Choice "b" is correct. Contributions to a non-profit include transactions which are unconditional (not requiring a future event to occur), non-reciprocal, voluntary, and not of an ownership investment. The FMV of the theater tickets (the exchange part of the transaction) must not be considered in determining the amount of the contribution revenue. The $50 above the FMV of the tickets is contribution revenue. Choice "a" is incorrect. Contributions to a non-profit include transactions which are unconditional (not requiring a future event to occur), non-reciprocal, voluntary, and not of an ownership investment. Part of the $150 from the donor can be considered contribution revenue meeting these criteria. Choice "c" is incorrect. Contributions to a non-profit include transactions which are unconditional (not requiring a future event to occur), non-reciprocal, voluntary, and not of an ownership investment. The $100 from the donor is an exchange transaction, as the donor received theater tickets with a FMV of $100. Choice "d" is incorrect. Contributions to a non-profit include transactions which are unconditional (not requiring a future event to occur), non-reciprocal, voluntary, and not of an ownership investment. The $150 from the donor includes both an exchange transaction and contribution revenue. CPA-01253 Type1 M/C 46. CPA-01253 ARE R97 #17 A-D Corr Register to View Answer PM#16 F 9-02 Page 47 Which of the following classifications is required for reporting of expenses by all not-for-profit organizations? a. Natural classification in the statement of activities or notes to the financial statements. b. Functional classification in the statement of activities or notes to the financial statements. c. Functional classification in the statement of activities and natural classification in a matrix format in a separate statement. d. Functional classification in the of statement activities and natural classification in the notes to the financial statements. CPA-01253 Explanation 24 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Choice "b" is correct. A not-for-profit organization needs to report its expenses in the statement of activities by their functional classification (program classification, supporting activities, fund-raising, etc.). This method helps donors and others in assessing an organization's service efforts. Choice "a" is incorrect. There is no requirement that the not-for-profit organization must report its expenses in a natural classification, except for voluntary health and welfare organizations. Choice "c" is incorrect. A not-for-profit organization needs to report its expenses in the statement of activities by their functional classification (program classification, supporting activities, fund-raising, etc.). There is no requirement that the organization must also report the expenses in a natural classification in a separate statement, except for voluntary health and welfare organizations. Choice "d" is incorrect. A not-for-profit organization needs to report its expenses in the statement of activities by their functional classification (program classification, supporting activities, fund-raising, etc.). There is no requirement that the organization must also report the expenses in a natural classification in a separate statement, except for voluntary health and welfare organizations. CPA-01261 Type1 M/C 47. CPA-01261 ARE R96 #6 A-D Corr Register to View Answer PM#19 F 9-02 Page 55 A storm damaged the roof of a new building owned by K-9 Shelters, a not-for-profit organization. A supporter of K-9, a professional roofer, repaired the roof at no charge. In K-9's statement of activities, the damage and repair of the roof should: a. b. c. d. Be reported by note disclosure only. Be reported as an increase in both expenses and contributions. Be reported as an increase in both net assets and contributions. Not be reported CPA-01261 Explanation Choice "b" is correct. Donated services are recognized if the services received either (1) create or enhance non-financial assets, or (2) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Both of these conditions are met so the following entry would be made to record the damage and repair of the roof: Expense Contributions CPA-01268 XXX XXX Type1 M/C 48. CPA-01268 ARE R96 #11 A-D Corr Register to View Answer PM#20 F 9-02 Page 43 In 1995, Gamma, a not-for-profit organization, deposited at a bank $1,000,000 given to it by a donor to purchase endowment securities. The securities were purchased January 2, 1996. At December 31, 1995, the bank recorded $2,000 interest on the deposit. In accordance with the bequest, this $2,000 was used to finance ongoing program expenses in March 1996. At December 31, 1995, what amount of the bank balance should be included as current assets in Gamma's classified balance sheet? a. b. c. d. $0 $2,000 $1,000,000 $1,002,000 CPA-01268 Explanation Choice "b" is correct. Since the external donor restricted the $1,000,000 gift for the purchase of endowment securities, that deposit is restricted cash and a non-current asset. The earnings on the endowment is designated by the external donor for ongoing program expense. As such, it is unrestricted cash and a current asset. 25 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Choice "a" is incorrect. Some portion of the cash is for ongoing program services. As such, it can be classified as unrestricted cash and a current asset. Choice "c" is incorrect. Since the external donor restricted the $1,000,000 gift for the purchase of endowment securities, that deposit is restricted cash and a non-current asset. Choice "d" is incorrect. Since the external donor restricted the $1,000,000 gift for the purchase of endowment securities, that deposit is restricted cash and a non-current asset. The earnings on the endowment is designated by the external donor for ongoing program expense. As such, it is unrestricted cash and a current asset. CPA-01273 Type1 M/C A-D 49. CPA-01273 ARE Nov 95 #74 Corr Register to View Answer PM#21 F 9-02 Page 46 A large not-for-profit organization's statement of activities should report the net change for net assets that are: Unrestricted a. Yes b. Yes c. No d. No Permanently restricted Yes No No Yes CPA-01273 Explanation Choice "a" is correct. A not-for-profit organization prepares a Statement of Activities that presents changes in unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. CPA-01276 Type1 M/C A-D 50. CPA-01276 ARE Nov 95 #75 Corr Register to View Answer PM#22 F 9-02 Page 69 Which of the following should normally be considered ongoing or central transactions for a not-for-profit hospital? I. Room and board fees from patients. II. Recovery room fees. a. b. c. d. Neither I nor II. Both I and II. II only. I only. CPA-01276 Explanation Choice "b" is correct. Revenues and expenses for a non-profit hospital arise from "activities associated with the provision of health care services, which constitute the ongoing major or central operations of providers of health care services." Both room and board fees from patients and recovery room fees are activities, which are considered patient service revenues. CPA-01280 Type1 M/C A-D 51. CPA-01280 ARE May 95 #58 Corr Register to View Answer PM#23 F 9-02 Page 46 The Jones family lost its home in a fire. On December 25, 1994, a philanthropist sent money to the Amer Benevolent Society to purchase furniture for the Jones family. During January 1995, Amer purchased this furniture for the Jones family. Amer, a not-for-profit organization, elected early adoption of FASB Statement No. 116, Accounting for Contributions Received and Contributions Made. How should Amer report the receipt of the money in its 1994 financial statements? 26 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 a. b. c. d. As an unrestricted contribution. As a temporarily restricted contribution. As a permanently restricted contribution. As a liability. CPA-01280 Explanation Choice "d" is correct. The Amer Benevolent Society received a donation from a philanthropist for the benefit of a specific beneficiary and the Amer Benevolent Society has no variance power (discretion) relative to the use of the contribution. Receipt of this cash is not a contribution received. Choice "a" is incorrect. The contribution received is subject to a specific donor-imposed restriction and is not unrestricted. Choice "b" is incorrect. Although the Amer Benevolent Society received a restricted contribution whose restriction can be satisfied by the purchase of furniture, a temporary restriction, the Society has no variance power over the resources and would therefore account for the transaction as a liability. Choice "c" is incorrect. Although the contribution received is subject to a restriction, the restriction can be satisfied by the Amer Benevolent Society by the expenditure of the contribution. The restriction is not permanent, it is temporary. CPA-01283 Type1 M/C A-D 52. CPA-01283 ARE May 95 #59 Corr Register to View Answer PM#24 F 9-02 Page 55 The Pel Museum, a not-for-profit organization, elected early adoption of FASB Statement No. 116, Accounting for Contributions Received and Contributions Made. If Pel received a contribution of historical artifacts, it need not recognize the contribution if the artifacts are to be sold and the proceeds used to: a. b. c. d. Support general museum activities. Acquire other items for collections. Repair existing collections. Purchase buildings to house collections. CPA-01283 Explanation Choice "b" is correct. An entity need not recognize contributions of works of art, historical treasures, and similar assets if the donated items are added to collections that meet all of the following conditions: 1. Are held for public exhibition, education, or research in furtherance of public service rather than financial gain. 2. Are protected, kept unencumbered, cared for, and preserved. 3. Are subject to an organizational policy that requires the proceeds from sale of collection items to be used to acquire other items for collections. CPA-01290 Type1 M/C A-D 53. CPA-01290 ARE Nov 94 #26 Corr Register to View Answer PM#26 F 9-02 Page 47 Cancer Educators, a not-for-profit organization, incurred costs of $10,000 when it combined program functions with fund-raising functions. Which of the following cost allocations might Cancer report in its statement of activities? a. b. c. d. Program services $0 $0 $6,000 $10,000 CPA-01290 Fund raising $0 $6,000 $4,000 $0 General services $10,000 $4,000 $0 $0 Explanation 27 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Choice "c" is correct. The three functional classifications for expenses incurred by a non-profit organization are: program services, management and general costs, and fund-raising and other supporting services. When common costs are incurred, they should be allocated to the appropriate classifications. Since Cancer Educators' $10,000 common costs were for program functions and fundraising functions, the costs should be allocated to those two classifications only. Choice "a" is incorrect. No part of the $10,000 common costs was for general services. Choice "b" is incorrect. Part of the $10,000 relates to program services and must be allocated. Choice "d" is incorrect. Part of the $10,000 relates to fund-raising services and must be allocated. CPA-01292 Type1 M/C A-D 54. CPA-01292 ARE Nov 94 #27 Corr Register to View Answer PM#27 F 9-02 Page 55 Lea Meditators, a not-for-profit religious organization, elected early adoption of FASB Statement No. 116, Accounting for Contributions Received and Contributions Made. A storm broke glass windows in Lea's building. A member of Lea's congregation, a professional glazier, replaced the windows at no charge. In Lea's statement of activities, the breakage and replacement of the windows should: a. b. c. d. Not be reported. Be reported by note disclosure only. Be reported as an increase in both expenses and contributions. Be reported as an increase in both net assets and contributions. CPA-01292 Explanation Choice "c" is the correct answer. Contributions of services are recognized if the services received either (1) create or enhance non-financial assets, or (2) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Both of these conditions are met so the following entry would be made to record the breakage and replacement of the windows: Expense Contributions CPA-01294 XXX XXX Type1 M/C A-D 55. CPA-01294 ARE Nov 94 #28 Corr Register to View Answer PM#28 F 9-02 Page 70 Which of the following normally would be included in other operating revenues of a hospital? Revenues from educational programs a. No b. No c. Yes d. Yes Unrestricted gifts No Yes No Yes CPA-01294 Explanation Choice "c" is correct. The three revenue classifications for a hospital are patient services revenues, other operating revenues, and non-operating revenues. Other operating revenues are those generated by operations other than patient services. Revenues from educational programs would be classified as other operating revenues while unrestricted gifts would be classified as non-operating revenues. CPA-01297 Type1 M/C A-D 56. CPA-01297 ARE Nov 94 #29 Corr Register to View Answer PM#29 F 9-02 Page 42 28 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 In a Statement of Activities of the People's Environmental Protection Association, a voluntary community organization, depreciation expense should: a. b. c. d. Not be included. Be included as an element of support. Be included as an element of other changes in fund balances. Be included as an element of expense. CPA-01297 Explanation Choice "d" is correct. Non-profit organizations record depreciation on fixed assets. Depreciation is reported as an element of expense in the organization's Statement of Activities. CPA-01298 Type1 M/C A-D 57. CPA-01298 ARE Nov 94 #30 Corr Register to View Answer PM#30 F 9-02 Page 42 FASB Statement No. 117, Financial Statements of Not-for-Profit Organizations, focuses on: a. b. c. d. Basic information for the organization as a whole. Standardization of funds nomenclature. Inherent differences of not-for-profit organizations that impact reporting presentations. Distinctions between current fund and non-current fund presentations. CPA-01298 Explanation Choice "a" is correct. SFAS #117 primarily focuses on basic information for the organization as a whole. The statement establishes standards for general-purpose external financial statements provided by a notfor-profit organization. CPA-01300 Type1 M/C A-D 58. CPA-01300 ARE May 94 #59 Corr Register to View Answer PM#31 F 9-02 Page 65 Which fund may account for a university's internally designated fund, the income from which will be used for a specified purpose? a. b. c. d. Endowment fund. Term endowment fund. Quasi-endowment fund. Restricted current fund. CPA-01300 Explanation Choice "c" is correct. Quasi-endowment funds account for assets that have been internally designated by the institution for a specific purpose. Choice "a" is incorrect. Endowment funds are funds for which outside donors have stipulated that the principal is to be maintained intact in perpetuity. Choice "b" is incorrect. Term endowment funds are funds for which outside donors have stipulated that the principal is to be maintained intact for a specified term or until the happening of some event. Choice "d" is incorrect. The restricted current fund accounts for current assets that are outside donorrestricted for a specific purpose. CPA-01301 Type1 M/C A-D 59. CPA-01301 ARE May 94 #60 Corr Register to View Answer PM#32 F 9-02 Page 70 Valley's community hospital normally includes proceeds from sale of cafeteria meals in: a. Deductions from dietary service expenses. b. Ancillary service revenues. c. Patient service revenues. 29 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 d. Other revenues. CPA-01301 Explanation Choice "d" is correct. Cafeteria revenue of a hospital is classified as other revenues. Choice "a" is incorrect. Cafeteria revenue is not offset against dietary service expenses. Choice "b" is incorrect. There is no such category as ancillary service revenue. Choice "c" is incorrect. Patient service revenue is the revenue earned for the services rendered to the patients. It does not include cafeteria revenue. CPA-01305 Type1 M/C A-D Corr Register to View Answer PM#33 F 9-02 60. CPA-01305 PII May 93 #21 Page 44 In 1991, Citizens' Health, a voluntary health and welfare organization, received a bequest of a $200,000 certificate of deposit maturing in 1992. The testator's only stipulations were that this certificate be held until maturity and that the interest revenue be used to finance salaries for a preschool program. Interest revenue for 1992 was $16,000. When the certificate matured and was redeemed, the board of trustees adopted a formal resolution designating $40,000 of the proceeds for the future purchase of equipment for the preschool program. What amount should Citizen report in its 1992 year-end balance sheet as unrestricted net assets designated for the preschool program? a. b. c. d. $0 $16,000 $40,000 $56,000 CPA-01305 Explanation Choice "c" is correct. In 1992 when the $200,000 certificate of deposit matures, it is transferred from the internal endowment fund (temporarily restricted assets) to the internal current unrestricted fund (unrestricted net assets). Of the $200,000 proceeds, $40,000 is board-designated for the preschool program, the remaining $160,000 is undesignated. The $16,000 interest revenue for 1992 is donorrestricted to finance salaries for a preschool program; therefore, it is recorded in the internal current restricted fund (unrestricted net assets) as revenue. The 1992 year-end balance sheet should report net assets designated for the preschool program of $40,000. Choice "a" is incorrect. Part of the proceeds of the certificate of deposit is board-designated and therefore would appear in the balance sheet as such. Choice "b" is incorrect. The $16,000 interest revenue is donor-restricted. It is recorded in the internal current restricted fund. Choice "d" is incorrect. Only part of the proceeds of the certificate of deposit is board-designated and therefore would appear in the balance sheet as such. The interest revenue is donor-restricted. As such, it is recorded as revenue in internal current restricted funds. CPA-01306 Type1 M/C A-D Corr Register to View Answer PM#34 F 9-02 61. CPA-01306 PII May 93 #24 Page 51 The following expenditures were made by Green Services, a society for the protection of the environment: Printing of the annual report Unsolicited merchandise sent to encourage contributions Cost of an audit performed by a CPA firm $12,000 25,000 3,000 What amount should be classified as fund-raising costs in the society's activity statement? a. $37,000 b. $28,000 c. $25,000 30 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 d. $0 CPA-01306 Explanation Choice "c" is correct. Fund-raising expenses are incurred to induce contributions. Of the ones listed, only the unsolicited merchandise sent to encourage contributions qualifies as fund-raising. The printing of the annual report and the cost of an audit would be reported under Supporting services-management and general expenses. CPA-01308 Type1 M/C A-D Corr Register to View Answer PM#35 F 9-02 62. CPA-01308 PII May 93 #25 Page 43 In addition to the statement of activities, which of the following financial statements should not-for-profit hospitals prepare? a. b. c. d. Balance sheet. Balance sheet, and statement of changes in financial position. Balance sheet and statement of cash flows. Statement of funds, statement of revenues and expenses, and statement of cash flows. CPA-01308 Explanation Choice "c" is correct. The required financial statements for a not-for-profit hospital are a balance sheet, a statement of activities, and a statement of cash flows. Choice "a" is incorrect. A statement of cash flows is also required. The income statement is formally called a statement of activities. Choice "b" is incorrect. A statement of cash flows, not a statement of changes in financial position, is required. The income statement is formally called a statement of activities. Choice "d" is incorrect. A balance sheet, not a statement of funds, is required. CPA-01310 Type1 M/C A-D Corr Register to View Answer PM#36 F 9-02 63. CPA-01310 PII May 93 #27 Page 44 At the end of the year, Cramer University's held assets of $15,000,000 and $9,000,000 of liabilities (including deferred revenues of $300,000). What is Cramer's net assets balance? a. b. c. d. $5,700,000 $6,000,000 $6,300,000 $15,000,000 CPA-01310 Explanation Choice "b" is correct. The net assets balance of the university equals its assets minus its liabilities (including deferred revenues). $15,000,000 - $9,000,000 = $6,000,000. Deferred revenues are not a component of net assets. CPA-01320 Type1 M/C A-D Corr Register to View Answer PM#37 F 9-02 64. CPA-01320 PII May 93 #29 Page 44 In hospital accounting, restricted funds, both permanent and temporary, are: a. Not available unless the board of directors remove the restrictions. b. Restricted as to use only for board-designated purposes. c. Not available for current operating use; however, the income generated by the funds is available for current operating use. d. Restricted as to use by the donor, grantor, or other source of the resources. 31 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 CPA-01320 Explanation Choice "d" is correct. Restricted funds are restricted as to use by the donor, grantor, or other source of the resources. They are externally restricted funds. Choice "a" is incorrect. Restricted funds are donor, not board-designated. Therefore, the board can not remove the restrictions. Choice "b" is incorrect. Restricted funds are donor, not board-designated. Board-designated funds are part of unrestricted funds. Choice "c" is incorrect. The principal and income of restricted funds may be available for current operating use if so specified by the outside donor. CPA-01321 Type1 M/C A-D Corr Register to View Answer PM#38 F 9-02 65. CPA-01321 PII May 93 #30 Page 54 Super Seniors is a not-for-profit organization that provides services to senior citizens. Super employs a full-time staff of 10 people at an annual cost of $150,000. In addition, two volunteers work as part-time secretaries replacing last year's full-time secretary who earned $10,000. Services performed by other volunteers for special events had an estimated value of $15,000. These volunteers were employees of local businesses and they received small-value items for their participation. What amount should Super report for salary and wage expenses related to the above items? a. b. c. d. $150,000 $160,000 $165,000 $175,000 CPA-01321 Explanation Choice "b" is correct. The value of donated services should be recorded as both a contribution and an expense if the services performed are a normal part of the program or supporting services and would otherwise be performed by salaried personnel. Clearly the two volunteers who replaced the secretary (value $10,000) would qualify under these criteria. The services performed by the other volunteers for special events would not qualify since they are not a normal part of the program and would not otherwise be performed by salaried personnel. Total salary and wage expense equals $150,000 paid staff plus $10,000 donated services = $160,000. CPA-01322 Type1 M/C A-D Corr Register to View Answer PM#39 F 9-02 66. CPA-01322 PII May 93 #33 Page 67 For the fall semester of 1992, Ames University assessed its students $3,000,000 for tuition and fees. The net amount realized was only $2,500,000 because scholarships of $400,000 were granted to students, and tuition remissions of $100,000 were allowed to faculty members' children attending Ames. What amount should Ames report for the period as unrestricted current fund gross revenues from tuition and fees? a. b. c. d. $2,500,000 $2,600,000 $2,900,000 $3,000,000 CPA-01322 Explanation Choice "d" is correct. Revenues from tuition and fees are reported at the gross amount. Only refunds are netted against the revenue. Scholarships and tuition remissions are shown separately as expenditures. The journal entry would be: Cash Expenses - scholarships 2,500,000 400,000 32 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Expenses - tuition remission Revenues - tuition and fees CPA-01323 Type1 M/C 100,000 3,000,000 A-D Corr Register to View Answer PM#40 F 9-02 67. CPA-01323 PII May 93 #35 Page 56 The League, a not-for-profit organization, received the following pledges: Unrestricted Restricted for capital additions $200,000 150,000 All pledges are legally enforceable; however, the League's experience indicates that 10% of all pledges prove to be uncollectible. What amount should the League report as pledges receivable, net of any required allowance account? a. b. c. d. $135,000 $180,000 $315,000 $350,000 CPA-01323 Explanation Choice "c" is correct. In a not-for-profit organization, if the pledges are legally enforceable, they are recorded in the accounts. Net pledges receivable are gross pledges receivable ($350,000) less allowance for uncollectible (10% $350,000), or $315,000. The unrestricted pledges, net of allowance, are credited to Support-Private gifts, while the restricted pledges, net of allowance, are credited to Restricted Net Assets. CPA-01324 Type1 M/C A-D Corr Register to View Answer PM#41 F 9-02 68. CPA-01324 PII May 93 #36 Page 63 In the balance sheet of a not-for-profit hospital, marketable equity securities should be reported at: a. b. c. d. Fair value with gains and losses reported in the statement of activities. Fair value with gains and losses reported as a component of net assets. The lower of aggregate cost or market in separate portfolios for current and non-current assets. Cost, with no valuation for declines in market value, and in separate portfolios for unrestricted and restricted assets. CPA-01324 Explanation Choice "a" is correct. Marketable equity securities with readily determinable fair values and all investments in debt securities are measured at fair value in the statement of financial position. Gains and losses on investments are reported in the statement of activities as increases or decreases in unrestricted net assets unless their use is temporarily or permanently restricted by explicit donor stipulations or law. Choice "b" is incorrect. Marketable equity securities with readily determinable fair values and all investments in debt securities are measured at fair value in the statement of financial position. Gains and losses on investments are reported in the statement of activities as increases or decreases in unrestricted net assets unless their use is temporarily or permanently restricted by explicit donor stipulations or law. Choice "c" is incorrect. Marketable equity securities with readily determinable fair values and all investments in debt securities are measured at fair value in the statement of financial position. Choice "d" is incorrect. Marketable equity securities with readily determinable fair values and all investments in debt securities are measured at fair value in the statement of financial position. CPA-01326 Type1 M/C A-D Corr Register to View Answer PM#42 F 9-02 33 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 69. CPA-01326 PII May 93 #38 Page 63 Midtown Church received a donation of marketable equity securities from a church member. The securities had appreciated in value after they were purchased by the donor, and they continued to appreciate through the end of Midtown's fiscal year. At what amount should Midtown report its investment in marketable equity securities in its year-end balance sheet? a. b. c. d. Donor's cost. Market value at the date of receipt. Market value at the balance sheet date. Market value at either the date of receipt or the balance-sheet date. CPA-01326 Explanation Choice "c" is correct. In the case of non-profit organizations such as churches, marketable equity securities are reported at market value as of the balance sheet date. Therefore, Midtown Church would report the investment at market value at the date of the balance sheet date. The marketable equity securities are reported at market value. CPA-01328 Type1 M/C A-D Corr Register to View Answer PM#43 F 9-02 70. CPA-01328 PII May 93 #40 Page 63 Maple Church has cash available for investments in several different accounting funds. Maple's policy is to maximize its financial resources. How may Maple pool its investments? a. Maple may not pool its investments. b. Maple may pool all investments, but must equitably allocate realized and unrealized gains and losses among participating funds. c. Maple may pool only unrestricted investments, but must equitably allocate realized and unrealized gains and losses among participating funds. d. Maple may pool only restricted investments, but must equitably allocate realized and unrealized gains and losses among participating funds. CPA-01328 Explanation Choice "b" is correct. Non-profit organizations such as churches may pool all investments of various funds, but must equitably allocate realized and unrealized gains and losses among the participating funds. CPA-01329 Type1 M/C A-D Corr Register to View Answer PM#44 F 9-02 71. CPA-01329 Th May 93 #60 Page 47 When a non-profit organization combines fund-raising efforts with educational materials or program services, the total combined costs incurred are: a. b. c. d. Reported as program services expenses. Allocated between fund-raising and program services expenses using an appropriate allocation basis. Reported as fund-raising costs. Reported as management and general expenses. CPA-01329 Explanation Choice "b" is correct. An allocation, using an appropriate allocation basis, must be made between the fund-raising activities and educational materials or program services where the costs are combined. CPA-04654 Type1 M/C A-D Corr Register to View Answer PM#45 F 9-02 72. CPA-04654 Released 2005 Page 48 An unrestricted cash contribution should be reported in a nongovernmental not-for-profit organization's statement of cash flows as an inflow from: 34 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 a. b. c. d. Operating activities. Investing activities. Financing activities. Capital and related financing activities. CPA-04654 Explanation Choice "a" is correct. Cash flows from Operating Activities in a non governmental not-for-profit organization include applicable agency transactions; including unrestricted cash contributions, program income, and interest income or dividend income from investments. Choices "b", "c", and "d" are incorrect, per above. CPA-04655 Type1 M/C A-D Corr Register to View Answer PM#46 F 9-02 73. CPA-04655 Released 2005 Page 53 Community Enhancers, a nongovernmental not-for-profit organization, received the following pledges: Unrestricted Restricted for capital additions $400,000 300,000 All pledges are legally enforceable. However, Community's experience indicates that 5% of all pledges prove to be uncollectible. What amount should Community report as pledges receivable, net of any required allowance account? a. b. c. d. $700,000 $665,000 $380,000 $285,000 CPA-04655 Explanation Choice "b" is correct. An allowance for uncollectible pledges should be recorded in accordance with commercial accounting principles for accounts receivable. Unrestricted pledges Restricted TOTAL PLEDGES Less allowance (5% x 700,000) Net Pledges Receivable CPA-04674 Type1 M/C A-D $400,000 300,000 700,000 (35,000) $665,000 Corr Register to View Answer PM#47 F 9-02 74. CPA-04674 Released 2005 Page 49 A not-for-profit voluntary health and welfare organization should report a contribution for the construction of a new building as cash flows from which of the following in the statement of cash flows? a. b. c. d. Operating activities. Financing activities. Capital financing activities. Investing activities. CPA-04674 Explanation Choice "b" is correct. Cash received with donor-imposed restriction limiting its use to long-term purposes (such as construction of a new building) is displayed as a financing activity on the statement of cash flows of a not-for-profit organization. Choice "a" is incorrect. Cash received with donor imposed restrictions limiting its use to long term purposes is a financing activity, not an operating activity, on the statement of cash flows of a not-for-profit 35 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 organization. Operating activities include cash received for unrestricted purposes or used in the central on going activities of the organization. Choice "c" is incorrect. This is a distracter. There is no classification in the statement of cash flows used for not for profit organizations entitled "Capital financing activities." This classification is used in the statement of cash flows prepared for a proprietary fund of a government. Choice "d" is incorrect. Cash received with donor imposed restrictions limiting its use to long term purposes is a financing activity, not an investing activity, on the statement of cash flows of a not-for-profit organization. Investing activities include sources of cash from the sale of long lived assets or uses of cash associated with the acquisition of long lived assets. CPA-04688 Type1 M/C A-D Corr Register to View Answer PM#48 F 9-02 75. CPA-04688 Released 2005 Page 69 Terry, an auditor, is performing test work for a not-for-profit hospital. Listed below are components of the statement of operations: Revenue relating to charity care Bad debt expense Net assets released from restrictions used for operations Other revenue Net patient service revenue (includes revenue related to charity care) $100,000 70,000 50,000 80,000 500,000 What amount would be reported as unrestricted revenues, gains, and other support on the statement of operations? a. b. c. d. $460,000 $530,000 $580,000 $630,000 CPA-04688 Explanation Choice "b" is correct. The amount reported as unrestricted revenues, gains and other support on the statement of operations of a not-for-profit hospital would include all income earned by the hospital and any amounts released from restriction. Charity care, those health care services provided but never expected to result in cash flows to the hospital, are not recorded as receivable or as revenue. Charity care is not recognized on the face of the financial statements but is disclosed. Revenues, gains and other support is computed as follows: Net patient service revenue (including charity care) Less: Charity care Plus: Other revenue Plus: Net assets released from restrictions used for used for operations Unrestricted revenues, gains and other support $500,000 (100,000) 80,000 50,000 $530,000 Choice "a" is incorrect. The amount represented by this selection ($460,000) is the amount properly recognized as total revenues, gains and other support ($530,000) net of bad debt expense of $70,000. Bad debt expense is recognized as an expense, not as a contra revenue. Choice "c" is incorrect. The amount represented by this selection ($580,000) is the total patient service revenue including charity care ($500,000) and other revenue (80,000), exclusive of net assets released from restrictions. This amount does not represent the total to be recognized as revenues, gains and other support. Choice "d" is incorrect. The amount represented by this selection ($630,000) is the amount properly recognized as total revenues, gains and other support ($530,000) plus charity care of $100,000. Charity care is improperly included and should not be recognized. 36 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 CPA-04695 Type1 M/C A-D Corr Register to View Answer PM#49 F 9-02 76. CPA-04695 Released 2005 Page 69 Hospital, Inc., a not-for-profit organization with no governmental affiliation, reported the following in its accounts for the current year ended December 31: Gross patient service revenue from all services provided at the established billing rates of the hospital (note that this figure includes charity care of $25,000) Provision for bad debts Difference between established billing rates and fees negotiated with third-party payors (contractual adjustments) $775,000 15,000 70,000 What amount would the hospital report as net patient service revenue in its statement of operations for the current year ended December 31? a. b. c. d. $680,000 $690,000 $705,000 $735,000 CPA-04695 Explanation Choice "a" is correct. Hospital, Inc. would report net patient revenue in an amount equal to its gross patient service revenue net of both charity care and the difference between established billing rates and fees negotiated with third party payors (sometimes called contractual adjustments). Net patient revenue for Hospital, Inc for the current year ended December 31, is computed as follows: Gross patient revenues including charity care of $25,000 Less: Charity care Less: Contractual adjustments Net patient service revenue $775,000 (25,000) (70,000) $680,000 Choice "b" is incorrect. The amount represented by this selection ($690,000) is the amount properly recognized as net patient service revenue ($680,000) plus charity care of $25,000 and net of bad debt expense of $15,000 given in the fact pattern. Charity care is improperly included and should not be recognized and bad debt expense is recognized as an expense, not a contra revenue. Choice "c" is incorrect. The amount represented by this selection ($705,000) is the amount properly recognized as net patient service revenue ($680,000) plus charity care of $25,000. Charity care is improperly included and should not be recognized. Choice "d" is incorrect. The amount represented by this selection ($735,000) is the amount properly recognized as net patient service revenue ($680,000) plus contractual adjustments of $70,000 and net of bad debt expense of $15,000 given in the fact pattern. Contractual adjustments are improperly included and should not be recognized and bad debt expense is recognized as an expense, not a contra revenue. CPA-05198 Type1 M/C A-D Corr Register to View Answer PM#50 F 9-02 77. CPA-05198 Released 2006 Page 52 During the year, Private College received the following: An unrestricted $50,000 pledge to be paid the following year. A $25,000 cash gift restricted for scholarships. A notice from a recent graduate that the college is named as a beneficiary of $10,000 in that graduate's will. What amount of contribution revenue should Private College report in its statement of activities? a. $25,000 b. $35,000 c. $75,000 37 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 d. $85,000 CPA-05198 Explanation Choice "c" is correct. Total contribution revenue is $75,000. The $50,000 unrestricted pledge is reported as contribution revenue on the statement of activities, even though it is to be paid (and collected) in the following year. The $25,000 cash gift is reported as contribution revenue on the statement of activities, even though it is restricted (it is recorded as restricted revenue). The "notice" from a recent graduate that the college is named as a beneficiary is not definite enough for the recording of revenue (the recent graduate may live a long time and may change his or her will at any time). Total contribution revenue is thus $75,000. Choice "a" is incorrect. The $50,000 unrestricted pledge is reported as contribution revenue on the statement of activities, not just the $25,000 cash gift. Choice "b" is incorrect. The $25,000 restricted gift is an element of recognized contribution revenue on the statement of activities, but the $10,000 "notice" is not. Choice "d" is incorrect. The $10,000 "notice" is not reported as contribution revenue on the statement of activities, although the other two amounts related to actual receipts or receivables are recognized. CPA-05203 Type1 M/C A-D Corr Register to View Answer PM#51 F 9-02 78. CPA-05203 Released 2006 Page 65 A voluntary health and welfare organization received a $700,000 permanent endowment during the year. The donor stipulated that the income and investment appreciation be used to maintain its senior center. The endowment fund reported a net investment appreciation of $80,000 and investment income of $50,000. The organization spent $60,000 to maintain its senior center during the year. What amount of change in temporarily restricted net assets should the organization report? a. b. c. d. $50,000 $70,000 $130,000 $770,000 CPA-05203 Explanation Choice "b" is correct. In this question, the donor stipulated that the income ($50,000) and the investment appreciation ($80,000) be used in maintain the senior center. Both the income and the investment appreciation represent increases in temporarily restricted net assets (total of $130,000). The actual $60,000 spent represents a decrease in temporarily restricted net assets. Thus, the total change is a $70,000 increase. Choice "a" is incorrect. The change in temporarily restricted net assets is not only the investment income. Choice "c" is incorrect. The change in temporarily restricted net assets is not just the income and investment appreciation. The $60,000 must be taken into account also. Choice "d" is incorrect. The $700,000 endowment is a permanently restricted net asset, not a temporarily restricted net asset. CPA-05209 Type1 M/C A-D Corr Register to View Answer PM#52 F 9-02 79. CPA-05209 Released 2006 Page 56 During the current year, a voluntary health and welfare organization receives $300,000 in unrestricted pledges. Of this amount, $100,000 has been designated by donors for use next year to support operations. If 15% of the unrestricted pledges are expected to be uncollectible, what amount of unrestricted support should the organization recognize in its current-year financial statements? a. $300,000 b. $270,000 38 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 c. $200,000 d. $170,000 CPA-05209 Explanation Choice "d" is correct. The unrestricted support, net of expected uncollectibles, recognized in the current year financial statements is $170,000. Although $300,000 was pledged, 15% are anticipated to be uncollectible and $100,000 is effectively temporarily restricted by the time restriction limiting the use of the funds to the following year. The $200,000 ($300,000 - $100,000) of unrestricted current year pledges, reduced by $30,000 (15% of $200,000) is $170,000 ($200,000 - $30,000). Choice "a" is incorrect. This answer incorrectly includes the entire amount pledged and ignores the $30,000 estimate of uncollectibility. Choice "b" is incorrect. This answer incorrectly includes the entire amount pledged for current year recognition as unrestricted but does subtract the $30,000 estimate of uncollectibility. Choice "c" is incorrect. This answer includes only the unrestricted pledges but does subtract the estimate of uncollectibility. CPA-05230 Type1 M/C A-D Corr Register to View Answer PM#53 F 9-02 80. CPA-05230 Released 2006 Page 42 Which of the following assets of a nongovernmental not-for-profit charitable organization must be depreciated? a. b. c. d. A freezer costing $150,000 for storing food for the soup kitchen. Building costs of $500,000 for construction in progress for senior citizen housing. Land valued at $1 million being used as the site of the new senior citizen home. A bulk purchase of $20,000 of linens for its nursing home. CPA-05230 Explanation Choice "a" is correct. A nongovernmental not-for-profit charitable organization is accounted for using the accrual method, so normal accrual accounting is used. A freezer would be considered a fixed asset and would be depreciated. Choice "b" is incorrect. Construction in progress is not depreciated, regardless of the type of organization. Choice "c" is incorrect. Land is not depreciated, regardless of the type of organization. Choice "d" is incorrect. Linens for a nursing home would not be considered a fixed asset and thus would not be depreciated. Linens would be considered a consumable (supplies). CPA-05232 Type1 M/C A-D Corr Register to View Answer PM#54 F 9-02 81. CPA-05232 Released 2006 Page 48 A nongovernmental not-for-profit organization borrowed $5,000, which it used to purchase a truck. In which section of the organization's statement of cash flows should the transaction be reported? a. b. c. d. In cash inflow and cash outflow from investing activities. In cash inflow and cash outflow from financing activities. In cash inflow from financing activities and cash outflow from investing activities. In cash inflow from operating activities and cash outflow from investing activities. CPA-05232 Explanation Choice "c" is correct. For a nongovernmental not-for-profit organization, the borrowing would be a cash inflow from financing activities, and the purchase of the truck would be a cash outflow from investing activities. For a nongovernmental not-for-profit organization, the commercial format for the statement of cash flows is followed. 39 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Choice "a" is incorrect. The cash inflow for the borrowing is a financing activity, not an investing activity. Choice "b" is incorrect. The cash outflow for the purchase of the truck is an investing activity, not a financing activity. Choice "d" is incorrect. The cash inflow for the borrowing is a financing activity, not an operating activity. CPA-05233 Type1 M/C A-D Corr Register to View Answer PM#55 F 9-02 82. CPA-05233 Released 2006 Page 52 Janna Association, a nongovernmental not-for-profit organization, received a cash gift with the stipulation that the principal be held for at least 20 years. How should the cash gift be recorded? a. b. c. d. A temporarily restricted asset. A permanently restricted asset. An unrestricted asset. A temporary liability. CPA-05233 Explanation Choice "a" is correct. For a nongovernmental non-for-profit organization, a cash gift (with a stipulation that the principal be held for at least 20 years) should be recorded as a temporarily (a 20-year spending restriction would be temporary because it can ultimately be satisfied) restricted asset. Choice "b" is incorrect. The cash gift would be recorded as a temporarily, not permanently, restricted net asset. Choice "c" is incorrect. The cash gift would be recorded as a temporarily restricted, not an unrestricted, asset. Choice "d" is incorrect. The cash gift would be recorded as a temporarily restricted net asset, not a temporary liability. The term temporary liability is a distracter. CPA-05421 Type1 M/C A-D Corr Register to View Answer PM#56 F 9-02 83. CPA-05421 Released 2007 Page 47 In the preparation of the statement of activities for a nongovernmental not-for-profit organization, all expenses are reported as decreases in which of the following net asset classes? a. b. c. d. Total net assets. Unrestricted net assets. Temporarily restricted net assets. Permanently restricted net assets. CPA-05421 Explanation Choice "b" is correct. Expenses are reported as decreases in unrestricted net assets. Choice "a" is incorrect. Although expenses reduce a component of total net assets, they specifically reduce unrestricted net assets. Choice "c" is incorrect. Expenses are reported as decreases in unrestricted net assets, no expenses are recorded to reduce temporarily restricted net assets. The focus of not for profit organization financial statements is the entity taken as a whole. Fund accounting is not used. The use of temporarily restricted assets for their intended purpose is not displayed as an expenditure of temporarily restricted funds. Satisfaction of temporarily restrictions are effected by reclassifications of net assets released from restrictions to unrestricted net assets and used for the central mission of the not for profit organization. Choice "d" is incorrect. Permanently restricted net assets account for restricted corpus whose earnings are reclassified to either temporarily restricted or unrestricted categories for use. Expenses are not recorded for permanently restricted net assets. 40 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 CPA-05429 Type1 M/C A-D Corr Register to View Answer PM#57 F 9-02 84. CPA-05429 Released 2007 Page 76 In a not-for-profit organization, which of the following should be included in total expenses? a. b. c. d. Grants to other organizations Yes Yes No No Depreciation Yes No No Yes CPA-05429 Explanation Choice "a" is correct. Both grants to other organizations and depreciation are recorded as expenses in a not-for-profit organization. Choice "b" is incorrect. Although partially correct in that grants to other organizations are recorded as expenses in not for profit organizations, excluding depreciation from total expenses of a not for profit organization is incorrect. Choice "c" is incorrect. Both grants to other organizations and depreciation are recorded as expenses in a not-for-profit organization. Choice "d" is incorrect. Although partially correct in that depreciation is recorded as an expense in not for profit organizations, excluding grants to other organizations from total expenses of a not for profit organization is incorrect. CPA-05444 Type1 M/C A-D Corr Register to View Answer PM#58 F 9-02 85. CPA-05444 Released 2007 Page 63 RST Charities received equities securities valued at $100,000 as an unrestricted gift. During the year, RST received $5,000 in dividends from these securities; at year end, the securities had a fair market value of $110,000. By what amount did these transactions increase RST's net assets? a. b. c. d. $100,000 $105,000 $110,000 $115,000 CPA-05444 Explanation Choice "d" is correct. RST's net assets increased $115,000 during the year as a result of the contribution of equity securities, the increase in market value and the dividends received is computed as follows: Equity security received Change in market value Fair market value at year end Dividends received Total $100,000 10,000 110,000 5,000 $115,000 All debt securities and those equity securities that have readily determinable fair values are measured at fair value in the statement of financial position. Gains and losses on investments are reported in the statement of activities. Investment income (e.g., dividends and interest) is reported in the period earned as an increase in net assets. Choice "a" is incorrect. The proposed solution excludes changes in market value and dividends from increases in net assets in error. Both the change in market value and the dividend would be considered as an increase in net assets. Choice "b" is incorrect. The proposed solution excludes changes in market value from increases in net assets in error. Both the change in market value and the dividend would be considered as an increase in net assets. 41 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Choice "c" is incorrect. The proposed solution excludes dividends from increases in net assets in error. Both the change in market value and the dividend would be considered as an increase in net assets. CPA-05445 Type1 M/C A-D Corr Register to View Answer PM#59 F 9-02 86. CPA-05445 Released 2007 Page 54 The Turtle Society, a nongovernmental not-for-profit organization, receives numerous contributed hours from volunteers during its busy season. Chris, a clerk at the local tax collector's office, volunteered ten hours per week for 24 weeks transferring turtle food from the port to the turtle shelter. His rate of pay at the tax office is $10 per hour, and the prevailing wage rate for laborers is $6.50 per hour. What amount of contribution revenue should Turtle Society record for this service? a. b. c. d. $0 $840 $1,560 $2,400 CPA-05445 Explanation Choice "a" is correct. No expense would be recognized for the work performed. Donated services should be recorded as contribution revenue and expense at fair value if the services meet the following criteria: 1. They create or enhance a non-financial asset. 2. They require specialized skills that the provider possesses and would otherwise have been purchased by the organization. Contributed services are, therefore, only recognized SOME of the time: when the service is Specialized, Otherwise needed, and Measured Easily. Chris's work for the Turtle Society does not meet the criteria for expense recognition. The fact pattern makes a point of describing the work as being different from his normal profession and valued at an amount less that his normal wage. Chris's work is not specialized even though it is likely that it would be otherwise needed. Choice "b" is incorrect. Chris's work for the Turtle Society is not sufficiently specialized to meet the criteria for expense recognition. The proposed response incorrectly attempts to value his volunteer labor as the difference between his compensation in an unrelated profession and the going rate for the work performed Choice "c" is incorrect. Chris's work for the Turtle Society is not sufficiently specialized to meet the criteria for expense recognition. The proposed response incorrectly attempts to value his volunteer labor at the going rate the unspecialized work performed. Choice "d" is incorrect. Chris's work for the Turtle Society is not sufficiently specialized to meet the criteria for expense recognition. The proposed response incorrectly attempts to value his volunteer labor as his compensation in an unrelated profession. Supplemental Questions CPA-01330 Type1 M/C 87. CPA-01330 Nov 89 T #58 A-D Corr Register to View Answer PM#1 F 9-99 Page 76 In a statement of activity of a voluntary health and welfare organization, depreciation expense should: a. b. c. d. Be included as an element of expense. Be included as an element of other changes in a statement of activity. Be included as an element of support. Not be included. 42 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 CPA-01330 Explanation Choice "a" is correct. Depreciation is included as an element of expense in a "statement of activity" of a voluntary health and welfare organization. Choices "b", "c", and "d" are incorrect, per above. CPA-01334 Type1 M/C 88. CPA-01334 May 90 II #14 A-D Corr Register to View Answer PM#2 F 9-99 Page 57 In 1991, Community Helpers, a private voluntary health and welfare organization, received a bequest of a $100,000 certificate of deposit maturing in 2001. The testator's only stipulations were that this certificate be held until maturity and that the interest revenue be used to finance salaries for a preschool program. Interest revenue for 2001 was $8,000. When the certificate was redeemed, the board of trustees adopted a formal resolution designating $20,000 of the proceeds for the future purchase of equipment for the preschool program. In regard to the certificate of deposit, what should be reported in the 2001 statement of activities? a. b. c. d. Legacies and bequests, $100,000. Reclassification from temporarily restricted net assets of $100,000. Transfer to land, building, and equipment fund, $20,000. Revenues control, $100,000. CPA-01334 Explanation Choice "b" is correct. When the certificate was redeemed, the $100,000 amount was reported in the 2001 statement of activity as a reclassification from temporarily restricted net assets to unrestricted net assets on the face of the statement of activities. Choices "a" and "c" are incorrect. The "contributions - temporarily restricted" account was increased when the $100,000 was originally received in 1991. Choice "d" is incorrect. The $100,000 maturity of the CD is not revenues. CPA-01336 Type1 M/C 89. CPA-01336 May 90 II #15 A-D Corr Register to View Answer PM#3 F 9-99 Page 52 In 1991, Community Helpers, a private voluntary health and welfare organization, received a bequest of a $100,000 certificate of deposit maturing in 2001. The testator's only stipulations were that this certificate be held until maturity and that the interest revenue be used to finance salaries for a preschool program. Interest revenue for 2001 was $8,000. When the certificate was redeemed, the board of trustees adopted a formal resolution designating $20,000 of the proceeds for the future purchase of equipment for the preschool program. What should be reported as "unrestricted contributions" in the 2001 statement of activity? a. b. c. d. Investment income, $8,000. Direct reduction of permanently restricted net assets of $20,000. $0. $108,000. CPA-01336 Explanation Choice "c" is correct. $0. Choice "a" is incorrect. The $8,000 investment income from long-term investment is "contributions temporarily restricted" for salaries for a preschool program. Choice "b" is incorrect. The board's formal resolution designating $20,000 of the maturing CD for the future purchase of equipment is not revenues and therefore not "unrestricted contributions." Choice "d" is incorrect. The $100,000 CD bequest was reported in 1991 as "contributions-temporarily restricted." When it matures in 2001 it is reported as "$100,000 net assets released from restrictions 43 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 expiration of time." The $8,000 was "contributions temporarily restricted," not revenues "unrestricted contributions." CPA-01342 Type1 M/C 90. CPA-01342 May 90 II #16 A-D Corr Register to View Answer PM#4 F 9-99 Page 44 In 1991, Community Helpers, a private voluntary health and welfare organization, received a bequest of a $100,000 certificate of deposit maturing in 2001. The testator's only stipulations were that this certificate be held until maturity and that the interest revenue be used to finance salaries for a preschool program. Interest revenue for 2001 was $8,000. When the certificate was redeemed, the board of trustees adopted a formal resolution designating $20,000 of the proceeds for the future purchase of equipment for the preschool program. What should be reported in the 2001 year-end statement of financial position? a. Temporarily restricted net assets (for purchase of equipment), $20,000; unrestricted net assets, $80,000. b. Unrestricted net assets, $100,000. c. Net assets temporarily restricted - designated for preschool program salaries, $8,000. Unrestricted net assets, $100,000. d. Temporarily restricted assets - designated for preschool program, $28,000; Net assets unrestricted, $80,000. CPA-01342 Explanation Choice "b" is correct. The 2001 year-end statement of financial position should report: Unrestricted net assets $100,000 Choice "a" is incorrect. The $20,000 board of trustee's resolution designating $20,000 for future purchase of equipment is considered "unrestricted assets" because the board can change its mind. Only contributions from donors may be permanently or temporarily restricted and only by donors. Choice "c" is incorrect. Note: the $8,000 of interest has already been expensed to finance the current period salaries and is no longer an asset. Choice "d" is incorrect, as explained in "a" and "c". CPA-01344 Type1 M/C 91. CPA-01344 May 90 II #18 A-D Corr Register to View Answer PM#5 F 9-99 Page 14 Metro General is a municipally-owned and operated hospital and a component unit of Metro City. In 20X1, the hospital received $7,000 in unrestricted gifts and $4,000 in unrestricted bequests. The hospital has $800,000 in long-term debt and $1,200,000 in fixed assets. The hospital has transferred certain resources to a hospital guild. Substantially all of the guild's resources are held for the benefit of the hospital. The hospital controls the guild through contracts that provide it with the authority to direct the guild's activities, management, and policies. The hospital has also assigned certain of its functions to a hospital auxiliary, which operates primarily for the benefit of the hospital. The hospital does not have control over the auxiliary. The financial statements of the guild and the auxiliary are not consolidated with the hospital's financial statements. The guild and the auxiliary have total assets of $20,000 and $30,000, respectively. Before the hospital's financial statements were combined with those of the city, the city's statements included data on one special revenue fund and one enterprise fund. The city's statements showed $100,000 in enterprise fund long-term debt, $500,000 in enterprise fund fixed assets, $1,000,000 in general long-term debt, and $6,000,000 in general fixed assets. The hospital's long-term debt should be reported in the city's financial statements as: 44 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 a. Long term debt in the component unit column of the government-wide long-term debt in the financial statements. b. An $800,000 contra amount against fixed assets. c. Part of $1,800,000 in long-term debt displayed in the governmental activities column of the government-wide statement of net assets. d. A separate "discrete presentation" of $800,000 in the hospital column. CPA-01344 Explanation Choice "a" is correct. The hospital's long-term debt should be reported in the city's financial statements as part of $900,000 component unit long-term debt in the government-wide financial statements. Choice "b" is incorrect. Debt is not offset against assets. Choice "c" is incorrect. The hospital is an enterprise fund component, not part of governmental activities. Choice "d" is incorrect. There is no hospital column. CPA-01349 Type1 M/C 92. CPA-01349 Nov 90 II #58 A-D Corr Register to View Answer PM#6 F 9-99 Page 46 United Together, a labor union, had the following revenues and expenses for the year ended December 31, 20X1: Receipts: Per capita dues Initiation fees Sales of organizational supplies Nonexpendable gift restricted by donor for loan purposes for 10 years Nonexpendable gift restricted by donor for loan purposes in perpetuity $680,000 90,000 60,000 30,000 25,000 Expenses: Labor negotiations Fund-raising Membership development Administrative and general 500,000 100,000 50,000 200,000 Additional information: The union's constitution provides that 10% of the per capita dues are designated for the Strike Insurance Fund to be distributed for strike relief at the discretion of the union's executive board. In United Together's statement of activity for the year ended December 31, 20X1, what amount should be reported under the classification of unrestricted revenues, gains, and other support? a. b. c. d. $740,000 $762,000 $770,000 $830,000 CPA-01349 Explanation Choice "d" is correct. $830,000. In United Together's statement of activity for the year ended December 31, 20X1, the amount that should be reported under the classification of unrestricted revenues, gains, and other support is $830,000 ($680,000 + $90,000 + $60,000). All other receipts are restricted. CPA-01354 Type1 M/C 93. CPA-01354 Nov 90 II #59 A-D Corr Register to View Answer PM#7 F 9-99 Page 47 United Together, a labor union, had the following receipts and expenses for the year ended December 31, 20X1: 45 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 Receipts: Per capita dues Initiation fees Sales of organizational supplies Nonexpendable gift restricted by donor for loan purposes for 10 years Nonexpendable gift restricted by donor for loan purposes in perpetuity $680,000 90,000 60,000 30,000 25,000 Expenses: Labor negotiations Fund-raising Membership development Administrative and general 500,000 100,000 50,000 200,000 Additional information: The union's constitution provides that 10% of the per capita dues are designated for the Strike Insurance Fund to be distributed for strike relief at the discretion of the union's executive board. In United Together's statement of activity for the year ended December 31, 20X1, what amount should be reported under the classification of program services? a. b. c. d. $850,000 $600,000 $550,000 $500,000 CPA-01354 Explanation Choice "d" is correct. $500,000. In United Together's statement of activity for the year ended December 31, 20X1, the amount reported as program services should be $500,000 of labor negotiations. The other expenses which include fund raising, membership development and general and administrative would be included as part of supporting services. CPA-01359 Type1 M/C 94. CPA-01359 Nov 90 II #60 A-D Corr Register to View Answer PM#8 F 9-99 Page 53 United Together, a labor union, had the following receipts and expenses for the year ended December 31, 20X1: Receipts: Per capita dues Initiation fees Sales of organizational supplies Nonexpendable gift restricted by donor for loan purposes for 10 years Nonexpendable gift restricted by donor for loan purposes in perpetuity Expenses: Labor negotiations Fund-raising Membership development Administrative and general $680,000 90,000 60,000 30,000 25,000 500,000 100,000 50,000 200,000 Additional information: The union's constitution provides that 10% of the per capita dues are designated for the Strike Insurance Fund to be distributed for strike relief at the discretion of the union's executive board. In United Together's statement of activity for the year ended December 31, 20X1, what amount should be reported under the classification of contributions - temporarily restricted? a. $30,000 46 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 b. $55,000 c. $25,000 d. $0 CPA-01359 Explanation Choice "a" is correct. $30,000. In United Together's statement of activity, the amount that should be reported under the classification of "contributions - temporarily restricted" would include the nonexpendable gifts restricted by the donor for loan purposes for 10 years. Funds restricted for loans in perpetuity would be classified as permanently restricted. CPA-01361 Type1 M/C 95. CPA-01361 Nov 91 T #57 A-D Corr Register to View Answer PM#9 F 9-99 Page 65 Funds received by a college from donors who have stipulated that the principal is nonexpendable but that the income generated may be expended by current operating funds would be accounted for internally in the: a. b. c. d. Endowment fund. Term endowment fund. Agency fund. Quasi-endowment fund. CPA-01361 Explanation Choice "a" is correct. Endowment fund. Funds received by a college from donors who have stipulated that the principal is nonexpendable but that the income generated may be expended by current operating funds would be accounted for in an endowment fund. Choice "b" is incorrect. A "term endowment fund" specifies that the principal may be expended at a certain time or on the happening of a certain event. Choice "c" is incorrect. An agency fund is used as a clearing mechanism for cash to be transferred to other funds. Choice "d" is incorrect. A quasi-endowment fund would be used of the governing board of the institution (not the donor) has the authority to determine the use of the income generated. CPA-01363 Type1 M/C 96. CPA-01363 May 92 II #40 A-D Corr Register to View Answer PM#10 F 9-99 Page 47 Environs, a community foundation, incurred $10,000 in management and general expenses during 1991. In Environs' statement of activity for the year ended December 31, 1991, the $10,000 should be reported as: a. b. c. d. A direct reduction of net assets - unrestricted. Part of supporting services. Part of program services. A contra account to offset revenue and support. CPA-01363 Explanation Choice "b" is correct. Part of supporting services. "Management and general" expenses incurred by a community foundation should be reported as part of supporting services in the "statement of activity." CPA-01366 Type1 M/C A-D Corr Register to View Answer47 PM#11 F 9-99 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 97. CPA-01366 May 92 T #59 Page 11 Is the recognition of depreciation expense required for externally published fund financial statements of public colleges and external financial statements of private not-for-profit colleges? a. b. c. d. Public No No Yes Yes Private Yes No Yes No CPA-01366 Explanation Choice "a" is correct. No - Yes. The recognition of depreciation expense is required for "private not-for-profit colleges," but not for "public colleges" in their fund financial statements. Although public universities may use a proprietory fund model they may also use a governmental fund model that precludes the recognition of depreciation. CPA-01369 Type1 M/C 98. CPA-01369 May 93 II #31 A-D Corr Register to View Answer PM#12 F 9-99 Page 78 Financial resources of a college or university that are currently expendable at the discretion of the governing board and that have not been restricted externally nor designated by the board for specific purposes should be reported internally in the balance sheet of which fund? a. b. c. d. Board-designated current fund. Restricted current fund. Unrestricted current fund. General fund. CPA-01369 Explanation Choice "c" is correct. The unrestricted current fund of a college or university would account for financial resources that are currently expendable and that are free of internal or external designations. Choice "b" is incorrect. Restricted current fund accounts for resources designated in some manner for specific purposes. Choices "a" and "d" are incorrect. Nonsense answers. Board-designated current fund and general fund do not exist even in the internal financial statements of educational institutions. CPA-01370 Type1 M/C 99. CPA-01370 Nov 94 #20 A-D Corr Register to View Answer PM#13 F 9-99 Page 39 Transfers received by a governmental-type fund should be reported in the Statement of Revenues, Expenditures, and Changes in Fund Balance as a(an): a. b. c. d. Addition to contributed capital. Addition to retained earnings. Other financing source. Reimbursement. CPA-01370 Explanation Choice "c" is correct. Transfers received by a governmental-type fund should be reported in the statement of revenues, expenditures, and changes in fund balance as another financing source. Choices "a", "b", and "d" are incorrect, per the above. CPA-04772 Type1 M/C A-D Corr Register to View Answer PM#14 F 9-99 48 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 9 100. CPA-04772 Released 2005 Page 44 During the current year, Mill Foundation, a nongovernmental not-for-profit organization, received $100,000 in unrestricted contributions from the general public. Mill's board of directors stipulated that $75,000 of these contributions would be used to create an endowment. At the end of the current year, how should Mill report the $75,000 in the net assets section of the statement of financial position? a. b. c. d. Permanently restricted. Unrestricted. Temporarily restricted. Donor restricted. CPA-04772 Explanation Choice "b" is correct. Mills Foundation would report internally designated but otherwise unrestricted net assets as unrestricted in its statement of financial position. Internally board designated funds are considered unrestricted. Only donor imposed restrictions are recognized on the financial statement. Choice "a" is incorrect. Permanent restrictions can only be created by a donor. They can not be internally stipulated for financial statement purposes. Choice "c" is incorrect. Temporary restrictions can only be created by a donor. They can not be internally stipulated for financial statement purposes. Choice "d" is incorrect. Donor restrictions can only be created by a donor. They can not be internally stipulated for financial statement purposes. 49 2009 DeVry/Becker Educational Development Corp. All rights reserved.

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Keller Graduate School of Management - ACCOUNTING - AC555ON
Becker CPA Review CourseRegistered to: James ChangQuestion CPA-03027 Lecture B1 Topic B 1-06Which of the following statements is a general requirement for the merger of two corporations?a.b.c.d.The merger plan must be approved unanimously by the s
Keller Graduate School of Management - ACCOUNTING - AC555ON
Becker CPA Review, PassMaster QuestionsLecture: Regulation 7CPA PassMaster QuestionsRegulation 7Export Date: 10/30/081 2009 DeVry/Becker Educational Development Corp. All rights reserved.Becker CPA Review, PassMaster QuestionsLecture: Regulation 7
Keller Graduate School of Management - ACCOUNTING - AC555ON
Becker CPA Review, PassMaster QuestionsLecture: Regulation 6CPA PassMaster QuestionsRegulation 6Export Date: 10/30/081 2009 DeVry/Becker Educational Development Corp. All rights reserved.Becker CPA Review, PassMaster QuestionsLecture: Regulation 6
Keller Graduate School of Management - ACCOUNTING - AC555ON
Becker CPA Review, PassMaster QuestionsLecture: Regulation 5CPA PassMaster QuestionsRegulation 5Export Date: 10/30/081 2009 DeVry/Becker Educational Development Corp. All rights reserved.Becker CPA Review, PassMaster QuestionsLecture: Regulation 5
Keller Graduate School of Management - ACCOUNTING - AC555ON
Becker CPA Review, PassMaster QuestionsLecture: Regulation 4CPA PassMaster QuestionsRegulation 4Export Date: 10/30/081 2009 DeVry/Becker Educational Development Corp. All rights reserved.Becker CPA Review, PassMaster QuestionsLecture: Regulation 4
Keller Graduate School of Management - ACCOUNTING - AC555ON
Becker CPA Review, PassMaster QuestionsLecture: Regulation 3CPA PassMaster QuestionsRegulation 3Export Date: 10/30/081 2009 DeVry/Becker Educational Development Corp. All rights reserved.Becker CPA Review, PassMaster QuestionsLecture: Regulation 3
Keller Graduate School of Management - ACCOUNTING - AC555ON
Becker CPA Review, PassMaster QuestionsLecture: Regulation 2CPA PassMaster QuestionsRegulation 2Export Date: 10/30/081 2009 DeVry/Becker Educational Development Corp. All rights reserved.Becker CPA Review, PassMaster QuestionsLecture: Regulation 2
Keller Graduate School of Management - ACCOUNTING - AC555ON
Becker CPA Review, PassMaster QuestionsLecture: Regulation 1CPA PassMaster QuestionsRegulation 1Export Date: 10/30/081 2009 DeVry/Becker Educational Development Corp. All rights reserved.Becker CPA Review, PassMaster QuestionsLecture: Regulation 1
Keller Graduate School of Management - ACCOUNTING - AC555ON
Regulation 7Class Questions1. CPA-01311Trent was retained, in writing, to act as Post's agent for the sale of Post's memorabilia collection. Whichof the following statements is correct?I. To be an agent, Trent must be at least 21 years of age.II. Po
Keller Graduate School of Management - ACCOUNTING - AC555ON
Regulation 6Class Questions1. CPA-01088Under the Commercial Paper Article of the UCC, which of the following documents would be consideredan order to pay?I. Draft.II. Certificate of deposit.a.b.c.d.I only.II only.Both I and II.Neither I nor
Keller Graduate School of Management - ACCOUNTING - AC555ON
Keller Graduate School of Management - ACCOUNTING - AC591
Keller Graduate School of Management - ACCOUNTING - AC591
Keller Graduate School of Management - ACCOUNTING - AC591
Keller Graduate School of Management - ACCOUNTING - AC591
Keller Graduate School of Management - ACCOUNTING - AC591
Keller Graduate School of Management - ACCOUNTING - AC591
Keller Graduate School of Management - ACCOUNTING - AC591
Becker CPA Review, PassMaster QuestionsLecture: Financial 6CPA PassMaster QuestionsFinancial 6Export Date: 10/30/081 2009 DeVry/Becker Educational Development Corp. All rights reserved.Becker CPA Review, PassMaster QuestionsLecture: Financial 6Pen
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Financial 1 UpdateFinancial 1Update for the 2011 EditionLast Updated April 4, 2011SECTION A: TEXT AND LECTURE ERRATAItem A.1Pg. F1-7 to F1-10, Items VII.A. SFAC No. 1, "Objectives of Financial Reporting by BusinessEnterprises" and VII.B. SFAC
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.FINANCIALDate AddedLecturePage NumberDescription03/17/2011F-2903/17/2011F-216Add text03/17/2011F-226
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Financial 2 UpdateFinancial 2Update for the 2011 EditionLast Updated April 4, 2011SECTION A: TEXT AND LECTURE ERRATAItem A.1Pg. F2-9, Example - Royalties Received in AdvanceThere is a typo in the text and calculation in this example (correctio
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.FINANCIALDate AddedLecturePage NumberDescription03/17/2011F-39Text change03/24/2011F-310Delete text03
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Financial 3 UpdateFinancial 3Update for the 2011 EditionLast Updated March 18, 2011SECTION A: TEXT AND LECTURE ERRATAItem A.1Pg. F3-9, SOLUTION (continued)The security labels in the chart at the end of this solution have been switched. The cha
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.FINANCIALDate AddedLecturePage NumberDescription03/17/2011F-428Text change03/17/2011F-443Add text03/1
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Financial 4 UpdateFinancial 4Update for the 2011 EditionLast Updated March 8, 2011SECTION A: TEXT AND LECTURE ERRATAItem A.1Pg. F4-28, Example - Moving Average MethodThere is a small error in this example (change highlighted).Facts and Requir
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.FINANCIALDate AddedLecturePage NumberDescription03/17/2011F-518Text change03/17/2011F-539Text change0
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Financial 5 UpdateFinancial 5Update for the 2011 EditionLast Updated March 8, 2011SECTION A: TEXT AND LECTURE ERRATAItem A.1Pg. F5-18, Example - Lease Liability and Asset Amortization - Lessee's BooksThe dates of the journal entries in this ex
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.FINANCIALDate AddedLecturePage NumberDescription03/17/2011F-612Text change03/17/2011F-616Text change0
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Financial 6 UpdateFinancial 6Updates for 2011 EditionLast Updated April 4, 2011SECTION A: TEXT AND LECTURE ERRATAItem A.1Page F6-12, EXAMPLEIn the example, the question should read as follows (changes highlighted):What is the over(under) fund
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Financial 7 UpdateFinancial 7Update for the 2011 EditionLast Updated April 4, 2011SECTION A: TEXT AND LECTURE ERRATAItem A.1Pg. F7-17, EXAMPLE Distribution of Dividends to Participating Preferred ShareholdersThe date of the stock issuance in t
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.FINANCIALDate AddedLecturePage NumberDescription03/17/2011F-710Text change03/17/2011F-717Text change0
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the Financial textbook.FINANCIALDate AddedLecturePage NumberDescription03/17/2011F-844Text change03/17/2011F-847Text ch
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Financial 8 UpdateFinancial 8Online Update for the 2011 EditionLast Updated March 3, 2011SECTION A: TEXT ERRATAItem A.1Pg. F8-44, Item 6. Bond Issue ProceedsThe wrong term is used to identify the name of the financial statement that displays t
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.FINANCIALDate Added04/18/2011LectureF-9Page Number40DescriptionChange textFinancial 9B.Becker Professio
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Financial 9 UpdateFinancial 9Updates for 2011 EditionLast Updated March 8, 2011SECTION A: TEXT AND LECTURE ERRATAItem A.1Page F9-81, Task Based Simulation, Sample 3The answer presented to Task Based Simulation Sample 3 on page F9-81 incorrectl
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Financial - AICPA Released Simulations UpdateFinancial - AICPA Released SimulationsUpdate for the 2011 EditionLast Updated March 8, 2011SECTION A: Simulation ErrataItem A.1AICPA Released May 2006 - Tab #2 - ResearchThis question asks for the p
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.BUSINESSDate Added03/14/2011LectureB-1Page Number81DescriptionFixing the incorrectly identified project ma
Keller Graduate School of Management - ACCOUNTING - AC591
Becker CPA Review 2011 Business 1 UpdateBusiness 1Online Update for the 2011 EditionLast Updated December 22, 2010SECTION A: TEXT ERRATAItem A.1Page B1-81, Item I.a.1.b Project ManagementThe text incorrectly identifies the five major project manage
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.BUSINESSDate Added03/14/2011LectureB-2Page Number48-54DescriptionMake material ancillaryBusiness 2Becker
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Business 2 UpdateBusiness 2Update for the 2011 EditionLast Updated February 9, 2011SECTION A: TEXT AND LECTURE ERRATAItem A.1Pgs. B2-48 to B2-54:Certain portions of this section of the B2 lecture have been marked as Ancillary. However, this en
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.BUSINESSDate Added03/14/2011LectureB-3Page Number75DescriptionText changeBecker Professional Education |
Keller Graduate School of Management - ACCOUNTING - AC591
Becker CPA Review 2011 Business 4 UpdateBusiness 4Online Update for the 2011 EditionLast Updated December 22, 2010SECTION A: TEXT ERRATANoneSECTION B: PASSMASTER/SIMULATIONS/QUIZZES ERRATAItem B.1Online Quiz Question #8 (CPA-05050)The text of thi
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.REGULATIONDate AddedLecturePage NumberDescription03/14/2011R-1903/14/2011R-110Changed number from $3,75
Keller Graduate School of Management - ACCOUNTING - AC591
Regulation 1 Update 2010 EditionRegulation 1Online Update for the 2011 EditionLast Updated March 3, 2011[Newly Added Items Since the Previous Update: C.7]SECTION A: TEXT ERRATAA.1.Page R1-55, Items a. and b. at the top of the pageThe two notes at
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.REGULATIONDate AddedLecturePage NumberDescription03/14/2011R-211Text change03/14/2011R-212Text change
Keller Graduate School of Management - ACCOUNTING - AC591
Regulation 2 Update 2011 EditionRegulation 2Online Update for the 2011 EditionLast Updated March 3, 2011Items Updated Since Last Posting: A.4. A.6.Section A: TEXT ERRATAA.1.Page R2-23, Item 4.a(3): Mortgage Insurance PremiumsThe text indicates tha
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.REGULATIONDate AddedLecturePage NumberDescription03/14/2011R-328Text change03/14/2011R-330Delete text
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Regulation 3 UpdateRegulation 3Online Update for the 2011 EditionLast Updated March 3, 2011Items Updated Since Last Posting: A.9.Section A: TEXT & AUDIO ERRATAA.1.Page R3-28, Item C.1: Expense Deduction in Lieu of DepreciationThe tax law was
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.REGULATIONDate AddedLecturePage NumberDescription04/18/2011R-459Delete text04/18/2011R-481Delete text;
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Regulation 4 UpdateRegulation 4Update for the 2011 EditionLast Updated March 3, 2011Items Updated Since Last Posting; A.1. and A.2.VERY IMPORTANT NOTICE REGARDING ANCILLARY MATERIALThe R4 class has a significant amount of ancillary material tha
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.REGULATIONDate AddedLecturePage NumberDescription03/14/2011R-610Reworded sentence03/14/2011R-665Text c
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Regulation 6 UpdateRegulation 6Update for the 2011 EditionLast Updated March 18, 2011SECTION A: TEXT ERRATAItem A.1Pg. R6-65, Task-Based Simulation Sample 1TASK BASED SIMULATION SAMPLE 1 is labeled Negotiability. This simulation has nothing to
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.REGULATIONDate Added03/14/2011LectureR-7Page Number47DescriptionText changeBecker Professional Education
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Regulation 7 UpdateRegulation 7Update for the 2011 EditionLast Updated February 16, 2011SECTION A: TEXT ERRATAItem A.1Pg. R7-47 Item B.1.a. 1934 Registration RequirementsThe note should contain the word or, not the word and.The correct wordin
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.AUDITINGDate Added03/14/2011LectureA-1Page Number4DescriptionDeletion of textAuditing 1E.Becker Profess
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.AUDITINGDate AddedLecturePage NumberDescription03/14/2011A-231Change "Must" to "Should"03/14/2011A-257
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.AUDITINGDate AddedLecturePage NumberDescription03/14/2011A-419Add text03/24/2011A-427Add text03/24/20
Keller Graduate School of Management - ACCOUNTING - AC591
This first page gives a listing of the corrected lecture text pages that follow. Print these correctedpages and insert in the lecture text.AUDITINGDate Added03/14/2011LectureA-5Page Number18DescriptionCorrected value in MathType equationAuditin
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Auditing 1 UpdateAuditing 1Update for the 2011 EditionLast Updated December 7, 2010SECTION A: TEXT AND LECTURE ERRATAItem A.1Pg. A1-4, Item E. The Auditor Must Then Report His or Her Findings Based Upon the EvidenceExaminedThe following item
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Auditing 2 UpdateAuditing 2Update for the 2011 EditionLast Updated March 8, 2011SECTION A: TEXT AND LECTURE ERRATAItem A.1Pg. A2-103, Chart: Reports Include a Statement Regarding:The statements listed in the first column of this chart are not
Keller Graduate School of Management - ACCOUNTING - AC591
2011 Auditing 4 UpdateAuditing 4Update for the 2011 EditionLast Updated March 18, 2011SECTION A: TEXT AND LECTURE ERRATAItem A.1Pg. A4-19, Item 3.d. Understandability and ClassificationThe description of this item given in the text applies to valua