Government and Not-for-Profit Test Bank Chapter 1
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Government and Not-for-Profit Test Bank Chapter 1

Course Number: ACCT 300, Spring 2012

College/University: Siena

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Chapter 1 The Government and Not-For-Profit Environment TRUE/FALSE (CHAPTER 1) 1. The main objective of a typical governmental or not-for-profit entity is to earn a profit. 2. A governments budget may be backed by the force of law. 3. Governmental entities have no need for an accounting system. 4. A governments internal managers rely on general purpose financial statements for a considerable amount of...

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1 The Chapter Government and Not-For-Profit Environment TRUE/FALSE (CHAPTER 1) 1. The main objective of a typical governmental or not-for-profit entity is to earn a profit. 2. A governments budget may be backed by the force of law. 3. Governmental entities have no need for an accounting system. 4. A governments internal managers rely on general purpose financial statements for a considerable amount of information about their government. 5. Governments and not-for-profits may never engage in business-type activities. 6. Lenders use the financial statements of governments and not-for profits just as they would those of businesses, that is, to help assess the borrowers credit-worthiness. 7. Financial statements, no matter how prepared, do not directly affect the economic worth of an entity. 8. The Financial Accounting Standards Advisory Boards standards do not apply to the federal Department of Treasury. 9. Governments may be subject to the same pressures that led to accounting scandals like Enron. 10. The Governmental Accounting Standards Board establishes generally accepted accounting principles for all state and local government entities, as well as all not-for-profit entities. Granof Test Bank Chapter 1 Page 1 MULTIPLE CHOICE (CHAPTER 1) 1. a) b) c) d) A primary characteristic that distinguishes governmental entities from business entities is The need to generate revenues equal to or in excess of expenditures/expenses. The importance of the budget in the governing process. The need to provide goods or services. The correlation between revenues generated and demand for goods or services. 2. A primary characteristic that distinguishes not-for-profit entities from business entities is a) The need to generate revenues equal to or in excess of expenditures/expenses. b) The importance of the budget in the governing process. c) The need to provide goods or services. d) The correlation between revenues generated and demand for goods or services. 3. Which of the following characteristics distinguishes a governmental or not-for-profit entity from a business entity? a) There is always a direct link between revenues generated and expenditures/expenses incurred. b) Capital assets are used to produce revenues and save costs. c) Revenues are always indicative of demand for goods and services. d) The mission of the entity will determine the goods or services provided. 4. a) b) c) d) The most significant financial document provided by a governmental entity is the The balance sheet. The operating statement. The operating budget. The cash flow statement. 5. Which of the following statements is true? a) Governments may engage in activities similar to activities engaged in by forprofit entities. b) There are a limited number of different types of governments. c) All governmental entities engage in the same activities. d) Managers may have a long-term focus and thereby sacrifice the short-term liquidity of the entity. 6. Which of the following activities is NOT an activity in which a governmental entity might engage? a) Selling electric power. b) Operating a golf course. c) Operating a bookstore. d) All of the above are activities that might be carried out by a government. 7. In which of the following activities is a not-for-profit entity least likely to engage? a) Providing educational services. b) Providing health-care services. c) Providing for terrorism defense. d) Retail sales of cookies. Granof Test Bank Chapter 1 Page 2 8. Which of the following can be affected by GAAP? a) Legal ability to issue bonds. b) Ability to balance the budget. c) Amount reported as employee pension plan contributions. d) Claims and judgments settled. 9. a) b) c) d) Which of the following characteristics is unique to a governmental entity? The ability to have activities financed with tax-exempt debt. The power to impose fees. The ability to issue tax-exempt debt. The ability to have activities financed by Federal grants. 10. To obtain a comprehensive understanding of a governments fiscal health, a financial analyst should obtain an understanding of which of the following? a) All of the resources owned by the governmental entity. b) All of the resources which may be summoned by a governmental entity. c) Demographic data about the residents served by the governmental entity. d) All of the above. 11. Which of the following is common to both governments and not-for-profit entities but distinguishes these entities from for-profit entities? a) The budget is a legal, financial document. b) Revenues are usually indicative of demand for goods or services. c) There is direct matching of revenues and expenses. d) There are no defined ownership interests. 12. Which of the following is NOT a purpose of external financial reporting by governments? External financial reports should allow users to a) Assess financial condition. b) Compare actual results with the budget. c) Assess the ability of elected officials to effectively manage people. d) Evaluate efficiency and effectiveness. 13. Which of the following is NOT a reason why users need governmental and not-for-profit external financial statements? a) To determine the ability of the entity to meet its obligations. b) To determine the ability of the entity to continue to provide services. c) To predict future fiscal solvency. d) To evaluate the overall profitability of the entity. 14. Users of government financial statements should be interested in information about compliance with laws and regulations for which of the following reasons? a) To determine if the entity has complied with bond covenants. b) To determine if the entity has complied with taxing limitations. c) To determine if the entity has complied with donor restrictions on the use of funds. d) To determine all of the above. Granof Test Bank Chapter 1 Page 3 15. Which of the following is NOT generally considered a main user of government and not-forprofit entity external financial statements? a) Investors and creditors. b) Taxpayers. c) Donors. d) Internal managers. 16. Which of the following is a probable use a donor would make of the external financial statements of a not-for-profit entity? a) To determine the proportion of entity resources directed to programs as opposed to fund-raising. b) To determine the creditworthiness of the entity for investment purposes. c) To determine the salaries paid to all employees of the entity. d) To determine the budget of the entity. 17. A regulatory agency would use the external financial statements of a local government for which of the following purposes? a) To assure that the entity is spending and receiving resources in accordance with laws, regulations or policies. b) To determine how resources should be allocated. c) To exercise general oversight responsibility. d) To do all of the above. 18. Which of the following constituency groups would be most likely to evaluate government financial statements to determine likely areas in which to achieve cost-savings? a) Creditors. b) Union officials representing the governments employees. c) Federal agencies that provide purpose-restricted grants. d) Students of governmental accounting. 19. Which of the following objectives is considered to be the cornerstone of financial reporting by a governmental entity? a) Accountability. b) Budgetary compliance. c) Interperiod equity. d) Service efforts and accomplishments. 20. Which of the following is an objective of financial reporting by governmental entities as established by GASB? a) Financial reporting should assist users in assessing the management skills of top management. b) Financial reporting should assist users in determining if current-period revenues were sufficient to pay for current-period services. c) Financial reporting should assist users in evaluating the cash management operations of the governmental entity for the year. d) Financial reporting should assist users in assessing whether the government provided appropriate services to its constituents in the current year. Granof Test Bank Chapter 1 Page 4 21. Which of the following is an objective of financial reporting for not-for-profit entities as established by FASB? Financial reporting should provide information that is useful to present and potential resource providers and other users in: a) Assessing the types of services provided and the need for those services. b) Assessing the services provided and the entitys ability to earn a profit. c) Making rational decisions about the allocation of resources to those organizations. d) Assessing how managers have managed personnel. 22. As used by GASB, interperiod equity refers to which of the following? Financial reporting should: a) Demonstrate compliance with finance-related contractual requirements. b) Provide information to determine whether current-year revenues were sufficient to pay for current-year services. c) Demonstrate whether resources were obtained and used in accordance with the entitys legally adopted budget. d) Provide information to assist users in assessing the governments economy, efficiency, and effectiveness. 23. Given a specific set of data, the basis of accounting selected by or imposed on a governmental entity will least affect which of the following? a) Determining whether or not the governmental entity has a balanced budget. b) Determining whether or not the governmental entity has the ability to issue debt. c) Determining whether or not certain economic events occurred. d) Determining the annual payments to a government-sponsored pension plan. 24. The basis of accounting selected by or imposed on a governmental entity can influence which of the following? a) A decision to contract-out a specific service rather than provide that service itself. b) The amount of salary increases proposed by union negotiators. c) The amount that is available to spend on a donor-specified project or service. d) All of the above. 25. The Governmental Accounting Standards Board is the primary standard-setting body for: a) All governments. b) All state and local governments. c) All governments and all not-for-profit entities. d) All state and local governments and all not-for-profit entities. 26. Under certain circumstances a governmental entity might use standards established by which of the following standard-setting bodies? a) GASB. b) FASB. c) AICPA. d) All of the above. Granof Test Bank Chapter 1 Page 5 27. The primary standard-setting body for accounting and financial reporting by a statesupported college or university is: a) GASB. b) FASB. c) AICPA. d) All of the above. 28. In descending order, the hierarchy of GAAP applicable to a church-owned college may be: a) FASB Statements and Interpretations, FASB Technical Bulletins, AICPA Industry Audit Guides, FASB Implementation Guides, other accounting literatureincluding GASB Standards. b) FASB Statements and Interpretations, FASB Technical Bulletins, FASB Implementation Guides, AICPA Practice Bulletins (if cleared by FASB). c) GASB Statements and Interpretations, AICPA Industry Audit Guides, GASB Implementation Guides, other accounting literatureincluding FASB Standards. d) GASB Statements and Interpretations, GASB Technical Bulletins, AICPA Industry Audit Guides, AICPA Practice Bulletins (if cleared by GASB), GASB Implementation Guides, other accounting literatureincluding FASB standards. 29. Which of the following entities was a principal in creating the FASAB? a) U.S. Congress. b) Office of Management and Budget. c) Governmental Accounting Standards Board. d) Securities and Exchange Commission. 30. The purpose of the FASAB is to: a) Establish accounting standards for not-for-profit entities. b) Establish accounting standards for federal entities. c) Establish accounting standards for all governmental entities. d) Establish accounting standards for non-federal governmental entities. Granof Test Bank Chapter 1 Page 6 PROBLEMS (CHAPTER 1) 1. Thorn County adopted a cash budget for FY2007 as follows. The City budget laws prohibit budgeting or operating at a deficit. During the year the County collected or spent the following amounts. Was the County in compliance with budget laws? Did the County accomplish the goal of interperiod equity? Explain your answers in detail. Budgeted Receipts from Property tax collections From the 2006 levy From the 2007 levy In advance for 2008 Receipts from Bonds Issued Borrowed from Bank (due in 5 years) Disbursements Salaries and Wages Operating Expenses City Hall Annex purchased Payments on Debt-Principal Payments on Interest Pension Contribution Collected/Spent $ 100,000 $1,000,000 $ 50,000 $ 500,000 $ -0- $ -0$ 900,000 $ -0$ 500,000 $ 75,000 $ $ $ $ $ $ $ $ $ $ $ $ 500,000 200,000 500,000 150,000 50,000 80,000 500,000 275,000 500,000 150,000 50,000 -0- Explanations provided by the City for the differences between budget and actual are as follows. Property tax collections are down because the major industry in the community closed and many citizens are currently unemployed. Operating expenses are up because the only bridge over a river bisecting the City sustained damages by an uninsured motorist and had to be repaired immediately. The repair was not budgeted. Granof Test Bank Chapter 1 Page 7 2. Save-the-Birds (STB), a not-for-profit entity dedicated to acquiring and preserving habitat for upland birds, prepares financial statements in accordance with generally accepted accounting principles. Currently, standards require that a not-for-profit entity report virtually all contributions as revenue in the year received. During the current year STB received a donation of several hundred acres of prime habitat for upland birds. STB will require several hundred thousand dollars in additional donations in order to make the land completely suitable for the birds. Before embarking on its fund-raising campaign STB prepares financial statements which are summarized as follows. Statement of Financial Position (Balance Sheet) Cash $ 8,000 Supplies $ 2,000 Equipment (net of depreciation) $ 5,000 Land $1,000,000 Total Assets $1,015,000 Liabilities Net AssetsUnrestricted Net AssetsRestricted Total Liabilities and Net Assets $ 1,000 $ 14,000 $1,000,000 $1,015,000 Statement of Activities (Income Statement) Revenues $1,030,000 Expenses: Salaries $ 30,000 Change in Net Assets $1,000,000 What difficulties, if any, will Save-the-Birds encounter in its new fund-raising drive? Knowing that the donation of the land accounted for $1,000,000 of the revenue reported by Save-the-Birds, do you think the financial statements present fairly the financial position and results of operations of this not-for-profit entity? 3. Johnson City prepares its budget on the cash basis and prepares its external financial statements on the accrual basis. From the following data prepare statements of activity (income statements) both on the cash basis and the accrual basis. Which statement best represents the results of operations of the City? Which statement best demonstrates compliance with laws and regulations? Which statement would you rather see? Which conveys the best information to the citizens of Johnson City? The City levies taxes in the current year of $1 million. Of this amount $.9 million is collected during the current year, $.05 will be collected next year, and $.04 will be collected in the future. $.01 will never be collected. During the current year the City pays bills from prior periods $.06 million, bills of the current period $.8 million, and defers payment until future periods on bills that were received for services consumed during the current period $.1 million. Granof Test Bank Chapter 1 Page 8 4. Certain fiscal practices of governments promote interperiod equity while others do not. For the situations listed below, indicate whether interperiod equity is promoted or undermined. Why? a. Issuing 30-year serial bonds to finance the construction of capital assets with estimated 30 year lives. b. Paying for the pensions of retired employees out of resources provided by current-period taxpayers. c. Charging the cost of supplies as expenditures in the year in which they were used rather than when they were purchased. d. Issuing 30-year bonds to finance a portion of the current period operating costs of a citys school system e. Charging payments of wages and salaries made in the first week of a new year to the previous fiscal year, the year in which the wages and salaries were earned. Granof Test Bank Chapter 1 Page 9 ESSAY (CHAPTER 1) 1. In the United States, educational services can be provided by federal governmental entities, by non-federal governmental entities, by not-for-profit entities, and by for-profit entities. Are the accounting and financial reporting standards the same for each of these entities? Should they be the same? 2. The Governmental Accounting Standards Board (GASB) stated that an objective of financial reporting is to measure interperiod equity, that isFinancial reporting should provide information to determine whether current-year revenues were sufficient to pay for currentyear services. What is your understanding of interperiod equity? What costs incurred in the current year should be paid for by the taxpayers of the current period? What costs incurred in the current year should be paid for by future taxpayers? 3. A not-for-profit entity raises funds to support specific programs, services, and activities. The recipients of the programs, services, and activities are frequently not the providers of the resources to deliver the programs, services, and activities. What information would donors to these not-for-profit entities be interested in seeing? What information would program beneficiaries be interested in seeing? Identify other users of the financial statements of a notfor-profit and the types of information in which they would be interested. 4. What is the significancefor financial reporting purposesof the fact that neither not-forprofits nor governments have owners (stockholders)? 5. What are some of the definitional criteria that distinguish a governmental entity from a notfor-profit entity? 6. How does the FASB influence generally accepted accounting principles for state and local governments? Granof Test Bank Chapter 1 Page 10 ANSWERS TO TRUE/FALSE QUESTIONS (CHAPTER 1) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. F T F T F T T F T F ANSWERS TO MULTIPLE CHOICE (CHAPTER 1) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. b b d c a d c c c d d c d d d a d b a b c b c d b d a a b b Granof Test Bank Chapter 1 Page 11 ANSWERS TO PROBLEMS (CHAPTER 1) 1. The City adopted a cash budget that projected an operating surplus of $170,000; therefore, it was in compliance with the budgeting portion of budget laws. In addition, the City balanced its current period operations. Total inflows are $1,475,000 and total outflows are $1,475,000. The City was seriously affected by the closure of the major employer in town. The City compensated for the shortfall in property tax revenues by failing to make the pension contribution in the current period and by borrowing on a long-term note at the bank. Although one expenditure category exceeded the budgeted amount (operating expenses was $75,000 more than budgeted), another was short by $80,000 (pension contributions). The City has probably complied with the budget laws that prohibit operating at a deficit (if deficit is defined as a cash deficit). It has probably not complied with the budget laws if the laws state that current revenues (not including borrowing) must be equal to or exceed current period costs. Interperiod equity is another issue. By failing to make the required contribution the City has passed on to future taxpayers costs that were associated with operations of the current period. Also, by borrowing at the bank the City has incurred obligations that must be borne by future taxpayers. 2. Save-the-Birds will be launching a major fund-raising drive with a financial statement that shows $1,030,000 in donations and only $30,000 in expenses. It may be difficult to explain to potential donors why the entity is conducting a fund-raising drive at the present time. The balance sheet should help Save-the-Birds explain why they need the additional monies. However, many people familiar with financial statements of for-profit entities may have difficulty understanding how an entity can generate a $1,000,000 profit and still need to be soliciting funds. The equity section shows Net Assets of $1,000,000. It may be difficult for readers to understand that this is not similar to Retained Earnings in for-profit entities. The distinction between unrestricted and restricted may be meaningless to the average reader. [Note: Students may react as readerswhy do they need another fund-raising drive now? If so, they have failed to grasp an important issue for many not-for-profit entities.] The financial statements of Save-the-Birds present fairly the financial position and results of operations of the entity. The financial statements do not tell the whole story. It will be necessary for Save-the-Birds to explain why they need the funds. Granof Test Bank Chapter 1 Page 12 3. Johnson City financial statements would be as follows: Cash Basis Accrual Basis $.9 million (.06) million (.8) million $.04 million Property tax receipts Property tax revenues Prior period expenses Accrued expenses Current expenses Net Income $.99 million (.1) million (.8) million $.09 million The cash basis financial statement would best demonstrate compliance with the budget but the non-cash basis financial statement would best convey results of operations. As a citizen, I would like to see both because legal compliance is important to me but so are results of operations. It may take both statements to fully inform the public about operations. [ Note: At this point students have not been exposed to 'modified accrual' accounting so they will not struggle with revenue recognition issues imbedded in this problem.] 4. a. b. c. d. e. Promotes interperiod equity. Because the bonds are required to be repaid over the life of the capital assets, the cost of those assets is allocated to the periods over which taxpayers benefit from the use of the assets. Undermines interperiod equity. The employee benefits costspension benefitsare paid by an entirely different generation of taxpayerslong after the employees earned the benefits by providing services. Promotes interperiod equity. Although not particularly material, supplies do not benefit taxpayers until they are used to provide services. Reporting these as expenditures when purchased reports the cost in a different period from when the benefit is provided. Undermines interperiod equity. Using debt to finance operating costs spreads the cost of providing services provided in a single period over the entire term of the long-term debt. Interest costs on the debt amplify the problem. Promotes interperiod equity. Again, while possibly immaterial, reporting the cost of providing servicesin the form of wages and salariesin the period in which services were provided promotes interperiod equity. Granof Test Bank Chapter 1 Page 13 ANSWERS TO ESSAY QUESTIONS (CHAPTER 1) 1. Accounting standards for educational institutions differ by the nature of the ownership. Public schools (K-12) are accounted for in the same way as state and local governments, as are public colleges and universities, theoretically. Private schools, colleges, and universities are accounted for using not-for-profit standards established by FASB. For-profit educational institutions would use the FASB rules for other for-profit entities. Because these entities are all involved in delivering the same basic serviceeducationit would appear that they should have the same standards. However, public schools are subject to the same openness as other government activities. The citizens should have a voice in determining what services are offered through the schools and how those services are delivered. The budget process is the opportunity for the public to be heard and the adopted budget is a plan of action to which citizens can, and should, hold officials accountable. Forprofit schools are organized to generate profits and should measure net income using full accrual accounting. Not-for-profit entities generate revenues from tuition and solicit contributions from the public, or a select group of the public. Donors to not-for-profit entities may be interested in different information than taxpayers are interested in. [Note: Students will have differing opinions about the appropriateness of different accounting standards for educational institutions determined by ownership rather than by activity. The question is designed to solicit their thoughts.] 2. Interperiod equity means that the citizens of one time period should pay the costs of the goods and services consumed during that time period. Interperiod equity as an accounting concept means that the financial statements should measure the success of a governmental entity in accomplishing the goal of raising sufficient revenues to pay for the cost of services consumed during a period. However, interperiod equity is a policy decision, not an accounting decision. To achieve interperiod equity, current-year taxpayers should cover the cost of current-year services. Everyone would agree that current period operating costs should be covered, including supplies and payroll costs. In addition, a portion of the cost of capital assets or other improvements, which benefit more than one period, should be considered in the equation. Finally, certain costs may not be paid until well into the future but arise from current operations. The governments employees earn many of these in the current period, including accumulating vacation benefits, pension benefits, and other postemployment benefits. Costs that should not be included in the current year measure of interperiod equity are costs that will benefit future periodsfor example, the portion of the historical cost of capital assets that will be allocated over future periods. Granof Test Bank Chapter 1 Page 14 3. Donors to not-for-profit (NFP) entities are probably interested in information about the costs incurred by the not-for-profit. Donors would be interested in comparing the cost incurred in delivering services by one entity compared to the cost incurred by another entity for delivering the same type of service. The amount spent on programs compared to the amount spent on fund-raising and general and administrative costs would be of interest to donors. Major donors should be very interested in the amounts spent on salaries to top NFP officials because major donors are, in effect, paying those salaries. Beneficiaries would be interested in the costs of delivering the goods and services and the success of the NFP in securing the funds necessary to continue to deliver those goods and services. Regulatory agencies, such as the IRS, would be very interested in the financial information of NFP entities to assess whether they should continue to be considered a NFP entity. Governments would be interested in the financial information of NFP entities. Many governments are considering outsourcing or privatizing the delivery of goods and services. If other entities can, indeed, perform those services more efficiently than government, perhaps the services should be privatized or outsourced. 4. The obvious significance of the fact that neither not-for-profits nor governments have owners is that neither governments nor not-for-profits report owners equity. More important however, is the fact that financial reports of governments cannot focus on owners. They must be prepared from the perspective of parties other than stockholders. Generally this focus is on resource providers and the restrictions they place on the assets they contribute. In addition, this distinction often means that there is less interest in the fair market values of assets and liabilities and other accounting measures that rely on fair values, such as pension expense. No stockholders exist to consider the price/earnings ratios of these entities or a potential buyout/takeover. Finally, both the FASB and GASB have called for information on service efforts and accomplishments. These measures would be used to assess, among other things, how effectively and efficiently the entities provide services. This information, however, is not easily expressed in monetary measures and has not yet been included in financial statements. 5. First, and foremost, a governmental entity usually has the power to assess taxes. Not-forprofit entities do not. In addition, governments may issue tax-exempt debt and their governing bodies are either elected by taxpayers or appointed by another government. Less common is the fact that a governmental entity can usually be unilaterally dissolved by another governmental entity (usually the one that created it) and its assets assumed without compensation. None of these things are true about not-for-profit entities. 6. The FASB influences generally accepted accounting principles of governments in two key ways. First, FASB pronouncements are included in the GASB hierarchy of GAAP. FASB pronouncements that the GASB has specifically made applicable to governments are included in the highest category; those that the GASB has not specifically adopted are included in the lowest category. Second, the business-type activities of governments are required (with a few exceptions) to follow the business accounting principles as set forth by the FASB. Granof Test Bank Chapter 1 Page 15

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Siena - ACCT - 300
Chapter 2Fund AccountingTRUE/FALSE (CHAPTER 2)1.Fund accounting promotes control and accountability over restricted resources.2.The basis of accounting determines when transactions and events are recognized.3.If an entity adopts a full accrual bas
Siena - ACCT - 300
Chapter 3Issues of Budgeting and ControlTRUE/FALSE (CHAPTER 3)1. Capital budgets focus on plans for the acquisition and construction of fixed assets.2. The accounting cycle for most governments is two to three years, consistent with the terms of elect
Siena - ACCT - 300
Chapter 4Recognizing Revenue in Governmental FundsTRUE/FALSE (CHAPTER 4)1. If an entity elects to focus on all economic resources, then it should adopt a modified accrualbasis of accounting.2. The budgetary measurement focus of governments is determi
Siena - ACCT - 300
Chapter 5Recognizing Expenditures in Governmental FundsTRUE/FALSE (CHAPTER 5)1. Expenditures are generally recognized when resources are acquired; expenses whenresources are consumed.2. Governmental fund liabilities are considered current only when t
Siena - ACCT - 300
Chapter 6Accounting for Capital Projects and Debt ServiceTRUE/FALSE (CHAPTER 6)1. The resources to service all general long-term debts of the governmental entity are typicallyaccounted for in debt service funds.2. When governments establish capital p
Siena - ACCT - 300
Chapter 7Long-lived Assets and Investments in Marketable SecuritiesTRUE/FALSE (CHAPTER 7)1. General capital assets are distinguished from the capital assets of proprietary funds andfiduciary funds.2. General capital assets are excluded from governmen
Siena - ACCT - 300
Chapter 8Long-term ObligationsTRUE/FALSE (CHAPTER 8)1. Unlike individuals and businesses, governments cannot seek protection under the FederalBankruptcy Code.2. General obligation debt is the obligation of the government at large and is thereby backe
Siena - ACCT - 300
Chapter 9Business-Type ActivitiesTRUE/FALSE (CHAPTER 9)1.In both the fund statements and the government-wide statements, business-type activities andinternal service funds are on a full accrual basis, and their measurement focus is on alleconomic re
Siena - ACCT - 300
Chapter 10Fiduciary Funds and Permanent FundsTRUE/FALSE (CHAPTER 10)1. Per GASB Statement No. 34, permanent funds are classified as fiduciary funds.2.In accounting for permanent funds only the income can be spent; the principal must bepreserved inta
Siena - ACCT - 300
Chapter 11Issues of Reporting, Disclosure, and Financial AnalysisTRUE/FALSE (CHAPTER 11)1.Governments must combine their blended component units into both the fund andgovernment-wide statements.2.Governments must combine their discretely presented
Siena - ACCT - 300
Chapter 12Not-for-Profit OrganizationsTRUE/FALSE (CHAPTER 12)1. FASB Statement No. 117 directs that revenues and expenses be reported in a statement offinancial position.2. In the statement of activities, FASB Statement No. 117 requires revenues to b
Siena - ACCT - 300
Chapter 13Colleges and UniversitiesTRUE/FALSE (CHAPTER 13)1. Government (public) colleges and universities must adhere to the FASB pronouncements.2. Private not-for-profit colleges and universities are subject to the same FASB standards asother not-f
Siena - ACCT - 300
Chapter 14Health Care ProvidersTRUE/FALSE (CHAPTER 14)1. The statement of financial position of a not-for-profit health care organization shoulddistinguish among unrestricted, temporarily restricted, and permanently restricted net assets.2. Unlike bu
Siena - ACCT - 300
Chapter 15Managing for ResultsTRUE/FALSE (CHAPTER 15)1. Zero-based budgeting requires the periodic review of all programs, not just new ones.2. It is difficult for accountants to have a role beyond auditing the financial statements ofgovernments and
Siena - ACCT - 300
Chapter 16Auditing Governments and Not-For-Profit OrganizationsTRUE/FALSE (CHAPTER 16)1. A cognizant agency can be either an employee of a federal agency or of an independentaccounting firm.2. The Single Audit Act of 1984 was passed to eliminate the
Siena - ACCT - 300
Chapter 17Federal Government AccountingTRUE/FALSE (CHAPTER 17)1.If the federal Treasury, GAO, or OMB objects to a FASAB standard, it is returned tothe Board for reconsideration.2.Federal operations consist of 5 fund typesthe general fund, special f
Siena - ACCT - 300
CHAPTER 16GAAP regarding: deferred tax assetsWOF causes temp diff: MACRS usedWOF differences: Prepaid rentA result of interperiod tax alloc: The income tax expense in theWOF creates a deferred tax liab: AcceleratedWOF circumstances: Straight line de
Siena - ACCT - 300
CHAPTER 19FX Services: 40 millionThe compensation associated with restricted: Allocated to expenseThe compensation associated with a share: The market price of an unrestrictedIf restricted stock is: Reverse related entriesM Company compensation expen
Siena - ACCT - 300
Chapter 01 - Environment and Theoretical Structure of Financial AccountingChapter 1Environment and Theoretical Structure ofFinancial AccountingQUESTIONS FOR REVIEW OF KEYQuestion 1-1TOPICSFinancial accounting is concerned with providing relevant fin
Siena - ACCT - 300
Chapter 02 - Review of the Accounting ProcessChapter 2Review of the Accounting ProcessQUESTIONS FOR REVIEW OF KEYQuestion 2-1TOPICSExternal events involve an exchange transaction between the company and a separateeconomic entity. For every external
Siena - ACCT - 300
Chapter 03 - The Balance Sheet and Financial DisclosuresChapter 3The Balance Sheet and Financial DisclosuresQUESTIONS FOR REVIEW OF KEYQuestion 3-1TOPICSThe purpose of the balance sheet, also known as the statement of financial position, is topresen
Siena - ACCT - 300
Chapter 04 - The Income Statement and Statement of Cash FlowsChapter 4The Income Statement and Statement of CashFlowsQUESTIONS FOR REVIEW OF KEYQuestion 4-1TOPICSThe income statement is a change statement that reports transactions revenues, expenses
Siena - ACCT - 300
Chapter 05 - Income Measurement and Profitability AnalysisChapter 5Income Measurement and Profitability AnalysisQUESTIONS FOR REVIEW OF KEYQuestion 5-1TOPICSThe realization principle requires that two criteria be satisfied before revenue can berecog
Siena - ACCT - 300
Chapter 06 - Time Value of Money ConceptsChapter 6Time Value of Money ConceptsQUESTIONS FOR REVIEW OF KEYQuestion 6-1TOPICSInterest is the amount of money paid or received in excess of the amount borrowed or lent.Question 6-2Compound interest inclu
Siena - ACCT - 300
Chapter 7Cash and ReceivablesAACSB assurance of learning standards in accounting and business education requiredocumentation of outcomes assessment. Although schools, departments, and faculty may approachassessment and its documentation differently, o
Siena - ACCT - 300
Chapter 08 - Inventories: MeasurementChapter 8Inventories: MeasurementQUESTIONS FOR REVIEW OF KEYQuestion 8-1TOPICSInventory for a manufacturing company consists of (1) raw materials, (2) work in process,and (3) finished goods. Raw materials represe
Siena - ACCT - 300
Chapter 09 - Inventories: Additional IssuesChapter 9Inventories: Additional IssuesQUESTIONS FOR REVIEW OF KEYQuestion 9-1TOPICSGAAP generally require the use of historical cost to value assets, but a departure from cost isnecessary when the utility
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Chapter 10 - Property, Plant, and Equipment and Intangible Assets: Acquisition and DispositionChapter 10Property, Plant, and Equipment andIntangible Assets: Acquisition and Disposition REVIEW OF KEYQUESTIONS FORQuestion 10-1The difference between ta
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Chapter 11 - Property, Plant, and Equipment and Intangible Assets: Utilization and ImpairmentChapter 11Property, Plant, and Equipment andIntangible Assets: UtilizationQUESTIONS FOR REVIEW OF KEYand ImpairmentQuestion 11-1The terms depreciation, dep
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12Student: _1. Securities classified as held to maturity could be reported as either current or long-termin a classifiedbalance sheet, depending upon their maturity dates.True False2. All investments in debt securities whose fair values are not read
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13Student: _1. Some liabilities are not contractual obligations and may not be payable in cash.True False2. Amounts withheld from employees in connection with payroll often representliabilities to thirdparties.True False3. A customer advance produ
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14Student: _1. The specific provisions of a bond issue are described in a document called a bondindenture.True False2. Periodic interest expense is the stated interest rate times the amount of debtoutstanding during theperiod.True False3. The car
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15Student: _1. At the inception of a lease agreement, the company's debt to equity ratio and rate ofreturn on assets areboth affected whether the lease is classified as a capital lease or as an operating lease.True False2. Capital leases are agreeme
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16Student: _1. A temporary difference originates in one period and reverses, or turns around, in one ormore laterperiods.True False2. Expenditures currently deducted in the tax return but not included with expenses in theincome statementuntil subs
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17Student: _1. The projected benefit obligation may be less reliable than the accumulated benefitobligation.True False2. The amount of the vested benefit obligation is less than the projected benefit obligationand more than theaccumulated benefit o
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18Student: _1. Mandatorily redeemable preferred stock is reported as a liability.True False2. Noncash assets received as consideration for the issue of stock are always valued basedon the fair valueof the stock.True False3. Treasury stock transact
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19Student: _1. GAAP requires using intrinsic value accounting for employee stock options.True False2. If previous experience indicates that a material number of stock options will beforfeited before they vest,the fair value estimate of the options o
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20Student: _1. Most, but not all, changes in accounting principle are reported using the retrospectiveapproach.True False2. Prior years' financial statements are restated when the prospective approach is used.True False3. The after-tax cumulative e
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21Student: _1. Amounts held in cash equivalent investments must be reported separately fromamounts held as cash inthe statement of cash flows.True False2. If the direct method is used to report cash flows from operating activities in the bodyof the
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Chapter8RiskandRatesofReturnLearningObjectivesAfterreadingthischapter,studentsshouldbeableto: Explainthedifferencebetweenstandaloneriskandriskinaportfoliocontext. Explainhowriskaversionaffectsastocksrequiredrateofreturn. Discussthedifferencebetweend
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Chapter13RealOptionsandOtherTopicsinCapitalBudgetingLearningObjectivesAfterreadingthischapter,thestudentshouldbeableto: Explainwhatrealoptionsare,howtheyinfluencecapitalbudgeting,andhowtheycanbeanalyzed. DiscusshowprojectsNPVsareaffectedbythesizeofth
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Chapter14CapitalStructureandLeverageLearningObjectivesAfterreadingthischapter,studentsshouldbeableto: Identifythetradeoffsthatfirmsmustconsiderwhentheydeterminetheirtargetcapitalstructure. Distinguishbetweenbusinessriskandfinancialriskandexplaintheef
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Chapter15DistributionstoShareholders:DividendsandShareRepurchasesLearningObjectivesAfterreadingthischapter,studentsshouldbeableto: Explainwhysomeinvestorslikethefirmtopaymoredividendswhileotherinvestorsprefer reinvestmentandtheresultingcapitalgains.
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Chapter16WorkingCapitalManagementLearningObjectivesAfterreadingthischapter,studentsshouldbeableto: Explainhowdifferentamountsofcurrentassetsandcurrentliabilitiesaffectfirmsprofitabilityand thustheirstockprices. Discusshowthecashconversioncycleisdete
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Chapter17FinancialPlanningandForecastingLearningObjectivesAfterreadingthischapter,studentsshouldbeableto: Discusstheimportanceofstrategicplanningandthecentralrolethatfinancialforecastingplaysinthe overallplanningprocess. Explainhowfirmsforecastsales
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Chapter18DerivativesandRiskManagementLearningObjectivesAfterreadingthischapter,studentsshouldbeableto: Identifythecircumstancesinwhichitmakessenseforcompaniestomanagerisk. Describethevarioustypesofderivativesandexplainhowtheycanbeusedtomanagerisk. V
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Chapter19MultinationalFinancialManagementLearningObjectivesAfterreadingthischapter,studentsshouldbeableto: Identifytheprimaryreasonscompanieschoosetogoglobal. Explainhowexchangeratesworkandinterpretdifferentexchangeratequotations. Discusstheintuitio
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Chapter20HybridFinancing:PreferredStock,Leasing,Warrants,andConvertiblesLearningObjectivesAfterreadingthischapter,studentsshouldbeableto: Identifythebasicfeaturesofpreferredstockandexplainitsadvantagesanddisadvantages. Differentiateamongthetypesofle
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Chapter 1The Government and Not-For-Profit EnvironmentQuestions for Review and Discussion1. The critical distinction between for-profit businesses and not-for-profits includinggovernments is that businesses have profit as their main motive whereas the
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Chapter 2Fund AccountingQuestions for Review and Discussion1.In governmental accounting, a fund is a fiscal and accounting entity with a selfbalancing set of accounts used to account for an organizations resources and claimsagainst those resources. I
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Chapter 3Issues of Budgeting and ControlQuestions for Review and Discussion1. Capital budgets are closely tied to operating budgets in that governments and othernot-for-profits must include current year capital expenditures in their operatingbudgets.
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Chapter 4Recognizing Revenue in Governmental FundsQuestions for Review and Discussion1. Basis of accounting refers to when transactions and events are recognized.Measurement focus refers to what is being reported upon that is, which assetsand liabili
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Chapter 5Recognizing Expenditures in Governmental FundsQuestions for Review and Discussion1. Expenditures are decreases in net financial resources whereas expenses arereductions in overall net assets. Expenditures are governmental fund equivalents of
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Chapter 6Accounting for Capital Projects and Debt ServiceQuestions for Review and Discussion1.Budgets, and hence budget comparisons, are not as essential for capital projects anddebt service funds because they are often on a project, rather than an a
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Chapter 7Long-Lived Assets and Investments in Marketable SecuritiesQuestions for Review and Discussion1. Capital assets are nonfinancial resources. They are excluded from governmentalfunds because the measurement focus of governmental funds is upon fi
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Chapter 8Long-Term ObligationsQuestions for Review and Discussion1. Unlike businesses, governments have the power to tax and, at least in theory, theiravailable resources are limited only by the wealth of their constituents. At the sametime, governme
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Chapter 9Business-Type ActivitiesQuestions for Review and Discussion1. Per GASB Statement No. 34, which establishes the new reporting model,governments may account for an activity in an enterprise fund as long as it chargesfees to external users for
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Chapter 10Fiduciary Funds and Permanent FundsQuestions for Review and Discussion1. Fiduciary funds are maintained to account for assets that governments hold astrustees or agents for individuals, private organizations, or other governmental units.Per
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Chapter 11Issues of Reporting, Disclosure and Financial AnalysisQuestions for Review and Discussion1.The two main adjustments are likely to be the addition of capital assets and longterm obligations.2.The main adjustments are likely to be:3.the ad
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Chapter 12Not-for-Profit OrganizationsQuestions for Review and Discussion1.(a) Resources restricted as to purpose: must be used for research; conferences;acquisition of plant and equipment;(b) Resources restricted as to time: a term endowment the pr
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Chapter 13Colleges and UniversitiesQuestions for Review and Discussion1.Government universities may elect to report as special purpose entities engaging (1)only in business-type activities, (2) only in governmental activities, or (3) in both. Ifthey