posted a question
1) Which of the following statements is true?
A. Managers may have a long-term focus and sacrifice the entity’s short-term liquidity.
B. All governmental entities engage in the same activities.
C. There are a limited number of different types of governments.
D. Governments may engage in activities similar to activities engaged in by for-profit entities.



2) Which of the following characteristics distinguishes a governmental or not-for-profit entity from a business entity?
A. Capital assets are used to produce revenues and save costs.
B. The mission of the entity will determine the goods or services provided.
C. There is a direct link between revenues generated and expenditures or expenses incurred.
D. Revenues are always indicative of the demand for goods and services.



3) A primary characteristic that distinguishes not-for-profit entities from business entities is
A. the importance of the budget in the governing process.
B. the correlation between revenues generated and demand for goods or services.
C. the need to generate revenues equal to or in excess of expenditures or expenses.
D. the need to provide goods or services.



4) 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 the ability to issue debt
B. Determining the annual payments to a government-sponsored pension plan
C. Determining whether or not the governmental entity has a balanced budget
D. Determining whether or not certain economic events occurred



5) Which of the following objectives is considered the cornerstone of financial reporting by a governmental entity?
A. Budgetary compliance
B. Service efforts and accomplishments
C. Accountability
D. Interperiod equity



6) As used by GASB, interperiod equity refers to which of the following? Financial reporting should
A. provide information to determine whether current revenues were sufficient to pay for current services.
B. provide information to assist users in assessing the government’s economy, efficiency, and effectiveness.
C. demonstrate compliance with finance-related contractual requirements.
D. demonstrate whether resources were obtained and used in accordance with the entity’s legally adopted budget.



7) Which of the following is NOT a function of a budget in the governmental environment?
A. Organizing
B. Evaluating
C. Planning
D. Controlling



8) Which of the following is the best reason for preparing budgets for governmental entities on the cash basis?
A. Cash basis budgeting helps ensure that the government will receive no more in revenues than is required to disburse.
B. Cash basis budgeting more accurately reflects the economic effect of fiscal activities.
C. Cash basis budgeting helps achieve interperiod equity.
D. Cash basis budgeting helps a government plan have cash on hand to pay bills.



9) The City of Lakeview adopts its budget on a basis of accounting that permits outstanding purchase commitments to be charged against the budget in the year that the goods are ordered, instead of in the year they are received. During the year, the city ordered and received $4,000 of supplies—of which $3,000 had been paid—and had $500 of outstanding purchase commitments for supplies at the year’s end. In the Statement of Budget to Actual, the expenditures for supplies would be
A. $4,500.
B. $4,000.
C. $3,500.
D. $3,000.



10) Which of the following sections is NOT required in a city’s CAFR?
A. Historical
B. Statistical
C. Introductory
D. Financial



11) Under the GASB Statement No. 34 reporting model for governmental entities, the government-wide Statement of Net Assets will display which of the following?
A. Assets, Liabilities, and Owner’s Equity
B. Assets, Liabilities, and Fund Equity
C. Assets, Liabilities, and Fund Balances
D. Assets, Liabilities, and Net Assets



12) Under the GASB Statement No. 34 reporting model for governmental entities, which of the following is required?
A. Two sets of financial statements, one that views the government as a whole using the current financial resources measurement focus and modified accrual basis of accounting, and one that views the government by function and combines all governmental activities in one column and all business activities in another column using the full accrual basis of accounting
B. Two sets of financial statements, one that views the government as a collection of separate funds and reports using the current financial resources measurement focus and modified accrual basis of accounting for governmental funds, and one that views the government as a whole by combining all governmental activities in one column and all business activities in another column using the full accrual basis of accounting
C. Only one set of financial statements, prepared on the modified accrual basis of accounting
D. Only one set of financial statements, prepared on the full accrual basis of accounting
13) The City of Holbrook transferred $100,000 from the General Fund to the Debt Service Fund for paying interest. The appropriate entry in the Debt Service Fund to record this transfer would be
A. Debit Cash: $100,000 and Credit Other Financing Sources—Transfer In: $100,000.
B. Debit Cash: $100,000 and Credit Fund Balance—Transfer In: $100,000.
C. Debit Cash: $100,000 and Credit Other Financing Uses—Transfer Out: $100,000.
D. Debit Cash: $100,000 and Credit Revenue: $100,000.



14) As used in governmental accounting, expenditures are decreases in
A. Net Economic Resources.
B. Net Cash.
C. Net Financial Resources.
D. Net Assets.



15) The amount of pension expenditures that should be recognized in the government-wide financial statements during the current year is the
A. actuarially determined amount.
B. amount paid so long as it does not exceed the actuarially determined amount.
C. amount paid plus the amount that is paid with available expendable financial resources.
D. amount paid.



16) State Community College, a public college, grants faculty members a one-year sabbatical leave after each 7 years of service. There are no requirements for research, study, or service during the compensated sabbatical leave. A particular faculty member earns $40,000 per year. Assuming that the college maintains its records in a manner that facilitates the preparation of the fund financial statements and assuming that any appropriate accruals have been made, what is the appropriate entry to record the employee’s salary paid while on sabbatical?
A. Debit Sabbatical Leave Payable: $40,000; Credit Cash: $40,000
B. No entry required.
C. Debit Expenditures: $40,000; Credit Cash: $40,000
D. Debit Expenditures: $40,000; Credit Sabbatical Leave Payable: $40,000



17) Employees of the City of Orleans earn 10 days paid leave for each 12 months of employment. The city has a policy that employees must take their vacation days during the year following the year in which it is earned. If they do NOT take vacation in the allotted period, they forfeit the benefit. Traditionally, employees have taken 80% of the vacation days earned. During the current year, employees earned $400,000 in vacation pay. Assuming the city maintains its records in a manner to facilitate the preparation of its government-wide financial statements, which of the following entries should be made to record the vacation pay earned during the current period?
A. Debit Expenses: $400,000; Credit Vacation Payable: $400,000
B. No entry required.
C. Debit Expenditures: $400,000; Credit Vacation Payable: $400,000
D. Debit Expenses: $320,000; Credit Vacation Pay Payable: $320,000



18) Employees of the City of Orleans earn 10 days paid leave for each 12 months of employment. The city has a policy that employees must take their vacation days during the year following the year in which it is earned. If they do NOT take vacation in the allotted period, they forfeit the benefit. Traditionally, employees have taken 80% of the vacation days earned. During the current year, employees earned $400,000 in vacation pay. Assuming the city maintains its records in a manner to facilitate the preparation of its fund financial statements, which of the following entries is the correct entry in the General Fund to record the vacation pay earned during the current period?
A. Debit Expenses: $400,000; Credit Vacation Payable: $400,000
B. No entry required.
C. Debit Expenditures: $400,000; Credit Vacation Payable: $400,000
D. Debit Expenditures: $320,000; Credit Vacation Pay Payable: $320,000



19) The modified accrual basis of accounting is used in presenting the fund financial statements of governmental funds because it
A. provides information as to whether or not the entity achieved interperiod equity.
B. results in accounting measurements based on the substance of transactions.
C. is the superior method of accounting for the economic resources of any entity.
D. is budget-oriented while facilitating comparisons among entities.



20) For fund financial statements, the measurement focus and basis of accounting used by governmental fund types are
A. economic resources and modified accrual accounting.
B. economic resources and full accrual accounting.
C. current financial resources and modified accrual accounting.
D. financial resources and full accrual accounting.



21) As used in governmental accounting, interperiod equity refers to a concept of
A. measuring whether current revenues are sufficient to pay for current services.
B. requiring that general fund budgets be balanced each year.
C. providing the same level of services to citizens each year.
D. levying property taxes at the same rate each year.

22) Which of the following is a valid argument for separate accounting principles for proprietary activities?
A. There are no clear-cut distinctions between business and nonbusiness activities.
B. Surveys of statement users indicate that information on depreciation is not of high priority to governmental decision-makers.
C. Two separate measurement focuses and bases for accounting in the same set of financial statements are confusing.
D. The measurement focus on all economic resources is more consistent with GASB objectives that financial reporting should provide information to determine whether current revenues were sufficient to pay for current services.



23) Which of the following is a valid reason for governmental entities to engage in business-type activities?
A. The activity competes with general government activities.
B. The entity may provide services more cheaply or efficiently than can a private firm.
C. The entity does not want control over the activity.
D. The entity does not want to subsidize the activity.



24) A proprietary fund of a governmental entity has donor-restricted assets on its balance sheet. Which of the following best describes where and how those assets will be displayed?
A. In a separate restricted fund
B. Intermingled with other assets on the statement of net assets
C. Intermingled with other assets on the statement of net assets, but footnoted
D. In a separate restricted asset category on the statement of net assets



25) A governmental entity receives a gift of cash and investments with a fair value of $200,000. The donor specified that the earnings from the gift must be used to beautify city-owned parks and the principal must be reinvested. The $200,000 gift should be accounted for in which of the following funds?
A. Permanent
B. Private-purpose trust
C. Agency
D. General



26) What basis of accounting is used to account for transactions of a governmental private-purpose trust fund?
A. Budgetary basis of accounting
B. Modified accrual basis of accounting
C. Cash basis of accounting
D. Full accrual basis of accounting



27) In previous years, Center City received a $400,000 gift of cash and investments. The donor specified that the earnings from the gift must be used to beautify city-owned parks and the principal must be reinvested. During the current year, the earnings from this gift were $24,000. The earnings should generally be considered revenue to which of the following funds?
A. Permanent
B. Private-purpose trust
C. Agency
D. Special revenue



28) The city created a legally separate Housing Authority to provide low-income housing to residents. The city issues debt for the authority in the name of the city, but the authority is responsible for repayment of the debt. The authority is governed by a board composed of all 5 members of the City Council. The authority may take action based on the affirmative vote of a simple majority of the board. In what manner would the authority be included in the city’s Basic Financial Statements?
A. Not included in any manner
B. Discretely presented
C. Note disclosure only
D. Blended



29) The county created a legally separate county hospital authority. Members of the board are elected in county-wide elections. The county must approve the hospital budget, but the hospital receives no financial support from the county, except that the county pays the hospital bills for county indigents. All revenues are user fees. In what manner would the hospital be included in the county’s Basic Financial Statements?
A. Not included in any manner
B. Discretely presented
C. Note disclosure only
D. Blended



30) The state has a legally separate State Building Authority, which has a board appointed by the Governor. The authority issues debt in its name, holds title to buildings in its name, and leases its building exclusively to the state. The authority would be considered a(n)
A. affiliated organization.
B. component unit.
C. related organization.
D. primary government.

31) Revenues of a not-for-profit organization should be reported as
A. increases in unrestricted net assets.
B. increases in temporarily restricted net assets.
C. increases in permanently restricted net assets.
D. increases in one of the three categories of net assets.



32) Restricted gifts to not-for-profit organizations
A. must be shown as an increase in unrestricted net assets.
B. may be shown as an increase in unrestricted net assets if the restriction is met in the same period.
C. may be shown as an increase in unrestricted net assets at the discretion of management.
D. must be shown as an increase in restricted net assets.



33) FASB require the balance sheets of not-for-profits to display
A. three separate funds—unrestricted, temporarily restricted, and permanently restricted net assets.
B. six totals—total assets, total liabilities, total net assets, total unrestricted net assets, total temporarily restricted net assets, and total permanently restricted net assets.
C. unrestricted, temporarily restricted, and permanently restricted retained earnings.
D. net assets in four separate categories—unrestricted, temporarily restricted, permanently restricted, and restricted by creditors.



34) In 2006, St. Joe’s Hospital received a $50,000 cash gift to buy supplies and other items for the pediatric department of the hospital. In 2007, St. Joe’s purchased puppets and other items to be used in explaining medical procedures to young children. The acquisition of the items causes a net decrease in which class(es) of net assets?
A. Temporarily restricted
B. Both unrestricted and temporarily
C. Neither unrestricted nor temporarily restricted
D. Unrestricted



35) Financial statements for Smith College, a church-supported college, should be prepared according to standards set by
A. the American Institute of Certified Public Accountants (AICPA).
B. FASB.
C. GASB.
D. any of the above.



36) Voluntary health and welfare organizations must report expenses by
A. function
B. natural classification.
C. budget code.
D. object.