answer to each question from those given. Each Problem is worth 4
1. What is the objective of financial reporting by state and local governments?
A) The same as the objectives of financial reporting by business enterprises.
B) To report on the legal requirements imposed on the government by its elected
C) To assist governments to discharge their duty to be publicly accountable in a
D. To fulfill the government's statutory duty to report on cash received and cash
2. Which of the following circumstances would indicate that a potential component unit
(PCU) should be included as part of the governmental financial reporting entity?
A) The primary government does not approve the operating budget of the potential
B) Officials of the primary government appoint a majority of the members of the
governing board of the PCU.
C) The PCU has sufficient operational and financial dependence that the primary
government can impose its will on the PCU.
D. Both B and C occurring together indicate that the PCU should be included in the
3. Which of the following would
be included within the financial section of the
comprehensive annual financial report (CAFR)?
A) Management's discussion and analysis (MD&A).
B) Management's letter of transmittal.
C) Independent auditor's report.
D. Required supplementary information (RSI).
4. Which of the following would increase the balance in net assets—invested in capital
assets, net of related debt?
A) Acquisition of a building to be used by the police department.
B) Issuance of long-term debt to be used to acquire equipment for the police
C) A gift of land to the city restricted by the donor to be used as a park.
D) None of the above.
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5. The term that is defined as determining whether current-year revenues are sufficient to
pay for the services provided that year and whether future taxpayers will be required
to assume burdens for services previously provided is
A) Financial position.
B) Financial condition.
C) Interperiod equity.
D) None of these terms.
6. Which of the following ratios would be most helpful in assessing the liquidity of a
A) Net tax-supported long-term debt/population.
B) Own source revenues/total revenues.
C) Debt service expenditures/total expenditures.
D) Unreserved fund balance/operating revenues.
7. A recognizable signal of fiscal stress is
A) Total revenues from own sources increasing as a percent of total revenues for all
B) Increasing population.
C) Declining property values.
D) An increasing ratio of total revenues to total expenditures.
8. A measure of the adequacy of the amount of the government's total unrestricted net
assets or deficit at the measurement date is
A) Unrestricted net assets/total revenues.
B) Business-type activities revenues/business-type activities expenses.
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