Governmental and Nonprofit Accounting Exam Questions
Course Introduction
This course provides a comprehensive overview of accounting principles and financial reporting practices unique to governmental and nonprofit organizations. Students will explore the frameworks established by the Governmental Accounting Standards Board (GASB) and the Financial Accounting Standards Board (FASB), focusing on fund accounting, budgetary control, financial statement preparation, and compliance requirements. The course emphasizes the analysis and interpretation of financial information for decision-making, accountability, and stewardship within public sector and nonprofit entities, equipping students with the knowledge necessary to navigate the complexities of financial management in these specialized areas.
Recommended Textbook
Advanced Accounting 9th Edition by Joe Ben Hoyle
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Page 2
Chapter 1: The Equity Method of Accounting for Investments
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Sample Questions
Q1) Under the equity method,when the company's share of cumulative losses equals its investment and the company has no obligation or intention to fund such additional losses,which of the following statements is true?
A)The investor should change to the fair-value method to account for its investment.
B)The investor should suspend applying the equity method until the investee reports income.
C)The investor should suspend applying the equity method and not record any equity in income of investee until its share of future profits is sufficient to recover losses that have not previously been recorded.
D)The cumulative losses should be reported as a prior period adjustment.
E)The investor should report these losses as extraordinary items.
Answer: C
Q2) What amount of equity income would Steven have recognized in 2009 from its ownership interest in Nicole?
Answer: [($120,000 x .4)- $12,000 - $840 + $1,500] = $36,660
Q3) What was the balance in the Investment in Nicole Corp.account at December 31,2006?
Answer: [$503,000 + $36,660 - ($40,000 x .4)] = $523,660
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Chapter 2: Consolidation of Financial Information
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Q1) How are direct combination costs accounted for in an acquisition transaction?
Answer: In an acquisition,direct combination costs are expensed in the period of the acquisition.
Q2) According to SFAS No.141,the pooling of interest method for business combinations
A)Is preferred to the purchase method.
B)Is allowed for all new acquisitions.
C)Is no longer allowed for business combinations after June 30,2001.
D)Is no longer allowed for business combinations after December 31,2001.
E)Is only allowed for large corporate mergers like Exxon and Mobil.
Answer: C
Q3) Assume that Bullen paid a total of $480,000 in cash for all of the shares of Vicker.In addition,Bullen paid $35,000 to a group of attorneys for their work in arranging the combination to be accounted for as an acquisition.What will be the balance in consolidated goodwill?
A)$0.
B)$20,000.
C)$35,000.
D)$55,000.
Answer: B
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Page 4
Chapter 3: Consolidations - Subsequent to the Date of Acquisition
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Sample Questions
Q1) Compute the December 31,2010,consolidated total expenses.
A)$620,000.
B)$280,000.
C)$900,000.
D)$909,625.
E)$299,625.
Answer: D
Q2) Compute the December 31,2010 consolidated retained earnings.
A)$1,645,375.
B)$1,350,000.
C)$1,565,375.
D)$2,845,375.
E)$1,265,375.
Answer: A
Q3) If this combination is viewed as an acquisition,what was consolidated patents as of December 31,2010?
Answer: 11ea88ab_df38_5f02_bb89_bdadeaef3d1b_TB4174_00
Q4) Determine the amortization expense related to the combination at the year-end date of 12/31/13.
Answer: 11ea88ab_df39_4975_bb89_55a6c0e579e6_TB4174_00
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Chapter 4: Consolidated Financial Statements and Outside Ownership
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Q1) The non-controlling interest's share shown on Denber's income statement for 2009 is calculated to be
A)$22,000
B)$24,000
C)$48,000
D)$66,000
E)$72,000
Q2) When a parent uses the equity method throughout the year to account for investment in a subsidiary,which of the following statements is false before making adjustments on the consolidated worksheet?
A)Parent company net income equals controlling interest in consolidated net income
B)Parent company retained earnings equals consolidated retained earnings
C)Parent company total assets equals consolidated total assets
D)Parent company dividends equals consolidated dividends
E)Goodwill may need to be recorded
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Chapter 5: Consolidated Financial StatementsIntercompany Asset Transactions
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Q1) An intercompany sale took place whereby the transfer price exceeded the book value of a depreciable asset.Which statement is true for the year following the sale?
A)A worksheet entry is made with a debit to gain for a downstream transfer.
B)A worksheet entry is made with a debit to gain for an upstream transfer.
C)A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer when the parent uses the equity method.
D)A worksheet entry is made with a debit to retained earnings for a downstream transfer.
E)No worksheet entry is necessary.
Q2) Compute the amortization of gain for 2010 for consolidation purposes.
A)$1,950.
B)$1,825.
C)$2,000.
D)$1,500.
E)$7,000.
Q3) What is the purpose of the adjustments to depreciation expense within the consolidation process when there has been an intercompany transfer of a depreciable asset?
Q4) What is consolidated net income for 2009?
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Chapter
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Q1) What is the total acquisition-date fair value of Involved?
A)$2,600,000
B)$4,812,500
C)$3,062,500
D)$2,312,500
E)$3,250,000
Q2) Using the indirect method,where does the decrease in accounts payable appear on a consolidated statement of cash flows?
A)$7,000 increase to net income as an operating activity.
B)$7,000 decrease to net income as an operating activity.
C)$5,600 increase to net income as an operating activity.
D)$5,600 decrease to net income as an operating activity.
E)$7,000 increase as a financing activity.
Q3) What should the adjusted book value of Chase be after the treasury shares were purchased?
A)$400,000.
B)$480,000.
C)$320,000.
D)$336,000.
E)$464,000.
Page 8
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Chapter 7: Consolidated Financial Statements - Ownership
Patterns and Income Taxes
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Sample Questions
Q1) What ownership structure is referred to as a connecting affiliation? Describe briefly or illustrate with a diagram.
Q2) What is Alpha's accrual-based income for 2009?
A)$564,000.
B)$564,800.
C)$572,200.
D)$580,000.
E)$600,000.
Q3) Which of the following statements is true regarding a subsidiary's investment in the parent company's stock?
A)The treasury stock approach focuses on the parent's control over its subsidiary.
B)For consolidation,both the parent and subsidiary must eliminate all intercompany investments.
C)In consolidation,the parent's retained earnings will not be reduced by the dividends it paid to the subsidiary.
D)This corporate combination is known as mututal ownership.
E)All of the above.
Q4) Under what conditions must a deferred income tax asset be recorded?
Page 9
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Chapter 8: Segment and Interim Reporting
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Q1) All of the following are required to be reported in interim financial statements for a material operating segment except:
A)Segment assets.
B)Segment revenues from external customers.
C)Intersegment revenues.
D)Segment profit or loss.
E)Reconciliation of segment profit or loss to toal income before taxes.
Q2) List the five aggregation criteria that need to be considered by management in determining whether business activities and environments are similar.
Q3) What is the minimum amount of revenue an operating segment must have to be considered a reportable segment?
A)$650,000.
B)$660,000.
C)$670,000.
D)$680,000.
E)$690,000.
Q4) What approach for segment determination was adopted by SFAS 131?
Q5) Prepare the asset test to determine which of these segments was separately reportable.
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Chapter 9: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Sample Questions
Q1) For what amount should Brisco's Accounts Payable be credited on May 8?
A)$2,500,000.
B)$2,440,000.
C)$1,600,000.
D)$1,639,344.
E)$1,666,667.
Q2) What is the amount of option expense for 2008 from these transactions?
A)$1,000.
B)$1,600.
C)$2,500.
D)$2,600.
E)$0.
Q3) Compute the U.S.dollars received on February 1,2008.
A)$138,000.
B)$136,500.
C)$145,500.
D)$141,000
E)$142,500.
Q4) Where can you find exchange rates between the U.S.dollar and most foreign currencies?
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Chapter 10: Translation of Foreign Currency Financial Statements
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Q1) What is the justification for the remeasurement of foreign currency transactions?
Q2) How can a parent corporation determine the functional currency for a foreign subsidiary that conducts business in more than one country?
Q3) The financial statements for Perez are remeasured by its U.S.parent.What amount of gain or loss would be reported in its translated income statement?
A)$1,530.
B)$1,575.
C)$1,465.
D)$1,090.
E)$1,650.
Q4) Assume the functional currency is the euro,compute the restated amount for accumulated depreciation for 2008.
A)$40,950.
B)$41,850.
C)$45,450.
D)$42,750.
E)$44,100.
Q5) Contrast the purpose of remeasurement with the purpose of translation.
Page 12
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Chapter 11: Worldwide Accounting Diversity and International Accounting Standards
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Q1) What are the six key FASB initiatives to further convergence?
Q2) What amount should be recognized as research and development expense in 2008 using IFRSs?
A)$50,000.
B)$150,000.
C)$200,000.
D)$0.
E)$250,000.
Q3) As a result of inventory loss,what is the difference in income between reporting using US GAAP and IFRSs?
A)US GAAP income is $1000 higher.
B)US GAAP income is $2000 lower.
C)IFRSs income is $1000 higher.
D)IFRSs income is $1000 lower.
E)IFRSs income is $2000 higher.
Q4) What are the two major types of legal systems used around the world?
Q5) What are the arguments against accounting harmonization?
Q6) What are the topics covered under the short-term convergence project?
Q7) Which two EU directives have helped harmonize accounting standards?
Q8) What were the major objectives of the Treaty of Rome? Page 13
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Page 14
Chapter 12: Financial Reporting and the Securities and Exchange Commission
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Q1) What is shelf registration?
Q2) Why was the Public Utility Holding Company Act of 1935 created?
Q3) Which one of the following forms is used in connection with registration of securities of real estate companies?
A)S-8.
B)S-6.
C)S-4.
D)SB-1.
E)S-11.
Q4) What information needs to be included in Form 10-Q?
Q5) What is a wrap-around filing?
Q6) Which one of the following requires the audit committee to be responsible for the appointment and compensation of the external auditor?
A)The Securities Act of 1933.
B)The Securities Exchange Act of 1934.
C)The Investment Company Act of 1940.
D)The Foreign Corrupt Practices Act of 1977.
E)The Sarbanes-Oxley Act of 2002.
Q7) What is the primary focus of the Sarbanes-Oxley Act of 2002?
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Chapter 13: Accounting for Legal Reorganizations and Liquidations
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Q1) On its balance sheet,a company undergoing reorganization should
A)report its assets at fair market value,so that financial statement users can estimate whether creditors' claims will be met.
B)report its assets at net realizable value because there is reason to doubt that the organization is a going concern.
C)report its assets as pledged or free.
D)report its assets at current replacement cost.
E)continue to report its assets at book value.
Q2) Compute the amount of free assets after payment of liabilities with priority.
Q3) To what does the term Chapter 11 bankruptcy refer?
Q4) What is the difference between a liquidation and a reorganization?
Q5) What are some of the common elements that can be included in a reorganization proposal?
Q6) How much should Quincy expect to pay on the accounts payable?
A)$240,000.
B)$128,000.
C)$120,000.
D)$96,000.
E)$146,000.
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Chapter 14: Partnerships: Formation and Operation
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Q1) What was the balance in Young's Capital account at the end of the first year?
A)$120,900.
B)$118,300.
C)$126,100.
D)$80,600.
E)$111,500.
Q2) What is the dissolution of a partnership?
Q3) Which of the following is not a characteristic of a partnership?
A)The partnership itself pays no income taxes.
B)It is easy to form a partnership.
C)Any partner can be held personally liable for all debts of the business.
D)A partnership requires written Articles of Partnership.
E)Each partner has the power to obligate the partnership for liabilities.
Q4) Eden contributes $49,000 into the partnership for a 25% interest.The four original partners share profits and losses equally.Using the bonus method,determine the balances for each of the five partners after Eden joins the partnership.
Q5) For what events or conditions should the Articles of Partnership make provision?
Q6) Determine the amount of income allocated to each partner for 2007.
Q7) Why are the terms of the Articles of Partnership important to partners?
Q8) By what methods can a person gain admittance to a partnership?
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Chapter 15: Partnerships: Termination and Liquidation
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Q1) A local partnership has assets of cash of $13,000 and land worth $70,000.All liabilities have been paid and the partners are all insolvent.The partners capital accounts are as follows Roberts,$50,000,Ferry,$30,000 and Mones 3,000.The partners share profits and losses 5:3:2.If the land is sold for $45,000,how much cash will Mones receive in the final settlement?
A)$0.
B)$1,500.
C)$3,000.
D)$21,750.
E)$36,250.
Q2) What financial schedule would be prepared for a partnership that has begun liquidation but has not yet completed the process? What is the purpose of this schedule?
Q3) What are the provisions of the marshaling of assets doctrine?
Q4) Record the journal entry for the sale of the noncash assets.
Q5) What should occur when a solvent partner has a deficit balance?
Q6) What events or circumstances might force the termination of a partnership and liquidation of its assets?
Q7) Prepare the schedule to compute the cash payments to the partners.
Q8) What is a safe cash payment?
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Chapter 16: Accounting for State and Local Governments,
Part I
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Q1) A $5,000,000 bond is issued by Northern City to build a new hospital.
Required:
Prepare the journal entry and identify the fund in which it is recorded to reflect the bond issue.
Q2) A city received a grant of $5,000,000 from a private agency.The money was to be used to build a new city library.In which fund should the money be recorded for the Fund-Based Financial Statements?
A)the General Fund.
B)an Expendable Trust Fund.
C)a Capital Projects Fund.
D)an Agency Fund.
E)a Permanent Fund.
Q3) When a city received a federal grant for books to be purchased for a library,the money should have been recorded in
A)the Permanent Fund.
B)an Expendable Trust Fund.
C)a Capital Projects Fund.
D)an Agency Fund.
E)a Special Revenue Fund.
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Chapter 17: Accounting for State and Local Governments,part II
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Q1) What is meant by the term fiscally independent?
Q2) What information is required in the financial section of a state or local government's CAFR?
Q3) Which statement is false regarding the government-wide Statement of Net Assets?
A)the purpose of the Statement of Net Assets is to report the economic resources of the government as a whole.
B)assets are reported excluding capital assets.
C)capital assets are reported net of depreciation.
D)investments are reported at fair value rather than historical cost.
E)Business-type activities include Enterprise Funds.
Q4) Which of the following is a financial statement of a fiduciary fund?
A)Balance sheet.
B)Statement of Operations.
C)Statement of Cash Flows.
D)Statement of Fiduciary Net Assets.
E)Statement of Revenues,Expenditures,and Changes in Fund Balance.
Q5) What are the three broad sections of a state or local government's CAFR?
Q6) Prepare a Statement of Activities
Q7) Prepare a Statement of Net Assets
Q8) What is meant by the term legally independent? Page 20
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Chapter 18: Accounting for Not-For-Profit Organizations
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Q1) The Yelton Center is a voluntary health and welfare organization.During 2008,unrestricted pledges of $780,000 were received by the center,sixty percent of which were payable in 2008,with the remainder payable in 2009 (for use in 2009).Officials estimated that fifteen percent of these pledges will be uncollectible.
Required: How much should the Yelton Center report as revenue for 2008?
Q2) The hospital estimated that contractual adjustments would reduce the amount collected from third-party payors to $1,710,000.
Required: Prepare the necessary journal entry to record the contractual adjustments.
Q3) Unconditional transfers of cash or other resources to an entity in a voluntary nonreciprocal transaction is the SFAS 116 definition for A)miscellaneous revenues. B)contributions.
C)unconditional promises to give.
D)exchange transactions.
E)pledges.
Q4) Record the journal entries that reflect all of this information.
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Page 22
Chapter 19: Accounting for Estates and Trusts
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Q1) A demonstrative legacy is a
A)gift of personal property that is directly identified.
B)cash gift from a particular source.
C)gift of estate property that remains after carrying out the other provisions of the will.
D)gift of real property.
E)gift of intangible property.
Q2) Cash of $195,000 was conveyed to the appropriate beneficiary. Prepare the journal entry to record the transaction.
Q3) Which of the following is normally viewed as an adjustment to the principal of an estate?
A)Ordinary repair expenses.
B)Insurance expenses.
C)Utility expenses.
D)Major repairs to rental property.
E)Property taxes.
Q4) What is meant by estate accounting?
Q5) What would be the taxable income?
Q6) Title to the residence was conveyed to Louis Tweed. Prepare the journal entry to record the transaction.
23
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