Governmental and Nonprofit Accounting Exam Materials
Course Introduction
Governmental and Nonprofit Accounting focuses on the unique accounting concepts, standards, and practices that govern the financial reporting and control of public sector and nonprofit organizations. The course covers topics such as fund accounting, budgetary control, financial statement preparation, and the regulatory environment established by bodies like the Governmental Accounting Standards Board (GASB) and the Financial Accounting Standards Board (FASB) for nonprofits. Students will learn to apply concepts of accountability, transparency, and stewardship in the management and reporting of resources, as well as gain an understanding of the differences between governmental, nonprofit, and for-profit accounting systems.
Recommended Textbook
Advanced Accounting 13th Edition By
Joe Ben Hoyle
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38 Chapters
3570 Verified Questions
3570 Flashcards
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Chapter 1: The Equity Method of Accounting for Investments
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Q1) How much income did Mehan report from Cook during 2017?
A) $30,000.
B) $22,500.
C) $ 7,500.
D) $ 0.
E) $50,000.
Answer: C
Q2) Which of the following results in an increase in the Equity in Investee Income account when applying the equity method?
A) Amortizations of purchase price over book value on date of purchase.
B) Amortizations, since date of purchase, of purchase price over book value on date of purchase.
C) Sale of a portion of the investment at a gain to the investor.
D) Investor's share of gross profit from intra-entity inventory sales for the prior year.
E) Sale of a portion of the investment at a loss.
Answer: D
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Page 3
Chapter 1: A: the Equity Method of Accounting for Investments
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Q1) Which of the following results in an increase in the investment account when applying the equity method?
A) Investor's share of gross profit from intra-entity inventory sales for the prior year.
B) Investor's share of gross profit from intra-entity inventory sales for the current year.
C) Dividends paid by the investor.
D) Dividends paid by the investee.
E) Sale of a portion of the investment during the current year.
Answer: A
Q2) What is the amount of goodwill associated with the investment?
A) $500,000.
B) $200,000.
C) $0.
D) $300,000.
E) $400,000.
Answer: D
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4
Chapter 2: Consolidation of Financial Information
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Q1) What amount will be reported for goodwill as a result of this acquisition?
A) $ 30,000.
B) $ 55,000.
C) $ 65,000.
D) $175,000.
E) $ 200,000.
Answer: B
Q2) Compute consolidated equipment (net) at the date of the acquisition.
A) $ 400.
B) $ 660.
C) $1,060.
D) $1,040.
E) $1,050.
Answer: C
Q3) 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.
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Page 5
Chapter 2: A: Consolidation of Financial Information
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Sample Questions
Q1) Compute the consolidated retained earnings at December 31, 2018.
A) $2,800.
B) $2,825.
C) $2,850.
D) $3,425.
E) $3,450.
Q2) For acquisition accounting, why are assets and liabilities of the subsidiary consolidated at fair value?
Q3) Compute the consolidated revenues for 2018.
A) $2,700.
B) $ 720.
C) $ 920.
D) $3,300.
E) $1,540.
Q4) How is contingent consideration accounted for in an acquisition business combination transaction?
Q5) How are stock issuance costs accounted for in an acquisition business combination?
Q6) Determine the balance for Goodwill that would be included in a December 1, 2017, consolidation.
Page 6
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Chapter 3: Consolidations - Subsequent to the Date of Acquisition
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Q1) Jansen Inc.acquired all of the outstanding common stock of Merriam Co.on January 1, 2017, for $257,000.Annual amortization of $19,000 resulted from this acquisition.Jansen reported net income of $70,000 in 2017 and $50,000 in 2018 and paid $22,000 in dividends each year.Merriam reported net income of $40,000 in 2017 and $47,000 in 2018 and paid $10,000 in dividends each year.What is the Investment in Merriam Co.balance on Jansen's books as of December 31, 2018, if the equity method has been applied?
A) $286,000.
B) $295,000.
C) $276,000.
D) $344,000.
E) $324,000.
Q2) Which one of the following accounts would not appear in the consolidated financial statements at the end of the first fiscal period of the combination?
A) Goodwill.
B) Equipment.
C) Investment in Subsidiary.
D) Common Stock.
E) Additional Paid-In Capital.
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Chapter 3: A: Consolidations - Subsequent to
the Date of Acquisition
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Q1) Which one of the following accounts would not appear in the consolidated financial statements at the end of the first fiscal period of the combination?
A) Goodwill.
B) Equipment.
C) Investment in Subsidiary.
D) Common Stock.
E) Additional Paid-In Capital.
Q2) Compute the December 31, 2020, consolidated additional paid-in capital.
A) $210,000.
B) $75,000.
C) $1,102,500.
D) $942,500.
E) $525,000.
Q3) Compute the December 31, 2020, consolidated common stock.
A) $450,000.
B) $530,000.
C) $555,000.
D) $635,000.
E) $525,000.
Q4) What was consolidated equipment as of December 31, 2018?
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Chapter 4: Consolidated Financial Statements and Outside Ownership
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Q1) What is the dollar amount of fair value over book value differences attributed to Perch at the date of acquisition?
A) $120,000.
B) $150,000.
C) $280,000.
D) $350,000.
E) $370,000.
Q2) Compute the noncontrolling interest in the net income of Demers at December 31, 2020.
A) $18,400.
B) $14,000.
C) $22,600.
D) $24,000.
E) $12,600.
Q3) What are the total consolidated current liabilities at January 2, 2019?
A) $53,200.
B) $56,000.
C) $64,400.
D) $42,000.
E) $70,000.
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Chapter 4: A: Consolidated Financial Statements and Outside Ownership
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Q1) What is the dollar amount of fair value over book value differences attributed to Perch at the date of acquisition?
A) $120,000.
B) $150,000.
C) $280,000.
D) $350,000.
E) $370,000.
Q2) What amount of goodwill should be attributed to the noncontrolling interest at the date of acquisition?
A) $ 0.
B) $ 20,000.
C) $ 30,000.
D) $100,000.
E) $120,000.
Q3) Compute Pell's investment in Demers at December 31, 2021.
A) $592,400.
B) $500,000.
C) $625,000.
D) $676,000.
E) $620,000.
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Chapter 5: Consolidated Financial Statements Intra-Entity
Asset Transactions
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Q1) Parent sold land to its subsidiary resulting in a gain in 2016, the year of transfer.The subsidiary sold the land to an unrelated third party for a gain in 2019.Which of the following statements is true?
A) A gain will be recognized in the consolidated income statement in 2016.
B) A gain will be recognized in the consolidated income statement in 2019.
C) No gain will be recognized in the 2019 consolidated income statement.
D) Only the parent company will recognize a gain in 2019.
E) The subsidiary will recognize a gain in 2016.
Q2) Assuming there are no excess amortizations or other intra-entity transactions, Compute the income from Devin reported on Pepe's books for 2017.
A) $174,600.
B) $184,800.
C) $172,000.
D) $171,000.
E) $180,000.
Q3) What is consolidated net income for 2018?
Q4) How does a gain on an intra-entity transfer of equipment affect the calculation of a noncontrolling interest?
Q5) How is the gain on an intra-entity transfer of a depreciable asset recognized?
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Chapter 5: A: Consolidated Financial Statements
Intra-Entity Asset Transactions
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Q1) What is the consolidated total for inventory at December 31, 2018?
A) $336,000.
B) $280,000.
C) $364,000.
D) $347,200.
E) $349,300.
Q2) Which of the following will be included in a consolidation entry for 2017?
A) Debit loss for $5,000.
B) Credit loss for $5,000.
C) Credit land for $5,000.
D) Debit gain for $5,000.
E) Credit gain for $5,000.
Q3) In the consolidation worksheet for 2017, which of the following accounts would be credited to defer unrecognized intra-entity gross profit with regard to the 2017 intra-entity transfers?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.
Page 12
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Chapter 6: Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows,
and Other Issues
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Q1) How do intra-entity transfers of inventory affect the preparation of a consolidated statement of cash flows?
A) They must be added in calculating cash flows from investing activities.
B) They must be deducted in calculating cash flows from investing activities.
C) They must be added in calculating cash flows from operating activities.
D) Because the consolidated balance sheet and income statement are used in preparing the consolidated statement of cash flows, no special elimination is required.
E) They must be deducted in calculating cash flows from operating activities.
Q2) Describe how this transaction would affect Panton's books.
Q3) What is the controlling interest share of Thomas' net income for the year ended December 31, 2018?
Q4) What is the adjusted book value of Jones after the sale of the shares?
A) $ 200,000.
B) $1,400,000.
C) $1,280,000.
D) $1,050,000.
E) $1,440,000.
Q5) What consolidation entry would be recorded in connection with these intra-entity bonds on December 31, 2019?
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Chapter 6: A: Variable Interest Entities, Intra-Entity Debt,
Consolidated Cash Flows, and Other Issues
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Q1) How does the existence of a noncontrolling interest affect the preparation of a consolidated statement of cash flows?
Q2) Wolff Corporation owns 70 percent of the outstanding stock of Donald, Inc.During the current year, Donald made $75,000 in sales to Wolff.How does this transfer affect the consolidated statement of cash flows?
A) Included as a decrease in the investing section.
B) Included as an increase in the operating section.
C) Included as a decrease in the operating section.
D) Included as an increase in the investing section.
E) Not reported in the consolidated statement of cash flows.
Q3) Parent Corporation recently acquired some of its subsidiary's outstanding bonds at an amount which required the recognition of a loss.In what ways could the loss be allocated? Which allocation would you recommend? Why?
Q4) How will dividends be reported in consolidated statement of cash flows?
A) $15,000 decrease as a financing activity.
B) $25,000 decrease as a financing activity.
C) $10,000 decrease as a financing activity.
D) $23,000 decrease as a financing activity.
E) $17,000 decrease as a financing activity.
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Chapter 7: Consolidated Financial Statements - Ownership
Patterns and Income Taxes
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Q1) Woods Company has one depreciable asset valued at $800,000.Because of recent losses, the company has a net operating loss carryforward of $150,000.The tax rate is 30%.The company was acquired for $1,000,000.It is more likely than not that the tax benefit will be realized.Compute the goodwill recognized for consolidated financial statements.
A) $ 0.
B) $155,000.
C) $200,000.
D) $305,000.
E) $350,000.
Q2) Assuming that separate income tax returns are being filed, what deferred income tax asset is created?
A) $ 0.
B) $ 360.
C) $ 450.
D) $2,250.
E) $3,600.
Q3) Required:
Prepare a schedule to show net income attributable to the controlling interest of Kurton.
Page 15
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Chapter 7: A: Consolidated Financial Statements -
Ownership Patterns and Income Taxes
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Q1) Compute Whitton's accrual-based consolidated net income for 2018.
A) $199,000.
B) $190,000.
C) $185,000.
D) $184,000.
E) $176,000.
Q2) Compute Chase's accrual-based net income for 2018.
A) $746,000.
B) $719,000.
C) $779,600.
D) $774,200.
E) $758,100.
Q3) Compute Cody's undistributed earnings for 2018.
A) $ 62,500.
B) $125,000.
C) $ 87,500.
D) $100,000.
E) $ 70,000.
Q4) What are the benefits or advantages of filing a consolidated income tax return?
Q5) Under what conditions must a deferred income tax asset be recorded?
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Chapter 8: Segment and Interim Reporting
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Q1) Prepare the revenue test and determine which of these segments was separately reportable.
Q2) The following items are required to be disclosed for each operating segment except:
A) Factors used to allocate company-wide pension expense.
B) Revenues from transactions with other operating segments.
C) Interest revenue and interest expense.
D) Depreciation, depletion, and amortization expense.
E) Revenues from external customers.
Q3) Which operating segments are separately reportable under the operating profit or loss test?
A) DVDs only.
B) DVDs and MP3s.
C) DVDs and VCRs.
D) VCRs and MP3s.
E) DVDs, VCRs, and MP3s.
Q4) According to U.S.GAAP, what revenues and expenses included in segment profit or loss need to be disclosed?
Q5) Prepare the asset test and determine which of these segments was separately reportable.
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Chapter 8: A: Segment and Interim Reporting
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Q1) Which of the following would be an acceptable grouping for a U.S.company to provide information by geographic area?
A) United States, All Other Countries.
B) United States, Europe, Taiwan.
C) United States, Asia, Germany.
D) United States, Central America, Mexico, Germany.
E) South America, Spain, All Other Countries.
Q2) 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.
Q3) Which items of information are required to be included in interim reports for each operating segment?
Q4) Compute cost of goods sold and gross profit for the quarter ending June 30, 2018.
Q5) Compute the after-tax effect of Harrison's change in inventory method.
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Chapter 9: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Q1) A U.S.company buys merchandise from a foreign company denominated in U.S.dollars.Which of the following statements is true?
A) If the foreign currency appreciates, a foreign exchange gain will result.
B) If the foreign currency depreciates, a foreign exchange gain will result.
C) No foreign exchange gain or loss will result.
D) If the foreign currency appreciates, a foreign exchange loss will result.
E) Any gain or loss will be included in comprehensive income.
Q2) What was the net impact on Mattie's 2019 income including the fair value hedge of a firm commitment?
A) $379,760.60 decrease.
B) $ 8,360.60 increase.
C) $ 8,360.60 decrease.
D) $ 4,390.40 decrease.
E) $379,760.60 increase.
Q3) (A.) Assume this hedge is designated as a cash flow hedge.Prepare the journal entries relating to the transaction and the forward contract.
(B.) Compute the effect on 2018 net income.
(C.) Compute the effect on 2019 net income.
Q4) What is meant by the spot rate?
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Chapter 9: A: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Q1) What is the amount of Adjustment to Accumulated Other Comprehensive Income for 2019 from these transactions?
A) $1,000.
B) $1,600.
C) $1,800.
D) $2,000.
E) $2,600.
Q2) Assuming a forward contract was entered into on December 16, what would be the net impact on Car Corp.'s 2018 income statement related to this transaction? Assume an annual interest rate of 12% and a fair value hedge.The present value for one half-month at 12% is .9950.
A) $ 700 (gain).
B) $ 700 (loss).
C) $ 995 (gain).
D) $ 300 (loss).
E) $ 298 (gain).
Q3) Where can you find exchange rates between the U.S.dollar and most foreign currencies?
Q4) What amount will Coyote Corp.report in its 2018 balance sheet for Accounts receivable?
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Chapter 10: Translation of Foreign Currency Financial Statements
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Q1) Assuming the functional currency of the subsidiary is the local currency, what total should be included in Parker's consolidated balance sheet at December 31, 2018, for the above items?
A) $407,500.
B) $418,000.
C) $396,000.
D) $403,500.
E) $398,500.
Q2) Under what circumstances would the remeasurement of a foreign subsidiary's financial statements be required?
Q3) Perkle Co.owned a subsidiary in Belgium; the subsidiary's functional currency was the Belgian franc.During 2018, Perkle engaged in hedging transactions to offset part of the subsidiary's net asset position.How should the effects of exchange rate fluctuations on the currency hedge be accounted for?
Q4) How can a parent corporation determine the functional currency for a foreign subsidiary that conducts business in more than one country?
Q5) Prepare a balance sheet for this subsidiary in stickles and then translate the amounts into U.S.dollars.
Page 21
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Chapter 10: A: Translation of Foreign Currency Financial Statements
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Q1) Compute the cost of goods sold for 2018 in U.S.dollars using the current rate method.
A) $376,550.
B) $387,750.
C) $388,800.
D) $400,950.
E) $409,050.
Q2) Assume the functional currency is the U.S.Dollar; compute the U.S.balance sheet amount for equipment for 2018.
A) $81,900.
B) $90,900.
C) $83,700.
D) $88,200.
E) $85,500.
Q3) Assume Boerkian was a foreign subsidiary of a U.S.multinational company and the U.S.dollar was the functional currency of the subsidiary.Prepare a schedule of changes in the net monetary assets of Boerkian for the year 2018 and properly label the resulting gain or loss.
Q4) What is the justification for the remeasurement of foreign currency transactions?
Page 22
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Chapter 11: Worldwide Accounting Diversity and International Accounting Standards
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Q1) What does the IASB's Conceptual Framework for Financial Reporting state as the objective of general purpose financial reporting?
Q2) Which of the following is not a factor influencing a country's financial reporting practices?
A) Providers of financing.
B) Inflation.
C) Legal system.
D) Gross National Product.
E) Political and economic ties.
Q3) IFRS for SMEs are primarily designed to meet the needs of:
A) Small Manufacturing Enterprises.
B) Governmental entities.
C) Companies whose shares of stock are not publicly traded.
D) Not-for-profit organizations.
E) Special Model Entities.
Q4) What two reconciliations are required by IFRS 1 for first-time IFRS Adopters?
Q5) The major providers of financing in some countries are stockholders, while other countries predominantly use banks as the main financing source.What difference does it make to accounting disclosures in comparing a company from one of each of those countries?
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Chapter 11: A: Worldwide Accounting Diversity and International Accounting Standards
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Q1) Which of the following is not a way for a country to use IFRS?
A) Require foreign companies listed on that country's stock exchange to use IFRS for consolidated financial statements.
B) Allow foreign companies listed on that country's stock exchange to use IFRS.
C) Permit its domestic companies listed on that country's stock exchange to use IFRS.
D) Adopt IFRS as that country's national GAAP.
E) All of these answer choices are correct.
Q2) Of the following IFRS, which was the most recently issued?
A) First-Time Adoption of IFRS
B) Leases
C) Revenue from Contracts with Customers
D) Insurance Contracts
E) Financial Instruments: Disclosures
Q3) With regard to IFRS, what does SME refer to, and what is the significance with regard to financial reporting requirements?
Q4) State the two major types of legal systems used around the world and briefly describe their differences.
Q5) Why do countries have their own unique set of financial reporting practices?
Page 24
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Chapter 12: Financial Reporting and the Securities and Exchange Commission
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Q1) Which one of the following forms is used when no other form is prescribed?
A) S-4.
B) S-3.
C) S-11.
D) S-8.
E) S-1.
Q2) Which one of the following prohibits fraudulent and unfair behavior such as sales practice abuses and insider trading?
A) The Securities Act of 1933.
B) The Securities Exchange Act of 1934.
C) The Investment Company Act of 1940.
D) The Investment Advisers Act of 1940.
E) The Sarbanes-Oxley Act of 2002.
Q3) What is required by the Trust Indenture Act of 1939?
Q4) For what purpose is the SEC's Registration Form S-4 used?
Q5) What is included in Part I of a securities registration statement?
Q6) What was the purpose of the Securities Act of 1933?
Q8) What is a private placement of securities? Page 25
Q7) What was the purpose of the Securities Exchange Act of 1934?
Q9) What is a primary focus of the Sarbanes-Oxley Act of 2002?
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Chapter 12: A: Financial Reporting and the Securities and Exchange Commission
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Q1) What was the purpose of the Securities Act of 1933?
Q2) What is required by the Trust Indenture Act of 1939?
Q3) What information is required in proxy statements?
Q4) Filings with the SEC are divided generally into two broad categories:
A) Registration statements and perpetual filings.
B) Reconciliation statements and periodic filings.
C) Registration statements and periodic filings.
D) Registration filings and reconciliation statements.
E) Reconciliation filings and perpetual filings.
Q5) What is included in Part II of a securities registration statement?
Q6) What is a proxy? Briefly explain the importance of a proxy solicitation and a proxy statement.
Q7) When must Form 8-K be filed with the SEC?
A) Within forty-five days of the end of any quarter other than the fourth quarter of the fiscal year.
B) Within ninety days of the end of the fiscal year.
C) Within fifteen days of the occurrence of certain significant events.
Page 27
D) Within sixty days of the end of the fiscal year.
E) When a relatively small company intends to issue securities.
Q8) Why was the Public Utility Holding Company Act of 1935 created?
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Chapter 13: Accounting for Legal Reorganizations and Liquidations
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Q1) 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.
Q2) During a reorganization, how should interest expense be reported on the financial statements?
A) On the income statement, but not classified as a reorganization item.
B) On the income statement as a separate reorganization item.
C) On the balance sheet as a prepaid expense.
D) As a debit directly to retained earnings.
E) On the balance sheet as an intangible asset.
Q3) What is meant by a "fully secured liability"?
Q4) How much should the mortgage holder expect to collect from the liquidation?
A) $474,000
B) $510,000
C) $450,000
D) $480,000
E) $478,000
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Chapter 13: A: Accounting for Legal Reorganizations and Liquidations
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Q1) Who must accept and confirm the Reorganization plan?
Q2) A company is insolvent when
A) It is unable to pay debts as the obligations come due.
B) It is more likely than not that it will not be able to pay debts within a reasonable period of time following the date such obligations become due.
C) It is unable to timely remit payment on more than two-thirds of its outstanding obligations measured on a rolling three-month basis.
D) It is unable to pay debts within 90 days following the close of the company's reporting year, whether such year is a calendar or fiscal year.
E) It is in default on one-third or more of its outstanding debt obligations.
Q3) Prepare a schedule to show the amount of assets available for unsecured creditors after payment of liabilities with priority.
Q4) What is an order for relief?
Q5) Prepare a schedule to show the amount of total liabilities with priority.
Q6) How is the presentation of an income statement during a reorganization different from a normal income statement?
Q7) What is meant by a "partially secured liability"?
Page 30
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Chapter 14: Partnerships: Formation and Operation
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Q1) If C is to contribute an amount equal to his book value share of the new partnership, how much should C contribute?
A) $22,000
B) $20,000
C) $25,000
D) $18,000
E) $10,000
Q2) What theoretical argument could be made against the recognition of goodwill when there is a change in the ownership of a partnership?
Q3) What is the total partnership capital after Anne retires receiving $80,000 and using the bonus method?
A) $70,000.
B) $40,000.
C) $60,000.
D) $80,000.
E) $42,000.
Q4) Brown and Green are forming a business as partners.If they do not create a formal written partnership agreement, what risks are they exposing themselves to?
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Chapter 14: A: Partnerships: Formation and Operation
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Q1) What was Young's total share of net income for the second year?
A) $17,160 income.
B) $ 4,160 income.
C) $19,760 income.
D) $17,290 income.
E) $28,080 income.
Q2) Anne retires and is paid $80,000 based on an independent appraisal of the business.If the goodwill method is used, what is the capital of the remaining partners?
A) Donald, $55,000; Todd, $60,000
B) Donald, $40,000; Todd, $30,000
C) Donald, $65,000; Todd, $55,000
D) Donald, $15,000; Todd, $30,000
E) Donald, $25,000; Todd, $0
Q3) What was Eaton's total share of net loss for the first year?
A) $ 3,900 loss.
B) $11,700 loss.
C) $10,400 loss.
D) $24,700 loss.
E) $ 9,100 loss.
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Chapter 15: Partnerships: Termination and Liquidation
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Q1) If the assets could be sold for $228,000 and there are no liquidation expenses, what is the minimum amount that Ezzard would receive from the liquidation?
A) $36,000.
B) $ 0.
C) $ 2,500.
D) $38,250.
E) $67,250.
Q2) Which of the following statements is false concerning the partnership Statement of Liquidation?
A) Liquidations may take a considerable length of time to complete.
B) Frequent reporting by the accountant is rarely necessary.
C) The Statement of Liquidation provides a listing of transactions to date, current cash, and capital account balances.
D) The Statement of Liquidation provides a listing of property still held by the partnership as well as liabilities remaining unpaid.
E) The Statement of Liquidation keeps creditors and partners apprised of the results of the process of dissolution.
Q3) What is the role of the accountant during the liquidation process?
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Chapter 15: A: Partnerships: Termination and Liquidation
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Q1) Record the journal entry for payment of outstanding liabilities to the creditors.
Q2) What amount of cash was available for safe payments, based on the above information?
A) $30,000.
B) $85,000.
C) $25,000.
D) $35,000.
E) $40,000.
Q3) What would be the maximum amount Garr might have to contribute to the partnership to eliminate a deficit balance in his account?
Q4) If the assets could be sold for $228,000 and there are no liquidation expenses, what is the amount that Laurel would receive from the liquidation?
A) $36,000.
B) $ 0.
C) $ 2,500.
D) $38,250.
E) $67,250.
Q5) Record the journal entry for the sale of the noncash assets.
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Chapter 16: Accounting for State and Local Governments,
Part I
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Q1) Which of the following statements is true regarding governmental fund financial statements?
A) Governmental fund financial statements report a government's activities and financial position as a whole.
B) Governmental fund financial statements should tell the amount spent this year on such services as public safety, education, health and sanitation, and the construction of a new road.
C) Governmental fund financial statements utilize the accrual basis of accounting much like any for-profit entity.
D) Governmental fund financial statements help to determine whether the government's overall financial position improved or deteriorated.
E) Governmental fund financial statements report all assets and liabilities in a way comparable to business-type accounting.
Q2) What is the primary difference between monies accounted for in the general fund and monies accounted for in the special revenue fund?
Q3) What assets would be included in the accounting records of a city's general fund?
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Chapter 16: A: Accounting for State and Local Governments,
Part I
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Q1) Shell City makes a transfer of $100,000 from the General fund to the Debt service fund.
Required:
Prepare the required journal entries and identify the funds in which they are recorded.
Q2) In May of 2018, the Town of Anthrop receives a $60,000 grant restricted for transporting all senior citizens to polling locations on Election Day in November of 2018.
Required:
Prepare the journal entry, and identify the fund in which it is recorded, to record the receipt of the grant.
Q3) For governmental entities, the accrual basis of accounting is used for:
A) Special revenue funds.
B) Internal service funds.
C) Debt service funds.
D) The general fund.
E) Capital projects funds.
Q4) For a government, what kinds of operations are accounted for using a proprietary fund? Give three examples.
Q5) Under modified accrual accounting, when are expenditures recorded?
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Chapter 17: Accounting for State and Local Governments,
Part II
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Q1) Over the years, four alternatives have been suggested for constructing the financial statements for public colleges and universities.These alternatives include all of the following except:
A) Adopt FASB's requirements so that all colleges and universities (public and private) prepare comparable financial statements.
B) Apply a more traditional model focusing on fund financial statements and the wide variety of funds that such schools often have to maintain.
C) Create an entirely new set of financial statements designed specifically to meet the unique needs of public colleges and universities.
D) Adopt the requirements issued by the Private Company Council (PCC) of the FASB.
E) Adopt the same reporting model for public schools that has been created for state and local governments.
Q2) What are the three broad sections of a state or local government's CAFR?
Q3) What three criteria must be met to identify a governmental unit as a primary government?
Q4) What is meant by the term fiscally independent?
Q5) What is meant by the term legally independent?
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Chapter
Part II
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Q1) Which item is not included on the government-wide Statement of Activities?
A) Revenues.
B) Expenses.
C) Assets.
D) Operating grants.
E) Capital contributions.
Q2) All of the following are true about the modified approach to infrastructure depreciation except:
A) If specific guidelines are met, a government can choose to expense all maintenance costs each year in lieu of recording depreciation.
B) The modified approach specifically excludes infrastructure assets within a network or subsystem of a network.
C) If specific guidelines are met, additions and improvements must be capitalized.
D) For eligible assets, the government must establish a minimum acceptable condition level.
E) The government must have an asset management system in place to monitor the eligible assets.
Q3) What is meant by the term legally independent?
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Chapter 18: Accounting for Not-For-Profit Entities
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Q1) In not-for-profit accounting, an acquisition occurs when one not-for-profit entity obtains:
A) Significant influence over another not-for-profit entity.
B) More than 50% of another not-for-profit entity's fixed assets.
C) The right to collect more than 20% of pledged contributions.
D) Control over another not-for-profit entity.
E) None of these answer choices are correct. An acquisition can only occur for profit-oriented entities.
Q2) Which statement below is not correct for financial statements of not-for-profit entities?
A) Pledged contributions are recognized in the accounting period in which pledged by donors.
B) A not-for-profit entity's Statement of Financial Position includes a section specifically for net assets.
C) Contributed assets are recognized by a not-for-profit entity as public support contribution revenue.
D) Depreciation expense is not recognized by not-for-profit entities.
E) Not-for-profit entities issue a Statement of Activities.
Q3) What are the objectives of accounting for a not-for-profit entity?
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Chapter 18: A: Accounting for Not-For-Profit Entities
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Q1) A local business donated medical supplies to Wakefield Home with a value of $40,000.
Prepare the journal entry for the receipt of these supplies.
Q2) In this month, there were several patients that had no health insurance and due to their low income level, the hospital decided that $85,000 of receivables would not be collectible.
Required:
Prepare the necessary journal entry to reflect the decision to consider the $85,000 as charity care.
Q3) Which one of the following financial statements is not required by GAAP regarding a voluntary health and welfare entity?
A) Statement of Financial Position.
B) Statement of Functional Expenses.
C) Statement of Activities and Changes in Net Assets.
D) Statement of Cash Flows.
E) Statement of Operations.
Q4) For not-for-profit entities, what is the difference in identification of "control" between a merger and an acquisition?
Q5) Record the journal entries that reflect all of this information.
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Chapter 19: Accounting for Estates and Trusts
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Q1) What choices does an executor of an estate have in determining the values of assets included in the estate for tax purposes?
Q2) Executor's fees and court costs for settling an estate usually
A) Must be apportioned between the principal and the income of the estate.
B) Are adjustments to the principal of the estate.
C) Are adjustments to the income of the estate.
D) Are subtracted from life insurance proceeds.
E) Are ignored.
Q3) In a will, a devise 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.
Q4) Debts of $52,000 were discovered. Prepare the journal entry to record the transaction.
Q5) Prepare the journal entry to record the collection of rental income of $10,000.$1,000 had been earned prior to the decedent's death.
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Chapter 19: A: Accounting for Estates and Trusts
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Sample Questions
Q1) The gift to David is a
A) General legacy.
B) Specific legacy.
C) Demonstrative legacy.
D) Residual legacy.
E) Devise.
Q2) After expenses of administering an estate, which claims would be next in a typical order of priority to establish which creditors will get paid? (1) Funeral expenses
(2) Medical expenses of the last illness
(3) Debts and taxes given preference under laws
(4) Credit card debts.
A) 1 and 2.
B) 2 and 3.
C) 3 and 4.
D) 1 and 4.
E) 2 and 4.
Q3) Prepare the journal entry to record the sales of the stocks and bonds for $120,000
Q4) What is meant by estate accounting?
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