Governmental and Nonprofit Accounting Exam Review
Course Introduction
This course provides an in-depth exploration of accounting principles and practices unique to governmental and nonprofit organizations. Students will learn about the conceptual framework underlying public sector accounting, including fund accounting, budgeting, and financial reporting in compliance with standards set by the Governmental Accounting Standards Board (GASB) and the Financial Accounting Standards Board (FASB). Emphasis is placed on the preparation and analysis of financial statements, internal controls, and accountability mechanisms specific to entities whose primary purpose is not profit generation. The course also explores regulatory, ethical, and operational issues affecting financial management in governmental and nonprofit environments.
Recommended Textbook
Advanced Financial Accounting 8th Edition by Richard Baker
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Page 2
Chapter 1: Intercorporate Acquisitions and Investments in Other Entities
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Q1) Based on the information provided,at the time of the transfer,Regan Company should record:
A)Building at $180,000 and no accumulated depreciation.
B)Building at $162,000 and no accumulated depreciation.
C)Building at $200,000 and accumulated depreciation of $24,000.
D)Building at $180,000 and accumulated depreciation of $18,000.
Answer: D
Q2) Based on the preceding information,what amount will be recorded by Zenith as its investment in Plummet,if it paid $500,000 for the acquisition?
A)$610,000
B)$400,000
C)$500,000
D)$510,000
Answer: D
Q3) Which of the following observations refers to the term differential?
A)Excess of consideration exchanged over fair value of net identifiable assets.
B)Excess of fair value over book value of net identifiable assets.
C)Excess of consideration exchanged over book value of net identifiable assets.
D)Excess of fair value over historical cost of net identifiable assets.
Answer: C
Page 3
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Chapter 2: Reporting Intercorporate Interests
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Q1) Based on the information provided,what amount of income will be reported by Wheeley from its investment in Twain for the year 2007?
A)$22,400
B)$11,800
C)$4,800
D)$12,400
Answer: B
Q2) Based on the preceding information,what will be the balance in the investment account on Dec 31,2007?
A)$150,000
B)$157,500
C)$154,500
D)$153,500
Answer: D
Q3) Under the cost method of accounting for a stock investment,the differential:
A)is written off.
B)is amortized.
C)is written down if related to limited-life assets.
D)is not amortized or written off.
Answer: D
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Chapter 3: The Reporting Entity and Consolidated Financial Statements
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Q1) Barnes Company acquired 80 percent of the outstanding voting stock of Dean Company on January 1,2008.During 2008 Dean Company sold inventory costing $50,000 to Barnes Company for $80,000.Barnes Company continued to hold the inventory at December 31,2008.Also during 2008,Barnes Company sold merchandise costing $400,000 to nonaffiliates for $600,000,and on its separate balance sheet reported total inventory at year end of $140,000.In its separate financial statements,Dean Company reported total sales and cost of goods sold of $350,000 and $220,000,respectively,for 2008 and ending inventory of $150,000.
Required: Based on the above information,compute the amounts that should appear in the consolidated financial statements prepared for Barnes Company and it subsidiary,Dean Company,at year end for the following items: 1)sales;2)cost of goods sold;3)gross profit on sales;4)inventory.
Answer: 1)Sales = $870,000 ($600,000 + $350,000 - $80,000)
2)Cost of Goods Sold = $570,000 ($400,000 + $220,000 - $50,000)
3)Gross Profit on Sales = $300,000 ($870,000 - $570,000)
4)Inventory = $260,000 ($140,000 + $150,000 - $30,000)
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Page 5
Chapter 4: Consolidation of Wholly Owned Subsidiaries
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Q1) Based on the information provided,what amount of goodwill will be included in the consolidated balance sheet immediately following the acquisition?
A)$30,000
B)$15,000
C)$85,000
D)$45,000
Q2) Based on the information provided,what amount of total assets will be reported in the consolidated balance sheet for the year?
A)$895,000
B)$801,000
C)$723,000
D)$1,111,000
Q3) Based on the information provided,what amount of inventory will be included in the consolidated balance sheet immediately following the acquisition?
A)$60,000
B)$75,000
C)$15,000
D)$45,000
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6
Chapter 5: Consolidation of Less-Than-Wholly Owned Subsidiaries
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Q1) Based on the preceding information,what amount of goodwill will be reported in the consolidated balance sheet immediately following the acquisition?
A)$0
B)$120,000
C)$65,000
D)$20,000
Q2) Based on the preceding information,in the entry to eliminate the investment balance,
A)retained earnings will be credited for $20,000.
B)additional paid-in-capital will be credited for $20,000.
C)differential will be credited for $10,000.
D)noncontrolling interest will be debited for 30,000.
Q3) Based on the preceding information,what amount of total liabilities will be reported in the consolidated balance sheet prepared immediately after the business combination?
A)$395,000
B)$280,000
C)$265,000
D)$195,000
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Chapter 6: Intercompany Transfers of Services and
Noncurrent Assets
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Q1) Any intercompany gain or loss on a downstream sale of land should be recognized in consolidated net income: I.in the year of the downstream sale. II)over the period of time the subsidiary uses the land.
III)in the year the subsidiary sells the land to an unrelated party.
A)I
B)II
C)III
D)I or II
Q2) Based on the preceding information,in the preparation of the 2009 consolidated financial statements,equipment will be:
A)debited for $1,000.
B)debited for $10,000.
C)credited for $15,000.
D)debited for $25,000.
Q3) Based on the preceding information,consolidated net income for 2009 will be:
A)$150,000.
B)$100,000.
C)$148,000.
D)$130,000.
Page 8
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Chapter 7: Intercompany Inventory Transactions
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Q1) Based on the information given above,what amount of cost of goods sold should be eliminated in the consolidation workpaper for 2008?
A)$82,000
B)$70,000
C)$95,000
D)$60,000
Q2) Based on the information given above,what amount of sales will be reported in the 2008 consolidated income statement?
A)$62,000
B)$120,000
C)$90,000
D)$58,000
Q3) Based on the information given above,what amount of cost of goods sold must be eliminated from the consolidated income statement for 2008?
A)$2,765,000
B)$1,620,000
C)$1,422,000
D)$2,963,000
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9
Chapter 8: Intercompany Indebtedness
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Q1) Based on the information given above,what amount of consolidated net income should be reported for 2008?
A)$163,750
B)$161,250
C)$146,250
D)$148,750
Q2) Based on the information given above,what amount of interest income will be eliminated in the preparation of the 2009 consolidated financial statements?
A)$17,000
B)$13,300
C)$18,500
D)$22,200
Q3) Based on the information given above,what amount of constructive gain will be allocated to noncontrolling interest in 2008 consolidated financial statements?
A)$4,925
B)$5,550
C)$5,625
D)$4,625
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10
Chapter 9: Consolidation Ownership Issues
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Q1) Based on the information provided,what is the book value of the common stock on January 1,2009?
A)$410,000
B)$360,000
C)$390,000
D)$350,000
Q2) Based on the preceding information,the eliminating entry to assign income to noncontrolling interest to prepare the consolidated financial statements for Company A as of December 31,2009,will include:
A)a debit to Income to Noncontrolling Interest for $24,000.
B)a credit to Dividends Declared - Preferred Stock for $10,000.
C)a credit to Dividends Declared - Common Stock for $8,000.
D)a credit to Noncontrolling Interest for $12,000.
Q3) Based on the preceding information,the entry to eliminate subsidiary preferred stock to prepare the consolidated financial statements for Company A as of December 31,2009,will include:
A)a debit to Preferred Stock for $60,000.
B)a credit to Investment in Company B Preferred Stock for $40,000.
C)a debit to Retained Earnings for $40,000.
D)a credit to Noncontrolling Interest for $40,000.
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Chapter 10: Additional Consolidation Reporting Issues
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Q1) For a subsidiary to be eligible to be included in a consolidated tax return,at least _____ of its stock must be held by the parent company or another company included in the consolidated return.
A)50 percent
B)40 percent
C)75 percent
D)80 percent
Q2) Based on the information provided,what is the amount of consolidated retained earnings as of December 31,2008?
A)$340,000
B)$250,000
C)$338,000
D)$388,000
Q3) Based on the information provided,what amount of consolidated net income will be reported for the year 2009?
A)$168,000
B)$280,000
C)$165,000
D)$250,000
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Chapter 11: Multinational Accounting: Foreign Currency
Transactions and Financial Instruments
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Q1) On March 1,2008,Wilson Corporation sold goods for a U.S.dollar equivalent of $31,000 to a Thai company.The transaction is denominated in Thai bahts.The payment is received on May 10.The exchange rates were: What entry is required to revalue foreign currency payable to U.S.dollar equivalent value on May 10?
A)Option A
B)Option B
C)Option C
D)Option D
Q2) Mint Corporation has several transactions with foreign entities.Each transaction is denominated in the local currency unit of the country in which the foreign entity is located.On October 1,2008,Mint purchased confectionary items from a foreign company at a price of LCU 5,000 when the direct exchange rate was 1 LCU = $1.20.The account has not been settled as of December 31,2008,when the exchange rate has decreased to 1 LCU = $1.10.The foreign exchange gain or loss on Mint's records at year-end for this transaction will be:
A)$500 loss
B)$500 gain
C)$378 gain
D)$5,500 loss
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Chapter 12: Multinational Accounting: Issues in Financial
Reporting and Translation of Foreign Entity Statements
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Q1) Infinity Corporation acquired 80 percent of the common stock of an Egyptian company on January 1,2008.The goodwill associated with this acquisition was $18,350.Exchange rates at various dates during 2008 follow: Goodwill suffered an impairment of 20 percent during the year.If the functional currency is the U.S.dollar,how much goodwill impairment loss should be reported on Infinity's consolidated statement of income for 2008?
A)$3,680
B)$3,670
C)$3,690
D)$3,700
Q2) Refer to the above information.Assuming the local currency of the country in which Perth Company is located is the functional currency,what are the translated amounts for the items below in U.S.dollars?
A)Option A
B)Option B
C)Option C
D)Option D
Q3) Use the information given in question 52 to prepare a schedule providing a proof of the translation adjustment.
Page 14
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Chapter 13: Segment and Interim Reporting
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Q1) During the third quarter of 2008,Pride Company sold a piece of equipment at an $8,000 gain.What portion of the gain should Pride report in its income statement for the third Quarter of 2008?
A)$0
B)$2,000
C)$4,000
D)$8,000
Q2) On March 15,2009,Clarion Company paid property taxes of $60,000 on its factory building for calendar year 2009.On July 1,2009,Clarion made $40,000 in unanticipated repairs to its machinery.The repairs will benefit operations for the remainder of the calendar year.What total amount of these expenses should be included in Clarion's quarterly income statement for the three months ended September 30,2009?
A)$55,000
B)$15,000
C)$35,000
D)$40,000
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15
Chapter 14: Sec Reporting
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Q1) Which of the following statements concerning the management discussion and analysis (MD&A)of a company's financial condition is true? I.It should cover the financial statements and other statistical data for the most recent three-year time span.
II)It should make year-to-year comparisons of material changes in the line items.
III)Management need not explain the cause(s)of the material changes.
IV)Disclosure of material off-balance sheet transactions,arrangements,and obligations is required in each annual and each quarterly report.
A)I,II,and IV
B)II and III
C)I,III,and IV
D)I,II,III,and IV
Q2) Both the FCPA (Foreign Corrupt Practices Act of 1977)and SOX (Sarbanes-Oxley Act of 2002)contain provisions related to Internal Control.Discuss some significant differences between how the two acts impact internal control practices for publicly held companies.
Q3) Form 8-K
Q4) Comment Letter
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Chapter 15: Partnerships: Formation,operation,and
Changes in Membership
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Q1) Griffin and Rhodes formed a partnership on January 1,2009.Griffin contributed cash of $120,000 and Rhodes contributed land with a fair value of $160,000.The partnership assumed the mortgage on the land which amounted to $40,000 on January 1.Rhodes originally paid $90,000 for the land.On July 31,2009,the partnership sold the land for $190,000.Assuming Griffin and Rhodes share profits and losses equally,how much of the gain from sale of land should be credited to Griffin for financial accounting purposes?
A)$0
B)$15,000
C)$35,000
D)$45,000
Q2) Refer to the above information.Which statement below is correct if a new partner purchases an interest in capital directly from the old partners?
A)C < D
B)C = D
C)C = D and B = A
D)C < D and B = A
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Chapter 16: Partnerships: Liquidation
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Q1) Refer to the above information.If the other assets are sold for $80,000,and all partners are personally insolvent,how much should E receive upon liquidation?
A)$0
B)$6,000
C)$10,000
D)$20,000
Q2) Based on the preceding information,the journal entry on the partnership's books to record distribution of stock to prior partners will include a debit to Wilfred,Capital for: A)$140,000.
B)$91,700.
C)$86,700.
D)$126,700.
Q3) Based on the preceding information,what amount will be paid out to Bill upon liquidation of the partnership?
A)$0
B)$25,000
C)$11,667
D)$2,500
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18
Chapter 17: Governmental Entities: Introduction and General Fund Accounting
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Q1) Which of the following accounts are debited when closing entries are made for the general fund (assume outstanding encumbrances lapse at year-end)?
A)I,II,III,VI.
B)I,II,IV.
C)I,IV,V,VI.
D)III,IV,V.
Q2) At the end of the fiscal year,uncollected property taxes in the general fund should be:
A)reclassified from current to delinquent.
B)written off as uncollectible.
C)charged against unreserved fund balance.
D)reclassified from current to noncurrent.
Q3) Which of the following items should not be included as revenue for a state government?
A)Property taxes levied in the current fiscal year.
B)Private property for which a state takes custody when the legal owner cannot be found.
C)Amounts received from other financing sources.
D)Fines and licensing fees for which amounts cannot be budgeted.
Page 19
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Chapter 18: Governmental Entities: Special Funds and
Government-Wide Financial Statements
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Q1) During the fiscal year ended June 30,2009,an enterprise fund of St.Cloud acquired computer equipment costing $110,000 on account and issued $400,000 of long-term bonds.Revenues of the enterprise fund will be used to repay bond interest and principal.What effect did these transactions have on St.Cloud's enterprise fund assets and long-term debt?
A)Option A
B)Option B
C)Option C
D)Option D
Q2) The City of Fargo issued general obligation bonds to finance construction of a new fire station.The bonds were issued at a discount.Which of the following is true? I.The amount expended for the improvement must be decreased.
II)The general fund must make up the difference to the face value of the bonds.
III)A debt service fund must make up the difference to the face value of the bonds.
A)I only
B)Either I or III
C)Either II or III
D)Either I or II
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Chapter 19: Not-For-Profit Entities
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Q1) A private university offers graduate assistantships to qualified students each year.In exchange for the waiver of tuition,graduate assistants are required to assist faculty members with research and other activities.Assume a graduate assistant received a $4,000 tuition waiver for the current academic year.Based on these facts,the university should record
A)tuition revenues of $4,000 and expenditures of $4,000.
B)tuition revenues of $0 and expenditures of $0.
C)tuition revenues of $4,000 and expenditures of $0.
D)tuition revenues of $4,000 and a reduction of tuition revenues of $4,000.
Q2) In accordance with FASB 117,contributions from donors which are to be permanently invested should be disclosed on the statement of activities of a private university as an increase in:
A)Permanently restricted net assets.
B)Permanently restricted fund balance.
C)Endowment fund balance.
D)Deferred revenues.
Q3) "Tangible fixed assets not depreciated by a private college or university" describes which term listed above?
Q4) Depreciation expense for the year was recorded.
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Chapter 20: Corporations in Financial Difficulty
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Q1) Based on the preceding information,what estimated amount will be available for general unsecured creditors upon liquidation?
A)$28,000
B)$93,000
C)$113,000
D)$121,000
Q2) Which of the following could be true of the proceedings under Chapter 11 of the Bankruptcy Code?
A)Always administered by the bankruptcy courts.
B)The debtor's assets are sold and its liabilities extinguished.
C)The company does not operate during this period.
D)The debtor continues as a business after the reorganization.
Q3) A debtor-in-possession balance sheet should report: I.Liabilities not subject to compromise.
II)Liabilities subject to compromise.
A)I only
B)II only
C)Both I and II
D)Neither I nor II
Q4) Briefly explain the three classes of creditors specified in the Bankruptcy Code.
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