Governmental and Nonprofit Accounting Practice Exam
Course Introduction
This course provides a comprehensive overview of accounting principles and practices unique to governmental and nonprofit entities. Students will explore the differences between private sector and public sector financial reporting, focusing on fund accounting, budgetary control, and regulatory compliance. Key topics include the structure and use of financial statements for government agencies and nonprofits, revenue recognition, fund categorization, and the role of accountability and transparency in the public sector. The course also examines recent developments in governmental accounting standards and provides practical skills for preparing, analyzing, and interpreting financial information relevant to decision-making in these organizations.
Recommended Textbook
Advanced Financial Accounting 8th Edition by Richard Baker
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Chapter 1: Intercorporate Acquisitions and Investments in Other Entities
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Q1) The fair value of net identifiable assets of a reporting unit of X Company is $300,000.On X Company's books,the carrying value of this reporting unit's net assets is $350,000,including $60,000 goodwill.If the fair value of the reporting unit is $335,000,what amount of goodwill impairment will be recognized for this unit?
A)$0
B)$10,000
C)$25,000
D)$35,000
Answer: C
Q2) Based on the preceding information,what number of shares of $7 par value stock did Spin issue to Conservative?
A)10,000
B)7,000
C)8,000
D)25,000
Answer: C
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Chapter 2: Reporting Intercorporate Interests
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Q1) Based on the preceding information,what would Gulfstream report as income tax expense for the year?
A)$17,500
B)$18,760
C)$23,800
D)$22,540
Answer: B
Q2) Based on the information provided,differential assigned by Wheeley to inventory for the year is:
A)$0
B)$12,000
C)$4,800
D)$22,000
Answer: C
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) Based on the preceding information,what amount will be assigned to the noncontrolling interest on January 3,2009,in the consolidated balance sheet?
A)$86,000
B)$44,000
C)$68,800
D)$50,000
Answer: A
Q2) Quid Corporation acquired 75 percent of Pro Company's common stock on December 31,2006.Goodwill (attributable to Quid's acquisition of Pro shares)of $300,000 was reported in the consolidated financial statements at December 31,2006.Parent company approach was used in determining this amount.What is the amount of goodwill to be reported under proprietary theory approach?
A)$300,000
B)$400,000
C)$150,000
D)$100,000
Answer: A
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Chapter 4: Consolidation of Wholly Owned Subsidiaries
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Q1) Based on the preceding information,what amount of differential will arise in the consolidation process?
A)$0
B)$5,000
C)$15,000
D)$65,000
Q2) Based on the information given above,what will be the amount of net assets reported in the consolidated balance sheet,prepared immediately following the combination?
A)$1,150,000
B)$1,550,000
C)$1,700,000
D)$1,830,000
Q3) Based on the preceding information,what is the differential associated with the acquisition?
A)$15,000
B)$21,000
C)$6,000
D)$10,000
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Chapter 5: Consolidation of Less-Than-Wholly Owned Subsidiaries
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Q1) Based on the preceding information,what amount will be reported as noncontrolling interest in the consolidated balance sheet prepared immediately after the business combination?
A)$0
B)$15,000
C)$40,000
D)$46,000
Q2) Based on the preceding information,what amount would be reported as total liabilities in the consolidated balance sheet at December 31,2009?
A)$330,000
B)$712,000
C)$318,000
D)$130,000
Q3) Based on the preceding information,the amount of goodwill reported in the consolidated financial statements prepared immediately after the combination is:
A)$0
B)$32,500
C)$26,000
D)$20,000
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Chapter 6: Intercompany Transfers of Services and
Noncurrent Assets
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Q1) A parent sold land to its partially owned subsidiary during the year at a loss.The subsidiary continues to hold the land at the end of the year.The amount to be reported as consolidated net income for the year should equal:
A)the parent's separate operating income,plus the intercompany loss.
B)the parent's separate operating income,plus the intercompany loss,plus the subsidiary's net income.
C)the parent's separate operating income,minus the intercompany loss.
D)the parent's separate operating income,minus the intercompany loss,plus the subsidiary's net income.
Q2) Peter Architectural Services owns 100 percent of Smith Manufacturing.During the course of 2008 Peter provides $100,000 of architectural services associated with Smith's new manufacturing facility,which will open January 4,2009,and has a 5 year useful life.Explain the impact providing this service has on Peter Architectural Services' 2008 and 2009 consolidated financial statements.
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Chapter 7: Intercompany Inventory Transactions
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Q1) Based on the information given above,by what amount was unadjusted revenue overstated in the combined income statement for 2008?
A)$25,000
B)$56,892
C)$31,250
D)$6,250
Q2) Based on the information given above,what will be the consolidated net income for 2007?
A)$495,000
B)$317,750
C)$486,250
D)$690,000
Q3) Based on the information given above,what amount should be reported in the December 31,2008,consolidated balance sheet as inventory?
A)$36,000
B)$12,000
C)$15,000
D)$28,000
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Chapter 8: Intercompany Indebtedness
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Q1) Based on the information given above,what amount of gain or loss on bond retirement will be reported in the 2008 consolidated financial statements?
A)$17,000 loss
B)$12,800 loss
C)$18,500 gain
D)$22,200 gain
Q2) Based on the information given above,in the preparation of the 2008 consolidated financial statements,premium on bonds payable will be:
A)debited for $45,000 in the eliminating entries.
B)credited for $40,500 in the eliminating entries.
C)debited for $40,500 in the eliminating entries.
D)credited for $45,000 in the eliminating entries.
Q3) Based on the information given above,what amount of interest expense will be eliminated in the preparation of the 2008 consolidated financial statements?
A)$13,000
B)$13,500
C)$10,000
D)$15,000
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Chapter 9: Consolidation Ownership Issues
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Q1) Based on the information provided,what amount of income will be assigned to the noncontrolling interest in the 2008 consolidated income statement?
A)$23,750
B)$25,000
C)$18,000
D)$33,750
Q2) Based on the information provided,what amount will be reported as income assigned to the controlling interest for 2009 under the treasury stock method?
A)$18,750
B)$156,250
C)$175,000
D)$100,000
Q3) Based on the preceding information,in the journal entry recorded by Vision for sale of shares,Additional Paid-in Capital will be credited for:
A)$0.
B)$15,000.
C)$9,000.
D)$45,000.
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Chapter 10: Additional Consolidation Reporting Issues
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Q1) Based on the preceding information,what was the change in cash balance for the consolidated entity for 2009?
A)Increase of $49,000
B)Decrease of $66,000
C)Increase of $17,000
D)Increase of $32,000
Q2) Based on the information provided,income to the controlling interest for 2009 is:
A)$155,370.
B)$56,000.
C)$168,000.
D)$250,000.
Q3) Based on the preceding information,what was the change in cash balance for the consolidated entity for 2009?
A)Decrease of $153,000
B)Increase of $450,000
C)Increase of $293,000
D)Increase of $150,000
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Chapter 11: Multinational Accounting: Foreign Currency
Transactions and Financial Instruments
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Q1) Based on the preceding information,in the entry made on December 2<sup>nd</sup> to revalue foreign currency receivable to current equivalent U.S.dollar value,
A)Accounts Payable will be debited for $18,350.
B)Foreign Currency Units will be debited for $18,500.
C)Foreign Currency Transaction Gain will be credited for $150.
D)Other Comprehensive Income will be credited for $300.
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) Refer the information provided above.Assuming the U.S.dollar is the functional currency,what is the amount of Mercury's cost of goods sold remeasured in U.S.dollars?
A)$1,680
B)$1,712
C)$1,700
D)$1,692
Q2) Based on the preceding information,at what dollar amount is the ending inventory shown in the trial balance of the consolidated workpaper?
A)$45,000
B)$50,000
C)$40,000
D)$35,000
Q3) When the local currency of the foreign subsidiary is the functional currency,a foreign subsidiary's inventory carried at cost would be converted to U.S.dollars by:
A)translation using historical exchange rates.
B)remeasurement using historical exchange rates.
C)remeasurement using the current exchange rate.
D)translation using the current exchange rate.
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Chapter 13: Segment and Interim Reporting
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Q1) Toledo Imports,a calendar-year corporation,had the following income before tax expense and estimated effective annual income tax rates for the first three quarters in 2008: Toledo's income tax expense in its interim income statement for the nine months ended September 30 and for the third quarter,respectively,are:
A)$250,800 and $103,200.
B)$252,000 and $108,000.
C)$252,000 and $103,200.
D)$250,800 and $108,000.
Q2) Refer to the above information.Which of the operating segments above are reportable segments?
A)B,C,and D
B)A,B,D,and E
C)B,D,and E
D)A,B,C,D,and E
Q3) FASB 131 uses a(n)______ approach to the definition of segments.
A)line of business
B)entity approach
C)portfolio
D)management
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Chapter 14: Sec Reporting
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Q1) In the issuer's annual report,how many years of audited financial statements must be presented? I.Three years of audited income statements
II)Two years of audited balance sheets
III)Three years of audited statements of cash flows
A)I and II
B)II and III
C)I and III
D)I,II,and III
Q2) Which of the following covers new or revised administrative practices and interpretations used by the SEC staff in reviewing financial statements?
A)Securities Exchange Act releases
B)Exchange Act industry guides
C)Accounting and Auditing Enforcement Releases
D)Staff Accounting Bulletins
Q3) Customary Review
Q4) Staff Accounting Bulletins
Q5) Comment Letter
Q6) "Red Herring" Prospectus
Q7) Accounting and Auditing Enforcement Releases
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Chapter 15: Partnerships: Formation,operation,and
Changes in Membership
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Q1) Apple and Betty are planning on beginning a new business.They plan on forming a partnership.Apple will contribute $300,000 and will not be working.Betty will be working full time.They plan on splitting profits equally.They approach you,as an accounting major,to confirm their thoughts.What do you recommend?
Q2) When a partnership is formed,noncash assets contributed by partners should be recorded: I.at their respective book values for income tax purposes. II)at their respective fair values for financial accounting purposes.
A)I only
B)II only
C)Both I and II
D)Neither I nor II
Q3) Which of the following accounts could be found in the general ledger of a partnership?
A)Option A
B)Option B
C)Option C
D)Option D
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Chapter 16: Partnerships: Liquidation
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Q1) Refer to the information provided above.Using a safe payments schedule,how much cash will be distributed to Dennis at the end of the first month?
A)$64,000
B)$60,000
C)$24,000
D)$36,000
Q2) Based on the preceding information,what amount will be paid out to Scott upon liquidation of the partnership?
A)$0
B)$2,500
C)$5,000
D)$6,429
Q3) Listen and Hear are thinking of dissolving their partnership.Listen has a friend who told him to complete a "lump-sum" liquidation.Hear wants to complete an "installment" liquidation.They have come to you for advice.What do you recommend and Why?
Q4) A partnership may be involved in "Dissociation" or "Dissolution".
Required:
Describe "Dissociation" and "Dissolution."
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Chapter 17: Governmental Entities: Introduction and General Fund Accounting
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Q1) The Town of Pasco has no supplies inventory in its general fund on January 1,2008.During 2008,Pasco incurred expenditures of $200,000 for the acquisition of supplies.On December 31,2008,Pasco's inventory of supplies amounted to $30,000.Assume Pasco uses the purchase method of accounting for supplies in its general fund and that the village reports on the calendar year.On December 31,2008,the general fund of Pasco should credit:
A)Expenditures for $170,000.
B)Fund Balance-Unreserved for $170,000.
C)Fund Balance-Reserved for Inventories for $30,000.
D)Expenditures for $30,000.
Q2) Briefly discuss the various types of governmental funds and proprietary funds.
Q3) Based on the preceding information,which of the following would be the correct account balances for 2008 if Gotham City used the consumption method of accounting for inventories?
A)Option A
B)Option B
C)Option C
D)Option D
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Chapter 18: Governmental Entities: Special Funds and Government-Wide Financial Statements
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Q1) Refer to the above information.For the year ended June 30,2009,what amount should the trust fund report as investment earnings on the statement of revenues,expenses,and changes in fund balance?
A)$60,000
B)$68,000
C)$70,000
D)$78,000
Q2) Which of the following items would not be reported on the financial statements of a special revenue fund?
A)Long-term productive assets.
B)Expenditures and revenues.
C)Vouchers payable and unreserved fund balance.
D)Fund balance reserved for encumbrances and expenditures.
Q3) Based on the preceding information,on the statement of net assets prepared at June 30,2009,what amount should be reported for total net assets?
A)$2,425,000
B)$4,200,000
C)$2,900,000
D)$3,625,000
Page 20
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Chapter 19: Not-For-Profit Entities
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Q1) The CFO of a "Not-for-Profit" hospital is making a presentation at your college.The presentation is for Business and Health-Science majors.During the presentation the CFO mentions assets being reported "above the line." On the way out your roommate a health-science major asks,you an accounting major,to explain what the CFO was referring to.What do you respond?
Q2) Endowment income was earned.The donor specified that the income be used for community service.
Q3) Depreciation expense for the year was recorded.
Q4) Transaction: The governing board designated assets for plant expansion. Effect on Statement of Operations:
A)Increases operating income.
B)Decreases operating income.
C)The event is reported on the statement of operations,but there is no effect on operating income.
D)The event is not reported on the statement of operations.
Q5) Incurred fund-raising costs.
Q6) "Classification of contributions restricted by purpose" describes which term listed above?
Q7) "Financial statement of a private NFP entity" describes which term listed above?
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Chapter 20: Corporations in Financial Difficulty
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Q1) 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
Q2) Under the Bankruptcy Code,an insolvent corporation may be: I.Reorganized. II)Liquidated.
A)I
B)II
C)Either I or II
D)Neither I nor II
Q3) Based on the preceding information,what is the total amount of unsecured claims?
A)$113,000
B)$126,000
C)$93,000
D)$121,000
Q4) What are the conditions necessary for using fresh start reporting in reorganization?
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