Introduction to Public Accounting Final Exam
Questions
Course Introduction
Introduction to Public Accounting provides students with an overview of the principles, practices, and roles within the public accounting profession. The course covers foundational topics such as the nature of public accounting services, including auditing, tax, and consulting, and explores the regulatory framework, ethical standards, and professional responsibilities of Certified Public Accountants (CPAs). Students will learn about the types of public accounting firms, the career paths available, and the impact of current issues and emerging technologies on the field. Emphasis is placed on developing an understanding of the public accountant's role in ensuring transparency, accountability, and trust in financial reporting.
Recommended Textbook
Introduction to Governmental and Not for Profit Accounting 7th Edition by Patton
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Chapter 1: Governmental and Not-For-Profit
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Q1) For which types of organizations is the Financial Accounting Standards Board (FASB)responsible for establishing accounting and financial reporting standards?
A)Business-type organizations and not-for-profit organizations,including not-for-profit colleges,universities and health care providers
B)Business-type organizations;not-for-profit organizations;and all colleges,universities and health care providers,whether organized as not-for-profit or governmental entities
C)Business-type organizations only
D)All entities,except for those under the jurisdiction of the American Institute of CPAs
Answer: A
Q2) Which entity establishes financial accounting standards and principles for the federal government?
A)FASB
B)GASB
C)FASAB
D)None of the above.
Answer: C
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3
Chapter 2: The Use of Funds in Governmental Accounting
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Q1) The information generated from the accounting system of a governmental-type fund
A)is budget oriented
B)measures profitability
C)measures operational efficiency
D)is intended for use only by legislators
Answer: A
Q2) What is the purpose of a debt service fund?
A)to accumulate resources for paying interest on all debt issued by the government
B)to account for all outstanding long-term and short-term debt issued by the government
C)to account for outstanding general long-term debt
D)to accumulate resources for paying principal and interest on general long-term debt
Answer: D
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Chapter 3: Budgetary Considerations in Governmental Accounting
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Sample Questions
Q1) (Determination of property tax rate)
The City of Weston is preparing its budget for calendar year 2013.After estimating revenues from all other sources,the City calculates that it must raise $7,000,000 from property taxes.You are given the following information regarding the tax rate: \(\begin{array} { l r } \text { Property taxes to be collected }&\$7,000,000\\\text { Estimated uncollectible property taxes } & \$ 70,707 \\ \text { Total assessed value of property at beginning of } 2013 & \$ 65,000,000 \\ \text { Expected reduction in assessed value from appeals } & \$ 200,000 \\ \text { Assessed value of City property, not subject to tax } & \$ 1,400,000 \\ \text { Adjustments to assessed values for senior citizen exemptions } & \$ 1,000,000 \end{array}\)
Required:
a.Compute the gross amount of property taxes required to be levied.
b.Compute the tax rate per $100 of net assessed valuation.
c.Determine the amount of property tax that a home owner whose property is assessed at $35,000 will have to pay.
Answer: a.Required property tax levy: $7,000,000 + 70,707 = $7,070,707
b.Tax rate per $100 of net assessed valuation: 11ea8f88_f0b8_d2c8_b491_b379def734a3_TB3013_00 c.Tax rate on property assessed at $35,000 = $35,000 X .1133 = $3,965.50
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Chapter 4: The Governmental Fund Accounting Cycle
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Q1) Which of the following financial statements normally are prepared for a Special Revenue Fund? \(\begin{array}{llll}&\text { operating } & \text { balance } & \text { cash flows } \\
&\text { statement } & \text { sheet } & \text { statement }\\
\text { a. } & \text { yes } & \text { yes } & \text { no } \\
\text { b. } & \text { no } & \text { yes } & \text { yes } \\
\text { c. } & \text { yes } & \text { yes } & \text { yes } \\
\text { d. } & \text { yes } & \text { no } & \text { yes } \end{array}\)
Q2) Under the modified accrual basis of accounting
A)expenditures are recognized when paid in cash if not previously encumbered
B)property tax revenues are recognized when earned
C)property tax revenues are recognized when measurable and available
D)encumbrances are equivalent to expenditures
Q3) The City of Watsonville places a purchase order for street maintenance supplies of $56,000.This would result in:
A)a debit to expenditures-street maintenance supplies
B)a debit to encumbrances-street maintenance supplies
C)a credit to assigned fund balance
D)a credit to vouchers payable
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Chapter 5: The Governmental Fund Accounting Cycle
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Q1) Which of the following is the most likely reason that deferred revenue is reported on the General Fund balance sheet?
A)qualifying expenditures have been incurred in conjunction with a federal grant
B)there are property taxes receivable at year end that probably will not be collected for at least 60 days after the end of the accounting period
C)there are property taxes receivable at year end that will probably be collected within 60 days after the end of the accounting period
D)the government owes refunds to property owners who have successfully appealed their property tax assessments
Q2) (Treatment of inventory-purchases method)
The General Fund of the City of Mineral Wells shows $40,000 in supplies inventory on January 1,2013.During the year 2013,General Fund cash is used to purchase $110,000 of supplies.On December 31,2013,the city conducts an inventory count and finds $50,000 of supplies inventory remains.Using the purchases method of accounting for inventory,prepare the journal entries necessary to record (a)the purchase of the inventory and (b)to make the year-end adjustment to inventory.
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Chapter 6: The Governmental Fund Accounting Cycle
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Q1) Based on the preceding set of facts,what should be reported in the financial statements of the General Fund for the year?
A)other financing uses of $1 million
B)expenditures of $1 million
C)other financing sources of $2 million and other financing uses of $1 million
D)revenues of $2 million and other financing sources of $7 million
Q2) A city acquires equipment on January 1,2013 by means of a capital lease agreement.The agreement calls for paying the leasing company $300,000 in three $100,000 annual payments,starting December 31,2013.The present value of the three lease payments,using a 6% interest rate,is $267,300.The city will make the lease payments from the General Fund.What journal entry should the city make on January 1,2013 in the Fund?
A)debit expenditures - capital outlay;credit other financing sources,for $300,000
B)debit expenditures - capital outlay;credit other financing sources,for $267,300
C)debit capital assets;credit capital leases payable,for $300,000
D)debit expenditures - capital outlay;credit capital leases payable,for $267,300
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Chapter 7: The Governmental Accounting Cycle
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Q1) At December 31,2013,a Water Enterprise Fund has outstanding revenue bonds payable of $1 million,of which $40,000 is due to be paid on February 15,2014,and $50,000 is due to be paid on August 15,2014.How should it report this liability in its fund statement of net position as of December 31,2013?
A)It should report $40,000 as a current liability and disclose $960,000 in a note
B)It should report $40,000 as a current liability and $960,000 as a noncurrent liability
C)It should report $90,000 as a current liability and $910,000 as a noncurrent liability
D)It should report no liability for this obligation on the fund statement of net position
Q2) Where should Internal Service Funds be presented on the face of proprietary fund financial statements?
A)they should be presented with governmental funds,not proprietary funds
B)in a separate column to the right of Enterprise Funds
C)in a separate set of financial statements
D)major Internal Service Funds should be reported in separate columns
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Chapter 8: The Governmental Fund Accounting
Cycle--Fiduciary Funds
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Q1) Empire State collects personal income taxes both for its own activities and for cities in the state that have elected to "piggy-back" their own income taxes on top of the state taxes.As a fiduciary,the state temporarily invests all tax receipts pending determination of amounts to remit to the cities.The total investment income received by the state is $300,000,of which $100,000 will be sent to the cities.How much of the investment income should be recognized as revenue in the state's Agency Fund?
A)$0
B)$100,000
C)$200,000
D)$300,000
Q2) Securities held by an Investment Trust Fund and carried on the books at $100,000 are sold for $110,000.On receiving the cash from the sale,how should the Investment Trust Fund account for the $10,000 gain?
A)as a direct credit to net position of the Fund participants
B)as a liability - due to Fund participants
C)as an addition - net increase in fair value of investments
D)as a gain - equity in investment pool
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Chapter 9: Reporting Principles and Preparation of Fund
Financial Statements
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Q1) What is the purpose of preparing proprietary fund balance sheets in classified format?
A)to distinguish between current and noncurrent assets and liabilities
B)to distinguish between assets and liabilities
C)to distinguish between restricted and unrestricted net position
D)to segregate net position into three components: invested in capital assets,net of related debt;restricted;and unrestricted
Q2) Which of the following interfund transactions does not affect fund balance?
A)reimbursements
B)transfers
C)loans
D)interfund services provided and used
Q3) Which of the following financial statements or schedules is prepared for all fiduciary funds?
A)Statement of fiduciary cash flows
B)Budgetary comparison schedule
C)Statement of fiduciary net position
D)Reconciliation between fund-level and government-wide level operating activities
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Chapter 10: Government-Wide Financial Statements
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Q1) If a government uses the "modified approach" in accounting for its infrastructure assets,which of the following items properly will not appear in its government-wide statement of activities?
A)depreciation expense for any capital assets
B)interest expense for bonds issued to finance any capital assets
C)depreciation expense for infrastructure capital assets
D)interest expense for bonds issued to finance infrastructure capital assets
Q2) How much should the city report in its December 31,2012,government-wide financial statements as net position invested in capital assets,net of related debt?
A)$70,000
B)$60,000
C)$58,333
D)$10,000
Q3) On the government-wide statement of net position,assets and liabilities may be reported:
A)in a classified format
B)in order of relative liquidity
C)in either order of relative liquidity or a classified format
D)in separate columns
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Chapter 11: Federal Government Accounting and Reporting
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Q1) Which of the following is the correct sequence of activities within the federal budgetary accounting cycle?
A)appropriation,apportionment,allotment,obligation
B)obligation,allotment,apportionment,appropriation
C)allotment,obligation,appropriation,apportionment
D)apportionment,allotment,obligation,appropriation
Q2) What does a credit balance in the account "Allotments - realized resources" show?
A)The agency's cash balance with the Treasury.
B)The amount available to a department for allotment to an agency
C)The amount of goods or services ordered by an agency but not received.
D)The amount of resources available to an agency for obligation or commitment.
Q3) What is the name of the entity that recommends accounting standards for the federal government?
A)the Governmental Accounting Standards Board
B)the Federal Accounting Standards Advisory Board
C)the Financial Accounting Standards Board
D)the American Institute of Certified Public Accountants
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Chapter 12: Accounting for Not-For-Profit Organizations
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Q1) A not-for-profit museum holds a collection of historical treasures.It manages the treasures in a manner that meets all three criteria permitting the option to either capitalize the collection or not.The museum has chosen not to capitalize its collection.It then receives a donation of several items that it intends to sell to help meet operating expenses.How should the museum account for the donated items?
A)It must recognize the fair value of the donated items as revenues or gains and assets when it receives the donation.
B)It has an option either to recognize or not to recognize the fair value of the donated items as revenues or gains when it receives the donation.
C)It may not recognize a revenue or gain until it sells the donated items.
D)It must disclose the donation in the notes to the financial statements,but it may not recognize a revenue or gain until it sells the donated items.
Q2) For not-for-profit entities,external financial reporting focuses on:
A)individual funds
B)fund groups
C)the organization as a whole
D)major funds
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Chapter 13: Accounting for Health Care Organizations
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Q1) In the statement of operations of a not-for-profit hospital,which of the following is not likely to be a factor in determining Excess of revenues over expenses?
A)net patient service revenue
B)change in unrealized gains and losses on investments
C)investment income
D)provision for bad debts
Q2) A not-for-profit hospital receives a $25,000 donation that must be used for a special training program for nurses.When the donated resources are used for the intended purpose,in which net asset classification should the hospital report the expense?
A)assets limited as to use
B)temporarily restricted net assets
C)unrestricted net assets
D)permanently restricted net assets
Q3) Which three categories of net position are reported by governmental hospitals?
A)restricted,committed,and unassigned
B)net investment in capital assets,restricted ,and unrestricted
C)temporarily restricted,permanently restricted,and unrestricted
D)permanently restricted,current,and noncurrent
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Chapter 14: Analysis of Financial Statements and Financial Condition
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Q1) At December 31,2013,Yorktown's pension fund had net assets available for benefits of $12 million.Its actuarial accrued liability at that time was $16 million.For the year ended December 31,2013,its pension fund had paid $3 million in pension benefits.Yorktown's salaries for the year were $18 million.What was Yorktown's funded ratio?
A)67%
B)75%
C)89%
D)400%
Q2) Why do financial analysts prepare common size financial statements?
A)it is easier to work with financial statements when they are all in the same format
B)they help the analyst identify changes over time in the proportion that each item of expense bears to the entity's total expenses
C)they are a necessary first step in allowing the analyst to develop per capita information
D)they show the dollar amount of change from one year to another for each item of expense,both for the entity studied and the reference group.
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Chapter 15: Fundamentals of Accounting
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Q1) Elsie owns a small business.At the end of the month,Elsie needed to make adjusting entries to prepare statements on the accrual basis.Which two of the following six possibilities occurred as a result of each of the following adjustments - an asset increased,an asset decreased,a liability increased,a liability decreased,equity increased,or equity decreased:
a.An accrual for salaries that were due to an employee,but were not paid
b.An adjustment for depreciation on Elsie's store fixtures
c.An adjustment for the expiration of prepaid insurance
d.An accrual for interest earned on a certificate of deposit that had not matured
Q2) Prepare journal entries to record the following transactions regarding a fire insurance policy purchased by Chang Electronics.Chang's business operates on a calendar-year basis.
a.April 1,2013 - Chang arranges to buy fire insurance.He receives a bill for $10,000 for an insurance policy that covers the period April 1,2013 through March 31,2014.
b.April 10 - Chang pays the insurance bill.
c.December 31- Chang prepares financial statements for the year ended.December 31,2013.He prepares an adjusting entry regarding insurance.
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