Practice Tests (All Q's) F6 M6 backwards Flashcards
(87 cards)
1
Q
What is the measurement focus of governmental fund accounting?
A
Current financial resources
2
Q
For governmental fund types, which item is considered the primary measurement focus?
A
Current financial resources
3
Q
What basis of accounting does enterprise funds use?
A
Accrual basis
4
Q
What fund types of a city government are revenues and expenditures recognized on the same basis of accounting as general fund?
A
debt Service
5
Q
Which bases of accounting should a government use for its proprietary funds in measuring financial position and operating results?
Modified accrual basis - Y/N
Accrual basis - Y/N
A
Modified accrual basis - N
Accrual basis - Y
6
Q
What type of fund of a governmental unit use the same basis of accounting as the special revenue fund?
A
Permanent fund
7
Q
Name a fund that would be reported as a fiduciary fund in Pine City’s FS
A
Private purpose trust
8
Q
What fund type should account for fixed assets in a manner similar to “for profit” organization?
A
Enterprise fund
9
Q
Which of the following funds of a governmental unit recognizes revenues only in the accounting period in which they become available and measurable in their fund financial statements?
General fund - Y/N
Enterprise fund - Y/N
A
General Fund - Y
Enterprise Fund - N
10
Q
What measurement focus and basis of accounting should be used by a local government’s private-purpose trust fund?
A
Measurement focus - economic resources
Basis of accounting - Accrual
11
Q
Which of the following fund types of a governmental unit has (have) an economic measurement focus?
General fund - Y/N
Permanent fund - Y/N
A
General fund - N
Permanent fund - N
12
Q
Are budgetary accounts reported in internal service funds?
A
No
13
Q
Roy City received a gift, the principal of which is to be invested in perpetuity with the income to be used to support the local library. In which fund should this gift be recorded?
A
Permanent fund
14
Q
Is there a budgetary focus for governmental funds?
A
Yes
15
Q
Does presentation for governmental funds include a statement of net position?
A
No
16
Q
The measurement focus of governmental-type funds is on the determination of:
Current financial resources - Y/N
Financial position - Y/N
A
Current financial resources - Y
Financial position - Y
17
Q
The primary emphasis in accounting and reporting for governmental funds is on:
A
Source, use , and balance of current financial resources
18
Q
What basis of accounting should be used when preparing a governmental funds statement of revenues, expenditures, and changes in fund balances?
A
Modified accrual basis of accounting
19
Q
The economic resources measurement focus and accrual basis of accounting would be most appropriate for which fund as used in the fund financial statements?
A
Internal service fund
20
Q
The modified accrual basis of accounting should be used for which fund for purposes of fund financial statements?
A
Capital projects fund
21
Q
What is a governmental fund that uses the current financial resources measurement focus?
A
special Revenue fund
22
Q
What fund of a governmental unit uses the modified accrual basis of accounting?
A
special Revenue funds
23
Q
What fund type of a governmental unit uses the same basis of accounting as the special revenue fund?
A
Capital Projects
24
Q
The city of C has 2 trust funds for the benefit of the city’s library, trust fund A and trust fund B. Only the earnings from A can be expended and both the principal and interest from B can be expended. How should the city of C report each trust fund?
A
A - Permanent
B - Special revenue
25
Under the modified basis of accounting for a governmental unit, revenues should be recognized in the accounting period in which they:
become available and measurable
26
A permanent fund of a municipality would have the same measurement focus as a:
General fund
27
The governmental fund measurement focus is on the determination of:
Income - Y/N
Financial position - Y/N
Current financial resources - Y/N
Income - N
Financial position - Y
Current financial resources - Y
28
A local government unit could have funds using which of the following accounting bases?
Accrual basis - Y/N
Modified accrual basis - Y/N
Accrual basis - Y
Modified accrual basis - Y
29
How should a nongovernmental NFP org report investments in its financial statements?
Fair value with gains and losses reported in the statement of activities
30
How should a nongovernmental NFP org report depreciation expense in its statement of activities?
It should be included as a decrease in net assets without donor restrictions
31
In a Statement of Activities of the People's Environmental Protection Association, a voluntary community organization, depreciation expense should:
Be included as an element of expense
32
A portfolio of equity securities that are traded on a national exchange is donated to a private, not-for-profit college as an endowment fund. How should the equity portfolio be valued in the college's year-end financial statements three years after the donation?
Using fair value at the date of the financial statements
33
On the first day of the year, a donor established a $100,000 irrevocable perpetual trust with a third-party trustee naming a not-for-profit entity as the sole income beneficiary in perpetuity. During the year, the trust earned and distributed $4,000 in income to the entity for unrestricted use. On the last day of the year, the fair value of the trust had increased by $5,000. What amount should the entity report in its year-end statement of financial position as beneficial interest in perpetual trust?
$105,000
34
What is the paramount objective of financial reporting by state and local governments?
Accountability
35
What amount should a nongovernmental NFP org report investments in debt securities?
Quoted market prices
36
In the balance sheet of a not-for-profit hospital, marketable equity securities should be reported at:
Fair value with gains and losses reported in the statement of activities
37
Ragg Coalition, a nongovernmental NFP org, received a gift of Treasury bills. The cost to the donor was $20,000, with an additional $500 for brokerage fees that were paid by the donor prior to the transfer of the Treasury bills. The Treasury bills had a fair value of $15,000 at the time of the transfer. At what amount should Ragg report the Treasury bills in its statement of financial position?
$15,000
38
How should a nongovernmental NFP org classify gains and losses on investments purchased with endowment assets with donor restrictions?
Unless explicitly restricted by donor or law, gains and losses should be reported in the statement of activities as increases or decreases in net assets without donor restrictions
39
The Marble Foundation Inc., a NFP org, is financially interrelated with its beneficiary organization, Boulder University. Receipts of the Marble Foundation would be displayed/disclosed in the Boulder University financial statements as:
A change in the university's interest in the foundation on the statement of activities
40
What is considered part of one of the three primary user groups of the external financial reports of a state government?
Advocate groups within the state
41
What characteristic of service efforts and accomplishments is the most difficult to report for a governmental entity?
Relevance
42
In complying with GASB 34, a government will present separate fund financial statements for its governmental and proprietary funds. The purpose of this presentation is to:
Report addition and detailed information about the primary government
43
At what value should a nongovernmental NFP org record shares of stock when received?
Fair value on the date of donation
44
Fund accounting is used by governmental units with resources that must be:
Segregated for the purpose of carrying on specific activities or attaining certain objectives
45
A nongovernmental, not-for-profit organization received the following donations of corporate stock during the year:
Donation 1
Donation 2
Number of shares
2,000
3,000
Adjusted basis
$8,000
$5,500
Fair market value at time of donation
8,500
6,000
Fair market value at year-end
10,000
4,000
What net value of investments will the organization report at the end of the year?
$14,000
46
A nongovernmental, not-for-profit organization had the following investments:
Investment
Cost
Fair Value
(Beginning of Year)
Fair Value
(End of Year)
Bonds
$9,900
$10,000
$9,950
Stock A (100 shares)
$50 per share
$45
$51
Stock B (200 shares)
$40 per share
$41
$49
What amount should be the total value of investments reported in the year-end statement of financial position?
$24,850
47
NFP orgs are considered financially interrelated organizations in the event that one of the organizations:
Is both able to influence the operating and financial decisions of the other AND has an ongoing economic interest in the net assets of the other
48
Belle, a nongovernmental NFP org, received funds during its annual campaign that were specifically pledged by the donor to another nongovernmental NFP health org. How should Belle record these funds?
Increase in assets and increase in liabilities
49
The city accountant for a newly established municipality is setting up the new fund structure for the city's accounting system. How many funds should the accountant establish for the city?
The minimum number of funds consistent with legal requirements and sound financial administration
50
RST Charities received equity securities valued at $100,000 as a gift without donor restrictions at the beginning of Year 1. During Year 1, RST received $5,000 in dividends from these securities; and year-end, the securities had a fair market value of $110,000. By what amount did these transactions increase RST's net assets?
$115,000
51
The primary authoritative body for determining the measurement focus and basis of accounting standards for governmental fund operating statements is the:
Governmental Accounting Standards Board (GASB)
52
Which of the following leads to the use of fund accounting by a governmental organization?
Financial Control - Y/N
Legal Restrictions - Y/N
Financial Control - Y
Legal Restrictions - Y
53
In its fiscal year ended June 30, Year 1, Barr College, a large, private institution, received $100,000 designated by the donor for scholarships for superior students. On July 26, Year 1, Barr selected the students and awarded the scholarships. How should the July 26 transaction be reported in Barr's statement of activities for the year ended June 30, Year 2.
As both an increase and a decrease of $100,000 in net assets without donor restrictions
54
Whitestone, a nongovernmental NFP organization, received a contribution in December, Year 1. The donor restricted use of the contribution until March, Year 2. How should Whitestone record the contribution?
Report as income in Year 1
55
In the current year a nongovernmental, NFP entity incurred $630,000 in expenditures exclusive of in-kind and other nonmonetary activity during the year. It also received legal services, which otherwise would have cost $40,000, and and consumed donated supplies with a value of $15,000. What should the entity report as total expenses in its statement of activities for the current year?
$685,000
56
The Community Services corporation is a private nongovernmental, NFP org that received a $1,000,000 private donation for the improvement of after-school programming in blighted neighborhoods. The donor requires an administrative report of program accomplishments once funds are fully expended. By the end of Year 1, Community Services had incurred $400,000 in program expenses. As a result of this activity, what classifications of revenues and expenses will Community Services report?
Revenues - with donor restriction $1,000,000
Expenses - without donor restrictions $400,000
57
During Year 7, Jones Foundation received the following support:
- A cash contribution of $875,000 to be used at the board of directors' discretion
- A promise to contribute $500,000 in Year 8 from a supporter who has made similar contributions in prior periods
- Contributed legal services with a value of $100,000, which Jones would have otherwise purchased
At what amounts would Jones classify and record these transactions?
Revenues and gains without donor restrictions: $975,000
Revenues and gains with donor restrictions: $500,000
58
Hospital Inc., a NFP org with no governmental affiliation, reported the following in its accounts for the current year ended December 31:
- Gross patient service revenue from all services provided at the established billing rates of the hospital (note that this figure includes charity care of $25,000): $775,000
- Provision for bad debts: $15,000
- Difference between established billing rates and fees negotiated with third-party payors (contractual adjustments): $70,000
What amount would the hospital report as net patient service revenue in its statement of activities for the current year ended December 31?
$680,000
59
Altruistic University, a NFP research university, conducts cancer research as part of its normal ongoing activities and regularly receives contributions to support these efforts. Experimental Pharmaceuticals Corporation, a large for profit corporation that markets drugs for cancer treatment, provides resources to Altruistic University to perform clinical trial research on an experimental drug to treat cancer. Resources are provided on the condition that Altruistic University comply with strict specifications governing the manner in which the research is conducted and the frequency and the character of outcome reports. Altruistic University should account for the resources provided by Experimental Pharmaceuticals as:
An exchange transaction that increases net assets without donor restrictions
60
Chris donated securities with a cost of $20,000 and a fair market value of $50,000 to a local civic theater. Chris's tax deduction was limited to $35,000. At what amount should the theater record the securities at the date of donation?
$50,000
61
A NFP boys club, YBCA, received $190,000 in pledges at YE. Of the pledges received, $75K is donor restricted for replacement of the gym's hardwood floors and remainder is without donor restrictions. If YBCA estimates that 8% of the pledges will be uncollectible, what amount will the NFP boys club report as net pledges receivable at YE, assuming all pledges are legally enforceable?
$174,800
62
The Pel Museum, a NFP org, received a contribution of historical artifacts, it need NOT recognize the contribution if the artifacts are to be sold and the proceeds used to:
Acquire other items for collections
63
The Charitable Foundation (the Foundation) provides Veterans Support Inc., a private NFP org, with a $400,000 grant to provide specific career training to veterans. The grant specifically requires Veterans Support to provide training to at least 8,000 veterans over the course of the year at a rate of at least 2,000 per quarter. The Foundation specifies a right to release from the obligation in the agreement in the event training does not keep pace with grant specifications. The Foundation also stipulates that it will only pay Veterans Support $100,000 each quarter with services provided to 2,000 veterans. As a result of this transaction, Veterans Support Inc. would:
Account for the grant as conditional and recognize contribution revenue as each milestone (veterans served) is met
64
Conditions are associated with pledges or receipts provided to a NFP organization in the event that there is:
Measurable performance-related barriers or other barriers relative to the promise or receipt AND a right of return of contributed resources or release of the promisor of any obligations
65
Balfour Animal Shelter, a NFP organization, received $10,000 from Agnes Balfour to fund the acquisition of grooming equipment on December 1, Year 1. On February 2, Year 2, the shelter used $5,000 to purchase grooming equipment and on March 15, Year 2, used the remaining $5,000 to purchase more equipment as intended by the bequest. As a result of the above transaction, Balfour Animal Shelter would record the following on its December 31, Year 1, financial statements:
Net assets with donor restrictions of $10,000
66
In Year 1, a donor promised to give $100,000 to a nongovernmental NFP kitchen if it provides 20,000 meals by March 31, Year 2. At the end of Year 1, the kitchen had provided 20,000 meals. In which line item, if any, should the contribution be reported in the kitchen's statement of financial position at the end of Year 1.
Contributions receivable
67
During the year, Pledge College received the following:
- A $50,000 pledge without donor restrictions to be paid the following year
- A $25,000 cash gift donor-restricted for scholarships
- A notice from a recent graduate that the college is named as a beneficiary of $10,000 in that graduate's will
What amount of contribution revenue should Private College report in its statement of activities?
$75,000
68
On July 1, Year 1, Mission Goodworks, a religious organization, received property as a gift from a local corporation with the understanding that the building would be used principally for a purpose consistent with the organization's mission. How should Mission Goodworks record this gift on its December 31, Year 1 financial statement?
Record the property as an increase in assets on the Statement of Financial Position and as support on the Statement of Activities and measure the property at its fair value
69
Arc Hospital received an unconditional pledge for $1 million, which will be paid in four installments of $250,000 over four years. What amount of installment pledge revenue should be recognized in the second year?
$0
70
During the year ended December 31, Year 0, Rich Giver notified the Salvation Church that he had remembered the Church in his will with a restricted bequest for the construction of an addition to the sanctuary conditioned upon acquisition of property adjoining the church, the site of the sanctuary expansion. Rich Giver dies in Year 3 and the probate court validates the will in Year 4 indicating that Rich Giver allocated $500,000 to the church. Salvation Church had not secured the property. Salvation Church would recognize the following revenue with donor restrictions in each of the following years:
Year 0
Year 3
Year 4
$0 in all 3 years
71
Healthy Care Hospital, Inc. a private NFP org, accumulated the following patient service revenue transactions in their records during the June 30, Year 1 fiscal year:
- Gross patient fees for all services provided at usual and customary rates: $5,000,000
- Contractual allowances for third party payments: $800,000
- Bad debts written off after an assessment of patient's ability to stay: $350,000
- Current year provision for bad debt: $300,000
- Charity care: $1,300,000
The amount reported as net patient service revenue for Healthy Care Hospital, Inc. for the year ended June 30, Year 1 would be:
$2,900,000
72
The Darberville Day Care collected $45,000 in day care fees from families during the year ended December 31, Year 1 to provided services. During the same period, the Day Care collected $30,000 from the United Way to provide ongoing funding for the Day Care's early childhood development programming and $10,000 from the Federal School Lunch Program to defray the cost of meals served to children. The Day Care's accounting policies consistently allow for the direct recording of contribution revenue with donor restrictions as contribution revenue without donor restrictions when the terms and conditions of the contributions are met in the year of donation. As a result of the above transactions, the Day Care would record revenues and support without donor restrictions of:
$85,000
73
The Community Mental Health Center (the Center), a nongovernmental, not-for-profit organization, executed state grant funding contracts for its services subject to a 25% match requirement from local funding sources. Qualifying match may include local government funding, in-kind revenues and expenses, and first-party fees. The state contracts are the primary source of operational funding for the Center. Services associated with the grants are fully consistent with the ongoing mission of the organization and revenues are fully consumed by the costs of services provided each year. The organization has a policy of consistently classifying revenues that carry donor restrictions as revenue without donor restrictions when restrictions are met within the same period. The terms and conditions of the grant likely result in:
Unrestricted revenues from the state recognized as matching conditions are met
74
The City of Lawrence's United Way received a donation of a vehicle from a concerned citizen on January 1, Year 1, who directed that the vehicle was to be donated to the Lawrence Day Care Center, a NFP org, and went on to stipulate that the Lawrence United Way could use the vehicle for a period of one year prior to the transfer. The vehicle had a fair value of $9,000 and a remaining useful life of 3 years. The United Way elects to use the vehicle. On their December 31, Year 1 financial statements, each organization should display the following Net Asset changes based on this transaction:
Lawrence United Way
Without donor restrictions: $3,000
Lawrence Day Care
With donor restrictions: $6,000
75
When should a conditional pledge to nongovernmental NFP org be recognized as revenue?
Never
76
On December 31, Year 1, SC Community Center, a nonprofit organization, acquired a building with a fair value of $500,000 by signing a mortgage note payable to SC County. The note requires no payments to be made for 30 years and is interest free. The present value of the loan, at the market interest rate, is $15,000. Furthermore, in the past, as long as an organization (in this case the Community Center) has continued to fulfill its stated purpose, SC County has forgiven loans of this nature. The Community Center has been in existence for 40 years, is well-respected in the community, and is strong financially. What is the correct accounting treatment of this transaction on the books of SC Community Center?
Mortgage payable of $15,000
77
On December 30, Year 1, Albert Altruistic donated $200,000 to the Carton Museum under the terms and conditions of a charitable remainder trust that guarantees Mr. Altruistic a life-time tax free annuity of $20,000 per year and bequeaths the remainder to Carton for use in their operations in furtherance of the mission of the museum. Independent actuaries have estimated that the museum's liability has a present value of $84,250. As a result of his contribution, the Carton Museum would record the following on its December 31, Year 1, financial statements:
An increase in net assets with donor restrictions of $115,750
78
Faith Church decided to replace its electric organ with a multiple rack pipe organ. The church purchased the organ itself for $250,000 and a congregation member stepped forward to assemble the organ and perform the necessary carpentry work for $5,000. The congregation member is a skilled craftsman who normally charges $40,000 for this work. Other congregation members stepped forward to help with general labor assistance valued at $7,000. As a result of the transaction above, Faith Church should record revenues from contributed services of:
$42,000
79
The Aesthetic Museum, Inc., a private NFP org, was awarded a federal matching grant from the National Endowment for the Arts. The grants requires a one-to-one match of local and federal funds to defray eligible program costs as specifically described by federal grant cost principles within Title 2 of the Code of Federal Regulations (2CFR). The matching and cost eligibility requirements could indicate the existence of:
Matching: Conditions
Cost Eligibility: Conditions
80
In April of Year 1, Delta Hospital purchased medicines from Field Pharmaceutical Co. at a cost of $5,000. However, Field notified Delta that the invoice was being canceled and that the medicines were being donated to Delta. Delta should record this donation of medicine as:
Other operating revenue
81
The Community Foundation, a nongovernmental NFP org, provides community grants restricted for use on a variety of community projects to benefit NFP orgs. Grants presume that recipient NFP orgs have the expertise to carry out the purpose of the funding. The Foundation includes a right of return and right of release from obligation in its agreements as a matter of policy and standard wording, but no other stipulation beyond the restriction of the grant itself. NFP orgs receiving Foundation grants would record the grants as what?
Contribution with donor restriction
82
Community Enhancers, a nongovernmental NFP org, received the following pledges:
- Without donor restrictions: $400,000
- With donor restrictions for capital additions: $300,000
All pledges are legally enforceable. However, Community's experience indicates that 5% of all pledges prove to be uncollectible. What amount should Community report as pledges receivable, net of any required allowance account?
$665,000
83
The Turtle Society, a nongovernmental NFP org, receives numerous contributed hours from volunteers during its busy season. Chris, a clerk at the local tax collector's office, volunteered ten hours per week for 24 weeks transferring turtle food from the port to the turtle shelter. This task typically is handled in the normal course of business at no charge to the Society and, consequently, no resources have been budgeted for service, but Chris' help has been accepted. His rate of pay at the tax office is $10 per hour, and the prevailing wage rate for laborers is $6.50 per hour. What amount of contribution revenue should Turtle Society record for this service?
$0
84
Valley's community hospital normally includes proceeds from sale of cafeteria meals in:
Other revenues
85
How should unconditional pledges received by a nongovernmental NFP org that will be collected over more than 1 year be reported?
Pledges receivable, valued at their present values
86
The Jasper Foundation, Inc., a NFP org, operates from a building it owns in Knoble Knob Hamlet. The holding company of the Knoble Knob Electric Authority contributes power services to the Jasper Foundation. Jasper Foundation would display or disclose the contributed utilities as:
Revenue and expense in the period received and used at fair value
87
