ACC 460 Final Exam 100% Correct Answers

ACC 460 Final Exam 100% Correct Answers

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1. A primary characteristic that distinguishes governmental entities from business entities is

a)      the need to generate revenues equal to or in excess of expenditures/expenses.

b)     the importance of the budget in the governing process.

c)      the need to provide goods or services.

d)     the correlation between revenues generated and demand for goods or services.

1. Which of the following is NOT a purpose of external financial reporting by governments?  External financial reports should allow users to

a)      Assess financial condition.

b)      Compare actual results with the budget.

c)      Assess the ability of elected officials to effectively manage people.

d)     Evaluate efficiency and effectiveness.

1. Basis of accounting determines which of the following?

a)      When transactions and events are recognized.

b)      What transactions and events will be reported.

c)      Where transactions and events will be reported.

d)     Why transactions and events will be reported.

1. A fund is

a)      A separate legal entity.

b)     A separate fiscal and accounting entity.

c)      A separate self-balancing set of accounts for inventory purposes.

d)     None of the above.

1. __________ is governments’ responsibility to report the extent to which they have met their operating objectives efficiently and effectively, using all resources available for that purpose, and whether they can continue to meet their objectives for the foreseeable future.

a)   Fund accountability.

b)   Fiscal accountability.

c)   Operational accountability.

d)   Government accountability.

1. In addition to government-wide statements, GASB Statement No. 34 requires fund financial statements be included in the government’s basic set of financial statements.  The basic fund financial statements that should be included for governmental funds are

a)   the Balance Sheet and

the Statement of Revenues, Expenditures, and  Changes in Fund Balance.

b)   the Statement of Nets Assets,

the Statement of Revenues, Expenses, and Changes in Fund Net Assets, and

the Statement of Cash Flows.

c)   the Statement of Fiduciary Net Assets, and

the Statement of Changes in Fiduciary Net Assets.

d)   the Balance Sheet,

the Income Statement,

the Statement of Cash Flows, and

the Statement of Retained Earnings.

1. The modified accrual basis of accounting is used in presenting the fund financial statements of  the governmental funds because

a)   it is the superior method of accounting for the economic resources of any entity.

b)   it provides information as to the extent the entity achieved interperiod equity.

c)   it is budget oriented while facilitating comparisons among entities.

d)   it results in accounting measurements based on the substance of transactions.

1. As used in defining the term ‘modified accrual basis of accounting’, available means

a)   received in cash.

b)   will be received in cash within 60 days of year-end.

c)   collection in cash is reasonably assured.

d)   collected within the current period or expected to be collected soon enough thereafter to be used to pay liabilities of the current period.

1. Under the modified accrual basis of accounting, the amount of property tax revenues that should be recognized by a governmental entity in the current year related to the current year levy will be

a)   the total amount of the levy.

b)   the expected collectible portion of the levy.

c)       the portion of the levy collected.

d)      the portion of the levy collected in the current year or within sixty days of the fiscal period.

1. Assume that the City of Juneau maintains its books and records to facilitate the preparation of its fund financial statement.  The City pays its employees bi-weekly on Friday.   The fiscal year ended on Wednesday, June 30.  Employees had been paid on Friday, June 25.  The employees paid from the General Fund had earned $120,000 on Monday, Tuesday, and Wednesday (June 28, 29, and 30).   What entry, if any, should be made on June 30?

a)    Debit Expenditures; Credit Wages and Salaries Payable.

b)    Debit Expenses; Credit Wages and Salaries Payable.

c)    Debit Expenditures; Credit Encumbrances.

d)    No entry is required.

1. Which of the following funds would use the accrual basis of accounting in preparing its fund financial statements ?

a)   City General Fund.

b)   City Hall Capital Project Fund.

c)   City Motor Pool Internal Service Fund.

d)   None of the above.

1. The debt service  fund of a governmental entity is accounted for using which of the following bases of accounting?

a)   Budgetary basis.

b)   Cash basis.

c)   Modified accrual basis.

d)   Accrual basis.

1. In which fund type would a governmental entity’s debt service fund be found?

a)   Governmental fund type.

b)   Proprietary fund type.

c)   Fiduciary fund type.

d)   Capital project fund type.

1. With regard to the resources dedicated to the acquisition of fixed assets which will be used in general government activities, which of the following is true?

a)    Governments must maintain capital project funds for resources that are legally restricted to the acquisition of fixed assets.

       b)    Governments may maintain capital project funds for resources that are legally restricted to the acquisition of fixed assets.

c)    Governments may account for any resources dedicated (whether legally or not) to the acquisition of fixed assets in any of the governmental funds.

d)    Government must account for all resources set aside for fixed asset acquisition in a capital project fund.

1. General long-term debt of a governmental entity includes

a)   All future financial obligations.

b)   All future financial obligations that result from past transactions.

c)   All future financial obligations that result from past transactions for which the government has already received a benefit.

d)   All future financial obligations that are backed by the government’s general credit and revenue raising power and that result from past transactions for which the government has already received a benefit.

1. In governmental fund-type  financial statements, the assets acquired under a capital lease would be reported at

a)   They are not reported in the fund financial statements.

   b)   The present value of the required lease payments.

c)   The undiscounted total of required lease payments.

d)   The total of all payments required under the lease.

1. Which of the following are required basic statements of a proprietary fund?

a)   Balance Sheet, Income Statement, Statement of Cash Flows.

b)   Balance Sheet, Statement of Revenues, Expenses, and Changes in Equity, and a Statement of Cash Flows.

c)   Statement of Net Assets, Statement of Revenues, Expenses, and Changes in Fund Net Assets.

d)   Statement of Net Assets, Statement of Revenues, Expenses, and Changes in Fund Net Assets, and Statement of Cash Flows.

1. The appropriate basis of accounting for the proprietary funds of a governmental entity is

a)   Cash basis.

b)   Modified accrual.

c)   Full accrual.

d)   None of the above.

1. A governmental entity receives a gift of cash and investments with a fair value of $200,000.  The donor specified that the earnings from the gift must be used to beautify city-owned parks and the principal must be re-invested.  The $200,000 gift should be accounted for in which of the following funds?

a)   Investment trust fund.

b)   Private-purpose trust fund.

       c)   Agency fund.

d)   Permanent fund.

1. Which of the following activities of a governmental entity should be accounted for in a fiduciary fund?

a)   Funds received from the federal government to support public transportation activities.

b)   Funds received from an individual who specified that the principal must be kept intact but the income can be used to support families of police officers killed in the line of duty.

c)   Funds received from the state government that must be used to purchase capital assets.

d)   Funds received from a contractor to assist with the development of utility infrastructure.

Essay Brief Answers (10 percent each)

1. The Governmental Accounting Standards Board (GASB) stated that an objective of financial  reporting should be to measure interperiod equity.  “Financial reporting should provide information to determine whether current-year revenues were sufficient to pay for current-year services.”  What is your understanding of ‘interperiod equity.’?  What costs incurred in the current year should be paid for by the taxpayers of the current period?  What costs incurred in the current year should be paid for by future taxpayers?

1. The activities of an internal service fund are presented on the Statement of Revenues, Expenses, and Changes in Fund Net Assets in the fund financial statements.  Why?  Where are the activities of an internal service fund presented on the Government-wide Statement of Activities?  Why?