Multiple choice Questions
1. The General Fund pays rent for two months. Which of the following is not correct?
a. Rent expense should be reported in the government-wide financial statements.
b. Rent expense should be reported in the General Fund.
c. An expenditure should be reported in the fund-based financial statements.
d. If one month of rent is in the first year with the other month in the next year, either the purchases method or the consumption method can be used in fund-based statements.
2. A purchase order for $3,000 is recorded in the General Fund for the purchase of a new computer.
The computer is received at an actual cost of $3,020. Which of the following is correct?
a. Machinery is increased in the General Fund by $3,020.
b. An encumbrance account is reduced by $3,020.
c. An expenditure is increased by $3,020.
d. An expenditure is recorded for the additional $20.
3. At the end of the current year, a government reports a fund balance-assigned of $9,000 in connection with an encumbrance. What information is being conveyed?
a. A donor has given the government $9,000 that must be used in a specified fashion.
b. The government has made $9,000 in commitments in one year that will be honored in the subsequent year.
c. Encumbrances exceeded expenditures by $9,000 during the current year.
d. The government spent $9,000 less than was appropriated.
4. A government buys equipment for its police department at a cost of $54,000. Which of the following is not true?
a. Equipment will increase by $54,000 in the government-wide financial statements.
b. Depreciation in connection with this equipment will be reported in the fund-based financial statements.
c. The equipment will not appear within the reported assets in the fund-based financial statements.
d. An expenditure for $54,000 will be reported in the fund-based financial statements.
5. A city acquires supplies for its fire department and uses the consumption method of accounting.
Which of the following statements is true for the fund-based statements?
a. An expenditures account was debited at the time of receipt.
b. An expense is recorded as the supplies are consumed.
c. An inventory account is debited at the time of the acquisition.
d. The supplies are recorded within the General Fixed Assets Account Group.
6. An income tax is an example of which of the following?
a. Derived tax revenue.
b. Imposed nonexchange revenue.
c. Government-mandated nonexchange revenue.
d. Voluntary nonexchange transaction.
7. The state government passes a law requiring localities to upgrade their water treatment facilities. The state then awards a grant of $500,000 to the Town of Midlothian to help pay for this cost. What type of revenue is this grant?
a. Derived tax revenue.
b. Imposed nonexchange revenue.
c. Government-mandated nonexchange revenue.
d. Voluntary nonexchange transaction.
8. The state awards a grant of $50,000 to the Town of Glenville. The state will pay the grant money to the town as a reimbursement for money spent on road repair. At the time of the grant, the state pays $8,000 in advance. During the first year of this program, the town spent $14,000 and applied for reimbursement. What amount of revenue should be recognized?
a. $_0_.
b. $8,000.
c. $14,000.
d. $50,000.
9. A city issues a 60-day tax anticipation note to fund operations. What recording should it make?
a. The liability should be reported in the government-wide financial statements; an other financing source should be shown in the fund-based financial statements.
b. A liability should be reported in the government-wide financial statements and in the fund-based financial statements.
c. An other financing source should be shown in the government-wide financial statements and in the fund-based financial statements.
d. An other financing source should be shown in the government-wide financial statements; a liability is reported in the fund-based financial statements.
10. A city issues five-year bonds payable to finance construction of a new school. What recording should be made?
a. Report the liability in the government-wide financial statements; show an other financing source in the fund-based financial statements.
b. Report a liability in the government-wide financial statements and in the fund-based financial statements.
c. Show an other financing source in the government-wide financial statements and in the fundbased financial statements.
d. Show an other financing source in the government-wide financial statements; report a liability in the fund-based financial statements.