1. A primary characteristic that distinguishes governmental entities from business entities is (Points: 6) 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. 2. A primary characteristic that distinguishes not-for-profit entities from business entities is (Points: 6) 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. 3. Which of the following characteristics distinguishes a governmental or not-for-profit entity from a business entity? (Points: 6) a) There is always a direct link between revenues generated and expenditures/expenses incurred. b) Capital assets are used to produce revenues and save costs. c) Revenues are always indicative of demand for goods and services. d) The mission of the entity will determine the goods or services provided. 4. The most significant financial document provided by a governmental entity is the (Points: 6) a) The balance sheet. b) The operating statement. c) The operating budget. d) The cash flow statement. 5. Which of the following statements is true? (Points: 6) a) Governments may engage in activities similar to activities engaged in by for-profit entities. b) There are a limited number of different types of governments. c) All governmental entities engage in the same activities. d) Managers may have a long-term focus and thereby sacrifice the short-term liquidity of the entity. 6. The City of San Jose built a new city hall and financed construction by issuing bonds due in installments over the next 30 years. The bond principal and interest will be paid by a special tax levied on property in the City. The revenue received from this special tax should be accounted for in which of the following funds? (Points: 6) a) General fund. b) Internal service fund. c) Capital project fund. d) Debt service fund. 7. Riverside Golf Course is a City-owned golf course that collects greens fees in amounts sufficient to cover its expenses. Riverside Golf Course should be accounted for in which of the following funds? (Points: 6) a) Internal service fund. b) Enterprise fund. c) General fund. d) Special revenue fund. 8. To fulfill the printing needs of its various departments and agencies, the City has established a Central Print Shop, which bills the various departments and agencies of the city for printing services rendered. The Central Print Shop should be accounted for in which of the following funds. (Points: 6) a) Internal service fund. b) Enterprise fund. c) General fund. d) Special revenue fund. 9. Which of the following sections is NOT required in the Comprehensive Annual Financial Report of a City? (Points: 6) a) Financial section. b) Introductory section. c) Statistical section. d) Historical section. 10. The Basic Financial Statements of a city do not include which of the following? (Points: 6) a) Government-wide Statement of Net Assets. b) Government-wide Statement of Activities. c) Government-wide Statement of Cash Flows. d) Separate balance sheets for governmental and proprietary funds. 11. The City of Lakeview adopts its budget on a basis of accounting that permits outstanding purchase commitments to be charged against the budget in the year that the goods are ordered instead of in the year they are received. During the year the City ordered and received $4,000 of supplies (of which $3,000 had been paid and $1,000 was unpaid) and had $500 of outstanding purchase commitments for supplies at year-end. In the Statement of Budget to Actual, the expenditures for supplies would be: (Points: 6) a) $3,000. b) $3,500. c) $4,000. d) $4,500. 12. A public school district formally adopted a budget with estimated revenues of $500 and approved expenditures of $490. Which of the following is the appropriate entry to record the budget? (Points: 6) a) Debit Estimated Revenues $500; Credit Appropriations $490; Credit Fund Balance $10. b) Debit Appropriations $490; Debit Fund Balance $10; Credit Estimated Revenues $500. c) Debit Encumbrances $490; Debit Fund Balance $10; Credit Estimated Revenues $500. d) Memorandum entry only. 13. A county general fund budget includes budgeted revenues of $600 and budgeted expenditures of $595. Actual revenues for the year were $610. To close the Estimated Revenues account at the end of the year (Points: 6) a) Debit Estimated Revenues $10 b) Credit Estimated Revenue $10 c) Debit Estimated Revenues $600 d) Credit Estimated Revenues $600 14. A county previously encumbered $10,000 for the acquisition of supplies. The supplies were received at a total cost of $9,800. To recognize this event the county should make which of the following entries? (Points: 6) a) Debit Reserve for Encumbrances $10,000; Credit Encumbrances $10,000. b) Debit Reserve for Encumbrances $9,800; Credit Encumbrances $9,800. c) Debit Encumbrances $10,000; Credit Reserve for Encumbrances $10,000. d) Debit Encumbrances $9,800; Credit Reserve for Encumbrances $9,800. 15. A city received supplies that had been previously encumbered. The supplies were encumbered for $5,000 and had an actual cost of $4,900. To recognize this event the county should make which of the following entries? (Points: 6) a) Debit Reserve for Encumbrances $5,000 and Supplies $4,900; Credit Encumbrances $5,000 and Vouchers Payable $4,900. b) Debit Encumbrances $5,000 and Supplies $4,900; Credit Reserve for Encumbrances $5,000 and Vouchers Payable $4,900. c) Debit Reserve for Encumbrances $4,900 and Supplies $4,900; Credit Encumbrances $4,900 and Vouchers Payable $4,900. d) Debit Encumbrances $4,900 and Supplies $4,900; Credit Reserve for Encumbrances $4,900 and Vouchers Payable $4,900. 16. As used in governmental accounting, interperiod equity refers to a concept of (Points: 6) a) providing the same level of services to citizens each year. b) measuring whether current year revenues are sufficient to pay for current year services. c) levying property taxes at the same rate each year. d) requiring that general fund budgets be balanced each year. 17. The modified accrual basis of accounting is used in presenting the fund financial statements of the governmental funds because (Points: 6) 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. 18. Under the modified accrual basis of accounting, derived nonexchange revenues are recognized when (Points: 6) a) they are earned. b) they are measurable and available to finance the expenditures of the current period. c) the underlying exchange transaction occurs. d) the underlying exchange transaction occurs and they are measurable and available to finance the expenditures of the current period. 19. A city that has a 12/31 fiscal year end has adopted a policy of recognizing the maximum amount of property tax revenue allowable under GAAP. Property taxes of $600,0000 (of which 10% are estimated to be uncollectible) are levied in October 2007 to finance the activities of the fiscal year 2008. During 2008, cash collections related to property taxes levied in October 2007 were $500,000. In 2009 the following amounts related to the property taxes levied in October 2007 were collected: January $25,000; March, $5,000. For the fiscal year ended 12/31/08, what amount should be recognized as property tax revenues related to the 2007 levy on the governmental fund financial statements? (Points: 6) a) $600,000. b) $540,000. c) $525,000. d) $500,000. 20. A city that has a 12/31 fiscal year end has adopted a policy of recognizing the maximum amount of property tax revenue allowable under GAAP. Property taxes of $600,0000 (of which 10% are estimated to be uncollectible) are levied in October 2007 to finance the activities of the fiscal year 2008. During 2008, cash collections related to property taxes levied in October 2007 were $500,000. In 2009 the following amounts related to the property taxes levied in October 2007 were collected: January $25,000; March, $5,000. For the fiscal year ended 12/31/08, what amount should be recognized as property tax revenues related to the 2007 levy on the government-wide financial statements? (Points: 6) a) $600,000. b) $540,000. c) $525,000. d) $500,000. 21. Which of the following funds would use the modified accrual basis of accounting in preparing its fund financial statements? (Points: 6) a) City Electric Utility Enterprise Fund. b) City Hall Capital Project Fund. c) City Motor Pool Internal Service Fund. d) City Employee Pension Trust Fund. 22. As used in governmental accounting, expenditures are decreases in (Points: 6) a) Net Assets. b) Net Financial Resources. c) Net Cash. d) Net Economic Resources. 23. Assume that the City of Juneau maintains its books and records to facilitate the preparation of its fund financial statements. 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 in the Citys General Fund? (Points: 6) 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. 24. Assume that the City of Juneau maintains its books and records to facilitate the preparation of its government-wide financial statements. 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). They will earn $80,000 on Thursday and Friday (July 1 and 2). What entry, if any, should be made on June 30? (Points: 6) a) Debit Expenditures $120,000; Credit Wages and Salaries Payable $120,000. b) Debit Expenditure $200,000; Credit Wages and Salaries Payable $200,000. c) Debit Expenses $120,000; Credit Wages and Salaries Payable $120,000. d) No entry is required. 25. Employees of the City of Orleans earn ten days paid leave for each 12 months of employment. The City has a policy that employees must take their vacation days during the year following the year in which it is earned. If they do not take vacation in the allotted period, they forfeit the vacation pay benefit. Traditionally, employees have taken 80% of the vacation days earned. During the current year, employees of the City of Orleans earned $400,000 in vacation pay. Assuming the city maintains its books and records in a manner to facilitate the preparation of its fund financial statements, which of the following entries is the correct entry in the General Fund to record the vacation pay earned during the current period? (Points: 6) a) Debit Expenditures $400,000; Credit Vacation Payable $400,000. b) Debit Expenses $400,000; Credit Vacation Payable $400,000. c) Debit Expenditures $320,000; Credit Vacation Pay Payable $320,000. d) No entry required. 26. The capital projects fund of a governmental entity is accounted for using which of the following bases of accounting? (Points: 6) a) Budgetary basis. b) Cash basis. c) Modified accrual basis. d) Accrual basis. 27. which fund type would a governmental entitys capital projects fund be found? (Points: 6) a) Governmental fund type. b) Proprietary fund type. c) Fiduciary fund type. d) Governmental activities. 28. The debt service fund of a governmental entity is accounted for using which of the following bases of accounting? (Points: 6) a) Budgetary basis. b) Cash basis. c) Modified accrual basis. d) Accrual basis. 29. Sister City was notified by the State that they had been awarded a $6 million grant to aid in the construction of a senior citizens center. At the time of the notification what is the appropriate entry in the capital projects fund (assuming that the City has met all eligibility requirements and maintains its books and records in a manner to facilitate the preparation of the fund financial statements)? (Points: 6) a) No entry at the time of the notification. b) Debit Grants Receivable $6 million; Credit Revenue $6 million. c) Debit Grants Receivable $6 million; Credit Deferred Revenue $6 million. d) Debit Grants Receivable $6 million; credit Other Financing SourcesTransfer $6 million. 30. Previously Rose City issued bonds with a face value of $10 million to construct a new city maintenance facility. Assuming that the City maintains its books and records in a manner that facilitates the preparation of the fund financial statements, what is the appropriate entry when the City receives a progress billing from the contractor? (Points: 6) a) Debit Building; Credit Cash b) Debit Building; Credit Accounts Payable. c) Debit Expenditure; Credit Accounts Payable. d) No entry is required. 31. The appropriate measurement focus for the business-type activities of the City of Rockford is (Points: 6) a) Current financial resources. b) Economic resources. c) Both (a) and (b). d) None of the above. 32. Which of the following is not a proprietary fund? (Points: 6) a) City Water Enterprise Fund. b) City Motor Pool Internal Service Fund. c) City Hall Capital Project Fund. d) None of the above. They are all proprietary funds. 33. The appropriate basis of accounting for the proprietary funds of a governmental entity is (Points: 6) a) Cash basis. b) Modified accrual. c) Full accrual. d) None of the above. 34. A governmental entity reports its utility services provided to the citizens in a proprietary fund. Which of the following best represents an acceptable election of accounting standards for the proprietary fund? Unless the FASB pronouncement conflicts with or contradicts a GASB pronouncement, a propriety fund must adhere to (Points: 6) a) All FASB pronouncements. b) All FASB pronouncements issued prior to November 30, 1989, as well as any post-November 30, 1989 pronouncements specifically adopted by GASB. c) It must apply only GASB standards. d) It may elect either (a) or (b). 35. A proprietary fund of a governmental entity has donor-restricted assets on its balance sheet. Which of the following best describes where and how those assets will generally be displayed? (Points: 6) a) In a separate restricted asset category on the statement of net assets. b) Intermingled with other assets on the statement of net assets. c) Intermingled with other assets on the statement of net assets but footnoted. d) In a separate restricted fund. 36. 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? (Points: 6) a) General fund. b) Private-purpose trust fund. c) Agency fund. d) Permanent fund. 37. In previous years, Center City had received a $400,000 gift of cash and investments. The donor had specified that the earnings from the gift must be used to beautify city-owned parks and the principal must be re-invested. During the current year, the earnings from this gift were $24,000. The earnings from this gift should generally be considered revenue to which of the following funds? (Points: 6) a) Special revenue fund. b) Private-purpose trust fund. c) Agency fund. d) Permanent fund. 38. What basis of accounting is used to account for transactions of a governmental private-purpose trust fund? (Points: 6) a) Full accrual basis of accounting. b) Modified accrual basis of accounting. c) Cash basis of accounting. d) Budgetary basis of accounting. 39. In which of the following funds would a government report depreciation expense? (Points: 6) a) Private-purpose trust fund. b) Agency fund. c) Permanent fund. d) None of the above 40. A wealthy citizen provided in her will for a gift of cash and other assets to the City. Her will specified that the gift was to be kept intact and that the earnings from the gift were to be used to support public parks. At the time of the donation, the gift had a book value in the hands of the donor of $250,000 and a fair value of $400,000. When recording this gift the City would credit (Points: 6) a) Contributions revenues $400,000. b) Other Financing SourcesContributions $400,000. c) Contributions revenues $250,000. d) Other Financing SourcesContributions $250,000. 41. The financial reporting entity is composed of (Points: 6) a) The primary government. b) The primary government and all legally separate governments for which the primary government is financial accountable. c) The primary government and all legally separate organizations for which the primary government is financially accountable. d) The primary government, all legally separate organizations for which the primary government is financially accountable and any organizations whose omission would cause the primary governments financial statements to be misleading or incomplete. 42. Which of the following is NOT a primary government? (Points: 6) a. A state government. b. A general purpose local government with the ability to determine its own budget. c. A general purpose local government whose tax levies must be approved by the state. d. A special purpose local government whose tax levies must be approved by the state. 43. Which of the following is necessary for a governmental entity to be considered fiscally independent? (Points: 6) a) It must be able to hire its own management. b) It must be able to issue bonds that are tax-exempt. c) It must not be subsidized by another governmental entity. d) It must be able to levy taxes and/or set rates for its services. 44. Which of the following is a necessary characteristic of a component unit? (Points: 6) a) It is fiscally dependent on a primary government. b) The primary government provides services that are used by both organizations. c) The primary government can impose its will on the unit or the unit has the potential to provide a financial benefit to or impose a financial burden on the primary government. d) The primary government appoints a voting majority of the component units governing body or a voting majority of the unit's governing body is composed of officials of the primary government. 45. The Marsh River School District, a legally separate school district that has a separately elected governing body, cannot enter into any debt agreements without the approval of the County Commission. Marsh River School District would be considered a(n): (Points: 6) a) Primary government. b) Component unit. c) Related organization. d) Affiliated organization. 46. The basis of accounting used by not-for-profit organizations in their external financial reports is (Points: 6) a) Industry-specific basis of accounting. b) Cash basis of accounting. c) Modified accrual basis of accounting. d) Accrual basis of accounting. 47. FASB require the balance sheets of not-for-profits to display (Points: 6) a) Net assets in four separate categoriesunrestricted, temporarily restricted, permanently restricted, and restricted by creditors. b) Three separate fundsunrestricted, temporarily restricted, and permanently restricted net assets. c) Six totalstotal assets, total liabilities, total net assets, total unrestricted net assets, total temporarily restricted net assets, and total permanently restricted net assets. d) Unrestricted, temporarily restricted, and permanently restricted retained earnings. 48. During the annual fundraising drive, the Cancer Society raised $900,000 in pledges of financial support for their general operations. By the fiscal year-end, the Society had collected $600,000 of the pledges. The Society estimates that 10% of the remaining pledges will be uncollectible. The NET amount of revenue the Society should recognize during the current year from this pledge drive is (Points: 6) a) $900,000. b) $870,000. c) $810,000. d) $600,000. 49. In the current year National Pet Charities, which uses fund-type accounting to maintain its books and records, received a $30,000 contribution to help educate people on responsible pet ownership. During the current year, the entry to record this donation is (Points: 6) a) UNRESTRICTED FUND. No entry. RESTRICTED FUND. Debit Cash $30,000; Credit Revenues $30,000. b) UNRESTRICTED FUND. No entry. RESTRICTED FUND. Debit Cash $30,000; Credit Net Assets $30,000. c) UNRESTICTED FUND. Debit Cash $30,000; Credit Revenues $30,000. RESTRICTED FUND. No entry. d) UNRESTRICTED FUND. Debit Cash $30,000; Credit Net Assets $30,000. RESTRICTED FUND. No entry. 50. During the current year a not-for-profit entity received a contribution of $50,000 to use for scholarships. In the current year the entity had already budgeted $200,000 for scholarships. During the current year, the entity disbursed $175,000 for scholarships. The amount the entity can consider as released from restriction in the current year is (Points: 6) a) $0. b) $50,000. c) $175,000. d) $200,000