1. Which of the following is not characteristics of a capital projects?

   	a.	Involves long-lived assets
   	b.	Usually requires long-range planning and extensive financing
   	c.	Usually has a year-to-year focus
   	d.	None of the above

2 points

QUESTION 5

1. In its governmental fund financial statements, a government should recognize revenue from special assessments

   	a.	In the year it imposes a special assessment.
   	b.	In the year an assessment is due.
   	c.	In the year an assessment is paid.
   	d.	In the year an assessment becomes available for expenditure.

2 points

QUESTION 6

1. How should the fund balance of a debt service fund generally be incorporated into the government-wide statement of net position?

   	a.	Net positioninvestment in capital assets, net of related debt
   	b.	Net positionunassigned
   	c.	Net positionunrestricted
   	d.	Net positionrestricted

2 points

QUESTION 7

1. The repayment of bond principal should be reported in the fund statements of a debt service fund as a/an

   	a.	Reduction of bonds payable.
   	b.	Expenditure
   	c.	Other financing use.
   	d.	Direct reduction of fund balance.

2 points

QUESTION 8

1. Under existing federal statutes, arbitrage, as it applies to state and local governments is

   	a.	Illegal.
   	b.	Illegal unless the government can demonstrate a just cause for engaging in it.
   	c.	Legal in some circumstances, but the government may be required to remit arbitrage earnings to the federal government.
   	d.	Illegal unless there is no more than a 2 percent difference between interest earned and interest paid.

2 points

QUESTION 9

1. The objectives of financial reporting for capital assets should be to provide information

   	a.	About a governmental entitys physical resources.
   	b.	That can be used to assess the service potential of a governmental entitys physical resources.
   	c.	To help users assess a governments long- and short-term capital needs.
   	d.	All of the above.

2 points

QUESTION 10

1. A government may record long-term assets in which of the following funds?

   	a.	General fund
   	b.	Internal service funds.
   	c.	Capital projects funds
   	d.	Debt service funds.

2 points

QUESTION 11

1. General capital assets are not reported in governmental funds because

   	a.	The measurement focus of governmental funds is on current financial resources.
   	b.	They are not used to used generate revenues.
   	c.	The basis of accounting is accrual.
   	d.	None of the above.

2 points

QUESTION 12

1. Joshua County bought a new backhoe using general fund cash. When the asset was acquired, what was the appropriate entry in the general fund, assuming that the entity maintains its books and records in a manner to facilitate the preparation of fund financial statements?

   	a.	Debit Equipment; Credit Cash.
   	b.	Debit Equipment; Credit Investment in capital assets.
   	c.	Debit Expenditures; Credit Cash.
   	d.	Debit Expenditures; Credit Investment in capital assets.

2 points

QUESTION 13

1. Surfer City sold a used police car. The police car had a historical cost of $25,000, a fair value of $18,000, and was sold for $10,000. Assuming that the city maintains its books and records in a manner to facilitate the preparation of the fund financial statements, what is the appropriate entry in the general fund to record this sale?

   	a.	Debit Cash $10,000; Credit Revenue $10,000.
   	b.	Debit Cash $10,000 and Loss on sale $8,000; Credit Automotive equipment $18,000.
   	c.	Debit Cash $10,000; Credit Other financing sourcessale of asset $10,000.
   	d.	Debit Cash $10,000; Credit Automotive equipment $10,000.

2 points

QUESTION 14

1. Hilltop School District receives a donation of ten computers from Computer Hut, a local computer firm. The cost to Computer Hut of each computer is $2,500. The retail value of each computer is $3,000. Assuming that the district maintains its books and records in a manner that facilitates the preparation of the fund financial statements, what is the appropriate entry in the general fund to record this donation?

   	a.	Debit Computer equipment $25,000; Credit Donation revenue $25,000.
   	b.	Debit Computer equipment $30,000; Credit Other financing sourcesdonation $30,000.
   	c.	Debit Computer equipment $30,000; Credit Donation revenue $30,000.
   	d.	No entry. The computers are not financial resources.

2 points

QUESTION 15

1. Which of the following costs will NOT be included in the cost of capital assets on the government-wide financial statements?

   	a.	Purchase price (invoice amount).
   	b.	Cost of demolishing existing structures that cannot be used.
   	c.	Interest on self-constructed items.
   	d.	Engineering costs.

2 points

QUESTION 16

1. Donated assets are reported in the government-wide financial statements at

   	a.	Historical cost to the donor
   	b.	Book value in the hands of the donor.
   	c.	Fair value on date of donation.
   	d.	Zero value because they were not purchased.

2 points

QUESTION 17

1. A government that is unable to satisfy claims against it

   	a.	Is prohibited from filing bankruptcy.
   	b.	May seek protection under the Federal Bankruptcy Code, using the same section that is used by businesses.
   	c.	May seek protection under the Federal Bankruptcy Code, using a special section directed to governments.
   	d.	Is automatically placed under the jurisdiction of a higher level of government.

2 points

QUESTION 18

1. To seek protection under the Federal Bankruptcy Code, a government must

   	a.	Be unable to provide the level of services it has provided in the recent past.
   	b.	Be unable to pay its debts in the current year.
   	c.	Have budgeted expenditures in excess of revenues.
   	d.	Both (b) and (c).

2 points

QUESTION 19

1. General long-term debt of a government 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 governments general credit and revenue raising power and that result from past transactions for which the government has already received a benefit.

2 points

QUESTION 20

1. When the proceeds of long term debt are reported in governmental fund financial statements

   	a.	They are reported only as an increase in liabilities in the funds.
   	b.	They are reported only as revenues in the funds.
   	c.	They are reported only as an other financing sourcedebt proceeds.
   	d.	They are reported only as an other financing usedebt proceeds.

2 points

QUESTION 21

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

   	a.	The total of all payments required under the lease.
   	b.	The present value of the required lease payments.
   	c.	The undiscounted total of required lease payments.
   	d.	They are not reported in the fund financial statements.

2 points

QUESTION 22

1. In the government-wide financial statements, the assets acquired under a capital lease would be reported at

   	a.	The total of all payments required under the lease.
   	b.	The present value of the required lease payments.
   	c.	The undiscounted total of required lease payments.
   	d.	They are not reported in the government-wide financial statements.

2 points

QUESTION 23

1. Salvador County issued $25 million of 5 percent demand bonds for construction of a county maintenance building. The county has no take-out agreement related to the bonds. It estimates that 20 percent of the bonds would be demanded (called) by the buyers if interest rates increased by at least one percentage point. At year-end, rates on comparable debt were 7 percent. How should these demand bonds be reported in thegovernment-wide financial statementsat year-end?

   	a.	$25 million in the long-term liabilities section of the governmental activities column.
   	b.	$5 million in the current liabilities section of the governmental activities column AND $20 million in the long-term liabilities section of the governmental activities column.
   	c.	$5 million in the governmental activities column AND $20 million would be reported in the schedule of changes in long-term obligations.
   	d.	$25 million in the current liabilities section of the governmental activities column.

2 points

QUESTION 24

1. Salvador County issued $25 million of 5 percent demand bonds for construction of a county maintenance building. Before year-end the county entered into a two-year noncancellable take-out agreement with a local bank with a 10-year payback period. The county estimates that 20 percent of the bonds would be demanded (called) by the buyers if interest rates increased by at least One percentage point. At year-end, rates on comparable debt were 7 percent. How should these demand bonds be reported in the countys government-wide financial statements at year-end?

   	a.	$25 million in the long-term liabilities section of the governmental activities column.
   	b.	$5 million in the current liabilities section of the governmental activities column AND $20 million in the long-term liabilities section of the governmental activities column.
   	c.	$5 million in the governmental activities column AND $20 million would be reported in the schedule of changes in long-term obligations.
   	d.	$25 million in the current liabilities section of the governmental activities column.

2 points

QUESTION 25

1. The appropriate measurement focus for the business-type activities of the Raymond City is

   	a.	Current financial resources.
   	b.	Economic resources.
   	c.	Both (a) and (b).
   	d.	None of the above.

2 points

QUESTION 26

1. Which of the following isnota proprietary fund?

   	a.	City Water Enterprise Fund.
   	b.	City Motor Pool Internal Service Fund.
   	c.	City Hall Capital Projects Fund.
   	d.	None of the above. They are all proprietary funds.

2 points

QUESTION 27

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

   	a.	Cash basis.
   	b.	Modified accrual.
   	c.	Full accrual.
   	d.	None of the above.

2 points

QUESTION 28

1. Which of the following is a valid reason for governments to engage in business-type activities?

   		The government does not want control over the activity.
   		The activity competes with general government activities.
   		The government does not want to subsidize the activity.
   		The government can provide the services more cheaply or efficiently than can a private firm.

2 points

QUESTION 29

1. Which of the following is a valid argument for separate accounting principles for proprietary activities?

   	a.	Two separate measurement focuses and bases for accounting within the same set of financial statements are confusing.
   	b.	There are no clear-cut distinctions between business and non-business activities.
   	c.	The measurement focus on all economic resources is more consistent with the GASBs objectives that financial reporting should provide information to help determine whether current-year revenues were sufficient to pay for current-year services.
   	d.	Surveys of statement users indicate that information on depreciation is not of high priority to government decision makers.

2 points

QUESTION 30

1. Which of the following is a key reason for using business-type accounting to account for proprietary fund activities?

   	a.	The modified accrual basis of accounting captures all the resources and obligations associated with an activity.
   	b.	Depreciation is not recognized in business-type accounting in governments and surveys of statement users indicate that information on depreciation is not of high priority to government decision makers.
   	c.	The measurement focus on all economic resources is more consistent with the GASBs objectives that financial reporting should provide information to help determine whether current-year revenues were sufficient to pay for current-year services.
   	d.	Business-type accounting facilitates comparisons with governmental activities.

2 points

QUESTION 31

1. Which of the following is NOT a budget typically prepared for an activity accounted for in a proprietary fund?

   	a.	Appropriation budget.
   	b.	Cash budget.
   	c.	Capital budget.
   	d.	Flexible budget.

2 points

QUESTION 32

1. A government reports the utility services it provides to citizens in a proprietary fund. Which accounting standards must the proprietary fund apply?

   	a.	All FASB pronouncements, unless a FASB pronouncement conflicts with or contradicts a GASB pronouncement.
   	b.	All FASB pronouncements issued prior to November 30, 1989, as well as any post-November 30, 1989 pronouncements specifically adopted by GASB.
   	c.	All GASB pronouncements.
   	d.	All FASB and AICPA standards incorporated into GASB Statement No. 62, as well as any FASB pronouncements issued after November 30, 1989 that have been specifically adopted by the GASB.

2 points

QUESTION 33

1. A government 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.	General fund.
   	b.	Private-purpose trust fund.
   	c.	Agency fund.
   	d.	Permanent fund.

2 points

QUESTION 34

1. In previous years, Boze 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?

   	a.	Special revenue fund.
   	b.	Private-purpose trust fund.
   	c.	Agency fund.
   	d.	Permanent fund.

2 points

QUESTION 35

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

   		Funds received from the federal government to support public transportation activities.
   		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.
   		Funds received from the state government that must be used to purchase capital assets.
   		Funds received from a contractor to assist with the development of utility infrastructure.

2 points

QUESTION 36

1. What basis of accounting is used to account for transactions of a governments private-purpose trust fund?

   	a.	Full accrual basis of accounting.
   	b.	Modified accrual basis of accounting.
   	c.	Cash basis of accounting.
   	d.	Budgetary basis of accounting.

2 points

QUESTION 37

1. In which of the following funds would a government report depreciation expense?

   	a.	Private-purpose trust fund.
   	b.	Agency fund.
   	c.	Permanent fund.
   	d.	None of the above

2 points

QUESTION 38

1. Which of the following would NOT be accounted for in a fiduciary fund of a government?

   		Nonexpendable resources held for the benefit of other governments.
   		Nonexpendable resources held for the benefit of the government holding the resources.
   		Expendable resources held for the benefit of other governments.
   		Funds held as an agent for other entities.

2 points

QUESTION 39

1. Permanent funds are classified as

   	a.	Governmental funds.
   	b.	Proprietary funds.
   	c.	Fiduciary funds.
   	d.	Trust funds.

2 points

QUESTION 40

1. Which of the following is NOT a fiduciary fund?

   	a.	Pension trust fund.
   	b.	Investment trust fund.
   	c.	Permanent fund.
   	d.	Private-purpose trust fund.

2 points

QUESTION 41

1. The basis of accounting used by not-for-profit organizations in their external financial reports is

   	a.	Industry-specific basis of accounting.
   	b.	Cash basis of accounting.
   	c.	Modified accrual basis of accounting.
   	d.	Accrual basis of accounting.

2 points

QUESTION 42

1. The FASB requires the balance sheets of not-for-profits to display

   	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.

2 points

QUESTION 43

1. The FASB requires external financial reports to provide information about

   	a.	Donor-imposed restrictions on resources.
   	b.	All restrictions on resources.
   	c.	Donor and creditor restrictions on resources.
   	d.	None of the above.

2 points

QUESTION 44

1. Expenses incurred by not-for-profit organizations should be reported as

   	a.	Decreases in one of the three categories of net assets.
   	b.	Decreases in unrestricted net assets.
   	c.	Decreases in temporarily restricted net assets.
   	d.	Decreases in permanently restricted net assets.

2 points

QUESTION 45

1. Revenues of a not-for-profit organization should be reported as

   	a.	Increases in one of the three categories of net assets.
   	b.	Increases in unrestricted net assets.
   	c.	Increases in temporarily restricted net assets.
   	d.	Increases in permanently restricted net assets.

2 points

QUESTION 46

1. The GAO publicationGovernment Auditing Standards(commonly known as the Yellow Book) is applicable in which of the following audit situations?

   	a.	To independent CPAs conducting a performance audit of a government that receives no federal financial assistance.
   	b.	To independent CPAs auditing a nongovernment entity that receives federal financial assistance.
   	c.	To independent CPAs auditing a government that receives no federal financial assistance.
   	d.	To state auditors auditing a local government that does not receive federal financial assistance.

2 points

QUESTION 47

1. Which of the following is an example of a financial audit?

   	a.	An audit of financial statements to determine if they are presented fairly in accordance with generally accepted accounting principles.
   	b.	An audit to determine whether the objectives of a new program are suitable and relevant and whether the entity has complied with laws and regulations that may have a material effect on the financial statements.
   	c.	An audit of the financial report on the Noxious Weed Special Revenue Fund to determine whether the entity has complied with specific finance-related requirements.
   	d.	An audit to determine whether an entity is acquiring its resources economically and efficiently.

2 points

QUESTION 48

1. A performance audit includes which of the following?

   	a.	Economy and efficiency audit.
   	b.	Program audits.
   	c.	Both a) and b).
   	d.	None of the above.

2 points

QUESTION 49

1. A program audit would include which of the following?

   	a.	Determining if sound procurement policies are being practiced.
   	b.	Determining if efficient operating procedures are being used.
   	c.	Determining if resources are being used efficiently.
   	d.	Determining the factors inhibiting satisfactory performance.

2 points

QUESTION 50

1. Which the following is not included in the GAO auditing standards for financial statement audits?

   	a.	General standards.
   	b.	Field work standards.
   	c.	Reporting standards.
   	d.	Statistical sampling standards.