, Question 1
A city's General Fund reports $4,200,000 in property tax revenue on the
modified accrual basis. Of that amount, $300,000 was collected more than 60
days after year-end and is considered unavailable. The government-wide
statement of activities should report property tax revenue of:
A. $3,900,000, because unavailable revenue is deferred in the
government-wide statements as well.
B. $4,200,000, because the accrual basis recognizes revenue when levied
regardless of collection timing.
C. $4,500,000, because the government-wide statements add back the
unavailable amount as revenue.
D. $3,900,000, because only the amount collected within 60 days is
measurable and available under full accrual.
Correct Answer: B - $4,200,000, because the accrual basis
recognizes revenue when levied regardless of collection timing.
RATIONALE
Under full accrual, property tax revenue is recognized when the
underlying transaction occurs and the revenue is measurable, not when
collected; the 60-day availability criterion is a modified accrual
concept. Thus the full $4,200,000 is reported government-wide.
Options A and D incorrectly apply the modified accrual availability
rule to full accrual, and C adds an amount that was never deferred at
the government-wide level.
Question 2
A not-for-profit receives a $500,000 grant restricted by the donor for a specific
research program. During the year, $200,000 of allowable costs are incurred.
Under current FASB guidance, the statement of activities should report:
A. Grant revenue of $500,000 with no net asset release, because the
restriction remains until the full grant is spent.
B. Grant revenue of $200,000 and a $300,000 refundable advance
Page 2
A city's General Fund reports $4,200,000 in property tax revenue on the
modified accrual basis. Of that amount, $300,000 was collected more than 60
days after year-end and is considered unavailable. The government-wide
statement of activities should report property tax revenue of:
A. $3,900,000, because unavailable revenue is deferred in the
government-wide statements as well.
B. $4,200,000, because the accrual basis recognizes revenue when levied
regardless of collection timing.
C. $4,500,000, because the government-wide statements add back the
unavailable amount as revenue.
D. $3,900,000, because only the amount collected within 60 days is
measurable and available under full accrual.
Correct Answer: B - $4,200,000, because the accrual basis
recognizes revenue when levied regardless of collection timing.
RATIONALE
Under full accrual, property tax revenue is recognized when the
underlying transaction occurs and the revenue is measurable, not when
collected; the 60-day availability criterion is a modified accrual
concept. Thus the full $4,200,000 is reported government-wide.
Options A and D incorrectly apply the modified accrual availability
rule to full accrual, and C adds an amount that was never deferred at
the government-wide level.
Question 2
A not-for-profit receives a $500,000 grant restricted by the donor for a specific
research program. During the year, $200,000 of allowable costs are incurred.
Under current FASB guidance, the statement of activities should report:
A. Grant revenue of $500,000 with no net asset release, because the
restriction remains until the full grant is spent.
B. Grant revenue of $200,000 and a $300,000 refundable advance
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