ACCT 4421 Exam 2 Review UPDATED
ACTUAL Exam Questions and CORRECT
Answers
If an entity elects to focus on all economic resources, then it should adopt a modified accrual
basis of accounting - CORRECT ANSWER -F
The budgetary measurement focus of governments is determined by applicable state or local
laws - CORRECT ANSWER -T
The revenue-recognition issues facing governments are generally focused on the exchange
transaction earning process, similar to those of businesses - CORRECT ANSWER -F
Governmental activities tend to derive the majority of their revenues from exchange transactions
- CORRECT ANSWER -F
In accounting for property taxes, under the modified accrual basis, existing standards provide
that, except in unusual circumstances, revenues should be recognized only if cash is expected to
be collected within sixty days after year-end - CORRECT ANSWER -T
Ad valorem taxes are taxes that are based on value - CORRECT ANSWER -T
Income taxes are classified as ad valorem taxes - CORRECT ANSWER -F
Sales taxes are taxpayer assessed, that is, parties other than the beneficiary government
determine the tax base - CORRECT ANSWER -T
Revenues that cannot be classified as general revenues are by default considered program
revenues - CORRECT ANSWER -F
,Taxes that are imposed on the reporting government's citizens are considered general revenues,
even if they are restricted to specific programs - CORRECT ANSWER -T
Current financial resources include cash and receivables but not investments - CORRECT
ANSWER -F
Under the modified accrual basis, revenues are "available" if they are collected within the current
period or are expected to be collected soon enough after the end of the period to be used to pay
liabilities of the current period - CORRECT ANSWER -T
As used in governmental accounting, interperiod equity refers to a concept of
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 - CORRECT ANSWER -B
For fund financial statements, the measurement focus and basis of accounting used by
governmental fund types are
A. current financial resources and modified accrual accounting
B. economic resources and modified accrual accounting
C. financial resources and full accrual accounting
D. economic resources and full accrual accounting - CORRECT ANSWER -A
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 - CORRECT
ANSWER -C
,As used in defining the modified accrual basis of accounting, the term "available" means
A. received in cash
B. will be received in cash within 60 days after 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 - CORRECT ANSWER -D
Under the modified accrual basis of accounting, derived nonexchange revenues are recognized
when
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 - CORRECT ANSWER -D
Under the accrual basis of accounting, property tax revenues are recognized
A. when they are received in cash
B. in the year for which they were levied
C. in the year for which they were levied and when collection in cash is reasonably assured
D. when they are available to finance expenditures of the fiscal period - CORRECT
ANSWER -B
Under the modified accrual basis of accounting, the amount of property tax revenues that should
be recognized by a government 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 after the end of the
fiscal period - CORRECT ANSWER -D
, Under the modified accrual basis of accounting, investment revenues for the current period
should include
A. only interest and dividends received
B. all interest and dividends received during the period plus all accruals of interest and dividends
earned
C. all interest and dividends received plus gains and losses on securities that were sold during the
period
D. all interest and dividends received, all gains and losses on securities sold, and all changes in
market values on securities held in the portfolio at year-end - CORRECT ANSWER -D
Under the accrual basis of accounting used by governments, investment revenues for the current
period should include
A. only interest and dividends received
B. all interest and dividends received during the period plus all accruals of interest and dividends
earned
C. all interest and dividends received plus gains and losses on securities that were sold during the
period
D. all interest and dividends received, all gains and losses on securities sold, and all changes in
market values on securities held in the portfolio at year-end - CORRECT ANSWER -D
Under the modified accrual basis of accounting, imposed nonexchange revenues (such as fines)
should be recognized
A. when assessed
B. when the government has an enforceable legal claim
C. when collected
D. when the government has an enforceable legal claim and when collected within the current
period or soon enough thereafter to be used to pay the liabilities of the current period -
CORRECT ANSWER -D
Under the accrual basis of accounting, imposed nonexchange revenues (such as fines) should be
recognized
ACTUAL Exam Questions and CORRECT
Answers
If an entity elects to focus on all economic resources, then it should adopt a modified accrual
basis of accounting - CORRECT ANSWER -F
The budgetary measurement focus of governments is determined by applicable state or local
laws - CORRECT ANSWER -T
The revenue-recognition issues facing governments are generally focused on the exchange
transaction earning process, similar to those of businesses - CORRECT ANSWER -F
Governmental activities tend to derive the majority of their revenues from exchange transactions
- CORRECT ANSWER -F
In accounting for property taxes, under the modified accrual basis, existing standards provide
that, except in unusual circumstances, revenues should be recognized only if cash is expected to
be collected within sixty days after year-end - CORRECT ANSWER -T
Ad valorem taxes are taxes that are based on value - CORRECT ANSWER -T
Income taxes are classified as ad valorem taxes - CORRECT ANSWER -F
Sales taxes are taxpayer assessed, that is, parties other than the beneficiary government
determine the tax base - CORRECT ANSWER -T
Revenues that cannot be classified as general revenues are by default considered program
revenues - CORRECT ANSWER -F
,Taxes that are imposed on the reporting government's citizens are considered general revenues,
even if they are restricted to specific programs - CORRECT ANSWER -T
Current financial resources include cash and receivables but not investments - CORRECT
ANSWER -F
Under the modified accrual basis, revenues are "available" if they are collected within the current
period or are expected to be collected soon enough after the end of the period to be used to pay
liabilities of the current period - CORRECT ANSWER -T
As used in governmental accounting, interperiod equity refers to a concept of
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 - CORRECT ANSWER -B
For fund financial statements, the measurement focus and basis of accounting used by
governmental fund types are
A. current financial resources and modified accrual accounting
B. economic resources and modified accrual accounting
C. financial resources and full accrual accounting
D. economic resources and full accrual accounting - CORRECT ANSWER -A
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 - CORRECT
ANSWER -C
,As used in defining the modified accrual basis of accounting, the term "available" means
A. received in cash
B. will be received in cash within 60 days after 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 - CORRECT ANSWER -D
Under the modified accrual basis of accounting, derived nonexchange revenues are recognized
when
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 - CORRECT ANSWER -D
Under the accrual basis of accounting, property tax revenues are recognized
A. when they are received in cash
B. in the year for which they were levied
C. in the year for which they were levied and when collection in cash is reasonably assured
D. when they are available to finance expenditures of the fiscal period - CORRECT
ANSWER -B
Under the modified accrual basis of accounting, the amount of property tax revenues that should
be recognized by a government 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 after the end of the
fiscal period - CORRECT ANSWER -D
, Under the modified accrual basis of accounting, investment revenues for the current period
should include
A. only interest and dividends received
B. all interest and dividends received during the period plus all accruals of interest and dividends
earned
C. all interest and dividends received plus gains and losses on securities that were sold during the
period
D. all interest and dividends received, all gains and losses on securities sold, and all changes in
market values on securities held in the portfolio at year-end - CORRECT ANSWER -D
Under the accrual basis of accounting used by governments, investment revenues for the current
period should include
A. only interest and dividends received
B. all interest and dividends received during the period plus all accruals of interest and dividends
earned
C. all interest and dividends received plus gains and losses on securities that were sold during the
period
D. all interest and dividends received, all gains and losses on securities sold, and all changes in
market values on securities held in the portfolio at year-end - CORRECT ANSWER -D
Under the modified accrual basis of accounting, imposed nonexchange revenues (such as fines)
should be recognized
A. when assessed
B. when the government has an enforceable legal claim
C. when collected
D. when the government has an enforceable legal claim and when collected within the current
period or soon enough thereafter to be used to pay the liabilities of the current period -
CORRECT ANSWER -D
Under the accrual basis of accounting, imposed nonexchange revenues (such as fines) should be
recognized
