ACCT 4421 Exam 2 UPDATED ACTUAL
Exam Questions and CORRECT Answers
1. compensated absences
2. Pensions
3. Claims/Judgements
4. Inventories
5. Prepayments
6. Capital Assets
7. Interest and Principal - CORRECT ANSWER - List the 7 GASB allowed exceptions
expenses - CORRECT ANSWER - g/w, full accrual, results from decreases in net
economic resources; generally recognized when asset is consumed (used up); liability is current
if it will be paid within 1 year or the operating cycle, whichever is longer
expenditures - CORRECT ANSWER - govt fund, modified accrual, result from decreases
in net current (expendable/available) financial resources (CA-CL); a liability is current if it will
be paid/liquidated from current (expendable/available) financial resources
GASB allowed exception - CORRECT ANSWER - allows the delay of recognizing
liability/expenditure until the period the liability is paid (thus, at the point the
expendable/available financial resources are reduced)
expense = expenditures - CORRECT ANSWER - if not one of the 7 GASB allowed
exceptions, ____________= ___________
compensated absences - CORRECT ANSWER - earned in one period but often not paid
until several periods later; amount to be paid is often uncertain, and compensation will be based
on the salary rate in effect when the time off is taken; liabilities/expenditures are recognized in
the periods in which payments are made
, sick leave - CORRECT ANSWER - different from vacation leave as it is beyond the
control of both the employer and employee; GASB states that is recognized as a liability only if
it is probable that the employer will compensate the employees for the benefits through cash
payments conditioned on the employees' termination/retirement; remainder is based on an
unknown variable
sabbatical leave - CORRECT ANSWER - after a specified term of service, employees may
be granted a paid leave of absence for either a semester or an academic year; GASB standards
for recognition depends on purpose of leave
period the leave is taken with no liability accrued in advance of the leave - CORRECT
ANSWER - sabbatical leave: if leave will benefit employer (obtain additional training),
the sabbatical should be accounted for ...?
during the period the leave is earned - CORRECT ANSWER - sabbatical leave: if leave if
for "compensated unrestricted time off" thus non beneficial to employer, then the government
should accrue a liability ...?
pensions - CORRECT ANSWER - amount of money paid to retired or disabled employees
and funded throughout the employee's working life; GASB states the expenditure should be the
amount that will be paid with expendable/available financial resources
pensions - CORRECT ANSWER - govt wide will report expense and liability at the
economic cost of the benefit; it is based on actuarial determinations, not just the amounts
contributed to the plans during the year or shortly thereafter
claims/judgements - CORRECT ANSWER - GASB states that the liability will be accrued
if its probable that asset impaired/liability incurred by BS date and loss can be reasonably
estimated; an expenditure is recorded in the period the liability is paid, not when the offending
incident took place or when a settlement was reached
inventories - CORRECT ANSWER - govt's do not acquire them w the intention to resell
them but use them to carry out day-to-day operations; not an expendable financial resource
Exam Questions and CORRECT Answers
1. compensated absences
2. Pensions
3. Claims/Judgements
4. Inventories
5. Prepayments
6. Capital Assets
7. Interest and Principal - CORRECT ANSWER - List the 7 GASB allowed exceptions
expenses - CORRECT ANSWER - g/w, full accrual, results from decreases in net
economic resources; generally recognized when asset is consumed (used up); liability is current
if it will be paid within 1 year or the operating cycle, whichever is longer
expenditures - CORRECT ANSWER - govt fund, modified accrual, result from decreases
in net current (expendable/available) financial resources (CA-CL); a liability is current if it will
be paid/liquidated from current (expendable/available) financial resources
GASB allowed exception - CORRECT ANSWER - allows the delay of recognizing
liability/expenditure until the period the liability is paid (thus, at the point the
expendable/available financial resources are reduced)
expense = expenditures - CORRECT ANSWER - if not one of the 7 GASB allowed
exceptions, ____________= ___________
compensated absences - CORRECT ANSWER - earned in one period but often not paid
until several periods later; amount to be paid is often uncertain, and compensation will be based
on the salary rate in effect when the time off is taken; liabilities/expenditures are recognized in
the periods in which payments are made
, sick leave - CORRECT ANSWER - different from vacation leave as it is beyond the
control of both the employer and employee; GASB states that is recognized as a liability only if
it is probable that the employer will compensate the employees for the benefits through cash
payments conditioned on the employees' termination/retirement; remainder is based on an
unknown variable
sabbatical leave - CORRECT ANSWER - after a specified term of service, employees may
be granted a paid leave of absence for either a semester or an academic year; GASB standards
for recognition depends on purpose of leave
period the leave is taken with no liability accrued in advance of the leave - CORRECT
ANSWER - sabbatical leave: if leave will benefit employer (obtain additional training),
the sabbatical should be accounted for ...?
during the period the leave is earned - CORRECT ANSWER - sabbatical leave: if leave if
for "compensated unrestricted time off" thus non beneficial to employer, then the government
should accrue a liability ...?
pensions - CORRECT ANSWER - amount of money paid to retired or disabled employees
and funded throughout the employee's working life; GASB states the expenditure should be the
amount that will be paid with expendable/available financial resources
pensions - CORRECT ANSWER - govt wide will report expense and liability at the
economic cost of the benefit; it is based on actuarial determinations, not just the amounts
contributed to the plans during the year or shortly thereafter
claims/judgements - CORRECT ANSWER - GASB states that the liability will be accrued
if its probable that asset impaired/liability incurred by BS date and loss can be reasonably
estimated; an expenditure is recorded in the period the liability is paid, not when the offending
incident took place or when a settlement was reached
inventories - CORRECT ANSWER - govt's do not acquire them w the intention to resell
them but use them to carry out day-to-day operations; not an expendable financial resource
