ACCT 4421 Module 1 QUESTIONS AND VERIFIED DETAILED SOLUTIONS 2025

Which of the following rule-making authorities would establish accounting standards for the University of Wisconsin (a public university)? - Correct Ans-the GASB Who may impose constraints for the use of a committed fund balance? - Correct Ans-the government's highest level of decision-making authority A city issues $20 million of general obligation bonds to improve its streets and roads. In accordance with the bond covenants, it committed $1 million to help ensure that it is able to meet its first payment of principal and $100,000 for its first payment of interest. The amount of liability that the city should report in its debt service fund is - Correct Ans-$0 The City of Round Lake receives a contribution of $20 million. The donor stipulates that the money is to be invested. The principal is to remain intact, and the investment proceeds are to be used to support a city-owned nature center. The city should report the contribution in a - Correct Ans-permanent fund. Rule 203 of the AICPA's Code of Professional Conduct pertains to - Correct Ans-authorities designated to establish accounting standards. The city of Alpine incurred the following costs during the year in its property tax collection department: Purchase of computer equipment $10,000 Salaries and wages $400,000 Purchase of electricity from the city-owned electric utility $40,000 Purchase of supplies, all of which were used during the year $10,000 As a consequence of these transactions, the amount that Alpine should report as expenditures in its general fund is - Correct Ans-$460,000 The primary objective of a not-for-profit organization or a government is to - Correct Ans-provide services to constituents. The FASB is to the GASB as - Correct Ans-a brother is to a sister. Which of the following is not one of the GASB's financial reporting objectives? - Correct Ans-ensuring that budgeted revenues are equal to or exceed budgeted expenses Interperiod equity refers to a condition whereby - Correct Ans-current-year revenues are sufficient to pay for current-year services. If the GASB has not issued a pronouncement on a specific issue, which of the following is true with respect to FASB pronouncements - Correct Ans-They could be taken into account but would have no higher standing than other accounting literature. If businesses are "governed by the marketplace," governments are governed by - Correct Ans-budgets. The organization responsible for setting accounting standards for state and local governments is the - Correct Ans-GASB In governments, in contrast to businesses, - Correct Ans-there may not be a direct relationship between revenues raised and the demand for the entity's services. The traditional business model of accounting is inadequate for governments and not-for-profit organizations primarily because businesses differ from governments and not-for-profit organizations in that - Correct Ans-they have different missions. Standards promulgated by the FASB are most likely to be adhered to by which of the following governmental units? - Correct Ans-an electric utility Which of the following rule-making authorities would establish accounting standards for Stanford University (a private university)? - Correct Ans-the FASB Under GASB Statement No. 54, what is the hierarchy classification of fund balances? - Correct Ans-nonspendable, restricted, committed, assigned, unassigned The number of governmental units in the United States is approximately - Correct Ans-90,056 During the year, Brian County collects $12 million of property taxes on behalf of Urton Township. Of this amount, it remits $10 million to the township, expecting to remit the balance shortly after the end of its fiscal year. The amount that the county should report as its year end net position is - Correct Ans-$0 Assuming that Bravo County receives all of its revenues from unassigned property taxes, it is most likely to account for the activities of its police department in its - Correct Ans-general fund Oak Township should report depreciation in which of the following funds: - Correct Ans-internal service fund Which of the following is the least appropriate use of the external financial statements of a government? - Correct Ans-to assess whether the compensation of management is reasonable in relation to that of comparable entities The Summerville Preparatory School (a private not-for-profit school) receives a donation of $14 million. The donor stipulates that the entire amount must be used to construct a new athletic field house. The school should classify the donation as - Correct Ans-restricted by donor Oak Township issued the following bonds during the year: Bonds to acquire equipment for a vehicle repair service that is accounted for in an internal service fund $3,000,000 Bonds to construct a new city hall $8,000,000 Bonds to improve its water utility, which is accounted for in an enterprise fund $9,000,000 The amount of debt to be reported in the general fund is - Correct Ans-$0 A city receives a $30 million contribution. The donor stipulates that the money is to be invested. The principal is to remain intact and the investment proceeds are to be used to provide scholarships for the children of city employees. The contribution should be reported as revenue of a - Correct Ans-fiduciary fund. Grove city received the following resources during the year: Property taxes $50,000,000 A federal grant to acquire police cars $400,000 Hotel taxes, which must be used to promote tourism $3,000,000 Proceeds of bonds issued to improve the city's electric utility $12,000,000 The amount that the city should most likely report as revenues in its special revenue funds is - Correct Ans-$3,400,000 The term "independent sector" refers to - Correct Ans-not-for-profit organizations. Which of the following is not one of the FASB's financial reporting objectives? - Correct Ans-reporting on budgetary compliance Governments differ from businesses in that they - Correct Ans-do not issue common stock. Which of the following practices is most likely to undermine interperiod equity? - Correct Ans-paying for a new school building out of current operating funds Which of the following is not an objective of external financial reporting by either the GASB or the FASB? - Correct Ans-to enable