ACCT 4421: Module 4 Quiz UPDATED
ACTUAL Exam Questions and CORRECT
Answers
Which of the following is true of demand bonds?
A. They give the issuer the right to call the bonds at a preestablished price.
B. They give the bondholder the right of first refusal with respect to any additional bonds sold by
the issuer.
C. They give the bondholder the right to demand repayment prior to maturity.
D. They give the issuer the right to demand that the bondholders purchase additional bonds at a
preestablished price. - CORRECT ANSWER -
Which of the following statements is true with respect to derivatives?
A. Their market values are typically less volatile than those of the underlying assets.
B. GASB standards require that governments explain in their annual reports the reasons why
they invested in derivatives.
C. They are highly speculative instruments and therefore are suitable only for governments that
are willing to accept a high degree of investment risk.
D. They need not be reported on governments' financial statements; they need only be disclosed
in notes to the financial statements. - CORRECT ANSWER -
A government acquires as an investment a 30-year U.S. Treasury bond having a face value of
$10,000. At the end of year 20, with 10 years remaining until maturity, the bond had a fair value
of $10,200. Taking into account the discount at which the government initially purchased the
bond, its amortized cost was $9,760. Assuming that it held the bond in a governmental fund, the
government should report the bond at a value of
A. $10,000
B. $9,760
, C. $10,200
D. $0 - CORRECT ANSWER -
A government repaves a section of highway every four years at a cost of $2 million to preserve it
at a specific condition level. How much should it report in depreciation charges under the
modified approach to accounting for infrastructure? The standard approach?
A. Modified Approach: $500,000
Standard Approach: $0
B. Modified Approach: $0
Standard Approach: $500,000
C. Modified Approach: $0
Standard Approach: $0
D. Modified Approach: $500,000
Standard Approach: $500,000 - CORRECT ANSWER -
Clifford City has issued $10 million of revenue bonds to help finance a factory for Travis, Inc, a
private manufacturing company. The city owns the factory and leases it to the company. The
bonds are payable exclusively from the lease payments. In the event the company defaults on its
lease payments, the bondholders have claims only on the factory. The city has no obligation for
the bonds other than to transmit to the bondholders the lease payments that it receives from the
company. In its annual financial statements the city should report the bonds
A. on its government-wide statement of net position but not in any fund statements.
B. only in notes.
C. only as required supplementary information.
D. both on its government-wide statements of net position and in its proprietary funds balance
sheet. - CORRECT ANSWER -
A city would probably not have to recognize an impairment loss on its hospital building if
ACTUAL Exam Questions and CORRECT
Answers
Which of the following is true of demand bonds?
A. They give the issuer the right to call the bonds at a preestablished price.
B. They give the bondholder the right of first refusal with respect to any additional bonds sold by
the issuer.
C. They give the bondholder the right to demand repayment prior to maturity.
D. They give the issuer the right to demand that the bondholders purchase additional bonds at a
preestablished price. - CORRECT ANSWER -
Which of the following statements is true with respect to derivatives?
A. Their market values are typically less volatile than those of the underlying assets.
B. GASB standards require that governments explain in their annual reports the reasons why
they invested in derivatives.
C. They are highly speculative instruments and therefore are suitable only for governments that
are willing to accept a high degree of investment risk.
D. They need not be reported on governments' financial statements; they need only be disclosed
in notes to the financial statements. - CORRECT ANSWER -
A government acquires as an investment a 30-year U.S. Treasury bond having a face value of
$10,000. At the end of year 20, with 10 years remaining until maturity, the bond had a fair value
of $10,200. Taking into account the discount at which the government initially purchased the
bond, its amortized cost was $9,760. Assuming that it held the bond in a governmental fund, the
government should report the bond at a value of
A. $10,000
B. $9,760
, C. $10,200
D. $0 - CORRECT ANSWER -
A government repaves a section of highway every four years at a cost of $2 million to preserve it
at a specific condition level. How much should it report in depreciation charges under the
modified approach to accounting for infrastructure? The standard approach?
A. Modified Approach: $500,000
Standard Approach: $0
B. Modified Approach: $0
Standard Approach: $500,000
C. Modified Approach: $0
Standard Approach: $0
D. Modified Approach: $500,000
Standard Approach: $500,000 - CORRECT ANSWER -
Clifford City has issued $10 million of revenue bonds to help finance a factory for Travis, Inc, a
private manufacturing company. The city owns the factory and leases it to the company. The
bonds are payable exclusively from the lease payments. In the event the company defaults on its
lease payments, the bondholders have claims only on the factory. The city has no obligation for
the bonds other than to transmit to the bondholders the lease payments that it receives from the
company. In its annual financial statements the city should report the bonds
A. on its government-wide statement of net position but not in any fund statements.
B. only in notes.
C. only as required supplementary information.
D. both on its government-wide statements of net position and in its proprietary funds balance
sheet. - CORRECT ANSWER -
A city would probably not have to recognize an impairment loss on its hospital building if
