ACCT 4421 Module 2 UPDATED ACTUAL
Exam Questions and CORRECT Answers
During the year the City of Hamburg engaged in the following transactions. The city uses the
consumption method of recording inventories and prepayments. The city has a 6/30 fiscal year
end.
Choose the correct journal entry to record the following transactions.
On April 1, the city leased a copying machine. The lease qualified as an operating lease. The
terms of the lease require yearly payments of $2,000 each April 1 for 5 years. The city prepaid
the entire 5 years of the lease.
A.) Dr. Asset - copy machine $2,000; Cr. Cash $2,000
B.) Dr. Expense $2,000; Cr. Cash $2,000
C.) Dr. Expenditure $2,000; Cr. Cash $2,000
D.) None of the above - CORRECT ANSWER - C.) Dr. Expenditure $2,000; Cr. Cash
$2,000
During the year the City of Hamburg engaged in the following transactions. The city uses the
consumption method of recording inventories and prepayments. The city has a 6/30 fiscal year
end.
Choose the correct journal entry to record the following transactions.
On January 1, the city leased some office equipment for use in the administrative offices. The
lease qualified as a capital lease. The present value of the minimum lease payments is $96,000.
A.) Dr. Asset - office equipment $96,000; Cr. Cash $96,000
B.) Dr. Capital lease expense $96,000; Cr. Cash $96,000
C.) Dr. Capital lease expenditure $96,000; Cr. Cash $96,000
,D.) None of the above - CORRECT ANSWER - C.) Dr. Capital lease expenditure $96,000;
Cr. Cash $96,000
The Sadie School District is considering buying new computer equipment. They are thinking of
leasing the computers under an operating lease, but prepay the entire rent ($60,000) in advance.
(Assume it is the district's policy to use the purchases method for reporting prepayments.)
Choose the amount of expenditure that would be incurred in the district's general fund to
recognize both the acquisition of the new computers and payment for them. Which of these
options achieves interperiod equity for the district?
A.) Dr. Equipment $60,000 & interperiod equity achieved
B.) Dr. Expenditure $60,000 & interperiod equity NOT achieved
C.) Dr. Equipment $60,000 & interperiod equity NOT achieved
D.) Dr. Expenditure $60,000 & interperiod equity achieved - CORRECT ANSWER - B.)
Dr. Expenditure $60,000 & interperiod equity NOT achieved
Assume that the County of Katerah maintains its books and records in a manner that facilitates
preparation of the fund financial statements. The county formally integrates the budget into the
accounting system and uses the encumbrance system. All appropriations lapse at year-end. At the
beginning of the fiscal year, the county had the following balances in its accounts.
Cash: $200
Fund balance unassigned: $50
Reserve for encumbrances (committed or assigned): $150
Prepare the necessary entries for the current fiscal year.
The county ordered supplies at an estimated cost of $50 and equipment at an estimated cost of
$70.
A.) Dr. Encumbrance $150; Cr. Fund Balance unassigned
, B.) Dr. Encumbrance $150; Cr. Reserve for Encumbrance (committed or assigned) $150
C.) Dr. Budgetary Fund Balance $120; Cr. Reserve for Encumbrance $150
D.) Dr. Expenditure $150; Cr. Reserve for Encumbrance (committed or assigned) $150 -
CORRECT ANSWER - B.) Dr. Encumbrance $150; Cr. Reserve for Encumbrance
(committed or assigned) $150
Assume that the County of Katerah maintains its books and records in a manner that facilitates
preparation of the fund financial statements. The county formally integrates the budget into the
accounting system and uses the encumbrance system. All appropriations lapse at year-end. At the
beginning of the fiscal year, the county had the following balances in its accounts.
Cash: $200
Fund balance unassigned: $50
Reserve for encumbrances (committed or assigned): $150
Prepare the necessary entries for the current fiscal year.
The county earned and collected, in cash, revenues of $810.
A.) Dr. Estimated Revenues $810; Cr. Revenue $810
B.) Dr. Revenue $810; Cr. Cash $810
C.) Dr. Cash $810; Cr. Estimated Revenue $800; Cr. Revenue $800
D.) Dr. Cash $810; Cr. Revenues $810 - CORRECT ANSWER - D.) Dr. Cash $810; Cr.
Revenues $810
The city transferred $400,000 from the general fund to a debt service fund to make the interest
payments due during the fiscal year. - CORRECT ANSWER - Dr. Nonreciprocal transfer
out $400,000; Cr. Cash $400,000
The interest payments due during the fiscal year were paid. - CORRECT ANSWER - Dr.
Interest expenditure $400,000; Cr. Cash $400,000
Exam Questions and CORRECT Answers
During the year the City of Hamburg engaged in the following transactions. The city uses the
consumption method of recording inventories and prepayments. The city has a 6/30 fiscal year
end.
Choose the correct journal entry to record the following transactions.
On April 1, the city leased a copying machine. The lease qualified as an operating lease. The
terms of the lease require yearly payments of $2,000 each April 1 for 5 years. The city prepaid
the entire 5 years of the lease.
A.) Dr. Asset - copy machine $2,000; Cr. Cash $2,000
B.) Dr. Expense $2,000; Cr. Cash $2,000
C.) Dr. Expenditure $2,000; Cr. Cash $2,000
D.) None of the above - CORRECT ANSWER - C.) Dr. Expenditure $2,000; Cr. Cash
$2,000
During the year the City of Hamburg engaged in the following transactions. The city uses the
consumption method of recording inventories and prepayments. The city has a 6/30 fiscal year
end.
Choose the correct journal entry to record the following transactions.
On January 1, the city leased some office equipment for use in the administrative offices. The
lease qualified as a capital lease. The present value of the minimum lease payments is $96,000.
A.) Dr. Asset - office equipment $96,000; Cr. Cash $96,000
B.) Dr. Capital lease expense $96,000; Cr. Cash $96,000
C.) Dr. Capital lease expenditure $96,000; Cr. Cash $96,000
,D.) None of the above - CORRECT ANSWER - C.) Dr. Capital lease expenditure $96,000;
Cr. Cash $96,000
The Sadie School District is considering buying new computer equipment. They are thinking of
leasing the computers under an operating lease, but prepay the entire rent ($60,000) in advance.
(Assume it is the district's policy to use the purchases method for reporting prepayments.)
Choose the amount of expenditure that would be incurred in the district's general fund to
recognize both the acquisition of the new computers and payment for them. Which of these
options achieves interperiod equity for the district?
A.) Dr. Equipment $60,000 & interperiod equity achieved
B.) Dr. Expenditure $60,000 & interperiod equity NOT achieved
C.) Dr. Equipment $60,000 & interperiod equity NOT achieved
D.) Dr. Expenditure $60,000 & interperiod equity achieved - CORRECT ANSWER - B.)
Dr. Expenditure $60,000 & interperiod equity NOT achieved
Assume that the County of Katerah maintains its books and records in a manner that facilitates
preparation of the fund financial statements. The county formally integrates the budget into the
accounting system and uses the encumbrance system. All appropriations lapse at year-end. At the
beginning of the fiscal year, the county had the following balances in its accounts.
Cash: $200
Fund balance unassigned: $50
Reserve for encumbrances (committed or assigned): $150
Prepare the necessary entries for the current fiscal year.
The county ordered supplies at an estimated cost of $50 and equipment at an estimated cost of
$70.
A.) Dr. Encumbrance $150; Cr. Fund Balance unassigned
, B.) Dr. Encumbrance $150; Cr. Reserve for Encumbrance (committed or assigned) $150
C.) Dr. Budgetary Fund Balance $120; Cr. Reserve for Encumbrance $150
D.) Dr. Expenditure $150; Cr. Reserve for Encumbrance (committed or assigned) $150 -
CORRECT ANSWER - B.) Dr. Encumbrance $150; Cr. Reserve for Encumbrance
(committed or assigned) $150
Assume that the County of Katerah maintains its books and records in a manner that facilitates
preparation of the fund financial statements. The county formally integrates the budget into the
accounting system and uses the encumbrance system. All appropriations lapse at year-end. At the
beginning of the fiscal year, the county had the following balances in its accounts.
Cash: $200
Fund balance unassigned: $50
Reserve for encumbrances (committed or assigned): $150
Prepare the necessary entries for the current fiscal year.
The county earned and collected, in cash, revenues of $810.
A.) Dr. Estimated Revenues $810; Cr. Revenue $810
B.) Dr. Revenue $810; Cr. Cash $810
C.) Dr. Cash $810; Cr. Estimated Revenue $800; Cr. Revenue $800
D.) Dr. Cash $810; Cr. Revenues $810 - CORRECT ANSWER - D.) Dr. Cash $810; Cr.
Revenues $810
The city transferred $400,000 from the general fund to a debt service fund to make the interest
payments due during the fiscal year. - CORRECT ANSWER - Dr. Nonreciprocal transfer
out $400,000; Cr. Cash $400,000
The interest payments due during the fiscal year were paid. - CORRECT ANSWER - Dr.
Interest expenditure $400,000; Cr. Cash $400,000
