Acct 4421 Midterm Review UPDATED
ACTUAL Exam Questions and CORRECT
Answers
When Capitol City makes its annual lease payment on an unpaid lease obligation, the journal
entry for the debt service fund accounts will include: - CORRECT ANSWER - A debit to
Expenditures - Principal of Lease Obiligation
Premiums received on tax-supported bonds are generally transferred to what fund? - CORRECT
ANSWER - Debt Service
A liability is recorded in governmental funds when: - CORRECT ANSWER - Goods or
services are received, and the invoice is vouchered.
The town received a $5,000,000 endowment, the terms of which indicate that earnings on the
endowment are to be used by health and welfare to provide vaccines to all citizens that are
interested. Where would the $5,000,000 be recorded? - CORRECT ANSWER - Permanent
Fund
What is the process by which a legal valuation is placed on taxable property called? - CORRECT
ANSWER - Property assessment
When Capitol City makes its annual lease payment on an unpaid lease obligation, the journal
entry for the governmental activities accounts will include: - CORRECT ANSWER -A
debit to lease Obligation Payable
Which of the following is not a required disclosure about each major class of capital assets? -
CORRECT ANSWER - Capital acquisitions and sales or other dispositions during the year
showing the date and method of acquisition or disposition.
,For which of the following types of nonexchange transactions are revenues recognized when all
the eligibility requirements are met? - CORRECT ANSWER - Voluntary nonexchange
transactions.
The receipt of equipment that had previously been ordered should be recorded in the General
Fund as a debit to: - CORRECT ANSWER - Expenditures
In which of the following would it not be appropriate to record depreciation of capital assets? -
CORRECT ANSWER - Capital projects fund
The sale of revenue bonds by a water utility fund would be recorded: - CORRECT
ANSWER - In an enterprise fund as a liability.
The account "Interfund Transfers In" would be classified in a General Fund statement of
revenues, expenditures, and changes in fund balance as a(an): - CORRECT ANSWER -
Other Financing source
The General Fund sent $750,000 to a debt service fund to cover principal and interest costs. This
transaction would be recorded in the governmental activities journal as - CORRECT
ANSWER - It would not be recorded since the transaction involves two governmental
funds.
Which of the following bases of accounting should be used in preparing fund financial
statements?
Governmental fundsProprietary fundsFiduciary funds
A)Modified accrual Accrual Modified accrual
B)Modified accrual Modified accrual Modified accrual
C)Modified accrual Accrual Accrual
D)Accrual Accrual Accrual - CORRECT ANSWER - Choice C
In accounting for state and local governments the modified accrual basis is required for -
CORRECT ANSWER - Governmental Funds
, Which of the following is not classified as a support activity reported by not-for-profit entities? -
CORRECT ANSWER - Program Expenses
GASB standards require that general capital assets be recorded in the government-wide
statements at: - CORRECT ANSWER - Historical Cost
When a government transfers the rights and obligations of an asset to another legally separate
governmental or private sector entity, the transaction is referred to as: - CORRECT
ANSWER - A service concession arrangement
The Town of Orleans purchased a truck for the parks department. If the operations of the parks
department are financed by general revenues, which of the following is correct concerning where
the capital asset would be recorded? - CORRECT ANSWER - General Fund: No;
Governmental Activities: Yes
Under the modified accrual basis of accounting used by the General Fund, financial resources are
considered available if the revenue or other financing source is expected to be collected -
CORRECT ANSWER - During the current fiscal period or soon enough after year-end to
pay current period obligations.
Which of the following is not one of the seven elements defined by the GASB concept
statements? - CORRECT ANSWER - Expenses
The Financial Accounting Standards Board has the responsibility for setting accounting and
financial reporting standards for which of the following? - CORRECT ANSWER - All not-
for-profit organizations that are nongovernmental and business entities.
Which of the following would be considered a general capital asset? - CORRECT
ANSWER - A vehicle purchased from General Fund revenues.
Expenditures and expenses are classified as which of the following elements under GASB
concepts statements? - CORRECT ANSWER - Outflows of resources.
ACTUAL Exam Questions and CORRECT
Answers
When Capitol City makes its annual lease payment on an unpaid lease obligation, the journal
entry for the debt service fund accounts will include: - CORRECT ANSWER - A debit to
Expenditures - Principal of Lease Obiligation
Premiums received on tax-supported bonds are generally transferred to what fund? - CORRECT
ANSWER - Debt Service
A liability is recorded in governmental funds when: - CORRECT ANSWER - Goods or
services are received, and the invoice is vouchered.
The town received a $5,000,000 endowment, the terms of which indicate that earnings on the
endowment are to be used by health and welfare to provide vaccines to all citizens that are
interested. Where would the $5,000,000 be recorded? - CORRECT ANSWER - Permanent
Fund
What is the process by which a legal valuation is placed on taxable property called? - CORRECT
ANSWER - Property assessment
When Capitol City makes its annual lease payment on an unpaid lease obligation, the journal
entry for the governmental activities accounts will include: - CORRECT ANSWER -A
debit to lease Obligation Payable
Which of the following is not a required disclosure about each major class of capital assets? -
CORRECT ANSWER - Capital acquisitions and sales or other dispositions during the year
showing the date and method of acquisition or disposition.
,For which of the following types of nonexchange transactions are revenues recognized when all
the eligibility requirements are met? - CORRECT ANSWER - Voluntary nonexchange
transactions.
The receipt of equipment that had previously been ordered should be recorded in the General
Fund as a debit to: - CORRECT ANSWER - Expenditures
In which of the following would it not be appropriate to record depreciation of capital assets? -
CORRECT ANSWER - Capital projects fund
The sale of revenue bonds by a water utility fund would be recorded: - CORRECT
ANSWER - In an enterprise fund as a liability.
The account "Interfund Transfers In" would be classified in a General Fund statement of
revenues, expenditures, and changes in fund balance as a(an): - CORRECT ANSWER -
Other Financing source
The General Fund sent $750,000 to a debt service fund to cover principal and interest costs. This
transaction would be recorded in the governmental activities journal as - CORRECT
ANSWER - It would not be recorded since the transaction involves two governmental
funds.
Which of the following bases of accounting should be used in preparing fund financial
statements?
Governmental fundsProprietary fundsFiduciary funds
A)Modified accrual Accrual Modified accrual
B)Modified accrual Modified accrual Modified accrual
C)Modified accrual Accrual Accrual
D)Accrual Accrual Accrual - CORRECT ANSWER - Choice C
In accounting for state and local governments the modified accrual basis is required for -
CORRECT ANSWER - Governmental Funds
, Which of the following is not classified as a support activity reported by not-for-profit entities? -
CORRECT ANSWER - Program Expenses
GASB standards require that general capital assets be recorded in the government-wide
statements at: - CORRECT ANSWER - Historical Cost
When a government transfers the rights and obligations of an asset to another legally separate
governmental or private sector entity, the transaction is referred to as: - CORRECT
ANSWER - A service concession arrangement
The Town of Orleans purchased a truck for the parks department. If the operations of the parks
department are financed by general revenues, which of the following is correct concerning where
the capital asset would be recorded? - CORRECT ANSWER - General Fund: No;
Governmental Activities: Yes
Under the modified accrual basis of accounting used by the General Fund, financial resources are
considered available if the revenue or other financing source is expected to be collected -
CORRECT ANSWER - During the current fiscal period or soon enough after year-end to
pay current period obligations.
Which of the following is not one of the seven elements defined by the GASB concept
statements? - CORRECT ANSWER - Expenses
The Financial Accounting Standards Board has the responsibility for setting accounting and
financial reporting standards for which of the following? - CORRECT ANSWER - All not-
for-profit organizations that are nongovernmental and business entities.
Which of the following would be considered a general capital asset? - CORRECT
ANSWER - A vehicle purchased from General Fund revenues.
Expenditures and expenses are classified as which of the following elements under GASB
concepts statements? - CORRECT ANSWER - Outflows of resources.
