GOV & NFP - EXAM II - Ch 10 UPDATED
ACTUAL Exam Questions and CORRECT
Answers
1. Per GASB Statement No. 34, permanent funds are classified as fiduciary funds.
T/F - CORRECT ANSWER -F
2. In accounting for permanent funds only the income can be spent; the principal must be
preserved intact.
T/F - CORRECT ANSWER -T
3. Fiduciary funds focus on current financial resources and use the full accrual basis of
accounting.
T/F - CORRECT ANSWER -F
4. Fiduciary funds are excluded from the government-wide financial statements.
T/F - CORRECT ANSWER -T
5. The concept of major versus nonmajor funds does not apply to permanent funds, as it does to
governmental and proprietary funds.
T/F - CORRECT ANSWER -F
6. Accounting for the employer's contribution to a defined contribution pension plan is straight
forward, because the employer is obligated only to make annual contributions in the amount
specified in the plan terms.
T/F - CORRECT ANSWER -T
7. Accounting for the employer's contribution to a defined benefit pension plan is straight
forward, because the employer is obligated only to make annual contributions in the amount
specified in the plan terms.
, T/F - CORRECT ANSWER -F
8. Not-for-profits report all investment gains and losses on endowments as additions to
temporarily restricted net assets, regardless of donor-imposed restrictions.
T/F - CORRECT ANSWER -F
9. An employer may have a liability to a defined benefit pension plan other than for its annual
required contributions, depending on the future financial health of the plan.
T/F - CORRECT ANSWER -T
10. In an agency fund, assets always equal fund balances because there are no liabilities.
T/F - CORRECT ANSWER -F
1. A governmental entity receives a gift of cash and investments with a fair value of $200,000.
The donor specified that the earnings from the gift must be used to beautify city-owned parks
and the principal must be re-invested. The $200,000 gift should be accounted for in which of the
following funds?
a) General fund.
b) Private-purpose trust fund.
c) Agency fund.
d) Permanent fund. - CORRECT ANSWER -D
2. In previous years, Center City had received a $400,000 gift of cash and investments. The
donor had specified that the earnings from the gift must be used to beautify city-owned parks and
the principal must be re-invested. During the current year, the earnings from this gift were
$24,000. The earnings from this gift should generally be considered revenue to which of the
following funds?
a) Special revenue fund.
b) Private-purpose trust fund.
c) Agency fund.
d) Permanent fund. - CORRECT ANSWER -D
ACTUAL Exam Questions and CORRECT
Answers
1. Per GASB Statement No. 34, permanent funds are classified as fiduciary funds.
T/F - CORRECT ANSWER -F
2. In accounting for permanent funds only the income can be spent; the principal must be
preserved intact.
T/F - CORRECT ANSWER -T
3. Fiduciary funds focus on current financial resources and use the full accrual basis of
accounting.
T/F - CORRECT ANSWER -F
4. Fiduciary funds are excluded from the government-wide financial statements.
T/F - CORRECT ANSWER -T
5. The concept of major versus nonmajor funds does not apply to permanent funds, as it does to
governmental and proprietary funds.
T/F - CORRECT ANSWER -F
6. Accounting for the employer's contribution to a defined contribution pension plan is straight
forward, because the employer is obligated only to make annual contributions in the amount
specified in the plan terms.
T/F - CORRECT ANSWER -T
7. Accounting for the employer's contribution to a defined benefit pension plan is straight
forward, because the employer is obligated only to make annual contributions in the amount
specified in the plan terms.
, T/F - CORRECT ANSWER -F
8. Not-for-profits report all investment gains and losses on endowments as additions to
temporarily restricted net assets, regardless of donor-imposed restrictions.
T/F - CORRECT ANSWER -F
9. An employer may have a liability to a defined benefit pension plan other than for its annual
required contributions, depending on the future financial health of the plan.
T/F - CORRECT ANSWER -T
10. In an agency fund, assets always equal fund balances because there are no liabilities.
T/F - CORRECT ANSWER -F
1. A governmental entity receives a gift of cash and investments with a fair value of $200,000.
The donor specified that the earnings from the gift must be used to beautify city-owned parks
and the principal must be re-invested. The $200,000 gift should be accounted for in which of the
following funds?
a) General fund.
b) Private-purpose trust fund.
c) Agency fund.
d) Permanent fund. - CORRECT ANSWER -D
2. In previous years, Center City had received a $400,000 gift of cash and investments. The
donor had specified that the earnings from the gift must be used to beautify city-owned parks and
the principal must be re-invested. During the current year, the earnings from this gift were
$24,000. The earnings from this gift should generally be considered revenue to which of the
following funds?
a) Special revenue fund.
b) Private-purpose trust fund.
c) Agency fund.
d) Permanent fund. - CORRECT ANSWER -D
