NFP FINAL EXAM QUESTIONS AND
ANSWERS
Under the modified accrual basis of accounting, license fees, permits and other
miscellaneous revenue are generally recognized for practical purposes - ANSWER-When
cash is received.
Reimbursement grant revenues should be recognized - ANSWER-When qualifying
expenditures have been made.
In its fund financial statements, the city would recognize the receipt of a new computer (to be
used for general administrative purposes) that it had ordered the previous year as an -
ANSWER-Expenditure
Which of the following funds would use the modified accrual basis of accounting in preparing
its fund financial statements? - ANSWER-City Hall Capital Projects Fund.
The amount of pension expense that a government should recognize in its government-wide
financial statements during the current year is - ANSWER-The contractually agreed amount.
Capital Project Funds do not report long-term obligations in the fund. - ANSWER-T
Arbitrage is the process of negotiating resolution of conflicts between the federal government
and municipalities over the applicability of federal regulations. - ANSWER-F
In Governmental Funds, the costs of capital assets are reported as expenses when the
assets are acquired. - ANSWER-F
Governments do not have to depreciate infrastructure assets if governments can
demonstrate they are preserving these assets at a specified condition level. - ANSWER-T
Unlike individuals and businesses, governments cannot seek protection under the Federal
Bankruptcy Code. - ANSWER-F
General obligation debt is the obligation of the government at large and is thereby backed by
the government's general credit and revenue-raising powers. - ANSWER-T
In both the fund statements and the government-wide statements, business-type activities
and internal service funds are on a full accrual basis, and their measurement focus is on all
economic resources. - ANSWER-T
Under GASB No. 54, what is the hierarchy classification of fund balances? - ANSWER-
Nonspendable, restricted, committed, assigned, and unassigned
Which of the following funds is a proprietary fund? - ANSWER-Internal Service Fund
, The state collects a gasoline tax that must be used to support highway construction and
maintenance. The gasoline tax revenue should be accounted for in which of the following
funds? - ANSWER-Special Revenue Fund
Appropriation budgets are typically concerned with - ANSWER-Current operating revenues
and expendutures.
For which of the following funds would a government be least likely to record its annual
budget and thereby integrate it into its accounting system? - ANSWER-Enterprise Fund
A governmental entity has formally integrated the budget into its accounting records. At year-
end the ledger account "Revenues from Property Taxes" has a debit balance. Which of the
following is the best explanation for the debit balance? - ANSWER-There is no logical
explanation; revenue accounts usually do not have debit balances.
Washington County received goods that had been approved for purchase but for which
payment had not yet been made. Should the following accounts be increased? - ANSWER-
Expenditures--yes; Encumbrances--no
Property taxes are an example of - ANSWER-An imposed nonexchange transaction.
Under the modified accrual basis of accounting, revenues cannot be recognized - ANSWER-
Until they are measurable and available.
The revenues of an internal service fund are the expenditures and expenses of other funds
of that government. - ANSWER-T
Debt service funds are maintained to account for resources accumulated to pay interest and
principal on general long-term debt--that is, long-term debt associated primarily with
governmental activities. - ANSWER-T
Governments may enter into operating leases, but may not enter into capital leases. -
ANSWER-F
The City of Baconsville engaged in the following transactions. Assume that the city maintains
its books and records in a manner that facilitates the preparation of government-wide
statements. Prepare the appropriate journal entries. If appropriate, write "No Entry Required".
a) The city purchased for cash three dump trucks for $80,000 each. - ANSWER-Dump
Trucks 80,000
Cash 80,000
The City of Baconsville engaged in the following transactions. Assume that the city maintains
its books and records in a manner that facilitates the preparation of government-wide
statements. Prepare the appropriate journal entries. If appropriate, write "No Entry Required".
b) The city sold for $4,000, a police car that had been purchased four years ago at a cost of
$30,000. At the time of acquisition, the city estimated that the police car had a useful life of
five years and a salvage value of $5,000. - ANSWER-Cash 4,000
ANSWERS
Under the modified accrual basis of accounting, license fees, permits and other
miscellaneous revenue are generally recognized for practical purposes - ANSWER-When
cash is received.
Reimbursement grant revenues should be recognized - ANSWER-When qualifying
expenditures have been made.
In its fund financial statements, the city would recognize the receipt of a new computer (to be
used for general administrative purposes) that it had ordered the previous year as an -
ANSWER-Expenditure
Which of the following funds would use the modified accrual basis of accounting in preparing
its fund financial statements? - ANSWER-City Hall Capital Projects Fund.
The amount of pension expense that a government should recognize in its government-wide
financial statements during the current year is - ANSWER-The contractually agreed amount.
Capital Project Funds do not report long-term obligations in the fund. - ANSWER-T
Arbitrage is the process of negotiating resolution of conflicts between the federal government
and municipalities over the applicability of federal regulations. - ANSWER-F
In Governmental Funds, the costs of capital assets are reported as expenses when the
assets are acquired. - ANSWER-F
Governments do not have to depreciate infrastructure assets if governments can
demonstrate they are preserving these assets at a specified condition level. - ANSWER-T
Unlike individuals and businesses, governments cannot seek protection under the Federal
Bankruptcy Code. - ANSWER-F
General obligation debt is the obligation of the government at large and is thereby backed by
the government's general credit and revenue-raising powers. - ANSWER-T
In both the fund statements and the government-wide statements, business-type activities
and internal service funds are on a full accrual basis, and their measurement focus is on all
economic resources. - ANSWER-T
Under GASB No. 54, what is the hierarchy classification of fund balances? - ANSWER-
Nonspendable, restricted, committed, assigned, and unassigned
Which of the following funds is a proprietary fund? - ANSWER-Internal Service Fund
, The state collects a gasoline tax that must be used to support highway construction and
maintenance. The gasoline tax revenue should be accounted for in which of the following
funds? - ANSWER-Special Revenue Fund
Appropriation budgets are typically concerned with - ANSWER-Current operating revenues
and expendutures.
For which of the following funds would a government be least likely to record its annual
budget and thereby integrate it into its accounting system? - ANSWER-Enterprise Fund
A governmental entity has formally integrated the budget into its accounting records. At year-
end the ledger account "Revenues from Property Taxes" has a debit balance. Which of the
following is the best explanation for the debit balance? - ANSWER-There is no logical
explanation; revenue accounts usually do not have debit balances.
Washington County received goods that had been approved for purchase but for which
payment had not yet been made. Should the following accounts be increased? - ANSWER-
Expenditures--yes; Encumbrances--no
Property taxes are an example of - ANSWER-An imposed nonexchange transaction.
Under the modified accrual basis of accounting, revenues cannot be recognized - ANSWER-
Until they are measurable and available.
The revenues of an internal service fund are the expenditures and expenses of other funds
of that government. - ANSWER-T
Debt service funds are maintained to account for resources accumulated to pay interest and
principal on general long-term debt--that is, long-term debt associated primarily with
governmental activities. - ANSWER-T
Governments may enter into operating leases, but may not enter into capital leases. -
ANSWER-F
The City of Baconsville engaged in the following transactions. Assume that the city maintains
its books and records in a manner that facilitates the preparation of government-wide
statements. Prepare the appropriate journal entries. If appropriate, write "No Entry Required".
a) The city purchased for cash three dump trucks for $80,000 each. - ANSWER-Dump
Trucks 80,000
Cash 80,000
The City of Baconsville engaged in the following transactions. Assume that the city maintains
its books and records in a manner that facilitates the preparation of government-wide
statements. Prepare the appropriate journal entries. If appropriate, write "No Entry Required".
b) The city sold for $4,000, a police car that had been purchased four years ago at a cost of
$30,000. At the time of acquisition, the city estimated that the police car had a useful life of
five years and a salvage value of $5,000. - ANSWER-Cash 4,000
