AGOV REVIEW

Question 1

Guil College, a private not-for-profit college, received the following cash inflows:
- $400,000 from students for tuition.
- $200,000 from a donor who stipulated that the money be invested indefinitely and the earnings used for student scholarships.
- $100,000 from a donor who stipulated that the money be spent according to the wishes of the Board of Trustees
Which amounts of these cash flows should be shown on the cash flow statement as cash from operating activities?
a. $700,000.
b. $400,000.
c. $600,000.
d. $500,000.

Answer 1

d. $500,000.

Question 2

On December 30, 19X4, Leigh Museum, a not-for-profit organization, received a $7,000,000 donation of Day Co. shares with donor stipulated requirements as follows:
- Shares valued at $5,000,000 are to be sold with the proceeds used to erect a public viewing building.
- Shares valued at $2,000,000 are to be retained with the dividends used to support current operations.
Leigh adopted of FASB Statement No. 117, Financial Statements of Not-for-Profit Organizations. As a consequence of the receipt of the Day shares, how much should Leigh report as temporarily restricted net assets on its 19X4 statement of financial position?
a. $0
b. $2,000,000
c. $5,000,000
d. $7,000,000

Answer 2

c. $5,000,000

Question 3

CIBA, a non-profit performing arts organization, received a contribution of a term endowment and a regular endowment. These endowments should be reported on the statement of activities as:
Term Endowments
Regular Endowments
a. Permanently restricted
Permanently restricted
b. Temporarily restricted
Permanently restricted
c. Temporarily restricted
Temporarily restricted
d. Unrestricted
Temporarily restricted

Answer 3

b. Temporarily restricted
Permanently restricted

Question 4

Vista, a voluntary health and welfare organization, received a donation of $100,000 to be spent in accordance with the wishes of the institution’s Board of Trustees. This donation should be reported on the statement of activities as:
a. Unrestricted revenue.
c. Temporarily restricted revenue
b. Other income - gifts.
d. Permanently restricted revenues

Answer 4

a. Unrestricted revenue.

Question 5

Ellen College, a private not-for-profit institution, received a $100,000 grant for faculty research in 20x1. The grant money was not spent until 20x2. For 20x1, Ellen College should report the contribution as:
a. Unrestricted revenue
b. Temporarily restricted revenue.
c. Other operating revenue.
d. Other non-operating revenue.

Answer 5

c. Other operating revenue.

Question 6

An NPO hospital has the following account balances:
Amount charged to patients
$500,000
Revenue from newsstand
15,000
Undesignated gifts
40,000
Contractual adjustments
70,000
Interest income
12,000
Salaries expense nurses
120,000
Bad debts
8,000
What is the hospital’s net patient service revenue?
a. $422,000
b. $430,000
c. $500,000
d. $540,000

Answer 6

b. $430,000

Question 7

Home Care, Inc., a nongovernmental voluntary health and welfare organization, received two contributions in 2003. One contribution of $250,000 was restricted for use as general support in 2004. The other contribution of $200,000 carried no donor restrictions. What amount should Home Care report as temporarily restricted contributions in its 2003 statement of activities.
a. $450,000
b. $250,000
c. $200,000
d. $0

Answer 7

b. $250,000

Question 8

The Weyman Hospital, a private, not-for-profit institution, reported the following information:
Gross patient service revenue
$1,000,000
Allowance for discounts to hospital employees
20,000
Bad debt expense
40,000
Contractual adjustments
100,000
What amount should the hospital report as net patient service revenue?
a. 840,000
b. 900,000
c. 880,000
d. 980,000

Answer 8

c. 880,000

Question 9

The Johnson Hospital, a private not-for-profit hospital, received the following revenues in the current year: $60,000
Proceeds from sales of the Hospital’s flower shop Dividends and interest revenue not restricted
$20,000
Cash contributions for the renovation of the children’s ward in the Hospital $200,000
Which of these amounts should be reported as other revenues and gains (other revenue) on the Statement of Operations?
a. $280,000
b. $60,000
c. $80,000
d. $260,000

Answer 9

c. $80,000

Question 10

A hospital has the following account balances:
Revenue from newsstand
$ 50,000
Amounts charged to patients
800,000
Interest income
30,000
Salary expense nurses
100,000
Bad debts
10,000
Undesignated gifts
80,000
Contractual adjustments
110,000
What is the hospital’s net patient service revenue?
a. $880,000
b. $800,000
c. $690,000
d. $680,000

Answer 10

c. $690,000

Question 11

Electra, a not-for-profit performing arts organization, held some donor restricted endowment funds which are invested in stocks that are listed on the NY Stock Exchange, so the fair values are readily determinable. Most of the investments represent amounts between 2% and 5% of the outstanding common stock of the investee corporations. However, Electra does own stock in one company that gives it the ability to exercise significant influence over the operating and financing policies of the investee company. How should these two types of investments be reported on Electra’s Statement of Financial
Position at year end?
Equity Securities
2%-5% ownership
Equity Securities
significant influence
a. Fair value
Fair value
b. Equity method
Equity method
C. Fair value
Equity method
d. Fair value
Carrying value

Answer 11

C. Fair value
Equity method

Question 12

A private not-for-profit performing arts center receives the following three donations:
A gift of $90,000 which is unrestricted.
A gift of $125,000 restricted for payment of salaries.
A gift of $200,000 that is restricted forever but the income from the gift may be used for current expenditures.
Which of the following is not true?
a. Temporarily restricted net assets increased by $125,000.
b. Permanently restricted net assets increased by $325,000.
c. When the money is spent for salaries, unrestricted net assets increase and decrease by the same amount.
d. When the money is spent for salaries, temporarily restricted net assets decrease.

Answer 12

b. Permanently restricted net assets increased by $325,000.

Question 13

Cash flows from a public university bookstore would appear on the statement of cash flows as
a. Cash flows from operations.
b. Cash flows from investing activities.
c. Cash flows from financing activities.
d. Cash flows from noncapital financing

Answer 13

a. Cash flows from operations.

Question 14

Which one of the following is not a required financial statement for a private voluntary health and welfare
organization?
a. Statement of Financial Position
b. Statement of Activities and Changes in Net Assets
C. Statement of Fund Balance
d. Statement of Cash Flows
e. Statement of Functional Expense

Answer 14

C. Statement of Fund Balance

Question 15

Gerlack College, a private, not-for-profit institution, received a donation of $2,000,000 as a challenge grant. If the college raises an additional $2,000,000 within the next two years, it may keep the donation. If it fails, the $2,000,000 must be returned to the donor. How would the college record the receipt of the
grant? a. Unrestricted revenue.
b. Temporarily restricted revenue.
c. Note to the financial statement.
d. Refundable advance.

Answer 15

d. Refundable advance

Question 16

Which of the following transactions of a private voluntary health and welfare organization would increase temporarily restricted net assets in the statement of activities for the current year?
I. Received a contribution of $20,000 from a donor in the current year who stipulated that the money not be spent until the following year.
II.
Spent $25,000 for fund raising during the current year from a donation from the previous year.
a. I only
b. I & II
c. II only
d. Neither

Answer 16

a. I only

Question 17

On December 31, 20X1, the Board of Trustees of a private, not-for-profit college designated $5,000,000 of unrestricted net assets for the construction of an addition to the music building. What effect does this designation have on the college’s unrestricted and temporarily restricted net assets shown on the statement of financial position on December 31, 20X1?
Unrestricted Net Assets
Temporarily restricted Net Assets
a. Decrease
Increase
b. Decrease
No effect
c. No effect
Increase
d. No effect
No effect

Answer 17

d. No effect
No effect

Question 18

The following contributions were received by a private voluntary health and welfare organization. Which of these would not be recorded as an increase in unrestricted revenue?
a. A carpenter donated labor and materials for the construction of a deck.
b. A painter donated paint and labor to paint all the meeting rooms.
c. A retired college professor donated reading services to senior citizens. The organization would not have paid for these services if they had not been donated.
d. A CPA firm donated its services to audit the financial statements for the past year

Answer 18

c. A retired college professor donated reading services to senior citizens. The organization would not have paid for these services if they had not been donated

Question 19

In November 20x1 Gilmore Heating and Air Conditioning Service repaired the air conditioning system for
70 GenCare, a voluntary health and welfare organization and mailed an invoice for $3,000. On December 25, a note was received by GenCare indicating that Gilmore was canceling the invoice and that repairs were being donated. For the year ended, December 31, 20x1, GenCare should report these contributed services
as:
a. A footnote.
b. No disclosure is required but a thank-you note was mailed to Gilmore.
c. An increase in unrestricted revenues and an increase in expenses on the statement of activities.
d. An increase in temporarily restricted net assets in the statement of activities.

Answer 19

c. An increase in unrestricted revenues and an increase in expenses on the statement of activities.

Question 20

Which of the following types of health care organizations recognize depreciation expense?
Investor-Owned
Health Care Enterprises
Not-for-Profit Organizations
Governmental Health Care Organizations
a.
Yes
Yes
No
b.
Yes
No
Yes
C.
No
No
Yes
d.
Yes
Yes
Yes

Answer 20

d.
Yes
Yes
Yes

Question 21

Entity A, a government entity, has an unused NCA of $50,000 at the end of the current year. The entry to record the reversion of unused NCA is
a. Subsidy from National Government - 50,000
Cash-Modified Disbursement
System (MDS), Regular - 50,000
b. Accumulated Surplus/(Deficit)
Cash-Treasury/Agency Deposit,
Regular
c. Subsidy from National Government
Cash-Collecting Officers
d. No journal entry.

Answer 21

d. No journal entry.

Question 22

During the period, Entity A, a government entity, withheld $100,000 taxes from its payments to employees and suppliers. On September 14 of the current year, Entity A remitted the taxes withheld to the BIR through Tax Remittance Advice. The entry to record the remittance includes
a.
Cash-Tax Remittance Advice
Due to BIR
b. Subsidy from National Government
Cash-Tax Remittance Advice
C. a and b
d. None of these.

Answer 22

d. None of these.

Question 23

Arrange the following steps in the budget process according to the sequence that they appear in the budget cycle.
I. Allotment
II. Bicameral deliberations
III. Budget accountability reports
IV. President’s enactment of the GAA
V. Budget hearings with the DBM
a. V, IV, II, I and III
b. II, V, II, I and III
c. V, II, IV, I and III
d. V, I, II, IV and III

Answer 23

c. V, II, IV, I and III

Question 24

Arrange the following steps in the budget process according to the sequence that they appear in the budget cycle.
I. Allotment
II. Disbursement authority
III. Disbursement
IV. Appropriation
V. Incurrence of obligation
a. IV, I, II, V and III
b. IV, I, V, II and III
c. IV, I, V, III and II
d. IV, V, I, II and III

Answer 24

b. IV, I, V, II and III

Question 25

It is an authorization issued by the DBM to NGAs to incur obligations. It is also referred to as Obligational Authority.
a. Appropriation
b. Budget call
c. Allotment
d. Budget hearings

Answer 25

c. Allotment

Question 26

A journal entry with a credit to the “Cash-Modified Disbursement System (MDS), Regular” account will most likely be recorded in the
a. General Journal
b. Cash Disbursements Journal
c. Special Journal
d. Check Disbursements Journal

Answer 26

d. Check Disbursements Journal

Question 27

Which of the following is a non-exchange transaction?
d. Check Disbursements Journal
a. Leasing
b. Rendering of legal services
c. Collection of taxes
d. Collection of tuition fees

Answer 27

c. Collection of taxes

Question 28

Entity A enters into a long-term contract to provide services. The outcome of the transaction can be estimated reliably and the progress on the contract can be measured with sufficient reliability. According to the PPSAS, how should Entity A recognize revenue from the contract?
a. On a straight line basis over the contract term.
b. By reference to the stage of completion of the contract at the reporting date.
c. Full recognition of contract price upon completion of the contract.
d. Only to the extent of costs that are expected to be recovered.

Answer 28

b. By reference to the stage of completion of the contract at the reporting date.

Question 29

According to the GAM for NGAs, interest revenue is recognized
a. on a time proportion basis using the effective interest method.
b. on a straight line basis.
c. in accordance with the substance of the relevant loan agreement.
d. when the entity’s right to receive payment is established.

Answer 29

a. on a time proportion basis using the effective interest method.

Question 30

Which of the following statements is correct?
a. The budget preparation in the Philippines uses a “bottom-up” approach. Under this approach, the budget preparation starts from the highest levels of the government down to the lowest levels.
b. Government entities and business entities use the term “obligation” or the phrase “incurrence of obligation” similarly.
c. The only valid modes of disbursement for a government entity are through cash or check.
d. A government entity must first receive an allotment before it can incur obligations.
e. An entity prepares its budget by simply rolling-over the budget in the previous year and adjusting each line item by 10% increment to reflect inflation. This process is described as zero-based budgeting.

Answer 30

b. Government entities and business entities use the term “obligation” or the phrase “incurrence of obligation” similarly.

Question 31

The taxable event for Value added tax (VAT) is the
a. undertaking of a taxable activity.
b. earning of taxable income.
c. movement of dutiable goods or services across the customs boundary.
d. any of these

Answer 31

a. undertaking of a taxable activity.

Question 32

Which of the following would result to an increase or decrease in the revenue reported by a government entity in its statement of financial performance?
a. Impairment loss on an amount already recognized as revenue.
b. Receipt of a pledge.
c. Receipt of donation in the form of services in kind.
d. The repayment of a loan payable is forgiven.

Answer 32

d. The repayment of a loan payable is forgiven.

Question 33

Which of the following statements is incorrect?
a. The Notice of Cash Allocation (NCA) is an authority issued by the DBM to central, regional and provincial offices and operating units to cover their cash requirements.
b. Responsibility accounting greatly enhances budget accountability because managers are evaluated
only in terms of the costs or other variables that they control, and therefore, budget deviations can be
readily attributed to the managers accountable therefor.
c. Technically, only the Journals and Ledgers are considered accounting records; the Registries are
budget records.
d. Appropriation is also called obligational authority.
e. Separate accounting records and budget registries are maintained for each fund cluster.

Answer 33

d. Appropriation is also called obligational authority.

Question 34

A private not-for-profit hospital provided $150,000 in charity care for the current year. The hospital should report this charity care as
a. Net patient service revenue of $150,000 and patient care expense of $150,000.
b. Net patient service revenue of $150,000 on the statement of operations.
c. Only in the notes to the financial statements.
d. As an unpaid accounts receivable on the balance sheet.

Answer 34

c. Only in the notes to the financial statements.