Gov

Question 1

Which of the following is not an indicator of reliable measurement for an asset?
a. Benefits can be expected on the basis of available evidence or logic.
b. Valuation method is free from material error or bias.
c. Faithful representation of the asset’s benefits.
d. Reliable information will, without bias or undue error, faithfully represent those transactions and
events

Answer 1

b. Valuation method is free from material error or bias.

Question 2

2. It refers to the disbursement authority issued by the DBM to agencies with foreign operations allowing
   them to use the income collected by their Foreign Service Posts to cover their operating requirements.
   a. Notice of Cash Allocation (NCA)
   b. Tax Remittance Advice (TRA)
   c. Cash Disbursement Ceiling (CDC)
   d. Non-Cash Availment Authority (NCAA)

Answer 2

d. Non-Cash Availment Authority (NCAA)

Question 3

3. Account titles in the Revised Chart of Accounts (RCA) are arranged according to this sequence
   a. Assets, Equity, Liability, Revenue, and Expenses
   b. Assets, Liability, Equity, Revenue, and Expenses
   c. Assets, Expenses, Liability, Equity and Revenue
   d. In no particular order.

Answer 3

c. Assets, Expenses, Liability, Equity and Revenue

Question 4

4. Which of the following is an indication of impairment from internal sources?
   a. Significant changes with an adverse effect on the entity have taken place during the period, or will take
   place in the near future, in the technological, market, economic, or legal environment in which the entity
   operates, or in the market to which an asset is dedicated.
   b. During the period, an asset’s market value has declined significantly more than would be expected as a
   result of the passage of time or normal use.
   c. Significant changes with an adverse effect on the entity have taken place during the period, or are
   expected to take place in the near future, in the extent to which, or the manner in which, an asset is
   used or is expected to be used.
   d. Market interest rates or other market rates of return on investments have increased during the period,
   and those increases are likely to affect the discount rate used in calculating an asset’s value in use and
   decrease the asset’s recoverable amount materially.

Answer 4

c. Significant changes with an adverse effect on the entity have taken place during the period, or are
expected to take place in the near future, in the extent to which, or the manner in which, an asset is
used or is expected to be used.

Question 5

5. Entity A, a government entity, had the following transactions during the period:
    Received Notice of Cash Allocation (NCA) amounting to ₱1,226,618.
    Earned total revenue of 1,598,000 from billings and collec ₱ tions of unbilled income.
    Incurred total expenses of ₱791,652.
    Remitted total taxes withheld of 87,460 to the BIR thro ₱ ugh Tax Remittance Advice (TRA).
    The “Cash-Modified Disbursement System (MDS), Regular” has an unused balance of 132,196 at the ₱
   end of the period.
   How much is the surplus (deficit) for the period?
   a. 1,988,230
   b. 1,898,230
   c. 1,742,320
   d. 1,988,320

Answer 5

b. 1,898,230

Question 6

Entity A grants a cash advance of 2,000 for the trav ₱ eling expenses of an officer. Actual expenses amount to
₱1,800. The officer remits the excess cash advance.
6. The entry to record the grant of cash advance is
a. Advances to Officers and Employees
Cash – Disbursing Officer
2,000
2,000
b. Advances to Officers and Employees
Cash – Modified Disbursement
System (MDS), Regular
2,000
2,000
c. Advances to Officers and Employees
Cash – Collecting Officer
2,000
2,000
d. Any of these.

Answer 6

b. Advances to Officers and Employees
Cash – Modified Disbursement
System (MDS), Regular
2,000
2,000

Question 7

7. The disbursement is recorded in the
   a. Journal and Ledger
   b. RAOD
   c. ORS
   d. All of these

Answer 7

d. All of these

Question 8

The entry to record the liquidation of the cash advance is
a. Traveling Expenses – Foreign
Advances to Officers and Employees
1,800
1,800
b. Traveling Expenses – Foreign
Due to Officers and Employees
1,800
1,800
c. Cash – Collecting Officers
Advances to Officers and Employees
1,800
1,800
d. a and c

Answer 8

a. Traveling Expenses – Foreign
Advances to Officers and Employees
1,800
1,800

Question 9

9. The entry to record the receipt and deposit of refund of excess cash advance is
   a. Cash – Collecting Officers
   Advances to Officers and Employees
   200
   200
   b. Cash – Treasury/Agency Deposit, Regular
   Cash – Collecting Officers
   200
   200
   c. a and b
   d. neither a nor b

Answer 9

d. neither a nor b

Question 10

10. This refers to valid and legal obligations of NGAs/OUs, for which, goods/services/projects have been
    delivered/rendered/completed and accepted, regardless of the year when these obligations were incurred.
    a. Accounts Payable
    b. Obligations
    c. Not Yet Due and Demandable
    d. Liability

Answer 10

b. Obligations

Question 11

11. Which of the following is not an essential characteristic of a financial instrument?
    a. There must be a contract.
    b. There are at least two parties to the contract.
    c. The contract gives rise to both a financial asset of one party and a financial liability or equity
    instrument of another party.
    d. It is subsequently measured at fair value.

Answer 11

d. It is subsequently measured at fair value.

Question 12

12. When determining depreciation, an entity considers all of the following except
    a. Initial cost
    b. Useful life
    c. Expected residual value at the end of the asset’s useful life
    d. Whether the asset is classified as with finite or indefinite useful life.

Answer 12

d. Whether the asset is classified as with finite or indefinite useful life

Question 13

13. Entity A spends 20,000 on the repair of one of its ₱ equipment. It is not clear whether the repair is a major
    repair or a minor repair. In accordance with the GAM for NGAs, how should Entity A account for the
    repair cost?
    a. As a minor repair
    b. As a major repair
    c. As an addition
    d. a or b

Answer 13

b. As a major repair

Question 14

14. The Statement of Comparison of Budget and Actual Amounts is dated
    a. As of the reporting date
    b. For a given reporting period
    c. Either a or b
    d. Not dated

Answer 14

b. For a given reporting period

Question 15

15. The main purpose of the Statement of Comparison of Budget and Actual Amounts is
    a. to provide a basis for increasing the budget in the following fiscal year.
    b. to provide information regarding the government’s financial condition vis-a-vis the resources entrusted
    to it.
    c. to enhance the transparency of government’s financial reporting.
    d. to provide information regarding the government’s financial performance.

Answer 15

d. to provide information regarding the government’s financial performance

Question 16

16. The statement of management responsibility for financial statements attached to a government agency’s
    combined financial statements (operating units, regional offices, and main office) would most likely be
    a. dated not later than February 14 of the year following the reporting period.
    b. dated not earlier than February 14 of the year following the reporting period.
    c. signed by the agency’s Head, together with the agency’s Secretary and Treasurer.
    d. none of these.

Answer 16

b. dated not earlier than February 14 of the year following the reporting period.

Question 17

19. Which of the following may not be included in the inventories of a government entity?
    a. rice and other welfare goods held for distribution
    b. raw materials and work-in-process
    c. accountable forms
    d. equipment costing ₱15,000

Answer 17

d. equipment costing ₱15,000

Question 18

20. Entity A exchanges an item of PPE with Entity B. How should Entity A account for any cash paid or
    received from the exchange?
    a. Add the cash paid to the initial measurement of the asset received.
    b. Deduct the cash paid from the initial measurement of the asset received.
    c. Add the cash received to the initial measurement of the asset received.
    d. Account for any cash paid or received in gain or loss but not on the initial measurement of the asset
    received.

Answer 18

a. Add the cash paid to the initial measurement of the asset received.

Question 19

21. According to the GAM for NGAs, these assets are those which have historical, cultural and environmental
    significance, and are intended to be preserved for future generations.
    a. Cultural assets
    b. Infrastructure assets
    c. Heritage assets
    d. Historical assets

Answer 19

c. Heritage assets

Question 20

At the beginning of Year 1, a government entity acquires an intangible asset for 100,000. The intangible ₱
asset has a useful life of 10 years. At the end of Year 3, the entity determines an indication of impairment and
makes the following estimates:
Fair value less costs to sell 60,000
Value in use 50,000
22. How much is the impairment loss?
a. 10,000
b. 20,000
c. 30,000
d. 0

Answer 20

b. 20,000

Question 21

23. At the end of Year 6, Entity A determines an indication that the previous impairment may no longer exist
    and makes the following estimates:
    Fair value less costs to sell 32,000
    Value in use 38,000
    How much is the gain on the reversal impairment loss?
    a. 3,714
    b. 5,714
    c. 8,714
    d. 0

Answer 21

b. 5,714

Question 22

24. Entity A leased a new machine to Entity B on January 1, 20x1. The lease expires on January 1, 20x6. The
    annual rental is 90,000. Additionally, on January 1, 20x1 ₱ , Entity B paid 50,000 to Entity A as a lease ₱
    bonus and 25,000 as a security deposit to be refunded ₱ upon expiration of the lease. In Entity A’s 20x4
    statement of financial performance, the amount of rental revenue should be
    a. 140,000
    b. 125,000
    c. 100,000
    d. 90,000

Answer 22

d. 90,000

Question 23

25. Which of the following statements is correct regarding the presentation of financial statements by
    government entities?
    a. Changes in accounting policies may be accounted for by prospective application.
    b. Non-adjusting events are never recognized but are always disclosed.
    c. Prior period errors are corrected by retrospective application.
    d. Just like business entities, government entities may (if they choose to) prepare interim financial
    statements on a quarterly basis.

Answer 23

b. Non-adjusting events are never recognized but are always disclosed.

Question 24

26. The notes to the financial statements is least likely to be expected to show which of the following
    information?
    a. General information on the reporting entity.
    b. Current and noncurrent distinctions of assets and liabilities.
    c. Statement of compliance with the PPSAS and basis of preparation of financial statements.
    d. Summary of significant accounting policies.

Answer 24

c. Statement of compliance with the PPSAS and basis of preparation of financial statements.

Question 25

27. A change in accounting estimate is accounted for
    a. using the transitional provision, if any.
    b. by retrospective application.
    c. by prospective application.
    d. any of these

Answer 25

d. any of these

Question 26

30. The operator in a service concession arrangement is a
    a. government entity
    b. private entity
    c. separate entity
    d. jeepney

Answer 26

b. private entity

Question 27

31. Which of the following applies to business entities but not to government entities?
    a. Finance lease accounting by lessors.
    b. Noncurrent asset held for sale classification.
    c. Direct method of presenting cash flows from operating activities.
    d. Cash equivalents classification for debt instruments acquired three months before their maturity date.

Answer 27

b. Noncurrent asset held for sale classification.

Question 28

32. Which of the following applies to business entities but not to government entities?
    a. Accounting for biological assets at fair value less costs to sell.
    b. Preparation of interim financial statements.
    c. Presenting information on earnings per share.
    d. Continued depreciation of idle equipment.

Answer 28

c. Presenting information on earnings per share.

Question 29

33. The accounting for government entities differs from the accounting for business entities in which of the
    following respects?
    a. Accounting for exchanges of property, plant and equipment.
    b. Accounting for exchanges of intangible assets.
    c. Accounting policy choice for the subsequent measurement of investment property.
    d. Classification of intangible assets as either with finite or with indefinite useful life for purposes of
    subsequent measurement

Answer 29

c. Accounting policy choice for the subsequent measurement of investment property.c. Accounting policy choice for the subsequent measurement of investment property.

Question 30

34. Which of the following statements is correct?
    a. All disbursements shall be made through Disbursement Vouchers (DVs) or Payroll which are approved
    by the Head of the Requisitioning Unit.
    b. The Non-Cash Availment Authority (NCAA) is a disbursement authority issued to government agencies
    with foreign service posts.
    c. According to the GAM for NGAs, the Advice to Debit Account (ADA) mode of disbursement can be used
    only if the payee maintains an account in the same bank where the government entity maintains its
    account.
    d. Disbursements through the Cash Disbursement Ceiling (CDC) results to the recognition of a loan
    payable in the books of accounts of the BTr.
    e. Under the Advice to Debit Account (ADA) mode of disbursement, payments from a government entity
    are directly credited to the bank accounts of the payees through bank transfers.

Answer 30

e. Under the Advice to Debit Account (ADA) mode of disbursement, payments from a government entity
are directly credited to the bank accounts of the payees through bank transfers.

Question 31

35. The accounting for government entities differs from the accounting for business entities in which of the
    following respects?
    a. Classification of joint ventures.
    b. Consolidation procedures when preparing consolidated financial statements.
    c. Disclosure of events after the reporting date.
    d. Impairment requirements, and reversals thereof, for noncurrent assets.

Answer 31

b. Consolidation procedures when preparing consolidated financial statements.

Question 32

36. The statement of cash flows of government entities
    a. shows the historical changes in cash and cash equivalents
    b. shows prospective information on budgeted amounts of expected future cash flows
    c. a and b
    d. is prepared using the accrual basis of accounting

Answer 32

b. shows prospective information on budgeted amounts of expected future cash flows

Question 33

37. The classification of leases under the GAM for NGAs is based on
    a. the form of the contract rather than the substance of the transaction.
    b. the extent of transfer of risks and rewards incidental to ownership of the leased asset from the lessor
    to the lessee.
    c. the significance in value of the leased asset.
    d. the significance in value of the leased asset and the length of the lease term.

Answer 33

b. the extent of transfer of risks and rewards incidental to ownership of the leased asset from the lessor
to the lessee.

Question 34

38. Lessee enters into a lease contract with Lessor. Which of the following would most likely indicate a
    substantial transfer of risks and rewards incidental to ownership of an asset?
    a. The lease term is 10 years for an annual lease payment of 5,000,000. ₱
    b. Lessee has the option to extend the lease for the remaining half of the leased asset’s useful life for the
    same amount of annual lease payment which is expected to be lower than the market rate during the
    extended period.
    c. The lease transfers ownership of the leased asset to the Lessee if the Lessee pays the Lessor the leased
    asset’s fair value, to be determined on payment date.
    d. The Lessee has the unilateral right to cancel the lease after the first 5 years of the lease term without
    any significant costs.

Answer 34

b. Lessee has the option to extend the lease for the remaining half of the leased asset’s useful life for the
same amount of annual lease payment which is expected to be lower than the market rate during the
extended period.

Question 35

39. On the statement of activities for a private not-for-profit institution, the account, net assets released from
    restrictions, would be shown under revenues, gains, and other support as a (use SFAS 117 in answering
    this question)
    a. Decrease in permanently restricted and an increase in temporarily restricted net assets.
    b. Decrease in restricted and an increase in temporarily restricted net assets
    c. Decrease in temporarily restricted and increase in permanently restricted net assets.
    d. Decrease in temporarily restricted and increase in unrestricted net assets.

Answer 35

d. Decrease in temporarily restricted and increase in unrestricted net assets.

Question 36

40. A statement of functional expenses is required for which of the following private not-for-profit institutions?
    (use SFAS 117 in answering this question)
    a. Hospital
    b. Voluntary Health and Welfare Organization
    c. Fraternal Organization
    d. College

Answer 36

b. Voluntary Health and Welfare Organization

Question 37

41. A government entity derecognizes which of the following?
    a. Idle PPE
    b. Unserviceable PPE
    c. Fully depreciated PPE
    d. Partially damaged PPE

Answer 37

b. Unserviceable PPE

Question 38

42. Entity A, a government entity, receives notice that for the current year, the maximum amount it can
    spend on maintenance and other operating expenses is 1₱ 0B. This event can be described as
    a. Notice of Cash Allocation
    b. Allotment
    c. Appropriation
    d. Budgetication

Answer 38

c. Appropriation

Question 39

43. Which of the following statements is incorrect regarding the accounting for unreleased checks by a
    government entity?
    a. The accounting procedures for unreleased checks prescribed under the GAM for NGAs apply only to
    commercial checks.
    b. Unreleased checks are reverted back to cash.
    c. At the start of the year, a reversing entry is made for the unreleased checks in the previous year.
    d. Unreleased checks are perforated.

Answer 39

d. Unreleased checks are perforated.

Question 40

44. On January 1, 20x1, the biological assets of Entity A consist of two 1-year old animals with fair value less
    costs to sell of 1,000 each. ₱
    The following transactions occurred during the period:
     On July 1, 20x1, two 1-year old animals are acquired for 1, ₱ 100 each, equal to the FVLCS on this date.
     On October 1, 20x1, two animals are born. The FVLCS of a newborn on this date is 500. ₱
    The FVLCS on December 31, 20x1 are as follows:
    Age FVLCS
    new born 600 ₱
    3 mos. old 800 ₱
    1 yr. old ₱1,200
    1.5 yr. old ₱1,500
    2 yrs. old ₱2,000
    How much is the total gain from the change in FVLCS during the period?
    a. 3,800
    b. 4,200
    c. 4,400
    d. 4,800

Answer 40

d. 4,800

Question 41

45. An office equipment representative has a machine for sale or lease. If you buy the machine, the cost is
    ₱7,596. If you lease the machine, you will have to sign a non-cancelable lease and make 5 payments of
    ₱2,000 each. At the time of the last payment you will receive title to the machine. The first payment will be
    made one period after the first day of the lease. The interest rate implicit in this lease is approximately
    a. 10%
    b. 12%
    c. Between 11% and 12%
    d. 16%

Answer 41

b. 12%

Question 42

46. If plotted on a graph, the periodic interest expenses recognized on bonds issued at a premium will show a:
    (X axis – time; Y axis - ) ₱
    a. straight line
    b. downward line sloping to the right
    c. upward line sloping to the right
    d. curvilinear line sloping here and there

Answer 42

b. downward line sloping to the right

Question 43

47. Which of the following information is not reported in the statement of changes in net assets/equity?
    a. Effects of current period errors.
    b. Surplus or deficit for the period
    c. Items of revenue and expense that are recognized directly in equity
    d. The balance of accumulated surpluses or deficits at the beginning of the period and at the reporting
    date, and the changes during the period.

Answer 43

b. Surplus or deficit for the period

Question 44

48. Which of the following is not one of the special journals prescribed by the GAM for NGAs?
    a. Sales Journal
    b. Cash Disbursements Journal
    c. Check Disbursements Journal
    d. Cash Receipts Journal

Answer 44

b. Cash Disbursements Journal

Question 45

49. The 8-digit Revised Chart of Accounts (RCA) Code for revenues starts with number
    a. 1
    b. 5
    c. 2
    d. None of these

Answer 45

d. None of these

Question 46

50. Which of the following does not affect the amount of surplus or deficit that is reported in the statement of
    financial performance?
    a. receipt of NCA
    b. constructive remittance of taxes withheld through TRA
    c. closing of the “Cash-Treasury/Agency Deposit, Regular” account
    d. adjustment of the “Cash-Modified Disbursement System (MDS), Regular” account for the unused
    Notice of Cash Allocation.
    e. All of these affect surplus or deficit.

Answer 46

d. adjustment of the “Cash-Modified Disbursement System (MDS), Regular” account for the unused
Notice of Cash Allocation.

Question 47

51. 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 47

d. $500,000.

Question 48

52. 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 48

c. $5,000,000

Question 49

53. 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 49

b. Temporarily restricted Permanently restricted

Question 50

54. 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.
    b. Other income – gifts.
    c. Temporarily restricted revenue
    d. Permanently restricted revenues

Answer 50

b. Other income – gifts.

Question 51

55. 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 51

b. Temporarily restricted revenue.

Question 52

56. 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 52

b. $430,000

Question 53

57. 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 53

b. $250,000

Question 54

58. 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 54

d. 980,000

Question 55

61. 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 55

c. $690,000

Question 56

62. 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 Equity Securities
    2% - 5% ownership significant influence
    a. Fair value Fair value
    b. Equity method Equity method
    c. Fair value Equity method
    d. Fair value Carrying value

Answer 56

d. Fair value Carrying value

Question 57

63. 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 57

c. When the money is spent for salaries, unrestricted net assets increase and decrease by the same
amount.

Question 58

64. 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 58

b. Cash flows from investing activities.

Question 59

65. 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 59

d. Statement of Cash Flows

Question 60

66. 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 60

d. Refundable advance

Question 61

67. 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 61

b. I & II

Question 62

68. 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 62

d. No effect No effect

Question 63

69. 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 63

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 64

70. In November 20x1 Gilmore Heating and Air Conditioning Service repaired the air conditioning system for
    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.Anincreaseintemporarilyrestrictednetassetsinthestatementofactivities

Answer 64

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