Test 2

Question 1

Which of the following best describes the notion of accountability?
Select one:

A. Accountability refers to the requirement that governments maintain an appropriate chart of accounts to aid them in the maintenance of their accounting records.

B. Accountability means that governments must maintain appropriate accounting systems.

C. Accountability is based on the belief that citizens have a right to know.

D. None of the above

Answer 1

C. Accountability is based on the belief that citizens have a right to know.

Question 2

Which of the following statements is true?
Select one:

A. Fund accounting refers to the maintenance of separate checking accounts for each cash fund so that they can be reconciled individually.

B. The primary purpose of fund accounting is to segregate the accounting for these activities so that they can be monitored.

C. Fund accounting refers to the accounting for the various investment funds that governments maintain.

D. None of the above

Answer 2

B. The primary purpose of fund accounting is to segregate the accounting for these activities so that they can be monitored.

Question 3

Which of the following is true?
Select one:

A. A budget is a form of control usually having the force of law.

B. A legally adopted budget provides both authorizations of and limitations on amounts that may be spent for particular purposes

C. Budgets are typically only established for planned expenditures since revenues are uncertain.

D. Both A and B are true.

Answer 3

D. Both A and B are true.

Question 4

Which of the following statements best describes an appropriation?
Select one:

A. An appropriation is the authorization to spend money for a specific use.

B. An appropriation is an expenditure of funds for a specific use.

C. An appropriation is an accrual of an expected expense for a specific use.

D. None of the above

Answer 4

A. An appropriation is the authorization to spend money for a specific use.

Question 5

Which of the following best describes an “expenditure”?
Select one:

A. An expenditure is an accrual that must be made before financial statements are issued to recognize an obligation.

B. An expenditure is using up an appropriation by purchasing goods or services.

C. An expenditure is a line item in the income statement that reduces profit for the period.

D. An expenditure is a planned payment of money.

Answer 5

B. An expenditure is using up an appropriation by purchasing goods or services.

Question 6

Which of the following best describes an enterprise fund?
Select one:

A. An enterprise fund is a governmental activity that is available to the public and is financed, in whole or in part, by general tax revenue.

B. An enterprise fund is a business-like activity.

C. An enterprise fund is a central operation, like a copy center, that provides service to many governmental departments for a fee.

D. Both A and B

Answer 6

B. An enterprise fund is a business-like activity.

Question 7

Which of the following is not a governmental Fund?
Select one:

A. Special revenue fund

B. Capital project fund

C. General fund

D. Internal service fund

Answer 7

D. Internal service fund

Question 8

Which of the following is not a proprietary fund?
Select one:

A. Enterprise fund

B. Internal service fund

C. Pension trust fund

D. All of the above are proprietary funds.

Answer 8

C. Pension trust fund

Question 9

Which of the following is not a fiduciary Fund?
Select one:

A. Investment trust fund

B. Special purpose fund

C. Pension trust fund

D. Agency fund

Answer 9

B. Special purpose fund

Question 10

The current financial resources measurement focus:
Select one:

A. Refers to what is being reported in the financial statements

B. refers to resources that can be consumed in the near future

C. refers to the timely issuance of financial statements

D. refers to both A and B

Answer 10

D. refers to both A and B

Question 11

Current financial resources include:
Select one:

A. Cash, prepaid items, receivables and property, plant, and equipment

B. Only cash and receivables

C. Cash, investments, prepaid items and receivables

D. Only cash and investments

Answer 11

C. Cash, investments, prepaid items and receivables

Question 12

Under the modified accrual basis of accounting:
Select one:

A. Revenues are recognized when they are measurable, even if not available to finance expenditures.

B. Revenues are recognized when they are available to finance expenditures, even if not currently measurable.

C. Revenues are recognized when they are both measurable and available to finance expenditures.

D. None of the above

Answer 12

C. Revenues are recognized when they are both measurable and available to finance expenditures.

Question 13

Which of the following statements best describes the recognition of revenue?
Select one:

A. Governments recognize revenues from exchange transactions when the cash is received, and, for nonexchange transactions, when the resources are available to satisfy existing liabilities.

B. Governments recognize revenues from exchange transactions when the transactions take place, and, for nonexchange transactions, when the resources are available to satisfy existing liabilities.

C. Governments recognize revenues from exchange transactions when the transactions take place, and, for nonexchange transactions, when it is probable that resources will be received in the current year.

D. None of the above

Answer 13

B. Governments recognize revenues from exchange transactions when the transactions take place, and, for nonexchange transactions, when the resources are available to satisfy existing liabilities.

Question 14

Which of the following best describes how revenues from property taxes are recognized?
Select one:

A. Revenues from property taxes are recognized when they are both measureable and available.

B. Revenues from property taxes are recognized when the taxes are paid.

C. Revenues from property taxes are recognized when tax bills are sent out.

D. None of the above

Answer 14

A. Revenues from property taxes are recognized when they are both measureable and available.

Question 15

Which of the following best describes how revenues from grants and other subsidies are recognized?
Select one:

A. Grants and other subsidies are recognized when it becomes likely that all eligibility requirements will be met.

B. Grants and other subsidies are recognized when collected.

C. Grants and other subsidies are recognized when all eligibility requirements are met.

D. Grants and other subsidies are recognized when it becomes probable that all eligibility requirements will be met.

Answer 15

C. Grants and other subsidies are recognized when all eligibility requirements are met.

Question 16

The journal entry to record the budget
Select one:

A. contains one or more debits to recognize appropriations and one or more credits to recognize revenues.

B. records the estimated increase or decrease in the budgetary fund balance as a debit or credit.

C. is typically reversed at the end of the accounting year.

D. Both B and C

Answer 16

D. Both B and C

Question 17

The journal entry to record the property tax levy
Select one:

A. is made when taxes are assessed and billings are sent to residents.

B. is not made until the taxes are received.

C. must include an entry to record deferred taxes.

D. Both A and C are true.

Answer 17

A. is made when taxes are assessed and billings are sent to residents.

Question 18

Which of the following statement is true?
Select one:

A.An expenditure relates to the establishment of an appropriation.

B. An expenditure typically recognizes accrued liabilities.

C. An expenditure relates to the using up of an appropriation

D. All of the above.

Answer 18

C. An expenditure relates to the using up of an appropriation

Question 19

Which of the following statements is true?
Select one:

A. An encumbrance is an expenditure.

B. An encumbrance is a contractual commitment relating to an existing appropriation.

C. An encumbrance is a liability appearing on the balance sheet.

D. None of the above.

Answer 19

B. An encumbrance is a contractual commitment relating to an existing appropriation.

Question 20

Which of the following is true?
Select one:

A. Outstanding encumbrances that have not yet must be cancelled with the vendor.

B. Outstanding encumbrances that have not yet been filled may be carried over to the following year if spending authority exists.

C. All outstanding encumbrances must be fulfilled by the end of the year.

D. None of the above are true.

Answer 20

B. Outstanding encumbrances that have not yet been filled may be carried over to the following year if spending authority exists.

Question 21

Which of the following statements is true about property, plant, and equipment (PPE) assets that are purchased by a government?
Select one:

A. They are recorded as assets in fund-based financial statements and are depreciated over their estimated useful lives.

B. They are recorded as assets in fund-based financial statements, but are not depreciated since useful lives cannot be determined.

C. They are not recorded as assets in fund-based financial statements

D. They are reported at fair value at each statement date in fund-based financial statements

Answer 21

C. They are not recorded as assets in fund-based financial statements

Question 22

The journal entry to record the sale of a property, plant, and equipment (PPE) asset used in a governmental fund recognizes:
Select one:

A. Cash or other assets received with a credit to other financing sources or revenue.

B. Cash or other assets received with a credit to accumulated depreciation and a gain or loss on the sale.

C. The reversal of an encumbrance account and the related expenditure.

D. Cash or other assets received and the reversal of an encumbrance relating to that asset.

Answer 22

A. Cash or other assets received with a credit to other financing sources or revenue.

Question 23

The journal entry to record the proceeds of long-term debt in a governmental fund includes a credit to:
Select one:

A. Cash

B. Other financing sources

C. Revenue

D. A long-term liability account

Answer 23

B. Other financing sources

Question 24

The journal entry to record the payment of principal and interest on long-term debt in the debt service fund generally includes a debit to:
Select one:

A. An interest expense account

B. A liability account

C. An expenditure account

D. A debit to cash

Answer 24

C. An expenditure account

Question 25

Which of the following statements best describes the accounting for a capital lease in a governmental fund?
Select one:

A. A capital lease is recorded at its present value.

B. A capital lease is recorded as an expenditure, not as a long-term asset.

C. The liability relating to a capital lease is not reflected on the balance sheet.

D. All of the above are true.

Answer 25

D. All of the above are true.

Question 26

Which of the following statements best describes the accounting for inventories in the General Fund?
Select one:

A. Inventories on hand at the end of the accounting period are not reflected on the balance sheet.

B. Inventories used during the period are reflected as an expense in the statement of revenues, expenditures, and changes in fund balances.

C. There is generally no recognition in the fund accounts of any remaining balance of inventories at the end of the accounting period.

D. None of the above

Answer 26

D. None of the above

Question 27

If supplies that were ordered by a department financed by the General Fund are received at an actual price that is less than the estimated price on the purchase order, the department’s available balance of appropriations for supplies will be:
Select one:

A. Decreased

B. Increased

C. Either decreased or increased, depending on the department’s specific budgetary control procedures.

D. Unaffected

Answer 27

B. Increased

Question 28

Which f the following types of funds has income determination (that is, flow of economic resources) as its measurement focus?
Select one:

A. General Fund = yes; Capital Projects Fund = yes

B. General Fund = no; Capital Projects Fund = yes

C. General Fund = yes; Capital Projects Fund = no

D. General Fund = no; Capital Projects Fund = no

Answer 28

D. General Fund = no; Capital Projects Fund = no

Question 29

The measurement focus and basis of accounting that should be used for proprietary fund financial statements are:
Select one:

A. Economic resources; modified accrual.

B. Economic Resources; accrual

C. Current financial resources; accrual.

D. Current financial resources; modified accrual.

Answer 29

B. Economic resources; accrual.

Question 30

Under the modified accrual basis of accounting, expenditures generally are not recognized until:
Select one:

A. They are paid in cash.

B. Goods or services are ordered

C. They are approved by a legislative body.

D. An obligation is incurred that will be paid from currently available financial resources.

Answer 30

D. An obligation is incurred that will be paid from currently available financial resources.

Question 31

Which of the following components is required in the comprehensive annual financial report?
Select one:

A. Fund financial statements

B. Government-wide financial statements

C. Management discussion and analysis

D. All of the above

Answer 31

D. All of the above

Question 32

Which of the following statements is correct about government-wide financial statements?
Select one:

A. Government-wide statements should display information about the reporting government as a whole, except for its fiduciary activities.

B. The statements should include separate columns for the governmental and business-type activities of the primary government as well as for its component units.

C. Government-wide financial statements should be prepared using the economic resources measurement focus and the accrual basis of accounting.

D. All of the above are correct.

Answer 32

D. All of the above are correct.

Question 33

Which of the following statements about government-wide financial statements is false?
Select one:

A. They distinguish between the primary government and its discretely presented component units.

B. They display information about individual funds.

C. They exclude information about fiduciary activities.

D. They distinguish between governmental activities and business-type activities.

Answer 33

B. They display information about individual funds.

Question 34

Which of the following best describes a “primary government”?
Select one:

A. A primary government, although legally separate, may be fiscally dependent upon another governmental entity.

B. A primary government must be both legally separate and fiscally independent.

C. Although a primary government has a separately elected governing body, it may not be a legally separate entity.

D. The only requirement is for a primary government to have a separately elected governing body; It does not have to be either legally separate or fiscally independent.

Answer 34

B. A primary government must be both legally separate and fiscally independent.

Question 35

Which of the following best describes a “component unit”?
Select one:

A. Primary governments are “financially accountable” for their component units.

B. Primary governments can incur financial obligations from their component units.

C. Primary governments control the appointment of a majority of the controlling board.

D. All of the above

Answer 35

D. All of the above

Question 36

Which of the following best describes the concept of “blending”?
Select one:

A. Blending is required even if the governmental unit provides services mostly to units outside of the primary government.

B. Blending relates to the inclusion of the financial statements of the blended unit in the report of the primary government.

C. The process of blending was eliminated in GASBS 34.

D. None of the above are true.

Answer 36

B. Blending relates to the inclusion of the financial statements of the blended unit in the report of the primary government.

Question 37

Which of the following statements is false?
Select one:

A. Government-wide financial statements use economic resources measurement focus, which requires inclusion of long-term assets and liabilities.

B. Government-wide financial statements use economic resources measurement focus and the accrual basis of accounting.

C. The economic resources measurement focus is like GAAP’s measurement focus.

D. Government-wide financial statements use current financial resources measurement focus and the accrual basis of accounting.

Answer 37

D. Government-wide financial statements use current financial resources measurement focus and the accrual basis of accounting.

Question 38

The accrual basis of accounting requires:
Select one:

A. That revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange like transactions should be recognized when the exchange takes place.

B. That governments should recognize assets from derived tax revenue transactions in the period when the exchange transaction on which the tax is imposed occurs or when the resources are received, whichever occurs first.

C. That governments should recognize assets from imposed nonexchange revenue transactions in the period when an enforceable legal claim to the assets arises or when the resources are received, whichever occurs first.

D. All of the above

Answer 38

D. All of the above

Question 39

Which of the following statements about the statement of net position is false?
Select one:

A. The difference between assets and liabilities must be labeled as net position, and cannot be labeled as equity, net fund balance, or another similar label.

B. Assets are presented in order of liquidity and liabilities in order of maturity.

C. Although long-term assets and liabilities are reported, there is no requirement to group them by current and noncurrent as we have for corporate financial statements.

D. The net position section of the statement should be displayed with three components: 1) invested in capital assets, net of related debt, 2) restricted, and 3) unrestricted.

Answer 39

C. Although long-term assets and liabilities are reported, there is no requirement to group them by current and noncurrent as we have for corporate financial statements.

Question 40

Which of the following statements about capital assets is false?
Select one:

A. Donated assets are initially reported at their historical cost to the donor.

B. Capital assets should generally be depreciated over their estimated useful lives unless they are indefinite lived assets (i.e., land).

C. Governmental entities can group similar assets and to depreciate them as a group using the same depreciation rate.

D. Capital assets are initially recorded at historical cost, including capitalized interest and any other costs necessary to make the asset ready for its intended use.

Answer 40

A. Donated assets are initially reported at their historical cost to the donor.

Question 41

Which of the following statements is false regarding the depreciation of capital assets?
Select one:

A. Governments are not allowed to group similar assets and to depreciate them as a group using the same depreciation rate.

B. Should the municipality incur liabilities that relate specifically to the acquisition, construction, or improvement of capital assets, those assets should be reported net of the related debt.

C. Infrastructure assets (like a road or lighting system), are not required to be depreciated under certain circumstances.

D. Any rational and systematic manner of depreciation can be used.

Answer 41

A. Governments are not allowed to group similar assets and to depreciate them as a group using the same depreciation rate.

Question 42

Which of the following does not accurately describe the accounting for works of art?
Select one:

A. Purchased works of art and historical treasures should be recorded at their purchase price on the date of acquisition.

B. If donated, they should be recorded at fair value whether held as individual items or in a collection.

C. Governments are not required to report works of art on their statements of net position.

D. All of the above accurately describe the accounting for works of art.

Answer 42

D. All of the above accurately describe the accounting for works of art.

Question 43

Which of the following does not describe the presentation of restricted and unrestricted net position?
Select one:

A. Net position should be reported as restricted when governments are not free to use the asset as they wish.

B. Unrestricted net position is available to meet the needs of the general operations of the government.

C. Even though the net position may be labeled as restricted, it may be available to meet the ongoing financial needs of the government.

D. Restrictions on the use of net position may be imposed by loan covenants, donor restrictions, laws or regulations, constitutional provisions or enabling legislation.

Answer 43

C. Even though the net position may be labeled as restricted, it may be available to meet the ongoing financial needs of the government.

Question 44

Which of the following does not accurately describe the accounting for landfill liability in the government-wide financial statements?
Select one:

A. The amount of the landfill liability is estimated at each statement date and adjusted, if necessary.

B. Landfill liability is reported on the statement of net position.

C. The amount of the landfill liability can be reduced if estimates change, resulting in a reduction of current-period cost.

D. The amount of the landfill liability is not adjusted following the initial estimate.

Answer 44

D. The amount of the landfill liability is not adjusted following the initial estimate.

Question 45

Which of the following does not accurately describe the statement of activities?
Select one:

A. The statement of activities separates governmental and business-type activities.

B. The statement of activities uses the same format as corporate income statements.

C. The net expense or revenue is reported for each government function or program separately.

D. The difference between revenues and expenses is labeled as the change in net position, not net income as in the corporate world.

Answer 45

B. The statement of activities uses the same format as corporate income statements.

Question 46

Which of the following accurately describes accounting for program revenues?
Select one:

A. Program revenues reduce the net cost of the function to be financed from the government’s general revenues.

B. All revenues are program revenues unless they are required to be reported as general revenues.

C. Program revenues include charges for services, but do not include grants revenues.

D. All of the above

Answer 46

A. Program revenues reduce the net cost of the function to be financed from the government’s general revenues.

Question 47

Which of the following statements does not complete the sentence, “The comprehensive annual financial report allows users to…”?
Select one:

A. see the cost of providing services to its citizenry.

B. see how the government finances its programs—through user fees and other program revenues versus general tax revenues.

C. understand the extent to which the government has invested in capital assets, including roads, bridges, and other infrastructure assets.

D. All of the statements can be used to complete the sentence.

Answer 47

D. All of the statements can be used to complete the sentence.

Question 48

The journal entries used to record capital assets in preparing the government-wide financial statements:
Select one:

A. Record capital assets at their fair value as of the beginning of the year.

B. Recognize a debit to capital assets and a credit to revenue.

C. Are required because those assets are not reported on fund-based financial statements.

D. Recognize a decrease in net position.

Answer 48

C. Are required because those assets are not reported on fund-based financial statements.

Question 49

The journal entries related to deferred revenues in preparing the government-wide financial statements:
Select one:

A. Provide information that is used in the reconciliation of the proprietary funds balance sheet.

B. Reduce the deferred revenues liability account that was established in the fund-based financial statements.

C. Recognize the decrease in net position that was not previously recognized because the revenues were not recognized.

D. Result in the recognition of revenue as a credit.

Answer 49

B. Reduce the deferred revenues liability account that was established in the fund-based financial statements.

Question 50

The comprehensive annual financial report (CAFR) of a governmental reporting entity should contain a statement of cash flows for:
Select one:

A. Neither governmental nor proprietary funds.

B. Proprietary funds but not governmental funds.

C. Governmental funds but not proprietary funds.

D. Governmental funds and proprietary funds.

Answer 50

B. Proprietary funds but not governmental funds.

Question 51

Which of the following best describes the presentation of restricted and unrestricted net position?
Select one:

A. Even though the net position may be labeled as restricted, it may be available to meet the ongoing financial needs of the government.

B. Unrestricted net position is not available to meet the needs of the general operations of the government.

C. Net position should be reported as unrestricted when governments are not free to use the asset as they wish.

D. Restrictions on the use of net position may be imposed by loan covenants, donor restrictions, laws or regulations, constitutional provisions or enabling legislation.

Answer 51

D. Restrictions on the use of net position may be imposed by loan covenants, donor restrictions, laws or regulations, constitutional provisions or enabling legislation.

Question 52

Component units that are discretely presented by the reporting entity are shown:
Select one:

A. Merged with similar accounts for the primary government.

B. As if they were all fiduciary funds of the primary government.

C. In a separate column to the right of the primary government’s information on the statements.

D. In the notes to the primary government’s financial statements.

Answer 52

C. In a separate column to the right of the primary government’s information on the statements.

Question 53

Under GASBS 34, financial information related to fiduciary activities is reported in:
Select one:

A. Government-wide financial statements and fund financial statements.

B. Government-wide financial statements, but not fund financial statements.

C. Fund financial statements, but not government-wide financial statements.

D. Neither government-wide nor fund financial statements.

Answer 53

C. Fund financial statements, but not government-wide financial statements.

Question 54

The basic financial statements of a state or local government include all of the following except:
Select one:

A. A management discussion & analysis (MD&A).

B. Notes to the financial statements.

C. Government-wide financial statements.

D. Fund financial statements.

Answer 54

A. A management discussion & analysis (MD&A).

Question 55

Which of the following categories are included in the statement of financial position?
Select one:

A. Net assets and equity

B. Assets, liabilities, and equity

C. Revenues and expenses

D. Assets, liabilities, and net assets

Answer 55

D. Assets, liabilities, and net assets

Question 56

The statement of financial position reports on assets and liabilities:
Select one:

A. In order of liquidity and maturity, respectively, with subtotals for the current section. Note disclosures also provide additional information about the restrictions that donors have placed on the allowable uses of particular assets.

B. Alphabetically. Note disclosures also provide additional information about the restrictions that donors have placed on the allowable uses of particular assets.

C. In order of liquidity and maturity, respectively, with subtotals for the current section. Restrictions that donors have placed on the allowable uses of particular assets do not need to be noted.

D. In order of liquidity and maturity, respectively, but with no subtotals for the current section. Footnote disclosures also provide additional information about the restrictions that donors have placed on the allowable uses of particular assets.

Answer 56

A. In order of liquidity and maturity, respectively, with subtotals for the current section. Note disclosures also provide additional information about the restrictions that donors have placed on the allowable uses of particular assets.

Question 57

Which of the following are typical restrictions that donors may place on the allowable use(s) of assets that they contribute to a not-for-profit organization?
Select one:

A. Types of activities for which assets can be used

B. Conditions that must be satisfied before assets can be used

C. The portion of the donation that can be used currently

D. All of the above are typical conditions

Answer 57

D. All of the above are typical conditions

Question 58

Which of the following statements about the net asset sections of the statement of financial position is true?
Select one:

A. Current account standards allow not-for-profit organizations to report their net assets in any way that they feel is reasonable and best conveys the composition of their net assets.

B. The net asset section of the statement of financial position does not require the segregation of net assets into categories as this was deemed to be too costly.

C. The net asset section of the statement of financial position requires the reporting of net assets into the categories of with donor restrictions (i.e., both permanently and temporarily restricted together) and without donor restrictions.

D. The net asset section of the statement of financial position requires the reporting of net assets into the categories of permanently restricted, temporarily restricted, and unrestricted.

Answer 58

C. The net asset section of the statement of financial position requires the reporting of net assets into the categories of with donor restrictions (i.e., both permanently and temporarily restricted together) and without donor restrictions.

Question 59

Which of the following best describes the difference between permanently restricted and temporarily restricted net assets?
Select one:

A. The difference between permanently and temporarily restricted net assets lies in the time period over which those restrictions expire or are fulfilled.

B. Permanently restricted net assets contain restrictions that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the organization. Temporarily restricted net assets provide for fulfillment of those restrictions, but not their expiration.

C. Permanently restricted net assets contain restrictions that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the organization while temporarily restricted net assets provide for such expiration or fulfillment.

D. Permanently restricted net assets contain restrictions that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the organization. Temporarily restricted net assets provide for expiration, but not fulfillment of those restrictions.

Answer 59

C. Permanently restricted net assets contain restrictions that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the organization while temporarily restricted net assets provide for such expiration or fulfillment.

Question 60

Once a restricted net asset is used for the defined purpose:
Select one:

A. The NFP transfers the amount spent from net assets with donor restrictions to net assets without donor restrictions.

B. The NFP transfers the related expense from net assets with donor restrictions to net assets without donor restrictions.

C. The NFP transfers the amount spent from permanently restricted net assets to unrestricted net assets.

D. The NFP transfers cash from a restricted account to an unrestricted account.

Answer 60

A. The NFP transfers the amount spent from net assets with donor restrictions to net assets without donor restrictions.

Question 61

Investments are initially recorded at market value when received as donations and:
Select one:

A. Any income earned on those investments is reported as restricted.

B. Any income earned on those investments is reported as permanently restricted.

C. Any income earned on those investments is reported as unrestricted.

D. Any income earned on those investments is reported either as net assets with donor restrictions or net assets without donor restrictions, depending upon the wishes of the donor.

Answer 61

D. Any income earned on those investments is reported either as net assets with donor restrictions or net assets without donor restrictions, depending upon the wishes of the donor.

Question 62

Which of the following is not true about the statement of activities?
Select one:

A. All income from investments is reported in the net assets without donor restrictions category.

B. Operating expenses are reported by program classification.

C. Payment of cash for an allowable use from restricted funds is accompanied by a transfer of that amount from net assets with donor restrictions to net assets without donor restrictions.

D. The statement of activities reports all operating expenses as decreases of net assets without donor restrictions.

Answer 62

A. All income from investments is reported in the net assets without donor restrictions category.

Question 63

Which of the following statements is false?
Select one:

A. Contributions from donors can be unrestricted, temporarily restricted, or permanently restricted.

B. Contributions from donors are recognized whether the donations are received in cash or are received as other assets.

C. Contributions are recognized as revenue when received or when a promise is made and properly documented.

D. Contributions from donors are always reported in the category net assets without donor restrictions.

Answer 63

D. Contributions from donors are always reported in the category net assets without donor restrictions.

Question 64

A contribution:
Select one:

A. Is a conditional transfer of cash or other assets to an entity or a settlement or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner

B. Is a transaction in which an entity incurs a liability or transfers an asset to another entity (or receives an asset or cancellation of a liability) without directly receiving (or giving) value in exchange.

C. Of services is recognized only if the services would typically need to be purchased if not provided by donation

D. Only A and B are true.

Answer 64

B. Is a transaction in which an entity incurs a liability or transfers an asset to another entity (or receives an asset or cancellation of a liability) without directly receiving (or giving) value in exchange.

Question 65

Which of the following statements about contributions is false?
Select one:

A. Conditional promises are recognized as support when the contribution is made if it is more likely than not that the conditions will be satisfied.

B. When contributions are made in the form of future promises, they are recorded for the present value of the future contribution as net assets with donor restrictions.

C. If the contribution is made in the form of a donor’s promise to pay, revenue is recognized, and a receivable is recorded when the promise is made; if there is enough evidence in the form of verifiable documentation that a promise was made and received.

D. Gifts of long-lived assets received are recognized as support (net assets with donor restrictions) if the not-for-profit has an accounting policy to imply a time restriction relating to the donation that expires over the useful life of the donated assets.

Answer 65

A. Conditional promises are recognized as support when the contribution is made if it is more likely than not that the conditions will be satisfied.

Question 66

Which of the following statements about contributions of works of art is false?
Select one:

A. Contributions of works of art must always be recognized as revenue when received.

B. Contribution of works of art, if not recognized as revenue, may not also be reported on the statement of financial position.

C. Contribution of works of art can be either recognized as revenue when received or not recognized as revenue under certain circumstances.

D. Contribution of works of art need not be recognized as revenue if they are held for public exhibition, protected, and the funds from their sale are reinvested in other items for the art collection.

Answer 66

A. Contributions of works of art must always be recognized as revenue when received.

Question 67

Neighborhood Health Clinic, a not-for-profit organization, receives contributed services from the following individuals valued at their normal billing rates:

Medical doctor provides volunteer cancer screenings: $12,000

Board member volunteers to prepare books for audit: 5,000

Accountant volunteers to assist with mailing campaign: 3,500

Registered nurse provides rides for cancer patients: 1,800

What amount should the non-for-profit organization record as contribution revenue?
Select one:

A. $21,300

B. $17,000

C. $12,000

D. $19,500

Answer 67

B. $17,000

Question 68

Your not-for-profit organization has previously received a $400,000 contribution that is restricted for use solely to construct an indoor pool in a camp that you manage for gifted music children. You are mailing out a check today for $500,000 to the contractor who will build the pool.

Which of the following best describes how you should account for this payment?
Select one:

A. Record the $400,000 as construction-in-progress.

B. Record $400,000 as construction-in-progress since that was the amount of the contribution.

C. Record the $500,000 as construction-in-progress and simultaneously transfer $400,000 from temporarily restricted contributions to permanently restricted contributions since this related to a long-lived asset.

D. Record the $500,000 as construction-in-progress and simultaneously transfer $400,000 from net assets with donor restrictions to net assets without donor restrictions.

Answer 68

D. Record the $500,000 as construction-in-progress and simultaneously transfer $400,000 from net assets with donor restrictions to net assets without donor restrictions.

Question 69

In the last fiscal year, you received notification that your not-for-profit organization has been named in the will of one of your long-time benefactors who has passed away (the estate has been probated and you made the appropriate accounting entry at that time). The will stipulates that the funds must be used to improve the buildings in your not-for-profit organization’s summer camp. The lawyer told you that you would receive $300,000, but you now receive a check for $312,000, $12,000 more than you had expected.

Which of the following best describes how you should account for the check received?
Select one:

A. Debit cash for $312,000, credit contributions-without donor restrictions for $312,000.

B. Debit cash for $312,000, credit contributions receivable for $300,000 and contributions without donor restrictions for $12,000.

C. Debit cash for $312,000 and credit restricted contributions for $312,000.

D. Debit cash for $312,000, credit contributions receivable for $300,000 and contributions with donor restrictions for $12,000.

Answer 69

D. Debit cash for $312,000, credit contributions receivable for $300,000 and contributions with donor restrictions for $12,000.

Question 70

You are reviewing the accounting for contributions for the year and notice an entry to record receipt of an unrestricted contribution in the amount of $120,000. This contribution was made in shares of stock with a market value of $135,000 when received, but which had fallen to a value of $120,000 when sold and the entry made. You notice that the letter accompanying the shares of stock referred to your capital campaign for renovation of your headquarters building and that the money was to be used for that purpose.
Which of the following statements is correct?
Select one:

A. The entry is incorrect and should have recorded the receipt as a contribution with donor restrictions in the amount of $135,000 with a subsequent write-down of the investment.

B. The original accounting as an unrestricted contribution in the amount of the $120,000 value of the stock when sold is correct.

C. The entry is incorrect and should have recorded the receipt as an unrestricted contribution in the amount of $135,000 with a subsequent write-down of the investment.

D. The entry is incorrect and should have recorded the receipt as a contribution with donor restrictions in the amount of $120,000.

Answer 70

A. The entry is incorrect and should have recorded the receipt as a contribution with donor restrictions in the amount of $135,000 with a subsequent write-down of the investment.