ACCT 450 - AICPA Questions 58 terms by pcora

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Encumbrances would not appear in d. Enterprise

which fund?

a. Capital projects
b. Special revenue
c. General
d. Enterprise

Roy City received a gift, the principal of a. Permanent fund

which is to be invested in perpetuity
with the income to be used to support
the local library. In which fund should
this gift be recorded?

a. Permanent fund
b. Investment trusts fund
c. Private-purpose trusts fund
d. Special revenue fund
During the current year, the Finn b. $1,000,000
Foundation, a nongovernmental not for-
profit organization, received a
$1,000,000 permanent endowment
from Chris. Chris stipulated that the
income must be used to provide
recreational activities for the elderly.
The endowment reported income of
$80,000 in the current year. What
amount of permanently restricted
contribution revenue should Finn report
at the end of the current year?

a. $1,080,000
b. $1,000,000
c. $ 80,000
d. $0

Which of the following activities should b. Fiduciary activities

be excluded when governmental fund
financial statements are converted to
government-wide financial statements?

a. Proprietary activities
b. Fiduciary activities
c. Government activities
d. Enterprise activities

Pann, a nongovernmental not-for profit b. Temporarily restricted

organization, provides food and shelter
to the homeless. Pann received a
$15,000 gift with the stipulation that the
funds be used to buy beds. In which net
asset class should Pann report the
contribution?

a. Endowment
b. Temporarily restricted
c. Permanently restricted
d. Unrestricted
Nongovernmental not-for-profit a. Statement of financial position,
organizations are required to provide statement of activities, statement of cash
which of the following external financial flows
statements?

a. Statement of financial position,

statement of activities, statement of cash
flows
b. Statement of financial position,
statement of comprehensive income,
statement of cash flows
c. Statement of comprehensive income,
statement of cash flows, statement of
gains and losses
d. Statement of cash flows, statement of
comprehensive income, statement of
unrelated business income

Fenn Museum, a nongovernmental not- b. $450,000

for-profit organization, had the
following balances in its statement of
functional expenses:

Education $300,000
Fundraising 250,000
Mgmt & general 200,000
Research 50,000

What amount should Fenn report as

expenses for support services?

a. $350,000
b. $450,000
c. $500,000
d. $800,000
Jonn City entered into a capital lease for a. General capital asset
equipment during the year. How should
the asset obtained through the lease be
reported in Jonn City's government-
wide statement of net assets?

a. General capital asset

b. Other financing use
c. Expenditure
d. Not reported

In preparing Chase City's reconciliation d. Book value of capital assets sold

of the statement of revenues, during the year
expenditures, and changes in fund
balances to the government wide
statement of activities, which of the
following items should be subtracted
from changes in fund balances?

a. Capital assets purchases

b. Payment of long-term debt principal
c. Internal service fund increase in net
assets
d. Book value of capital assets sold
during the year
A nongovernmental not-for-profit d. $50,000 increase
organization received a $2 million gift
from a donor who specified it be used to
create an endowment fund that would be
invested in perpetuity. The income from
the fund is to be used to support a
specific program in the second year and
beyond. An investment purchased with
the gift earned $40,000 during the first
year. At the end of the first year, the fair
value of the investment was $2,010,000.
What is the net effect on temporarily
restricted net assets at year end?

a. $0
b. $10,000 increase
c. $40,000 increase
d. $50,000 increase

Toigo Co. purchased merchandise from a d. A gain of $25,000 in the income

vendor in England on November 20 for statement
500,000 British pounds. Payment was
due in British pounds on January 20.
The spot rates to purchase one pound
were as follows:
November 20 $1.25
December 31 1.20
January 20 1.17

How should the foreign currency

transaction gain be reported on Toigo's
financial statements at December 31?

a. A gain of $40,000 as a separate

component of stockholders' equity
b. A gain of $40,000 in the income
statement
c. A gain of $25,000 as a separate
component of stockholders' equity
d. A gain of $25,000 in the income
statement
If a city government is the primary c. Discrete presentation
reporting entity, which of the following
is an acceptable method to present
component units in its combined
financial statements?

a. Consolidation
b. Cost method
c. Discrete presentation
d. Government-wide presentation

A company reported $6 million of c. Determine whether the fair value of

goodwill in last year's statement of the reporting unit is less than the
financial position. How should the carrying amount and report an
company account for the reported impairment loss on goodwill in the
goodwill in the current year? income statement.

a. Determine the current year's

amortizable amount and report the
current-year's amortization expense.
b. Determine whether the fair value of
the reporting unit is greater than the
carrying amount and report a gain on
goodwill in the income statement.
c. Determine whether the fair value of
the reporting unit is less than the
carrying amount and report an
impairment loss on goodwill in the
income statement.
d. Determine whether the fair value of
the reporting unit is greater than the
carrying amount and report the recovery
of any previous impairment in the
income statement.
Which of the following is included in c. Foreign currency translation
other comprehensive income? adjustments.

a. Unrealized holding gains and losses

on trading securities.
b. Unrealized holding gains and losses
that result from a debt security being
transferred into the held-to-maturity
category from the available-for-sale
category.
c. Foreign currency translation
adjustments.
d. The difference between the
accumulated benefit obligation and the
fair value of pension plan assets.

In Soan County's general fund statement a. Purchase of fixed assets.

of revenues, expenditures, and changes
in fund balances, which of the following
has an effect on the excess of revenues
over expenditures?

a. Purchase of fixed assets.

b. Payment to a debt-service fund.
c. Special items.
d. Proceeds from the sale of capital
assets.

How should state appropriations to a b. Nonoperating revenues.

state university choosing to report as
engaged only in business-type activities
be reported in its statement of revenues,
expenses, and changes in net assets?

a. Operating revenues.
b. Nonoperating revenues.
c. Capital contributions.
d. Other financing sources.
What is the major difference between an a. The relationship between the amount
exchange transaction and a non- of value given and received.
exchange transaction for governmental
units?

a. The relationship between the amount

of value given and received.
b. Time requirements and whether the
transaction is required by law.
c. Purpose restrictions placed upon fund
balances.
d. Whether resources acquired can be
further exchanged.

A nongovernmental not-for-profit c. $12,500

animal shelter receives contributed
services from the following individuals
valued at their normal billing rate:
Veterinarian provides volunteer animal
care $8,000 Board members volunteer
to prepare books for audit 4,500
Registered nurse volunteers as
receptionist 3,000 Teacher provides
volunteer dog walking 2,000 What
amount should the shelter record as
contribution revenue?

a. $8,000
b. $11,000
c. $12,500
d. $14,500
Whitestone, a nongovernmental not-for- c. Report as income in Year 1
profit organization, received a
contribution in December, Year 1. The
donor restricted use of the contribution
until March, Year 2. How should
Whitestone record the contribution?

a. Footnote the contribution in Year 1

and record as income when it becomes
available in Year 2.
b. No entry required in Year 1 and record
as income in Year 2 when it becomes
available.
c. Report as income in Year 1
d. Report as deferred income in Year 1.

A nongovernmental, not-for-profit c. $14,000

organization received the following
donations of corporate stock during the
year: Donation 1 Donation 2 Number of
shares 2,000 3,000 Adjusted basis
$8,000 $5,500 Fair market value at time
of donation 8,500 6,000 Fair market
value at year end 10,000 4,000 What net
value of investments will the
organization report at the end of the
year?

a. $12,000
b. $13,500
c. $14,000
d. $14,500
King City Council will be establishing a d. Enterprise fund.
library fund. Library fees are expected to
cover 55% of the library's annual
resource requirements. King has decided
that an annual determination of net
income is desirable in order to maintain
management control and accountability
over library. What type of fund should
King establish in order to meet their
measurement objectives?

a. Special revenue fund.

b. General fund.
c. Internal service fund.
d. Enterprise fund.

Which of the following statements are
required to be presented for special-
purpose governments engaged only in
business-type activities (such as
utilities)?
d. The financial statements required for
enterprise funds, including MD&A and
RSI.

a. Statement of net assets only.

b. Management's Discussion and
Analysis (MD&A) and Required
Supplementary Information (RSI) only.
c. The financial statements required for
governmental funds, including MD&A.
d. The financial statements required for
enterprise funds, including MD&A and
RSI.
Brandon County's general fund had the a. $100,000
following transactions during the year:
Transfer to a debt service fund $100,000
Payment to a pension trust fund
500,000 Purchase of equipment
300,000 What amount should Brandon
County report for the general fund as
other financing uses in its governmental
funds statement of revenues,
expenditures, and changes in fund
balances?

a. $100,000
b. $400,000
c. $800,000
d. $900,000

During the current year, the local d. $0

humane society, a nongovernmental not-
for-profit organization, received a
$100,000 permanent endowment from
Cobb. Cobb stipulated that the income
must be used to care for older horses
that can no longer race. The endowment
reported income of $8,000 in the
current year. What amount of
unrestricted contribution revenue
should the humane society report for the
current year?

a. $108,000
b. $100,000
c. $8,000
d. $0
How should operating expenses for a b. Change in unrestricted net assets.
nongovernmental not-for-profit
organization be reported?

a. Change in temporarily restricted net

assets.
b. Change in unrestricted net assets.
c. Change in permanently restricted net
assets.
d. Contra-account to associated
revenues.

Jordan Co. had the following gains a. $0

during the current period:

Gain on disposal of business segment

$500,000
Foreign currency translation gain
100,000

What amount of extraordinary gain

should be presented on Jordan's income
statement for the current period?

a. $0
b. $100,000
c. $500,000
d. $600,000
A foreign subsidiary's functional Salaries Sales to
currency is its local currency, which has expense external customers
not experienced significant inflation. a. Yes Yes
The weighted average exchange rate for
the current year would be the
appropriate exchange rate for
translating

Salaries Sales to
expense external customers
a. Yes Yes
b. Yes No
c. No Yes
d. No No

Harland County received a $2,000,000 a. Agency fund.

capital grant to be equally distributed
among its five municipalities. The grant
is to finance the construction of capital
assets. Harland had no administrative or
direct financial involvement in the
construction. In which fund should
Harland record the receipt of cash?

a. Agency fund.
b. General fund.
c. Special revenue fund.
d. Private purpose trust fund.

Which of the following funds should be a. Debt service.

reported as part of local government's
governmental activities column in its
government-wide statements?

a. Debt service.
b. Agency.
c. Private-purpose trust.
d. Pension trust.
Which format must an enterprise fund c. Direct method.
use to report cash flow operating
activities in the statement of cash flows?

a. Indirect method, beginning with

operating income.
b. Indirect method, beginning with
change in net assets.
c. Direct method.
d. Either direct or indirect method.

Tang City received land from a donor b. Permanent.

who stipulated that the land must
remain intact, but any income generated
from the property may be used for
general government services. In which
fund should Tang City record the
donated land?

a. Special revenue.
b. Permanent.
c. Private-purpose trust.
d. Agency.
Nack City received a donation of a d. May be capitalized, but it is not
valuable painting. Nack planned to add required, and depreciation is not
the painting to its collection and display required.
it in the protected exhibition area of city
hall. Nack had a policy that if such
donated art works were sold, the
proceeds would be used to acquire other
items for its collections. Which of the
following would be correct regarding the
donated painting?

a. Must be capitalized and depreciated.

b. Must be capitalized but not
depreciated.
c. May be capitalized, but it is not
required, and it must be depreciated.
d. May be capitalized, but it is not
required, and depreciation is not
required.

How should a nongovernmental not-for- b. It should be included as a decrease in

profit organization report depreciation unrestricted net assets.
expense in its statement of activities?

a. It should not be included.

b. It should be included as a decrease in
unrestricted net assets.
c. It should be included as an increase in
temporarily restricted net assets.
d. It should be reclassified from
unrestricted net assets to temporarily
restricted net assets, depending on
donor-imposed restrictions on the
assets.
Arkin Corp. is a nongovernmental not- b. Salaries of fundraisers for funds used
for-profit organization involved in in research.
research. Arkin's statement of functional
expenses should classify which of the
following as support services?

a. Salaries of staff researchers involved

in research.
b. Salaries of fundraisers for funds used
in research.
c. Costs of equipment involved in
research.
d. Costs of laboratory supplies used in
research.

A nongovernmental not-for-profit d. Income statement.

organization's statement of activities is
similar to which of the following for-
profit financial statements?

a. Balance sheet.
b. Statement of cash flows.
c. Statement of retained earnings.
d. Income statement.

Which of the following not-for-profit b. A shelter for the homeless.

entities is required to prepare a
statement of functional expense?

a. An art museum.
b. A shelter for the homeless.
c. A private foundation.
d. A public golf course.
Gridiron University is a private c. As a refundable advance.
university. A successful alumnus has
recently donated $1,000,000 to
Gridiron for the purpose of funding a
"center for the study of sports ethics."
This donation is conditional upon the
university raising matching funds within
the next 12 months. The university
administrators estimate that they have a
50% chance of raising the additional
money. How should this donation be
accounted for?

a. As a temporarily restricted support.

b. As unrestricted support.
c. As a refundable advance.
d. As a memorandum entry reported in
the footnotes.

During the current fiscal year, Foxx, a d. $95,000

nongovernmental not-for-profit
organization, received unrestricted
pledges of $300,000. Of the pledged
amount, $200,000 was designated by
donors for use during the current year,
and $100,000 was designated for next
year. Five percent of the pledges are
expected to be uncollectible. What
amount should Foxx report as restricted
support (contributions) in the statement
of activities for the current year?

a. $200,000
b. $190,000
c. $100,000
d. $95,000
Gordon Ltd., a 100% owned British b. 1.55
subsidiary of a U.S. parent company,
reports its financial statements in local
currency, the British pound. A local
newspaper published the following U.S.
exchange rates to the British pound at
year end:
Current rate: $1.50
Historical rate (acquisition): 1.70
Average rate: 1.55
Inventory (FIFO): 1.60

Which currency rate should Gordon use

to convert its income statement to U.S.
dollars at year end?

a. 1.50
b. 1.55
c. 1.60
d. 1.70

Which of the following funds of a c. Internal service fund.

governmental unit records depreciation?

a. Capital projects fund.

b. Debt service fund.
c. Internal service fund.
d. Special revenue fund.

What is the measurement focus and the d. Economic resources Accrual

basis of accounting for the government-
wide financial statements?
Measurement focus Basis of accounting
a. Current financial resources Modified
accrual
b. Economic resources Modified accrual
c. Current financial resources Accrual
d. Economic resources Accrual
Powell City purchased a piece of a. As an expenditure.
equipment to be used by a department
financed by the general fund. How
should Powell report the acquisition in
the general fund?

a. As an expenditure.
b. Capitalize, depreciation is optional.
c. Capitalize, depreciation is required.
d. Capitalize, depreciation is not
permitted.

A state had general obligation bonds d. Fund balance.

outstanding that required payment of
interest on July 1 and January 1 of each
year. State law allowed for the general
fund to make debt payments without the
use of a fiscal agent. The fiscal year
ended June 30. Which of the following
accounts would have decreased when the
state paid the interest due on July 1?

a. Interest expenditures.
b. Interest payable.
c. Interest expense.
d. Fund balance.

All of the following statements regarding a. The notes contain disclosures related
notes to the basic financial statements of to required supplementary information.
governmental entities are true, except:

a. The notes contain disclosures related

to required supplementary information.
b. Some notes presented by governments
are identical to notes presented in
business financial statements.
c. Notes that are considered essential to
the basic financial statements need to be
presented.
d. It is acceptable to present notes in a
very extensive format.
A county's balances in the general fund
included the following: Appropriations
$435,000 Encumbrances 18,000
Expenditures 164,000
Vouchers payable 23,000
What is the remaining amount available
for use by the county?
c. $253,000
Budget: Appropriations $435,000
Activity: Expenditures (164,000)
Encumbrances (18,000)
Available appropriations $253,000

a. $230,000
b. $248,000
c. $253,000
d. $271,000

Which of the following items is an d. Property taxes.

example of imposed nonexchange
revenue for a governmental entity?

a. Personal income taxes.

b. Retail sales tax.
c. Federal grant money.
d. Property taxes.

Hann School, a nongovernmental not- a. Increase in unrestricted net assets.

for-profit organization, spent $1 million
of temporarily restricted cash to acquire
land and building. How should this be
reported in the statement of activities?

a. Increase in unrestricted net assets.

b. Increase in temporarily restricted net
assets.
c. Increase in permanently restricted net
assets.
d. Decrease in permanently restricted
net assets.
Which of the following comprise a. Program services, management and
functional expense categories for a general, and fund-raising.
nongovernmental not-for-profit
organization?

a. Program services, management and

general, and fund-raising.
b. Membership dues, fund-raising, and
management and general.
c. Grant expenses, program services, and
membership development.
d. Membership development,
professional fees, and program services.

Settam, a nongovernmental not-for- a. $0

profit organization, received a donation
of stock with donor-stipulated
requirements as follows: Shares valued
at $8,000,000 are to be sold with the
proceeds used for renovation.
Shares valued at $2,000,000 are to be
retained with the dividends used to
support current operations.
What amount should Settam include as
unrestricted net assets as a result of this
donation?

a. $0
b. $2,000,000
c. $8,000,000
d. $10,000,000
How should unconditional pledges b. Pledges receivable, valued at their
received by a nongovernmental not-for- present values.
profit organization that will be collected
over more than one year be reported?

a. Long-term pledges receivable, valued

at the expected collection amount.
b. Pledges receivable, valued at their
present values.
c. Deferred revenue, valued at present
value.
d. Pledges receivable, valued at the
amount pledged.

How should a nongovernmental, not- c. Financing activity inflow.

for-profit organization report donor-
restricted cash contributions for long-
term-purposes in its statement of cash
flows?

a. Operating activity inflow.

b. Investing activity inflow.
c. Financing activity inflow.
d. As a noncash transaction.

In the preparation of the statement of b. Unrestricted net assets.

activities for a nongovernmental not-for-
profit organization, all expenses are
reported as decreases in which of the
following net asset classes?

a. Total net assets.

b. Unrestricted net assets.
c. Temporarily restricted net assets.
d. Permanently restricted net assets
Johan Co. has an intangible asset, which Johan Abco
it estimates will have a useful life of 10 b. Yes No
years, while Abco Co. has goodwill,
which has an indefinite life. Which
company should report amortization in
its financial statements?
Johan Abco
a. Yes Yes
b. Yes No
c. No Yes
d. No No

Which of the following transactions is an c. Routine employer contributions from

expenditure of a governmental unit's the general fund to a pension trust fund.
general fund?

a. Contribution of enterprise fund capital

by the general fund.
b. Operating subsidy transfer from the
general fund to an enterprise fund.
c. Routine employer contributions from
the general fund to a pension trust fund.
d. Transfer from the general fund to a
capital projects fund.

In a not-for-profit organization, which of a. Yes Yes

the following should be included in total
expenses?

Grants to other
Organizations Depreciation
a. Yes Yes
b. Yes No
c. No No
d. No Yes
RST Charities received equities
securities valued at $100,000 as an
unrestricted gift. During the year, RST
received $5,000 in dividends from these
securities; at year end, the securities had
a fair market value of $110,000. By what
amount did these transactions increase
RST's net assets?
d. $115,000
Equity security received $100,000
Change in market value 10,000
FMV at year end 110,000
Dividends received 5,000
Total $115,000

a. $100,000
b. $105,000
c. $110,000
d. $115,000

The Turtle Society, a nongovernmental a. $0

not-for-profit organization, receives
numerous contributed hours from
volunteers during its busy season. Chris,
a clerk at the local tax collector's office,
volunteered ten hours per week for 24
weeks transferring turtle food from the
port to the turtle shelter. His rate of pay
at the tax office is $10 per hour, and the
prevailing wage rate for laborers is $6.50
per hour. What amount of contribution
revenue should Turtle Society record for
this service?

a. $0
b. $840
c. $1,560
d. $2,400

Goodwill should be tested for value b. Each reporting unit.

impairment at which of the following
levels?

a. Each identifiable long-term asset.

b. Each reporting unit.
c. Each acquisition unit.
d. Entire business as a whole.