462802814 Government accounting final examination with answer and solution docx PDF

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Government AccountingFINAL EXAMINATION 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...

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Government Accounting FINAL EXAMINATION 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. 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) c. Cash Disbursement Ceiling (CDC) b. Tax Remittance Advice (TRA) d. Non-Cash Availment Authority (NCAA) 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. 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. 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 collections of unbilled income.  Incurred total expenses of ₱791,652.  Remitted total taxes withheld of ₱87,460 to the BIR through 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 c. 1,742,320 b. 1,898,230 d. 1,988,320 Use the following information for the next four questions: Entity A grants a cash advance of ₱2,000 for the traveling 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 b. Advances to Officers and Employees Cash – Modified Disbursement System (MDS), Regular c. Advances to Officers and Employees Cash – Collecting Officer d. Any of these.

7. The disbursement is recorded in the a. Journal and Ledger c. ORS b. RAOD d. All of these 8. The entry to record the liquidation of the cash advance is a. Traveling Expenses – Foreign Advances to Officers and Employees b. Traveling Expenses – Foreign Due to Officers and Employees c. Cash – Collecting Officers Advances to Officers and Employees

2,000 2,000 2,000 2,000 2,000 2,000

1,800 1,800 1,800 1,800 1,800 1,800

d.

a and c

9. The entry to record the receipt and deposit of refund of excess cash advance is a. Cash – Collecting Officers 200 Advances to Officers and Employees 200 b. Cash – Treasury/Agency Deposit, Regular 200 Cash – Collecting Officers 200 c. a and b d. neither a nor b 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. c. Not Yet Due and Demandable a. Accounts Payable d. Liability b. Obligations 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. 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. 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 c. As an addition b. As a major repair d. a or b 14. The Statement of Comparison of Budget and Actual Amounts is dated a. As of the reporting date c. Either a or b b. For a given reporting period d. Not dated 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. 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. 17. Entity A is a government hospital. Entity A operates a pharmacy within the hospital. Entity A would most likely recognize revenue from sales of medicines in the pharmacy a. upon billing, when goods are transferred to the buyer. b. on a straight-line basis. c. by reference to the stage of completion at the reporting date. d. in accordance with the substance of the relevant agreement which requires an in-depth analysis by a CPA who studied accounting for four to five years, or more. 18. Which of the following is not one of the classifications of inventory held by a government entity? d. Inventory Held for Consumption a. Inventory Held for Distribution e. Semi-Expendable Property b. Inventory Held for Long-term Use c. Inventory Held for Manufacturing 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 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. 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 c. Heritage assets b. Infrastructure assets d. Historical assets

Use the following information for the next two questions:

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 c. 30,000 b. 20,000 d. 0 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 c. 8,714 b. 5,714 d. 0 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 c. 100,000 b. 125,000 d. 90,000 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. 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. 27. A change in accounting estimate is accounted for a. using the transitional provision, if any. c. by prospective application. b. by retrospective application. d. any of these 28. This is attached to the annual general purpose financial statements of a government entity as a cover letter. a. President’s Budget Message b. Report on Highlights and Executive Summary c. Statement of Management Responsibility for Financial Statements d. Dedications, acknowledgments and best wishes. 29. The main purpose of the statement of comparison of budget and actual amounts is a. to apply the concepts of responsibility accounting. b. to enhance the transparency of financial reporting of the government. c. to show information not presented on the face of the other components of a complete set of general purpose financial statements. d. to provide vital information needed in impeachment proceedings. 30. The operator in a service concession arrangement is a a. government entity c. separate entity b. private entity d. jeepney 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. 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. 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. 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. 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. 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 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. 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. 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. 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) c. Fraternal Organization a. Hospital d. College b. Voluntary Health and Welfare Organization 41. A government entity derecognizes which of the following? a. Idle PPE c. Fully depreciated PPE b. Unserviceable PPE d. Partially damaged PPE 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 ₱10B. This event can be described as c. Appropriation a. Notice of Cash Allocation d. Budgetication b. Allotment 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. 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 c. 4,400 b. 4,200 d. 4,800 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% c. Between 11% and 12% b. 12% d. 16% 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 - ₱) c. upward line sloping to the right a. straight line d. curvilinear line sloping here and there b. downward line sloping to the right 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. 48. Which of the following is not one of the special journals prescribed by the GAM for NGAs? a. Sales Journal c. Check Disbursements Journal b. Cash Disbursements Journal d. Cash Receipts Journal 49. The 8-digit Revised Chart of Accounts (RCA) Code for revenues starts with number a. 1 c. 2 b. 5 d. None of these 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. 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. c. $600,000. b. $400,000. d. $500,000. 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 c. $5,000,000 b. $2,000,000 d. $7,000,000 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