Exam Chapters 1-6 - These multiple choice questions and answers are good practice for the CPA exam. PDF

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These multiple choice questions and answers are good practice for the CPA exam....

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ACCT 556 Chapters 1-6 Fall 2020 1. List 4 factors that cause society to subject G&NP organizations to more stringent, legal, regulatory, and other controls than it imposes on private businesses?    

They lack the ability to perform a profit test needed for a valid performance indicator as it is not profit oriented They lack competition as there is no open market for most of their goods and services Governments have unique financial resources such as the power of taxation Most of the resources available to government and non-profit organizations are typically restricted, that is, for specified services

2. Which of the following organizations has had the least impact on the development of GAAP for state and local governments? a. American Hospital Association b. Federal Accounting Standards Advisory Board c. National Association of College & University Business Officers d. National Committee on Governmental Accounting 3. Expenditures in a governmental (expendable) fund would not potentially include: a. Depreciation b. Salaries and Wages c. Long-term debt d. Accrued building and maintenance repairs 4. Which of the following is not a characteristic used to determine if an organization is a government? a. The majority of governing board members are appointed by government entities. b. An entity that has the power to enact and enforce a property tax levy. c. An entity receives over half of its resources from other governmental entities. d. The potential for unilateral dissolution with the net assets reverting to a government upon dissolution. 5. Which of the following has the highest level of authority for a government in the government GAAP hierarchy? a. A FASB standard on pension accounting b. A GASB standard on pension accounting c. AICPA state and local government audit guide coverage of pensions d. The coverage of pensions in a Journal of Accountancy article 6. A governmental fund budgetary comparison statement or schedule should a. Be prepared on the same basis the budget was enacted b. Always be prepared on a GAAP basis

c. Always be prepared on a cash basis d. Be prepared only for the General Fund 7. Which of the following is not a common revenue source in a governmental fund budget? a. Investment income b. Investment interest c. Property taxes d. Other financing resources 8. Which of the following fund balance classifications is used for budgetary accounting but not for GAAP financial statement reporting? a. Nonspendable fund balance b. Budgetary fund balance c. Committed fund balance d. Unassigned fund balance 9. Which of the following transactions requires entries recording encumbrances in an Expenditures Subsidiary Ledger? a. Accrual of salaries and wages b. Order of supplies c. Purchasing of equipment d. Legal adoption of the General Fund budget 10. Property taxes billed but not collected by the end of the fiscal period or within 60 days following the end of the fiscal period should be a. reported as revenues as long as the taxes are expected to be collected the same year b. reported as a liability/unearned revenues c. reported as a deferred inflow/deferred revenues d. reported as revenue in the last month of the fiscal year 11. The City of Cranston issued $100,000 of purchase orders. Assume that when all orders were received, the actual cost was $99,000. How much would be recorded as expenditures when the goods are received? a. $0 b. $1,000 c. $99,000 d. $100,000 12. When preparing a budgetary comparison statement for a General Fund, which column is optional? a. Final amended budget b. Original budget c. Variance comparing the final budget to the actual amounts on a budgetary basis d. Actual amounts on a budgetary basis 13. The ‘Unencumbered Balance’ in an expenditure subsidiary ledger represents a. Appropriation less expenditures

b. Appropriation less encumbrances c. Appropriation less expenditures and encumbrances d. Estimated revenue less appropriation

14. Which of the following are governmental fund revenues that are typically recognized only as cash is collected? a. Sales taxes b. Property taxes c. Speeding fines d. Sales of capital assets 15. The city of Warwick ordered uniforms with an expected cost of $6,000 for policemen. The credit required to record this transaction is a. Appropriations b. Encumbrances c. Vouchers payable d. Encumbrances outstanding 16. Expenditures are defined as a. Costs expired b. Uses of current financial resources c. Decreases in net financial resources d. Changes in liabilities and deferred inflows 17. Each of the following is a fiduciary fund expect a. A permanent fund b. An investment trust fund c. A private trust fund d. An agency fund 18. The General Fund reported a beginning balance of inventory of materials and supplies of $122,000. The ending balance was $150,000. Supplies purchased during the year totaled $600,000. The city uses the consumption method. The General Fund should report expenditures for materials and supplies for the year of a. $450,000 b. $572,000 c. $600,000 d. $628,000 19. Expenditures in a government fund are recognized when due for a. Interest on general long-term debt b. Salaries and wages c. Capital outlay d. Rent 20. Financial assets include a. Capital assets than can be sold

b. Cash, investments, and receivables c. Only cash & other governmental resources converted to cash in the current period d. Only cash & other governmental fund assets converted to cash during the period 21. The purchases method of accounting is permitted for a. Materials and supplies, but not for prepaid insurance b. Prepaid insurance, but not for materials and supplies c. Neither prepaid insurance nor materials and supplies d. Both prepaid insurance and materials and supplies 22. Each of the following transactions would decreased fund balance in the General Fund except a. Salaries and wages b. Depreciation c. The purchase of capital assets d. The principal repayment of long-term debt 23. A Special Revenue Fund a. Is used to account for revenues restricted or committed to expenditures for capital outlay or debt service purposes b. Must be used to account for all expendable restricted or committed resources c. Is used to account for resources that are restricted or committed to expenditures for specific purposed other than debt service or capital outlay d. Must be used to account for all nonexpendable, restricted, or committed resources 24. General Fund expenditures for uncollectable accounts receivable should be reported in the period that the receivable is a. Legally due and payable b. Established c. Written off as uncollectable d. There are no expenditures for the write-off of uncollectable accounts 25. A bill that should have been paid by a Special Revenue Fund was erroneously paid by the General Fund. The General Fund refunds the amount to the Special Revenue Fund. This transaction is an example of an interfund a. Transfer b. Services provided and used transaction c. Reimbursement transaction d. Loan 26. $1,000,000 of General Fund cash was contributed to provide permanent capital for a newly established municipal landfill Enterprise Fund. This transaction is an example of an interfund a. Transfer b. Services provided and used transaction c. Reimbursement transaction d. Loan 27. General Fund resources of $25,000 were contributed to a Capital Projects fund to finance a portion of the cost of a major project. This transaction is an example of an interfund

a. Transfer b. Services provided and used transaction c. Reimbursement transaction d. Loan

28. Accounts receivables are determined to be uncollectable and are written off. The following account should be debited a. Bad debt expense b. Revenue c. Allowance for uncollectable accounts receivable d. Accounts receivable 29. Which of the following should not be accrued as expenditures in a gov’t fund at year-end? a. Interest incurred on short-term debt, but not yet due b. Interest incurred on long-term debt, but not yet due c. Salaries earned by employees but not yet paid d. Repair work performed by contractors, but not completed 30. The fund balance category that can have either a positive or negative balance is a. Committed fund balance b. Unassigned fund balance c. Assigned fund balance d. Nonspendable fund balance 31. For a transaction to be classified as a special item it must be a. Unusual in nature or infrequent in occurrence but not under the control of directors b. Unusual in nature or infrequent in occurrence c. Unusual in nature or infrequent in occurrence & under control of management d. Unusual in nature or infrequent in occurrence 32. Which of the following statements regarding the accounting and reporting requirements for governmental fund investments is false? a. Certain fund investments may be reported at amortized cost rather than fair value b. Many general government investments are exempt from fair value standards c. Money market investments with remaining maturities of less than one year as of the end of the reporting period are exempt from fair value reporting standards d. A change in the fair value of investments is reported in revenue, whether the change is an increase or decrease 33. The city of Newport’s General Fund has $75,000 of inventory, $600,000 of long-term loans receivable, $250,000 long-term loans due from other funds, and $1,900,000 of investments. Based solely on this information, what is Newport’s nonspendable fund balance? a. $925,000 b. $850,000 c. $675,000 d. $600,000

34. Organizations that aren’t considered to be nonprofit include all of the following except a. Boys and Girls Scouts b. Churches c. Semi-Pro baseball teams d. Rhode Island Society of CPA’s 35. Which of the following statements is true a. Typically, governmental and nonprofit organizations have more restricted resources than do business entities b. Nonprofit organizations never use fund accounting c. G&NP organizations never operate with a profit motive d. Businesses have scarce resources that must be allocated to different uses 36. Which of the following should be reported in the statement of revenues, expenditures, and changes in fund balance of a General Fund? a. A short-term loan to another governmental fund b. A long-term loan to another governmental fund c. Repayment of a short-term loan from a bank d. Repayment of a long-term loan from a bank 37. Which of the following would be classified as Other Financing Sources (Uses)? a. Purchase of capital assets b. Proceeds from the issuance of 6-month notes payable c. Transfers from an Internal Service Fund d. Special Item 38. A Special Revenue Fund expenditure of $25,000 was initially paid from and recorded in the General Fund. The General Fund is now being reimbursed. The General Fund should report a. Other changes in fund balances of $25,000 b. Revenues of $25,000 c. Other financing sources of $25,000 d. $25,000 reduction in expenditures 39. Allotments are best defined as a. Legislative appropriations subdivided into more detailed expenditure categories b. Legislative appropriations subdivided by time periods c. Operating grants that must be sued for a specific purpose d. A budgeting tool that must be used in conjunction with the purchases method of inventory accounting 40. The body with primary accounting standards setting authority for state and local governments is the a. AICPA. b. FASB. c. GASB. d. USAGBA...