Question 1

A local government began the year with a portfolio of securities with an historical cost of $1,200 and a fair value of $1,240.During the year the government acquired an additional security at a cost of $260 and sold for $200 a security that had an historical cost of $172 and a fair value at the beginning of the year of $190.At the end of the year,the securities portfolio had a fair value of $1,330.The amount that should be recognized on the financial statements for the year as investment income is

Accepted Answer

A) $10. 
B) $20. 
C) $28. 
D) $30.

Question 2

Under GAAP,investment income for governments must include

Accepted Answer

A) only dividends and interest received during the period. 
B) only dividends and interest earned during the period. 
C) only realized gains and losses. 
D) dividends and interest received during the period and both realized and unrealized gains and losses

Question 3

Governments should recognize revenue from donated capital assets that will be sold to support the government's programs at which amount in their government-wide financial statements?

Accepted Answer

A) historical cost to the donor. 
B) book value in the hands of the donor. 
C) fair value of the donated assets. 
D) zero.

Question 4

Under the accrual basis of accounting used by governments,investment revenues for the current period should include

Accepted Answer

A) only interest and dividends received. 
B) all interest and dividends received during the period plus all accruals of interest and dividends earned. 
C) all interest and dividends received plus gains and losses on securities that were sold during the period. 
D) all interest and dividends received,all gains and losses on securities sold,and all changes in market values on securities held in the portfolio at year-end.

Question 5

A city levies a 2 percent sales tax.Sales taxes must be remitted by the merchants to the City by the twentieth day of the month following the month in which the sale occurred.Cash received by the city related to sales taxes is as follows: $\begin{array}{ll}
\text { Amount received } 1 / 20 / 14 \text {, applicable to December } 2013 \text { sales } & \$ 100 \
\text { Amount received } 2 / 20 / 14 \text {, applicable to January } 2014 \text { sales } & \$ 30 \
\text { Amount received during } 2014 \text { related to February-November } 2014 \text { sales } & \$ 400 \
\text { Amount received } 1 / 20 / 15 \text { for December } 2014 \text { sales } & \$ 110 \
\text { Amount received } 2 / 20 / 152 \text { for January } 2014 & \$ 40
\end{array}$ Assuming the city uses the same period to define "available" as the maximum period allowable for property taxes,what amount should it recognize in the governmental fund financial statements as sales tax revenue for the fiscal year ended 12/31/14?

Accepted Answer

A) $430. 
B) $530. 
C) $540. 
D) $550.

Question 6

Ad valorem taxes are taxes that are based on value.

Accepted Answer

A) True 
 B)False

Question 7

For fund financial statements,the measurement focus and basis of accounting used by governmental fund types are

Accepted Answer

A) current financial resources and modified accrual accounting. 
B) economic resources and modified accrual accounting. 
C) financial resources and full accrual accounting. 
D) economic resources and full accrual accounting.

Question 8

The revenue-recognition issues facing governments are generally focused on the exchange transaction earning process,similar to those of businesses.

Accepted Answer

A) True 
 B)False

Question 9

Under the modified accrual basis of accounting,imposed nonexchange revenues such as fines)should be recognized

Accepted Answer

A) when assessed. 
B) when the government has an enforceable legal claim. 
C) when collected. 
D) when the government has an enforceable legal claim and when collected within the current period or soon enough thereafter to be used to pay the liabilities of the current period.

Question 10

If an entity elects to focus on all economic resources,then it should adopt a modified accrual basis of accounting.

Accepted Answer

A) True 
 B)False

Question 11

Under the accrual basis of accounting,gains and losses on disposal of capital assets

Accepted Answer

A) are not recognized. 
B) are recognized when the proceeds cash)of the sale are received on the installment basis). 
C) are recognized only if there is a gain. 
D) are recognized when the sale occurs,regardless of when the cash is collected.

Question 12

A city is the recipient of a cash bequest of $500,000 that must be used to plant flowers and shrubs in the city parks.During the year only $200,000 is actually received from the bequest and $150,000 is spent on shrubs.The amount that should be recognized as revenue by the city in its government-wide financial statements in the current year is

Accepted Answer

A) $-0-. 
B) $150,000. 
C) $200,000. 
D) $500,000.

Question 13

The modified accrual basis of accounting is used in presenting the fund financial statements of the governmental funds because

Accepted Answer

A) it is the superior method of accounting for the economic resources of any entity. 
B) it provides information as to the extent the entity achieved interperiod equity. 
C) it is budget oriented while facilitating comparisons among entities. 
D) it results in accounting measurements based on the substance of transactions.

Question 14

Governmental activities tend to derive the majority of their revenues from exchange transactions.

Accepted Answer

A) True 
 B)False

Question 15

Sales taxes are taxpayer assessed,that is,parties other than the beneficiary government determine the tax base.

Accepted Answer

A) True 
 B)False

Question 16

Reimbursement-type grant revenues are recognized in the accounting period in which

Accepted Answer

A) the award is made. 
B) the cash is received. 
C) the grantee is notified of the award. 
D) expenditures are recorded on grant-related activities.

Question 17

During 2014,a state has the following cash collections related to state income taxes $\begin{array}{ll}
 \text { Payroll withholdings and estimated payments related to 2014 income } &\$ 360 \
 \text {4 / 15 / 14   Balance of 2013 net of   \$ 10   refunds) income taxes  } &\$ 40 \
 \text {1 / 15 / 15   payroll withholdings and estimated payments related to 2014 income  } &\$ 30 \
 \text { 2 / 15 / 15   payroll withholdings and estimated payments related to 2014 income } &\$ 35 \
 \text {  3 / 15 / 15   payroll withholdings and estimated payments related to 2015 income} &\$ 25 \
 \text { 4 / 15 / 15 Balnce of 2014 net of   \$ 5   refunds) income taxes } &\$ 45 \
\end{array}$ Assuming that the state defines "available" as the maximum period allowable for property taxes,what is the amount of revenue that will be recognized in the 2014 government-wide financial statements related to state income taxes?

Accepted Answer

A) $400. 
B) $475. 
C) $430. 
D) $465.

Question 18

Under the modified accrual basis of accounting,gains and losses on disposal of capital assets

Accepted Answer

A) are not recognized. 
B) are recognized when the proceeds cash)of the sale are received on the installment basis). 
C) are recognized only if there is a gain. 
D) are recognized when the sale occurs,regardless of when the cash is collected.

Question 19

Under GAAP,property taxes levied in one fiscal period to finance the activities of the following fiscal period are recognized as revenue in the governmental fund financial statements

Accepted Answer

A) in the year levied. 
B) in the year for which they are intended to finance the activities. 
C) when collected,regardless of when levied. 
D) in the year for which they are intended to finance the activities,if collected within that period or within a period no greater than 60 days after the close of the fiscal year.

Question 20

The budgetary measurement focus of governments is determined by applicable state or local laws.

Accepted Answer

A) True 
 B)False

Exam 4: Recognizing Revenues in Governmental Funds

Under GAAP,investment income for governments must include

Governments should recognize revenue from donated capital assets that will be sold to support the government's programs at which amount in their government-wide financial statements?

Under the accrual basis of accounting used by governments,investment revenues for the current period should include

Ad valorem taxes are taxes that are based on value.

For fund financial statements,the measurement focus and basis of accounting used by governmental fund types are

The revenue-recognition issues facing governments are generally focused on the exchange transaction earning process,similar to those of businesses.

Under the modified accrual basis of accounting,imposed nonexchange revenues such as fines) should be recognized

If an entity elects to focus on all economic resources,then it should adopt a modified accrual basis of accounting.

Under the accrual basis of accounting,gains and losses on disposal of capital assets

The modified accrual basis of accounting is used in presenting the fund financial statements of the governmental funds because

Governmental activities tend to derive the majority of their revenues from exchange transactions.

Sales taxes are taxpayer assessed,that is,parties other than the beneficiary government determine the tax base.

Reimbursement-type grant revenues are recognized in the accounting period in which

Under the modified accrual basis of accounting,gains and losses on disposal of capital assets

Under GAAP,property taxes levied in one fiscal period to finance the activities of the following fiscal period are recognized as revenue in the governmental fund financial statements

The budgetary measurement focus of governments is determined by applicable state or local laws.