Question 1

Which of the following is evidence of fiscal independence for the purpose of considering whether one legally separate organization is a component unit of another?

Accepted Answer

A)   The potential component unit is precluded from issuing long-term debt.
B)   The potential component unit raises taxes without the approval of the primary government.
C)   The budget of the potential component unit must be approved by the primary government.
D)   The potential component unit sets user charges with approval of the primary government. B

Question 2

In reconciling between the governmental fund and government-wide statements,capital assets acquired by a governmental fund are deducted from fund balance-governmental funds to arrive at net position of governmental activities.

Accepted Answer

A) True 
 B)False  False

Question 3

Describe some items requiring adjustments when modified accrual basis accounting information must be converted to accrual basis accounting in preparation of government-wide statements.

Accepted Answer

Items requiring adjustment when going from modified accrual basis of accounting to accrual basis of accounting include: (1)capital expenditures are reclassified as capital assets, (2)annual depreciation on capital assets is recognized, (3)other financing sources from bonds are reclassified as long-term liabilities, (4)interest on long-term debt is recorded, (5)internal service activity is moved from proprietary funds to be reported with governmental activities, (6)transfers and balances between funds are netted and balances between governmental and business-type activities are reported as internal balances,and (7)interfund transfers between governmental funds and internal service funds are eliminated.

Question 4

A not-for-profit organization could be reported as a component unit of a primary government.

Accepted Answer

A) True 
 B)False

Question 5

The GASB defines a component unit as any organization for which the primary government is financially accountable.

Accepted Answer

A) True 
 B)False

Question 6

According to the guidance of GASB Concepts Statement 3,financial information can be communicated by recognition in the financial statements,disclosure in the notes to the financial statements,presentation as required supplementary information,or presentation as supplementary information.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following would increase the governmental activities balance in Net Position-Net Investment in Capital Assets?

Accepted Answer

A)   Acquisition of a building to be used by the police department.
B)   Issuance of long-term debt to be used to acquire equipment for the police department.
C)   A gift of land to the city restricted by the donor to be used by the city airport, which is accounted for as an enterprise fund.
D)   Recording annual depreciation on capital assets.

Question 8

The GASB requires that interim financial reports be prepared on a semi-annual basis at a minimum.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following factors would not indicate that a potential component unit (PCU)imposes a financial burden or provides a financial benefit to the primary government?

Accepted Answer

A)   The primary government is entitled to its share of any dividends distributed by the PCU.
B)   The primary government is obligated to provide financial support to the PCU.
C)   The primary government is obligated for the PCU's debt.
D)   The primary government is entitled to the PCU's resources.

Question 10

State and local governments should prepare only those financial reports required by law-generally year-end financial statements.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements concerning the reporting of expenses on the statement of activities is ?

Accepted Answer

A)   Expenses are reported after program revenues.
B)   Expenses are reported after general revenues.
C)   Expenses are reported after program and general revenues.
D)   Expenses are reported before program and general revenues.

Question 12

Under GASB standards,the financial statements that report on business-type activities at the government-wide level include the statement of net position,statement of activities,and statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements concerning the reporting of internal balances by a government at the end of its fiscal year is ?

Accepted Answer

A)   The internal balances amounts reported in the balance sheet columns represent activity among governmental funds.
B)   The internal balances amounts reported in the statement of net position columns represent activity between governmental activities and business-type activities.
C)   The internal balances amounts are reported in both the asset and liability sections on the statement of net position.
D)   The internal balances amounts reported represent the difference between interfund transfers in and interfund transfers out.

Question 14

Both a general purpose and a special purpose government could be considered examples of primary governments under GAAP.

Accepted Answer

A) True 
 B)False

Question 15

Combining financial statements for nonmajor funds of a government should be included

Accepted Answer

A)   In the basic financial statements.
B)   In the notes to the financial statements.
C)   As a part of the financial section of the comprehensive annual financial report (CAFR) .
D)   As part of the statistical section of the comprehensive annual financial report (CAFR) .

Question 16

Which of the following is not one of the methods recommended by the GASB Concepts Statement 3 for communicating information to external users of government financial reports?

Accepted Answer

A)   Providing a popular report.
B)   Recognition in the financial statements.
C)   Presentation as required supplementary information.
D)   Disclosure in the notes to the financial statements.

Question 17

Which of the following items are typically reported differently between the governmental fund statements and the Governmental Activities column of the government-wide statements?

Accepted Answer

A)   Capital outlays.
B)   Cash collected on property taxes receivable.
C)   Accounts payable and other accrued expenses.
D)   Inventories.

Question 18

Some governments provide to their citizens highly condensed financial information,budget summaries,and narrative descriptions.This report is called a(an)

Accepted Answer

A)   Comprehensive annual financial report.
B)   Basic financial statements.
C)   Required supplementary information.
D)   Popular report.

Question 19

Which of the following is a required program revenue category in the government-wide statement of activities?

Accepted Answer

A)   Special assessments.
B)   Operating grants and contributions.
C)   Sales taxes.
D)   Transfers.

Question 20

The General Fund data for a blended component unit should be reported as a special revenue fund of the primary government.

Accepted Answer

A) True 
 B)False

Exam 9: Financial Reporting of State and Local Governments

Which of the following is evidence of fiscal independence for the purpose of considering whether one legally separate organization is a component unit of another?

In reconciling between the governmental fund and government-wide statements,capital assets acquired by a governmental fund are deducted from fund balance-governmental funds to arrive at net position of governmental activities.

Describe some items requiring adjustments when modified accrual basis accounting information must be converted to accrual basis accounting in preparation of government-wide statements.

A not-for-profit organization could be reported as a component unit of a primary government.

The GASB defines a component unit as any organization for which the primary government is financially accountable.

According to the guidance of GASB Concepts Statement 3,financial information can be communicated by recognition in the financial statements,disclosure in the notes to the financial statements,presentation as required supplementary information,or presentation as supplementary information.

Which of the following would increase the governmental activities balance in Net Position-Net Investment in Capital Assets?

The GASB requires that interim financial reports be prepared on a semi-annual basis at a minimum.

Which of the following factors would not indicate that a potential component unit (PCU) imposes a financial burden or provides a financial benefit to the primary government?

State and local governments should prepare only those financial reports required by law-generally year-end financial statements.

Which of the following statements concerning the reporting of expenses on the statement of activities is ?

Under GASB standards,the financial statements that report on business-type activities at the government-wide level include the statement of net position,statement of activities,and statement of cash flows.

Which of the following statements concerning the reporting of internal balances by a government at the end of its fiscal year is ?

Both a general purpose and a special purpose government could be considered examples of primary governments under GAAP.

Combining financial statements for nonmajor funds of a government should be included

Which of the following is not one of the methods recommended by the GASB Concepts Statement 3 for communicating information to external users of government financial reports?

Which of the following items are typically reported differently between the governmental fund statements and the Governmental Activities column of the government-wide statements?

Some governments provide to their citizens highly condensed financial information,budget summaries,and narrative descriptions.This report is called a(an)

Which of the following is a required program revenue category in the government-wide statement of activities?

The General Fund data for a blended component unit should be reported as a special revenue fund of the primary government.