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EXAM 2 TEST BANK QUESTIONS EXAM 2 TEST BANK QUESTIONS
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If an entity elects to focus on all economic resources, then it should adopt a modified accrual basis of accounting - ✔F The budgetary measurement focus of governments is determined by applicable state or local laws - ✔T The revenue-recognition issues facing governments are generally focused on the exchange transaction earning process, similar to those of businesses. - ✔F Governmental activities tend to derive the majority of their revenues from exchange transactions - ✔F In accounting for property taxes, under the modified accrual basis, existing standards provide that, except in unusual circumstances, revenues should be recognized only if cash is expected to be collected within sixty days of year-end - ✔T Ad valorem taxes are taxes that are based on value - ✔T Income taxes are classified as ad valorem taxes - ✔F Sales taxes are taxpayer assessed, that is, parties other than the beneficiary government determine the tax base. - ✔T Revenues that cannot be classified as general revenues are by default considered program revenues - ✔F Taxes that are imposed on the reporting government's citizens are considered general revenues, even if they are restricted to specific programs - ✔T
governmental fund types are 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. - ✔A
e) $600,000. - ✔C
the 20th day of the month following the month in which the sale occurred. Cash received by the City related to sales tax is as follows: Amount received 1/20/11, applicable to December 2010 sales $ Amount received 2/20/11, applicable to January 2011 sales $ 30 Amount received during 2011 related to February-November 2011 sales $ Amount received 1/20/12 for December 2011 sales $ Amount received 2/20/12 for January 2012 $ 40 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 government-wide financial statement as sales tax revenue for the fiscal year ended 12/31/11. a) $430. b) $530. c) $540. d) $550. - ✔C
Amount received 1/20/12 for December 2011 sales $ Amount received 2/20/12 for January 2012 $ 40 Amount received 3/20/12 for February 2012 $ 10 Assuming the City uses the same period to define "available" as the maximum period allowable for property taxes, what amount should it recognize as s - ✔C
d) expenditures are recorded on grant-related activities. - ✔D
generated from—not the contributed assets—may be used to finance specific programs. A government should recognize revenue from the initial endowment when a) it receives the assets (cash). b) when it receives the pledge. c) ratably over 30 years. d) never. The contributions themselves cannot be used to support the government's programs. - ✔B
d). Dr Land held for sale $5 million Cr Revenue from donations $5 million - ✔D The resources to service all general long-term debts of the governmental entity are typically accounted for in debt service funds - ✔T When governments establish capital projects funds, they may choose to maintain a separate fund for each major project, or they may choose to combine two or more projects in a single fund. - ✔T Governments are required to integrate budgetary account information in their debt service and capital projects funds only when control cannot readily be established by means other than a budget. - ✔T Capital projects funds do not report long-term obligations in the fund. - ✔T When bonds are issued at a premium, the capital projects fund can transfer those excess resources to the debt service fund - ✔T When bonds are issued at a discount, the debt service fund usually transfers an amount to the capital projects fund to make up for the deficiency - ✔F In accounting for costs incurred on a major construction project in a capital projects fund, the construction outlays would be reported in the fund as general capital assets - ✔F Debt service funds are maintained to account for resources accumulated to pay interest and principal on general long-term debt—that is, long-term debt associated primarily with governmental activities - ✔T In contrast to the accounting for debt service fund expenditures, the interest revenue on bonds held as investments should be accrued in the period the revenue is earned - ✔T Special assessments are imposed nonexchange transactions, similar to property tax levies - ✔T
Voters in Lincoln School District approved the construction of a new high school and approved an $8 million bond issue with a stated rate of interest of 6% to fund the construction. Bids were received and the low bid was $8 million. When the bonds were issued, they sold for face value less bond underwriting fees of $.5 million. The School Board voted to fund the balance of the construction by a transfer from the general fund.
c) Debit Grants receivable $5 million; Credit Deferred revenue $5 million. d) Debit Grants receivable $5 million; credit Other financing sources—transfer $ million. - ✔B