Reference no: EM1310373

Q1. A governmental entity is the recipient of a bequest of a multi-story office building that the government intends to sell to support program activities.  The building has a historical of $425,000; a book value in the hands of the benefactor of $350,000; and a fair value of $525,000.  The city had not yet begun to try to sell the building when its annual financial statements were issued.  The city should recognize on its governmental fund financial statements, donations revenue of

A.       $-0-.

B.       $350,000.

C.       $425,000.

D.       $525,000.

Q2. A wealthy philanthropist donates three buildings to H-Town.  Each of the buildings has a fair market value of $5 million.  H-Town plans to use Building 1 as a new fire station, but sell Buildings 2 and 3.

Building 2 is sold after year-end, but within the availability period.  Building 3 fails to sell by the time H-Town issues the financial statements.  As a result, which of the following represents the correct way to record revenue from the three buildings?
a). Dr Buildings                                               $15 million
Cr Deferred revenue                                         $5 million
Cr Revenue from donations                               $10 million
b). Dr Land held for sale                                 $10 million
Cr Deferred revenue                                        $5 million
Cr Revenue from donations                              $5 million
c). Dr Land held for sale                                 $5 million
Cr Deferred revenue                                        $5 million
d). Dr Land held for sale                                 $5 million
Cr Revenue from donations                              $5 million

Use the following information to Questions 3 through 5:
Lincoln City has a 6/30 fiscal year-end. The City has a policy of recognizing revenues/ expenditures when collected/paid or if expected to be collected/paid within 60 days of year-end.  
The City has a sick leave benefit policy for its employees.  The policy allows City employees one day of paid sick leave per month and permits them to accumulate sick leave they do not take.  Sick leave vests at the completion of the fifth year of employment, and unused sick leave is paid in cash upon termination or retirement.  During the fiscal year ended 6/30/07, City employees who are paid from the General Fund, earned $1.4 million of sick leave, of which $.5 was taken.  Of the balance, the City estimates $.1 million will be taken in the next sixty days, $.3 million will be taken in the next five years, $.2 million will vest, and $.3 million will never be taken. 

Q3. The amount of sick pay expenditure that should appear on the General Fund financial statements for the fiscal year ended 6/30/07 is

A.       $1.4 million.

B.       $1.3 million.

C.       $.6 million.

D.       $.5 million.

Q4. The amount of sick pay liability that should appear on the General Fund balance sheet at 6/30/07 is

A.       $.6 million.

B.       $.2 million.

C.       $.1 million.

D.       No liability should appear.

Q5. The amount of sick pay expense that should appear on the government-wide financial statements for the fiscal year ended 6/30/07 is

A.       $1.4 million.

B.       $1.3 million.

C.       $.6 million.

D.       $.7 million.

Q6. The debt service fund of a governmental entity is accounted for using which of the following bases of accounting?

A.       Budgetary basis.

B.       Cash basis.

C.       Modified accrual basis.

D.       Accrual basis.

Q7. With regard to the resources dedicated to the acquisition of fixed assets that will be used in general government activities, which of the following is true?

A.       Governments must maintain capital projects funds for resources that are legally restricted to the acquisition of fixed assets.

B.       Governments may maintain capital projects funds for resources that are legally restricted to the acquisition of fixed assets.

C.       Governments may account for any resources dedicated (whether legally or not) to the acquisition of fixed assets in any of the governmental funds.

D.       Government must account for all resources set aside for fixed asset acquisition in a capital projects fund.

Q8. Sugar City issued $2 million of bonds to fund the construction of a new city office building.  The bonds have a stated rate of interest of 5% and were sold at 101.  Which of the following entries should be made in the Capital Projects Fund to record this event?

A.       Debit Cash $2.02 million; Credit Bonds Payable $2 million and Premium on Bonds Payable $.02 million.

B.       Debit Cash $2.02 million; Credit Bonds Payable $2 million and Other Financing Sources $.02 million.

C.       Debit Cash $2.02 million; Credit Other Financing Sources $2.02 million.

D.       Debit Cash $2.02 million; Credit Other Financing Sources $2 million and Revenue $.02 million.

Q9. The risk that there will a change in interest or market prices is

A.       Market risk.

B.       Credit risk.

C.       Collaterized risk.

D.       Legal risk.

Q10. For governmental entities, a capital asset is considered impaired

A.       When its service capacity has declined significantly and unexpectedly.

B.       When it is reported in a governmental fund.

C.       When it no longer generates cash flows.

D.       When it no longer generates the cash flows expected of it.