Exam 1: The Government and Not-For-Profit Environment

Johnson City prepares its budget on the cash basis and prepares its external financial statements on the accrual basis. From the following data prepare statements of activity (income statements) on both the cash basis and the accrual basis. Which statement best represents the results of operations of the City? Which statement best demonstrates compliance with laws and regulations? Which statement would you rather see? Which conveys the best information to the citizens of Johnson City? The City levies taxes in the current year of $1 million. Of this amount $.9 million is collected during the current year, $.05 will be collected next year, and $.04 will be collected in the future. $.01 will never be collected. During the current year the City pays bills from prior periods $.06 million, bills of the current period $.8 million, and defers payment until future periods on bills that were received for services consumed during the current period $.1 million.

In which of the following activities is a not-for-profit entity least likely to engage?

Certain fiscal practices of governments promote interperiod equity while others do not. For the situations listed below, indicate whether interperiod equity is promoted or undermined. Why? a. Issuing 30-year serial bonds to finance the construction of capital assets with estimated 30-year lives. b. Paying for the pensions of retired employees out of resources provided by current-period taxpayers. c. Charging the cost of supplies as expenditures in the year in which they were used rather than when they were purchased. d. Issuing 30-year bonds to finance a portion of the current-period operating costs of a city's school system e. Charging payments of wages and salaries made in the first week of a new year to the previous fiscal year, the year in which the wages and salaries were earned.

The purpose of the FASAB is to establish accounting standards for

Which of the following characteristics distinguishes a government or not-for-profit entity from a business?

Which of the following activities is NOT an activity in which a government might engage?

A regulatory agency would use the external financial statements of a local government for which of the following purposes?

Thorn County adopted a cash budget for FY2016 as follows. The City budget laws prohibit budgeting or operating at a deficit. During the year the County collected or spent the following amounts. Was the County in compliance with budget laws? Did the County accomplish the goal of interperiod equity? Explain your answers in detail. Explanations provided by the City for the differences between budget and actual are as follows. Property tax collections are down because the major industry in the community closed and many citizens are currently unemployed. Operating expenses are up because the only bridge over a river bisecting the City sustained damages by an uninsured motorist and had to be repaired immediately. The repair was not budgeted.

Which of the following can be affected by GAAP?

In descending order, the hierarchy of GAAP applicable to a church-owned college may be: