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Governmental/Not-for-profit Accounting Basis

Exercise 4-1
1. Under the modified accrual basis of accounting, revenues
cannot be recognized
a. Until cash has been collected
b. Unless they will be collected within sixty days of
year-end
c. Until they are subject to accrual
d. Until they are measurable and available

2. Available (as in measurable and available) means
a. Available to finance expenditures of the current
period
b. Subject to accrual
c. Collectible
d. Available for appropriation

3. Property taxes are an example of
a. An imposed exchange transaction
b. An imposed nonexchange transaction
c. A derived transaction
d. A government-mandated nonexchange transaction

4. To be considered available, property taxes must
have been collected either during the governments
fiscal year or within
a. The time it takes for the government to liquidate
its obligations from the prior year
b. Thirty days of year-end
c. Sixty days of year-end
d. The following fiscal year

5. For its fiscal year ending September 30, 2007, Twin
City levied $500 million in property taxes. It collected
taxes applicable to fiscal 2007 as follows (in millions):
June 1, 2006, through September 30, 2006 $ 20
October 1, 2006, through September 30,
2007 440
October 1, 2007, through November 30,
2007 15
December 2007 4
The city estimates that $10 million of the outstanding
balance will be uncollectible. For the fiscal year ending
September 30, 2007, how much should Twin City
recognize in property tax revenue (in millions) in its
general fund?
a. $440
b. $460
c. $475
d. $490

6. Assume the same facts as in the previous example. How
much should Twin City recognize in property tax revenue
(in millions) in its government-wide statement of
activities?
a. $440
b. $460
c. $475
d. $490

7. Central City was awarded two state grants during its
fiscal year ending September 30, 2007: a $2 million
block grant that can be used to cover any operating
expenses incurred during fiscal 2008, and a $1 million
grant that can be used any time to acquire equipment
for its police department. For the year ending September
30, 2007, Central City should recognize in grant
revenue in its funds statements (in millions)
a. $0
b. $1
c. $2
d. $3

8. Assume the same facts as in the previous example. How
much should the city recognize in grant revenue in its
government-wide statements?
a. $0
b. $1
c. $2
d. $3

9. Assuming that a government will collect its sales taxes
in sufficient time to satisfy the available criterion, it
would ordinarily recognize revenue from sales taxes in
its governmental fund statements
a. When the underlying sales transaction takes place
b. On the date the merchant must remit the taxes to
the government
c. On the date the merchant must file a tax return
d. When the taxes are received by the government

10. Assuming that a government will collect its sales taxes
in sufficient time to satisfy the available criterion, it
would ordinarily recognize revenue from sales taxes in
its government-wide statements
a. When the underlying sales transaction takes place
b. On the date the merchant must remit the taxes to
the government
c. On the date the merchant must file a tax
return
d. When the taxes are received by the government

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