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Chapter 4 Recognizing Revenue in Governmental Funds

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Topic: General General Questions
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37. At the beginning of its fiscal year, a local government owned an investment with a historical cost of $85 and a fair value of $95. During the year, dividends of $2 were received. At the end of the year, the investment had a fair value of $100. The amount that should be recognized on the governmental fund financial statements for the year as investment income is

a) $-0-.

b) $7.

c) $15.

d) $17.

38. A local governmental entity began the year with a portfolio of securities with an historical cost of $600 and a fair value of $620. During the year the government acquired an additional security at a cost of $130 and sold for $100 a security that had an historical cost of $86 and a fair value at the beginning of the year of $95. At the end of the year, the securities portfolio had a fair value of $665. The amount that should be recognized on the financial statements for the year as investment income is

a) $5.

b) $10.

c) $14.

d) $15.

39. Under GAAP, investment income for governmental entities must include

a) only dividends and interest received during the period.

b) only dividends and interest earned during the period.

c) only realized gains and losses.

d) dividends and interest received during the period and both realized and unrealized gains and losses

40. A governmental entity is the recipient of a bequest of a multi-story office building that the government intends to use as a new city hall. The building has a historical cost of $425,000; a book value in the hands of the benefactor of $350,000; and a fair value of $525,000. The city should recognize on its governmental fund financial statements, donations revenue of

a) $-0-.

b) $350,000.

c) $425,000.

d) $525,000.

41. 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.

42. A city is the recipient of a cash bequest of $500,000 that must be used to plant flowers and shrubs in the city parks. During the year only $200,000 is actually received from the bequest and $150,000 is spent on shrubs. The amount that should be recognized as revenue by the city in its government-wide financial statements in the current year is

a) $-0-.

b) $150,000.

c) $200,000.

d) $500,000.

43. Governmental entities should recognize revenue from donated fixed assets that will be sold to support programs of the entity at which amount in their government-wide financial statements?

a) historical cost to the donor.

b) book value in the hands of the donor.

c) fair value of the donated assets.

d) zero.

44. State governments should recognize food stamp revenue

a) when it receives the food stamps.

b) when food stamps are distributed by the state to eligible recipients.

c) when the recipient uses the food stamps

d) never. Food stamps are not financial resources.

45. Endowments are provided to governments with the specification that only the revenues 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.

46. For purposes of recognizing property tax revenues in governmental funds, “available” is defined as

a. revenues received within 90 days of year-end.

b. revenues received within 60 days of year-end.

c. revenues received within 120 days of year-end.

d. being up to the judgment of the preparer.

47. Which of the following is not characterized as non-exchange?

a) Sales taxes

b) Property taxes

c) Fines and forfeits

d) Charges for services

48. Which of the following is a derived tax revenue?

a. Income taxes

b. Sales taxes

c. Both of the above

d. Neither of the above

49. 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

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