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MAC 505 MIDTERM EXAM| ACTUAL EXAM
QUESTIONS WITH CORRECT ANSWERS| UPDATED
2025-2026|A+GRADED
Governments and nonprofit entities are similar in many ways. Which of the following statements is not true? Select one: a. Both governments and nonprofit entities provide services. b. Both governments and nonprofit entities often report restricted resources. c. Both governments and nonprofit entities assess taxes. d. Neither governments nor nonprofit entities have a profit motive. C Why do governments and nonprofit entities use fund accounting? Select one: a. To help limit errors when posting general journal entries to the general ledger. b. To allow managers more flexibility when budgeting. c. To better match revenues and expenses. d. To help ensure restricted resources are spent for their intended purpose.
D
Which of the following is generally the major source of revenues for governments? Select one: a. Voluntary donations. b. Taxes. c. Revenue from investments. d. Revenue from exchange transactions. B Successful entities prepare budgets. Which of the following entities is generally required by law to prepare a budget? Select one: a. All of the above are required by law to prepare a budget. b. Governments. c. Commercial business enterprises. d. Nonprofit entities. B
c. Nonprofit entities. d. Both a and b. e. Both a and c E Which of the following type of entities prepares financial statements using both the modified accrual basis of accounting and the accrual basis of accounting? Select one: a. Nonprofit entities. b. Business enterprises. c. Federal government. d. State and local governments. D Which of the following type of entities prepares both entity-wide and fund financial statements? Select one: a. State and local governments. b. Nonprofit entities.
c. Business enterprises. d. Federal government. A Which of the following types of entities follow FASB standards when preparing financial statements? Select one: a. Business enterprises and the federal government. b. Federal government and state and local governments. c. State and local governments and nonprofit entities. d. Nonprofit entities and business enterprises D Which of the following type of entities follows FASAB standards when preparing financial statements? Select one: a. Business enterprises. b. Federal government. c. State and local governments. d. Nonprofit entities.
- The proceeds of a federal grant received to assist in financing the construction of a police training facility
- Receipts from a special tax levied, after approval by the citizenry, to pay the principal and interest on general obligation bonds issued to finance construction of an office building
- Receipts from a special tax on gasoline to be used, pursuant to law, solely to finance the annual costs of fixing potholes
- The bi-weekly payroll of the police officers, firefighters, and trash collectors
- capital projects fund
- debt services fund
- special revenue fund
- general fund Which of the following fund categories uses the current financial resources measurement focus and the modified accrual basis of accounting? Select one: a. Governmental- NoProprietary- Yes
b. Governmental- NoProprietary- No c. Governmental- Yes Proprietary- Yes d. Governmental- Yes Proprietary- No D Several years ago, a city established a fund to retire general obligation bonds issued for the purpose of constructing a new police station. This year the city made a $50,000 contribution to that fund from its general revenues. The fund also realized $15,000 in revenue from its investments. The bonds due this year were retired. This year's transactions require accounting recognition in which funds? Select one: a. Debt Service Fund and General Fund b. General Fund and Capital Projects Fund c. Capital Projects Fund and Debt Service Fund d. Debt Service Fund and Special Revenue Fund A Which of the following statements is true regarding the accounting measurement implications of the current financial resources measurement focus and modified accrual basis of accounting?
A city-owned electric utility, which serves primarily the city's residents, sends a bill to the city for electricity provided to the police, sanitation and other operating departments. Which pair of funds is needed to record this transaction? Select one: a. Internal Service Fund and Special Revenue Fund b. Enterprise Fund and Special Revenue Fund c. Internal Service Fund and General Fund d. Enterprise Fund and General Fund D A city's General Fund transfers resources to the Debt Service Fund. How should the transfer out of the General Fund and into the Debt Service Fund be reported in the governmental funds statement of revenues, expenditures and changes in fund balance? Select one: a. As transfers in and out, in the Other financing sources (uses) section of the statement b. As adjustments of the beginning of year fund balances of both funds c. As expenditures of the General Fund and revenues of the Debt Service Fund d. They should not be reported because the transfers out and in offset each other
A
Which of the following statements is true regarding accounting for capital assets by state and local governments? Select one: a. Capital outlays are recorded as assets in Enterprise Funds and are depreciated in those funds. b. Capital outlays are recorded as assets in Enterprise Funds, but the depreciation on those assets is recorded in the General Fund. c. Capital outlays are recorded as assets in Internal Service Funds, but are not depreciated. d. Capital outlays are recorded as expenditures in Internal Service Funds. A A state government collects sales taxes for the state and for all counties within the state that levy a sales tax. In which fund should the state record the liability for sales taxes it holds for the counties, pending remittance of the cash to them? Select one: a. Enterprise Fund b. Custodial Fund
d. Enterprise Fund D Which of the following funds is likely to have the caption "equipment" in its fund balance sheet/statement of net position? Select one: a. Capital Projects Fund b. Custodial Fund c. General Fund d. Enterprise Fund D Which of the following funds of a government records the acquisition of a fixed asset as an expenditure rather than as an asset? Select one: a. Pension Trust Fund b. Internal Service Fund c. General Fund d. Enterprise Fund C
Which of the following funds of a government uses the modified accrual basis of accounting? Select one: a. Debt Service Fund b. Pension Trust Fund c. Internal Service Fund d. Enterprise Fund A Which fund should record the fixed assets of a central purchasing and stores department organized to serve all municipal departments? Select one: a. Capital Projects Fund b. Internal Service Fund c. Enterprise Fund d. General Fund B
Which fund should record the liability from general obligation bonds issued for constructing a city hall and serviced from property tax revenues? Select one: a. Enterprise Fund b. Capital Projects Fund c. General Fund d. None of the above D Which fund should be used to account for the operations of a municipal swimming pool receiving the majority of its support from charges to users? Select one: a. Special Revenue Fund b. Enterprise Fund c. Internal Service Fund d. General Fund B
Bay Creek's municipal motor pool maintains all city-owned vehicles and charges the various departments for the cost of rendering those services. In which of the following funds should Bay Creek account for the maintenance costs? Select one: a. Internal Service Fund b. Custodial Fund c. General Fund d. Special Revenue Fund A When the chief executive of a governmental submits a "balanced budget" to the legislative body, it usually means that: Select one: A. Proposed expenditures do not exceed estimated monies available for the year B. The budget is balanced in accordance with generally accepted accounting principles C. Proposed expenditures do not exceed estimated tax revenues to be raised during the year D. The budget is balanced on the full accrual basis of accounting A
C. $16 for each $1,000 of net assessed value. D. $2.67 for each $1,000 of net assessed value A In classifying expenditures, which of the following is an illustration of an "object"? Select one: A. Materials and supplies B. Fire Department C. Public Safety D. Arson investigation A The City of Snow's 2020 annual budget included an appropriation of $65,000 for snow removal. By the end of January, the City had experienced 3 Nor'easters with total snow accumulation of 65 inches, equal to the amount anticipated for January and February. The City approves a budget revision to increase the appropriation for snow removal to $90,000 and reduce budgetary fund balance by an equal amount. The Waste Removal Department also receives invoices for and makes payments for January snow removal of $55,000. What was the effect on budgetary fund balance?
Select one: A. Budgetary fund balance was credited for $35, B. Budgetary fund balance was credited for $25, C. Budgetary fund balance was debited for $25, D. Budgetary fund balance was debited for $35, C What journal entry is made when a purchase order is placed with a supplier? Select one: A. Debit expenditures and credit budgetary fund balance reserved for encumbrances B. Debit appropriations consumed and credit budgetary fund balance reserved for encumbrances C. Debit encumbrances and credit budgetary fund balance reserved for encumbrances D. Debit encumbrances and credit appropriations C The accounting department for Sea City Maryland maintains an appropriations ledger for its Beautification Department--supplies. The
