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31 Cards in this Set

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Which of the following is not a reason for the popularity of partnerships as a legal form for businesses?

Partnerships can more easily generate significant amounts of capital.

How does partnership accounting differ from corporate accounting?

Individual capital accounts replace the contributed capital and retained earnings balances found in corporate accounting.

Which of the following best describes the article of partnership agreement?

The articles of partnership are a legal covenant that may be expressed orally or in writing, and forms the central governance for a partnership's operations.

Pat, Jean Lou and Diane are partners with capital balances of $50,000, $30,000, and $20,000 respectively. The 3 partners share profits and losses equally. For an investment of $50,000 cash (paid to the business), Mary Ann will be admitted as a partner with 1/4 interest in capital and profits. Based on this information, which of the following best justifies the amount of Mary Ann's investment?

The book value of the partnership's net asses was less than the fair value immediately prior to Mary Ann's investment.

If a partnership is liquidated, how is the final allocation of business assets made to the partners?

According to the final capital account balances.



Which of the following statements is true concerning the accounting for a partnership going through liquidation?

Gains and losses are reported directly as increases and decreases in the appropriate capital account.

During a liquidation, if a partner's capital account balance drops below zero, what should happen?

The partner with a deficit contributes enough assets to offset the deficit balance.

What is a predistribution plan?

A guide for the cash distributions to partners during a liquidation.

Which of the following are governmental funds?

Special revenue fund, Capital projects fund, Debt service fund

What is the purpose of a special revenue fund?

To account for operations financed in whole or in part by outside user charges.

Which of the following is true?

There are 5 different types of governmental funds.

A government expects to receive revenues of $400,000 but has approved expenditures of $430,000. The anticipated shortage will have an impact on which of the following terms?

Interperiod equity

A citizen of the City of Townsend gives it a gift of $22,000 in investments. The citizen requires that the investments be held but any resulting income must be used to help maintain the city's cemetery. In which fund should this asset be reported

Permanent funds

Which of the following statements is correct about the reporting of governmental funds?

Government-wide financial statements measure economic resources




Fund financial statements measure revenues and expenditures based on modified accrual accounting.

During the current year, a government buys land for $80,000. Which of the following is true?

The land could be reported as an asset by the business-type activities in the governmental wide financial statements.


The land could be reported as an asset by the governmental activities in the governmental wide financial statements.


The land could be reported as an asset by the proprietary funds in the fund financial statements.

Which of the following statements is true concerning the recording of a budget?

At the beginning of the year, debit Estimated Revenues

The general fund pays rent for 2 months. Which of the following is true?

Rent expense should be reported in the government-wide financial statements.


An expenditure should be reported in the fund financial statements.


If one month of rent is in the 1st ear with the other month in the next year, either the purchases method or the consumption method can be used in fund statements.

A purchase order for $3,000 is recorded in the general fund for the purchase of a new computer. The computer is received at an actual cost of $3,020. Which of the following is correct?

An expenditure is increased by $3,020.

At the end of the current year, a government reports a fund balance--assigned of $9,000 in connection with an encumbrance. What information is being conveyed?

The government has made $9,000 in commitments in one year that will be honored in the subsequent year.

A government buys equipment for its police department at a cost of $54,000. Which of the following is true?

Equipment will increase by $54,000 in the government-wide financial statements.


The equipment will not appear within the reported assets in the fund financial statements.


An expenditure for $54,000 will be reported in the fund financial statements.

A city acquires supplies for its fire department and uses the consumption method of accounting? Which of the following statement is true for the fund statements?

An inventory account is debited at the time of the acquisition.

An income tax is an example of which of the following?

Derived tax revenue

The state government passes a law requiring localities to upgrade their water treatment facilities. The state then awards a grant of $500,000 to the Town of Midlothian to help pay for this cost. What type of revenue is this grant?

Government-mandated nonexchange revenue

The state awards a grant of $50,000 to the Town of Glenville. The state will pay the grant money to the town as a reimbursement for money spent on road repair. At the time of the grant, the state pays $8,000 in advance. During the 1st year of this program,the town spent $14,000 and applied for reimbursement. What amount of revenue should be recognized?

$14,000

A city issues a 60-day tax anticipation note to fund operations. What recording should it make?

A liability should be reported in the government-wide financial statements; and in the fund financial statements.

Which of the following is true?


I. Private not-for-profit universities must report depreciation expense.


II. Public universities must report depreciation expense.

Both I and II are true

A donor gives Charity 1 $50,000 in cash that it must convey to Charity 2. However, the donor can revoke the gift at any time prior to its conveyance to Charity 2. Which of the following is true?

The donor continues to report an asset even after it is given to Charity 1.

A private not-for-profit university charges its students tuition of $1 million. However, financial aid grants total $220,000. In addition, the school recieves a $100,000 grant restricted for faculty salaries. Of this amount, it spent $30,000 appropriately this year. On the statement of activities, the school reports 3 categories: 1. revenues and suppport 2. net assets reclassified 3. Expenses Which is true?

Unrestricted net assets should show an increase of $30,000 for net assets reclassified.


Unrestricted net assets should recognize expenses of $30,000.


Unrestricted net assets show the $220,000 as a direct reduction to the tuition revenue balance.

A private not-for-profit entity has the following activities performed by volunteer who work at no charge. In which case should contributions be reported?

A carpenter builds a porch on the back of one building so that patients can sit outside.


An accountant does the organization's financial reporting.


A computer expert repairs the organization's computer.

To send a mailing, a private not-for-profit charity spends $100,000. The mailing solicits donations and provides educational and other information about the charity. Which of the following is true?

Under certain specified circumstances, the organization should allocate a portion of the $100,000 to program service expenses.

The financial reporting for private not-for-profit entities primarily focuses on

Basic information for the organization as a whole