CPA Financial Accounting and Reporting (FAR) : Modified Accrual Basis of Accounting
Study concepts, example questions & explanations for CPA Financial Accounting and Reporting (FAR)
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Example Questions
Example Question #1 : Modified Accrual Basis Of Accounting
The city of Frankford assesses a sales tax on all purchases over $40,000. On December 28, Year 1, a sale of $65,000 occurs that will result in a payment of a tax to the city of $2,400. The payment is expected to be received during March of Year 2. Assets such as investments and receivables are viewed as current if they are collectible within 60 days. How should this tax revenue be reported in the Year 1 fund financial statements?
It should be divided proportionately between Year 1 and Year 2
It should not be recorded until Year 2
As an encumbrance
As a revenue
It should not be recorded until Year 2
This sales tax assessment will not be recorded in Year 1 because it is not expected to be collected within 60 days of year-end.
Example Question #2 : Modified Accrual Basis Of Accounting
Pattinson County is currently preparing general purpose financial statements for Year 1. Currently, they are working on fund-based financial statements for the general fund and special revenue fund. Which of the following will not be reported as assets on the balance sheet for these funds at December 31, Year 1?
Supplies that were received on December 24 and reported using the purchases method
An outstanding receivable for property taxes with collection expected to happen in early Year 2
A piece of machinery that was purchased on December 28 and will not be paid for until January of Year 2
An investment made in a publicly-held company that will be liquidated in the future as needed
A piece of machinery that was purchased on December 28 and will not be paid for until January of Year 2
An encumbrance will be recorded for the machine at the time of purchase but an asset will not be recorded until the machine is received.
Example Question #3 : Modified Accrual Basis Of Accounting
The city of Carlton produces a comprehensive annual financial report which includes general purpose financial statements. Which of the following statements is true?
Government-wide financial statements must be included but fund-based financial statements are optional
Both fund-based financial statements or government-wide financial statements must be included
Either fund-based financial statements or government-wide financial statements must be included
Fund-based financial statements must be included but government-wide financial statements are optional
Both fund-based financial statements or government-wide financial statements must be included
The CAFR includes fund-base statements and government-wide statements.
Example Question #231 : Cpa Financial Accounting And Reporting (Far)
A government wide statement of net position must include which of the following?
Prior year comparative financial data
Primary government fiduciary fund data
A distinction between governmental and business type activities
A consolidation of all government wide activities
A distinction between governmental and business type activities
The government statement of net position must include a distinction between governmental and business type activities.
Example Question #4 : Modified Accrual Basis Of Accounting
In a governmental entity's government wide statement of net position, which of the following would not be included as a liability?
Salary payable
Prepaid expenses
Compensated absences
General obligation bonds
Prepaid expenses
All of the following except for prepaid expenses would be a liability. Prepaid expenses are assets.
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