Receipt of a capital grant that has not been expended at fiscal year-end.

An increase in accumulated depreciation.

Acquisition of a capital lease.

Sale of a fully depreciated capital asset.

All of the above.

General Fund.

Special revenue fund.

Capital projects fund.

All of the above.

Audited in at least one of the two most recent audit periods as a major program.

With no significant changes in personnel or systems that would have significantly increased risk.

Considered low-risk in the auditor’s professional judgment.

9. Which of the following is a primary objective of financial reporting by state and local governments?

To report on the legal requirements imposed on the government by its elected officials.

To fulfill the government's statutory duty to report on cash received and cash disbursed.

To provide information that can be used for capital allocation decisions made by external investors.

To provide information that can be used to assess a government's accountability.

St. Lucia Blood Bank
Cost Control Report
For the Month Ended September 30

Actual Results

Planning Budget

Variances

Liters of blood collected

780

600

Medical supplies

$

9,252

$

7,110

$

2,142

U

Lab tests

10,876

8,700

2,176

U

Equipment depreciation

1,920

1,700

220

U

Rent

1,500

1,500

0

Utilities

376

350

26

U

Administration

14,090

13,940

150

U

Total expense

$

38,014

$

33,300

$

4,714

U

Cost Formulas

Medical supplies

$11.85q

Lab tests

$14.50q

Equipment depreciation

$1,700

Rent

$1,500

Utilities

$350

Administration

$1.90q

Cash

$

51,000

Current liabilities

$

86,000

Accounts receivable

66,000

Long-term liabilities

43,000

Inventory

71,000

Common stock

111,000

Equipment

156,000

Retained earnings

104,000

Total assets

$

344,000

Total liabilities and equity

$

344,000

The library is a jointly governed organization.

The library is a joint venture.

The library is a component unit.

The library is a special purpose government.

14. Advanced Pharmaceuticals, Inc., is a wholesale distributor of prescription drugs to independent retail and hospital-based pharmacies. Management believes that top-notch customer representatives are the key factor in determining whether the company will be successful in the future. Customer representatives serve as the company’s liaison with customers—helping pharmacies monitor their stocks, delivering drugs when customer stocks run low, and providing up-to-date information on drugs from many different companies. Customer representatives must be ultra-reliable and are highly trained. Good customer representatives are hard to come by and are not easily replaced.

Customer representatives routinely record the amount of time they spend serving each pharmacy. This time includes travel time to and from the company’s central warehouse as well as time spent replenishing stocks, dealing with complaints, answering questions about drugs, informing pharmacists of the latest developments and newest products, reviewing bills, explaining procedures, and so on. Some pharmacies require more hand-holding and attention than others and consequently they consume more of the representatives’ time.

Recently, customer representatives have made more frequent complaints that it is impossible to do their jobs without working well beyond normal working hours. This has led to an alarming increase in the number of customer representatives quitting for jobs in other organizations. As a consequence, management is considering dropping some customers to reduce the workload on customer representatives. Data concerning a representative sample of the company’s customers appears below:

Customer service costs include all of the costs—other than the costs of the drugs themselves—that could be avoided by dropping the customer. These costs include the hourly wages of the customer representatives, their sales commissions, the mileage-related costs of the customer representatives’ company-provided vehicles, and so on.

Required:

1. Rank the four customers in terms of their profitability.

2. Customer representatives are currently paid $25 per hour plus a commission of 1% of sales revenues. If these four pharmacies are indeed representative of the company’s customers, could the company afford to pay its customer representatives more in order to retain them?

15. In accounting for state and local governments the modified accrual basis is required for

Governmental funds.

Governmental and internal service funds.

Proprietary and fiduciary funds.

Governmental and fiduciary funds.

17. Under the modified accrual basis of accounting, revenues should be recognized when

       Authorized by the budget ordinance.

Earned.

Measurable and available.

Collected in cash.

18. Use the following information to determine whether the Development Special Revenue and the Debt Service Funds should be reported as major funds based on asset amounts provided. Development Special Revenue Fund Assets $740,000 Debt Service Fund Assets $150,000 Total Governmental Fund Assets $7,500,000 Total Governmental Fund and Enterprise Fund Assets $8,750,000

       The Development Special Revenue Fund should be reported as major.

The Debt Service Fund should be reported as major.

Both the Development Special Revenue Fund and the Debt Service Fund should be reported as major.

Neither the Development Special Revenue Fund nor the Debt Service Fund should be reported as major.

19. Combining financial statements for nonmajor funds of a government should be included

       In the notes to the financial statements.

As a part of the financial section of the comprehensive annual financial report (CAFR).

In the basic financial statements.

As part of the statistical section of the comprehensive annual financial report (CAFR).

20. When conducting a single audit:

        All programs not identified as low risk must be audited.

At a minimum, all Type A major programs not identified as low risk and certain high-risk Type B programs must be considered for audit.

All major programs must be audited.

All federal grant programs must be audited.

23. Which of the following factors would not indicate that a potential component unit (PCU) imposes a financial burden or provides a financial benefit to the primary government?

       The primary government is entitled to the PCU's resources.

The primary government is obligated for the PCU's debt.

The primary government is entitled to its share of any dividends distributed by the PCU.

The primary government is obligated to provide financial support to the PCU

2017

2016

Net sales

$

456,600

$

372,200

Cost of goods sold

201,400

133,880

Operating expenses

73,390

70,730

Net earnings

37,060

26,310

A city received resources that the state indicates can only be used for public works projects, such as road construction. Assuming the resources have not been expended by year end, how would the resources the city received be shown in the city’s fund balances?

       Spendable-Assigned Fund Balance.

Spendable-Restricted Fund Balance.

Spendable-Committed Fund Balance.

Spendable-Designated Fund Balance.

Which of the following is not a characteristic of a fund as defined by GASB standards?

        An accounting entity.

A fiscal entity.

A reporting entity.

A self-balancing set of accounts.

Carlsville Company, which began operations in 2015, invests its idle cash in trading securities. The following transactions are from its short-term investments in trading securities.

2015

Jan.

20

Purchased 800 shares of Ford Motor Co. at $26 per share plus a $125 commission.

Feb.

9

Purchased 2,200 shares of Lucent at $44.25 per share plus a $578 commission.

Oct.

12

Purchased 750 shares of Z-Seven at $7.50 per share plus a $200 commission.

Dec.

31

Fair value of the short-term investments in trading securities is $130,000.

2016

Apr.

15

Sold 800 shares of Ford Motor Co. at $29 per share less a $285 commission.

July

5

Sold 750 shares of Z-Seven at $10.25 per share less a $102.50 commission.

July

22

Purchased 1,600 shares of Hunt Corp. at $30 per share plus a $444 commission.

Aug.

19

Purchased 1,800 shares of Donna Karan at $18.25 per share plus a $290 commission.

Dec.

31

Fair value of the short-term investments in trading securities is $160,000.

2017

Feb.

27

Purchased 3,400 shares of HCA at $34 per share plus a $420 commission.

Mar.

3

Sold 1,600 shares of Hunt at $25 per share less a $250 commission.

June

21

Sold 2,200 shares of Lucent at $42 per share less a $420 commission.

June

30

Purchased 1,200 shares of Black & Decker at $47.50 per share plus a $595 commission.

Nov.

1

Sold 1,800 shares of Donna Karan at $18.25 per share less a $309 commission.

Dec.

31

Fair value of the short-term investments in trading securities is $180,000.

Required:

1.

Prepare journal entries to record these short-term investment activities for the years shown. On December 31 of each year, prepare the adjusting entry to record any necessary fair value adjustment for the portfolio of trading securities.