Question 1 :

A workpaper summary states “conditional grants were reviewed and none exist,” but the client has multiple awards labeled “reimbursement subject to approval” and the file contains no grant term summaries, what is the most appropriate deliverable to request or create to support the conclusion?

Add a note that management believes all grants are unconditional

Create a schedule listing only grant cash receipts and assume they are revenue

Create a grant terms matrix summarizing barriers, right-of-return or release provisions, and evidence of satisfaction by award, then tie recognized revenue to satisfied conditions

Remove the conclusion because conditionality cannot be evaluated for small nonprofits

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Question 2 :

The TB shows Accrued Expenses of $14,200, but the modified basis memo states only payroll accruals are included, and the support for the $14,200 is a list of vendors with no service periods, what is the most defensible conclusion?

Keep the accrual because any liability improves completeness.

Reclass it to AP because vendors were listed.

The accrual is outside the defined modified basis and is unsupported, so it should be removed or redefined with evidence and an updated basis policy before it is presented.

Write it off to Other Income because it is unsupported.

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Question 3 :

The governmental funds statement for Stonebridge City shows $180,000 of "principal payments on debt" as an expenditure, and the reconciliation to the statement of activities has no adjustment for it; what is the most defensible conclusion?

No adjustment is needed because principal payments are expenditures in governmental funds

Principal payments should be reclassified to interest expense in the statement of activities

The principal payments should be treated as capital outlay because they relate to long-term items

The reconciliation should include an adjustment that removes the debt principal expenditure from the statement of activities and reflects it instead as a reduction of the long-term liability in government-wide statements

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Question 4 :

The credit memo log for Maple Harbor Boutique shows $9,700 of returns issued in October related to September sales, and the client has a consistent 8% return pattern; what is the most defensible September adjustment approach?

Estimate returns as variable consideration at September 30 using supportable historical patterns and record a refund liability and revenue reduction

Ignore the returns because the credits were issued after period end

Record the full $9,700 as September returns regardless of pattern or timing

Record a bad debt allowance because returns are a collection issue

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Question 5 :

Pinecrest County uses a payroll clearing process where the General Fund pays payroll for multiple funds, and the grant fund reimburses monthly based on detailed payroll registers, but staff recorded the reimbursement as transfer in and transfer out, what is the most defensible correction?

Reclass the entries as reimbursement of expenditures because the cash movement is repayment of specific costs incurred on behalf of the benefiting fund.

Keep transfers because any cash movement between funds is a transfer by definition.

Record the reimbursement as revenue in the General Fund and expenditure in the grant fund.

Eliminate the reimbursement in the fund statements because it is internal.

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Governmental Accounting and Financial Reporting

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5

The TB shows Accrued Expenses of $14,200, but the modified basis memo states only payroll accruals are included, and the support for the $14,200 is a list of vendors with no service periods, what is the most defensible conclusion?

MCQ

0

5

The governmental funds statement for Stonebridge City shows $180,000 of "principal payments on debt" as an expenditure, and the reconciliation to the statement of activities has no adjustment for it; what is the most defensible conclusion?

MCQ

0

5

The credit memo log for Maple Harbor Boutique shows $9,700 of returns issued in October related to September sales, and the client has a consistent 8% return pattern; what is the most defensible September adjustment approach?

MCQ

0

5

Pinecrest County uses a payroll clearing process where the General Fund pays payroll for multiple funds, and the grant fund reimburses monthly based on detailed payroll registers, but staff recorded the reimbursement as transfer in and transfer out, what is the most defensible correction?

MCQ

0

5