Governmental and Nonprofit Accounting: Theory and Practice, 9e Update (Freeman)

Chapter 1 Governmental and Nonprofit AccountingEnvironment and Characteristics

1) Which of the following would not be considered a government or nonprofit organization?
A) A software company that sells software exclusively to state and local governments
B) A public elementary school
C) A church
D) A private trust organized for charitable purposes
Answer: A
2) Each of the following would be defined as a governmental entity based on the definition of a
government that was jointly developed by the GASB and FASB except
A) A Historic Preservation District created by the governing board of the municipal government.
B) A Charter School incorporated in accordance with state law and accountable to the state
oversight agency.
C) A hospital formerly owned by a local government entity that was sold to and is now owned by
a private, for-profit health care management corporation.
D) A financing authority that is legally separate from the municipal government, but provides
financing for the government's major capital projects. The governing board of the financing
authority is appointed by the municipal government's board.
E) All of the above would be defined as governmental entities.
Answer: C
3) The Financial Accounting Foundation has oversight responsibilities over
A) The Financial Accounting Standards Board (FASB).
B) The Governmental Accounting Standards Board (GASB).
C) The Government Accountability Office (GAO).
D) All of the above
E) Items A and B only
F) Items B and C only
Answer: E
4) The governmental GAAP hierarchy was established by
A) The Governmental Accounting Standards Board (GASB).
B) The Financial Accounting Standards Board (FASB).
C) The American Institute of Certified Public Accountants (AICPA).
D) The Financial Accounting Foundation (FAF).
E) The Government Accountability Office (GAO).
Answer: A

5) Which of the following is not specifically identified in the GAAP hierarchy for state and local
governments?
A) AICPA Industry Audit and Accounting Guides
B) GASB Technical Bulletins
C) GASB Implementation Guides
D) GAO's Yellow Book
E) AICPA Practice Bulletins
F) All of the above are specifically identified in the state and local government hierarchy.
Answer: D
6) Which of the following statements is false?
A) The power to tax is unique to governments.
B) Taxation is a nonexchange transaction.
C) Governmental entities may not finance a function or service with both a user fee and tax
revenues.
D) All of the above statements are true statements.
E) Both items B and C are false statements.
Answer: C