Varsity of Advanced Financial Accounting

and Reporting

Basic Module for December 2016

Multiple Choice:
1. Which group of governmental financial statements reports all revenues
and all costs of providing services each year?
a. GAAP Based Financial Statements
b. Fund- Based Financial Statements
c. Cost- based Financial Statements
d. Government- Wide Financial Statements

2. Proprietary funds are:

a. Funds used to account for the activities of a government that are
carried out primarily to provide services to citizens
b. Funds used to account for a government’s ongoing organizations and
activities that are similar to those operated by for profit organizations.
c. Funds used to account for monies held by the government in a trustee
capacity.
d. Funds used to account for all financial resources except those required
to be accounted for in another fund.

3. Fiduciary funds are:

a. Funds used to account for the activities of a government that are
carried out primarily to provide services to citizens.
b. Funds used to account for a government’s ongoing organizations and
activities that are similar to those operated by for- profit organizations.
c. Funds used to account for monies held by the government in a trustee
capacity.
d. Funds used to account for all financial resources except those required
to be accounted for in another fund.
4. Governmental funds are:
a. Funds used to account for the activities of a government that are
carried out primarily to provide services to citizens.
b. Funds used to account for a government’s ongoing organizations and
activities that are similar to those operated by for- profit organizations.
c. Funds used to account for monies held by the government in a trustee
capacity.
d. Funds used to account for revenues that have been legally restricted
as to expenditure.

5. Special Revenue funds are:

a. Funds used to account for revenues that have been legally restricted
as to expenditure
b. Funds used to account for the activities of a government that are
carried out primarily to provide services to citizens
c. Funds used to account for monies held by the government in a trustee
capacity.
d. Funds used to account for a government’s ongoing organizations and
activities that are similar to those operated by for- profit organizations.

6. The term “current financial resources” refers to:

a. Those assets that can quickly be converted into cash
b. Monetary assets that are available to meet the government’s needs.
c. The government’s current assets and current liabilities.
d. The current value of all net assets owned by the governmental unit.

7. What are the broad types or classifications of funds for a governmental

entity such as a city?
a. General, governmental and trust funds
b. Governmental, proprietary and fiduciary funds
c. Revenue, trust and governmental fund
d. Enterprise, revenue and fiduciary fund
8. Under modified accrual accounting, revenues should be recognized
when they are:
a. collected
b. realizable
c. reasonably estimable
d. measurable and available

9. Which of the following is a governmental fund?

a. enterprise fund
b. internal service fund
c. permanent fund
d. investment trust fund

10. What account is debited in the general fund when equipment is received
by a governmental entity?
a. expenditures
b. encumbrances
c. plant assets
d. accounts payable

11. When the hybrid method is used to record the withdrawal of a partner,
the partnership:
a. revalues assets and liabilities and records goodwill to the continuing
partner but not to the withdrawing partner
b. revalues liabilities but not assets, and no goodwill is recorded
c. can recognize goodwill but does not revalue assets and liabilities
d. revalues assets and liabilities but does not record goodwill
12. In accounting, the term translation refers to:
a. the calculation of gains or losses from hedging transaction
b. the calculation of exchange rate gains or losses on individual
transactions in foreign currencies
c. the procedure required to identify a company’s functional currency
d. a procedure to prepare a foreign subsidiary’s financial statements for
consolidation

13. What is a company’s functional currency?

a. the currency of the primary economic enviroment in which it operates
b. the currency of the country where it has its headquarters
c. the currency in which it prepares its financial statements
d. the reporting currency of its parent for a subsidiary

14. In translating a foreign subsidiary’s financial statements, which exchange

rate does the current method require for the subsidiary’s assets and
liabilities.
a. the exchange rate in effect when each asset or liability was acquired
b. the average exchange rate for the current year
c. a calculated exchange rate based on market value
d. the exchange rate in effect as of the balance sheet date

15. What is marshaling of assets?

a. a listing of estimated realizable values of a business’ assets
b. the order in which the creditors of a partnership will be paid as
partnership assets are liquidated
c. the order in which partners receive cash as partnership assets are
liquidated
d. a ranking of claims against an individual
Problem Solving:
1. On June 1, Catco received a contract to sell inventory for 500,000 yens.
The sale would take place in 90 days. Catco immediately signed a 90-
day forward contract to sell the yen as soon as they are received. The
spot rate on June 1 was P1 = 240 yens and the 90- day forward rate was
P1 = 234 yens. At what amount would the company record the forward
contract on June 1?.

2. On October 1, 2017, Jude company ordered some equipment from a

supplier for 200,000 baht. Delivery and payment is to occur on November
30, 2017. The spot rates on October 1 and November 30 are P1.5 and P1.3
respectively. If the company does not hedge the commitment, at what
amount is the equipment recorded on the books on Nov 30, 2017?

3. An entity has a subsidiary that operates in a foreign country. The subsidiary

sold goods to the parent for 2.1 million baht. The cost of goods to the
subsidiary was 1.2 million baht. The goods were recorded by the entity at
1.05 million baht (2 baht = P1) and were all unsold at the year end of
December 31, 2016. The exchange rate at that date was 1.5 baht = P1.
What is the value of the intragroup profit that will be eliminated at
December 31, 2016?
 ANSWER KEY

Multiple Choice:
1. D
2. B
3. C
4. A
5. A
6. B
7. B
8. D
9. C
10. A
11. D
12. D
13. A
14. D
15. D

Problem Solving:

1. 0, No fair value of contract on the date of hedging

2. 260,000, P1.3 X 200,000
3. P450,000
Sales to Parent 2,100,000 baht
Less: COGS 1,200,000 baht
Gross Profit (baht) 900,000 baht
Divided by historical rate 2 baht
Gross Profit (PHP) P450,000
Prepared by:

Jude Faith B. Bragais

Regional Vice President for Academics
NFJPIA – Region IV