Appendix 10: Answers to Reinforcement Quiz ñ Section III, Chapter 6
Answers to Reinforcement Quiz ñ Section III, Chapter 6
1. Federal accounting standards include managerial cost accounting
requirements that result in all of the following except:
a.
recognition of costs used to produce the outputs of the entity but
financed by other federal entities.
b. recognition of costs incurred by state and local governments due to
mandates of the federal government.
c.
identification of responsibility segments on the Statement of Net
Costs or in the notes.
Answer: (b). To ensure that the full cost to the taxpayer of programs is
presented on the statement of net cost in a meaningful way, standards
require costs paid by other federal agencies to be recognized by the
agency conducting the program. The cost should be further
disaggregated to responsibility segments.
2. Why is the office space an operating lease, rather than a capital lease?
a.
Funds for future lease payments have not been appropriated.
b. The lease term is not equal to, or greater than, the estimated
economic life of the building.
c.
The lease term is not equal to, or greater than, the estimated
economic life of the building and none of the other criteria for a
capital lease are met.
d. The U.S. Department of Monitoring intends to renegotiate the lease
as its staff grows.
Answer: (c), because a lease is a capital lease only if any one of the four
criteria for a capital lease is met.
3. The loss relating to the employee grievance would not have been
recognized if there was no reasonable basis for estimating the detailed
employeeís award amount. True or false?
Answer: True. Even when it is probable that a loss has been incurred, the
loss must be estimable to be recognized.
4. If the loss relating to the employee grievance is only reasonably possible,
the existence of the loss and, if estimable, a loss amount must be
disclosed in notes to the financial statements. True or false?
Answer: True. If a loss contingency exists and it is reasonably possible
the loss will occur, the existence of the possible loss should be disclosed
in notes to the financial statements and, if measurable, an estimate of the
loss or range of loss.
Online version, for personal use only
AGA Study Guide 2, 2016 Edition

Appendix 10: Answers to Reinforcement Quiz ñ Section III, Chapter 6
5. An imputed financing source is recognized for employee benefits because
the U.S. Department of Monitoring paid 17.3%, but the full cost of benefits
was 22% and:
a.
the full cost must be reported on the Statement of Net Cost.
b. the full cost must be reported on the Balance Sheet.
c.
the imputed financing source is still owed to the Office of Personnel
Management.
d. the imputed financing source will be provided for in future
appropriations.
Answer: (a). To ensure that the U.S. Department of Monitoring
recognizes the full cost of its employeesí services, it must recognize the
actuarially determined cost of benefits, which is less than the payment to
OPM. The difference is considered an ìimputed cost,î to be reported on
the Statement of Net Cost. A financing source, equal to the imputed cost,
is reported on the Statement of Changes in Net Position.
6. An apportionment is made so that Monitoring:
a.
will not obligate funds too early in the year, as to avoid a deficiency
or require supplemental appropriations.
b. will achieve the most effective and economical use of amounts
made available.
c.
will have to communicate with Congress regarding its quarterly
results.
d. both (a) and (b)
Answer: (d). The Anti-Deficiency Act required OMB to establish a process
to ensure agencies do not spend funds too quickly during the year, and to
guide them to effective and economical use of funds.
7. An allowance for bad debts was recognized because some companies,
who owe regulatory fees, experienced negative growth, and it is remotely
possible they will be unable to pay their fees. True or false?
Answer: False. If credit losses are ìmore likely than notî, the federal entity
should establish an allowance for the losses and recognize ìbad debt
expense.î
8. The U.S. Department of Monitoringís furniture and equipment were:
a.
expensed when purchased, because there is no need to match
costs with revenue.
b. capitalized, but not depreciated, so that the government maintains
accountability for the asset.
c.
capitalized and depreciated over their estimated useful life, so that
the government is accountable for the asset and is able to match
costs with outputs.
Online version, for personal use only
AGA Study Guide 2, 2016 Edition

Appendix 10: Answers to Reinforcement Quiz ñ Section III, Chapter 6
Answer: (c). Furniture and equipment are usually categorized as general
PP&E, for which the government is accountable, and a cost must be
recognized as the items are consumed in providing goods and services.
9. Accounts payable of $400,000 were recognized because:
a.
furniture was received in exchange for a promise to provide cash or
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AGA CGFM Study Guide 2: Governmental Accounting, Financial Reporting and Budgeting