CGFM Exam 2 Questions with Verified
Solutions
I 1.The Defense Logistics Agency holds jet fuel as inventory, which it sells to support
flight operations. The table on the left provides beginning/ending fiscal year 2017
inventory levels and purchase information. Assuming the agency uses the FIFO
inventory valuation method, what was the cost of goods sold for jet fuel in fiscal year
2017? - ANS-Correct Answer: $133.50
I 2.In financial reporting, consistency of communication means - ANS-Correct Answer: if
accounting principles have changed or if the financial reporting entity has changed, the
nature and reason for the change, as well as the effect of the change, should be
disclosed.
I 3.Budgeting is an element of which policy? - ANS-Correct Answer: fiscal
I 4.Another term for the federal government baseline budget is - ANS-Correct Answer: a
current level of service budget.
I 5.As described by FASAB, the four groups of people to whom the government is
accountable and are, therefore, potential users of federal financial statements are -
ANS-Correct Answer: citizens, Congress, executives, and program managers.
I 6.When establishing an allowance for doubtful accounts, the journal entry required is a
debit to - ANS-Correct Answer: Bad Debts Expense and a credit to the Allowance for
Doubtful Accounts.
I 7.Street resurfacing is a type of which budget element? - ANS-Correct Answer:
program
I 8.Which of the following is a correct accounting entry when one government agency
receives a grant from another government agency? - ANS-Correct Answer: The grantor
agency recognizes liability and the recipient agency recognizes non-exchange revenue
when the recipient agency meets all eligibility requirements.
I 9.Which of the following sources of accounting principles is at the top of the GASB
hierarchy? - ANS-Correct Answer: Generally Accepted Accounting Principles
I 10.The role of the International Public Sector Accounting Standards Board is to - ANS-
Correct Answer: set standards for the general purpose financial statements of
international public sector entities.
,I 11.A state needs to determine its indirect cost rate for fringe benefits as a function of
direct salaries costs of $3 million. Based on the information shown on the left, the
indirect cost is - ANS-Correct Answer: 10.8%
I 12.Non-exchange revenue includes inflows of resources arising from - ANS-Correct
Answer: taxes, fines and penalties from the private sector.
I 13.A group of activities within a function are known as - ANS-Correct Answer: a
program.
I 14.In financing capital projects, special assessments are used to ensure that - ANS-
Correct Answer: the individuals benefiting from the project are the ones who pay for it.
I 15.The organizations that establish the standards used by their constituents for
external reporting purposes include FASB, FASAB, GASB and - ANS-Correct Answer:
International Public Sector Accounting Standards Board.
I 16.Which of the following terms describes costs an agency incurs on behalf of another
agency? - ANS-Correct Answer: inter-entity
I 17.State and local governments need cost information to receive reimbursements for
allowable costs for federal grants, while federal agencies are required to have cost
accounting concepts in the preparation of what type of statements? - ANS-Correct
Answer: financial statements
I 18.State and local governments use encumbrances as the major budgetary control
tool to ensure availability of funds prior to entering agreements, while the federal
government instills budgetary control using - ANS-Correct Answer: commitments and
obligations.
I 19.The equipment department of a municipality rents out equipment to other
departments and wants to set a fee that will recover expenses. The department
estimates 10,000 rentals per year, with the annual operating costs shown on the left.
The department has $5,000 in annual interest payments and $15,000 in annual debt
service payments for the loan they took out to purchase the equipment. The annual
depreciation on the equipment is $7,500. Based on this information, the user fee should
be set at - ANS-Correct Answer: $91.25 per rental.
I 20.Apportionments and allotments are used by agencies to ensure - ANS-Correct
Answer: that outlays do not exceed appropriations.
I 21.Departments and agencies submit their apportionment requests for future
expenditures during which budget phase? - ANS-Correct Answer: execution
, I 22.Which element of the budget structure is represented by license and permit
revenue? - ANS-Correct Answer: category or source
I 23.Agencies generally submit their budget requests during the - ANS-Correct Answer:
budget preparation phase.
I 24.In United States governments, what is the cornerstone of financial reporting? -
ANS-Correct Answer: accountability
I 25.Unlike governments, businesses establish priorities for the services and products
they provide, based on the concept that - ANS-Correct Answer: shareholders provide
financing and expect the business goals and objectives to be profit-driven.
I 26.Which is the preferred costing methodology? - ANS-Correct Answer: directly tracing
costs wherever feasible and economically practical
I 27.Two agencies using the same accounting principles is an example of - ANS-Correct
Answer: comparability.
I 28.The function element of the budget refers to - ANS-Correct Answer: one of the
major government service classifications.
I 29.One purpose of the hierarchy of generally accepted accounting principles for state,
local, and federal accounting and financial reporting is to - ANS-Correct Answer: provide
guidance to preparers and attesters regarding accounting issues.
I 30.All of the following factors should be considered when choosing the method used to
forecast revenues EXCEPT the - ANS-Correct Answer: complexity of the forecasting
process.
31.Federal government-wide financial reporting allows the reader to - ANS-Correct
Answer: assess the government's financial condition and long-term sustainability.
I 32.What action is allowable during the expired phase of federal budget execution? -
ANS-Correct Answer: make upward adjustments to obligations
I 33.The concept that taxpayers of the current period should pay for the services they
receive rather than passing on the costs to the taxpayers of subsequent periods is
called - ANS-Correct Answer: interperiod equity.
I 34.An agency is recommending a new program to the legislature. Included with the
information is a budgetary estimate, which forecasts expenditures for the upcoming
fiscal year, as well as the next five years. The budget was determined by comparing the
goals to other entities providing similar services. This method of forecasting
expenditures is called - ANS-Correct Answer: performance based-budgeting.
Solutions
I 1.The Defense Logistics Agency holds jet fuel as inventory, which it sells to support
flight operations. The table on the left provides beginning/ending fiscal year 2017
inventory levels and purchase information. Assuming the agency uses the FIFO
inventory valuation method, what was the cost of goods sold for jet fuel in fiscal year
2017? - ANS-Correct Answer: $133.50
I 2.In financial reporting, consistency of communication means - ANS-Correct Answer: if
accounting principles have changed or if the financial reporting entity has changed, the
nature and reason for the change, as well as the effect of the change, should be
disclosed.
I 3.Budgeting is an element of which policy? - ANS-Correct Answer: fiscal
I 4.Another term for the federal government baseline budget is - ANS-Correct Answer: a
current level of service budget.
I 5.As described by FASAB, the four groups of people to whom the government is
accountable and are, therefore, potential users of federal financial statements are -
ANS-Correct Answer: citizens, Congress, executives, and program managers.
I 6.When establishing an allowance for doubtful accounts, the journal entry required is a
debit to - ANS-Correct Answer: Bad Debts Expense and a credit to the Allowance for
Doubtful Accounts.
I 7.Street resurfacing is a type of which budget element? - ANS-Correct Answer:
program
I 8.Which of the following is a correct accounting entry when one government agency
receives a grant from another government agency? - ANS-Correct Answer: The grantor
agency recognizes liability and the recipient agency recognizes non-exchange revenue
when the recipient agency meets all eligibility requirements.
I 9.Which of the following sources of accounting principles is at the top of the GASB
hierarchy? - ANS-Correct Answer: Generally Accepted Accounting Principles
I 10.The role of the International Public Sector Accounting Standards Board is to - ANS-
Correct Answer: set standards for the general purpose financial statements of
international public sector entities.
,I 11.A state needs to determine its indirect cost rate for fringe benefits as a function of
direct salaries costs of $3 million. Based on the information shown on the left, the
indirect cost is - ANS-Correct Answer: 10.8%
I 12.Non-exchange revenue includes inflows of resources arising from - ANS-Correct
Answer: taxes, fines and penalties from the private sector.
I 13.A group of activities within a function are known as - ANS-Correct Answer: a
program.
I 14.In financing capital projects, special assessments are used to ensure that - ANS-
Correct Answer: the individuals benefiting from the project are the ones who pay for it.
I 15.The organizations that establish the standards used by their constituents for
external reporting purposes include FASB, FASAB, GASB and - ANS-Correct Answer:
International Public Sector Accounting Standards Board.
I 16.Which of the following terms describes costs an agency incurs on behalf of another
agency? - ANS-Correct Answer: inter-entity
I 17.State and local governments need cost information to receive reimbursements for
allowable costs for federal grants, while federal agencies are required to have cost
accounting concepts in the preparation of what type of statements? - ANS-Correct
Answer: financial statements
I 18.State and local governments use encumbrances as the major budgetary control
tool to ensure availability of funds prior to entering agreements, while the federal
government instills budgetary control using - ANS-Correct Answer: commitments and
obligations.
I 19.The equipment department of a municipality rents out equipment to other
departments and wants to set a fee that will recover expenses. The department
estimates 10,000 rentals per year, with the annual operating costs shown on the left.
The department has $5,000 in annual interest payments and $15,000 in annual debt
service payments for the loan they took out to purchase the equipment. The annual
depreciation on the equipment is $7,500. Based on this information, the user fee should
be set at - ANS-Correct Answer: $91.25 per rental.
I 20.Apportionments and allotments are used by agencies to ensure - ANS-Correct
Answer: that outlays do not exceed appropriations.
I 21.Departments and agencies submit their apportionment requests for future
expenditures during which budget phase? - ANS-Correct Answer: execution
, I 22.Which element of the budget structure is represented by license and permit
revenue? - ANS-Correct Answer: category or source
I 23.Agencies generally submit their budget requests during the - ANS-Correct Answer:
budget preparation phase.
I 24.In United States governments, what is the cornerstone of financial reporting? -
ANS-Correct Answer: accountability
I 25.Unlike governments, businesses establish priorities for the services and products
they provide, based on the concept that - ANS-Correct Answer: shareholders provide
financing and expect the business goals and objectives to be profit-driven.
I 26.Which is the preferred costing methodology? - ANS-Correct Answer: directly tracing
costs wherever feasible and economically practical
I 27.Two agencies using the same accounting principles is an example of - ANS-Correct
Answer: comparability.
I 28.The function element of the budget refers to - ANS-Correct Answer: one of the
major government service classifications.
I 29.One purpose of the hierarchy of generally accepted accounting principles for state,
local, and federal accounting and financial reporting is to - ANS-Correct Answer: provide
guidance to preparers and attesters regarding accounting issues.
I 30.All of the following factors should be considered when choosing the method used to
forecast revenues EXCEPT the - ANS-Correct Answer: complexity of the forecasting
process.
31.Federal government-wide financial reporting allows the reader to - ANS-Correct
Answer: assess the government's financial condition and long-term sustainability.
I 32.What action is allowable during the expired phase of federal budget execution? -
ANS-Correct Answer: make upward adjustments to obligations
I 33.The concept that taxpayers of the current period should pay for the services they
receive rather than passing on the costs to the taxpayers of subsequent periods is
called - ANS-Correct Answer: interperiod equity.
I 34.An agency is recommending a new program to the legislature. Included with the
information is a budgetary estimate, which forecasts expenditures for the upcoming
fiscal year, as well as the next five years. The budget was determined by comparing the
goals to other entities providing similar services. This method of forecasting
expenditures is called - ANS-Correct Answer: performance based-budgeting.
