Tutorial

Modified Accrual Basis

Some items at cash basis Some items at accrual basis

1-Any cash received recorded as 1-Short term received is

Revenues . recorded as A/R.
2-Any cash paid is recorded as 2-Short term payable is
Expenditures . recorded as A/P.
3-No Depreciations. 3-No Depreciations.
4-No Adjusting Entry.
Problem 1 Solution
The City should contribute
A.$170,000
$255,000 to its firefighters for
benefits earned in 2019. The
City paid only $ 170,000 in 2019 B.$85,000
and $ 85,000 in 2020.
If the City uses cash basis of
accounting, the total C.$255,000
expenditures in 2019:

D.Zero
Problem 2 Solution
The City should contribute
A.$170,000
$255,000 to its firefighters for
benefits earned in 2019. The
City paid only $ 170,000 in 2019 B.$85,000
and $ 85,000 in 2020.
If the City uses cash basis of
accounting, the total C.$255,000
expenditures in 2020:

D.Zero
Problem 3 Solution
The City should contribute
A.$170,000
$255,000 to its firefighters for
benefits earned in 2019. The
City paid only $ 170,000 in 2019 B.$85,000
and $ 85,000 in 2020.
If the City uses cash basis of
accounting, the total expenses C.$255,000
in 2019:

D.Zero
Problem 4 Solution
The City should contribute
A.$170,000
$255,000 to its firefighters for
benefits earned in 2019. The
City paid only $ 170,000 in 2019 B.$85,000
and $ 85,000 in 2020.
If the City uses cash basis of
accounting, the total expenses C.$255,000
in 2020:

D.Zero
Problem 5 Solution
The City should contribute
A.$170,000
$255,000 to its firefighters for
benefits earned in 2019. The
City paid only $ 170,000 in 2019 B.$85,000
and $ 85,000 in 2020.
If the City uses accrual basis of
accounting, the total C.$255,000
expenditures in 2019:

D.Zero
Problem 6 Solution
The City should contribute
A.$170,000
$255,000 to its firefighters for
benefits earned in 2019. The
City paid only $ 170,000 in 2019 B.$85,000
and $ 85,000 in 2020.
If the City uses accrual basis of
accounting, the total C.$255,000
expenditures in 2020:

D.Zero
Problem 7 Solution
The City should contribute
A.$170,000
$255,000 to its firefighters for
benefits earned in 2019. The
City paid only $ 170,000 in 2019 B.$85,000
and $ 85,000 in 2020.
If the City uses accrual basis of
accounting, the total expenses C.$255,000
in 2019:

D.Zero
Problem 8 Solution
During the year, Brian Country
A.Zero
collects $12 million of property
taxes on behalf of Urton
Township. Of this amount it B.$2M
remits $10 million to the
township, expecting to remit the
balance shortly after the end of C.$10M
its fiscal year. The amount of
revenue that the country should
D.$12M
report is
Question 9 Solution
The main objective for the
A.True.
government is to achieve profit

B.False.
Question 10 Solution
Which of the following fund
A.Special revenue.
types is present in every
general-purpose government?
B.General fund.

C.Capital projects fund.

D.Permanent fund.
Question 11 Solution
Under the Accrual Basis of
A.On payment.
Accounting, expenses are
recorded
B.On being incurred.

C.Either a or b.

D.None of these.
Question 12 Solution
Accrual basis is a more
A.True.
appropriate basis for
determining profits as expenses
are matched against revenue B.False.
earned.
Question 13 Solution
Cash basis considers the
A.True.
revenue as realized when the
goods are sold on account
B.False.
Problem 14 Solution
Oak Township issued the
A.Zero
following bonds during the year:
Bonds to acquire equipment for
a vehicle repair service that is B.$3,000,000
accounted for in a special
revenue fund: $3,000,000 The
amount of debt to be reported C.$8,000,000
in the general fund is

D.$20,000,000
Question 15 Solution
Assuming that Bravo Country
A.Police department fund
receives all of its revenues from
unassigned property taxes, it is
most likely to account for the B.Police enterprise fund
activities of its police
department in its
C.Property tax fund

D.General fund
Problem 16 Solution
Grove City received the following
resources during the year Property A.$400,000
taxes: $50,000,000, A federal grant
to acquire police cars: $400,000,
B.$3,000,000
Hotel taxes that must be used to
promote tourism: $3,000,000,
Proceeds of bonds issued to C.$3,400,000
improve the city's electric utility:
$12,000,000. The amount that the
city should most likely report as D.$65,400,000
revenues in its special revenue
funds is
Question 17 Solution
Governmental funds include:
A.Enterprise fund.

B.Custodial fund.

C.Special revenue fund.

D.Internal service fund.

Question 18 Solution
The City of Round Lake receives
A.Special revenue fund
a contribution of $20 million.
The donor stipulates that the
money is to be invested. The B.Permanent fund
principal is to remain
unexpended, and the
investment proceeds are to be C.Fiduciary fund
used to support a city-owned
nature center. The city should
D.Agency fund
report the contribution in a
Question 19 Solution
On December 31, the accrued A. Credit to Unearned Revenue of $700
interest revenue is 700. Then,
on February 1, the cash is B. Debit to interest receivable of $500
received. Under the cash basis,
the entry on December 31 will C. No entry.
include a:
D.debit to interest receivable of $700
Question 20 Solution
Using the same information in A. Credit to Unearned Revenue of $700
question (19). Under the accrual
basis, the entry on December B. Debit to interest receivable of $500
31 will include a:
C. No entry.

D.Debit to interest receivable of $700

Question 21 Solution
The Houston Rockets basketball A. Debit to Unearned Revenue of $1,000
team receives $6,000 for season
tickets on September 1. By B. Credit revenue of $6,000
December 31, they have earned
$1,000 of the revenue. Under C. No entry.
the cash basis, the entry on
December 31 will include a:
D.Credit to unearned revenue of $6,000
Question 22 Solution
Using the same information in A. Debit to Unearned Revenue of $1,000
question (21). Under the accrual
basis, the entry on December B. Credit revenue of $6,000
31 will include a:
C. No entry.

D.Credit to unearned revenue of $6,000

Question 23 Solution
A. Debit to insurance expenditure of
On September 1, Phillips Tool
and Die Company paid six $60,000
months’ insurance in advance
B. Debit to prepaid insurance of $60,000
totaling $60,000. Under the
cash basis, the entry on C. Debit to insurance expense of
September 1 will include a:
$10,000

D.Credit to unearned revenue of $6,000

Question 24 Solution
A. Debit to insurance expenditure of
Using the same information in
question (23). Under the accrual $60,000
basis, the entry on September 1
B. Debit to prepaid insurance of $60,000
will include a:
C. Debit to insurance expense of
$10,000

D.Credit to unearned revenue of $6,000

Question 25 Solution
A. Debit to insurance expenditure of
Using the same information in
question (23). Under the cash $60,000
basis, the entry on December
B. Debit to prepaid insurance of $60,000
31 (year-end) will include a:
C. Debit to insurance expense of
$10,000

D.No entry.
Question 26 Solution
A. Debit to insurance expenditure of
Using the same information in
question (23). Under the accrual $60,000
basis, the entry on December
B. Debit to prepaid insurance of $60,000
31 (year-end) will include a:
C. Debit to insurance expense of
$40,000

D.No entry.
Question 27 Solution
A. Revenue earned but not yet collected.
Which of these transactions
requires an adjusting entry
B. Revenue collected but not yet earned.
(debit) to Unearned Revenue?
C. Revenue earned before being
collected, when it is later collected

D.Revenue collected before being

earned, when it is later earned
Question 28 Solution
A. Economic resources measurement focus and
Governmental funds use the:
accrual basis of accounting.

B. Current financial resources measurement

focus and accrual basis of accounting.

C. Economic resources measurement focus and

modified accrual basis of accounting.

D. Current financial resources measurement

focus and modified accrual basis of
accounting.
Problem 29 Solution
A city issues $20 million of general
A.Zero
obligation bonds to improve its
streets and roads, In accordance
with the bond covenants it sets B.$18.9M
aside $1 million to help ensure
that it is able to meet its first
payment of principal and $0.1 C.$19M
million for its first payment of
interest. The amount of liability
D.$20M
that the city should report in its
debt service fund is
Question 30 Solution
The equipment originally cost A. Debit dep. expenses of $7,000.
$50,000 were purchased in cash
on January 1. On December 31, B. No entry.
Depreciation expense for the
year was $7,000. Under the C. Credit cash of 7,000.
accrual basis, the entry on
December 31 will include
D.Debit building expenditure of 50,000.
Question 31 Solution
Accrual basis of accounting
A.True.
gives a true and fair view of the
results of operations of
business and financial position B.False.
of the business
Question 32 Solution
The city spends 4M to pave city
A.General fund.
streets, using the proceeds of a city
gasoline tax dedicated to road and
highway improvements B.Debt service fund.
Which type of fund :

C.Special revenue fund.

D.Permanent fund.
Question 33 Solution
The city earns $200,000 on
A.Debt service fund.
investment set aside to make
principal payments on the city’s
outstanding bonds. The bonds B.Permanent fund.
were issued to finance
improvements to the city’s
tunnels and bridges C.Special revenue fund.
Which type of fund :

D.General fund.
Thank You