AGA
GAFRB
Q1:
According to GASB, the costs of which of the following activities associated with internally generated computer software should be capitalized?
○
A
selecting between alternatives for the software project○
B
converting extra data not needed to make the software work○
C
testing the software for functionality and ease of use○
D
training employees to use the softwareAccording to GASB Statement No. 51 -- Accounting and Financial Reporting for Intangible Assets, costs associated with internally generated computer software can be capitalized only during the ''application development stage.'' Activities in this stage that are capitalizable include:
Coding
Software configuration
Testing (for functionality)
Non-capitalizable activities include:
Preliminary project planning (e.g., selecting between alternatives)
Data conversion not necessary for the software to operate
Training employees
Therefore, testing the software for functionality is an activity that should be capitalized.
Relevant Reference:
GASB Statement No. 51
GFOA Best Practices -- Capitalization of Intangible Assets
Answer : C. testing the software for functionality and ease of use
AGA
GAFRB
Q2:
The quarterly inventory record below has been provided for use in preparing the organization's financial statements. Based upon the information provided, what method of inventory valuation is used by the organization?
○
A
FIFO○
B
average cost○
C
LIFO○
D
net weight scaleThe organization's inventory records show that the beginning and ending amounts and values change each month, and the relationship between units and dollar values suggests that the cost per unit is averaged, not fixed (as with FIFO or LIFO). Let's evaluate January:
Beginning: 1,200 units / $2,400 $2.00 per unit
Purchased: 800 units / $2,000 $2.50 per unit
Ending: 600 units / $1,500 $2.50 per unit
The ending value of $1,500 for 600 units gives a per-unit cost of $2.50, matching the purchase cost in January. This suggests the system uses a weighted average cost method rather than tracking the specific cost layers (as FIFO or LIFO would).
Relevant Reference:
FASAB SFFAS No. 3 -- Accounting for Inventory and Related Property
GAAP and GASB guidelines on inventory valuation
GFOA Best Practices -- Inventory and Supply Chain Management
Answer : B. average cost
AGA
GAFRB
Q3:
Interest accrued on the public debt is reported as
○
A
a receipt.○
B
an outlay.○
C
a cost of goods sold.○
D
a tax expenditure.Interest accrued on the public debt (e.g., Treasury securities) is considered a government expenditure. In federal financial reporting and budgeting, this is classified as an outlay, representing a payment made to meet an obligation.
It is not a receipt (revenues collected), a cost of goods sold (used in commercial accounting), or a tax expenditure (which refers to revenue foregone due to deductions, credits, etc.).
Relevant Reference:
OMB Circular A-11 -- Budgetary Definitions
Treasury Financial Manual (TFM) -- Federal Outlay Reporting
GAO Glossary -- Public Debt Interest Treatment
Answer : B. an outlay
AGA
GAFRB
Q4:
For state and local governments, a fund that is legally restricted to the use of earnings with the principal protected is
○
A
an enterprise fund.○
B
a permanent fund.○
C
an internal service fund.○
D
a general fund.
AGA
GAFRB
Q5:
Which of the following government-wide financial statements are required for state and local governments?
○
A
balance sheet and operating statement○
B
statement of net position and statement of changes in net position○
C
statement of net position and statement of activities○
D
statement of net position, statement of activities, and statement of cash flows