Q&A Hero

Q: A small town in a rural area has an organization that serves the local community when there is a financial need. Among the services they provide is free groceries, clothes and furniture, along with transportation to doctors' appointments when the doctor is out of town. This voluntary health and welfare organization (VHWO) accepts most donations of goods, all donations of cash, and has developed a relationship with the local grocer who helps them obtain needed food items. The VHO has one paid administrator who tracks and coordinates the donations, performs application reviews to determine eligibility, and schedules transportation for those in need. Volunteers unload and pack grocery items, sort clothes and furniture, and drive those who need transportation. Gasoline costs are reimbursed to the driver based on mileage. The local CPA provides bookkeeping and tax services for free, and designates 90% of expenses incurred to community services and 10% to management and general.The VHWO had the following transactions in 2011:1. The administrator is paid $11,000 salary.2.The accountant services are valued at $6,000 based on their normal billable rate.3. The landlord of the building they use for their operations has waived their rent and provided the bill of $6,000 for their records. The VHWO paid utilities and property taxes of $3,000.4. Office furniture was donated with an estimated fair value of $9,400.5. The VHWO received cash donations of $20,000, $5,000 of which was an unpaid pledge from the prior year. The beginning pledges receivable balance was $6,000, and no amount had previously been estimated to be uncollectible. The prior year balance will now be written off. In addition, $12,000 was pledged to be donated in 2012. Based on recent history, the VHWO knows that 10% of the new pledges will not be collected.Required:Prepare the journal entries for the transactions noted above.

Q: The ʺChain Store Actʺ is a name given to theA) Clayton Act. B) Federal Trade Commission Act.C) Robinson-Patman Act. D) Sherman Antitrust Act.

Q: Will Wealth made three charitable donations in 2011. Each was for $500,000, however they were made to three different organizations as follows:1. Will donated to a local voluntary health and welfare organization (VHWO), and indicated that the funds could be used as the VHO wanted.2. Will donated to a local private, not-for-profit university, designating the funds to be used for scholarships and student aid.3. Will donated to the local not-for-profit, nongovernmental hospital, designating the funds to be used for purchase of diagnostic equipment.Required:For each of the above three situations:A. Prepare the journal entry that each organization would prepare at the time of the contribution.B. Prepare the journal entry that each organization would prepare at the time of the subsequent spending of the funds. Assume that the spending is in accordance with any restrictions that Will placed on the donation.

Q: A market with few sellers, some influence over price, high barriers to entry, a differentiated product, and non-price competition is known asA) perfect competition. B) monopolistic competition.C) oligopoly. D) monopoly.

Q: In a not-for-profit, private university, the federal grant funds given directly to students for financial aid are an example ofA) a bequest.B) an agency transaction.C) unrestricted revenue.D) a restricted contribution.

Q: Which of the following is NOTa reason why some industries are oligopolies?A) Economies of scale B) Barriers to entryC) Strategic independence D) Mergers

Q: An alumnus made a donation of adjoining land to a not-for-profit, nongovernmental university. The donor made no specifications regarding the time period or use of the land. The university would record the gift asA) an endowment asset.B) temporarily restricted revenue.C) unrestricted revenue.D) permanently restricted support.

Q: In the long run in a monopolistically competitive market, a firm will, in theory, A) earn economic profits. B) suffer losses.C) break even. D) earn zero accounting profits.

Q: For a monopoly earning positive economic profits at the profit -maximizing output level, all of the following are true EXCEPTA) P > ATC. B) P > MR. C) P > MC. D) P = MR.

Q: Not-for-profit, private colleges classify student unions, dining halls, and residence halls asA) educational and general services.B) auxiliary enterprises.C) independent operations.D) restricted enterprises.

Q: An alumnus of a nonprofit, nongovernmental university establishes an endowment of $50,000. When the university receives the endowment from the donor, what account will the university credit?A) Temporarily restricted revenuesB) Temporarily restricted supportC) Permanently restricted revenuesD) Permanently restricted support

Q: With marginal cost pricing,A) marginal benefits are usually less than marginal cost.B) all opportunity costs will be covered in the short run.C) the price charged is equal to the opportunity cost to society of producing one more unit of the good.D) there cannot be any short-run economic profit.

Q: In a nongovernmental, nonprofit hospital, contractual adjustments areA) the discounted rate given to hospital employees.B) discounts arranged with third-party payors.C) recorded as a deduction from revenue or as an expense.D) additional amounts paid by select group participants.

Q: Under what condition are profits maximized?A) at the rate of output at which marginal revenue equals marginal costB) at the output rate where marginal cost is greater than marginal revenueC) at the point at which the difference between total revenues and total costs is negativeD) at the point at which the difference between price and quantity demanded is greatest

Q: In a nonprofit, nongovernmental hospital, courtesy allowances areA) charity care services.B) revenue deductions.C) expenses.D) revenues earned even if the standard charge is above or below the allowance.

Q: ʺAll average costs have a U-shaped curve.ʺ Do you agree or disagree? Explain why?

Q: The gift shop of a nonprofit, private hospital has cash revenue of $24,000. What account will the hospital credit?A) Unrestricted supportB) Unrestricted revenueC) Temporarily restricted revenueD) Other operating revenue - unrestricted

Q: When El Torito Restaurant is deciding how many waiters to hire for a holiday weekend, it is making a decision.A) plant-size B) long-run C) short-run D) fixed-input

Q: Voluntary health and welfare organizations (VHWO) measure contributions at fair value unlessA) fair value is less than the original cost of the item.B) the contributed item is not intended to be re-sold by the VHWO.C) fair value cannot be reasonably determined.D) the contributions are not in cash or cash equivalents.

Q: A firm that is not maximizing profits A) would never be able to operate in the United States. B) must not be owned by stockholders. C) may find it difficult to raise financial capital from external capital markets. D) is likely to face legal prosecution from the Department of Commerce.

Q: Voluntary health and welfare organizationsA) may not have paid executives or staff.B) are governed by separate GASB statements.C) use fund accounting, following the rules for proprietary fund reporting.D) are supported by, and provide voluntary services to, the public.

Q: In the above figure, if the budget line is originally line DE and the price of coffee decreases, the consumer willA) drink less coffee and increase bagel consumption slightly. B) drink more coffee and increase bagel consumption slightly. C) drink more coffee and decrease bagel consumption slightly. D) leave consumption of both coffee and bagels unchanged.

Q: Restaurants that allow customers to eat as much as they want for a fixed price must make money or they would not remain in business. How can they earn profits when people can always eat more so that the restaurantʹs costs keep getting higher? What practice that regular restaurants use will not be used by all-you-can-eat places?

Q: Voluntary health and welfare organizations classify fund-raising costs asA) costs of services sold.B) program services.C) auxiliary expenses.D) supporting services.

Q: Use the above figure. Which graph depicts substitute goods?A) A B) BC) C D) D

Q: Which one of the following statements is not required for voluntary health and welfare organizations?A) A statement of financial positionB) A statement of activitiesC) A statement of functional expensesD) A statement of changes in net assets

Q: Voluntary health and welfare organizations must report expenses classified byA) restriction.B) function and natural classification.C) restriction and natural classification.D) restriction, function and natural classification.

Q: If the absolute price elasticity of demand is 0.2, a 10 percent increase in the price will causeA) the quantity demanded to decrease by 2 percent.B) the quantity demanded to decrease by 20 percent. C) the quantity demanded to decrease by 5 percent. D) the quantity demanded to decrease by 0.2 percent.

Q: A gift-in-kind, for which the not-for-profit entity has no discretion on disposition, should be accounted for by the not-for-profit, nongovernmental entity asA) a special purpose contribution.B) an exchange transaction.C) an agency transaction.D) a conditional promise to give.

Q: The crux of the problem of pollution isA) a poorly run Environmental Protection Agency. B) greed on the part of consumers.C) greed on the part of producers.D) poorly defined property rights are expensive to enforce.

Q: For nonprofit, nongovernmental organizations, unconditional promises to give that include promises of payments due in future periods (next year or later) are reported asA) unrestricted revenues.B) unrestricted support.C) deferred revenues until payment is received.D) restricted revenues.

Q: The percentage of total national income spent on health care in the United States hasA) declined rapidly since 1965.B) remained below the level of inflation.C) risen steadily since 1965.D) remained constant over the last few years.

Q: For a Voluntary Health and Welfare Organization, what entry is prepared when the restriction on a cash donation is met?A) Debit Unrestricted Net Assets, Credit Restricted Net AssetsB) Debit Unrestricted Fund Balance, Credit Restricted Fund BalanceC) Debit Restricted Fund Balance, Credit Unrestricted Fund BalanceD) Debit Temporarily Restricted Net Assets - Reclassifications out, Credit Unrestricted Net Assets - Reclassifications in

Q: The more bowed (skewed) the Lorenz curve,A) the more equal the distribution of income.B) the greater the number of households in the society. C) the more unequal the distribution of money income. D) the greater the total income of the society.

Q: A donor gives a Voluntary Health and Welfare Organization(VHWO) $1,000 cash that is restricted for a research project. What account does the VHWO credit when the VHWO receives the money?A) Nonoperating RevenueB) Permanently Restricted RevenueC) Unrestricted SupportD) Temporarily Restricted Support

Q: Since the 1970s, union membership in the U.S. has beenA) rising. B) remaining constant.C) declining. D) erratic.

Q: A nongovernmental, not-for-profit entity is subject to:I. GASBII. FASBA) I onlyB) II onlyC) a combination of I and II depending on the entity's purposeD) neither I or II

Q: Coal is required to make steel. Hence, the price elasticity of demand for coal by steel manufacturers will beA) unit elastic. B) inelastic.C) elastic. D) perfectly elastic.

Q: On January 1, 2011, a Voluntary Health and Welfare Organization (VHWO) receives an unconditional promise to give $6,000. The money is not collectible until 2012. The VHWO estimates that 10% of pledges are uncollectible. On January 1, 2011, the VHWO will creditA) Unrestricted Support - Contribution, $6,000.B) Allowance for Uncollectible Contributions $600, and Unrestricted Support - Contribution, $5,400.C) Allowance for Uncollectible Contributions $600, Temporarily Restricted Support - Contribution, $5,400.D) Allowance for Uncollectible Contributions $600, Contribution Revenue $5,400.

Q: It is illegal to price discriminate except in cases in which the price differences are due to actual cost differences. This situation is due to which antitrust act?A) Clayton Act B) Contestable Market ActC) Federal Trade Commission Act D) Sherman Antitrust Act

Q: 1) Which of the following is not true?A) A not-for-profit entity operates for purposes other than to provide goods or services at a profit.B) A not-for-profit entity may be governmental or non-governmental.C) A not-for-profit entity may possess ownership interests like a corporation.D) A not-for-profit entity receives resources from resource providers who do not expect commensurate or proportionate pecuniary return.

Q: A market with many sellers, some influence over price, low barriers to entry, a differentiated product, and non-price competition often taking the form of advertising is known asA) perfect competition. B) monopolistic competition.C) oligopoly. D) monopoly.

Q: In a Statement of Cash Flows for a proprietary fund, what are the primary categories of cash flow activities?A) Operating, Financing, InvestingB) Operating, Noncapital Financing, Capital and Related Financing, InvestingC) Operating, Financing, Noncapital Investing, Capital and Related InvestingD) Noncapital Operating, Capital and Related Operating, Investing, Financing

Q: The existence of economies of scale is one reason oligopolies exist becauseA) a firm is able to increase price leading to increased profits. B) the marginal cost decreases as output increases.C) of strategic dependence.D) as output increases average total cost decreases leading to large -scale firms.

Q: In the long run, in a monopolistically competitive market, price will beA) equal to MR. B) equal to MC. C) greater ATC. D) equal to ATC.

Q: On January 1, 2011, the Enterprise Fund for a local city receives an operating grant of $100,000 cash from the state government. Upon receipt of the cash, qualifying expenses of $200,000 for the operating grant have been incurred. What journal entry did the Enterprise Fund prepare on January 1, 2011?A) Debit Cash $100,000, credit Deferred Revenue $100,000B) Debit Cash $100,000, credit Contributed Capital $100,000C) Debit Restricted Cash $100,000, credit Nonoperating Revenues $100,000D) Debit Restricted Cash $100,000, credit Other Financing Sources - operating grant $100,000

Q: The fixed assets and long-term liabilities associated with Proprietary Funds are reported on theA) financial statements of governmental funds.B) financial statements of fiduciary funds.C) financial statements of proprietary funds.D) financial statements of trust funds.

Q: Which of the following is true of a perfectly competitive firm and a monopoly in the long run?A) P = MC B) P = ATC C) MR = MC D) P = MR

Q: The accounting equation for the enterprise fund isA) assets = liabilities.B) current assets + current liabilities = fund balance.C) current assets - current liabilities = net assets.D) current assets + noncurrent assets - current liabilities - noncurrent liabilities = net assets.

Q: Economic efficiency meansA) the same as technical efficiency.B) that all firms within a single competitive industry are producing at the same level of output.C) that it is impossible to increase the output of any good without lowering the total value of the output of the economy.D) that high-tech methods of production are the most efficient.

Q: On January 1, 2011, the General Fund contributes $200,000 cash to the Internal Service Fund. On January 1, 2011, the General Fund also loans $100,000 cash to the Internal Service Fund. On January 1, 2011, what journal entry does the Internal Service Fund prepare?A) debit Cash $300,000, credit Other Financing Sources $300,000B) debit Cash $300,000, credit Other Financing Sources $200,000, credit Advance from General Fund $100,000C) debit Cash $300,000, credit Advance from General Fund $300,000D) debit Cash $300,000, credit Nonreciprocal Transfer from General Fund $200,000, credit Advance from General Fund $100,000

Q: Marginal revenueA) cannot be used to determine the profit-maximizing rate of production. B) is the change in total revenues resulting from a change in output.C) is a change in revenue that is immeasurable and non -quantifiable.D) cannot be effectively utilized when analyzing the perfect competitor.

Q: Enterprise funds are accounted for in a manner similar toA) internal service funds.B) capital project funds.C) special revenue funds.D) debt service funds.

Q: What are the relationships between the marginal cost curve and the average cost curves? Explain in words.

Q: What basis of accounting is used by proprietary funds?A) Modified accrual accountingB) Accrual accountingC) Cash basis accountingD) Fair value accounting

Q: For an economist, the short run means a time periodA) during which new firms are prohibited from entering the industry.B) during which firms are not allowed to change the amount of imported resources they use. C) that is between one and five years.D) during which the firm is unable to change its plant size.

Q: Based upon the flow information provided below for the year ending December 31, 2011, prepare a cash flow statement for the Downtown City Motor Pool, an internal service fund.Cash received from customers $830,000Cash received from General Fund (noncapital loan) 20,000Interest revenue received 1,000Cash received from short-term note payable (not used for capital assets) 40,000Payments to employees 450,000Payments to suppliers 250,000Cash paid to the General Fund - noncapital loan 65,000Payments for capital improvements 60,000Interest paid on short-term note payable above 2,000Principal paid on capital debt 50,000Interest paid on capital debt 5,000Unrestricted Cash (and cash equivalents), January 1, 2011 13,000

Q: The goal of the firm, according to economists, is to A) stay in business for as long as possible. B) sell as many units of the good it produces as possible. C) grow as large as possible. D) make as much economic profit as is possible.

Q: The four cash flow categories required in an Enterprise Fund's Statement of Cash Flows are listed below and assigned a letter code.A) Cash flows from operating activitiesB) Cash flows from noncapital financing activitiesC) Cash flows from capital and related financing activitiesD) Cash flows from investing activities Required:Use the correct letter code to indicate where each of the following ten items associated with an Enterprise Fund should be reported in the Statement of Cash Flows.1. An enterprise fund's fixed asset was sold for cash.2. Cash paid to suppliers for goods.3. Paid principal, $100,000, and interest, $5,000, on a mortgage.4. Cash proceeds from sale of investments, $65,000.5. Cash paid for new equipment, $18,000.6. Cash received from the general fund; restricted to cover part of the cost of plant expansion, $900,000.7. Cash received from another fund as a 6-month loan for the sole purpose of financing purchase of equipment, $47,000.8. Cash proceeds from issuing bonds for an enterprise fund's construction project.9.Cash paid to employees for salaries.10. Cash received from interest earned on investments.

Q: In the above figure, the budget line will change from line DE to line DF whenA) income rises. B) the price of bagels increases.C) the price of coffee increases. D) the price of coffee decreases.

Q: Based upon the cash flow information provided below for the year ended December 31, 2011, prepare a cash flow statement for the Bloomfield Municipal Golf Course, an enterprise fund.Green fees received $400,000Membership fees received 160,000League outing fees received 90,000Interest revenue received 2,000Cash received from short-term note payable (not used for capital assets) 75,000Payments to employees 350,000Payments to suppliers 198,000Cash paid to the General Fund - Noncapital loan 60,000Payments for capital improvements 85,000Interest paid on short-term loan (loan not used for capital assets) 5,000Unrestricted cash and cash equivalents, January 1, 2011 17,000

Q: What is the principle of diminishing marginal utility?

Q: Prepare journal entries to record the following grant-related transactions of the municipal swimming pool, which is funded primarily by membership fees. 1. Received an operating grant in cash from the state for $200,000, to be used for life-saving and first-aid training. 2. Incurred and paid qualifying expenses on the state grant program by providing training, $165,000. 3. Received a federal grant to finance purchase of an energy efficient heating system for the pool, $120,000 (cash received in advance). 4. New heating system installed and paid, $115,000.

Q: Use the above figure. Which graph depicts complementary goods?A) A B) B C) C D) D

Q: Prepare journal entries to record the following grant-related transactions of an Enterprise Fund. 1. Received an operating grant in cash from the state, $2,500,000. 2. Incurred and paid qualifying operating expenses on the state grant program, $1,600,000. 3. Received a federal grant to finance construction of a plant, $4,500,000 (cash received in advance). 4. Incurred and paid construction costs on the plant, $3,000,000. The plant is not completed.

Q: If the absolute price elasticity of demand is 2, a 10 percent increase in the price will causeA) the quantity demanded to decrease by 2 percent. B) the quantity demanded to decrease by 20 percent. C) the quantity demanded to decrease by 5 percent. D) the quantity demanded to decrease by 0.2 percent.

Q: In general, pollution exists ifA) people are unconcerned about the hazards associated with pollution. B) there are poorly defined private property rights.C) there are poorly defined common property rights.D) profit-making activity is taken to an extreme.

Q: Journalize the following municipal zoo transactions in the Lackluster County Enterprise Fund: 1. The zoo issued $1,000,000 of 5% revenue bonds at 99 on July 1, 2011 (an interest payment date). The bond proceeds are to be used for a new polar bear exhibit and the issue will mature in 20 years. Interest is paid on January 1 and July 1. 2. Depreciation for the year-ended December 31, 2011 included $175,000 for buildings and $105,000 for outdoor exhibit areas. 3. The zoo paid $800,000 in construction costs for the new exhibit. The exhibit is still under construction. 4. Interest on the revenue bonds was accrued at year-end, December 31, 2011. Straight-line amortization is used for bond discounts and premiums.

Q: Journalize the following utility transactions in the Hazzard County Enterprise Fund: 1.The utility sold $4,000,000 of 6.5% revenue bonds at 98 on July 1, 2011 (an interest payment date). The bond proceeds are to be used for new plant construction and the issue will mature in 20 years. Interest is paid semi-annually on July 1 and January 1. 2. Depreciation for the year-ended December 31, 2011 included $300,000 for buildings and $190,000 for equipment. 3. The utility paid $600,000 in construction costs for the new plant.The plant is still under construction. 4. Interest on the revenue bonds was accrued at year-end, December 31, 2011. Straight-line amortization is used for bond discounts and premiums.

Q: A benefit of deductibles and health savings accounts is that theyA) reduce the moral hazard problem associated with third -party payers. B) increase the quality of health care.C) reduce the use of expensive techniques for hopeless cases. D) reduce the incomes of physicians.

Q: Prepare journal entries in the motor pool department of Hill County to record each of the following transactions. 1. The General Fund contributed $50,000 cash to the motor pool department. The motor pool department purchased four vehicles on July 1, 2011 by paying $50,000 down and borrowing $70,000 on a 5%, 3-year note. 2. Billed General Fund departments $430,000 for services provided to those departments. Billings to the Enterprise Fund totaled $210,000. All billings were collected by year-end(June 30, 2012) except for $80,000 charged to the General Fund. 3. Accrued year-end adjustments at June 30, 2012 for interest expense and depreciation. The useful life of the equipment is 5 years with no salvage value.

Q: A straight-line Lorenz curve showsA) an equal distribution of money income.B) a greater than proportionate share of income going to middle -income households. C) a high incidence of absolute poverty.D) a highly unequal distribution of income.

Q: Which statement concerning powers granted the President of the United States by the Taft-Hartley Act is true?A) The President can obtain an injunction that will stop a strike, if the strike involves government workers only.B) The President can require management to negotiate with a union and if the firmʹs management refuses, the President can appoint an arbitrator to resolve the conflict.C) The President can obtain an injunction that will stop a strike for an eighty -day ʺcooling offʺ period if the strike is expected to imperil national safety or health.D) The President can obtain an injunction that will stop a strike indefinitely.

Q: Prepare journal entries in an Internal Service Fund of Union County to record each of the following transactions. Purchased equipment on September 1, 2011 by paying $25,000 down and borrowing $100,000 on a 6%, 2-year note. 2. In 2011, billed General Fund $620,000 for services provided. Billings to the Enterprise Fund totaled $165,000. All billings were collected by December 31, 2011 except for $100,000 charged to the General Fund. 3. Accrued year-end adjustments at December 31, 2011 for interest expense and depreciation. The useful life of the equipment is 5 years with no salvage value.

Q: Journalize the following utility transactions in the Quest County Enterprise Fund: 1. Billings to external customers $1,600,000; billings to Quest County governmental funds $130,000. 2. Collected refundable deposits from new customers $10,000. 3. Collected 95% of all billings by fiscal year-end. 4. Refunded $4,000 in deposits to former customers. 5. Unbilled services to outside customers at year-end $14,000.

Q: The elasticity of demand for labor will be less theA) longer the time period.B) easier it is to substitute one input for another.C) less the demand elasticity for the final product.D) larger the share of total costs accounted for by labor.

Q: Static City started a department to provide copy, printing and mailing services for all departments and agencies of the city.During the fiscal year from July 1, 2010 through June 30, 2011, the copy services department had the following transactions:1. Paper and toner inventory was purchased for $58,000, on account.2. The paper and toner inventory physical count showed only $8,000 on hand at June 30, 2011.3. The department billed other departments for services rendered to them amounting to: General Fund, $43,000; Enterprise Fund, $24,000; Debt Service Fund, $21,000; and Trust Fund, $16,000. All receivables were collected with the exception of $6,000 from the Trust Fund which is expected to be collected in July, 2011.4. The department incurred and paid the following expenses: salaries and wages, $23,000; Electric, $8,000; Other operating expenses, $6,000. Also, $63,000 of the Accounts Payable were paid during the year.5. Depreciation Expense on Equipment amounted to $6,000 for the year ending June 30, 2011.6. The department prepared the closing entry on June 30, 2011.Required:For the fiscal year ended June 30, 2011, prepare the journal entries to record the transactions for the Internal Service Fund.

Q: What is the relationship between the Sherman Antitrust Act and the Clayton Act?A) The Clayton Act was the first act passed and the Sherman Antitrust Act was the second.B) The Sherman Antitrust Act encouraged competition among firms in the U.S. while the Clayton Act encouraged competition among foreign firms.C) The Clayton Act strengthened the Sherman Antitrust Act by limiting some very specific business practices.D) Both Acts deal with issues of setting price and quantity for regulated industries.

Q: A trust fund was created to assist local students in financial need. The following transactions occurred in the trust. 1. The committee forming the fund was able to raise $700,000 and invested the funds so that the principal would remain indefinitely, and the earnings would be used to aid needy students. 2. During the year, the fund earned $65,000 interest. Earnings remain invested in the trust until withdrawn to distribute, so the interest was invested. 3. $50,000 of the investments were sold, withdrawn, and distributed to provide scholarships. 4. The fund-raising committee contributed an additional $200,000 cash to the fund. This cash was deposited into the account and invested. 5. Interest earned but not yet deposited into the investment account was accrued at $17,000.Required:Prepare the necessary journal entries for each of the above transactions for the trust fund.

Q: A market with many sellers, no influence over price, no barriers to entry, a homogeneous product, and an absence of non -price competition is known asA) perfect competition. B) monopolistic competition.C) oligopoly. D) monopoly.