1. A governmental agency has received a grant of $500,000 that is

restricted for research and development. How should this be reported in

the fund financial statements?

 A) As deferred inflow of resources

 B) As revenue in the governmental funds

 C) As revenue in the proprietary funds

 D) As an inflow of resources in the agency fund

 Answer: B) As revenue in the governmental funds. Rationale: Since the

grant is specifically restricted for research and development, it should be

recognized as revenue in the fund financial statements when all applicable

eligibility requirements are met.

2. During the fiscal year, a city government has incurred $1 million in

capital expenditures for constructing a new public library. Which of the

following statements is true regarding budgetary control?

 A) The expenditures should be recorded as an expense in the general

fund.

 B) The expenditures should be capitalized and depreciated over its

useful life.

 C) The expenditures should be recorded as an expenditure in the capital

projects fund.

 D) The expenditures should be financed through long-term debt and

recorded in the debt service fund.

 Answer: C) The expenditures should be recorded as an expenditure in

the capital projects fund. Rationale: Capital outlays are typically financed

from capital projects funds, and such expenditures are recorded as

expenditures rather than expenses.

3. A state government has collected property taxes amounting to $10

million, but 5% is expected to be uncollectible. How should this

transaction be recorded?

 A) Recognize $9.5 million as revenue and $0.5 million as allowance for

uncollectibles.

 B) Defer recognition of revenue until cash is collected.

 C) Recognize $10 million as revenue and increase expenses by $0.5

million for estimated uncollectibles.

 D) Recognize $10 million as revenue and disclose the information about

uncollectibles in the notes to financial statements.