FAR Sample CPA Exam Questions

CPA Pop Quiz #578: FAR: State and Local Governments

Thank you for taking our Financial Accounting and Reporting (FAR) review quiz. Check back again for five new sample BEC CPA questions to help you prepare for the exam.

Tree City reported a $1,500 net increase in the fund balance for Governmental Funds. During the year, Tree purchased general capital assets totaling $9,000 and recorded a depreciation expense of $3,000. What amount should Tree report as the Change in Net Position for governmental activities in Tree's Statement of Activities?

  • $4,500
  • $1,500
  • $7,500
  • $10,500
Correct Answer C.

The increase in the fund balance for Governmental Funds is measured on the modified accrual basis, while the Change in Net Position for governmental activities is measure on the full accrual basis. To convert the increase in fund balance to full accrual:

Increase in Fund Balance + $1,500
Add back the Expenditures related to the purchase of capital assets + 9,000
Deduct the depreciation expense not included in Fund Balance – 3,000
Change in Net Position $7,500
Incorrect
End of quiz

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