CPRE Finance and Budgeting 2 — Questions and Answers
Question 1: Which cost allocation method assigns indirect costs based on specific activities that drive those costs?
- Step-down method
- Simplified allocation method
- Direct method
- Activity-based costing (Correct answer)
Correct answer: Activity-based costing
Activity-based costing assigns indirect costs to cost objects based on the activities that drive those costs.
Question 2: Depreciation on park infrastructure is recorded primarily to:
- Reduce taxable income
- Match the cost of long-lived assets with the periods they benefit (Correct answer)
- Establish replacement fund balances
- Comply with bond covenants
Correct answer: Match the cost of long-lived assets with the periods they benefit
Depreciation allocates the cost of a capital asset over its useful life to match expense recognition with the benefit period.
Question 3: A park district issues general obligation bonds. The primary security pledged to bondholders is:
- Facility revenues
- Federal grant funds
- The full faith and credit and taxing power of the government (Correct answer)
- A specific capital project cash flow
Correct answer: The full faith and credit and taxing power of the government
General obligation bonds are backed by the issuer's pledge of its full faith and credit, including the power to levy taxes.
Question 4: A cost-benefit analysis for a new recreation center should express benefits and costs in:
- Nominal dollars without adjustment
- Present value terms (Correct answer)
- Future value terms
- Per-capita terms only
Correct answer: Present value terms
Cost-benefit analysis converts all future cash flows to present value to allow valid comparison on a common time basis.
Question 5: Which financial document provides a snapshot of an agency's assets, liabilities, and net position at a specific point in time?
- Statement of revenues and expenditures
- Cash flow statement
- Statement of net position (Correct answer)
- Budget variance report
Correct answer: Statement of net position
The statement of net position (balance sheet) presents assets, liabilities, and net position as of a specific date.
Question 6: When a park agency's actual revenues fall short of budgeted revenues mid-year, the recommended first response is to:
- Issue short-term debt to cover the shortfall
- Implement a budget amendment reducing expenditure appropriations (Correct answer)
- Transfer funds from the capital fund
- Request an emergency tax levy
Correct answer: Implement a budget amendment reducing expenditure appropriations
A budget amendment formally adjusts appropriations to reflect revised revenue projections and maintain fiscal balance.
CPRE Finance and Budgeting 2
Which cost allocation method assigns indirect costs based on specific activities that drive those costs?