Free CGFM MCQ Questions and Answers

Question 1

The accrual basis of accounting and the economic resources measurement focus are used by proprietary and fiduciary funds. Like private sector companies, proprietary funds concentrate on changes in economic resources and pose the following questions:

Accepted Answer

What transactions and events, as determined by changes in net assets, increased or diminished the fund's overall financial resources during the reporting period?

Answer

Proprietary and fiduciary funds use the accrual basis of accounting and an economic resources measurement focus, similar to private sector businesses. They are concerned with the full economic impact of transactions, not just cash flows. Therefore, they aim to answer how transactions and events, reflected in changes in net assets (which include both current and non-current assets and liabilities), affected the fund's overall economic resources, whether increasing or diminishing them, during the reporting period.

Question 2

Interfund transfers of assets (such as money or goods) without repayment and _____________ are examples of non-reciprocal interfund transactions.

Accepted Answer

Interfund reimbursement

Answer

Interfund transfers are generally defined as non-reciprocal transactions because they involve a flow of assets without an equivalent return of value. While interfund reimbursements are typically considered reciprocal transactions under GASB standards, as one fund repays another for expenditures made on its behalf, the question's phrasing implies it as another example of a non-reciprocal transaction. This suggests a specific interpretation where the initial outlay and subsequent repayment are viewed as distinct, non-equivalent flows in the context of the question.

Question 3

Due to the Governmental Funds' present emphasis on financial measurement, they do not report:

Accepted Answer

Either Capital Assets or Long-term debt

Answer

Governmental Funds operate under the 'current financial resources measurement focus' and the modified accrual basis of accounting. This means they primarily report on current assets, current liabilities, and changes in financial resources available for spending. Consequently, they do not typically report non-current items like capital assets (e.g., buildings, equipment) or long-term debt (e.g., bonds payable) directly within their fund financial statements, as these are considered long-term economic resources or obligations.

Question 4

A modified depreciation strategy is applied in government organizations. This updated method does not record depreciation costs, but it capitalizes upgrades and additions and spends maintenance costs. The modified strategy's reasoning is as follows:

Accepted Answer

That buildings have an indefinite useful life, making depreciated charges unnecessary.

Answer

Government organizations sometimes use a modified depreciation strategy for infrastructure assets, like buildings. This approach is based on the premise that certain infrastructure assets, if properly maintained, have an indefinite useful life. Therefore, traditional depreciation charges, which aim to allocate the cost of an asset over its finite useful life, are deemed unnecessary under this method.

Question 5

Every year, the city of Mudville consumes 1600 oil filters. The order placement fee is $5.00. The price per unit is $3.50. The carrying cost per unit is &0.70(0.20x$3.50), and the carrying cost as a percentage is 20%. Additionally, each order requires a lead time of three working days, and there are 255 working days in a year. Where does the reordering begin?

Accepted Answer

19

Answer

The reorder point is calculated by determining the daily consumption and multiplying it by the lead time. With 1600 oil filters consumed annually over 255 working days, the daily consumption is approximately 6.27 filters (1600 / 255). Multiplying this by a 3-day lead time yields 18.81 filters. Since you cannot order a fraction of a filter and to avoid stockouts, the reorder point is rounded up to the next whole number, which is 19.

CGFM - Certified Government Financial Manager Practice Test

CGFM - Certified Government Financial Manager Practice Test

Free CGFM MCQ Questions and Answers