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AGA Examination 2: Governmental Accounting, Financial Reporting and Budgeting (GAFRB) Sample Questions:

1. An agency offers service for a fee; bad debts have historically averaged 5% of each year's fee revenue. During the past fiscal year, $1.1 million in fee revenue was recorded and $1 million in fees was collected. What is the bad debt expense recorded for the past fiscal year?

A) $ 5.000
B) $ 55.000
C) $100,000
D) $ 50.000

2. The measurement focus of the governmental fund level financial statements is

A) modified accrual basis.
B) accrual basis.
C) current financial resources.
D) economic resources.

3. State and local governments account for budgeted and actual expenditures to ensure that

A) cash is available to pay bills when they come due.
B) spending conforms to legal requirements.
C) actual expenditures are used to formulate next year's budget.
D) GASB standards are met when producing the basic financial statements.

4. Depreciation is measured on the statewide financial statements using the

A) modified accrual basis.
B) accrual basis.
C) tax basis.
D) cash basis.

5. State Medicaid caseloads have been exceeding projections for the past two months. Review of the data indicates the increase is likely to continue, leading to the need for significant supplemental appropriations before the end of the fiscal year. Based upon this information, what is the first action the state director of Medicaid should take?

A) Inform the legislative counsel bureau about the potential over-expenditure.
B) Impose a hiring freeze and hold all spending approvals for contracts and purchases on the affected departments.
C) Inform the governor of the situation and options for addressing the shortfall.
D) Confer with the chairmen or staff directors of the House and Senate appropriations committees concerning the need to call a legislative special session.

Solutions: