Problem 15-1 (LO 1, 2, 3) Measurement focus and basis of accounting. Select the best answer for each of the following multiple-choice questions. (Nos. 3 and 7 are AICPA adapted.)1. What is the underlying reason a governmental unit uses separate funds to account for its transactions?a. Governmental units are so large that it would be unduly cumbersome to account for all transactions as a single unit.b. Because of the diverse nature of the services offered and legal provisions regarding activi- ties of a governmental unit, it is necessary to segregate activities by functional nature.c. Generally accepted accounting principles require that not-for-profit entities report on a funds basis.d. Many activities carried on by governmental units are short lived, and their inclusion in a general set of accounts could cause undue probability of error and omission.2. The primary authoritative body for determining the measurement focus and basis of accounting standards for governmental fund operating statements is thea. GovernmentalAccountingStandardsBoard(GASB). b. NationalCouncilonGovernmentalAccounting(NCGA). c. GovernmentAccountingandAuditingCommitteeoftheAICPA(GAAC). d. FinancialAccountingStandardsBoard(FASB).3. Themeasurementfocusforgovernmentalfundsisthea. flowofcash. b. flowoffinancialresources. c. amountofgrossrevenue. d. matchingofrevenuesandexpenditures. Interperiodequitymeasurementforgovernmentalfundsdetermineswhethera. thereisapositivecashflow. b. thereisaprofit. c. current-yearrevenuesaresufficienttopayforcurrent-yearservices. d. actualamountsexceedbudgetedamounts.5. Theproceedsofalong-termbondissuewereusedbyacountytoacquiregeneralfixedassets. The long-term liability is recordeda. onlyinthegenerallong-termdebtaccountgroup. b. onlyinthegeneralfund. c. bothinthegeneralfundandinthegenerallong-termdebtaccountgroup. d. intheappropriategovernmentalfund,dependingonthenatureoftheassetinvolved.6. An expenditure for general obligation long-term debt is always recorded at year-end in the governmental funds fora. accruedinterestandaccruedprincipal. b. accruedprincipalbutnotaccruedinterest. c. accruedinterestbutnotaccruedprincipal. d. neitheraccruedinterestnoraccruedprincipal.7. Encumbrancesoutstandingatyear-endinastate’sgeneralfundshouldbereportedasaa. liabilityinthegeneralfund. b. fundbalancereserveinthegeneralfund. c. liabilityinthegenerallong-termdebtaccountgroup. d. fundbalancedesignationinthegeneralfund