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State & Local Govt - Business-type Activities

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Chapter 7
turquoise_cat
Quiz by turquoise_cat, updated more than 1 year ago
turquoise_cat
Created by turquoise_cat almost 11 years ago
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Resource summary

Question 1

Question
Under utility regulatory accounting principles (RAP), the account "Utility Plant Acquisition Adjustment" reflects
Answer
  • The difference between the amount paid for utility plant and the amount originally paid by the utility that first placed the plant into public service, less accumulated depreciation.
  • The difference between the fair market value of the utility plant and the amount paid for it, less accumulated depreciation.
  • The difference between the amount paid for the utility plant less its current replacement cost.
  • The difference between the amount paid for the utility plant less the fair market value of its tangible plant assets.

Question 2

Question
Which of the following activities or services would most likely not be accounted for by an internal service fund?
Answer
  • Electronic data processing.
  • Central purchasing, warehousing, and issuing of supplies.
  • Municipal golf course.
  • Risk management.

Question 3

Question
Which of the following is not true regarding proprietary funds?
Answer
  • The difference between assets and liabilities of proprietary funds is called "fund balance".
  • Proprietary funds record long-term debt directly in the fund accounts.
  • Proprietary funds record capital assets directly in the fund accounts.
  • Proprietary funds present a statement of cash flows.

Question 4

Question
To establish a new internal service fund with a transfer of funds (not to be repaid), which account would be credited in the internal service fund?
Answer
  • Cash.
  • Interfund Transfer In.
  • Interfund Transfer Out.
  • Estimated Revenues.

Question 5

Question
When a new utility customer submits a deposit, the enterprise fund journal entry will include
Answer
  • A credit to Customer Deposits.
  • A debit to Customer Deposits.
  • A debit to Sales of Water.
  • A credit to Sales of Water.

Question 6

Question
Which of the following account balances would only be reported if a city-owned utility followed regulatory accounting principles?
Answer
  • Depreciation expense.
  • Pumping expense.
  • Restricted Assets-Cash.
  • Utility Plant Acquisition Adjustments.

Question 7

Question
Which of the following is not a true statement about the Allowance for Funds Used During Construction (AFUDC)?
Answer
  • AFUDC may have either a debt component or an equity component.
  • The amount credited to AFUDC may exceed the amount of interest paid during the period on bonds issued for construction.
  • AFUDC may be credited for an imputed amount of interest on the utility's own funds used for construction.
  • AFUDC may include the total amount of borrowing during construction.

Question 8

Question
The liability for general obligation bonds issued for the benefit of a governmentally owned electric utility and serviced by its earnings should be recorded in
Answer
  • An enterprise fund.
  • An enterprise fund and disclosed in the notes to the financial statements.
  • An enterprise fund and the business-like activities accounts.
  • The governmental activities accounts.

Question 9

Question
How should financial information for internal service funds be reported in the government-wide financial statements?
Answer
  • As part of governmental activities.
  • As part of business-type activities.
  • Amounts allocated proportionately between governmental and business-type activities.
  • Usually as part of governmental activities, unless the internal service fund predominantly serves one or more enterprise funds.

Question 10

Question
Primarily, the operating statement of a proprietary fund should provide information useful in answering which of the following questions?
Answer
  • What are the transactions or events of the period that have increased or decreased the resources available for spending in the near future?
  • Have current financial resources increased or decreased during the period?
  • Have cash balances increased or decreased as a result of transactions and events of the period?
  • What are the transactions or events of the period that have increased or decreased the fund's total economic resources?

Question 11

Question
Which of the following is true regarding the statement of revenues, expenses, and changes in fund net position—proprietary funds?
Answer
  • Enterprise and internal service funds identified as major funds are shown in separate columns.
  • Capital contributions are shown after the nonoperating revenues/expenses section.
  • Any special items are to be included as operating income and expenses.
  • The statement must be divided into operating, nonoperating, and other revenues and expenses sections.

Question 12

Question
How does an internal service fund differ from an enterprise fund?
Answer
  • An internal service fund's primary revenue source is user charges.
  • An internal service fund is a proprietary fund.
  • An internal service fund's primary customers are departments of the same government.
  • An internal service fund's focus is on the economic flow of resources.

Question 13

Question
Which of the following is not one of the required financial statements for proprietary funds?
Answer
  • Statement of net position.
  • Statement of cash flows.
  • Statement of revenues, expenses, and changes in fund net position.
  • Statement of revenues, expenditures, and changes in fund balances.

Question 14

Question
At the government-wide level, financial information for an internal service fund is:
Answer
  • Generally reported in the Governmental Activities column.
  • Generally reported in the Business-type Activities column.
  • At management's discretion is reported in the Governmental Activities or Business-type Activities column.
  • Generally reported in the Component Units column.

Question 15

Question
Which of the following activities or services is least likely to be accounted for as an enterprise fund?
Answer
  • A city swimming pool.
  • The provision of water to city residents.
  • The provision of central purchasing and warehousing of the city's supplies.
  • A municipal golf course.

Question 16

Question
Which of the following accounts would least likely be found in the general ledger of an internal service fund?
Answer
  • Expenditures.
  • Cash.
  • Billings to Departments.
  • Accumulated Depreciation—Machinery and Equipment.

Question 17

Question
In an internal service fund the account Billings to Departments is reported as a (an):
Answer
  • Current asset on the statement of net position.
  • Operating revenue.
  • Interfund loan.
  • None of the statements are correct.

Question 18

Question
A cash flow statement prepared under GASB standards differs from one prepared under FASB standards in which of the following ways?
Answer
  • The GASB statement of cash flows has four categories of cash flows rather than three.
  • The GASB statement of cash flows reports Cash and Cash Equivalents, not just Cash.
  • The GASB statement of cash flows reports investments in the securities of other entities as cash flows from investing activities.
  • All of the statements are correct.

Question 19

Question
In enterprise fund accounting, restricted assets are:
Answer
  • Those that management has designated for specific purposes or functions, such as future construction.
  • Those that are designed for a limited range of uses; for example, a special purpose vehicle designed for use of personnel of an electric utility in installing power line poles.
  • Those whose use is restricted by contractual agreements or legal requirements.
  • All of the statements are correct.

Question 20

Question
In accounting for a municipally owned electric utility, customer deposits are reported as:
Answer
  • Revenues from Customer Deposits.
  • A restricted asset.
  • A liability payable from restricted assets or as a current liability.
  • Both A restricted asset and A liability payable from restricted assets or as a current liability are correct.

Question 21

Question
What is the term that represents the cost of a utility plant to the owner that first devotes the plant to public customers?
Answer
  • Original cost.
  • Historical cost.
  • Sunk cost.
  • Public cost.

Question 22

Question
If an Allowance for Funds Used During Construction (AFUDC) account is used, which of the following is true?
Answer
  • AFUDC will always have a credit balance equal to the total amount of interest paid during the period on bonds payable.
  • AFUDC may represent either actual interest on debt issued for construction or an imputed interest on the utility's own equity capital used to finance construction.
  • AFUDC is reported as a contra-asset on the utility's balance sheet.
  • All of the statements are true.

Question 23

Question
Net position of an enterprise fund should be reported in which of the following categories?
Answer
  • Contributed capital and retained earnings.
  • Unreserved, reserved, and invested in capital assets.
  • Unrestricted, restricted, and invested in capital assets, net of related debt.
  • Net investment in capital assets; restricted; and unrestricted.

Question 24

Question
The Fulton Municipal Golf Course, an enterprise fund, issued a long-term mortgage note to finance the construction of a new clubhouse. Issuance of the note would be reported in which section of the statement of cash flows?
Answer
  • Investing activities.
  • Noncapital financing activities.
  • Capital and related financing activities.
  • Operating activities.

Question 25

Question
The city's Solid Waste Disposal Fund transferred $560,000 of cash to the city's General Fund to help the General Fund cover operating expenditures. How would the transfer be reported in the Solid Waste Disposal Fund's statement of cash flows?
Answer
  • Operating activity
  • Noncapital financing activity.
  • Capital and related financing activity.
  • It would not be reported since it involved a transfer between two funds of the same government.

Question 26

Question
GASB standards require that pricing of goods or services provided by enterprise funds must:
Answer
  • Cover at least the marginal costs of the goods or services.
  • Cover at least the variable costs of the goods or services.
  • Cover the full cost of providing the goods or services.
  • None of the statements are correct.

Question 27

Question
Bates City's municipal solid waste landfill (MSWLF) is accounted for as an enterprise fund. The estimated total closure and postclosure costs are $375,000. At the beginning of the current reporting period the landfill was estimated to be 40 percent filled and the MSWLF had recognized expenses totaling $150,000 (40 percent of $375,000). The city's sanitation engineers have estimated at the end of the current fiscal year that total closure and postclosure costs remain at $375,000 and the landfill is now 45 percent filled. The current year expense, referred to as provision for closure and postclosure costs, should be debited for:
Answer
  • $18,750.
  • $168,750.
  • $225,000.
  • Since the units of production are not provided the amount cannot be determined.

Question 28

Question
Which of the following is not a true statement regarding segment reporting for enterprise funds?
Answer
  • A segment is an identifiable activity reported as or within an enterprise fund or an other stand-alone entity for which one or more revenue-backed debt securities are outstanding.
  • Segment reporting is not required for an activity that is reported as a major fund.
  • Full financial statements are required for each reportable segment.
  • Condensed financial statements are required for each reportable segment.

Question 29

Question
The city operates a Risk Management Pool, an internal service fund, for self-insurance purposes. The General Fund requests payment for costs incurred for the repair of damages done to a garage as a result of a storm. How would the General Fund's request be recognized at the fund level by the Risk Management Pool?
Answer
  • It would debit an expense account and credit Cash.
  • It would debit Interfund Transfer Out and credit Cash.
  • It would debit Building and credit Cash.
  • It would not record a transaction since the activity occurred between two funds of the same government.
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