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Exam 7: Accounting for the Business-type Activities of State and Local Governments

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Question 1

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Interest and principal on enterprise fund revenue bonds should be recorded in a debt service fund until paid.

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Question 2

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The Central City Golf Course, an enterprise fund, purchased a new stove for use in the course's snack shop. The debit for the entry to record the purchase should be to:

A) Expenditures.
B) Purchases.
C) Equipment.
D) General capital assets.

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C

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If enterprise funds are the predominant participants in an internal service fund, the government should report the internal service fund's residual assets, deferred inflows and outflows of resources, and liabilities within the business-type activities column in the statement of net position.

A motor pool is a common example of an internal service fund.

When utility customers are billed during the year, the enterprise fund journal entry will include:

Consistent with accounting in capital projects funds, interest capitalization for self-constructed assets of proprietary funds is prohibited.

Internal service funds should be used only if:

Internal service funds account for operating expenses on the accrual basis of accounting.

The following cash transactions were among those reported by Genesee County's Wastewater Enterprise Fund for the year: In the Wastewater Enterprise Fund's statement of cash flows for the year ended December 31, what amount should be reported as cash flows from capital and related financing activities?

Under regulatory reporting, Utility Plant in Service is stated at original cost.

Which of the following accounts would appropriately be included on an enterprise fund balance sheet?

Which of the following would be reflected in the operating statement of a proprietary fund?

In some local government financial reports you will find activities such as solid waste disposal and sewage disposal accounted for as a part of the General Fund. In other reports apparently identical activities are accounted for as enterprise funds. When is a government required to establish an enterprise fund?

Under GASB standards, an internal service fund should prepare all of the following financial statements except a:

Select the key term that relate to accounting for the business-type activities of state and local governments from the list that best matches with the following definition. A. Allowance for Funds Used during Construction B. Revenue bonds C. Utility plant acquisition adjustment D. Regulatory accounting principles E. Original cost F. Historical cost G. General obligation bonds ________ 1. In utility accounting, the net cost for the period of construction of borrowed funds used for construction purposes and a reasonable rate on other funds so used. ________ 2. Accounting principles prescribed by federal or state regulatory commissions for investor-owned and some governmentally owned utilities. ________ 3. Bonds whose principal and interest are payable exclusively from earnings of a public enterprise. ________ 4. Bonds which carry the pledge of the government entity's full faith and credit, although the intent may be to service them from proprietary revenues rather than general taxes. ________ 5. The account that captures the premium paid on a utility plant purchased by a government.

The amount of expense and liability to be reported each period for the closure and postclosure costs of a municipal solid waste landfill (MSWLF) is proportional to the amount of landfill capacity used during the period.

Legislators often believe an internal service fund function will not be subjected to annual legislative budget review and the legislature will "lose control" of the fund. Do you agree with this line of reasoning? Why or why not?

Internal service funds are intended to operate on taxes or other financing sources authorized by the legally enacted revenue budget for each year; therefore, they are classified as governmental funds.

Proprietary funds report using three net position categories: net investment in capital assets; restricted; and unrestricted.

Enterprise funds are reported as a part of the Governmental Activities column of the government-wide financial statements when they provide services to governmental funds.