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

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Question 21

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Internal service funds should not account for depreciation of capital assets used in their operations, since this would, in effect, charge the government twice for the same assets.

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Question 22

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"Enterprise funds should not be permitted to accumulate unrestricted net position, since to do so would indicate overpricing of its services." Do you agree? Why or why not?

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No. It is in the best interest of taxpay...

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Question 23

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The comprehensive annual financial report (CAFR) of a government should contain a statement of revenues, expenses, and changes in fund net position for:

Enterprise funds may capitalize interest paid on debt incurred for construction of plant assets.

If a business-type activity is subsidized by a government's General Fund rather than fully covering its costs of providing services with fees or charges, that activity need not be reported in an enterprise fund.

Explain the difference between operating revenues/expenses and nonoperating revenues/expenses. Why does the GASB require that operating revenues/expenses be reported separately on proprietary statements of revenues, expenses, and changes in fund net position?

Which of the following funds of a government uses the same basis of accounting as a proprietary fund?

Goods and services provided by internal service funds to other departments of the government are typically priced to:

GASB requires the statement of cash flows for proprietary funds to be prepared using the direct method of presentation.

Explain the reporting requirements for internal service funds and enterprise funds. Internal service funds and enterprise funds are both proprietary funds, so why do their reporting requirements differ?

Unlike the General Fund and other major governmental funds for which a budget is legally adopted, proprietary funds are not required by GASB standards to record budgets in their accounting systems, nor are they required to present a budgetary comparison schedule.

When a supplies internal service fund records a billing to the General Fund, the journal entry in the internal service fund will include:

An employee pension fund is a common example of an internal service fund.

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 investing activities?

The City of Crescent Hill operates a central motor pool as an internal service fund for the benefit of the city's other funds and departments. In the current year, this fund charged the Parks Department $30,000 for vehicle rentals. What account should the internal service fund use to record these charges?

Which of the following properly portrays the components of net position for proprietary funds?

Which of the following should be accounted for in an internal service fund?

How does the statement of cash flows under GASB standards differ from the statement of cash flows under FASB standards?

Which of the following illustrates the appropriate basis of accounting for enterprise and internal service funds? $\begin{array} { | l | l | l | } \hline & \text { Enterprise Funds } & \text { Internal Service Funds } \\\hline \text { A } & \text { Modified Accrual } & \text { Modified Accrual } \\\hline \text { B. } & \text { Modified Accrual } & \text { Accrual } \\\hline \text { C. } & \text { Accrual } & \text { Modified Accrual } \\\hline \text { D. } & \text { Accrual } & \text { Accrual } \\\hline\end{array}$

The liability for utility revenue bonds should be reported in business-type activities on the government-wide statements, as well as in the enterprise fund.