 |
| 1.
| |
Which of the following is NOT true of a proprietary fund? |
| | A) | Users of goods or services produced by a proprietary fund are charged amounts directly related to the costs of providing the goods or services |
| | B) | Many proprietary funds are intended to be self-supporting |
| | C) | Revenues and expenses are recognized on the full accrual basis |
| | D) | GASB standards require budget-actual reporting |
| | E) | None of the above |
|
|
|
| 2.
| |
Which of the following is NOT a type of proprietary fund? |
| | A) | Private-purpose trust fund |
| | B) | Enterprise fund |
| | C) | Internal service fund |
| | D) | All of the above |
| | E) | None of the above |
|
|
|
| 3.
| |
Which of the following is NOT a financial statement required for proprietary funds? |
| | A) | Statement of Cash Flows |
| | B) | Statement of Retained Earnings |
| | C) | Statement of Net Assets (or Balance Sheet) |
| | D) | Statement of Revenues, Expenses and Changes in Fund Net Assets |
| | E) | None of the above |
|
|
|
| 4.
| |
How are internal service funds reported in the financial statements for proprietary funds? |
| | A) | By major fund, as is the case for enterprise funds |
| | B) | Combined with nonmajor enterprise funds |
| | C) | In a single column |
| | D) | Not required to be reported, included in supplementary schedules |
| | E) | None of the above |
|
|
|
| 5.
| |
Which of the following is NOT true about internal service funds? |
| | A) | They account for activities that serve departments within a single government only |
| | B) | They recognize revenues and expenses on an accrual basis |
| | C) | They account for all fixed assets used in their operations |
| | D) | They account for long-term debt that is serviced by revenues generated through their operations |
| | E) | All of these statements are true |
|
|
|
| 6.
| |
Which of the following is NOT an example of an activity an internal service fund might engage in? |
| | A) | Risk management |
| | B) | Transportation services |
| | C) | Computer services |
| | D) | Purchasing and stores services |
| | E) | Internal service funds are used to account for all of these activities |
|
|
|
| 7.
| |
Which of the following is true of an internal service fund? |
| | A) | Net assets are to be reported in three categories |
| | B) | Revenues and expenses are recognized on the accrual basis |
| | C) | All fixed assets used in operations and all long-term debt to be serviced from revenues generated by operations are accounted for by the fund |
| | D) | All of the above are true |
| | E) | None of the above is true |
|
|
|
| 8.
| |
How is an internal service fund normally established? |
| | A) | By a transfer or a long-term advance from another fund |
| | B) | By issuing bonds |
| | C) | By securing external financing |
| | D) | All of the above |
| | E) | None of the above |
|
|
|
| 9.
| |
County of Y established an internal service fund to account for operation of the purchasing and stores function. The fund received a transfer of $500,000 from the General Fund, of which $100,000 was to be used for capital acquisitions. The fund also received a long-term advance from the Sewer Utility Fund of $250,000, also to be used to finance capital acquisitions. The advance will be repaid over a period of ten years in equal installments, with no interest. Supplies inventory in the amount of $400,000 was purchased. The entry to record receipt of the initial sources of funding by the Supplies Fund would be: |
| | A) | Debit: Due from Other Funds $750,000 Credit: Transfers In $750,000 |
| | B) | Debit: Due from Other Funds $750,000 Credit: Transfers In $500,000 Credit: Advance from Sewer Utility Fund $250,000 |
| | C) | Debit: Cash $750,000 Credit: Transfers In $500,000 Credit: Advance from Sewer Utility Fund $250,000 |
| | D) | Debit: Cash $750,000 Credit: Advances from Other Funds $750,000 |
| | E) | None of the above |
|
|
|
| 10.
| |
County of Y established an internal service fund to account for operation of the purchasing and stores function. Supplies inventory in the amount of $400,000 was purchased. The Supplies Fund issued supplies costing $250,000 to General Fund Departments. The markup on cost is 25%. The General Fund has not yet transferred the cash in payment for the supplies. The Supplies Fund entry to record this transaction would be: |
| | A) | Debit: Operating Expenses - Cost of Supplies $312,500 Credit: Inventory of Supplies $312,500 Debit: Cash $312,500 Credit: Operating Revenues - Charges for Supplies $312,500 |
| | B) | Debit: Operating Expenses - Cost of Supplies $250,000 Credit: Inventory of Supplies $250,000 Debit: Due from General Fund $312,500 Credit: Operating Revenues - Charges for Supplies $312,500 |
| | C) | Debit: Operating Expenses - Cost of Supplies $250,000 Credit: Inventory of Supplies $250,000 Debit: Cash $312,500 Credit: Operating Revenues - Charges for Supplies $312,500 |
| | D) | Debit: Operating Expenses - Cost of Supplies $312,500 Credit: Inventory of Supplies $312,500 Debit: Cash $250,000 Credit: Operating Revenues - Charges for Supplies $250,000 |
| | E) | None of the above |
|
|
|
| 11.
| |
County of Y established an internal service fund to account for operation of the purchasing and stores function. The fund received a transfer of $500,000 from the General Fund, of which $100,000 was to be used for capital acquisitions. The fund also received a long-term advance from the Sewer Utility Fund of $250,000, also to be used to finance capital acquisitions. The advance will be repaid over a period of ten years in equal installments, with no interest. The first annual repayment of the long-term advance from the Sewer Utility Fund is made by the Supplies Fund. The cash is transferred immediately. The entry to record this transaction would be: |
| | A) | Debit Advance from Sewer Utility Fund, credit Cash for $25,000 |
| | B) | Debit Advance from Sewer Utility Fund, credit Accounts Payable for $25,000 |
| | C) | Debit Due from General Fund, credit Cash for $25,000 |
| | D) | Debit Due to General Fund, credit Accounts Payable for $25,000 |
| | E) | None of the above |
|
|
|
| 12.
| |
The city of Howe established an internal service fund to account for its Maintenance Department. The Department provided services to another department of the government in the amount of $950. Which of the following statements is true? |
| | A) | For this transaction, the Maintenance Department should record a Transfer In and the other department should record an Other Financing Use — Transfer Out in the amount of $950 |
| | B) | For this transaction, the Maintenance Department should record revenue in the amount of $950 and the other department should record an Other Financing Use — Transfer Out in the amount of $950 |
| | C) | For this transaction, the Maintenance Department should record revenue of $950. If the other department is governmental in nature, it should record an expenditure of $950 |
| | D) | For this transaction, the Maintenance Department should record revenue of $950. If the other department is an enterprise fund, it should record an expenditure of $950 |
| | E) | both C and D are true |
|
|
|
| 13.
| |
The city of Monroe established an internal service fund to account for its Supplies and Purchasing Department. Which of the following statements is true about this internal service fund? |
| | A) | The fund should record encumbrances to help prevent overspending |
| | B) | The fund's budget would be approved by the city council and recorded in the accounts |
| | C) | The fund should account for its inventory of supplies on a perpetual inventory basis |
| | D) | Both A and C |
| | E) | A, B, and C are all true |
|
|
|
| 14.
| |
Which of the following statements is true about internal service funds? |
| | A) | GASB standards do not require the use of internal service funds |
| | B) | An activity accounted for in one government with an internal service fund may be accounted for in the General Fund (or other funds) of another government |
| | C) | If an internal service fund has positive operating income, the fund balances reported by governmental funds using its services are reduced as a result |
| | D) | Both A and B |
| | E) | A, B, and C are all true |
|
|
|
| 15.
| |
If a government decides to self-insure for all or part of its risk financing activities, it must use which of the following to account for this activity? |
| | A) | Internal service fund |
| | B) | General fund |
| | C) | Agency fund |
| | D) | A or B |
| | E) | A, B, or C |
|
|
|
| 16.
| |
In which of the following situations would a government NOT be required to use an enterprise fund to account for an activity in which services are provided to the general public on a user-charge basis? |
| | A) | A legal requirement exists that the cost of providing services for that activity, including capital costs, be recovered through fees or charges |
| | B) | Debt is issued that is backed solely by the fees and charges generated by that activity |
| | C) | Debt is issued that is backed by the general taxing power of the government |
| | D) | The government's policy is that fees and charges should cover the cost of providing services for that activity |
| | E) | None of the above |
|
|
|
| 17.
| |
Which of the following is NOT an example of an activity that would be accounted for in an enterprise fund? |
| | A) | Parking lots |
| | B) | Hospitals |
| | C) | Airports |
| | D) | Government-run liquor stores |
| | E) | All of these activities may be accounted for in enterprise funds |
|
|
|
| 18.
| |
Which of the following is NOT true of an enterprise fund? |
| | A) | It uses the current financial resources measurement focus and modified accrual basis of accounting |
| | B) | It is to use accounting and reporting standards provided for business enterprises issued on or before November 30, 1989, and may use guidance from FASB statements for businesses issued after that date. |
| | C) | Fixed assets and long-term debt are included in the accounts |
| | D) | It records depreciation, accrues interest payable, and amortizes of discounts and premiums on debt |
| | E) | None of the above |
|
|
|
| 19.
| |
Which type of bonds would be recorded directly in the accounts of the enterprise fund? |
| | A) | Revenue bonds |
| | B) | General obligation bonds |
| | C) | General obligation bonds that are to be repaid from enterprise revenues |
| | D) | A, B and C |
| | E) | A and C only |
|
|
|
| 20.
| |
County of Y operates a Sewer Utility Fund to account for wastewater services provided to county residents. During 2007, nongovernmental customers were billed $1,000,000 and the County's General Fund was billed $100,000 for services provided. All revenue was from sewer treatment services. The entry to record these transactions would be: |
| | A) | Debit: Customer Accounts Receivable $1,100,000 Credit: Operating Revenues - Charges for Services $1,100,000 |
| | B) | Debit: Customer Accounts Receivable $1,000,000 Debit: Due from General Fund $100,000 Credit: Operating Revenues - Charges for Services $1,100,000 |
| | C) | Debit: Cash $1,100,000 Credit: Operating Revenues - Charges for Services $1,100,000 |
| | D) | Debit: Cash $1,000,000 Debit: Due from General Fund $100,000 Credit: Operating Revenues - Charges for Services $1,100,000 |
| | E) | None of the above |
|
|
|
| 21.
| |
County of Y operates a Sewer Utility Fund to account for wastewater services provided to county residents. As of December 31, 2007, it had advanced $250,000 to the Supplies Fund to finance that fund's capital acquisitions. This amount was to be repaid in 2017. The entry to record the advance made by the Sewer Utility Fund to the Supplies Fund would be: |
| | A) | Debit Due from Supplies Fund, credit Cash for $250,000 |
| | B) | Debit Long-Term Advance to Supplies Fund, credit Accounts Payable for $250,000 |
| | C) | Debit Due from Supplies Fund, credit Accounts Payable for $250,000 |
| | D) | Debit Long-Term Advance to Supplies Fund, credit Cash for $250,000 |
| | E) | None of the above |
|
|
|
| 22.
| |
County of Y operates a Sewer Utility Fund to account for wastewater services provided to county residents. Several construction projects to make significant additions to the processing plant's capacity were in progress at the end of the fiscal year. Materials and supplies totaling $240,000 were issued during the year to various departments of the Sewer Utility Fund. Of the total issued, $130,000 was for use for construction projects and the remainder was for normal operations. The entry to record this transaction would be: |
| | A) | Debit: Operating Expenses - Cost of Supplies $240,000 Credit: Materials and Supplies $240,000 |
| | B) | Debit: Construction Work in Progress $130,000 Credit: Materials and Supplies $130,000 |
| | C) | Debit: Operating Expenses - Cost of Supplies $110,000 Debit: Construction Work in Progress 130,000 Credit: Materials and Supplies $240,000 |
| | D) | Debit: Operating Expenses - Cost of Supplies $110,000 Credit: Materials and Supplies $110,000 |
| | E) | None of the above |
|
|
|
| 23.
| |
County of Y operates a Sewer Utility Fund for the purpose of accounting for wastewater services provided to county residents. As of December 31, 2007, the County's fiscal year-end, it had outstanding revenue bonds of $3,000,000. Bond interest in the amount of $225,000 was paid in cash during the year. The entry to record this payment would be: |
| | A) | Debit Nonoperating Expenses - Interest, credit Cash for $225,000 |
| | B) | Debit Operating Expenses - Administrative, credit Cash for $225,000 |
| | C) | Debit Nonoperating Expenses - Interest, credit Accounts Payable for $225,000 |
| | D) | Debit Operating Expenses - Administrative, credit Accounts Payable for $225,000 |
| | E) | None of the above |
|
|
|
| 24.
| |
County of Y operates a Sewer Utility Fund for the purpose of accounting for wastewater services provided to county residents. Several construction projects to make significant additions to the processing plant's capacity were in progress during the fiscal year. By the end of the fiscal year, construction projects totaling $530,000 were completed, and the assets placed in use. The entry to record this activity would be: |
| | A) | Debit Utility Plant in Service, credit Cash for $530,000 |
| | B) | Debit Utility Plant in Service, credit Construction Work in Progress for $530,000 |
| | C) | Debit Equipment, credit Construction Work in Progress for $530,000 |
| | D) | Debit Equipment, credit Construction Work in Progress for $530,000 |
| | E) | None of the above |
|
|
|
| 25.
| |
County of Y operates a Sewer Utility Fund for the purpose of accounting for wastewater services provided to county residents. The Sewer Utility Fund calculated depreciation of all fixed assets for the year in the amount of $125,000. The entry to record this transaction would be: |
| | A) | Debit Operating Expenses - Depreciation, credit Accumulated Provision for Depreciation of Utility Plant for $125,000 |
| | B) | Debit Net Assets Invested in Capital, net of Related Debt, credit Accumulated Provision for Depreciation of Utility Plant for $125,000 |
| | C) | Debit Operating Expenses - Depreciation, credit Accounts Payable for $125,000 |
| | D) | Debit Net Assets Invested in Capital, net of Related Debt, credit Accounts Payable for $125,000 |
| | E) | None of the above |
|
|
|
| 26.
| |
Prairie City uses an enterprise fund to account for its water and sewer service. Prairie City imposes a hook up fee for new water customers. How should the enterprise fund account for these fees? |
| | A) | As operating revenue |
| | B) | As a capital contribution |
| | C) | As a current liability |
| | D) | As restricted net assets |
| | E) | None of the above |
|
|
|
| 27.
| |
Prairie City uses an enterprise fund to account for its water and sewer service. The city recently imposed an impact fee of $22,000 on a developer who is about to build a new residential addition to the city. The purpose of the fee is to help pay for costs of new sewer and water lines. How should the enterprise fund account for the fee? |
| | A) | As an unrestricted asset and an operating revenue |
| | B) | As restricted asset and a capital contribution |
| | C) | As an unrestricted asset and a capital contribution |
| | D) | As an unrestricted asset and an increase in a liability |
| | E) | None of the above |
|
|
|
| 28.
| |
Prairie City uses an enterprise fund to account for its water and sewer utility. How should the Water Utility Fund account for bad debts from its customers? |
| | A) | The fund should use the direct write-off method and record an expense when an account is written off |
| | B) | When provision is made for bad debts, the adjusting entry should include a reduction of operating revenue, not an expense |
| | C) | The fund should prepare an adjusting entry to record bad debts expense and an increase in the Accumulated Provision for Uncollectible Accounts. |
| | D) | Bad debts should be recognized as a direct decrease in Net Assets — Unrestricted. |
| | E) | None of the above |
|
|
|
| 29.
| |
A local government operates a municipal solid waste landfill and accounts for that activity in an enterprise fund. As of December 31, 2004, the end of the second year of operation, the total estimated closure and postclosure care costs are $50,000,000, and total estimated capacity is 10,000,000 cubic yards. During 2004, the landfill accepted 2,500,000 cubic yards of solid waste. During the previous year, 1,000,000 cubic yards had already been accepted What percentage of the landfill's total capacity had been used as of the end of 2004? |
| | A) | 5% |
| | B) | 20% |
| | C) | 25% |
| | D) | 35% |
| | E) | Cannot be determined from facts given |
|
|
|
| 30.
| |
A local government operates a municipal solid waste landfill, and accounts for that activity in an enterprise fund. As of December 31, 2004, the end of the second year of operation, the total estimated closure and postclosure care costs are $50,000,000, and total estimated capacity is 10,000,000 cubic yards. During 2004, the landfill accepted 2,500,000 cubic yards of solid waste. During the previous year, 1,000,000 cubic yards had already been accepted How much should be recognized in 2004 for expenses of estimated landfill closure and postclosure care costs? |
| | A) | $17,500,000 |
| | B) | $12,500,000 |
| | C) | $ 2,500,000 |
| | D) | $10,000,000 |
| | E) | Cannot be determined from facts given |
|
|
|
| 31.
| |
Which of the following is NOT true of the Proprietary Fund Statement of Net Assets? |
| | A) | GASB requires a classified format |
| | B) | Net assets are segregated into the same three categories used for the government-wide Statement of Net Assets |
| | C) | Restricted net assets include those designated by management for a particular purpose |
| | D) | Capital assets may be presented as a single figure net of accumulated depreciation |
| | E) | None of the above |
|
|
|
| 32.
| |
Which of the following is NOT true of the Proprietary Fund Statement of Revenues, Expenses and Changes in Fund Net Assets? |
| | A) | Operating revenues and expenses must be shown separately from and prior to nonoperating revenues and expenses |
| | B) | Operating expenses must be reported by function |
| | C) | Operating revenues should be displayed by source |
| | D) | Capital contributions, extraordinary and special items and transfers should be shown separately, after nonoperating items |
| | E) | None of the above |
|
|
|
| 33.
| |
Which of the following is NOT a classification of cash flows under GASB requirements? |
| | A) | Noncapital financing activities |
| | B) | Capital and related financing activities |
| | C) | Investing activities |
| | D) | Operating activities |
| | E) | All of these are categories of cash flows |
|
|
|
| 34.
| |
Which of the following is NOT true of the Proprietary Fund Statement of Cash Flows under GASB requirements? |
| | A) | The direct method is optional |
| | B) | Four classifications of cash flows are required |
| | C) | A reconciliation between operating income and cash flows from operating activities is required |
| | D) | Cash flows from investing activities do not include acquisition of capital assets |
| | E) | None of the above |
|
|
.