Question 1

Which of the following is a valid reason for governments to engage in business-type activities?

Accepted Answer

A) The government does not want control over the activity. 
B) The activity competes with general government activities. 
C) The government does not want to subsidize the activity. 
D) The government can provide the services more cheaply or efficiently than can a private firm. 
A) The government does not want control over the activity. 
B) The activity competes with general government activities. 
C) The government does not want to subsidize the activity. 
D) The government can provide the services more cheaply or efficiently than can a private firm.

Question 2

Flora County issues $6 million of revenue bonds to finance construction of additional physical plant facilities for the county sewer system that is accounted for in an enterprise fund.The bond agreement requires that $0.5 million of the proceeds be invested in U.S.Treasury securities to be used to service the debt if revenues in a particular year are insufficient to do so.When it sells the bonds, the county debits restricted cash and credits revenue bonds payable.What additional entry, if any, is needed?

Accepted Answer

A) No additional entry is needed at this time. 
B) Debit restricted net position $0.5 million; Credit unrestricted net position $0.5 million. 
C) Debit unrestricted net position $0.5 million; Credit restricted net position $0.5 million. 
D) Debit unrestricted retained earnings $0.5 million; Credit restricted retained earnings $0.5 million. 
A) No additional entry is needed at this time. 
B) Debit restricted net position $0.5 million; Credit unrestricted net position $0.5 million. 
C) Debit unrestricted net position $0.5 million; Credit restricted net position $0.5 million. 
D) Debit unrestricted retained earnings $0.5 million; Credit restricted retained earnings $0.5 million.

Question 3

A statement of revenues, expenses, and changes in net position of a proprietary fund should include which of the following in addition to operating revenues, operating expenses, and ending net position?

Accepted Answer

A) Nonoperating revenues and expenses. 
B) Nonoperating revenues and expenses; other changes in net position. 
C) Nonoperating revenues and expenses; capital contributions and other changes in net position; beginning net assets. 
D) None of the above. 
A) Nonoperating revenues and expenses. 
B) Nonoperating revenues and expenses; other changes in net position. 
C) Nonoperating revenues and expenses; capital contributions and other changes in net position; beginning net assets. 
D) None of the above.

Question 4

"Cash flows from investing activities" include which of the following as outflows

Accepted Answer

A) Repayments of short-term borrowing to finance operations. 
B) Interest received on investments. 
C) Cash transfers to other funds. 
D) Purchase of short-term investments. 
A) Repayments of short-term borrowing to finance operations. 
B) Interest received on investments. 
C) Cash transfers to other funds. 
D) Purchase of short-term investments.

Question 5

Any internal service fund balances that are not eliminated in the consolidation process should generally be presented on the government-wide financial statements

Accepted Answer

A) In the business-type activities column. 
B) In the internal service fund column. 
C) In the governmental activities column. 
D) These balances should not be presented on the government-wide financial statements. 
A) In the business-type activities column. 
B) In the internal service fund column. 
C) In the governmental activities column. 
D) These balances should not be presented on the government-wide financial statements.

Question 6

The operating statement required as one of the three basic financial statements for proprietary funds is called the statement of revenues, expenditures, and changes in net position.

Accepted Answer

A) True 
 B)False

Question 7

A city's comptroller is distraught because depreciation cannot be recorded in a general fund.Moreover, for political reasons the city council never permits the general fund to have a substantial surplus balance.As a consequence the city is unable to "save" resources to replace aging capital assets.The comptroller has heard that it is possible indirectly to charge depreciation in a general fund by transferring capital assets to an internal service fund and correspondingly to build up a cash reserve to replace the capital assets.Is the comptroller correct? If so, explain how an internal service fund can be used to charge depreciation in the general fund and thereby create a cash reserve of what would otherwise be general fund assets.

Accepted Answer

The city can establish an internal servi

Question 8

The appropriate basis of accounting for the proprietary funds of a government is

Accepted Answer

A) Cash basis. 
B) Modified accrual. 
C) Full accrual. 
D) None of the above. 
A) Cash basis. 
B) Modified accrual. 
C) Full accrual. 
D) None of the above.

Question 9

Jay County has designated the General Fund as the single fund to account for its self-insurance activities.What is the maximum amount that can be charged to expenditure in the general fund related to the self-insurance activities?

Accepted Answer

A) The amount of "premium" charged to the other funds. 
B) The amount of actual claims expenditures. 
C) The actuarially determined amount necessary to cover claims, expenditures, and catastrophic losses. 
D) The amount transferred from other funds and activities to the general fund for self-insurance purposes. 
A) The amount of "premium" charged to the other funds. 
B) The amount of actual claims expenditures. 
C) The actuarially determined amount necessary to cover claims, expenditures, and catastrophic losses. 
D) The amount transferred from other funds and activities to the general fund for self-insurance purposes.

Question 10

Jona City has designated an internal service fund as the single fund to account for its self-insurance activities.Most of the insured activities, such as the police department, fire department, and general government functions, are accounted for in the general fund.What is the maximum amount that can be charged to expenditure in the general fund related to the self-insurance activities?

Accepted Answer

A) The amount of "premium" charged to the general fund by the internal service fund. 
B) The amount of actual losses incurred by the insurance activity. 
C) The actuarially determined amount necessary to cover claims, expenditures, and catastrophic losses. 
D) The amount transferred from the general fund to the internal service fund for self-insurance purposes. 
A) The amount of "premium" charged to the general fund by the internal service fund. 
B) The amount of actual losses incurred by the insurance activity. 
C) The actuarially determined amount necessary to cover claims, expenditures, and catastrophic losses. 
D) The amount transferred from the general fund to the internal service fund for self-insurance purposes.

Question 11

In which of the following circumstances must an enterprise fund be used to account for the activity?

Accepted Answer

A) A newly created electric utility fund will finance its operations by a charge to users based on kilowatt hours used. 
B) To finance the acquisition of plant facilities, a newly created electric utility issues general obligation debt. 
C) To finance the acquisition of plant facilities, a newly created electric utility issues revenue bonds that will be repaid solely from operations of the electric utility. 
D) To acquire needed plant facilities, a newly created electric utility enters into long-term lease agreements. 
A) A newly created electric utility fund will finance its operations by a charge to users based on kilowatt hours used. 
B) To finance the acquisition of plant facilities, a newly created electric utility issues general obligation debt. 
C) To finance the acquisition of plant facilities, a newly created electric utility issues revenue bonds that will be repaid solely from operations of the electric utility. 
D) To acquire needed plant facilities, a newly created electric utility enters into long-term lease agreements.

Question 12

What are the differences between a cash flows statement prepared for a governmental electric utility versus one prepared for an investor-owned utility?

Accepted Answer

First, the statement of cash flows for a

Question 13

Governments are required to prepare a statement of cash flows for proprietary funds, but not for governmental funds.

Accepted Answer

A) True 
 B)False

Question 14

The following transactions were among those reported by Morris City's water utility enterprise fund for the current year.   In the water utility enterprise fund's statement of cash flows for the current year, what amount should be reported as cash flows from capital and related financing activities?

Accepted Answer

A) $3,900,000 
B) $6,200,000 
C) $5,500,000 
D) $4,600,000 
A) $3,900,000 
B) $6,200,000 
C) $5,500,000 
D) $4,600,000

Question 15

Governments must account for an activity in an enterprise fund only if local laws specifically require use of an enterprise fund.

Accepted Answer

A) True 
 B)False

Question 16

GASB standards require that governments advance fund landfill closure and postclosure costs on an actuarial basis similar to the advance funding of pension plans.

Accepted Answer

A) True 
 B)False

Question 17

As part of a service concession arrangement with a private firm involving operation of a city car park, a government agrees to incur certain future maintenance costs.If the present value of the consideration paid and to be paid to the government exceeds the present value of the maintenance costs to be incurred by the government, how, if at all, should the government report the "gain"?

Accepted Answer

A) Immediate recognition of revenue. 
B) Deferred inflow of resources, and recognize revenue in a systematic and rational manner over the term of the arrangement. 
C) Current liability. 
D) A gain should not be reported; only a loss. 
A) Immediate recognition of revenue. 
B) Deferred inflow of resources, and recognize revenue in a systematic and rational manner over the term of the arrangement. 
C) Current liability. 
D) A gain should not be reported; only a loss.

Question 18

A government reports the utility services it provides to citizens in a proprietary fund.Which accounting standards must the proprietary fund apply?

Accepted Answer

A) All FASB pronouncements, unless a FASB pronouncement conflicts with or contradicts a GASB pronouncement. 
B) All FASB pronouncements issued prior to November 30, 1989, as well as any post-November 30, 1989 pronouncements specifically adopted by GASB. 
C) All GASB pronouncements. 
D) All FASB and AICPA standards incorporated into GASB Statement No.62, as well as any FASB pronouncements issued after November 30, 1989 that have been specifically adopted by the GASB. 
A) All FASB pronouncements, unless a FASB pronouncement conflicts with or contradicts a GASB pronouncement. 
B) All FASB pronouncements issued prior to November 30, 1989, as well as any post-November 30, 1989 pronouncements specifically adopted by GASB. 
C) All GASB pronouncements. 
D) All FASB and AICPA standards incorporated into GASB Statement No.62, as well as any FASB pronouncements issued after November 30, 1989 that have been specifically adopted by the GASB.

Question 19

Linden County operates a solid waste landfill that is accounted for in an enterprise fund.The county calculated this year's portion of the total closure and postclosure costs associated with the landfill to be $300,000.The entry(ies)to record this cost should be

Accepted Answer

A) Debit landfill expense $300,000; Credit liability for landfill costs $300,000 
B) Debit landfill expense $300,000; Credit liability for landfill costs $300,000 AND include an addition of $300,000 on the schedule of changes in long-term obligations. 
C) Show only an addition of $300,000 on the schedule of changes in long-term obligations. 
D) No entry in the fund; No addition on the schedule of changes in long-term obligations. 
A) Debit landfill expense $300,000; Credit liability for landfill costs $300,000 
B) Debit landfill expense $300,000; Credit liability for landfill costs $300,000 AND include an addition of $300,000 on the schedule of changes in long-term obligations. 
C) Show only an addition of $300,000 on the schedule of changes in long-term obligations. 
D) No entry in the fund; No addition on the schedule of changes in long-term obligations.

Question 20

The amount the city's general fund can recognize as an expenditure is

Accepted Answer

A) $620,000. 
B) $600,000. 
C) $540,000. 
D) $500,000. 
A) $620,000. 
B) $600,000. 
C) $540,000. 
D) $500,000.

Which of the following is a valid reason for governments to engage in business-type activities?

A statement of revenues, expenses, and changes in net position of a proprietary fund should include which of the following in addition to operating revenues, operating expenses, and ending net position?

"Cash flows from investing activities" include which of the following as outflows

Any internal service fund balances that are not eliminated in the consolidation process should generally be presented on the government-wide financial statements

The operating statement required as one of the three basic financial statements for proprietary funds is called the statement of revenues, expenditures, and changes in net position.

The appropriate basis of accounting for the proprietary funds of a government is

Jay County has designated the General Fund as the single fund to account for its self-insurance activities.What is the maximum amount that can be charged to expenditure in the general fund related to the self-insurance activities?

In which of the following circumstances must an enterprise fund be used to account for the activity?

What are the differences between a cash flows statement prepared for a governmental electric utility versus one prepared for an investor-owned utility?

Governments are required to prepare a statement of cash flows for proprietary funds, but not for governmental funds.

The following transactions were among those reported by Morris City's water utility enterprise fund for the current year. In the water utility enterprise fund's statement of cash flows for the current year, what amount should be reported as cash flows from capital and related financing activities?

Governments must account for an activity in an enterprise fund only if local laws specifically require use of an enterprise fund.

GASB standards require that governments advance fund landfill closure and postclosure costs on an actuarial basis similar to the advance funding of pension plans.

A government reports the utility services it provides to citizens in a proprietary fund.Which accounting standards must the proprietary fund apply?

Linden County operates a solid waste landfill that is accounted for in an enterprise fund.The county calculated this year's portion of the total closure and postclosure costs associated with the landfill to be $300,000.The entry(ies)to record this cost should be

The amount the city's general fund can recognize as an expenditure is

The Government and Not-For-Profit Environment

Fund Accounting

Issues of Budgeting and Control

Recognizing Revenues in Governmental Funds

Recognizing Expenditures in Governmental Funds

Accounting for Capital Projects and Debt Service

Capital Assets and Investments in Marketable Securities

Long-Term Obligations

Pensions and Other Fiduciary Activities

Issues of Reporting, Disclosure, and Financial Analysis

Not-For-Profit Organizations

Colleges and Universities

Health Care Providers

Managing for Results

Auditing Governments and Notforprofit Organizations

Federal Government Accounting

Filters

Exam 9: Business-Type Activities

Which of the following is a valid reason for governments to engage in business-type activities?

A statement of revenues, expenses, and changes in net position of a proprietary fund should include which of the following in addition to operating revenues, operating expenses, and ending net position?

"Cash flows from investing activities" include which of the following as outflows

Any internal service fund balances that are not eliminated in the consolidation process should generally be presented on the government-wide financial statements

The operating statement required as one of the three basic financial statements for proprietary funds is called the statement of revenues, expenditures, and changes in net position.

The appropriate basis of accounting for the proprietary funds of a government is

Jay County has designated the General Fund as the single fund to account for its self-insurance activities.What is the maximum amount that can be charged to expenditure in the general fund related to the self-insurance activities?

In which of the following circumstances must an enterprise fund be used to account for the activity?

What are the differences between a cash flows statement prepared for a governmental electric utility versus one prepared for an investor-owned utility?

Governments are required to prepare a statement of cash flows for proprietary funds, but not for governmental funds.

The following transactions were among those reported by Morris City's water utility enterprise fund for the current year. In the water utility enterprise fund's statement of cash flows for the current year, what amount should be reported as cash flows from capital and related financing activities?

Governments must account for an activity in an enterprise fund only if local laws specifically require use of an enterprise fund.

GASB standards require that governments advance fund landfill closure and postclosure costs on an actuarial basis similar to the advance funding of pension plans.

A government reports the utility services it provides to citizens in a proprietary fund.Which accounting standards must the proprietary fund apply?

Linden County operates a solid waste landfill that is accounted for in an enterprise fund.The county calculated this year's portion of the total closure and postclosure costs associated with the landfill to be $300,000.The entry(ies)to record this cost should be

The amount the city's general fund can recognize as an expenditure is

The Government and Not-For-Profit Environment

Fund Accounting

Issues of Budgeting and Control

Recognizing Revenues in Governmental Funds

Recognizing Expenditures in Governmental Funds

Accounting for Capital Projects and Debt Service

Capital Assets and Investments in Marketable Securities

Long-Term Obligations

Pensions and Other Fiduciary Activities

Issues of Reporting, Disclosure, and Financial Analysis

Not-For-Profit Organizations

Colleges and Universities

Health Care Providers

Managing for Results

Auditing Governments and Notforprofit Organizations

Federal Government Accounting

Filters