Exam 9: Business-Type Activities

Carlton City has operated a City Utility (Enterprise) Fund for a number of years. The fund accounts for the activities of the city-owned electric, water and sewer systems. During the current year, the city engaged in the following transactions related to the city utility Fund. REQUIRED: Prepare the appropriate journal entries. If none is required, write "No entry required." a) The city billed its customers $1 million for services provided during the year. b) The city received $260,000 from a developer to connect new houses to the existing utility lines. c) Depreciation on existing physical plant was $700,000. d) Revenue bonds in the amount of $2 million were issued at par to finance new construction. The bond agreement requires that the city retain $200,000 of the bond proceeds for purposes of servicing the debt if revenues are not sufficient to do so.

In a statement of net position, the net position of a proprietary fund should be displayed in which of the following categories?

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

Cougar City issued $2 million in general obligation bonds to acquire a fleet of vehicles for the Central Motor Pool Internal Service Fund. At the date of issue, the appropriate entry in the internal service fund is a $ 2 million debit to cash and a $2 million credit to

On the fund financial statements, internal service activities should be presented

How should a government usually report the activities of an internal service fund in the government-wide financial statements?

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

Which of the following entities is required to use the direct method to report its cash flows?

The revenues of an internal service fund are the expenditures and expenses of other funds of that government.

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

The government should not recognize a liability for an asset retirement obligation until expenses are incurred.

Which of the following is NOT true about internal service funds as reported in the fund financial statements?

Altona City opened a landfill that it elects to account for in an enterprise fund. -At the time the landfill was opened the government estimated total capacity of the landfill to be 5 million cubic feet, useful life to be 20 years, and total closure and postclosure costs to be $18 million. -At the end of Year 1, the government reestimated total closure costs to be $18.3 million and estimated capacity to be same as the original estimate. -At the end of Year 2, the government reestimated total capacity to be 4.8 million cubic feet and total closure costs to be $18.5 million. -At the end of Year 3, the government reestimated useful life to be 17 years but capacity remained unchanged from the preceding year and closure and postclosure costs were estimated to be $18.4 million. REQUIRED: Prepare journal entries in the enterprise fund to record the following events. b) During Year 1, the city estimates that 300,000 cubic feet of capacity were used. Record the landfill expense. c) During Year 2, the city estimates that 650,000 cubic feet of capacity were used. Record the landfill expense. d) During Year 3 the city installed equipment at a cost of $130,000. The equipment will be used in monitoring the landfill when it is closed. e) During Year 3 the city estimates that 1,050,000 cubic feet of capacity were used. Record the landfill expense.

Asset retirement obligations liabilities should be reported at:

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

Which of the following is a valid argument for separate accounting principles for proprietary activities?

A government operates a landfill. In the Landfill Enterprise Fund financial statements, which of the following would be reported as a restricted asset?

"Cash flows from investing activities" do NOT include which of the following as inflows

Governments are not required to incorporate proprietary fund budgets into the accounting system.

The use of either an enterprise fund or a governmental fund to report a particular activity is most likely optional if