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

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

For which of the following assets can the "modified approach" be elected in lieu of depreciation?

Enterprise funds are used by state and local governments to account for services that are provided to the general public on a user-charge basis,with prices set to recover the costs of operations,activities financed with debt secured solely by revenues from fees of the activity,activities required by law or regulations to recover operating costs from user charges,or any activity that the governing body of the government has decided should be accounted for on a "business basis."

Customers' meter deposits,which cannot be spent for normal operating purposes,would be classified as restricted cash in the balance sheet of which fund type?

Explain how governmental entities that use internal service funds to account for risk financing and risk management activities should account for those activities.

The net position of an internal service fund consists of contributed equity and reserves for assets that will not be converted into cash in the normal operation of the fund.

General obligation bonds used to increase the capacity of a water treatment plant (part of a water utility enterprise fund),but for which the debt service (including repayment of principal)will be paid from general government revenues should be reported as a long-term liability in the water utility fund balance sheet.

The following are key terms in Chapter 7 that relate accounting for the business-type activities of state and local governments: A.Customer advances for construction B.Revenue bonds C.Utility plant acquisition adjustment D.Regulatory accounting principles E.Original cost F.Historical cost G.General obligation bonds For each of the following definitions,indicate the key term from the list above that best matches by placing the appropriate letter in the blank space next to the definition.

A statement of revenues,expenses,and changes in net position for an internal service fund is similar in many respects to an income statement prepared for an investor-owned business.

What are the alternative methods of dissolving an internal service fund? What factors should be considered in choosing the appropriate method?

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

For items reported in the restricted assets section of an enterprise fund balance sheet,how are the related items reported in the liability and fund equity sections of the balance sheet?

Utility enterprise funds that report to regulatory agencies may capitalize both actual interest paid on debt incurred for construction of plant assets and an imputed amount on their own funds so used.

Internal service funds should account for operating expenditures on the accrual basis.

To establish a new internal service fund with a transfer of funds (not to be repaid),which account would be credited in the internal service fund?

The liability for general obligation bonds issued for the benefit of a governmentally owned electric utility and serviced by its earnings should be recorded in

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

Explain how capitalization of interest costs differs for enterprise funds as opposed to governmental funds.

"In order to determine whether user charges are commensurate with operating costs,it is desirable for internal service fund operations to be accounted for on a business basis." Do you agree? Why or why not?

Revenues of internal service funds should be recognized only when they are expected to be available in time to pay current liabilities of the fund.