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

In the context of regulatory utility plant accounting,original cost and historical cost have the same meaning.

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?

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.

Premiums or discounts on bonds payable issued by enterprise funds should be accounted for in the same manner as those of a comparable business entity.

A statement of cash flows is not prepared for an internal service fund.

The Stores and Supplies Fund of Walnut City has quietly followed a policy of charging all actual cost and normal overhead for materials and supplies bought from them.Annually an amount of cash equal to the net gain by that method is transferred to the Walnut Library Fund.Is this an appropriate pricing policy? Why or why not?

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?

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."

Which of the following is not true regarding proprietary funds?

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.

How should financial information for internal service funds be reported in the government-wide financial statements?

Budgets for enterprise funds should be recorded in the accounts in the same manner as budgets for a General Fund or a special revenue fund.

Which of the following is a difference between enterprise funds and internal service funds?

GASB accounting and financial reporting standards for risk financing activities provide that an internal service fund should recognize claims expense and a related liability when a claim has been asserted and

Internal service funds of one government may not provide goods or services,on a cost-reimbursement basis,to other governments.

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

Which of the following may properly be reported as a component of net assets in the proprietary fund statement of net assets?

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

Proprietary funds are accounted for in a manner similar to investor-owned businesses; among other features,the accrual basis of accounting is used and all of the capital assets used in fund operations are accounted for by the using fund.

Primarily,the operating statement of a proprietary fund should provide information useful in answering which of the following questions?