ACCY 4070 - Exercise 7-2 Multiple Choice

Ch. 7 Proprietary Funds - Ex 7-2 (LO7-1 through LO7-4)

1. GASB standards require a statement of cash flows for

All internal service funds and enterprise funds.

2. Which of the following would most likely be accounted for in an internal service fund?

An asphalt plant used to supply the asphalt needed to resurface the city's streets.

3. Under GASB standards, the City of Parkview is required to use an enterprise fund to account for its nature center if

The ordinance that was passed to establish the nature center requires that all costs of the nature center be paid for by user fees.

4. During the current fiscal year, the Palm Springs government recorded a $25,000 transfer from the General Fund to an internal service fund, a $25,000 transfer from the General Fund to an enterprise fund, a $5,000 transfer from an enterprise fund to an internal service fund, and a $15,000 transfer from an enterprise fund to the General Fund. In the Business-type Activities column of the government-wide financial statements, Palm Springs should report

Net transfers in of $5,000.

5. Which of the following events would generally be classified as nonoperating on an enterprise fund's statement of revenues, expenses, and changes in fund net position?

Loss on the sale of a piece of equipment.

6. A proprietary fund issued $5,000,000 of bonds at par to purchase new machinery. If the machinery has not been purchased by year-end, the bond proceeds are reported on the statement of net position as

Restricted net position.

7. Under GASB standards, which of the following events would be classified as an investing activity on a proprietary fund's statement of cash flows?

Interest earned on certificates of deposit held by the proprietary fund.

8. If a predominant portion of an internal service fund's operating income results from billings to enterprise funds,

The government should report the internal service fund's residual assets and liabilities within the Business-type Activities column in the statement of net position.

9. During the year an enterprise fund purchased $230,000 worth of equipment. The equipment was acquired with a cash down payment of $30,000 and a $200,000 loan. A partial year of depreciation on the equipment was taken in the amount of $23,000. What is the net effect of these transactions on the net position accounts of the enterprise fund?

Net investment in capital assets is increased by $7,000.

10. Tinsel Town had the following long-term liabilities at year-end: Revenue bonds to be repaid from tolls collected by the superhighway enterprise fund $250,000; General obligation bonds issued for the Tinsel Town water utility, which will service the debt $200,000. What amount should be recorded as noncurrent liabilities in the proprietary fund financial statements?

$450,000.

11. The City of Tutland issued $10 million, 6 percent, 10-year bonds at 101 to finance refurbishment of its water utility fund equipment. The bond issuance is recorded in the water utility enterprise fund as

Bonds payable of $10 million and premium on bonds payable of $100,000.

12. The City of Tutland issued $10 million, 6 percent, 10-year bonds at 101 to finance refurbishment of its water utility fund equipment. The bond issuance is reported in the water utility enterprise fund statement of cash flows as

A cash flow from capital and related financing activities.